Chevron’s (CVX) critical $45 billion Tengiz field expansion project in Kazakhstan will “reduce some work” related to basic production and continue only critical work due to a coronavirus outbreak.
The venture is run by Kazakhstan’s biggest oil producer Tengizchevroil (TCO) – which is 50% owned by Chevron, with the remaining 50% split between Exxon Mobil Corp (XOM), Russia’s LUKOIL and Kazakh state energy firm KazMunayGaz.
Kazakhstan has already reported over 1,000 coronavirus cases, including a small outbreak at a camp for workers near the Tengiz field.
“As a result of the confirmed COVID-19 cases among our contractor and subcontractor workforce, over the next several weeks… TCO will reduce activities and personnel to ensure their safety and to minimise the impact of the pandemic on our operations and construction activities,” the company said in a statement.
It stated that “only certain activities that are on the (expansion) project’s critical path will continue”.
“TCO notes that these measures have been implemented in order to protect the health and safety of the Tengiz workforce and are not related to current market conditions,” it said.
Meanwhile Chevron confirmed to Reuters that it is “fully committed to the project’s expansion.”
Even though CVX is trading down 30% year-to-date, analysts remain bullish with a Strong Buy analyst consensus on TipRanks. CVX’s $107 average analyst price target translates into 26% upside potential from current levels. (See Chevron’s stock analysis on TipRanks)
“We see the key delivery risk for Chevron being the Tengiz growth project, and given the ~50k people working on the project, it is clearly likely to be impacted over time should travel restrictions be extended” commented RBC Capital’s Biraj Borkhataria on April 14.
However the analyst did add that “a slowdown would likely result in lower capex in the near term, which some may see positively.”
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