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The commodity downturn that began in the second half of 2014 has severely impacted most of the oil and gas companies across the globe, including the US-based integrated energy company, Chevron Corporation. The oil and gas giant’s revenue and EBITDA dropped close to 40% in 2015, due to the weak commodity prices throughout the year. As a result, the company’s stock dropped from its all-time high of $133 per share to close to $100 per share, representing a drop of more than 30% since mid-2014. Based on the current commodity prices, and the market trends, we forecast a gradual recovery in crude oil prices over the next couple of years. We estimate crude oil to rebound to around $70 per barrel by 2018 in our base case. However, in case the market conditions improve over the next few quarters, due to the Organization of the Petroleum Exporting Countries or the US oil producers cutting down their high level of production, or stronger-than-expected global demand for oil, crude oil prices could surge back to almost $100 per barrel by 2018. In such a case, we expect Chevron’s 2018 revenue to be approximately 25% higher than our base case estimates. Below, we show how each division would perform in the aforementioned base case and upside case. |
