Right time to sell Chevron

Introduction:

Chevron Corp. (NYSE:CVX) is the second largest energy corporation in the U.S, just falling behind Exxon Mobil and considered as one of the six Super or Big Oil companies in the world. It operates in over 180 countries, having established and using a strong network of retail gas stations which include big brands such as Chevron Corp. itself, Texaco and Caltex. Chevron business integration is a vertical one, with its operations diversifying from producing oil to mining as well manufacturing petrochemical products.

Chevron comes under very stringent environmental regulations, having faced very costly litigations on environmental protection and has a pending litigation on it due to the contamination of the Ecuadorian Amazon rainforest, where the plaintiffs have made a claim of over $24 billion. Nigeria’s political instability has also created challenges to Chevron, which is a substantially large oil export in Africa.

The BP’s oil spill resulted in a six month temporary prohibition on the deepwater drilling of oil in Gulf of Mexico. This resulted in Chevron not being able to work oil rigs having a depth of around 500 feet or more. Norway has also put a temporary restriction on the exploration in deep waters.

Chevron operational and strategic business restructurings:

Chevron has started to streamline its downstream operations, investing in the more profitable upstream ones which include oil exploration and production, particularly because of the slimming margins in the refined products. The last year’s budget showed approximately 85% to the upstream business, while only 15% to the downstream business, which is now expected to face even more shifts in 2014 making it 92% to 8% respectively.

Nearly 2000 jobs, representing 1...

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... CVX stock analysis as per above information, it becomes pretty clear that CVX stock and generally all other energy corporations are losing their value. For a bullish market and optimistic investors, the idea might be favorable in the sense that since the CVX stock prices have hit rock bottom in the recent weeks, it might lead to swing upwards due to the upward momentum of all the Energy stocks. The trap here however is that the CVX stock price, although they look underpriced, acceptable as value for investment, the earnings against such stocks have been in a downward loop since years, and the trend continued in year 2013. This would result in a downward pressures and price movement again in 2014, unless Chevron discretely or oil and energy sector as a whole shows some sign of improvements in terms of supply increase or price per barrel or refined product increasing.