NEW YORK (TheStreet) -- Chevron Corp. (CVX - Get Report) is planning to sell its stake in Australian oil refining business Caltex Australia Ltd. (CTXAY) for almost $3.6 billion as the oil and energy company looks to remove some of its assets in order to help its balance sheet against declining oil prices.
On Friday, the company said it entered into an underwriting agreement to unload its 50% interest in Caltex. The company is the owner of an oil refinery in Brisbane and about 1,800 gas stations across the country, according to the Wall Street Journal.
The company said it will sell its stake to a broad range of Australian and global equity market institutional investors.
"This transaction reflects Chevron's commitment to regularly review our portfolio and generate cash to support our long-term priorities. It is aligned with our previously announced asset sales commitment," Michael Wirth, the executive VP of Chevron's downstream and chemicals business, said in a statement.
Separately, TheStreet Ratings team rates CHEVRON CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHEVRON CORP (CVX) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CVX's debt-to-equity ratio is very low at 0.18 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 0.94 is somewhat weak and could be cause for future problems.
- CVX, with its decline in revenue, slightly underperformed the industry average of 19.6%. Since the same quarter one year prior, revenues fell by 22.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CHEVRON CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- CHEVRON CORP's earnings per share declined by 28.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CHEVRON CORP reported lower earnings of $10.14 versus $11.09 in the prior year. For the next year, the market is expecting a contraction of 63.2% in earnings ($3.74 versus $10.14).
- You can view the full analysis from the report here: CVX Ratings Report