Chevron Can Still Energize Your Portfolio

Tickers in this article: BP CVX TOT XOM

NEW YORK (TheStreet) -- Since reaching a recent high of $126.43 in September, shares of Chevron have hit a snag, falling more than 6%. Coincidently, this drop matches the company's 6% profit decline, which was caused by weak refining results.

Investors are now wondering if Chevron best days are over. I don't believe that to be the case.

As with rival Exxon Mobil , production growth has been Chevron's toughest obstacle. As the world's second-largest oil company, investors have demanded immediate results, and Chevron management has done its best to oblige. But it's not going to happen overnight. Not to mention, growth does not come free.

To that end, the 6% decline in profits, which coincided with higher expenses wasn't a surprise. In fact, on a relative basis, I consider it a strong performance. While the 6% decline might seem disappointing, let's realize not only did Exxon's profits declined 18% this quarter, which didn't stop Warren Buffett from taking a $3.4 billion stake in the company. Rivals such as BP and Total posted declines of 26% and 20%, respectively.

So, before we blow Chevron's results completely out of proportion, given that the company posted a 3% year-over-year increase in oil and gas production, along with (what remains) a highly profitable upstream business, I believe the company still offers plenty of value at current levels. This is despite the struggles in the refining business.

With Exxon posting third-quarter production of growth of only 1.5%, which (if I may say) was good for Exxon, I was quite pleased with Chevron's output of 3%. The Street saw it differently. Investors have every right to demand more, especially since management missed its own production guidance. But it's not that cut-and-dry.

Let's not forget, in the August quarter, not only did Chevron's revenue decline 8% year over year, but production declined 2% year over year and sequentially. By contrast, in this quarter revenue grew almost 2% compared to a 2.4% revenue decline for Exxon. Chevron's net oil-equivalent production rose 2.7% from 2.52 million barrels per day to 2.59 million.