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Chevron Corporation (NYSE:CVX)’s huge cash reserve of $21 billion has come into media focus and speculation runs rife that the company may use it to acquire smaller companies. Significantly, if Chevron Corporation (NYSE:CVX) chose to extinguish all its debt, there would still be $11 billion left in hand. With interest rates running at all-time lows, treasury income from the cash is surely not a motive for Chevron. Why then is it hoarding so much of the green stuff?

An article in the WSJ speculates that the company may be contemplating acquisitions, such as Chesapeake Energy Corporation (NYSE:CHK) and Hess Corp. (NYSE:HES), though both companies have reportedly declined to comment.

A lot of Chevron’s cash was generated during the booming prices of oil through last year. Moreover, unlike other rivals, Chevron Corporation (NYSE:CVX) did not spend boatloads of money hunting projects in the natural gas business, which later turned sour, due to uneconomically low prices of gas. Chevron Corporation (NYSE:CVX) is therefore uniquely poised in a very advantageous position, vis-a-vis a lot of its rivals, who are substantially out of cash, and not having much in the way of returns to show for it. And many of these companies are quoted at substantial discounts today, making them ideal targets for a cash-rich industry rival, such as Chevron.

Chevron’s explanation for nursing the huge cash hoard is that it is insurance, as the company implements huge projects across the globe in the face of highly volatile end-product prices. Just two of its projects to liquify natural gas for use in Asia could end up costing upwards of $60 billion. These projects face escalations, due to currency headwinds and rising labor costs.

Yet analysts are not buying this argument, saying that instead of hoarding dead cash, the company could easily borrow money in the event of project overruns. Other analysts question why the company is not doing more by increasing dividends further, or buying back more stock. Both counter-arguments lead to one possible answer – Chevron Corporation (NYSE:CVX) might be going shopping for an acquisition in the near future.

A Chevron rival, Exxon, is also sitting on cash. Yet its situation is different given its huge exposure to low natural gas prices. In June, Exxon Chief Executive Rex Tillerson admitted in a talk before the Council on Foreign Relations in New York, “We are all losing our shirts today. We’re making no money. It’s all in the red,” in the context of low gas prices.

It may be noted that troubled Chesapeake Energy Corporation (NYSE:CHK), in the throes of a cash crunch, could be a good target, given its huge asset base and low market cap. Activist shareholders are also reportedly pushing for a sale of the company.

Hess Corp. (NYSE:HES) was also suggested by Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) as a good takeover option for Chevron.