Hess Reports Estimated Results for the Second Quarter of 2022
Key Developments:
- Commenced common stock repurchases in the quarter of approximately 1.8 million shares for $190 million; total cash returned to shareholders in the quarter amounted to $306 million including dividends
- Announced two new discoveries at Seabob and Kiru-Kiru on the Stabroek Block, offshore Guyana; adds to the previous gross discovered recoverable resource estimate for the Block of approximately 11 billion barrels of oil equivalent (boe)
- The Liza Unity and Liza Destiny floating production, storage and offloading vessels (FPSOs) on the Stabroek Block have reached their combined production capacity of more than 360,000 gross barrels of oil per day (bopd)
Second Quarter Financial and Operational Highlights:
- Net income was $667 million, or $2.15 per common share, compared with a net loss of $73 million, or $0.24 per common share, in the second quarter of 2021; Adjusted net income1 in the second quarter of 2021 was $74 million, or $0.24 per common share
- Oil and gas net production, excluding Libya, was 303,000 barrels of oil equivalent per day (boepd); Bakken net production was 140,000 boepd
- E&P capital and exploratory expenditures were $622 million compared with $429 million in the prior-year quarter
- Cash and cash equivalents, excluding Midstream, were $2.16 billion at June 30, 2022
2022 Updated Guidance:
- Net production, excluding Libya, is forecast to be in the range of 330,000 boepd to 335,000 boepd in the third quarter, in the range of 365,000 boepd to 370,000 boepd in the fourth quarter, and approximately 320,000 boepd for the full year
- Bakken net production is forecast to be in the range of 155,000 boepd to 160,000 boepd in the third quarter, in the range of 160,000 boepd to 165,000 boepd in the fourth quarter, and in the range of 150,000 boepd to 155,000 boepd for the full year
- Full year E&P capital and exploratory expenditures are expected to be approximately $2.7 billion; a fourth rig was added in the Bakken in July
NEW YORK–(BUSINESS WIRE)–Hess Corporation (NYSE: HES) today reported net income of $667 million, or $2.15 per common share, in the second quarter of 2022, compared with a net loss of $73 million, or $0.24 per common share, in the second quarter of 2021. On an adjusted basis, the Corporation had net income of $74 million, or $0.24 per common share, in the second quarter of 2021. The improvement in after-tax earnings compared with the prior-year quarter adjusted results was primarily due to higher realized selling prices in the second quarter of 2022.
| 1. |
“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 and 8. |
“In a world that needs reliable, low cost oil and gas resources now and for decades to come, Hess offers a highly differentiated value proposition,” CEO John Hess said. “As our portfolio becomes increasingly free cash flow positive, we will continue both to invest to grow our company’s intrinsic value and to return capital to our shareholders through further dividend increases and share repurchases.”
After-tax income (loss) by major operating activity was as follows:
|
|
Three Months Ended June 30, (unaudited) |
|
Six Months Ended June 30, (unaudited) |
||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
(In millions, except per share amounts) |
||||||||||
|
Net Income (Loss) Attributable to Hess Corporation |
|
|
|
|
|||||||
|
Exploration and Production |
$ |
723 |
|
$ |
(25) |
|
$ |
1,183 |
|
$ |
283 |
|
Midstream |
|
65 |
|
|
76 |
|
|
137 |
|
|
151 |
|
Corporate, Interest and Other |
|
(121) |
|
|
(124) |
|
|
(236) |
|
|
(255) |
|
Net income (loss) attributable to Hess Corporation |
$ |
667 |
|
$ |
(73) |
|
$ |
1,084 |
|
$ |
179 |
|
Net income (loss) per common share (diluted) |
$ |
2.15 |
|
$ |
(0.24) |
|
$ |
3.49 |
|
$ |
0.58 |
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||
|
Adjusted Net Income (Loss) Attributable to Hess Corporation |
|
|
|
|
|||||||
|
Exploration and Production |
$ |
723 |
|
$ |
122 |
|
$ |
1,183 |
|
$ |
430 |
|
Midstream |
|
65 |
|
|
76 |
|
|
137 |
|
|
151 |
|
Corporate, Interest and Other |
|
(121) |
|
|
(124) |
|
|
(249) |
|
|
(255) |
|
Adjusted net income (loss) attributable to Hess Corporation |
$ |
667 |
|
$ |
74 |
|
$ |
1,071 |
|
$ |
326 |
|
Adjusted net income (loss) per common share (diluted) |
$ |
2.15 |
|
$ |
0.24 |
|
$ |
3.45 |
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
||||
|
Weighted average number of shares (diluted) |
|
310.9 |
|
|
307.5 |
|
|
310.6 |
|
|
308.7 |
|
|
|
|
|
|
|
|
|
||||
Exploration and Production:
E&P net income was $723 million in the second quarter of 2022, compared with a net loss of $25 million in the second quarter of 2021. On an adjusted basis, E&P second quarter 2021 net income was $122 million. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $99.16 per barrel in the second quarter of 2022, compared with $59.79 per barrel in the prior-year quarter. The average realized natural gas liquids (NGL) selling price in the second quarter of 2022 was $40.92 per barrel, compared with $23.12 per barrel in the prior-year quarter, while the average realized natural gas selling price was $6.45 per mcf, compared with $4.05 per mcf in the second quarter of 2021.
