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Released October 27, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--After shedding more than $2 billion in assets to fund operations off the coast of Guyana in South America, U.S. oil and gas producer Hess Corporation (NYSE:HES) (New York, New York) reported a third-quarter net loss of $624 million, nearly double the prior-year quarter. Industrial Info is tracking about $8 billion in active projects involving Hess, excluding the company's divestitures in Equatorial Guinea and Norway and the planned sale of its Denmark assets.
In the same period last year, Hess incurred a net loss of $339 million. The weak results come as Hess tries to refocus its operations on Guyana and the U.S. after divesting its oil and natural gas interests in Equatorial Guinea and Norway earlier this week. The company attributed most of the loss to a change in tax structure.
Total revenue rose to $1.67 billion in the third quarter due to a 13.3% spike in average realized selling prices of crude, but production was lower across most of Hess' portfolio. Gulf of Mexico output fell 3.3% to 59,000 barrels of oil equivalent per day during the quarter. Excluding Libya, total quarterly production declined 4.8%. In North Dakota, the company's largest area of operations, oil production missed forecasts in the third quarter due to inclement weather, Chief Executive Officer John Hess said in an earnings-related conference call.
"We are successfully executing our strategic plan to focus our portfolio by investing in our highest-return assets and divesting mature higher-cost assets," Hess said. "Proceeds from these asset sales, along with cash on the balance sheet, will pre-fund development of our world-class investment opportunity in offshore Guyana where we have participated in one of the world's largest oil discoveries of the past decade---positioning our company to deliver more than a decade of cash-generative growth and a significant value to our shareholders."
For the third quarter, Hess reported exploratory capital spending of $558 million, up from $433 million during the same period in 2016. That included increased activity in the Bakken and Guyana. Industrial Info is tracking about $8 billion in active projects involving Hess, excluding the company's divestitures in Equatorial Guinea and Norway and the planned sale of its Denmark assets.
In the U.S., Hess is mainly focused on its Bakken assets in Williston, North Dakota, and the Gulf of Mexico, with a minor presence in the Utica shale play in the Appalachian Basin. Following the asset sales, the company's exploration and production activities will be concentrated in Algeria, Australia, Azerbaijan, Brazil, Egypt, Gabon, Ghana, Indonesia, Libya, Malaysia, Russia, Thailand, the United Kingdom and the United States.
The company's largest project is the development of the Stampede platform. Located in the deep-water Gulf of Mexico, the Hess-operated platform, in which the company has a 25% interest, is on track to start up in the first half of 2018, after which production is expected to ramp up to 15,000 barrels of oil equivalent per day (boe/d), Hess has said. Construction on the $6 billion project began in 2015. The platform will be located approximately 170 miles southeast of New Orleans, Louisiana, in water depth of 3,350 feet. MODEC International Incorporated (Houston, Texas) is one of the engineering, procurement and construction firms on the project. For more information, see Industrial Info's project reports on the platform and subsea equipment.
In North Dakota, Hess kicked off a $10 million drilling program near Keene, North Dakota early this year. Nabors Drilling USA (Williston, North Dakota) is serving as drilling contractor on the project, which utilizes four rigs. The company also completed construction on a $30 million crude oil facility in Hawkeye, which has a capacity of 80,000 BBL/d, and has proposed $30 million second-phase and $30 million third-phase expansions. For more information, see Industrial Info's project reports on the drilling program and the first phase, second phase and third phase of the Hawkeye facility.
Outside of the U.S., Hess announced back-to-back deals to sell its offshore Equatorial Guinea interests for $650 million and its oil and natural gas operations in Norway for roughly $2 billion earlier this week.
In Norway, Hess will sell its subsidiary, Hess Norge AS (Stavanger, Norway), which owns interests in the Valhall and Hod fields to Norway's Aker BP ASA (OSE:AKERBP) (Fornebu, Norway). Hess holds a 64.05% interest in Valhall and a 62.5% stake in Hod. Aker BP also will assume Hess Norge's tax liabilities, including an after-tax loss carry forward of $1.5 billion. The Valhall and Hod fields produced an average of 26,000 boe/d net to Hess during first-half 2017.
In Equatorial Guinea, Kosmos Energy Limited (NYSE:KOS) (Hamilton, Bermuda) will acquire Hess' 85% stake in two long-producing oil fields for $650 million. Hess' exit from the Central African country comes after nearly two decades of operations at the Ceiba field and Okume complex, in the Rio Muni Basin, which began producing in 2000 and 2006, respectively. Hess' partners in the fields, Tullow Oil (15%) (London, England) and national oil company GEPetrol (5% carried interest) (Malabo, Equatorial Guinea) will remain.
The sale of its interests in Norway, combined with the company's previously announced divestitures of its enhanced oil-recovery assets in the Permian basin and interests in Equatorial Guinea, have captured around $3.25 billion in cash proceeds year-to-date. These additional moves, including the planned sale of interests in Denmark, also will extinguish around $3.2 billion in future abandonment liabilities.
In June, Hess and its partner, Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) announced a final investment decision for the Liza oil prospect located on the Stabroek Block offshore Guyana. The companies put the reserve estimate for the broader area offshore Guyana as high as 2.75 billion barrels of oil, 10% higher than initially thought. The development cost of $3.2 billion is considered relatively low for a field that could yield 450 million barrels of oil after first oil is on stream by 2020.
