A $6 billion mega-petrochemical complex is going to be built in Qatar, Chevron Phillips Chemical (NYSE:CVX) (NYSE:PSX) and QatarEnergy announced a final investment decision on Sunday.
The massive integrated olefins and polyethylene complex at Ras Laffan Industrial City will, according to QatarEnergy, be the largest investment in the company’s history. QatarEnergy will own 70% of the project, with the joint venture between Chevron and Phillips 66 owning the other 30%.
According to QatarEnergy, the complex will start producing ethylene in 2026 and will include an ethane cracker with a 2.1M metric ton/year capacity, making it “the largest in the Middle East and one of the largest in the world,” as well as two polyethylene trains that will produce a combined 1.7M tons/year of high-density polyethylene polymer products, bringing the total petrochemical production capacity to almost 14M tons/year.
In a recent research article published on Seeking Alpha, Leo Nelissen notes that Phillips 66 “has a high yield, solid and rising free cash flow used to support high dividend growth and a balance sheet that allows aggressive buyback.”
Oil prices start out in 2023 in the mid-$70s, or around where they were at the beginning of 2022. Over the past year, they have been everything but steady. After Russia invaded Ukraine, crude oil surged to a high of $120 but eventually fell on worries that the world economy would sputter.
Chevron Stock Analyzed
What will happen with oil prices this year is anyone’s guess. Some analysts predict that oil will return to the triple digits, while others think that if a recession occurs, petroleum prices may decline. Making investment decisions in the energy sector can be challenging due to this unpredictability. Whatever happens with oil prices this year, some energy stocks can prosper. Chevron stock (CVX 0.09%) is one of these.
Chevron should post record cash flows for 2022 when it releases its fourth-quarter and full-year results later this month. Chevron should be able to take advantage of an increase in oil prices in 2023 by increasing production.
Chevron should still be able to keep its financial strength and pay regular dividends to its shareholders even if crude prices go down. This is because it has built up a lot of cash and paid down debt in previous quarters. For instance, Chevron reduced its debt levels in the third quarter for the sixth consecutive quarter, bringing its net debt ratio to just 4.9% as of September 30.
In fact, Chevron is likely to announce in the next few weeks that it will raise its dividends for the 36th year in a row. This ought to support the stock’s 3%+ yield. On the company’s Q3 results call, CEO Mike Wirth said that the company is “well-positioned to deliver value to our shareholders in any environment,” which is helped by the fact that its dividends keep going up. Also, if famous investor Warren Buffett keeps putting the same amount of money into Chevron through Berkshire Hathaway, that could help this oil stock even more in 2023. More information was reported on The Motley Fool.
Featured Image: Unsplash @ Luis Ramirez