Hess Reports Estimated Results for the Fourth Quarter of 2022
Key Developments:
- Continued exploration success in 2023 on the Stabroek Block, offshore Guyana, with a significant new oil discovery at the Fangtooth SE-1 well located approximately 8 miles southeast of the original Fangtooth-1 discovery
- The Fangtooth SE-1 well encountered approximately 200 feet of oil bearing sandstone reservoirs
- Fangtooth adds to the block’s gross discovered recoverable resource estimate of more than 11 billion barrels of oil equivalent (boe) and has the potential to underpin a future oil development
- The development plan for Uaru, the fifth development on the Stabroek Block, was submitted to the Government of Guyana for approval in the fourth quarter; the project is expected to have a capacity of approximately 250,000 gross barrels of oil per day (bopd) with first oil anticipated at the end of 2026
- Entered into an agreement with the Government of Guyana for the purchase of high quality REDD+ carbon credits for a minimum of $750 million from 2022 through 2032; the long-term strategic partnership with the Government of Guyana aims to prevent deforestation and support sustainable development in Guyana
- Completed the sale of the Corporation’s interest in Libya for net proceeds of $150 million
- Total cash returned to stockholders was $405 million in the quarter through dividends and share repurchases of $310 million
Fourth Quarter Financial and Operational Highlights:
- Net income was $624 million, or $2.03 per common share, compared with net income of $265 million, or $0.85 per common share, in the fourth quarter of 2021; adjusted net income1 was $548 million, or $1.78 per common share, in the fourth quarter of 2022
- Oil and gas net production, excluding Libya, was 376,000 barrels of oil equivalent per day (boepd), up 27 percent from 295,000 boepd in the fourth quarter of 2021
- E&P capital and exploratory expenditures were $818 million compared with $593 million in the prior-year quarter
- Cash and cash equivalents, excluding Midstream, were $2.48 billion at December 31, 2022
- Year-end proved reserves are estimated to be 1.26 billion boe; organic reserve replacement was 144 percent at a finding and development cost of approximately $14.80 per boe
2023 Guidance:
- Net production is forecast to be in the range of 355,000 boepd to 365,000 boepd, which is an approximate 10 percent increase from 2022, proforma for assets sold
- E&P capital and exploratory expenditures are expected to be approximately $3.7 billion, of which more than 80 percent will be allocated to Guyana and the Bakken
1. “Adjusted net income” 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 and 7.
NEW YORK–(BUSINESS WIRE)– Hess Corporation (NYSE: HES) today reported net income of $624 million, or $2.03 per common share, in the fourth quarter of 2022 compared with net income of $265 million, or $0.85 per common share, in the fourth quarter of 2021. On an adjusted basis, the Corporation had net income of $548 million or $1.78 per common share in the fourth quarter of 2022. The improvement in adjusted after-tax earnings compared with the prior-year period was primarily due to increased sales volumes in Guyana in the fourth quarter of 2022.
“Our strategy is to grow our resource base, deliver a low cost of supply and generate industry leading cash flow growth – and at the same time maintain our industry leadership in environmental, social and governance performance and disclosure,” CEO John Hess said. “Our successful execution of this strategy has uniquely positioned our company to deliver significant value to shareholders by both growing intrinsic value and growing cash returns.”
After-tax income (loss) by major operating activity was as follows:
|
|
Three Months Ended December 31, (unaudited) |
Year Ended December 31, (unaudited) |
|||||||||||||
|
|
2022 |
2021 |
2022 |
2021 |
|||||||||||
|
|
(In millions, except per share amounts) |
||||||||||||||
|
Net Income Attributable to Hess Corporation |
|
|
|
|
|
|
|
|
|||||||
|
Exploration and Production |
$ |
667 |
$ |
309 |
$ |
2,422 |
$ |
770 |
|||||||
|
Midstream |
|
64 |
|
74 |
|
269 |
|
286 |
|||||||
|
Corporate, Interest and Other |
|
(107) |
|
(118) |
|
(468) |
|
(497) |
|||||||
|
Net income attributable to Hess Corporation |
$ |
624 |
$ |
265 |
$ |
2,223 |
$ |
559 |
|||||||
|
Net income per common share (diluted) |
$ |
2.03 |
$ |
0.85 |
$ |
7.18 |
$ |
1.81 |
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||
|
Adjusted Net Income Attributable to Hess Corporation |
|
|
|
|
|
|
|
|
|||||||
|
Exploration and Production |
$ |
591 |
$ |
309 |
$ |
2,400 |
$ |
888 |
|||||||
|
Midstream |
|
64 |
|
74 |
|
269 |
|
286 |
|||||||
|
Corporate, Interest and Other |
|
(107) |
|
(118) |
|
(467) |
|
(497) |
|||||||
|
Adjusted net income attributable to Hess Corporation |
$ |
548 |
$ |
265 |
$ |
2,202 |
$ |
677 |
|||||||
|
Adjusted net income per common share (diluted) |
$ |
1.78 |
$ |
0.85 |
$ |
7.11 |
$ |
2.19 |
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||
|
Weighted average number of shares (diluted) |
|
308.1 |
|
310.0 |
|
309.6 |
|
309.3 |
|||||||
Exploration and Production:
E&P net income was $667 million in the fourth quarter of 2022, compared with $309 million in the fourth quarter of 2021. On an adjusted basis, fourth quarter 2022 E&P net income was $591 million. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $76.07 per barrel in the fourth quarter of 2022, compared with $71.04 per barrel in the prior-year quarter. The average realized natural gas liquids (NGL) selling price in the fourth quarter of 2022 was $26.93 per barrel, compared with $36.47 per barrel in the prior-year quarter, while the average realized natural gas selling price was $5.17 per mcf, compared with $4.77 per mcf in the fourth quarter of 2021.
