Global oil and energy companies are being faced with the pressure of ramping up their investments in clean energy projects to appease their major shareholders and activist groups. However, multinational oil and gas giant Chevron Corporation (NYSE:CVX) knows how to play this game differently. Yes, the company is slaying it! The oil giant boasts a solid balance sheet and is expanding its footprint in both traditional and renewable energy markets.
Chevron Is Expanding in Both Markets
Chevron seems to be firing on all cylinders to exploit current market opportunities. Its Permian Basin production is expected to grow by more than 15% year-over-year in 2022. Further, considering the supply constraints and demand levels in Europe amid the Russia-Ukraine crisis, it is developing its liquefied natural gas business.
Following the acquisition of Renewable Energy Group (REG), Chevron’s new business segment, Chevron Renewable Energy Group, is expected to enhance the company’s renewable fuel production capacity to 100,000 barrels per day by 2030. The company is looking to fortify its grip on renewable natural gas and fuels and hydrogen production in the coming years.
Chevron Is Stuck Between ESG & Anti-ESG Activists
Industry experts argue that large asset managers create direct and indirect pressure, particularly on oil and energy behemoths, to comply with the ESG standards, thereby fulfilling their personal, social, and political motives. However, anti-ESG activists have been insisting that such corporations prioritize profits and business over such agendas. Interestingly, BlackRock, State Street, and Vanguard Group are some major index-fund providers that own about a 20% stake in Chevron.
The Wall Street Journal recently reported that Vivek Ramaswamy, an anti-ESG activist, asked Chevron to invest in capital projects to boost oil production. Notably, Mr. Ramaswamy’s recently launched Strive U.S. Energy ETF (DRLL) fund holds approximately a 0.02% stake in the oil giant.
Is CVX a Good Stock to Buy Now?
As of now, CVX stock seems to be a decent option to invest in. Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 11 Buys and five Holds.
CVX stock scores a ‘Perfect 10’ on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform the market. Also, financial bloggers are 87% Bullish on CVX stock, compared to the sector average of 72%.
TipRanks data shows that hedge funds, too, are bullish about the company, as they bought 2.9 million shares of CVX stock in the last quarter.
Conclusion: Chevron Striking the Right Chords
Chevron is having a wild run on the bourses as the CVX stock is up 35.5% so far in 2022, largely backed by robust demand and high oil-and-gas prices. The company’s solid balance sheet boasted cash and cash equivalents of around $12.03 billion as of June end. The solid cash balance can support Chevron last year’s pledge to triple its spending to $10 billion on low-carbon projects through 2028. Further, Chevron stock’s average target price of $179.75, signals a 17.1% upside potential from the current levels.
Finally, if in doubt, investors can take cues from the Oracle of Omaha. Warren Buffett’s Berkshire Hathaway holds approximately 8% stake in Chevron, making it the largest individual shareholder, according to FactSet data.
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