How Australia Will Drive Chevron Stock Higher

Its citizens may drive on the "wrong" side of the road, but Australia is set to become the driving force for Chevron (NYSE: CVX  ) stock. America's third largest company has joined industry peers to pour close to $100 billion into developing its oil and natural gas fields. And for good reason. Australia represents the biggest immediate growth opportunity for the energy industry. It only gets bigger when you consider that its proximity to the Asian market provides an easy destination for liquefied natural gas, or LNG, and big profits. Chevron's leadership position will allow it to reap the biggest rewards.

Australia go boomski
In the midst of our own energy renaissance, it's easy to overlook northwestern Australia as one of the biggest energy plays in the world. The complex offshore natural gas fields have been carved up by large multinationals over the past two decades.

Don't stare at this for too long. Source: Chevron SEC filings.  

Chevron is among the largest owners of reserves in the country, although 93% of its assets were undeveloped at the end of 2012. All of the company's production from the region last year -- 428 million cubic feet of natural gas per day (MMcfpd) -- came from the North West Shelf Project. Those numbers pale in comparison with other geographic regions from 2012:

Don't rely on these numbers for future potential, though. Australia will easily cruise to the top of the list for natural gas production for Chevron as new fields begin operations in the next several years. Partners in the North West Shelf even ponied up $5.4 billion to reinvest in recoverable reserves from the aging field. Chevron expects new assets in the field to start up in mid-2013 and for total production to total 2 billion cubic feet of natural gas per day (MMMcfpd) and 39,000 barrels per day (bpd) of condensate. Chevron owns only a portion of this field, but it will get a big boost from majority stakes in developing projects.   

For instance, the Wheatstone Project will produce 1.6 MMMcfpd of natural gas and 30,000 bpd of condensate. Chevron leads the pack with a 64% stake, while Royal Dutch Shell (NYSE: RDS-A  ) owns 6.4% of the field. Wheatstone will produce 8.9 million metric tons of LNG each year -- most of which is already penciled into supply contracts for Japanese utilities.   

Those numbers are big, but nothing matches the mighty Gorgon Project. The largest single resource development in Australia's history will produce 2.6 MMMcfpd of natural gas and 20,000 bpd of condensate at its peak. Similar to Wheatstone, Gorgon will produce plenty of LNG for Asian markets -- 15 million metric tons, to be exact. Chevron is once again leading development with a 47% stake in the project, followed by Shell and ExxonMobil (NYSE: XOM  ) at 25% each.  

These are some big numbers that can be difficult to visualize, so feast your eyes upon the following infographic.

Foolish bottom line
It can be difficult to breakdown the exact ownership stake in each project and translate that to projections for the top or bottom line. For instance, Chevron's interest in offshore licenses in Wheatstone is 80.2%, while its interest in LNG facilities tied to the project is 64.1%. That is why I focused on totals for each field, but I don't think it matters much. In the end it is pretty clear: Australia represents an amazing opportunity for investors and should continue to drive Chevron stock higher for the foreseeable future.

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  • Report this Comment On June 01, 2013, at 12:10 AM, TMFBlacknGold wrote:

    My apologies for making the second infographic difficult to read with the chosen theme. =/

    --Maxxwell

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