*

Acquisition of Hess boosts long-term growth prospects

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Stabroek Block holds 11 billion barrels of oil equivalent

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Chevron's ( CVX ) reserves fell to lowest in a decade, shares down

7.5%

over past year

By Sheila Dang

HOUSTON, July 18 (Reuters) - Chevron's ( CVX )

imminent entry into Guyana's rich offshore oilfields solves one

of the biggest problems dogging the U.S. major: where its growth

will come from beyond the next few years.

On Friday, the U.S. oil producer closed its $55-billion

acquisition of Hess - among the largest ever oil and gas deals -

and gained the latter's stake in Guyana's Stabroek Block after

prevailing in a legal fight against larger rival Exxon Mobil ( XOM )

.

Before the deal closed, concerns had been rising about

Chevron's ( CVX ) financial and production growth prospects, with its

reserves of oil and gas dropping to the lowest in at least a

decade.

The Stabroek Block holds at least 11 billion barrels of oil

equivalent and is one of the most significant oil discoveries in

decades.

"The combination enhances and extends our growth profile

well into the next decade," Chevron ( CVX ) CEO Mike Wirth said about

closing the Hess acquisition.

Some investors cheered the development as boosting the

company's long-term prospects.

"The acquisition plugs a free cash flow hole that Chevron ( CVX )

had looming at the end of this decade into the 2030s," said

David Byrns, a portfolio manager at American Century

Investments, which has a $351-million position in Chevron ( CVX ),

according to LSEG data.

Without Hess, it was unclear how Chevron ( CVX ) could maintain free

cash flow, he said, adding the acquisition is also expected to

help Chevron ( CVX ) sustain its dividend into the 2030s.

SHARES FALL

The closure is a much-needed win for Chevron ( CVX ) after several tough

months during which it announced global layoffs, faced rising

safety issues, and lost exports from Venezuela. Its shares fell

7.5% over the past year. On Friday, they declined 2% in midday

trading.

Chevron's ( CVX ) oil and gas reserves, or the amount it can potentially

extract from its oil and gas fields, fell to 9.8 billion boe at

the end of 2024, the lowest point in at least a decade.

Its organic reserve replacement ratio, a measure of how much

new oil and gas was added to reserves compared to the amount it

produced, and which excludes acquisitions and sales, was just

45%. A ratio of 100% or more means the company is replacing its

reserves at the same rate that it depletes them.

By comparison, UK-based oil major Shell and French oil major

TotalEnergies both have average reserve replacement ratios over

the past three years of more than 100%.

Chevron ( CVX ) production volumes after combining with Hess could

reach 4.31 million boe/d in 2030, significantly higher than what

Chevron ( CVX ) would produce as a standalone company, said John Gerdes,

president of Gerdes Energy Research.

Chevron ( CVX ) produced 3.3 million boe/d in 2024.

Exxon, which operates the Stabroek Block, and CNOOC, the

other minority partner in the field, filed arbitration claims

against Hess last year, arguing they had a contractual right of

first refusal to purchase Hess' stake.

The battle was pivotal to Chevron ( CVX ), given that the Guyana

field was the most coveted asset in Hess' portfolio. If the

arbitration had gone against Chevron ( CVX ), the acquisition would have

collapsed.

Another long-term question that Chevron ( CVX ) faces is whether it

will extend its contract to operate the giant Tengiz oilfield in

Kazakhstan, which expires in 2033.

Chevron ( CVX ) has a 50% stake in the Tengizchevroil joint venture that

it operates. The company told Reuters in January the field would

produce about 1 million boe/d after an expansion project reached

full capacity.