NEW YORK (TheStreet) -- Chevron (CVX) - Get Chevron Corporation Report reported a drop in production in its latest quarterly results on Friday, as the company's shares dropped by more than 1% and still haven't fully recovered. (As of 1 p.m. Tuesday, shares were trading at $125.83.)

This could be a buying opportunity for long-term investors who consider the six major projects that could revive Chevron's flagging production growth within the next three years.

In terms of price-to-earnings ratio, a metric which is commonly used to measure valuation, with the latest stock price drop Chevron has now become the cheapest vertically integrated oil super-major, as compared to rivals ExxonMobil (XOM) - Get Exxon Mobil Corporation Report, Royal Dutch Shell (RDS.A) (undefined) BP (BP) - Get BP p.l.c. Sponsored ADR Report and Total (TOT) - Get Total SA Sponsored ADR Class B Report.

In its second-quarter results, Chevron's net income increased by 5.6% to $5.7 billion, easily beating analysts' estimates on the back of a better pricing environment and gains on the sale of assets. On the other hand, Chevron's quarterly revenues came in at $57.9 billion, unchanged from last year and below the market's expectations, as its production dropped by 1.5% to 2.55 million barrels of oil equivalents per day.

The results came a day after Chevron received a setback when Apache (APA) - Get Apache Corporation Report, Chevron's partner in the Kitimat liquified natural gas project off the coast of western Canada, decided to pull out from the joint venture.

Apache's move has cast doubts over the future of the LNG export project, which is 50% owned by Chevron. During the earnings conference call, Chevron's head of exploration and production George Kirkland said that the company will stick to its share in Kitimat, meaning it is not going to buy Apache's stake and will likely seek another partner.

On the other hand, Chevron has three major LNG projects slated to come online through 2016 that could lift its flagging output and earnings. Two of these projects, Gorgon and Wheatstone, are located in Australia. These two projects are  known for their infamous cost over-runs. That said, the $54 billion Gorgon LNG project is now more than 83% complete and will begin first production of LNG from next year. Kirkland expects Gorgon, which could produce 15.6 million tons of LNG each year, will become a key driver of production growth from 2015.

Similarly, the Wheatstone project, with its 8.9 million tons per year, also comes with a hefty price tag of $29 billion and is on track to begin production from the final quarter of 2016. Chevron has developed 40% of Wheatstone and will reevaluate the costs once the project is 50% complete.

The third LNG project is located in Angola. It shut down earlier this year due to technical problems. The $10 billion project, which is 36.4% owned by Chevron, started producing LNG in 2013, but could not operate at full capacity due to frequent problems. However, following repairs and testing, Kirkland has forecast that Angola LNG will begin "sustained production" from the latter half of 2015. This project could produce 5.2 million tons of LNG, 63,000 barrels of natural gas liquids and 125 million cubic feet of gas on a daily basis. 

Meanwhile, Chevron is also gearing up to start two major deepwater Gulf of Mexico projects this year. Those should lift the company's crude output. The 44,000 barrels of oil equivalents per day Tubular Bells project is nearly complete, and will begin production from the current quarter. After this, Chevron will start the massive Jack/St. Malo project in the fourth quarter of this year, which should produce 177,000 barrels of oil equivalents per day.

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Next year, Chevron's Big Foot development in the deepwater Gulf of Mexico will also begin commercial operations, producing up to 79,000 barrels of oil equivalents per day. Chevron owns more than 40% of Tubular Bells and Jack/St. Malo and 60% of Big Foot.

Overall, these six projects, along with two large, operating deepwater developments in Nigeria and Brazil, and the Mafumeira Sul project in offshore Angola (expected to begin operations from 2016), will lift Chevron's production by around 900,000 barrels of oil equivalents per day by 2017. And we haven't even considered Chevron's shale assets at the Permian Basin in West Texas, Vaca Muerta in Argentina and the Duvernay and Liard Basin in Canada.

With increasing output from LNG, deepwater and shale assets, Chevron has said that it will gradually increase its production to 3.1 million barrels per day by 2017, an increase of more than 20% from the previous quarter -- even if it suffers a setback that could cut its output by 50,000 barrels a day.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates ROYAL DUTCH SHELL PLC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ROYAL DUTCH SHELL PLC (RDS.A) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has increased to $13,984.00 million or 20.97% when compared to the same quarter last year. In addition, ROYAL DUTCH SHELL PLC has also modestly surpassed the industry average cash flow growth rate of 18.80%.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • RDS.A's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.
  • ROYAL DUTCH SHELL PLC's earnings per share declined by 44.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ROYAL DUTCH SHELL PLC reported lower earnings of $5.18 versus $8.52 in the prior year. This year, the market expects an improvement in earnings ($14.80 versus $5.18).