Chevron 'Makes a Wise Decision' in Withdrawing from Bidding War

Source: Streetwise Reports 05/10/2019

Thoughts on the latest development and answers to some related lingering questions are provided in a Raymond James report.

In a May 9 research note, Raymond James analyst Pavel Molchanov reported that Chevron Corp. (CVX:NYSE) bowed out of the acquisition battle for Anadarko precipitated by Occidental in early April.

“With today’s decision that Chevron will not attempt to outbid Occidental’s $76 per share buyout proposal, Chevron shareholders can breathe a sigh of relief,” Molchanov commented. “This decision by Chevron management is entirely correct,” and by the increase in the company’s stock price, the market seems to agree. Now, he added, shareholders can focus on the company’s strong fundamentals.

Molchanov answered the question of whether Chevron will pursue acquiring a different company or asset. First, he highlighted the company does not need to expand its portfolio via large-scale mergers and acquisitions. It has plenty of growth opportunities within its current asset base, including in the Permian, Tengiz, deepwater Gulf of Mexico, Argentina and Kitimat LNG. However, he noted Chevron likely will at some point “buy something,” but “it ought to be bolt-on deals rather than megamergers.”

The analyst clarified another uncertain point in indicating Chevron will maintain the annual share buyback increase to $5 billion it announced in early April. “The $1 billion break-up fee to be received from Anadarko (that is to say, Occidental) is helping in this regard,” Molchanov noted, but regardless, free cash flow estimates for the company cover it.

Molchanov reiterated Raymond James’ Outperform rating and $132 per share target price on Chevron, whose stock is now trading at around $122.99.

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Disclosures from Raymond James, Chevron Corp., May 9, 2019

ANALYST INFORMATION

Analysts Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system.
Several factors enter into the bonus determination, including quality and performance of research product, the analyst’s success in rating stocks
versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.

The covering analyst and/or research associate owns shares of Chevron Corporation.

The analyst Pavel Molchanov, primarily responsible for the preparation of this research report, attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.

RAYMOND JAMES RELATIONSHIP DISCLOSURES
Certain affiliates of the RJ Group expect to receive or intend to seek compensation for investment banking services from all companies under
research coverage within the next three months.

Chevron Corp.: The covering analyst and/or research associate owns shares of the common stock of the issuer.

Raymond James & Associates, Inc. makes a market in the shares of Occidental Petroleum Corporation, Anadarko Petroleum Corporation and Chevron Corporation.

Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories,
is available here.

( Companies Mentioned: APC:NYSE,
CVX:NYSE,
OXY:NYSE,
)

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