Crude oil and natural gas producer Chevron Corporation (NYSE:CVX) may face daily work stoppages at two of its liquefied natural gas (LNG) production facilities in Australia. As a result, this integrated energy company may lose billions of dollars in exports. Chevron is the largest producer of LNG in Australia.
The continued conflict between the labor union and the company over pay and other matters would cause the workers at two of Chevron’s natural gas projects (Gorgon and Wheatstone, which account for 5% of the world’s LNG capacity) to start rolling stoppages and work bans. This could disrupt production and eventually result in export losses.
The workers’ union, Offshore Alliance, said that its lawyers have already notified Chevron about plans for protected industrial action starting next week (September 7). According to a Reuters report, workers initially plan to stop work for seven hours on September 7 and increase it to 10 and 11 hours on consecutive days.
While Chevron continues negotiating with union officials, a prolonged delay in resolving the issues could hurt the company. Against this backdrop, let’s look at what Street recommends for CVX stock.
Is Chevron Stock a Good Buy Now?
It is yet unclear how the discussions with union representatives will turn out. However, the business has impressed with its resilient earnings base, ability to generate strong cash flows, and enhance shareholder returns. Chevron returned $7.2 billion to shareholders in Q2, reflecting an increase of 37% year-over-year. Nevertheless, lower average oil and gas prices keep analysts cautious in the short term.
Chevron stock has received nine Buy and five Hold recommendations, translating into a Moderate Buy consensus rating. Investors should note that these ratings were provided before the unions plan to stop work. Any significant disruption from the work stoppages could lead analysts to reconsider their recommendations and price target for CVX stock.
Nonetheless, based on analysts’ average 12-month price target of $190.36, Chevron stock offers an upside potential of 18.82% from current levels.