The Liza field also has "attractive" economics with oil prices as low as $40 per barrel, Hess said. After lingering in the mid-$40 range for most of the latter portion of the first half of the year, prompt-month December Brent crude, the global benchmark, settled at $58.44/BBL on Wednesday.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle TM, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
In the same period last year, Hess incurred a net loss of $339 million. The weak results come as Hess tries to refocus its operations on Guyana and the U.S. after divesting its oil and natural gas interests in Equatorial Guinea and Norway earlier this week. The company attributed most of the loss to a change in tax structure.
Total revenue rose to $1.67 billion in the third quarter due to a 13.3% spike in average realized selling prices of crude, but production was lower across most of Hess' portfolio. Gulf of Mexico output fell 3.3% to 59,000 barrels of oil equivalent per day during the quarter. Excluding Libya, total quarterly production declined 4.8%. In North Dakota, the company's largest area of operations, oil production missed forecasts in the third quarter due to inclement weather, Chief Executive Officer John Hess said in an earnings-related conference call.
"We are successfully executing our strategic plan to focus our portfolio by investing in our highest-return assets and divesting mature higher-cost assets," Hess said. "Proceeds from these asset sales, along with cash on the balance sheet, will pre-fund development of our world-class investment opportunity in offshore Guyana where we have participated in one of the world's largest oil discoveries of the past decade---positioning our company to deliver more than a decade of cash-generative growth and a significant value to our shareholders."
For the third quarter, Hess reported exploratory capital spending of $558 million, up from $433 million during the same period in 2016. That included increased activity in the Bakken and Guyana. Industrial Info is tracking about $8 billion in active projects involving Hess, excluding the company's divestitures in Equatorial Guinea and Norway and the planned sale of its Denmark assets.
In the U.S., Hess is mainly focused on its Bakken assets in Williston, North Dakota, and the Gulf of Mexico, with a minor presence in the Utica shale play in the Appalachian Basin. Following the asset sales, the company's exploration and production activities will be concentrated in Algeria, Australia, Azerbaijan, Brazil, Egypt, Gabon, Ghana, Indonesia, Libya, Malaysia, Russia, Thailand, the United Kingdom and the United States.
The company's largest project is the development of the Stampede platform. Located in the deep-water Gulf of Mexico, the Hess-operated platform, in which the company has a 25% interest, is on track to start up in the first half of 2018, after which production is expected to ramp up to 15,000 barrels of oil equivalent per day (boe/d), Hess has said. Construction on the $6 billion project began in 2015. The platform will be located approximately 170 miles southeast of New Orleans, Louisiana, in water depth of 3,350 feet. MODEC International Incorporated (Houston, Texas) is one of the engineering, procurement and construction firms on the project. For more information, see Industrial Info's project reports on the platform and subsea equipment.
In North Dakota, Hess kicked off a $10 million drilling program near Keene, North Dakota early this year. Nabors Drilling USA (Williston, North Dakota) is serving as drilling contractor on the project, which utilizes four rigs. The company also completed construction on a $30 million crude oil facility in Hawkeye, which has a capacity of 80,000 BBL/d, and has proposed $30 million second-phase and $30 million third-phase expansions. For more information, see Industrial Info's project reports on the drilling program and the first phase, second phase and third phase of the Hawkeye facility.
Outside of the U.S., Hess announced back-to-back deals to sell its offshore Equatorial Guinea interests for $650 million and its oil and natural gas operations in Norway for roughly $2 billion earlier this week.
In Norway, Hess will sell its subsidiary, Hess Norge AS (Stavanger, Norway), which owns interests in the Valhall and Hod fields to Norway's Aker BP ASA (OSE:AKERBP) (Fornebu, Norway). Hess holds a 64.05% interest in Valhall and a 62.5% stake in Hod. Aker BP also will assume Hess Norge's tax liabilities, including an after-tax loss carry forward of $1.5 billion. The Valhall and Hod fields produced an average of 26,000 boe/d net to Hess during first-half 2017.
In Equatorial Guinea, Kosmos Energy Limited (NYSE:KOS) (Hamilton, Bermuda) will acquire Hess' 85% stake in two long-producing oil fields for $650 million. Hess' exit from the Central African country comes after nearly two decades of operations at the Ceiba field and Okume complex, in the Rio Muni Basin, which began producing in 2000 and 2006, respectively. Hess' partners in the fields, Tullow Oil (15%) (London, England) and national oil company GEPetrol (5% carried interest) (Malabo, Equatorial Guinea) will remain.
The sale of its interests in Norway, combined with the company's previously announced divestitures of its enhanced oil-recovery assets in the Permian basin and interests in Equatorial Guinea, have captured around $3.25 billion in cash proceeds year-to-date. These additional moves, including the planned sale of interests in Denmark, also will extinguish around $3.2 billion in future abandonment liabilities.
In June, Hess and its partner, Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) announced a final investment decision for the Liza oil prospect located on the Stabroek Block offshore Guyana. The companies put the reserve estimate for the broader area offshore Guyana as high as 2.75 billion barrels of oil, 10% higher than initially thought. The development cost of $3.2 billion is considered relatively low for a field that could yield 450 million barrels of oil after first oil is on stream by 2020.
The Liza field also has "attractive" economics with oil prices as low as $40 per barrel, Hess said. After lingering in the mid-$40 range for most of the latter portion of the first half of the year, prompt-month December Brent crude, the global benchmark, settled at $58.44/BBL on Wednesday.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle TM, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
