Opportunities in the Oil Market: BP, Zefiro Methane, and Chevron In Focus

Chevron: It Is Complicated

Chevron shares have been particularly popular among value investors ever since investment legend Warren Buffett acquired a stake in the oil company through his investment vehicle, Berkshire Hathaway. However, in the first quarter, the firm took advantage of high oil prices and reduced its position by a good third. Even though Chevron remains one of the largest holdings in the Berkshire portfolio, this is not good news.

The situation at the Houston-based company remains unclear. Production suffered noticeably in the first quarter due to supply cuts and logistical disruptions in the Persian Gulf. In Venezuela, on the other hand, the company appears to be among the winners. Thanks to exemptions granted by the US government, it can operate freely there. In April, for instance, it agreed to an asset swap to strengthen its position in the heavy oil sector. In addition, Chevron increased its stake in the Petroindependencia joint venture to 49%. Things were complicated once again in neighbouring Guyana. Following the now-completed acquisition of Hess Corporation, Chevron finally holds its 30% stake in the massive Stabroek Block off the country's coast. For a long time, arbitration proceedings were ongoing behind the scenes with the consortium leader, ExxonMobil, which asserted a right of first refusal but has now lost the case in court. This final legal resolution provides greater certainty for Chevron.

Nevertheless, the many ongoing issues are reflected in the financial results. In the first quarter, profit reached USD 2.8 billion. This was below the previous year's level but exceeded market expectations. In contrast, revenue of USD 48.6 billion came in slightly below the analyst consensus. Overall, various negative effects weighed on the results. Still, the book losses in the derivatives business—which management describes as purely paper losses—are expected to be partially reversed in the second quarter.

Despite the many headwinds, shareholder returns remain unchanged. Chevron distributed a total of USD 6 billion in the first quarter. Of this, USD 3.5 billion was attributed to the dividend, which was raised slightly to USD 1.78 per share for the quarter. Chevron has thus increased its payout for the 39th consecutive year. In addition, USD 2.5 billion was invested in share buybacks.

In terms of valuation, Chevron's stock is just as complicated as its operating business! If you simply calculate the current P/E ratio excluding all special items, you end up with a figure of more than 25—well above the historical average. For 2027, however, the P/E ratio appears quite fair at 14-16, excluding special items. Analysts predominantly rate the stock as "Buy" or "Overweight." The average price target is about 12% above the current level. Leading firms like UBS point out, however, that restructuring is likely to accelerate earnings growth in the second half of 2026.

Zefiro Methane: The Cleanup Specialist in the Oil and Gas Business

But the oil industry also has a darker side. Beyond the geopolitical conflicts often associated with this resource, its environmental impact should not be underestimated. Yet in North America, addressing this legacy problem has become a business opportunity with meaningful environmental benefits. In the United States alone, there are an estimated 2.2 million abandoned and orphaned oil and gas wells. The environmental consequences can be significant, as methane—one of the most potent greenhouse gases—can escape into the atmosphere. The reasons are varied. Some operators went bankrupt and abandoned their wells, leaving no one responsible for ongoing maintenance. In other cases, wells were inadequately sealed, steel casings corroded over time, or cement barriers deteriorated, allowing methane and other substances to leak.

The US government has now taken action. A total of USD 4.7 billion has been made available through the states to address this issue. The market volume is estimated at USD 400-600 billion. Zefiro Methane Corp. specializes in plugging these old oil and gas wells. So far, the company has secured about a quarter of all the contracts for which it applied. Zefiro focuses on the states in the Appalachian region, where many of the wells are located due to historical reasons. In some cases—such as in New York State—it is even the only provider to date. In 2025, Zefiro has already plugged more than 200 abandoned or orphaned oil and gas wells.

These successes are also reflected in Zefiro Methane's financials. In the third quarter (of its fiscal year), the company reported revenue of approximately USD 11 million. At the same time, expenses fell by a substantial 14%. Based on the first nine months, Zefiro has already reported EBITDA of USD 4.25 million. By comparison, the market capitalization amounts to approximately EUR 40 million.

For investors, this concept could turn out to be a real goldmine. Zefiro Methane is in its element in this niche of the oil market. The stock price already reflects the momentum of the business. The share has more than doubled since the beginning of the year. Economies of scale should gradually become apparent in the business.

In addition, there are three factors that the market likely still underestimates. First, Zefiro recently expanded its regional presence by acquiring the fleet of Viking Well Service. Second, the sale of emission credits is also a key factor. Closing orphaned oil and gas wells reduces climate-damaging emissions. Last but not least, Zefiro has also begun licensing its technology to other companies.

If the management team led by CEO Catherine Flax continues to implement its strategy consistently, Zefiro Methane will likely soon leave the stock market doldrums of small-cap status behind. The potential is certainly enormous in the coming years, especially since these are government-guaranteed funds.

BP: Debt Reduction Comes First

BP is clearly one of the beneficiaries of high oil prices. However, the company is plagued by high debt. For investors, this means dividends will be paid, but share buybacks are on hold for now.

At the end of April, the British company reported its results for the first quarter of 2026. After a modest performance in the previous quarter, high oil prices began to make their presence felt, driven in part by strong trading activity. As a result, adjusted net profit rose to USD 3.2 billion. That is more than double the figure from Q4 2025 (USD 1.5 billion). The British company thus clearly beat market expectations. The strong performance was primarily driven by the Customers & Products segment, where the group achieved "exceptional" results in oil trading. This is a direct consequence of the war in the Persian Gulf and the resulting high oil prices.

BP's problem remains its high debt burden. Net debt rose once again, from USD 22.2 billion at year-end to USD 25.3 billion. The company had built up massive working capital to cushion the impact of longer shipping routes. When it comes to dividends, the company remains true to form: BP is focusing on stability and is paying an unchanged dividend of USD 0.0832 per common share for the first quarter. Management is sticking to its goal of increasing the dividend by at least 4% annually. The dividend is certainly attractive, with a yield of around 4.4%.

Share buybacks, however, remain a casualty of high debt. BP aims to reduce its liabilities and is continuing to suspend share buybacks. Management also emphasized that buybacks are not expected to resume this year. Operational restructuring is also continuing. BP aims to reduce costs. At the same time, the portfolio is being further streamlined. For instance, the Gelsenkirchen refinery was sold. However, investments are also being made. The company plans to increase investments in oil and gas by about 20%, while the budget for traditional energy transition sectors (renewables) is being cut by over USD 5 billion.

However, it will likely be some time before BP reaps the benefits of its restructuring measures. Currently, the stock is primarily a derivative of the oil price. Dividend hunters should wait for pullbacks before picking up shares here!

BP shares remain a derivative of the oil price. Even though it posted a profit in the first quarter, the restructuring—with many ongoing projects—prevents major gains, as does the high debt. Zefiro Methane has strong growth potential in a niche market. Investors looking for a long-term holding may want to pick up a few shares here, especially since many of the effects will only become apparent gradually. At Chevron, the situation is more than complicated. However, analysts point to opportunities later in the year. Restructuring efforts could significantly boost profits.