The Zhitong Finance App learned that US oil and gas giant Chevron (CVX.US) exceeded expectations for two consecutive quarters, mainly because the strong increase in crude oil production brought about by the oil and gas giant's recent acquisition helped the company take advantage of profit opportunities when international crude oil prices were higher than 80 US dollars per barrel. Earnings data showed that the company's adjusted first-quarter profit per share was $2.93, which was 3 cents higher than Wall Street analysts' average expectations. The company's latest crude oil production is close to 2 million barrels per day, which also exceeds analysts' expectations. At a time when oil prices are above 80 US dollars, oil and gas giants' crude oil production has become the focus of market attention.

Although Chevron's net profit for the first quarter exceeded expectations, compared to a year-on-year net profit of 6.57 billion US dollars, the company's net profit in Q1 fell to 5.5 billion US dollars. This was mainly due to a decrease in sales margin of refined oil products such as petroleum compared to the previous year and lower natural gas prices. Chevron's total revenue for the first quarter fell 4.1% year over year to US$48.72 billion, but exceeded analysts' general expectations of US$48.42 billion.

Investors and analysts are currently questioning whether Chevron's oil and gas product portfolio has sufficient potential for long-term growth, especially if the $53 billion deal to buy Hess Corp. (Hess Corp.), one of the energy giants, fails.

In March of this year, Chevron's biggest competitor in the US, Exxon Mobil Corp. (Exxon Mobil Corp.) objected to whether Chevron had the right to absorb 30% of Hess's shares in a large-scale oil project operated by ExxonMobil in Guyana. As a result, the deal faced a major obstacle.

ExxonMobil recently publicly stated that it is considering exercising the right to acquire the shares of the oil and gas company Hess in a large-scale offshore oil development project in Guyana, and this is the core asset that attracted Chevron to acquire Hess. ExxonMobil discovered this large oil field in Guyana in 2015 and owns up to 45% of the project.

The focus of the current multi-party dispute is a private contract between Exxon and Hess, which governs the Stabroek block in Guyana. It includes a “preferential right to purchase” clause, which means that if a party wants to sell its shares, it must first make them available to other important players.

During the global COVID-19 pandemic and for a long time thereafter, Chevron's stock price performance far outperformed competitors such as ExxonMobil and Occidental Petroleum, mainly because investors admired its strong financial strength and generous shareholder returns. This is also an important logic that attracted Buffett to hold the stock for a long time. Last year, the company's total share repurchases were close to a staggering $15 billion, or 5% of the shares already issued.

As global oil demand continues to reach new highs and electric vehicle sales decline, oil and gas industry giants such as Chevron and ExxonMobil are once again targeting an increase in crude oil production.

That's why this deal to buy Hess is so important to Chevron. The company's CEO Mike Wirth (Mike Wirth) called it “the industry's most attractive and longest-lived growing oil and gas asset.” It will also help close the valuation gap between Chevron and ExxonMobil, which operates the Stabroek block in this region of Guyana and owns 45% of the shares. The stakes for what can be called the “battle of the century” between the two oil and gas giants couldn't be higher, as it could completely disrupt Chevron's massive $53 billion acquisition of US-based oil and gas producer Hess.

While Voss is still hoping to complete the acquisition of Hess, he is trying to prove to investors that Chevron itself has enough endogenous growth potential. The company's goal this year is to achieve a 4% to 7% increase in oil production without the acquisition of Hess, mainly from the Permian Basin, a new offshore platform in the Gulf of Mexico, and PDC Energy, which was acquired by Chevron in August.

Voss previously said that oil production in the Permian Basin will decline in the first half of this year and then grow strongly in the second half of the year, with an annual growth rate of about 10% for the entire region. In the long run, Chevron's growth prospects face greater challenges. A major expansion project in Kazakhstan is over budget and behind schedule, and shale oil production outside the Permian region is expected to level off.