It's time to buy some stock in Chevron Corporation (CVX) - Get Report .

There are three broad reasons. The first is that oil prices look set to surge in the coming months. Secondly, the shares are cheap compared to the company's peers. And lastly, the firm's expansion plans should continue to add profitability, even if energy prices dip.

Given that Wall Street thinks the stock could provide investors with double-digit returns in the next year, now is the time to act. 

Permian Plans

At the company's analyst day on Tuesday, Chevron said it would further expand its production, primarily in the Permian Basin of the U.S. Southwest, where huge energy deposits are located. This announcement should be greeted with glee by anyone who owns the stock.

"There's lots oil there, and it's very easy oil to bring to the surface," says Adam Johnson, a former professional oil trader and author of the Bullseye Brief financial newsletter. 

He says that it is possible to extract the energy at the equivalent of $30 a barrel or in some cases even lower. Put another way, pumping oil in the Permian will continue to be highly profitable even at lower prices than the recent futures prices of $66 a barrel for Brent crude on the CME futures exchange.

"You are making a boatload of money," says Johnson.

There is also zero political risk for Chevron in extracting oil in the Permian Basin. Political risk is often used to describe the possibility that a hostile government takes over the oil operations of a company, or that a war breaks out. Oil companies operate in many politically hostile environments.

Swiss financial services firm UBS says the move into the Permian area will help guarantee revenue growth for the medium term and allow management some flexibility. 

This gives "management an awful lot of discretion in strategic direction," states a recent report from UBS. In simple terms, the chiefs at Chevron should have the cash resources to weather storms and pursue risky projects. 

Wall Street Is Bullish

Wall Street analysts are bullish on continued price appreciation of the stock. Plump dividends and a major planned stock buyback will add more to the equation.

UBS has a 12-month price target on Chevron of $135, which is about 10% above the current price of $123. A projected dividend should add a further 3.8%. 

Morningstar says the stock is worth a tad more at $136, while New York-based research company CFRA has a more cautious target of $128.

Better still, the company's leadership seems intent on keeping investors happy.

"Management will maintain a focus on shareholder returns with plans to repurchase $4 billion [of] shares this year," states a recent report from Morningstar. Over the next four years, the company plans to distribute up to 45% of its operating cash flow to shareholders, based on Brent crude oil prices staying above $60 a barrel, Morningstar notes.

Oil Headed Higher

As I wrote earlier this week, oil prices look set to rally. One catalyst is pending production cuts by Saudi Arabia, which is one of the largest producers in the world. And a second is a likely tightening of sanctions on Iran, which would mean lower supplies of Iranian oil on the world market. 

That lower supply should send prices crude prices higher and that should like the earnings of oil companies including Chevron.

However, be warned that many oil traders aren't yet entirely taking these likely changes into account. Once they wake up to these pending supply cuts, the oil market will probably be quite volatile. That means prices for crude could swing wildly from day to day, and that, of course, will reverberate through the oil stocks including Chevron.

Cheaper Than Its Peers

Chevron's stock is cheap relative to its big oil peers. It currently trades at a forward price earnings ratio of 17, compared to 17.5 for ExxonMobil Corp (XOM) - Get Report and 19.4 for ConocoPhilips (COP) - Get Report , according to data from Morningstar.

That partially reflects the fact that the operating performance of Chevron slightly lags that of Exxon and Conoco when measured by return on assets, which is a closely watched financial metric. 

However, as mentioned, a move into extracting more energy from the Permian basin could help the firm catch up.

The author owns none of the securities mentioned in this story.