Chevron (NYSE:CVX) is one of the largest energy companies in the world, and competes with other established oil producers like Exxon Mobil (NYSE:XOM), ConocoPhillips (NYSE:COP), BP (NYSE:BP) and Anadarko (NYSE:APC). Below we take a quick look at a few key trends affecting Chevron, and examine how these effects could shape the company’s outlook.
Our price estimate for Chevron’s stock stands at $104, in line with market price.
- Chevron Q1 Earnings: Revenues And Earnings Suffer, Cash Outflows Still Greater Than Inflows, Company Cuts Capex
- How Are Chevron’s Revenue & EBITDA Composition Expected To Change By 2020?
- By What Percentage Can Chevron’s Revenues Grow Over the Next Five Years?
- How Has Chevron’s Revenue Composition Changed In The Last Five Years?
- What Has Led To More Than A 30% Decline In Chevron’s Revenues & EBITDA In The Last Five Years?
- What Is Chevron’s Fundamental Value Based On Expected 2016 Results?
Chevron is trimming its downstream business, plans to focus more on upstream
In early 2010, Chevron announced a strategy to trim its downstream business of refining, marketing and transportation operations. This segment has struggled when it comes to profitability. We estimate that EBITDA margins for this segment declined from 3.9% in 2006 to about 1.2% in 2009.
However, this EBITDA margin recovered to about 2.3% in 2010 as a result of improving prices and the company’s own strategic efforts. Chevron has been cutting employee count in its downstream business and plans to focus on the more profitable oil & natural gas exploration and production business.
Chevron is also embracing alternative energy solutions
Even though Chevron’s business is dependent on non-renewable energy sources like crude oil and natural gas, the company is also focused on embracing alternative energy solutions. The company’s solar portfolio consists of about 22 megawatts of generated capacity, with more than 128,000 solar panels installed. Chevron is also involved in the development of solutions that convert waste streams of organic material into on site power for waste-water treatment plants. As of now, these are loss making businesses which we account for in costs to the company for modeling purposes.