Chevron's Fighting Around the World

While tough times make things difficult for everyone, Chevron (NYSE: CVX  ) is facing some big challenges on nearly every front. Along with its everyday business operations, the oil and gas producer must now deal with multi-billion dollar legal challenges, protesters at today's annual meeting, and a pipeline attack in Nigeria that has curtailed production. Operating a major global oil and gas company is hardly a cakewalk in today's world.

Oil in the battle zone
The company has shut in about 100,000 barrels a day of Nigerian crude production following a pipeline attack by the Movement for the Emancipation of the Niger Delta, or MEND. The group, made up of tribesmen from the region, has intermittently attacked oilfield infrastructure and employees during the past few years. The most recent skirmishes have lasted about two weeks.

Although none of the other companies operating in the area -- including ExxonMobil (NYSE: XOM  ) and Royal Dutch Shell (NYSE: RDS-A  ) -- have reported production cutbacks during this go-round, both companies have been hit in the past by the militants. All in all, since 2006, analysts estimate that MEND's activities have cut Nigeria's crude production between 20% and 25%.

Waiting for the verdict
But Nigeria isn't the only place on which Chevron has its corporate eyes trained. The company, which acquired Texaco in 2001, expects any day to receive a verdict from a court in Ecuador relating to Texaco's having allegedly deposited a mixture of oil and water into open pits in the country in the 1990s.

A victory for those who claim their homeland was polluted by Texaco could cost Chevron as much as $27 billion. That's a big number, given that Chevron's lead corporate counsel has pointed to actions that have compromised the trial process in Ecuador in favor of the locals.

All of these difficulties -- you could also throw in minor events in Kazakhstan and criticism of Chevron's Burmese operations -- may explain why, when Venezuelan President Hugo Chavez removed a number of major oil companies as operators, the company didn't take the lead of Exxon and ConocoPhillips (NYSE: COP  ) by fighting the action. Instead, Chevron joined a group that included BP (NYSE: BP  ) , Italy's Eni (NYSE: E  ) , and Norway's StatoilHydro (NYSE: STO  ) in reaching settlements with Chavez.

Chevron's difficulties notwithstanding, I'm still cautiously optimistic about the company. With a reasonable valuation and a good dividend yield -- not to mention my contention that crude prices are headed higher -- Chevron deserves a place on your watch list.

For related Foolishness:

StatoilHydro ASA is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor David Lee Smith doesn't have financial interests in any of the companies mentioned above. He does, however, welcome your questions or comments. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 907815, ~/Articles/ArticleHandler.aspx, 9/20/2014 10:22:50 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement