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By Sheila Dang
Houston (Reuters) – Chevron’s oil and gas reserves have fallen to the lowest point in at least a decade, highlighting the importance of the planned acquisition of the US oil producer. UU. HESS that has stagnated due to a Judicial battle with Exxon Mobil.
Reserve replacement is one of the key metrics for investors in energy companies, since it gives an idea of how much oil and gas could produce companies and for how long.
If Chevron closes the acquisition of HESS, he would gain a participation in the lucrative oil fields of Guyana that operate the rival of Chevron, Exxon.
Exxon and CNOOC, the other minority partner in the Guyana field, have challenged Chevron’s offer for HESS in the Court, saying that they have the first right of rejection about HESS’s equity in the project.
Chevron reserves, or the amount of oil and gas that can be extracted, decreased from 11.1 billion barrels of oil equivalent by 2023 to 9.8 billion at the end of 2024. Reserves also decreased partly due to surface sales.
The low reserve replacement rate increases the “red flags,” said Paul Cheng, Scotiabank analyst, highlighting concerns about the company’s longer term perspectives.
Chevron said that his reserve replacement ratio in the 10 -year period was 88%.
The company’s organic reserve replacement ratio, a metric that measures the amount of new oil and gas to reserves compared to the amount that produced and excludes acquisitions and sales, was 45%. A 100% or more ratio means that the company is replacing its reserves at the same pace that exhausts them.
Cheng said that the company’s replacement relationship has been below the equilibrium requirement in the last three years. Scotiabank maintains a higher performance rating to the Chevron sector.
Chevron declined to comment. During the Fourth Quarter Gains call, CEO Mike Wirth said the company focused on developing high quality oil and gas assets, even in the Gulf of Mexico.
The acquisition of HESS, a $ 53 billion agreement reached in October 2023, could improve Chevron’s prospects. It would grant the company a 30% participation in more than 11 billion oil barrels equivalent to the recoverable resource discovered in Guyana, the company said when it announced the agreement.
“The combined company is expected to have resource inventory depth in the next decade, far beyond what we can generally see with confidence in our business,” Wirth said in October.
Exxon has not yet reported its replacement ratio for 2024, but the American oil producer number 1 also fought for replacing their reserves in 2023 and 2022, which may have contributed to their decision to buy natural resources pioneers of the oil and gas producer said Cheng. Exxon declined to comment.
