US energy company Chevron is due to report earnings on Friday. Earnings per share is forecasted at -$0.89. In Q1 the company reported earnings of $1.93. This was well above expectations of a $0.65 EPS.
However, as a result of the disruption caused by the COVID-19 crisis, the market is now expecting Chevron to record a loss in Q2.
Chevron To Purchase Noble
It was reported earlier this month that Chevron is due to purchase oil and gas producer Noble for around $5 billion in stock. This will mark the first major energy deal since the COVID-19 crisis struck.
The decline in energy prices saw the shares of many energy companies crashing over the course of the pandemic. However, these conditions created opportunities for those companies which were able to weather the storm. Chevron reported Q1 revenues of $8.5 billion following its withdrawal of a $33 billion bid for Anadarko.
With the purchase of Noble, Chevron will now have access to the company’s Leviathan oil field. The oil field is just off the coast of Israel and is the biggest one in the eastern Mediterranean. With this access, Chevron becomes the first major energy company to enter the Israeli market.
Speaking with Reuters regarding the purchase, Chevron CEO Mike Wirth said:
We certainly are mindful of the fact that there are political differences and tensions” between Israel and neighboring countries where Chevron also has business interested but insisted that Chevron was “apolitical” and “a commercial actor” adding that “we engage with all of our different stakeholders as we go through something like this”.
Activists Protesting The Deal
However, the move has been divisive and activists in Israel have protested the sale, accusing Chevron of corruption. During a Knesset climate change meeting on Monday, activists pointed to Chevron’s poor pollution record as well as its failure to honor a $9.5 billion payout to Ecuadorian tribes who won a court order against the company.
Activists also pointed to chevron’s poor record with cleaning up oil spills in other parts of the world, calling the company “unreliable and immoral”.
Following a near 60% crash from 2020 highs, chevron shares have since recovered around two-thirds of the sell-off. Price is hovering around the 91 mark, trading up 1% pre-market on Tuesday.
Chevron Holding Above Key Support
The recovery rally in Chevron was capped around the 100 level, with price trading back down to the 82.55 level which is currently holding as support. Price now trades back above the 89.97 level. While above here, focus is on a continued grind higher with the 95.39 level the next resistance to watch, where we also have the bearish trend line from 2020 highs creating additional confluence.