Chevron, Exxon shares in focus after US intervention in Venezuela

Shares of U.S. oil companies soared in premarket trade on Monday, as investors scrutinize the fallout from the Trump administration’s surprise military operation in Venezuela.

Chevron shares rose 6.4% at 7:40 a.m. ET, with Exxon Mobil up 3%, exploration and production company ConocoPhillips advancing 5.5% and oilfield services giant SLB climbing 8.5%.

The moves come after the U.S. conducted a major military operation in Venezuela over the weekend, capturing Venezuelan President Nicolas Maduro and his wife, Cilia Flores, in an audacious intervention that has sent shockwaves across the globe.

U.S. President Donald Trump has since said the White House will “run” the South American country until such a time that “a safe, proper and judicious transition” can take place.

Venezuela is a founding member of OPEC, an influential energy alliance, and sits on the largest proven crude oil reserves in the world at 303 billion barrels, according to the U.S. Energy Information Administration. That represents roughly 17% of global oil reserves.

Trump has said U.S. investment in Venezuela’s energy sector is now a core objective for his administration.

“We’re going to have our very large United States oil companies — the biggest anywhere in the world — go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure,” Trump said in a press conference from his Mar-a-Lago residence in Palm Beach, Florida.

“Let’s start making money for the country,” Trump said on Saturday.

Oil prices were last seen trading slightly higher on Monday.

International benchmark Brent crude oil futures with March delivery were up 0.5% at $61.03 per barrel, while U.S. West Texas Intermediate futures with February delivery stood 0.6% higher at $57.64.

Allen Good, director of equity research at Morningstar, said Chevron appeared to be best positioned among the oil majors to benefit from U.S. involvement in Venezuelan crude restoration projects, highlighting the firm’s significant presence in the country.

The Trump administration’s intervention in Venezuela could also allow for Exxon and ConocoPhillips to re-enter the country, Good said, although he warned that Venezuela’s oil industry “will require tens of billions in investment” to meaningfully lift production.

“Oil companies will need to be cautious about deploying capital until there is greater regulatory and contractual certainty,” Good said.

“While Chevron may be able to add incremental production in the near term with US approval, meaningful volume increases are likely years away. With this in mind, the possibility of US companies developing Venezuela’s oil reserves remains far from certain,” he added.

Neil Atkinson, an independent energy analyst and former London-based employee of Venezuela’s state-owned oil company PDVSA, said there are several challenges to address when it comes to fixing Venezuela’s oil industry.

“Look at it cynically, you want to get Venezuela’s oil industry back up and running. If you want to do that, you can only do it if you have stability, and that means you have to ensure that there is law and order, which there isn’t now,” Atkinson told CNBC’s “Squawk Box Europe” on Monday.

“You have to ensure that there is stable electricity supplies, which there isn’t now. You have to ensure that food and fuel supplies are reliable, where they are not now. So, a lot has to happen and it cannot happen without the consent of the Venezuelan people,” he added.

Asked whether American oil companies would want to go into Venezuela given relatively low oil prices, Atkinson said, “Well, I would think for long-term strategic reasons, yes. But, as you say, the price is low currently.”

He added: “There are special issues in terms of increasing oil production in Venezuela, the type of oil that it is, the cost and complexity of processing it. But for them, it would be a long-term play. That, to me, is the main reason why investors might feel more positive toward those companies.”

— CNBC’s Spencer Kimball contributed to this report.