Deutsche Bank Went On The Road With Chevron; Here's What They Saw

In a report published Wednesday, Deutsche Bank analyst Ryan Todd maintained a Buy rating on Chevron Corporation (NYSE: CVX), with a target of $125, after meeting the company's CEO.Chevron is a leading player, recording volume and CF growth ahead of its peers. Investor concerns related to its cash flow and capex spend appear overdone. The company's Permanian position is the most attractive asset in the US onshore and continues to perform ahead of expectations. "Near-term cash burn remains challenging optically, but we view CVX as relatively attractive amongst mega-caps, whose coming volume and cash flow inflection point is well positioned for a gradual recovery in crude," analyst Ryan Todd mentioned."With nearly $12bn of major project spend rolling off from 2014 to 2017 (~$9Bn in LNG alone), the imminent start of Gorgon (1st cargo in 4Q), and a $14bn ramp in annual cash flow associated with Gorgon and Wheatstone (2017 vs. 2014), CVX is set to show peer-leading volume and cash flow growth through 2018 (5%/6.5% CAGR)," Todd added.Chevron is committed to cash flow neutrality in 2017. In the report Deutsche Bank Securities noted, "…the combination of capex reductions and material cash flow growth should support a relatively straightforward path to FCF neutrality (post dividend) by 2017 on our deck ($75/bbl Brent, $70/bbl WTI) in line with company guidance."Concerns about Chevron's performance post 2017 are overdone in view of LNG growth into 2018 and the company's strong US onshore asset base and a deepwater GoM portfolio.