Chevron Corporation (NYSE:CVX) announced this week that it and its partners, including Cobalt International Energy (NYSE:CIE), made another significant oil discovery in the Gulf of Mexico. The discovery at the Chevron-operated Anchor prospect was the oil giant's second major Gulf of Mexico discovery in the past year and represented the 30th oil and gas discovery it made in 2014, capping one of its best years ever with the drill bit.

Looking at Chevron's new anchor
The Anchor prospect is 55% owned and operated by Chevron, while the prospect is also 20% owned by Cobalt, with the rest of the ownership interest divided among two smaller partners. The discovery well, which was drilled 140 miles off the cost of Louisiana, was drilled in 5,183 feet of water and to a total depth of 33,749 feet. That's a mile's worth of water and over six miles in total depth. Along the way, the company encountered several oil-bearing sections of the Lower Tertiary Wilcox Sands.

The company isn't yet sure how much oil Anchor holds, which is why it will begin appraisal drilling later this year. This gives a glimpse toward the long-term view of the company as it costs a lot of money to drill these deepwater wells, and it could be years before the company sees a return on this money. However, the company's long-term view is that the world will continue to need new oil supplies, and it plans to be one of the key players in supplying that oil.

Building a leading position in the Gulf of Mexico
As we see on the map below, the Anchor discovery is just one of several recent discoveries and producing assets Chevron has in the Lower Tertiary Trend of the Gulf.

Source: Chevron Corporation Press Release.

The company's other recent discovery was announced this past October when it, along with BP Plc (NYSE:BP) and another partner, announced the Guadalupe discovery. That find, which has yet to be quantified, also encountered significant oil in the Lower Tertiary Wilcox Sand. Like Anchor, the company plans to run more tests and drill appraisal wells in order to see just how much oil it's sitting on.


Tubular Bells. Source: Hess Corporation.

Once Chevron has a better grasp of the magnitude of its two most recent discoveries, it can sanction a development plan to start producing oil. This past year, the company sanctioned the $6 billion Stampede project, which is led by Hess Corporation (NYSE:HES). The Stampede Field was originally discovered in 2005, but development isn't expected to start until the fourth quarter of this year, and it won't see first oil until 2018, which shows just how long the lead time can be on offshore projects. That said, once it starts producing, it should deliver about 80,000 barrels per day from a field that should ultimately produce 300-350 million barrels of oil equivalent.

Chevron's Gulf of Mexico business isn't just about future oil production, as 2014 saw the company deliver first oil from several projects in the Gulf. Amid slumping oil prices, the company saw first oil from the Jack/St. Malo and Tubular Bells projects late in the year. Tubular Bells, which was first discovered in 2003, didn't see construction start until late 2011. However, now that it's operational, the Hess-led project is expected to produce about 50,000 barrels of oil equivalent per day. Meanwhile, the Chevron-led Jack/St. Malo projects were also discovered more than a decade ago. Now that the projects are producing oil, it's estimated that these fields can produce more than 500 million barrels of oil equivalent over the next 30 years, again showing that these projects require a long-term outlook that spans decades. 

Investor takeaway
Right now, oil is despised by investors as its price continues to collapse. That said, as Chevron has demonstrated, it takes a very long-term view when it invests in oil. The company's own history shows that it can be a decade or more before an offshore discovery is turned into production. Further, the price of oil can vary widely from the time a discovery is made to when first oil is finally delivered, as oil was about $30 per barrel a decade ago and climbed to more than $100 when some of these developments were sanctioned. However, over time, Chevron believes oil prices will be high enough to justify the billions of dollars it will invest in an effort to pull out as much oil as it can from these deepwater fields.