Chevron's Lithium Push: How Big Oil Is Powering the EV Future

Chevron Corporation CVX is making a significant move into the lithium business. The energy giant just acquired 125,000 acres across Texas and Arkansas in the Smackover Formation, marking its first official step into commercial lithium production. This essential material is crucial for manufacturing electric vehicle (EV) batteries.

The company plans to use the Direct Lithium Extraction (DLE) technology. This method promises to be quicker and more efficient than traditional mining, all while having a smaller impact on the environment. The Smackover Formation, known for its oil history, is now recognized as one of North America's richest lithium sources.

Chevron's decision reflects a broader strategy to diversify beyond oil and gas. The company is leveraging its extensive experience in drilling, managing reservoirs, and handling fluids for this new venture. This shift comes at a time when there's increasing demand for domestically produced battery materials, as the United States aims to secure its critical mineral supply chains amid global uncertainties.

Chevron's move into lithium isn't just a small side project; it shows a dedication to building a lasting, scalable business in energy transition materials. By utilizing its deep operational knowledge, Chevron is set to become a key player in the U.S. lithium supply chain. This step highlights not only a diversification of its portfolio but also Chevron's commitment to powering the electrification age and strengthening U.S. energy independence.

Peer Moves: ExxonMobil and Occidental’s Lithium Push

Chevron’s larger rival, ExxonMobil XOM, is already a step ahead in the lithium race. Back in 2023, the company secured 120,000 acres in the Smackover Formation, showing its early commitment to this critical mineral. ExxonMobil plans to leverage its deep expertise in underground operations and DLE technology, with an ambitious goal to produce enough lithium to power over one million EVs every year by 2030. The company has already signed supply agreements, including a major deal with South Korean battery manufacturer LG Chem. ExxonMobil is building a commercial facility in Arkansas, targeting first production by 2027.

Occidental Petroleum OXY, through its TerraLithium subsidiary, is also making an ambitious play in the lithium market. The company holds significant land in Arkansas and has partnered with Berkshire Hathaway in California's Salton Sea region. Occidental Petroleum’s focus is on extracting lithium from geothermal brines using proprietary DLE methods. This approach isn't just about churning out lithium but also aims for a low-carbon production method. This lithium venture naturally fits with Occidental Petroleum's larger goals of carbon management and decarbonization. The company sees lithium as a logical extension of its strategy to transition toward cleaner energy.

CVX’s Price Performance, Valuation and Estimates

Shares of Chevron have gained more than 5% in the past month.

From a valuation standpoint, Chevron’s forward 12-month P/E multiple stands at around 18.5X, below the S&P 500. CVX carries a Value Score of B.

CVX beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two.

The stock currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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