Hess Dissappoints With Larger Loss, Increases CapEx

Independant oil and gas explorer Hess Corporation reported fourth-quarter 2017 earnings below expectations before the market opened Monday. $HES was down near 6% with production concerns and debt worries, though eased by asset sales and CapEx plans. 

Independant oil and gas explorer Hess Corporation reported fourth-quarter 2017 earnings below expectations before the market opened Monday. $HES was down near 6% with production concerns and debt worries, though eased by asset sales and CapEx plans.

Earnings

For Q4 adjusted diluted net loss per share of $1.01 on revenues of $1.3 billion. In the same period a year ago $HES reported a loss of $1.01 per share on revenues of $1.39 billion. These were worse than consensus estimates for a net loss of $0.91 per share but higher than expected revenues of $1.31 billion.

For the full year, Hess reported an adjusted net loss of $4.61 per share on revenues of $5.41 billion compared to a per-share net loss of $4.94 and revenues of $4.84 billion in the prior year. Analysts had been anticipating a net loss of $4.52 and $5.16 billion in revenues.

Reaction Hess Corp NYSE: $HES

Lunch $45.10 ▼ 2.78 (-5.81%)

Writedowns

Fourth-quarter 2017 results reflect net after-tax charges totaling $2.37 billion, including a noncash accounting charge of $1.7 billion to reduce the carrying value of Hess’ interests in the Stampede and Tubular Bells Fields in the Gulf of Mexico, as a result of a lower long-term crude oil price outlook.

Production

  • Hess reported fourth quarter 2017 net U.S. production of 170.5 Mboe/d, down 9% from third quarter 2017 volumes of 188.2 Mboe/d.
  • U.S. volumes were hurt by downtime at the Enchilada platform fire, though there was growth in the Bakken formation.
  • Hess expects production in the range of 245,000 to 255,000 barrels of oil equivalent per day in 2018, compared to pro forma production of 242,000 barrels in 2017.

Capital Spending

  • Hess Q4 2017 capital spending totaled $568 million, requating to a full-year spend of $2,047 million. This spend was over double Hess’ cash flow from operations of $945 million.
  • Fourth quarter spending included $200 million in the Bakken, $162 million in the Gulf of Mexico, $150 million in Asia and $51 million in Europe.

 Previous Quarters

Hess $HES Misses Earnings, Where Now With Lower Oil Prices?

Since early 2014 Hess’s long-term debt load has been rising from near $5.5 billion to near $6.7 billion. During the second quarter of 2017 both oil and natural gas prices fell putting further pressure on exploration firms like Hess. 

Asset Sales and Debt Reduction

Hess commenced the process to sell interests in Denmark in 2018. Proceeds along with cash on balance sheet to prefund it’s offshore Guyana (Hess – 30 percent) play. Hess is currently on track with development activities on Liza Phase One, with first production set for 2020. Additionally, Hess and Esso confirmed a second giant oil field in Guyana with estimated recoverable resources of 500 million barrels.

Hess agreed to sell its interests in enhanced oil recovery (EOR) assets in the Permian Basin to Occidental $OXY for a total consideration of $600 million, effective June 1, 2017. Proceeds from the sale will be used to fund the company’s strong growth opportunities. The agreement is expected to close Aug. 1, 2017.CEO

John Hess said: In the past year, our company successfully completed an ambitious asset sales program, replaced 351 percent of production at an attractive F&D cost of just over $5 per barrel, continued our extraordinary exploration success on the Stabroek Block in Guyana and sanctioned the Liza Phase 1 development with plans underway for the next two phases. We enter 2018 well positioned to deliver a decade plus of capital efficient growth with increasing cash generation and returns to shareholders.

About Hess

Hess operates in two key U.S. shale plays, the North Dakota Bakken and Three Forks formations, producing shale oil and gas, and the Ohio Utica Basin, where they primarily produce natural gas and natural gas liquids (NGLs). 

Hess is the sixth-largest producer in the Gulf of Mexico and also has offshore assets in Europe, Asia Pacific and West Africa. They operate major offshore projects by Gulf of Mexico partners and by the Malaysian national oil company.

Source: HES, Criterion

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