Hess Reports Estimated Results for the Fourth Quarter of 2021
Key Developments:
Announced significant new discoveries at Fangtooth and Lau Lau on the Stabroek Block, offshore Guyana; the positive result at Fangtooth, the first standalone deep prospect, confirms the deeper exploration potential of the Block
- The Fangtooth and Lau Lau discoveries increase the Stabroek Block’s previously announced gross discovered recoverable resource estimate to more than 10 billion barrels of oil equivalent (boe)
Fourth Quarter Financial and Operational Highlights:
- Net income was $265 million, or $0.85 per share, compared with a net loss of $97 million, or $0.32 per share in the fourth quarter of 2020; adjusted net loss1 in the prior-year quarter was $176 million, or $0.58 per share
- Oil and gas net production, excluding Libya, was 295,000 barrels of oil equivalent per day (boepd); Bakken net production was 159,000 boepd
- E&P capital and exploratory expenditures were $593 million compared with $371 million in the prior-year quarter
- Year-end proved reserves are estimated to be 1,309 million boe; organic reserve replacement was 295 percent (204 percent excluding price revisions) at a finding and development cost of approximately $5.25 per boe (approximately $7.60 per boe excluding price revisions)
2022 Guidance:
- Net production, excluding Libya, is forecast to be in the range of 330,000 boepd to 340,000 boepd, which is a 12 percent to 15 percent increase from 2021; Bakken net production is forecast to be in the range of 165,000 boepd to 170,000 boepd, which is a 6 percent to 9 percent increase from 2021
- E&P capital and exploratory expenditures are expected to be approximately $2.6 billion, of which approximately 80 percent will be allocated to Guyana and the Bakken
NEW YORK–(BUSINESS WIRE)–Hess Corporation (NYSE: HES) today reported net income of $265 million, or $0.85 per share, in the fourth quarter of 2021, compared with a net loss of $97 million, or $0.32 per share, in the fourth quarter of 2020. On an adjusted basis, the Corporation reported a net loss in the prior-year quarter of $176 million, or $0.58 per share. The improvement in adjusted after-tax results compared with the prior-year period was primarily due to higher realized selling prices in the fourth quarter of 2021.
- “Adjusted net income (loss)” is a non-GAAP financial measure. The definition of this non-GAAP measure and a reconciliation to its nearest GAAP equivalent measure appears on pages 6 to 8.
“This year marks an inflection point in the execution of our strategy,” CEO John Hess said. “We have built a differentiated portfolio offering a unique value proposition – delivering durable cash flow growth that enables us to continue to invest in some of the highest return projects in the industry and to start growing our cash returns to our shareholders.”
After-tax income (loss) by major operating activity was as follows:
|
|
Three Months Ended December 31, (unaudited) |
Year Ended December 31, (unaudited) |
|||||||||||||
|
|
2021 |
2020 |
2021 |
2020 |
|||||||||||
|
|
(In millions, except per share amounts) |
||||||||||||||
|
Net Income (Loss) Attributable to Hess Corporation |
|
|
|||||||||||||
|
Exploration and Production |
$ |
309 |
$ |
(39) |
$ |
770 |
$ |
(2,841) |
|||||||
|
Midstream |
|
74 |
|
62 |
|
286 |
230 |
||||||||
|
Corporate, Interest and Other |
|
(118) |
|
(120) |
|
(497) |
(482) |
||||||||
|
Net income (loss) attributable to Hess Corporation |
$ |
265 |
$ |
(97) |
$ |
559 |
$ |
(3,093) |
|||||||
|
Net income (loss) per share (diluted) |
$ |
0.85 |
$ |
(0.32) |
$ |
1.81 |
$ |
(10.15) |
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|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|||||||||||
|
Adjusted Net Income (Loss) Attributable to Hess Corporation |
|
|
|||||||||||||
|
Exploration and Production |
$ |
309 |
$ |
(118) |
$ |
888 |
$ |
(643) |
|||||||
|
Midstream |
|
74 |
|
62 |
|
286 |
230 |
||||||||
|
Corporate, Interest and Other |
(118) |
(120) |
|
(497) |
(481) |
||||||||||
|
Adjusted net income (loss) attributable to Hess Corporation |
$ |
265 |
$ |
(176) |
$ |
677 |
$ |
(894) |
|||||||
|
Adjusted net income (loss) per share (diluted) |
$ |
0.85 |
$ |
(0.58) |
$ |
2.19 |
$ |
(2.93) |
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|
|
|
|
|
|
|||||||||||
|
Weighted average number of shares (diluted) |
|
310.0 |
|
305.1 |
|
309.3 |
304.8 |
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|
|
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Exploration and Production:
E&P net income was $309 million in the fourth quarter of 2021, compared with a net loss of $39 million in the fourth quarter of 2020. On an adjusted basis, E&P’s net loss in the prior-year quarter was $118 million. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $71.04 per barrel in the fourth quarter of 2021, compared with $45.32 per barrel in the prior-year quarter. The average realized natural gas liquids (NGL) selling price in the fourth quarter of 2021 was $36.47 per barrel, compared with $15.80 per barrel in the prior-year quarter, while the average realized natural gas selling price was $4.77 per mcf, compared with $3.35 per mcf in the fourth quarter of 2020.
