Chevron Gains An Edge (COP)(CVX)

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Chevron will increase capex 20% next year to almost $20 billion. Exploration of new fields in the Gulf of Mexico are expected to fuel much of this. Conoco, on the other hand, is cuttin capex by 25% to $13,5 billion.

Wall St should probably like the move by Chevron more, even though it is putting out a larger sum.

Chevron’s production has been flat for several years, between 2001 and 2005. Oil reserves in the Gulf and elsewhere could remedy that.

Conoco has recently completed development of Russian oil fields Lower capex will allow it to cut costs and raise dividends.

But, longer term, companies with larger development opportunities should do better than those seeking to get cash to shareholders now.

Chevron’s stock has outperformed Conoco’s over the last year. Chevron is up close to 30% while Conoco is up only 10%. Look for that to continue long range if the Gulf works for Chevron.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own shares in companies that he writes about.