*

Chevron's ( CVX ) reserve replacement ratio declines to 45%,

raising

investor concerns

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Hess acquisition would boost Chevron's ( CVX ) prospects with

Guyana

oilfield stake

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Exxon and CNOOC challenged Chevron's ( CVX ) bid for Hess in court

By Sheila Dang

HOUSTON, Feb 11 (Reuters) - Chevron's ( CVX ) oil and

gas reserves have fallen to the lowest point in at least a

decade, highlighting the importance of the U.S. major's planned

acquisition of oil producer Hess that has stalled due to a court

battle with Exxon Mobil ( XOM ).

Reserve replacement is one of the key metrics for investors

in energy companies, as it gives a sense of how much oil and gas

the companies could produce and for how long.

If Chevron ( CVX ) closes the Hess acquisition, it would gain a

stake in the lucrative Guyana oilfields that are operated by

Chevron's ( CVX ) rival, Exxon.

Exxon and CNOOC, the other minority partner in

the Guyana field, have challenged Chevron's ( CVX ) bid for Hess in

court, saying that they have first right of refusal on Hess's

equity in the project.

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

potentially extract, declined from 11.1 billion barrels of oil

equivalent in 2023 to 9.8 billion by the end of 2024. The

reserves also declined in part due to sales of acreage.

The low rate of reserve replacement raises "red flags," said

Paul Cheng, an analyst with Scotiabank, highlighting concerns

about the company's longer-term prospects.

Chevron ( CVX ) said its reserve replacement ratio over the past

10-year period was 88%.

The company's organic reserve replacement ratio, a metric

that measures how much new oil and gas was added to the reserves

compared to the amount it produced and excludes acquisitions and

sales, was 45%. A ratio of 100% or more means the company is

replacing its reserves at the same rate that it depletes them.

Cheng said the company's replacement ratio has been below

the breakeven requirement over the past three years. Scotiabank

maintains a sector outperform rating for Chevron ( CVX ).

Chevron ( CVX ) declined to comment. During the fourth quarter

earnings call, CEO Mike Wirth said the company was focused on

developing high-quality oil and gas assets, including in the

Gulf of Mexico.

The acquisition of Hess, a $53 billion deal struck in

October 2023, could improve Chevron's ( CVX ) prospects. It would grant

the company a 30% stake in more than 11 billion barrels of oil

equivalent of discovered recoverable resource in Guyana, the

company said when it announced the deal.

"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.

Exxon has not yet reported its replacement ratio for 2024,

but the No. 1 U.S. oil producer also struggled to replace its

reserves in 2023 and 2022, which may have contributed to its

decision to buy oil and gas producer Pioneer Natural Resources

, Cheng said. Exxon declined to comment.

The Pioneer acquisition last year made Exxon the largest oil

producer in the Permian Basin, the biggest U.S. oil field.

UK-based oil company Shell and French oil major

TotalEnergies both have an average reserve replacement

ratio over the past three years of more than 100%.