If there's a textbook example of the adage, "It takes money to make money," it might be the energy sector. You need hard capital to search for oil and gas, buy the rights to it, drill wells, and build production rigs and transportation systems, not to mention refineries and handling facilities.
Accordingly, the country's No. 2 player in energy, Chevron
The company is certainly directing the bulk of next year's spending toward increasing production. More than $11 billion -- about 75%, of total spending -- is earmarked for toward the exploration and/or production of oil and natural gas. Another large chunk (about 19%) will be steered toward refining, marketing, and transportation. That capital will be used to enhance the company's gasoline production capacity, augment its ability to use sour or heavy crudes, and build gas-to-liquid (GTL) facilities.
As Fools may suspect, this is a fairly normal part of how the cycle works -- when energy prices go up, energy companies look to invest the increased cash flow into more production and exploration operations. It's also part of why so-called "windfall" taxes are a bad idea. If you curb the industry's ability to invest in new facilities when times are good, you run a very real risk of shortages and bottlenecks down the road.
In a general sense, this is good news for a host of companies across the energy sector. Drillers such as NaborsIndustries
I'm not suggesting that all (or any) of those companies are specifically tied to Chevron. Rather, I'm making a more general statement that as companies like Chevron, ExxonMobil
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).