.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

E.H., Syracuse, N.Y.

Dear E.H.:

Not to worry. As I write this, Chevron Corp. (CVX-$85.15) is preparing to settle with the U.S. government. Chevron will pay fines of $30 million because it paid $20 million in hush money between 2000 and 2003 for the privilege of purchasing tens of millions of barrels of Iraqi oil.

A $30 million fine is basically one day’s net income or a drop in the barrel for Chevron. El Paso Corp., Exxon Mobil and Bay Oil also got their hands slapped but for lesser amounts, and those fines won’t make a tinker’s damn worth of difference to their balance sheets or income statements. I’m surprised however, that Kofi Annan, former secretary-general of the United Nations, who, with family and friends, mulcted $12 billion in cool cash from the Iraq “Oil for Food” program, was never fined or asked to return a centime. He left the U.N. when the criticism got hot and retired wealthy as a nabob. Go figure.

Even though the CVX dividend has increased in each of the last 25 years and could continue to do so for the foreseeable future, I’d not own this stock. Though it offers a generous and well-covered dividend, which has grown fourfold in the past decade, aficionados seem to think that CVX’s future dividend growth may be niggardly. So the outlook next year and beyond is not too sanguine.

Other than Royal Dutch Shell plc, CVX has the lowest potential production rate of all its peers. In fact, since Chevron’s merger with Texaco in 2001, production has declined an average of 2.5 percent a year. CVX has been unable to increase its production from North America and the North Sea, so management is relying on new oil fields in Kazakhstan and offshore production in West Africa. These are politically sensitive areas where there’s a serious risk to stability and dependability.

Earnings for 2007 will probably decline about 7 percent to $7.30 per share, and earnings for 2008 and beyond are also expected to fall.

Though the dividend is expected to grow each year, the annual increases will also be significantly less. At $79-$85, the stock is trading at its all-time high and many observers believe there’s little (if any) appreciation remaining in the shares. Seventeen analysts follow CVX: five analysts have a “strong buy” rating, one has a “buy,” nine recommend “hold” and there are two “strong sell” ratings.

I suspect there’s about a 10 percent to 12 percent downside risk to CVX, which currently trades at 11 times 2007 earnings. The $2.20 dividend was just raised to $2.32 and yields a modest 2.7 percent. Some suggest that CVX might increase its dividend a nickel before year’s end.

The suits on Wall Street seem to think that Ashland Oil, ConocoPhillips, Exxon Mobil Corp., Sunoco Inc., Total SA, Marathon Oil Corp. and Petrobras also have limited appeal over the next three to five years. But if it’s an oil company you must have, the suits would suggest that BP, nee British Petroleum, trading at $73.30, and Royal Dutch Shell, trading at $85.27, have significantly better prospects than any of the big issues in the oil patch.