Net production, excluding Libya, was 295,000 boepd in the fourth quarter of 2021, compared with 309,000 boepd in the fourth quarter of 2020, or 295,000 boepd proforma for assets sold. Net production for Libya was 21,000 boepd in the fourth quarter of 2021 compared with 12,000 boepd in the prior-year quarter.
Cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $12.17 per boe (excluding Libya: $12.84 per boe) in the fourth quarter of 2021, compared with $11.31 per boe (excluding Libya: $11.57 per boe) in the prior-year quarter. The change in per unit cost reflects the impact of lower production volumes and higher production and severance taxes in North Dakota in the fourth quarter of this year. Income tax expense increased in the fourth quarter of 2021 compared with the prior-year quarter primarily due to improved results from Libya and Guyana.
Oil and Gas Reserves Estimates:
Oil and gas proved reserves at December 31, 2021, which are subject to final review, were 1,309 million boe, compared with 1,170 million boe at December 31, 2020. Net proved reserve additions in 2021 totaled 348 million boe, which is comprised of net positive revisions of 107 million boe due to higher commodity prices and other net additions of 241 million boe primarily from the Bakken. Asset sales in 2021 reduced proved reserves by 91 million boe.
Excluding asset sales, the Corporation replaced 295 percent of its 2021 production (204 percent excluding price revisions) at a finding and development cost of approximately $5.25 per boe (approximately $7.60 per boe excluding price revisions).
Operational Highlights for the Fourth Quarter of 2021:
Bakken (Onshore U.S.): Net production from the Bakken was 159,000 boepd compared with 189,000 boepd in the prior-year quarter primarily due to the impact of lower drilling activity caused by a reduction in rig count from six to one during the first half of last year, lower NGL and natural gas volumes received under percentage of proceeds contracts, and the second quarter 2021 sale of Little Knife and Murphy Creek nonstrategic acreage interests, which contributed net production of approximately 5,000 boepd in the fourth quarter of 2020. Net oil production was 79,000 barrels of oil per day (bopd) compared with 97,000 bopd in the fourth quarter of 2020. NGL and natural gas volumes received under percentage of proceeds contracts were 9,000 boepd in the fourth quarter of 2021 compared with 21,000 boepd in the fourth quarter of 2020 due to higher realized NGL prices lowering volumes received as consideration for gas processing fees. The Corporation added a second rig in February 2021 and a third rig in September 2021, and drilled 17 wells, completed 13 wells, and brought 19 new wells online in the fourth quarter.
Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 39,000 boepd, compared with 32,000 boepd in the prior-year quarter primarily due to downtime for hurricane-related maintenance in the fourth quarter of 2020. Net production from the Shenzi Field, which was sold in November 2020, was 3,000 boepd in the fourth quarter of 2020.
Guyana (Offshore): At the Stabroek Block (Hess – 30%), the operator, Esso Exploration and Production Guyana Limited, announced two significant discoveries at Fangtooth and Lau Lau. The Fangtooth-1 well encountered approximately 164 feet of high quality oil bearing sandstone reservoirs, and confirms the deeper exploration potential of the Stabroek Block. The well was drilled in 6,030 feet of water and is located approximately 11 miles northwest of the Liza Field. The Lau Lau-1 well encountered approximately 315 feet of high quality hydrocarbon bearing sandstone reservoirs. The well was drilled in 4,793 feet of water and is located approximately 42 miles southeast of the Liza Field.
