PM: I am a big fan of Chevron Corp. (CVX:NYSE). Its stock has been beaten down year-to-date. Not so much because of oil prices, but because the company is spending $11 billion ($11B) this year out of a total $35B dollar capital budget on two LNG megaprojects in Australia. Gorgon LNG is set to start up in 2015, and Wheatstone LNG in 2016. Because of these two megaprojects, Chevron is targeting nearly 5% annualized production growth in 2015, 2016 and 2017, which is by far the fastest in its peer group. And as production grows and capital spending flattens, the firm’s free cash flow metrics should improve significantly—which is why I really like this stock.
TER: Any others?
PM: InterOil Corp. (IOC:NYSE) is a special situation in oil and gas that has my attention. The company resides in the higher end of the risk spectrum and it is definitely far from a dividend story. It has a $3B market cap. It is a preproduction E&P company that discovered one of the biggest gas fields in the South Pacific more than five years ago. It is now developing the gas field through a partnership with Total S.A. (TOT:NYSE), which is a major oil and gas company based in France.
Total and InterOil announced this partnership in December of last year and recently finalized all the terms. InterOil has received a $401 million cash payment for selling a portion of its gas to Total. InterOil will also have a stake in an LNG plant slated to be built as a part of the project.
TER: Do you have a target price on InterOil?
PM: InterOil’s stock is trading in the sixties, and we have a $100/share target price. High-risk, high-reward.
TER: Thanks for your time today, Pavel.
PM: Thank you.
Pavel Molchanov joined Raymond James & Associates in 2003 and began work as part of the energy research team, becoming an analyst in 2006. He initiated coverage on the alternative energy/clean technology sector in 2006, followed by the integrated oil and gas sector in 2009. Molchanov has been recognized in the StarMine Top Analyst survey, the Forbes Blue Chip Analyst survey, and The Wall Street Journal Best on the Street survey. He graduated cum laude from Duke University in 2003 with a Bachelor of Science degree in economics, with high distinction, writing his senior honors thesis about OPEC’s oil output policies.
Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Peter Byrne conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services.
3) Pavel Molchanov: I own, or my family owns, shares of the following companies mentioned in this interview: Chevron Corp. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.