Net production, excluding Libya, was 303,000 boepd in the second quarter of 2022, compared with 307,000 boepd in the second quarter of 2021, or 302,000 boepd proforma for assets sold.
Cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $13.90 per boe (excluding Libya: $14.56 per boe) in the second quarter of 2022, compared with $11.63 per boe (excluding Libya: $12.16 per boe) in the prior-year quarter. The increase in cash operating costs in the second quarter of this year, compared with the second quarter of last year, reflects higher production and severance taxes in North Dakota due to higher realized selling prices, and higher workover activity in North Dakota and the Gulf of Mexico.
Operational Highlights for the Second Quarter of 2022:
Bakken (Onshore U.S.): Net production from the Bakken was 140,000 boepd, which remained within our guidance range for the second quarter, reflecting unplanned production shut-ins caused by severe weather in April and May. Net production in the second quarter of 2021 was 159,000 boepd. During the second quarter of 2022, the Corporation operated three rigs and drilled 20 wells, completed 19 wells, and brought 19 new wells online. In July, the Corporation added a fourth drilling rig.
Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 29,000 boepd, compared with 52,000 boepd in the prior-year quarter, primarily due to field decline and unplanned downtime at the Stampede and Penn State fields.
Guyana (Offshore): At the Stabroek Block (Hess – 30%), net production totaled 67,000 bopd in the second quarter of 2022 compared with 26,000 bopd in the prior-year quarter. Production from the Liza Destiny FPSO reached its new production capacity of more than 140,000 gross bopd in the second quarter of 2022 following the completion of production optimization work initiated in March. Net production from the Liza Unity FPSO, which commenced in February, was 35,000 bopd in the second quarter of 2022, and reached its production capacity of 220,000 gross bopd in July. In the second quarter, we sold 6 one-million barrel cargos of crude oil from Guyana compared with 2 one-million barrel cargos in the prior year quarter.
Net production guidance for Guyana for the full year 2022 is expected to be approximately 75,000 bopd, which includes approximately 6,000 bopd of tax barrels. Net production guidance for the third quarter of 2022 is expected to be in the range of 90,000 bopd to 95,000 bopd, which includes approximately 7,000 bopd of tax barrels. There were no tax barrels in the first or second quarters.
The third development, Payara, will utilize the Prosperity FPSO with an expected capacity of 220,000 gross bopd, with first production expected in late 2023. The fourth development, Yellowtail, was sanctioned in April and will utilize the ONE GUYANA FPSO with an expected capacity of approximately 250,000 gross bopd, with first production expected in 2025.
Two new discoveries were announced at Seabob and Kiru-Kiru, which add to the previously announced gross discovered recoverable resource estimate for the Stabroek Block of approximately 11 billion boe. The Seabob-1 well encountered 131 feet of high quality oil bearing sandstone reservoirs. The well was drilled in 4,660 feet of water and is located approximately 12 miles southeast of the Yellowtail Field. Drilling operations at Kiru-Kiru are ongoing. The Kiru-Kiru-1 well has thus far encountered 98 feet of high quality hydrocarbon bearing sandstone reservoirs. The well is being drilled in 5,760 feet of water and is located approximately 3 miles southeast of the Cataback-1 discovery.
Southeast Asia (Offshore): Net production at North Malay Basin and JDA was 67,000 boepd in the second quarter of 2022 compared with 66,000 boepd in the prior-year quarter.
Midstream:
The Midstream segment had net income of $65 million in the second quarter of 2022, compared with net income of $76 million in the prior-year quarter.
