Is Chevron’s Stock Still Attractive After Earnings?

T = Trends Support the Industry in which the Company OperateOil Barrels

There’s a lot of thinking being done about the future of the oil industry. Oil prices dropped about $6 dollars per barrel in the third quarter of 2012 compared to 2011, and the decline has hurt oil companies across the board.

The public International Energy Agency Oil Market Report points out that with the fiscal cliff looming in the United States and global economic outlook still weak, oil prices hit four-month lows during October. The forecast for fourth-quarter global oil demand was cut by 290,000 barrels per day to a total of 90.1 million bpd.

The increasing role of natural gas in the energy mix is changing the types of acquisitions supermajors are making. Hydraulic fracturing and horizontal drilling have made accessing shale oil and gas reserves much more financially feasible, and as a result production in North America is ramping up. The IEA predicts that North America will become the world leader in oil production by 2020. Exporting U.S. oil is slated to look very attractive in the coming future.

By successfully drilling in Australia and Indonesia, and a buying land in Poland and Bulgaria, Chevron has strengthened its global position. Oil and gas companies have been dubious about inland European production, but advancing technology makes shale deposits there easier to access. The vast majority of demand for oil and gas heading through 2035 is expected to come from China, India, and other rapidly industrializing nations. OECD nations are expected to offset increased energy demands with higher efficiencies and renewable energy. Strong production facilities in Australia and Indonesia can help Chevron get ahead of U.S. exports.