Net production, excluding Libya, was 376,000 boepd in the fourth quarter of 2022, compared with 295,000 boepd in the fourth quarter of 2021, primarily due to higher production in Guyana.
Cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $12.49 per boe (excluding Libya: $12.72 per boe) in the fourth quarter of 2022, compared with $12.17 per boe (excluding Libya: $12.84 per boe) in the prior-year quarter.
Oil and Gas Reserves Estimates:
Oil and gas proved reserves at December 31, 2022, which are subject to final review, were 1.26 billion boe, compared with 1.31 billion boe at December 31, 2021. Proved reserve additions and net revisions in 2022 totaled 184 million boe, primarily from Guyana, which included sanctioning of the Yellowtail development, and the Bakken. Asset sales during 2022 reduced proved reserves by 109 million boe.
Excluding asset sales, the Corporation replaced 144 percent of its 2022 production at a finding and development cost of approximately $14.80 per boe.
Operational Highlights for the Fourth Quarter of 2022:
Bakken (Onshore U.S.): Net production from the Bakken of 158,000 boepd in the fourth quarter was impacted by unplanned production shut-ins caused by severe winter weather in December. Net production in the fourth quarter of 2021 was 159,000 boepd. The Corporation added a fourth drilling rig in July 2022, and drilled 19 wells, completed 14 wells, and brought 15 new wells online during the fourth quarter. Net production is forecast to be in the range of 165,000 boepd to 170,000 boepd in 2023.
Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 35,000 boepd in the fourth quarter of 2022, compared with 39,000 boepd in the prior-year quarter.
Guyana (Offshore): At the Stabroek Block (Hess – 30%), net production from the Liza Destiny and the Liza Unity floating production, storage and offloading vessels (FPSOs) totaled 116,0002 bopd in the fourth quarter of 2022 compared with 31,000 bopd2 in the prior-year quarter. The Liza Unity FPSO, which commenced production in February 2022, reached its production capacity of 220,000 gross bopd in July 2022. In the fourth quarter, we sold ten cargos of crude oil from Guyana compared with three cargos in the prior year quarter. Net production is forecast to be approximately 100,0002 bopd in 2023.
The third development, Payara, will utilize the Prosperity FPSO with an expected capacity of 220,000 gross bopd, with first production expected by the end of 2023. The fourth development, Yellowtail, was sanctioned in April 2022 and will utilize the ONE GUYANA FPSO with an expected capacity of 250,000 gross bopd, with first production expected in 2025. A fifth development, Uaru, was submitted for approval to the Government of Guyana in the fourth quarter. Pending Government approvals and project sanctioning, the project is expected to have a capacity of approximately 250,000 gross bopd with first oil anticipated at the end of 2026.
The Corporation today announced a significant oil discovery at the Fangtooth SE-1 well on the Stabroek Block, offshore Guyana. The Fangtooth SE-1 well encountered approximately 200 feet of oil bearing sandstone reservoirs. The well was drilled in 5,397 feet of water by the Stena Carron and is located approximately 8 miles southeast of the original Fangtooth-1 well, which had encountered approximately 164 feet of oil bearing sandstone reservoirs. Further appraisal activities are underway. Fangtooth will add to the block’s gross discovered recoverable resource estimate of more than 11 billion boe and has the potential to underpin a future oil development on the Stabroek Block.
Southeast Asia (Offshore): Net production at North Malay Basin and JDA was 67,000 boepd in the fourth quarter of 2022 compared with 66,000 boepd in the prior-year quarter.
