Chevron vs Shell: Which Gulf of America Energy Giant Reigns Supreme?

Chevron and Shell are two of the world's largest energy companies operating in the Gulf of America. Chevron has recently started pumping oil from two new projects, Ballymore and Whale, expected to produce 75,000 and 100,000 barrels of oil equivalent per day, respectively. Chevron is combining its offshore experience with energy-efficient designs, resulting in profitable and environmentally friendly oil production. Shell is also investing in the region, with a focus on reducing emissions and increasing production. Investors are paying closer attention to both companies' activities in the Gulf of America due to the region's importance and high profitability.

Chevron Corporation (CVX) and Shell plc (SHEL) are two of the world's largest energy companies operating in the Gulf of America (GoA), a region that provides about 14% of all the crude oil produced in the United States. Both companies have been drilling for oil and gas in the deep waters of the GoA for decades, and their operations in this region are a vital part of their long-term plans. As developing oil and gas in deep water enters a new era with advanced technology and a focus on reducing emissions, investors are paying closer attention to Chevron and Shell's GoA activities.

Chevron's Gulf of America Operations

Chevron has recently started pumping oil from two new projects, Ballymore and Whale, expected to produce 75,000 and 100,000 barrels of oil equivalent per day, respectively. These projects are part of Chevron's plan to boost its GoA production to 300,000 net barrels of oil equivalent per day by 2026, a 50% increase from 2020 levels. Chevron is combining its offshore experience with energy-efficient designs to produce profitable and environmentally friendly oil. The company’s Anchor platform, which started operating in August 2024, is designed to tap into high-pressure oil reserves. Even older facilities, like Tahiti, which has been producing since 2009, are still thriving thanks to updated models and smarter cost management. Chevron's strategy of using simpler designs and building facilities in pre-made sections helps cut down on development time and costs, making its oil production more efficient and sustainable.

Shell's Gulf of America Operations

Shell is a pioneer in deepwater drilling and remains the biggest producer in the GoA. The company has a list of major projects including Perdido, Stones, Vito, and Whale, highlighting its ability to operate in extremely deep waters. Shell's strategic advantage comes from its focus on replicating designs and using robotics. For instance, the Vito and Whale projects used almost identical designs, which meant engineering work was 50% faster and manufacturing errors were reduced by 75%. Shell's GoA portfolio is anchored by advanced deepwater hubs like Perdido and Stones, enabling efficient tiebacks and extended field life. Shell's upcoming project, Sparta, set to begin producing in 2028, follows a phased, capital-efficient approach. Shell has already reduced methane output in the GoA by 40% since 2016 and even beat its 2023 emissions target by 5%, further strengthening its reputation for environmental responsibility.

Investment Considerations

Over the last year, Shell's stock has remained relatively stable, dropping just 0.1%, while Chevron's stock has dipped 3.3%. Chevron's recent underperformance might mean its stock is undervalued, especially if its ambitious Gulf production goals are met on time. When looking at how much investors are willing to pay for future earnings, Chevron trades at 18.26 times its forward earnings, while Shell trades at 11.29 times. Chevron's higher valuation likely reflects expectations of better profit margins from its growing GoA projects and the positive impact of recently acquired high-value assets from Hess.

The Zacks Consensus Estimate sees Chevron’s EPS to drop by 27% in 2025, but then bounce back strongly with a 23% increase in 2026. Shell's EPS is projected to fall by 20% in 2025, with a slower recovery of 10% in 2026. Both companies currently carry a Zacks Rank #3 (Hold), making it challenging for investors to pick a clear winner. However, Chevron seems to be in a slightly better position right now due to its very clear production targets, smart spending, and a projected stronger rebound in earnings.

Conclusion

Chevron and Shell are both powerful players in the Gulf of America, bringing decades of experience together with modern efficiencies and a good environmental track record. Shell stands out for its sheer size, innovative spirit, and ability to replicate successful projects. Chevron, on the other hand, offers a more focused strategy in the Gulf, with a clearer outlook for higher profit margins and stronger production growth. Both stocks remain compelling options for investors looking for high-quality exposure to one of the world's most resilient and environmentally conscious offshore oil basins.

References

[1] https://finviz.com/news/111977/chevron-vs-shell-in-gulf-of-america-whos-got-the-edge
[2] https://www.alchempro.com/news/chemicals-news/chevron-finalises-hess-deal-adds-guyana-bakken-assets-304097-newsdetails.htm