Integrated oil and gas giant Chevron Corp. (CVX) once again made a successful discovery of natural gas through the Acme-1 exploration well in the hydrocarbon-rich area of the Carnarvon Basin. This happens to be Chevron;s ninth and largest offshore discovery in Western Australia in the last 12 months.
The Acme-1 well was drilled to a depth of 15,469 feet of water and encountered gas deposits of approximately 896 feet. The find is located in the WA-205-P permit area in the offshore region of Western Australia. Chevron Australia has a 67% operated interest in the prospect, with the other partner being Royal Dutch Shell Plc (RDS.A).
This discovery followed the company’s find of natural gas in the Exmouth Plateau area of the Carnarvon Basin last week. Chevron drilled the Brederode-1 exploration well (in the WA-364-P permit area) to a depth of 9,022 feet and found approximately 49 feet of net gas pay. A subsidiary of Chevron and Royal Dutch Shell PLC (RDS.A) holds a 50:50 operating interest in this project.
With this find, Chevron’s confidence in the natural gas potential of the Exmouth Plateau area and the prospect of further frontier opportunities in offshore northwest Australia has strengthened.
The two major discoveries in the Carnarvon Basin over the last seven days indicate that management is actively realizing every opportunity and potential that the company has as a premier lease holder in the region.
These will also aid the company in fulfilling its long-standing target of setting up a leading natural gas business in Australia and the Asia-Pacific region.
We believe that these exploration successes will boost Chevron’s growth prospects in Australia by adding to its already significant gas interests in the country (through majority holdings in the Gorgon and Wheatstone natural gas developments).
We appreciate the company’s strategy of focusing on the more lucrative and well performing ‘upstream’ exploration and production end of the business both at home and abroad. In our opinion, Chevron’s strong pipeline of development projects and impressive recent exploration successes will drive the company’s growth.
However, the uncertain commodity-price scenario, a weaker-than-anticipated global economic recovery and unfavorable macro backdrop diminish our positive sentiments. Hence, we retain a long-term Neutral recommendation on the stock.
Chevron currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
