Chevron vs. Shell in Gulf of America: Who's Got the Edge?

Globe and Mail

23-07-2025

Chevron Corporation CVX and Shell plc SHEL are two of the world's biggest energy companies, and both have been drilling for oil and gas in the deep waters of the Gulf of America (GoA) — what we used to call the Gulf of Mexico — for decades. This region is super important because it provides about 14% of all the crude oil produced in the United States, and is known for producing oil that's very profitable and has a lower carbon footprint. For both Chevron and Shell, their operations in the GoA are a vital part of their long-term plans, helping them use their money efficiently and meet their sustainability goals.
Developing oil and gas in deep water is entering a new era, with companies using advanced technology and focusing more on reducing emissions. Because these projects cost a lot of money and U.S. energy independence is increasingly important globally, investors are paying closer attention to Chevron and Shell's GoA activities than ever before.
Let's take a closer look at both companies to see which might be a better investment right now.
The Case for Chevron Stock
Chevron is really stepping up its game in the Gulf of America. The company recently started pumping oil from two huge new projects: Ballymore in April 2025, and Whale just a few months before that. Once it's fully running, Ballymore is expected to produce 75,000 barrels of oil per day, while Whale is designed for 100,000 barrels of oil equivalent per day. These two massive projects are key to Chevron's plan to boost its GoA production to 300,000 net barrels of oil equivalent per day by 2026, which is a whopping 50% increase from the 2020 levels!
Chevron is combining its many years of offshore experience with new, energy-efficient designs. The company's Anchor platform, which started operating in August 2024, is built to tap into high-pressure oil reserves. Even older facilities, like Tahiti, which has been producing since 2009, are still thriving thanks to updated models and smarter cost management. All these upgrades mean that Chevron's oil from the Gulf is among the most profitable and environmentally friendly in its entire portfolio.
Chevron isn't just focused on producing more oil; they are also investing smartly. The integrated major is using simpler designs and building things in pre-made sections to cut down on development time and costs. For example, the Whale facility uses energy-efficient systems to minimize its pollution. This strategy helps Chevron produce highly profitable oil with less carbon, showing they're being financially smart and environmentally responsible.
The Case for Shell Stock
Shell is a true pioneer in deepwater drilling and remains the biggest producer in the Gulf of America. They were the first company to successfully extract oil from water depths beyond 1,000 feet, way back in 1978. Shell's current list of assets includes major projects like Perdido, Stones, Vito, and Whale, all of which highlight Shell's unmatched ability to operate in extremely deep waters. Sparta, another new project set to begin producing in 2028, will be the next standardized facility in its deepwater portfolio. These projects really show off Shell's engineering skill and its ability to control costs even in one of the toughest drilling environments in the world.
Shell's strategic advantage comes from its focus on replicating designs and using robotics. The Vito and Whale projects, for instance, used almost identical designs, which meant engineering work was 50% faster and manufacturing errors were reduced by 75%. Also, in 2024, the Stones project led the industry by using robotic systems to inspect offshore tanks, cutting costs and making operations safer. When it comes to emissions, Shell has already reduced methane output in the GoA by 40% since 2016 and even beat its 2023 emissions target by 5%, further strengthening its reputation for environmental responsibility.
Shell's GoA portfolio is anchored by advanced deepwater hubs like Perdido and Stones, among the world's deepest and most complex offshore facilities. These assets support a hub-and-spoke model, enabling efficient tiebacks and extended field life. Upcoming projects like Sparta follow Shell's phased, capital-efficient approach. With high uptime, strong recovery rates, and low emissions, Shell's GoA operations offer reliable cash flow while aligning with its broader strategy of disciplined growth and decarbonization.
Price Performance
Over the last year, Shell's stock has remained relatively stable, dropping just 0.1%, while Chevron's stock has dipped 3.3%. Chevron's recent underperformance might mean its stock is undervalued, especially if its ambitious Gulf production goals are met on time.
Valuation Comparison
When we look at how much investors are willing to pay for future earnings, Chevron trades at 18.26 times its forward earnings, while Shell trades at 11.29 times. Chevron's higher value likely reflects expectations of better profit margins from its growing GoA projects and the positive impact of recently acquired high-value assets from Hess.
Earnings Outlook
The Zacks Consensus Estimate sees Chevron's EPS to drop by 27% in 2025, but then bounce back strongly with a 23% increase in 2026.
Image Source: Zacks Investment Research
Shell's EPS is projected to fall by 20% in 2025, with a slower recovery of 10% in 2026.
Conclusion
Chevron and Shell are both powerful players in the Gulf of America, bringing decades of experience together with modern efficiencies and a good environmental track record. Shell stands out for its sheer size, innovative spirit, and ability to replicate successful projects. Chevron, on the other hand, offers a more focused strategy in the Gulf, with a clearer outlook for higher profit margins and stronger production growth.
With both companies currently carrying a Zacks Rank #3 (Hold), investors might find it tough to pick a clear winner. However, Chevron seems to be in a slightly better position right now. This is due to its very clear production targets, smart spending, and a projected stronger rebound in earnings. That said, both stocks remain compelling options for investors looking for high-quality exposure to one of the world's most resilient and environmentally conscious offshore oil basins.
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