Corporate, Interest and Other:
After-tax expense for Corporate, Interest and Other was $121 million in the second quarter of 2022, compared with $124 million in the second quarter of 2021.
Capital and Exploratory Expenditures:
E&P capital and exploratory expenditures were $622 million in the second quarter of 2022 compared with $429 million in the prior-year quarter, primarily due to higher drilling and development activities in the Bakken, Gulf of Mexico, Guyana, and Malaysia and JDA. Midstream capital expenditures were $72 million in the second quarter of 2022, up from $47 million in the prior-year quarter.
Liquidity:
Excluding the Midstream segment, Hess Corporation had cash and cash equivalents of $2.16 billion and debt and finance lease obligations totaling $5.61 billion at June 30, 2022. The Midstream segment had cash and cash equivalents of $3 million and total debt of $2.9 billion at June 30, 2022. The Corporation’s debt to capitalization ratio as defined in its debt covenants was 37.9% at June 30, 2022 and 42.3% at December 31, 2021.
Net cash provided by operating activities was $1,509 million in the second quarter of 2022, up from $785 million in the second quarter of 2021. Net cash provided by operating activities before changes in operating assets and liabilities2 was $1,463 million in the second quarter of 2022, compared with $659 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 $46 million during the second quarter of 2022 and increased cash flow from operating activities by $126 million during the prior-year quarter.
The Corporation commenced common stock repurchases in the second quarter with the purchase of approximately 1.8 million shares for $190 million under the Corporation’s existing $650 million board authorized stock repurchase program. The Corporation intends to utilize the remaining amount under the stock repurchase program by the end of this year. Total cash returned to shareholders in the second quarter amounted to $306 million including dividends.
In April 2022, the Corporation received net proceeds of $346 million from the public offering of approximately 5.1 million Hess Midstream LP (HESM) Class A shares held by the Corporation and the repurchase by Hess Midstream Operations LP (HESM Opco) of approximately 6.8 million HESM Opco Class B units held by the Corporation. The repurchase of approximately 6.8 million HESM Opco Class B units was financed by the issuance of $400 million of 5.500% senior unsecured notes due 2030 by HESM Opco. After giving effect to the above transactions, the Corporation owns approximately 41% of HESM on a consolidated basis.
In July 2022, the Corporation replaced its $3.5 billion revolving credit facility expiring in May 2024 with a new $3.25 billion revolving credit facility maturing in July 2027. In July 2022, HESM Opco extended the maturity of its $1.4 billion credit facilities, consisting of a $1.0 billion revolving credit facility and a fully drawn $400 million term loan, through July 2027. Borrowings under both revolving credit facilities, including the fully drawn five-year term loan, will bear interest based on the Secured Overnight Financing Rate plus an applicable margin.
| 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 June 30, (unaudited) |
|
Six Months Ended June 30, (unaudited) |
||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
(In millions) |
||||||||||
|
Exploration and Production |
$ |
— |
|
$ |
(147) |
|
$ |
— |
|
$ |
(147) |
|
Midstream |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Corporate, Interest and Other |
|
— |
|
|
— |
|
|
13 |
|
|
— |
|
Total items affecting comparability of earnings between periods |
$ |
— |
|
$ |
(147) |
|
$ |
13 |
|
$ |
(147) |
Second Quarter 2021: E&P results included a charge of $147 million ($147 million after income taxes) in connection with abandonment obligations in the West Delta 79/86 field in the Gulf of Mexico. These abandonment obligations were assigned to the Corporation as a former owner after they were discharged from Fieldwood Energy LLC (Fieldwood) as part of Fieldwood’s approved bankruptcy plan.
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 June 30, (unaudited) |
|
Six Months Ended June 30, (unaudited) |
||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
(In millions) |
||||||||||
|
Net income (loss) attributable to Hess Corporation |
$ |
667 |
|
$ |
(73) |
|
$ |
1,084 |
|
$ |
179 |
|
Less: Total items affecting comparability of earnings between periods |
|
— |
|
|
(147) |
|
|
13 |
|
|
(147) |
|
Adjusted net income (loss) attributable to Hess Corporation |
$ |
667 |
|
$ |
74 |
|
$ |
1,071 |
|
$ |
326 |
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 June 30, (unaudited) |
|
Six Months Ended June 30, (unaudited) |
||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
(In millions) |
||||||||||
|
Net cash provided by (used in) operating activities before changes in operating assets and liabilities |
$ |
1,463 |
|
$ |
659 |
|
$ |
2,415 |
|
$ |
1,474 |
|
Changes in operating assets and liabilities |
|
46 |
|
|
126 |
|
|
(1,062) |
|
|
(98) |
|
Net cash provided by (used in) operating activities |
$ |
1,509 |
|
$ |
785 |
|
$ |
1,353 |
|
$ |
1,376 |
Hess Corporation will review second 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, 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, 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 limitations on investment in oil and gas activities 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 (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.
