Power Up: Chevron's big win

July 21 - By Liz Hampton

U.S. energy markets editor

Hello Power Up readers! Oil prices are down to kick off the week, as the latest European sanctions on Russian oil appear to have minimal impact on supplies. The European Union on Friday approved the 18th package of sanctions against Russia over its war with Ukraine, and also targeted an Indian company that exports fuel refined from Russian crude. Still, the latest round of sanctions are not expected to change supply and demand balances, analysts said.

Brent crude futures were last off 77 cents at $68.51 a barrel on Monday, while U.S. West Texas Intermediate futures fell 71 cents to $66.63 a barrel. Henry Hub natural gas futures were down more than 6% to $3.339 per million British thermal units.

Chevron closes its Hess acquisition

Chevron on Friday closed on its long-awaited $55 billion acquisition of Hess after winning a legal battle against rival Exxon Mobil over access to Guyana's massive oilfields.

The deal is key to Chevron CEO Mike Wirth's strategy to turn around his company's lagging performance. The Strabroek block off the coast of Guyana is estimated to have more than 11 billion barrels of oil.

Exxon, along with partners, had filed arbitration disputes claiming they had a pre-emptive right to purchase Hess's stake in the asset, delaying the acquisition by more than a year.

The closure of the deal, first announced in October 2023, was a needed win for Chevron. Its entry into Guyana's oilfields will help boost its long-term growth outlook, as its reserves have fallen to their lowest in at least a decade and its shares have fallen by 7.5% over the past year, Sheila Dang reports.

Chevron's organic reserve replacement ratio, which measures reserves added compared with the amount produced, was just 45%. A ratio of 100% or more means the company is replacing reserves at the same rate it depletes them.

Rivals Shell and TotalEnergies both have average reserve replacement ratios of more than 100% over the past three years.

BP names new chairman

British oil major BP will name outsider Albert Manifold as its new chairman, the company said on Monday, amid a strategy reversal aimed at improving sentiment among investors and turning around its weak share performance.

Manifold was the former boss of building materials producer CRH and has not held a senior position in the energy sector. He is succeeding Helge Lund from October. While at CRH, the company's shares soared nearly fivefold as it reshaped its portfolio.

As part of its strategy shift, BP has slashed planned renewables spending and said it would increase spending on oil and gas. The pressure for change came as activist investor Elliott Investment Management built a stake in the company.

BP is also selling its U.S. onshore wind business to power grid operator LS Power for an undisclosed price. The move is part of BP's ongoing divestment strategy. The oil major has come under criticism from investors in recent months for underperformance. The deal includes 10 operating wind assets with combined generation capacity of 1.7 gigawatts.

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China has begun construction on what will become the world's largest hydropower dam on the eastern rim of the Tibetan Plateau, Premier Li Qiang announced. The project will cost an estimated $170 billion. Financial markets saw the start of construction as proof of China's economic stimulus, which drove stock prices and bond yields higher on Monday.

U.S. oil and gas drillers last week added rigs for the first time in 12 weeks, oilfield services firm Baker Hughes said on Friday. The rig count rose by seven to 544. That is still down 42 rigs, or 7%, from the same time last year.

Top oilfield services firm SLB on Friday warned of a decline in upstream spending this year, led primarily by weakness in North and Latin America. Its shares fell 4% on the warning. SLB said the broader market is facing uncertainty as OPEC+ raises production, and amid ongoing trade tensions and geopolitical conflicts.

Baker Hughes, Hunt Energy and Argent LNG will develop a masterplan for Syria's oil, gas and power sector, Argent's CEO said on Friday. The partnership is aimed at rebuilding energy infrastructure which has been shattered after 14 years of civil war.

Brookfield Renewable will invest $1 billion to increase its stake in Colombian energy firm Isagen to roughly 38%. Qatar Investment Authority, an existing co-investor, also plans to spend about $500 million and increase its equity interest in Isagen to about 15%.

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