Angelica Govea

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• By
• Angelica Govea
• Ismar Salihbasic
• Leticia Alvarado
• Jose Barron
• Daniel Feazle

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What is Chevron About?
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What is Chevron?

• The fifth-largest energy company in the world
• Headquartered in San Ramon, California
• Involved in every aspect of the oil and gas
  industry, including
• exploration and production
• refining
• marketing
• transportation
• sales

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Chevrons Mission

• To be the global energy company most admired for
  its people, partnership and performance. Beyond
  meeting the world's energy needs, Chevrons goal
  is to be recognized and admired everywhere for
  having a record of environmental excellence.

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The Pioneers Of Chevron

• Charles N. Felton George Loomis
  LloydTevis
• On September 10,1879, in San Francisco, Felton,
  Tevis and Loomis formed the Pacific Coast Oil
  Co., the predecessor to ChevronTexaco with 1
  million in capitalwhich developed into the West
  Coast's leading integrated oil company.

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Background

• In 1906, a consolidation between Pacific Coast
  Oil and Iowa Standard created a new entity,
  Standard Oil Company
• Standard Oil Co. of California created a historic
  partnership with Texaco in 1936, known as Caltex
• On Oct.9, 2001, the shareholders of Chevron and
  Texaco voted to approve the merger, and
  ChevronTexaco Corporation began doing business
  the next day.

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Chevron marked its 125th anniversary in 2004.
Founded in 1879 as the Pacific Coast Oil Co.
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Chevron has operations in approximately 180
countries worldwide
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Facts and Operations

• Chevron and its people take great pride in a
  commitment to community partnerships, social
  responsibility and environmental excellence.
• Diverse and highly skilled global work force of
  more than 47,000 employees
• Global refining capacity of more than 2 million
  barrels of oil per day

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Board of Directors
David J. O'Reilly Chairman of the Board and CEO
Peter J. Robertson Vice Chairman of the Chevron
Board.
Samuel H. Armacost Chairman of SRI
International.
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Products
Motor Oils
Fuel Cleaning Systems
Fuel Additives
Aviation Fuels
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Major Competitors
Largest non-government gas marketer and reserves
holder
Second largest energy company
Leading multinational energy company
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Chevron Texaco Corp Sales of Oil and Gas
Sales of Chevron Texaco Corp States Sales
Figures California 2,902,000 Gulf of
Mexico 3,683,000 Other Countries 43,387,000
Chevrons ongoing commitment to provide products
not only in their home country, but also for the
global community.
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Market Cap.
Top 10 Companies in billions Exxon
Mobil 387.3 BP 230.4 Total SA
140.4 Royal Dutch Petroleum
127.2 PetroChina 126.1 Chevron
124.5 Eni SpA 103.8 Shell Transport
Trading 89.4 ConocoPhillips 83.7 Repsol
YPF SA 31.5 www.marketguide.com
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Financial RatiosGrowth Rates
Rating Poor
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Financial RatiosPrice Ratios
Rating Very Poor
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Financial RatiosProfit Margins
Rating Very Good
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Financial RatiosFinancial Condition
Rating Good
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Financial RatiosInvestment Returns
Rating Very Good
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Financial RatiosManagement Efficiency
Rating Very Good
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Holding Period Return
Current Price is 56.84
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Free Cash Flow and Cost of Equity
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Cost of Equity
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(No Transcript)
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Cost of Capital
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Capital Structure
2005 Industrys Current Debt Ratio
Debt 13
Equity 87
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MM Proposition Chart
With WACC decreasing steadily from 2002-2004,
this would indicate strength in Chevron. Chevron
does not fall under any of the models in the MM
propositions.
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Company Specific News Chevron and Unocal Reach
Agreement with Federal Trade Commission Staff

• One day before the announcement Chevrons stock
  price was 58.78
• The day of the announcement the stock price fell
  to 56.47, then decreased the following day to
  55.21
• The stock price then increased steadily over the
  next few days before falling to below 52 within
  2 weeks.
• This announcement by Chevron proved to be bad
  news to investors.
• This continuous fluctuation in stock price
  displays no form of market efficiency.

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Non-Company Specific News

• Investors received good news upon the
  announcement that Tropical Storm Arlene had
  dissipated and Chevrons biggest platform in the
  gulf would return to full capacity.
• Stock prices of the major oil producers
  experienced increases.
• The stock price climbed 3.33 from 56.01 on June
  13 to 59.34 over the following week.
• The above graph indicates no form market
  efficiency.

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Chevrons Strengths

• Financial Ratios
• Financial Condition
• Current Ratio 1.6 1.1 1.5
• Interest Coverage 51.6 24.7 3.4
• High Returns on Investments
• Return On Equity 28.9 24.4 14.7
• Return On Assets 14.0 11.1 2.5
• Return On Capital 23.6 21.2 7.0
• Free Cash Flow
• Net Income 13,328 7,230 1,132
• FCFE 5,147 5,126 1,501 439
• The company is currently underpriced because Ke(
  DCF model) gt Ke(CAPM)
• 0.0474gt 0.0237
• Beta Low Beta (Low Risk)
• Investors always want a low risk stock with high
  returns.

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Chevrons Weaknesses

• Poor Debt/Equity Ratio
• The current Debt/Equity ratio of Chevron is 22
  which is more than competitors in the industry of
  15. Chevron is using more debt to finance its
  operations however the debt ratio has been
  decreasing since 2002. Despite interest coverage
  being very high compared to the industry
  standard, Chevron still needs to improve its
  Debt/Equity ratio, and they are on the right
  track.
• Poor Growth Rates
• Sales (Qtr vs year ago qtr) 23.10 31.00 11.50
• EPS (Qtr vs year ago qtr) 4.50 60.80 11.90
• EPS (5-Year Annual Avg.) 17.00 17.67 4.71

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Analysts Opinion
Zacks average brokerage recommendation Hold.
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5-Year Stock Price
Since 2002 the price has been increasing.
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Our Recommendations

• We suggest Hold or Buy
• Based on the following
• Positive HPR
• Increasing Cash Flows and Net Income
• Low Beta
• High Returns on Equity, Assets and Capital-
• Stock is underpriced
• Ke( DCF model) gt Ke(CAPM)
• 0.0474gt 0.0237
• Analysts Opinion

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The End