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Chevron (CVX) to Sell a Third of 60% Stake in Block 5, Suriname

Chevron (CVX) will keep a 40% holding in block 5 off the coast of Suriname, while Shell and Paradise Oil Company will each have a 20% and 40% interest, respectively.

This story originally appeared on Zacks

Chevron Corporation’s CVX affiliate Chevron Suriname Exploration (CSEL) recently agreed to sell its 20% holding in Block 5 off the coast of Suriname to a unit of Royal Dutch Shell Plc. (RDS.A) (KE Suriname B.V).

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San Ramon, CA-based Chevron Suriname will own a 40% share in the block when the agreement is completed, while the Anglo-Dutch supermajor Shell will hold a 20% stake. Paradise Oil Company (POC), a wholly-owned subsidiary of Staatsolie Maatschappij Suriname, owns the remaining 40% interest.

Staatsolie appreciates the involvement of a well-known party like Shell in Block 5. The farm-out demonstrates a high level of interest in Suriname's offshore territory, spurred by the recent big discoveries and the country’s  excellent efforts in showing great potential in offshore blocks to the oil and gas industry.

RDS.A's engagement in Block 5 is considered a way to boost chances of greater exploration and its resultant success in offshore Suriname by bringing in more experience to the block's research.

In October this year, Staatsolie signed a 30-year production sharing contract (PSC) with Chevron for the Block 5, which encompasses 863 square miles in size and is located in the shallow offshore region. By signing into this PSC, Chevron obtained exploration, development and production rights. Staatsolie is foraying into offshore activities as a partner through this transaction.

Also, recently, Chevroninked a deal with the government of Equatorial Guinea (EG) for offshore block EG09 in the Douala Basin near the Cameroon border.

Per the terms of the deal, CVX will be run with an 80% stake, the rest being held by GEPetrol, the state-owned oil company. Chevron will implement a work program in collaboration with the government to pave the way for Block EG09 development.

Brief on the Company

Chevron is one of the largest publicly-traded oil and gas companies in the world with operations spread to almost every corner of the globe. A component of the Dow Jones Industrial Average, this energy player recently provided a glimpse of its 2022 capital spending plans.

CVX pegged its capital and exploratory budget at $15 billion, which matches the lower end of its previous estimate of $15-$17 billion. The same is, however, up 20% from the midpoint of its revised 2021 guided range of $12-$13 billion. Chevron is following a capital deployment strategy aligned with its plans to move ahead in tune with the global economic recovery.

Zacks Rank & Key Picks

Chevron currently has a Zacks Rank #3 (Hold). Investors interested in the energy sector might look at the following stocks with a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Occidental Petroleum Corporation OXY is an integrated oil and gas company with significant exploration and production exposure. OXY is also a producer of various basic chemicals, petrochemicals, polymers and specialty chemicals. As of 2020 end, OXY's preliminary worldwide proved reserves totaled 2.91 billion BOE compared with 3.9 billion BOE at the end of 2019.

In the past year, shares of Occidental Petroleum have surged 99% compared with the industry's growth of 96.6%. OXY's 2021 earnings are expected to soar 151.4% from the year-ago reported figure. OXY has also witnessed eight northward estimate revisions in the past 60 days. In the third quarter, OXY achieved its divestiture target of $10 billion by inking a deal to sell off its interest in two offshore Ghana assets for $750 million.

PDC Energy PDCE is an independent upstream operator dealing in exploration, development and production of natural gas, crude oil and natural gas liquids. PDCE, which reached its present status following the January 2020 merger with SRC Energy, is currently the second-largest producer in the Denver-Julesburg Basin. As of 2020 end, PDCE's total estimated proved reserves were 731,073 thousand Boe.

In the past year, shares of PDC Energy have gained 169% compared with the industry's growth of 108.6%. PDCE's earnings for 2021 are expected to surge 273.4% from the prior-year reported figure. In the past 60 days, the Zacks Consensus Estimate for PDC Energy's 2021 earnings has been raised 26.8%. Earnings of PDCE beat the Zacks Consensus Estimate in all the last four quarters, the average being 51.06%.

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