Libya (Onshore): In November 2022, the Corporation completed the sale of its 8% interest in the Waha Concession for net proceeds of $150 million. Net production from Libya was 10,000 boepd in the fourth quarter of 2022 compared with 21,000 boepd in the prior-year quarter.
Midstream:
The Midstream segment had net income of $64 million in the fourth quarter of 2022, compared with net income of $74 million in the prior-year quarter.
Corporate, Interest and Other:
After-tax expense for Corporate, Interest and Other was $107 million in the fourth quarter of 2022, compared with $118 million in the fourth quarter of 2021.
Capital and Exploratory Expenditures:
E&P capital and exploratory expenditures were $818 million in the fourth quarter of 2022 compared with $593 million in the prior-year quarter, primarily due to higher drilling and development activities in the Bakken and Guyana. Midstream capital expenditures were $63 million in the fourth quarter of 2022 and $54 million in the prior-year quarter.
Liquidity:
Excluding the Midstream segment, Hess Corporation had cash and cash equivalents of $2.48 billion and debt and finance lease obligations totaling $5.60 billion at December 31, 2022. The Midstream segment had cash and cash equivalents of $4 million and total debt of $2.9 billion at December 31, 2022. The Corporation’s debt to capitalization ratio as defined in its debt covenants was 35.8% at December 31, 2022 and 42.3% at December 31, 2021.
Net cash provided by operating activities was $1,252 million in the fourth quarter of 2022, up from $899 million in the fourth quarter of 2021. Net cash provided by operating activities before changes in operating assets and liabilities3 was $1,402 million in the fourth quarter of 2022, compared with $886 million in the prior-year quarter primarily due to higher sales volumes.
During the fourth quarter, the Corporation received net proceeds of $150 million from the sale of its interest in the Waha Concession in Libya and purchased 5 million REDD+ carbon credits from the Government of Guyana for $75 million.
Total cash returned to stockholders in the fourth quarter through common stock repurchases and dividends amounted to $405 million. The Corporation repurchased approximately 2.3 million shares of common stock for $310 million during the fourth quarter, bringing total share repurchases in 2022 to $650 million at an average price of approximately $120 per share.
2. Net production from Guyana in the fourth quarter of 2022 included 22,000 bopd of tax barrels. There were no tax barrels in the fourth quarter of 2021. Net production guidance for Guyana in 2023 of approximately 100,000 bopd includes approximately 10,000 bopd of tax barrels.
3. “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 6 and 7.
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) |
||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
|
(In millions) |
||||||||||||||
|
Exploration and Production |
$ |
76 |
|
$ |
— |
|
$ |
22 |
|
$ |
(118) |
||||
|
Midstream |
|
— |
|
|
— |
|
|
— |
|
|
— |
||||
|
Corporate, Interest and Other |
|
— |
|
|
— |
|
|
(1) |
|
|
— |
||||
|
Total items affecting comparability of earnings between periods |
$ |
76 |
|
$ |
— |
|
$ |
21 |
|
$ |
(118) |
||||
Fourth Quarter 2022: E&P results include a pre-tax gain of $76 million ($76 million after income taxes) associated with the sale of the Corporation’s interest in the Waha Concession in Libya.
Reconciliation of U.S. GAAP to Non-GAAP Measures:
The following table reconciles reported net income attributable to Hess Corporation and adjusted net income:
|
|
Three Months Ended December 31, (unaudited) |
|
Year Ended December 31, (unaudited) |
||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
|
(In millions) |
||||||||||||||
|
Net income attributable to Hess Corporation |
$ |
624 |
|
$ |
265 |
|
$ |
2,223 |
|
$ |
559 |
||||
|
Less: Total items affecting comparability of earnings between periods |
|
76 |
|
|
— |
|
21 |
|
|
(118) |
|||||
|
Adjusted net income attributable to Hess Corporation |
$ |
548 |
|
$ |
265 |
|
$ |
2,202 |
|
$ |
677 |
||||
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) |
||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
|
(In millions) |
||||||||||||||
|
Net cash provided by (used in) operating activities before changes in operating assets and liabilities |
$ |
1,402 |
|
$ |
886 |
|
$ |
5,222 |
|
$ |
2,991 |
||||
|
Changes in operating assets and liabilities |
|
(150) |
|
|
13 |
|
|
(1,278) |
|
|
(101) |
||||
|
Net cash provided by (used in) operating activities |
$ |
1,252 |
|
$ |
899 |
|
$ |
3,944 |
|
$ |
2,890 |
||||
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; information about sustainability goals and targets and planned social, safety and environmental policies, programs and initiatives; 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; reduced demand for our products, including due to perceptions regarding the oil and gas industry, 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, fracking bans as well as restrictions on oil and gas leases; 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, public health measures 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 limitations on investment in oil and gas activities, rising interest rates or negative outcomes within commodity and financial markets; liability resulting from environmental obligations and 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” presented in this release is defined as reported net income 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 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 or net cash provided by (used in) operating activities. A reconciliation of reported net income attributable to Hess Corporation (U.S. GAAP) to adjusted net income, 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.
