Chevron's Acquisition Strategy: Small Companies Need Not Apply

News that Devon Energy plans to offload its international and offshore assets in the Gulf of Mexico has ignited speculation of when and who will snap them up.

Exxon Mobil has been batted about as a possible candidate to buy up Devon’s assets. China — with its growing appetite for energy — has shown interest in investing Gulf of Mexico assets and may go after some of Devon’s assets there.

What about Chevron?

Pat Yarrington, vice president and chief financial officer of Chevron provided Tuesday some insight into the company’s portfolio as well as whether the company is looking for an acquisition target.

Yarrington, speaking to investors at the Bank of America Merrill Lynch 2009 Energy Conference, wouldn’t comment on specific M&A targets.

She did outline Chevron’s M&A strategy, which offered a glimpse into what the energy giant may find appealing.

The second-largest U.S. oil company has made acquisitions — and major ones at that — including Unocal in 2005 and Texaco in 2001.

But it has focused more recently on exploration. Chevron has increased its resource portfolio by 26 percent — or 13 billion barrels of oil equivalent — to 64 billion boe.

And it’s spent a bundle in the process. Chevron has invested at least $200 million into each of its 90 capital projects. The company’s investment exceeded $1 billion in forty of its major capital projects.

Because of Chevron’s investment and resulting exploration success, it doesn’t need to buy a company in order to expand.

“We are very fortunate in that we have a good organic development queue, so we’re not forced into M&A, not forced to do anything, Yarrington said during the conference, which also was available via Web cast.

So, what are they looking for?

An acquistion has to offer scale, it must be a strategic fit and Chevron would look for assets where it could do more with because of technology, she said.

“We’re not looking for small things because that really wouldn’t move the needle on a company like Chevron,” Yarrington said.

As Yarrington summed it up, an acquisition target would be “an arrow in our quiver.”

Devon’s Gulf of Mexico assets could fit the bill.