The Corporation’s net production from the Liza Destiny floating production, storage and offloading vessel (FPSO) was 31,000 bopd in the fourth quarter of 2021 compared with 26,000 bopd in the prior-year quarter. On October 25, 2021, the Liza Unity FPSO, with an expected capacity of 220,000 gross bopd, arrived at the Stabroek Block and startup of Phase 2 of the Liza Field development remains on track for the first quarter of 2022. The third development, Payara, will utilize the Prosperity FPSO with an expected capacity of 220,000 gross bopd; first oil is expected in 2024. A fourth development, Yellowtail, was submitted to the government of Guyana for approval in the fourth quarter. Pending government approval and project sanctioning, the project is expected to have a capacity of 250,000 gross bopd with first oil anticipated in 2025. We expect to have at least six FPSOs on the Stabroek Block in 2027, with the potential for up to 10 FPSOs to develop the current discovered recoverable resource base.
Following the completion of the Fangtooth-1 well, the Stena DrillMAX will begin drilling at the Tarpon prospect. Following the completion of the Lau Lau-1 well, the Noble Don Taylor began drilling at the Barreleye prospect. The Stena Carron completed drill stem tests on the Longtail-2, Whiptail-2 and Turbot-2 wells, and is currently performing a drill stem test on the Tilapia-1 well. The Noble Sam Croft, the Noble Bob Douglas and the Noble Tom Madden are currently drilling and completing development wells at Liza Phase 2 and the Payara Field.
South East Asia (Offshore): Net production at North Malay Basin and JDA was 66,000 boepd compared with 56,000 boepd in the prior-year quarter, reflecting higher natural gas nominations due to a recovery in economic activity which had been impacted by COVID-19.
Midstream:
The Midstream segment had net income of $74 million in the fourth quarter of 2021, compared with net income of $62 million in the prior-year quarter, primarily due to increased revenue from higher minimum volume commitments and rates.
In October 2021, Hess Midstream LP completed a public offering of approximately 8.6 million Class A shares held by Hess Corporation and Global Infrastructure Partners. The Corporation received net proceeds of $108 million. After giving effect to this transaction, the Corporation owns an approximate 44% interest in Hess Midstream LP, on a consolidated basis.
Corporate, Interest and Other:
After-tax expense for Corporate, Interest and Other was $118 million in the fourth quarter of 2021, compared with $120 million in the fourth quarter of 2020.
Capital and Exploratory Expenditures:
E&P capital and exploratory expenditures were $593 million in the fourth quarter of 2021, compared with $371 million in the prior-year quarter, primarily due to higher drilling and development activity in Guyana and the Bakken. Midstream capital expenditures were $54 million in the fourth quarter of 2021, compared with $51 million in the prior-year quarter.
Liquidity:
Excluding the Midstream segment, Hess Corporation had cash and cash equivalents of $2.71 billion and debt and finance lease obligations totaling $6.1 billion at December 31, 2021. The Midstream segment had cash and cash equivalents of $2 million and total debt of $2.6 billion at December 31, 2021. The Corporation’s debt to capitalization ratio as defined in its debt covenants was 42.3% at December 31, 2021 and 47.5% at December 31, 2020.
Net cash provided by operating activities was $899 million in the fourth quarter of 2021, up from $486 million in the fourth quarter of 2020. Net cash provided by operating activities before changes in operating assets and liabilities2 was $886 million in the fourth quarter of 2021, compared with $532 million in the prior-year quarter, primarily due to higher realized selling prices. Changes in operating assets and liabilities increased cash flow from operating activities by $13 million during the fourth quarter of 2021 and decreased cash flow from operating activities by $46 million in the prior-year quarter.
During the quarter, the Corporation received net proceeds of $108 million from the public offering of approximately 4.3 million Hess-owned Class A shares of Hess Midstream LP. In January 2022, the Corporation paid accrued Libyan income tax and royalties of approximately $470 million related to operations for the period December 2020 through November 2021.
2. “Net cash provided by (used in) operating activities before changes in operating assets and liabilities” is a non-GAAP financial measure. The definition of this non-GAAP measure and a reconciliation to its nearest GAAP equivalent measure appears on pages 7 and 8.
