Summary
Melius upgraded Chevron to Buy from Hold on Monday and established a $205.00 price objective, implying upside from the stock's trading level of $183.74. The firm emphasized Chevron's emphasis on returning cash to shareholders through dividends and buybacks, a measured approach to exploration concentrated on high-impact frontier regions, and a strategic change in the Permian toward cash harvesting rather than volume growth. Melius additionally identified potential upside from changes in Venezuela and highlighted recent operational and corporate developments that support its view.
Analyst move and market context
The upgrade by Melius raises Chevron's recommendation to Buy and sets a price target of $205.00, compared with the company's then-trading price of $183.74. The stock is trading close to its 52-week high of $186.52 and has produced a year-to-date return of 20.56%.
Shareholder returns and capital allocation
Melius pointed to Chevron's focus on distributing cash to investors as a core rationale. The firm noted Chevron's long record of shareholder payouts, observing that the company has raised its dividend for 38 consecutive years. At the time referenced, Chevron's dividend per share stood at $7.12, translating to a yield of 3.91%.
Exploration strategy and geographic exposure
The analyst highlighted an increase in exploration activity directed at high-impact frontier areas. Melius also cited Chevron's entry into Libya via a contract for Area 106 in the Sirte Basin as part of the company's broader push to expand global exploration efforts. In addition to Libya, the firm referenced a substantial engineering and construction contract Chevron awarded to Subsea 7 for work in the Eastern Mediterranean Sea, valued between $150 million and $300 million, with offshore work expected to commence in the first quarter of 2028.
Operational posture in the Permian and Venezuela considerations
Melius described a strategic shift in Chevron's Permian operations away from production growth and toward cash harvesting. The analyst also pointed to potential upside stemming from changes in Venezuela, suggesting that removal of the Venezuelan Navy from Guyana could open up roughly another one-third of a block, which would be beneficial to both Chevron and Exxon Mobil. Separately, the article noted that Venezuela's Amuay refinery had restarted basic services after a power blackout and was preparing to resume processing activities.
Leadership, deals and management changes
Melius underscored CEO Mike Wirth's leadership since 2018, citing a record of disciplined mergers and acquisitions, consistent cash generation, and strategic growth initiatives. The firm cited Chevron's acquisition of Hess as a pivotal transaction that provided access to the Guyana basin. It also pointed to a recent reshuffle of Chevron's management team that prioritized younger, internally developed leaders.
Street context and differing views
Not all analysts are aligned with Melius. TD Cowen reiterated a Hold rating on Chevron with a $168 price target, emphasizing the company's focus on margin expansion rather than production growth and noting that TD Cowen does not expect additional near-term capital allocation to Venezuela. TD Cowen also flagged Chevron's ongoing operations in the Permian Basin and attention to opportunities in the Middle East.
Implications
Melius framed Chevron's investment profile as differentiated by a preference for value over volume and a shareholder-return approach that contrasts with European peers that have scaled back buybacks. The combination of disciplined capital allocation, focused exploration, and geopolitical developments in regions such as Venezuela were presented as the principal drivers behind the upgrade.
Key points
- Melius upgraded Chevron to Buy from Hold with a $205.00 price target; the stock was trading at $183.74 and has returned 20.56% year-to-date.
- The firm highlighted Chevron's shareholder-return focus including dividends and buybacks and noted the company's 38-year streak of dividend increases, with a current yield of 3.91% and dividend per share of $7.12.
- Melius cited increased exploration in high-impact frontier regions, a shift to cash harvesting in the Permian, potential upside related to Venezuela, and recent corporate moves such as the Hess acquisition and management reshuffling.
Risks and uncertainties
- Geopolitical and operational uncertainty in Venezuela could affect potential upside tied to Guyana-related developments - this impacts upstream oil and exploration exposure.
- Differing analyst views, illustrated by TD Cowen's Hold rating and $168 target, point to uncertainty around capital allocation priorities, particularly regarding additional investment in Venezuela - relevant to investor returns and capital markets sentiment.
- Execution risk tied to frontier exploration and large offshore projects, such as the Subsea 7 contract in the Eastern Mediterranean, could influence project timelines and costs - this affects offshore services and upstream project delivery.