To The Moon

Hollywood Fiction.

In Hollywood “Underworld” movie franchise, vampires and werewolves shared a common origin through the Corvinus bloodline.

Alexander Corvinus, a 5th-century warlord whose unique genetic mutation, known as the Corvinus Strain, made him immortal and passed this to his twin sons:

• Marcus Corvinus, who became the first vampire after being bitten by a rabid bat.

• William Corvinus, who became the first werewolf after being bitten by a wolf.

Vampire & Werewolf of Oil Industry.

The same could be said about $Exxon Mobil(XOM)$ and $Chevron(CVX)$.

The link between Exxon and Chevron lies primarily in their shared heritage as descendants of the original Standard Oil.

The conglomerate formed by John D. Rockefeller in 1870 , dominated the American oil industry.

That was before Standard Oil was broken up by the US government in 1911, under antitrust laws.

The Standard Oil Company was broken into 34 companies.

Many of these companies later became (a) independent major oil companies or (b) were eventually acquired or merged into other global energy firms.

For example:

• Standard Oil of California became Chevron Corp in 1984 after acquiring other entities and rebranding.

• Standard Oil of New York changed its name to Mobil Oil Corp in 1966.

• Standard Oil of Jersey changed its name to Exxon Corp to create uniform branding for its products in 1972.

• In 1999, both Exxon and Mobil merged to form Exxon Mobil.

Remaining 31 Companies:

• Standard Oil of Indiana became Amoco, which was later acquired by BP.

• Standard Oil Company of Ohio was eventually bought by BP.

• A number of other Standard Oil descendants were absorbed into major players like BP, Chevron or ExxonMobil.

• Some early Standard Oil affiliates were merged or acquired by US Steel, DuPont, and even non-petroleum companies.

Cue To Present.

In the past decade, the two majors have competed fiercely for dominance in US shale oil.

Chevron had an early advantage given its ownership of large swathes of land in the Permian basin, the shale heartland.

However, Exxon planned and regained grounds:

• In 2010, it spent $41 billion to acquire natural gas producer XTO.

• In October 2023, Exxon cemented its position as the largest US producer with its $60 billion, acquisition of US shale producer Pioneer Natural Resources (PXD).

Chevron responded quickly, announcing on 23 Oct 2023, that it had agreed to acquire Hess, 12 days after Exxon's Pioneer deal. (see above)

However, it was not a straight cut deal.

The Legal Challenge.

Immediately after its announcement, Chevron faced legal challenges from ExxonMobil and China National Offshore Oil Corporation (CNOOC), who claimed preemptive rights to purchase Hess's 30% stake in the Guyana Stabroek Block.

The dispute centered on whether the joint operating agreement's right of first refusal applied to (a) a full company acquisition or (b) only to direct asset sales.

After a protracted 20-month arbitration overseen by the International Chamber of Commerce (ICC), the panel ruled in favour of Chevron.

ICC found that the right-of-first-refusal provision did not cover the entire Hess company acquisition.

This ruling allowed Chevron to finalize the deal in July 2025, gaining access to one of the largest recent oil discoveries globally.

In addition, the ICC's arbitration decision is final and not subject to appeal, marking a decisive legal victory for Chevron.

The Win.

The Hess deal should help Chevron keep pace with Exxon moving forward.

Chevron’s production is (now) expected to exceed 4 million bpd by 2030 from 3.4 million bpd in Q1 2025.

By contrast, Exxon expects its output to grow to 5.4 million bpd by end of the decade, from 4.5 million bpd in Q1 2025.

Dwindling Reserves.

Oil and gas companies are facing a future with limited options for building reserves as (a) the unexplored frontier shrinks and (b) shareholders push for cost control.

These firms replenish their reserves not only to grow output but also to offset existing fields’ natural decline.

According to LSEG data:

• Depletion has been a major problem for Chevron.

• In 2024, its reserve replacement ratio slid to negative -4%, with reserves falling to their lowest point in at least a decade at 9.8 billion barrels.

• That’s the equivalent to 8 years of production, down from 10 years in 2023. (see below)

• Compared with Exxon’s 12 years in 2024, it is trailing by 25% comparatively speaking.

Objectively, reserves can be increased thru:

• Exploration - a high-risk, high-reward activity.

• By acquiring assets & companies.

Over the decades, energy giants have invested billions in exploration, that led to the discovery of resources in new basins such as (i) North Sea, (ii) Angola, (iii) Brazil and (iv) Indonesia.

This activity has slowed in recent years as companies have cut spending to appease shareholders.

Also, there are fewer accessible fields to tap.

Although the world holds vast oil and gas reserves, sufficient to supply around 50 years of current oil consumption, not all resources are created equal.

• Firstly, many resources are simply far too expensive to develop because of depth, complexity or remoteness.

• Secondly, over 2/3 of the world’s oil reserves are located in countries where Western companies have restricted access.

• This includes Iran, Venezuela, Russia as well as OPEC countries whose strict terms make operations less attractive for foreign investors.

This is why the discovery of enormous, low-cost oil resources in Guyana a decade ago was a big advantage for Western oil companies.

It is also why Chevron and ExxonMobil were willing to spend billions battling for access to a single field there.

First Shot.

The concluded clash between Exxon and Chevron may be an indication of what the industry can expect in the coming years as competition for low-cost resources intensifies amid the world’s transition away from fossil fuels.

No one knows exactly when global oil demand will peak.

While the International Energy Agency (IEA), the global energy watchdog, expects oil consumption to crest by the end of this decade (2029), OPEC forecasts demand to grow into 2050.

This shows that the oil industry is going thru a shift, and the costly Exxon-Chevron fight, one of the biggest legal battles ever, might be a sign of more challenges ahead.

Winning the Hess lawsuit, is a positive catalyst increasing the odds for CVX stock price rise. With the energy sector headwinds, the upside is cautious growth of 3% - 15% thru 2025.

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