|
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES |
|||||||||||
|
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED) |
|||||||||||
|
(IN MILLIONS) |
|||||||||||
|
|
Fourth Quarter 2022 |
|
Fourth Quarter 2021 |
|
Third Quarter 2022 |
||||||
|
Income Statement |
|
|
|
|
|
||||||
|
Revenues and non-operating income |
|
|
|
|
|
||||||
|
Sales and other operating revenues |
$ |
2,934 |
|
$ |
2,237 |
|
$ |
3,122 |
|||
|
Gains on asset sales, net |
|
76 |
|
|
— |
|
|
— |
|||
|
Other, net |
|
44 |
|
|
18 |
|
|
35 |
|||
|
Total revenues and non-operating income |
|
3,054 |
|
|
2,255 |
|
|
3,157 |
|||
|
Costs and expenses |
|
|
|
|
|
||||||
|
Marketing, including purchased oil and gas |
|
821 |
|
|
672 |
|
|
982 |
|||
|
Operating costs and expenses |
|
385 |
|
|
316 |
|
|
398 |
|||
|
Production and severance taxes |
|
55 |
|
|
49 |
|
|
72 |
|||
|
Exploration expenses, including dry holes and lease impairment |
|
40 |
|
|
45 |
|
|
58 |
|||
|
General and administrative expenses |
|
116 |
|
|
86 |
|
|
109 |
|||
|
Interest expense |
|
124 |
|
|
121 |
|
|
125 |
|||
|
Depreciation, depletion and amortization |
|
504 |
|
|
398 |
|
|
471 |
|||
|
Impairment and other |
|
— |
|
|
— |
|
|
54 |
|||
|
Total costs and expenses |
|
2,045 |
|
|
1,687 |
|
|
2,269 |
|||
|
Income before income taxes |
|
1,009 |
|
|
568 |
|
|
888 |
|||
|
Provision for income taxes |
|
300 |
|
|
212 |
|
|
282 |
|||
|
Net income |
|
709 |
|
|
356 |
|
|
606 |
|||
|
Less: Net income attributable to noncontrolling interests |
|
85 |
|
|
91 |
|
|
91 |
|||
|
Net income attributable to Hess Corporation |
$ |
624 |
|
$ |
265 |
|
$ |
515 |
|||
|
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES |
|||||||
|
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED) |
|||||||
|
(IN MILLIONS) |
|||||||
|
|
Year Ended December 31, |
||||||
|
|
2022 |
|
2021 |
||||
|
Income Statement |
|
|
|
||||
|
Revenues and non-operating income |
|
|
|
||||
|
Sales and other operating revenues |
$ |
11,324 |
|
$ |
7,473 |
||
|
Gains on asset sales, net |
|
101 |
|
|
29 |
||
|
Other, net |
|
145 |
|
|
81 |
||
|
Total revenues and non-operating income |
|
11,570 |
|
|
7,583 |
||
|
Costs and expenses |
|
|
|
||||
|
Marketing, including purchased oil and gas |
|
3,328 |
|
|
2,034 |
||
|
Operating costs and expenses |
|
1,452 |
|
|
1,229 |
||
|
Production and severance taxes |
|
255 |
|
|
172 |
||
|
Exploration expenses, including dry holes and lease impairment |
|
174 |
|
|
162 |
||
|
General and administrative expenses |
|
430 |
|
|
340 |
||
|
Interest expense |
|
493 |
|
|
481 |
||
|
Depreciation, depletion and amortization |
|
1,703 |
|
|
1,528 |
||
|
Impairment and other |
|
54 |
|
|
147 |
||
|
Total costs and expenses |
|
7,889 |
|
|
6,093 |
||
|
Income before income taxes |
|
3,681 |
|
|
1,490 |
||
|
Provision for income taxes |
|
1,107 |
|
|
600 |
||
|
Net income |
|
2,574 |
|
|
890 |
||
|
Less: Net income attributable to noncontrolling interests |
|
351 |
|
|
331 |
||
|
Net income attributable to Hess Corporation |
$ |
2,223 |
|
$ |
559 |
||
Contacts
For Hess Corporation
Investors:
Jay Wilson
(212) 536-8940
Media:
Lorrie Hecker
(212) 536-8250
Jamie Tully
Sard Verbinnen & Co
(917) 679-7908