Items Affecting Comparability of Earnings Between Periods:
The following table reflects the total after-tax income (expense) of items affecting comparability of earnings between periods:
|
|
Three Months Ended December 31, (unaudited) |
Year Ended December 31, (unaudited) |
|||||||||||||
|
|
2021 |
2020 |
2021 |
2020 |
|||||||||||
|
|
(In millions) |
||||||||||||||
|
Exploration and Production |
$ |
— |
$ |
79 |
$ |
(118) |
$ |
(2,198) |
|||||||
|
Midstream |
— |
— |
— |
— |
|||||||||||
|
Corporate, Interest and Other |
— |
— |
— |
(1) |
|||||||||||
|
Total items affecting comparability of earnings between periods |
$ |
— |
$ |
79 |
$ |
(118) |
$ |
(2,199) |
|||||||
Fourth Quarter 2020: E&P results included a pre-tax gain of $79 million ($79 million after income taxes) associated with the sale of the Corporation’s 28% working interest in the Shenzi Field in the deepwater Gulf of Mexico.
Reconciliation of U.S. GAAP to Non-GAAP Measures:
The following table reconciles reported net income (loss) attributable to Hess Corporation and adjusted net income (loss):
|
|
Three Months Ended December 31, (unaudited) |
Year Ended December 31, (unaudited) |
|||||||||||||
|
|
2021 |
2020 |
2021 |
2020 |
|||||||||||
|
|
(In millions) |
||||||||||||||
|
Net income (loss) attributable to Hess Corporation |
$ |
265 |
$ |
(97) |
$ |
559 |
$ |
(3,093) |
|||||||
|
Less: Total items affecting comparability of earnings between periods |
— |
79 |
(118) |
(2,199) |
|||||||||||
|
Adjusted net income (loss) attributable to Hess Corporation |
$ |
265 |
$ |
(176) |
$ |
677 |
$ |
(894) |
|||||||
The following table reconciles reported net cash provided by (used in) operating activities from net cash provided by (used in) operating activities before changes in operating assets and liabilities:
|
|
Three Months Ended December 31, (unaudited) |
|
Year Ended December 31, (unaudited) |
||||||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
|
|
(In millions) |
||||||||||||||
|
Net cash provided by (used in) operating activities before changes in operating assets and liabilities |
$ |
886 |
|
$ |
532 |
|
$ |
2,991 |
|
$ |
1,803 |
||||
|
Changes in operating assets and liabilities |
13 |
|
(46) |
|
(101) |
|
(470) |
||||||||
|
Net cash provided by (used in) operating activities |
$ |
899 |
|
$ |
486 |
|
$ |
2,890 |
|
$ |
1,333 |
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Hess Corporation will review fourth quarter financial and operating results and other matters on a webcast at 10 a.m. today (EDT). For details about the event, refer to the Investor Relations section of our website at www.hess.com.
Hess Corporation is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas. More information on Hess Corporation is available at www.hess.com.
Forward-looking Statements
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; estimates of our crude oil and natural gas reserves and levels of production; benchmark prices of crude oil, NGL and natural gas and our associated realized price differentials; our projected budget and capital and exploratory expenditures; expected timing and completion of our development projects, and future economic and market conditions in the oil and gas industry.
Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements: fluctuations in market prices of crude oil, NGL and natural gas and competition in the oil and gas exploration and production industry, including as a result of COVID-19; reduced demand for our products, including due to COVID-19, competing or alternative energy products and political conditions and events; potential failures or delays in increasing oil and gas reserves, including as a result of unsuccessful exploration activity, drilling risks and unforeseen reservoir conditions, and in achieving expected production levels; changes in tax, property, contract and other laws, regulations and governmental actions applicable to our business, including legislative and regulatory initiatives regarding environmental concerns, such as measures to limit greenhouse gas emissions and flaring as well as fracking bans; operational changes and expenditures due to climate change and sustainability related initiatives; disruption or interruption of our operations due to catastrophic events, such as accidents, severe weather, geological events, shortages of skilled labor, cyber-attacks, health measures related to COVID-19 or climate change; the ability of our contractual counterparties to satisfy their obligations to us, including the operation of joint ventures under which we may not control and exposure to decommissioning liabilities for divested assets in the event the current or future owners are unable to perform; unexpected changes in technical requirements for constructing, modifying or operating exploration and production facilities and/or the inability to timely obtain or maintain necessary permits; availability and costs of employees and other personnel, drilling rigs, equipment, supplies and other required services; any limitations on our access to capital or increase in our cost of capital, including as a result of weakness in the oil and gas industry or negative outcomes within commodity and financial markets; liability resulting from litigation, including heightened risks associated with being a general partner of Hess Midstream LP; and other factors described in Item 1A—Risk Factors in our Annual Report on Form 10-K and any additional risks described in our other filings with the Securities and Exchange Commission (SEC).