|
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES |
||||||||
|
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED) |
||||||||
|
(IN MILLIONS) |
||||||||
|
|
Second Quarter 2022 |
|
Second Quarter 2021 |
|
First Quarter 2022 |
|||
|
Income Statement |
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
Revenues and non-operating income |
|
|
|
|
|
|||
|
Sales and other operating revenues |
$ |
2,955 |
|
$ |
1,579 |
|
$ |
2,313 |
|
Gains (losses) on asset sales, net |
|
3 |
|
|
— |
|
|
22 |
|
Other, net |
|
30 |
|
|
19 |
|
|
36 |
|
Total revenues and non-operating income |
|
2,988 |
|
|
1,598 |
|
|
2,371 |
|
Costs and expenses |
|
|
|
|
|
|||
|
Marketing, including purchased oil and gas |
|
843 |
|
|
322 |
|
|
682 |
|
Operating costs and expenses |
|
356 |
|
|
315 |
|
|
313 |
|
Production and severance taxes |
|
67 |
|
|
44 |
|
|
61 |
|
Exploration expenses, including dry holes and lease impairment |
|
33 |
|
|
48 |
|
|
43 |
|
General and administrative expenses |
|
95 |
|
|
84 |
|
|
110 |
|
Interest expense |
|
121 |
|
|
118 |
|
|
123 |
|
Depreciation, depletion and amortization |
|
391 |
|
|
385 |
|
|
337 |
|
Impairment and other |
|
— |
|
|
147 |
|
|
— |
|
Total costs and expenses |
|
1,906 |
|
|
1,463 |
|
|
1,669 |
|
Income (loss) before income taxes |
|
1,082 |
|
|
135 |
|
|
702 |
|
Provision (benefit) for income taxes |
|
328 |
|
|
122 |
|
|
197 |
|
Net income (loss) |
|
754 |
|
|
13 |
|
|
505 |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
87 |
|
|
86 |
|
|
88 |
|
Net income (loss) attributable to Hess Corporation |
$ |
667 |
|
$ |
(73) |
|
$ |
417 |
|
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES |
|||||
|
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED) |
|||||
|
(IN MILLIONS) |
|||||
|
|
Six Months Ended June 30, |
||||
|
|
|
2022 |
|
|
2021 |
|
Income Statement |
|
|
|
||
|
|
|
|
|
||
|
Revenues and non-operating income |
|
|
|
||
|
Sales and other operating revenues |
$ |
5,268 |
|
$ |
3,477 |
|
Gains (losses) on asset sales, net |
|
25 |
|
|
— |
|
Other, net |
|
66 |
|
|
40 |
|
Total revenues and non-operating income |
|
5,359 |
|
|
3,517 |
|
Costs and expenses |
|
|
|
||
|
Marketing, including purchased oil and gas |
|
1,525 |
|
|
840 |
|
Operating costs and expenses |
|
669 |
|
|
580 |
|
Production and severance taxes |
|
128 |
|
|
81 |
|
Exploration expenses, including dry holes and lease impairment |
|
76 |
|
|
81 |
|
General and administrative expenses |
|
205 |
|
|
178 |
|
Interest expense |
|
244 |
|
|
235 |
|
Depreciation, depletion and amortization |
|
728 |
|
|
781 |
|
Impairment and other |
|
— |
|
|
147 |
|
Total costs and expenses |
|
3,575 |
|
|
2,923 |
|
Income (loss) before income taxes |
|
1,784 |
|
|
594 |
|
Provision (benefit) for income taxes |
|
525 |
|
|
245 |
|
Net income (loss) |
|
1,259 |
|
|
349 |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
175 |
|
|
170 |
|
Net income (loss) attributable to Hess Corporation |
$ |
1,084 |
|
$ |
179 |
Contacts
For Hess Corporation
Investor Contact:
Jay Wilson
(212) 536-8940
Media Contacts:
Lorrie Hecker
(212) 536-8250
Jamie Tully
Sard Verbinnen & Co
(917) 679-7908
