DBRS Confirms Chevron Corporation at AA, Stable Trend

DBRS has today confirmed the Issuer Rating and the Senior Unsecured Notes and Debentures rating of Chevron Corporation (Chevron or the Company) at AA with a Stable trend. The rating confirmation is underpinned by Chevron’s superior business and financial risk profiles, which remain strong and among the top in the industry. The Stable trend is reflective of DBRS’s expectation that, while being challenged by significant cost overruns in its mega LNG projects and being exposed to potential delays related to Deepwater projects, Chevron’s well-diversified projects portfolio keeps it on track to grow its production over the medium term while maintaining a strong balance sheet.

Chevron’s business risk profile continues to be supportive of a strong AA-rated entity with (1) a geographically well-diversified presence in all key production basins globally, (2) superior size with more than 2.6 million barrels of oil equivalent production per day (boe/d) and (3) strong growth prospects, with more than 15 projects starting up over the 2014-2017 period with an anticipated 20% increase in production. Chevron’s well-integrated operations with technologically advanced downstream segment provides the Company with superior flexibility and strong access to higher-priced markets.

With a number of capital-intensive and complex LNG and Deepwater projects in its growth portfolio, Chevron remains vulnerable to a very high level of capital spending in the near term (upstream comprises more than 90% of capital spending). Capital expenditure (capex) is expected to remain elevated at nearly $40.0 billion annually, which would likely result in significant free cash flow deficits until incremental cash flow from the anticipated increase in production ramps up. Chevron has a strong financial risk profile, with all key credit metrics reflective of considerable balance sheet capacity within the AA range. DBRS expects Chevron to fund its free cash flow deficits with planned asset divestitures ($10.0 billion planned for the 2014-2016 period), cash on hand and incremental increase in debt. As a result, it is DBRS’s expectation that Chevron will likely experience some weakening in its credit metrics over the growth phase (2014 to 2017), while key credit metrics remain well within the current rating category.

Overall, DBRS views Chevron as one of the few multinationals operators with the ability to withstand a severe economic downturn.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is Rating Oil and Gas Companies, which can be found on our website under Methodologies.