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Chevron’s oil and gas reserves fell to the lowest level in at least a decade, underlining the significance of its stalled $53 billion bid to acquire oil producer Hess.
The decline raises concerns about the US oil major’s ability to sustain long-term production as it faces a court battle over the deal with Exxon Mobil.
Chevron’s reserves—the amount of oil and gas it can potentially extract—dropped from 11.1 billion barrels of oil equivalent (boe) in 2023 to 9.8 billion by the end of 2024, partly due to sales of acreage.
“The low rate of reserve replacement raises red flags,” said Paul Cheng, an analyst with Scotiabank, emphasising concerns about the company’s long-term outlook.
The Hess acquisition, first announced in October 2023, would give Chevron a 30% stake in Guyana’s massive oilfields, which hold over 11 billion barrels of discovered recoverable resources.
However, Exxon and CNOOC, Hess’s partners in the Stabroek Block, have challenged the deal in court, arguing they have the right of first refusal over Hess’s stake.
Chevron’s reserve replacement ratio (RRR)—a key investor metric showing how much new oil and gas it adds compared to what it produces—stood at 88% over the past decade.
However, its organic reserve replacement ratio (which excludes acquisitions and sales) was just 45%, well below the 100% breakeven threshold.
“The company’s replacement ratio has been below the breakeven requirement over the past three years,” Cheng noted.
Scotiabank still maintains a sector ‘outperform’ rating for Chevron.
Chevron declined to comment on the matter, but CEO Mike Wirth, speaking during the company’s Q4 earnings call, stressed that Chevron was focused on developing high-quality oil and gas assets, particularly in the Gulf of Mexico.
“The combined company is expected to have resource inventory depth into the next decade—much further than we can usually see with confidence in our business,” Wirth said in October when announcing the Hess deal.
Chevron’s struggles with reserve replacement are not unique. Exxon, the largest US oil producer, has not yet disclosed its 2024 RRR, but it also faced reserve replacement issues in 2023 and 2022.
Some analysts speculate this played a role in Exxon’s $60 billion acquisition of Pioneer Natural Resources, which made it the top producer in the Permian Basin, the largest US oilfield. Exxon declined to comment.
In contrast, European rivals Shell and TotalEnergies have maintained a three-year average RRR above 100%, signaling stronger long-term resource replenishment.
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