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Gold/Mining/Energy : Chevron Corporation

CVX 155.12

-1.6%

9:30 AM EST

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To: Dennis Roth who wrote (12)	3/12/2008 9:43:57 AM
From: Dennis Roth	Read Replies (1) of 31

Chevron Corp. (CVX): Solid E&P outlook already reflected in shares; remains Neutral rated - Goldman Sachs - March 12, 2008 What's changed Chevron hosted its annual analyst meeting on March 11, providing an update on its outlook and key initiatives. Implications We maintain our Neutral rating on shares of Chevron following today’s analyst meeting. While we came away incrementally more positive about the company’s upstream outlook, we believe the key question for Chevron remains whether 2008 will be the year the company finally returns to positive organic volume growth and 100%+ reserve replacement. We are modeling slightly positive E&P growth in 2008 followed by +3% growth in 2009, while also assuming over 100% organic reserve replacement for the next several years. However, after a prolonged period of disappointing E&P growth and lackluster reserve replacement consider, we recognize that our lowered expectations could still prove to be optimistic. While we continue to favor E&Ps and refiners within Energy, risk/reward for the integrated oils is beginning to look better, particularly since the group has lagged the recent strength in oil prices. Among super-cap oils we prefer ConocoPhillips (Neutral) given its less expensive valuation and Marathon Oil (Buy) among North American integrated oils owing to its significant leverage to our bullish refining outlook. Valuation We see 8% upside potential to our unchanged, $93 12-month target price, which is based on asset value, P/E and cash flow valuation analyses. Key risks Key risk is sustained lower commodity prices.

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