1 The situation: Why Venezuela is so important for Chevron
- Venezuela has the largest oil reserves in the world, especially heavy oil for the refineries in the Gulf of Mexico, which is important for the USA
- Chevron is the only US company that already has an active infrastructure and joint ventures on site thanks to a special license (General License 41)
- a political upheaval leading to a more US-friendly government would turn Chevron from a "tolerated guest" into a key player in the reconstruction process
2. possible positive effects
- Massive production boost: Chevron could double production at its joint ventures (such as Petropiar and Petroboscan) from the current level of around 100,000-150,000 barrels per day (bpd) in the short term and increase it well beyond that in the long term
- Debt repayment: In the past, Chevron has used oil exports to pay off billions in outstanding debt owed to Venezuela's state-owned oil and gas company (PDVSA), a more stable environment would accelerate this cash flow return
- Strategic advantage: While competitors (e.g. $XOM (-1,6%) , $SHEL (-2,73%) ) would first have to negotiate new contracts, Chevron can immediately ramp up existing infrastructure
3. risks and red flags
- 🚩 Capex explosion: Venezuelan infrastructure (pipelines, refineries) is in a desolate state after years of neglect
- If Chevron announces that it will massively increase its capital expenditure (CapEx) beyond the planned USD 18-21 bn to clean up Venezuela, this could reduce share buybacks
- 🚩 Political instability & "resource nationalism": A new government could also try to increase profit shares for the state once production is up and running
- Reports of new taxes, higher royalties or disputes over operational control in joint ventures would be a warning signal
- 🚩 Oil price pressure due to oversupply: If Venezuela quickly dumps millions of barrels onto the global market again, the oil price (Brent) could come under pressure.
- A falling oil price coupled with rising investment costs in Venezuela would undermine Chevron's margins (unit margins)
3. progress with the "Hess synergies" and Guyana
- The integration of Hess is essential for Chevron to underpin the portfolio with extremely low-cost oil (breakeven <$30) - synergy target has already been raised to USD 1.5 billion by the end of 2026
- 🚩 Delays or legal setbacks in accessing the Hess shares in Guyana, e.g. due to arbitration proceedings with ExxonMobil
- Guyana is the "safety net" for Chevron. If the Venezuela coup becomes geopolitically unstable or the oil price collapses due to oversupply, Chevron needs the highly profitable barrels from Guyana to support the dividend and the share price.
As long as Chevron maintains share buybacks and capex discipline, the stock remains a strong investment in my view, despite geopolitical volatility. However, if management starts "throwing good money after bad money" to support political objectives in Venezuela, one should be wary. My position remains in the portfolio, I will not be buying more at the moment.
Any other opinions and points of view? 🤓