As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
Non-GAAP financial measures
The Corporation has used non-GAAP financial measures in this earnings release. “Adjusted net income (loss)” presented in this release is defined as reported net income (loss) attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods. “Net cash provided by (used in) operating activities before changes in operating assets and liabilities” presented in this release is defined as Net cash provided by (used in) operating activities excluding changes in operating assets and liabilities. Management uses adjusted net income (loss) to evaluate the Corporation’s operating performance and believes that investors’ understanding of our performance is enhanced by disclosing this measure, which excludes certain items that management believes are not directly related to ongoing operations and are not indicative of future business trends and operations. Management believes that net cash provided by (used in) operating activities before changes in operating assets and liabilities demonstrates the Corporation’s ability to internally fund capital expenditures, pay dividends and service debt. These measures are not, and should not be viewed as, a substitute for U.S. GAAP net income (loss) or net cash provided by (used in) operating activities. A reconciliation of reported net income (loss) attributable to Hess Corporation (U.S. GAAP) to adjusted net income (loss), and a reconciliation of net cash provided by (used in) operating activities (U.S. GAAP) to net cash provided by (used in) operating activities before changes in operating assets and liabilities are provided in the release.
Cautionary Note to Investors
We use certain terms in this release relating to resources other than proved reserves, such as unproved reserves or resources. Investors are urged to consider closely the oil and gas disclosures in Hess Corporation’s Form 10-K, File No. 1-1204, available from Hess Corporation, 1185 Avenue of the Americas, New York, New York 10036 c/o Corporate Secretary and on our website at www.hess.com. You can also obtain this form from the SEC on the EDGAR system.
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HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES |
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|
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED) |
|||||||||||
|
(IN MILLIONS) |
|||||||||||
|
|
Fourth Quarter 2021 |
|
Fourth Quarter 2020 |
|
Third Quarter 2021 |
||||||
|
Income Statement |
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
|
Revenues and non-operating income |
|
|
|
|
|
||||||
|
Sales and other operating revenues |
$ |
2,237 |
|
$ |
1,321 |
|
$ |
1,759 |
|||
|
Gains on asset sales, net |
— |
|
79 |
|
29 |
||||||
|
Other, net |
18 |
|
17 |
|
23 |
||||||
|
Total revenues and non-operating income |
2,255 |
|
1,417 |
|
1,811 |
||||||
|
Costs and expenses |
|
|
|
|
|
||||||
|
Marketing, including purchased oil and gas |
672 |
|
281 |
|
522 |
||||||
|
Operating costs and expenses |
316 |
|
313 |
|
333 |
||||||
|
Production and severance taxes |
49 |
|
32 |
|
42 |
||||||
|
Exploration expenses, including dry holes and lease impairment |
45 |
|
60 |
|
36 |
||||||
|
General and administrative expenses |
86 |
|
82 |
|
76 |
||||||
|
Interest expense |
121 |
|
118 |
|
125 |
||||||
|
Depreciation, depletion and amortization |
398 |
|
486 |
|
349 |
||||||
|
Total costs and expenses |
1,687 |
|
1,372 |
|
1,483 |
||||||
|
Income (loss) before income taxes |
568 |
|
45 |
|
328 |
||||||
|
Provision (benefit) for income taxes |
212 |
|
72 |
|
143 |
||||||
|
Net income (loss) |
356 |
|
(27) |
|
185 |
||||||
|
Less: Net income (loss) attributable to noncontrolling interests |
91 |
|
70 |
|
70 |
||||||
|
Net income (loss) attributable to Hess Corporation |
$ |
265 |
|
$ |
(97) |
|
$ |
115 |
|||
Contacts
For Hess Corporation
Investors:
Jay Wilson
(212) 536-8940
Media:
Lorrie Hecker
(212) 536-8250
Jamie Tully
Sard Verbinnen & Co
(917) 679-7908
