Managing Director Evan Calio of Morgan Stanley says Chevron Corporation (NYSE:CVX) has a large number of projects coming into the market, which is one reason why it is his top pick among the oil & gas majors.
Within the majors, Chevron remains our top pick, where we expect the single largest free-cash-flow inflection relative to the major oil peers. Chevron has the largest number of projects that are coming into the market. These are projects that they have invested in over a long period of time, the last five-plus years, that are going to begin production.
So the free-cash-flow inflection is the capex rolling off, the production starting up, and with that large free-cash inflection amongst majors, we expect the recycle into their Permian Basin position, which is the most differentiated amongst the majors, to drive better dividend growth prospects and dividend coverage ratios relative to peers. So it’s a combination of projects working through the portfolio and the free cash flow being invested into a relatively differentiated higher-return/shorter-cycle growth asset in Texas.