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Chevron Cash Reserves Spark Acquisition Speculation

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Chevron Corporation (NYSE: CVX), the world's fourth largest energy company, reported decreased oil and natural gas production in the third quarter, the lowest levels for the company since 2008. Last month, the company reported pumping 3.2 percent less oil for the third quarter compared to the same quarter last year.

This marks the seventh consecutive quarter of production declines for Chevron, which stated that weather and repairs contributed to the drop.

While the price of crude continues to rise, new regulations in major oil-producing countries like Nigeria have reduced the share of output that foreign operators can claim. Still, Chevron's competitors, like Exxon (NYSE: XOM) and Royal Dutch Shell Plc (NYSE: RDS-A)(NYSE: RDS-B), haven't slipped as much from these regulations and other contributing factors as much as Chevron has.

The big surprise with Chevron, however, is not its flagging production. It's that the company, smaller in size than Exxon and Shell, has larger cash reserves: $21.3 billion, compared to $13.1 billion and $18.8 billion for Exxon and Shell, respectively.

Chevron's reserves have grown by about 60 percent since the beginning of last year, and the company has even issued debt recently, an unusual move for a company with so much equity on hand. The company has spent almost $90 million a day this year searching for untapped oil reserves and building gas-export plants overseas, and analysts are convinced that Chevron will use their $21 billion in cash and equivalents to buy up one or more smaller companies that are also involved in oil and natural gas exploration.

And there are many options for Chevron to pursue. Cobalt International Energy Inc. (NYSE: CIE), a company worth about $11.6 billion, announced yesterday that they had made a “significant” discovery at a well in the Gulf of Mexico in which they own a 60 percent interest. In addition, the company's projects off the coast of Angola have produced an estimated 1 billion barrels of crude.

Kosmos Energy Ltd. (NYSE: KOS), valued at about $4.6 billion, has several well-placed assets in oil-rich zones off the coasts of Gabon, Angola, and Morocco, and is another potential candidate for a takeover attempt by Chevron.

Ophir Energy Plc (LSE: OPHR) is seeking a partner with capital to spend on a liquefaction plant for Equatorial Guinea, and the $3.3 billion company may also seek a buyer for a significant stake of other offshore zones.

Neither Chevron, nor any of the other companies rumored to be on its shopping list, have made any statement either confirming or denying the possibility of acquisitions. Lloyd Avram, a spokesman for Chevron, stated only that the company is “in a period of heavy investment and our cash balance allows us to weather lower commodity prices.”

Posted-In: Chevron Corporation Cobalt International Energy Incorporated Exxon Mobil Corporation Kosmos Energy Ltd.News Commodities M&A Markets Best of Benzinga

 

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