The discovery of an elephantine oil gusher in a Damam salt dome in 1937 by Chevron (once Standard Oil of California) geologists is the greatest black swan event in modern Arabian history. This oil gusher heralded the birth of Saudi Arabia as the new geopolitical fulcrum and financial superpower of the Middle East and Washington’s closest ally in the region other than Israel and the Shah’s Iran. In 2023, the ghosts of John D. Rockefeller haunts the boardrooms of both Chevron and its peer Exxon (once Jersey Standard), the top two US oil and gas Seven Sisters.
Chevron operates in 100 countries, has a $14 billion capex budget, boasts 7,000 patents, has a best reserve replacement ratio/output growth metrics in Big Oil, trades at a modest valuation multiple of 10.8X earnings and a 3.8% div yield at a time when energy is the only credible insurance policy against what Saddam charmingly called Umm Maarik, the mother of all battles, a replay of the Warsaw Ghetto, Fallujah and the Tora Bora caves.
I believe Mike Wirth is the best CEO among the Sette Sorelle, his capital allocation discipline has been immaculate, as has been the strategy and timing of his takeover bids, notably for shale assets in the Permian Basin and now the Colorado River. Its free cash flow tsunami will exceed $16 a share next year even if Brent trades at 90, which it definitely will not once Bibi and Biden go to war in Gaza and Lebanon.
I must thank the Oracle of Omaha for inspiring me to load up on CVX, given that he now owns 123 million shares or 6.3% of the free float. I bet apno Warren Buffett is a secret Khoja and is Grand Mukhi of the biggest jamatkhana in Nebraska LOL! Chevron will be the big winner in Uncle Sam’s new embrace of Venezuela, this decade’s Iraq/North Sea/Alaska scale windfall with its 304 billion barrels in reserves, bigger than KSA and 3X Abu Dhabi. My friend Rafik Seedat suggested we take a trip to Caracas. Me amigo is not loco but mucho smarto. Chevron owns and operates some of the world’s most profitable energy assets, from the Gorgon LNG complex in Australia to the vast Tengiz oil field in Kazakhstan and 40% of Israel’s Leviathan gas field in the East Med, now secured by two US carrier battle strike forces. Its acreage in the Permian Basin is world class and destined to expand via drilling for shale on the NYSE.
CVX will spend $10 billion on hydrogen, renewable fuels, carbon capture/storage as climate change risk haunts Big Oil. Chevron produced 3 million net BOE but I believe that its footprint in the Permian Basin alone will double from its current 800,000 BOE to 1.6 million BOE in the next 5 years. CVX is my guardian angel in the pantheon of the Seven Sisters as its DNA includes Gulf Oil, Texaco and even Unocal!
Mike Wirth knows how to optimize shareholder value and this is the only kind of captain I want at the helm when the storm clouds darken and the lights go out in the electronic netherworld of global finance.
Also published on Medium.
