(CVX) Chevron Wins Bulgarian Approval for Shale Gas Exploration

Chevron Corp. (CVX) has secured a five-year permit from the Bulgarian government for the exploration of shale gas deposits in northeastern Bulgaria.

The company will make a 30 million euro payment to the Bulgarian government to commence shale gas exploration in the field, which – as per initial estimates – is expected to have the potential reserves between 300 billion and 1 trillion cubic meters of shale gas.

Last month, the U.S. oil giant won a tender offer to explore and consequently develop the 4,398-square-kilometer (1,698-square-mile) Novi pazar field.

Chevron also has plans for a five-year project worth 50 million euros ($72 million) as well as an environment protection venture in which it will invest 4 million euros ($5.8 million).

Bulgaria requires nearly 4 billion cubic meters of gas a year and falls back on Russia for natural gas supplies. Hence, the country is desperately trying to diversify its potential resources and planning two tenders for shale gas exploration in northeastern Bulgaria for which offers will be submitted by the end of this month.

The Balkan country is also trying to develop a network for gas transportation to its neighbor Greece in 2014 and collect gas from Azerbaijan through an interconnector system.

San Ramon, California-based Chevron is one of the largest publicly traded oil and gas companies in the world, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.

The company boasts of an impressive business model, with a greater focus on upstream activities. Chevron also possesses one of the healthiest balance sheets in the industry, which helps it to capitalize on investment opportunities with the option to make strategic acquisitions.

Hence, we maintain our long-term Neutral recommendation for the company. Chevron, which competes with Total SA (TOT), Statoil ASA (STO) and PetroChina Co. Ltd. (PTR), currently retains a Zacks #3 Rank (short-term Hold rating), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months.

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