Melius Research believes that shares of Chevron could get a boost from renewed exploration momentum and underappreciated Venezuela upside. The firm upgraded the oil and gas giant to buy and updated its price target to $205, implying that shares of Chevron could rise 13% from here. Analyst James West pointed to Chevron refocusing on ramping up its exploration spending. West anticipates better results due to a 50% increase in spending and new talent from Chevron’s acquisition of Hess. CVX 1Y mountain CVX 1y chart “The company has increased its acreage position by +50% with ten new basin entries over the past 2 years,” he wrote. “The company noted new entry opportunities in Libya and Iraq, with acquisitions likely to be on the asset or country entry level with opportunities in these regions more interesting than a decade ago. Chevron anticipates drilling at least 10 to 15 exploration wells, with the Gulf of America, Libya, Namibia, Nigeria, Angola, Suriname, Brazil, and Guyana as compelling areas for exploration activity.” The company’s other exploration plays could unlock additional world scale plays, including a recent re-entry into Libya and the Sirte basin. “The Libya concession marks the company’s return after almost 15 years. Also, Namibia (Orange basin), Guinea-Bissau (with the recent entry), and Egypt and especially the gas-rich Eastern Mediterranean,” West said. West also applauded a recent reshuffling of Chevron’s management team to prioritize younger and home-grown leaders to position the company for its next leg of growth. The analyst added that an additional tailwind comes from Chevron being in the best position to capture upside potential in Venezuela. “Production collapsed under both Chavez and Maduro, squeezed by expropriations and sanctions for the past two decades. Chevron is the immediate winner from the change on the ground in the country,” he said. “This is a tangible growth driver, considering its assets have been kept at performance level while competitors had exited the country.” Chevron stock has added 17% over the past 12 months and 19% this year.
