Chevron's Tengiz Project Adds Scale, Cash Flow and Reach

Chevron Corporation CVX has completed a massive undertaking in Kazakhstan. The $48 billion Future Growth Project (FGP) at the Tengiz oil field, managed through its 50% owned partner Tengizchevroil LLP (TCO), is now fully operational. After an impressive 30-day start-up, this huge effort is already adding 260,000 extra barrels of oil per day. This boost brings Tengiz's total daily production to nearly 1 million barrels of oil equivalent, truly showcasing Chevron's ability to execute large-scale projects and secure its long-term energy supply in Central Asia.

Apart from churning out more oil, the FGP significantly strengthens Chevron's ability to generate cash. The company anticipates receiving a hefty $5 billion in free cash flow from its share in TCO in 2025, which is expected to climb to $6 billion in 2026. This cash comes from a combination of loan repayments and direct dividends. Since Chevron owns half of the project, it gets substantial returns without having to shoulder all the capital costs. This makes the FGP a cornerstone of Chevron's strategy for efficient capital use and returning money to its shareholders.

The project also expands Chevron's influence in the crucial energy infrastructure of Eurasia. This offers valuable flexibility as global politics and potential pipeline issues can shift. With advanced techniques like sour gas reinjection (which puts certain gases back underground to help get more oil out and reduce emissions), modern "third-generation" processing, and fully digitalized operations, the FGP is more than just a simple capacity boost. It's a forward-thinking plan for maintaining high-profit production from challenging oil reservoirs. For investors, Tengiz signifies not just more barrels of oil, but Chevron's commitment to smart, disciplined growth and a strong focus on generating cash.

Global Megaprojects: CVX’s FGP vs. Exxon’s Share and TotalEnergies’ LNG Play

ExxonMobil XOM, Chevron’s larger rival, is also seeing benefits from the massive FGP development at the Tengiz oil field in Kazakhstan. ExxonMobil holds a 25% ownership stake in the TCO venture, the group behind this huge project. This means that as FGP ramps up production, ExxonMobil is certainly receiving its share of the increased oil output and the associated financial gains.

Meanwhile, French energy major TotalEnergies TTE is moving forward with its ambitious $20 billion Mozambique LNG project following a halt due to militant attacks in the region. This project represents a major strategic investment for TotalEnergies, focusing on what it sees as low-cost, long-life assets. Like other big energy projects, TotalEnergies' aim here is to unlock significant free cash flow for the company over many years.

CVX’s Price Performance, Valuation and Estimates

Shares of Chevron have gained more than 8% in the past three months.

From a valuation standpoint, Chevron’s forward 12-month P/E multiple stands at around 18.2X, 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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