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What's In It For Chevron In Gulf Of Mexico?

1833 words - 8 pages

Introduction

Oil, also known as Black Gold, is the world's prime energy source. It is used in everything from internal combustion engines, machinery installed in factories, in power generators that provide backup power during a blackout, etc to almost about any mechanical device. As a result, it is always in demand and because of this high demand, the commodity trades very well at high prices especially when supply is low.

About ten years ago, oil prices were at their most brilliant, almost USD 0.89 per gallon. At this rate, a tank of gas in an average four door sedan filled up for about USD 10.00. Now, that same tank fills up for about USD 40.00.

Over the past century, man has learned ...view middle of the document...

Opponents argue that oil is harmful to the environment since it isn't bio-degradable even though it occurs naturally. Other criticisms include that companies keep digging and digging until we'll eventually run out of it therefore we need to explore alternative sources that are less harmful to the environment.

This article explores Chevron's recent announcement of investing USD 12 Billion in oil drilling and exploration in the Gulf of Mexico.

And yes this lengthy introduction was necessary in order to give the reader an idea of the massive scale and lengths that oil companies are willing to go to in order to boost revenues by oil exploration.
Chevron – An oil giant

Chevron Corporation is headquartered in San Ramon, California and has a presence in more than 180 countries worldwide. Its core business is energy and it focuses on oil, gas and geothermal forms of energy.

It is a publicly traded company on the New York Stock Exchange. Financial figures as of 2012 are as follows; revenue was USD 241.909 Billion, operating income of USD 46.332 Billion, net income of USD 26.179 Billion, total assets of USD 232.982 Billion and equity of USD 137.832 Billion.

Chevron Corporation's (CVX) stock is currently as of this writing in first quarter of 2014 trading at USD 113 on the NYSE index with an average price of USD 112.50 and a 5 year trend analysis shows that the CVX stock price has risen from about USD 52 to it's current price.

What's in it for Chevron really?

To put it succinctly, 1.5 Trillion US Dollars, that's what Chevron stands to gain.

The media and analysts have been abuzz since Chveron made this announcement and has said that it is building two huge oil drilling platforms (oil rigs as they are commonly known) called Jack St. Malo and Big Foot at the Kiewit Fabrication facility located at the South of Texas.

The first oil rig, Jack St. Malo is expected to be deployed by the end of 2013 and Big Foot will make its way in 2014. The former will weigh at 75,000 tons and float in 7,000 feet of water while the latter will weigh about the same and float in 5,000 feet.

The output expected from these oil rigs will be about 230,000 barrels of crude oil per day as suggested by Chevron's general manager of capital projects, Joe Gregory.

All this is very promising in terms of job creation and stock dividends rising but people are still on the fence due to the BP oil spill which happened in the same region back in 2010.

Chevron has issued the following statement to critics and the general public;

“We design the safety risk into the project, we look at the risk avoidance we take of making sure we can fabricate safely. We look at the verification of the designs. Those are important to make sure this facility operates safely every day.”

Whether or not this safety will be guaranteed is any body's guess because accidents can happen.
This is a bit off topic but recall the Chernobyl Nuclear disaster in the late 1980's in Russia. That was...

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