Zacks_Analysts' Blog : Liberia Okays Chevron's Tie-Up - Analyst Blog

Major integrated oil and gas company, Chevron Corporation's (CVX) plans to enter the Liberian oil and gas industry turned into a reality with the approval of the exploration deal by the Liberian government. The announcement of the aforesaid deal was made in the last week of August,

2010.

(Read the full coverage on the news at: Chevron Sails to Liberian Waters <http://www.zacks.com/stock/news/39533/Chevron+Sails+to+Liberian+Waters>)



As per the agreement, Chevron will acquire a 70% interest and drill three deepwater blocks in Liberia - LB-11, LB-12 and LB-14. These concessions are located between 12 to 110 miles to the south of the capital, Monrovia, covering a total area of 3,700 square miles.

The Liberian subsidiary of Chevron will carry out the three-year exploratory program, scheduled to start in the fourth quarter of 2010. The financial terms of the deal were not disclosed.

Chevron's presence in Africa spreads across Angola, Chad, the Democratic Republic of the Congo, Nigeria and the Republic of the Congo. In 2009, the company's production totaled a net average of approximately 430,000 barrels of oil equivalent in these countries.

According to management, Liberia presents a lucrative investment opportunity for Chevron as the country's natural resources are vastly unexplored. Hence, management remains optimistic about stepping into the Liberian oil and gas sector and believes that the deal will reinforce the company's foothold in West Africa.

California-based Chevron Corporation is one of the largest publicly traded oil and gas companies in the world. The company has an impressive portfolio of new development projects, a track record of solid operating performance and a strong financial flexibility.

However, considering the company's exposure to the volatile oil and gas prices and international business risks, we remain cautious on the stock in the long run, as reflected in our Neutral rating.

With an expectation that the stock will perform in line with the broader equity market, we have a Zacks Rank of #3 (short-term Hold recommendation) on the shares.