“The Chevron Analysis”
Instructor: Mr. James McCague
Class: FIN 4461
By: Jairo Rivero
Chevron is a world-renowned company that is a leader in the development of energy resources that help drive human progression. The ability to meet the needs of ever-expanding energy consumption is what makes Chevron an innovative and market leading company. When people think of Chevron many think of “Big Oil”, when in fact, its business strategy is very complex and entails: * Exploration and Production (oil and natural gas)
* Manufacturing, Products (lubricants, etc.)
* Transportation (global trading, pipelines, shipping, etc.) * Other businesses (chemicals, mining, power and technology) “The company’s vision is to be the global energy company most admired for its people, partnership and performance“(Chevron.com). With this being said, the company as a whole is built on a solid foundation of core values. These values include: integrity, diversity, trust, ingenuity, high performance, partnership and protecting people and the environment. Established in 1879, by a group of explorers and merchants, the company was initially named Pacific Coast Oil Co. Through the over 100 years of service to consumers and businesses, Chevron has established itself as one of the premier energy production companies in the world. It has even created its own methodology in “The Chevron Way”. Over the years Chevron has strived to achieve efficiency and effectiveness in its business strategy and operational excellence compared to other companies such as Exxon Mobil. Increasing stockholder wealth over the years, Chevron has also has been categorized as a “blue chip” stock (CVX symbol on the S&P 500 and DJIA) because of its stability and profitability. Oil and other natural resources are not unlimited and competition for these resources will become even fiercer. With a vast network of business partnerships and resources Chevron is truly a company that has an “upstream” strategy that other companies will have difficulty surpassing. The characteristics of the industry and nature of Chevron’s products varies. The energy production industry is very aggressive and exploration and production of oil and gas are at the core of its business. Chevron has an extensive array of products and services that its business is comprised of. “Chevron is involved in virtually every facet of the energy industry. It explores for, produce and transport crude oil and natural gas; refine, market and distribute transportation fuels and lubricants; manufacture and sell petrochemical products; generate power and produce geothermal energy; provide energy efficiency solutions; and develop the energy resources of the future, including biofuels” (Chevron 2010 Annual Report). Crude oil exploration and production is a major aspect of the Chevron business plan and is a homogenously similar product to other companies’, such as Exxon Mobil. The company is not extremely unique in the sense that there are many other oil companies with the same products and similar strategy for market expansion (in different regions). The pricing strategy for Chevron’s products is to be competitive but also increase shareholder value. The prices of its products tend to fluctuate because of different factors (politics, laws, demand, supply, economies, wars, etc.) around the world affecting oil prices. There are several opportunities that Chevron has identified and acted upon. The first is in its upstream strategy, to grow profitability in its core areas and build new positions. For example,” it has key operating developments in: Australia (Gorgon Project), Cambodia (exploration wells), Canada (mining), China (acreage), Indonesia (production fields), Kazakhstan/Russia (pipelines), Liberia (deep-water blocks), Poland (shale gas), Republic of the Congo (permits on new wells) and Romania (shale gas exploration blocks)” (SEC.gov).
Chevron’s growth potential looks very...
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