U.S. energy behemoth Chevron Corp. (CVX) has approved a multibillion-dollar deepwater project in the Gulf of Mexico (“GoM”), just months after the federal government decided to lift its drilling moratorium on the region. The company plans to invest $4 billion to develop the Big Foot field, located approximately 225 miles south of New Orleans in water depths of 5,200 feet.
Chevron’s decision to go ahead with the discovery – the company’s second largest investment in the GoM since British giant BP plc’s (BP) oil rig disaster in April – underscores the importance of the region to western oil companies. In October, Chevron gave the go-ahead for spending $7.5 billion to develop two large fields – Jack and St. Malo, located within 25 miles of each other, approximately 280 miles southwest of New Orleans in water depths of 7,000 feet.
The Big Foot field (estimated to contain in excess of 200 million recoverable oil equivalent barrels) is situated in the Walker Ridge Area in the deepwater GoM. The facility, which is designed to produce 75,000 barrels of oil and 25 million cubic feet of natural gas per day, is set to go on stream in 2014. Chevron has a 60% operating interest in the project, with the other partners being Norway’s StatoilHydro ASA (STO) and Japan’s Marubeni Corp.
San Ramon, California-based Chevron is the second-largest U.S. oil company by market value after ExxonMobil Corp. (XOM). It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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