Hess Corporation is a global energy company engaged in the exploration, development, production, transportation, purchase, and sale of crude oil, natural gas liquids, and natural gas. With a diverse portfolio of assets spanning the United States, Guyana, Malaysia, and Thailand, Hess has established itself as a leading player in the energy industry.
Financials
In the fiscal year 2023, Hess reported impressive financial results, with annual net income reaching $1,382 million and annual revenue of $10,701 million. The company's annual operating cash flow was a robust $3,942 million, while its annual free cash flow stood at -$166 million, reflecting the company's significant capital investments to drive future growth.
Quarterly Performance Highlights
In the first quarter of 2024, Hess continued to deliver strong operational and financial results. The company reported net income of $972 million, a significant increase from the $346 million reported in the same period of the prior year. This impressive performance was driven by higher production volumes, which averaged 476,000 barrels of oil equivalent per day (boepd) in the first quarter of 2024, compared to 374,000 boepd in the first quarter of 2023.
The company's Exploration and Production (E&P) segment was a standout performer, contributing $997 million in net income. This was primarily due to higher realized selling prices, with the average realized crude oil selling price reaching $80.06 per barrel in the first quarter of 2024, compared to $74.23 per barrel in the prior-year quarter.
Guyana: A Transformative Asset
One of the key drivers of Hess' growth has been its operations in the Stabroek Block, offshore Guyana. In the first quarter of 2024, net production from Guyana totaled 190,000 barrels of oil per day (bopd), including 33,000 bopd of tax barrels. This represents a significant increase from the 112,000 bopd reported in the first quarter of 2023, driven by the start-up of the Payara development in November 2023.
The Stabroek Block has been a transformative asset for Hess, with the company and its partners making several world-class oil discoveries in the region. The block is expected to underpin the potential for up to ten floating production, storage, and offloading (FPSO) vessels, with a total expected production capacity of approximately 1.3 million gross bopd by the end of 2027.
Bakken: A Reliable Contributor
In addition to its success in Guyana, Hess has also maintained a strong presence in the Bakken shale play in North Dakota. In the first quarter of 2024, net production from the Bakken averaged 190,000 boepd, up from 163,000 boepd in the first quarter of 2023. This increase was driven by higher drilling and completion activity, as well as higher natural gas liquids and natural gas volumes received under percentage of proceeds contracts.
Hess plans to continue operating four drilling rigs in the Bakken throughout 2024 and forecasts net production to be in the range of 195,000 boepd to 200,000 boepd in the second quarter of 2024.
Midstream Segment: A Steady Contributor
Hess' Midstream segment, which includes the company's approximately 38% consolidated ownership interest in Hess Midstream LP, also contributed to the overall financial performance. In the first quarter of 2024, the Midstream segment reported net income of $67 million, compared to $61 million in the same period of the prior year.
The Midstream segment provides fee-based services, including gathering, compressing, and processing natural gas, as well as fractionating natural gas liquids, gathering and terminaling crude oil and natural gas liquids, storing and terminaling propane, and water handling services primarily in the Bakken shale play.
Liquidity
As of March 31, 2024, Hess had $1.4 billion in cash and cash equivalents, excluding its Midstream segment, and total liquidity, including available committed credit facilities, of approximately $4.8 billion. The company's E&P capital and exploratory expenditures are forecast to be approximately $4.2 billion for 2024.
Hess has a strong balance sheet and is well-positioned to fund its capital investment program and return capital to shareholders. The company's Board of Directors has authorized a new $1 billion share repurchase program, which is expected to be executed over time, subject to market conditions and other factors.
Outlook
For the second quarter of 2024, Hess forecasts total net production to be in the range of 465,000 boepd to 475,000 boepd. The company also expects Midstream net income to be in the range of $65 million to $70 million and E&P income tax expense to be in the range of $285 million to $295 million.
Risks and Challenges
While Hess has demonstrated impressive growth and financial performance, the company is not without its risks and challenges. These include volatility in commodity prices, geopolitical risks in its international operations, and the potential impact of environmental regulations and climate change on its business.
Additionally, the company's proposed merger with Chevron Corporation, announced in October 2023, is subject to various regulatory approvals and the resolution of the Stabroek right of first refusal arbitration. The successful completion of the merger could provide significant synergies and growth opportunities for the combined entity, but any delays or complications in the process could also pose risks to Hess' operations and financial performance.
Conclusion
Hess Corporation has established itself as a diversified energy giant, with a strong portfolio of assets and a proven track record of operational and financial success. The company's focus on high-quality assets, such as the Stabroek Block in Guyana and the Bakken shale play in North Dakota, has positioned it for continued growth and value creation.
With a robust liquidity position, a disciplined capital allocation strategy, and a promising outlook for its key business segments, Hess is well-poised to navigate the challenges of the energy industry and deliver long-term value to its shareholders.