HESS CORPORATION
HESS REPORTS ESTIMATED RESULTS FOR THE SECOND QUARTER OF 2016
Second Quarter Highlights:
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Net loss was $392 million, or $1.29 per common share, compared with a net loss of $567 million, or $1.99 per common share, in the prior-year quarter
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Adjusted net loss was $335 million, or $1.10 per common share, compared to an adjusted net loss of $147 million, or $0.52 per common share, in the second quarter of last year
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E&P capital and exploratory expenditures were $485 million, down 52 percent from $1,006 million in the prior-year quarter
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Oil and gas production was 313,000 barrels of oil equivalent per day (boepd); Bakken net production was 106,000 boepd
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Liza-2 well in the Stabroek block, offshore Guyana (Hess 30 percent) was successfully completed; confirms a world-class oil discovery with estimated gross recoverable resource for the Liza discovery of between 800 million and 1.4 billion barrels of oil equivalent
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Skipjack exploration well, offshore Guyana, which is a separate prospect 25 miles northwest of the Liza discovery, commenced drilling in July
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Cash and cash equivalents were $3.1 billion at June 30, 2016; debt to capitalization ratio, excluding Bakken Midstream, was 23.5 percent
2016 Revised Full Year Guidance:
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E&P capital and exploratory expenditures are projected to be $2.1 billion
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Net production is forecast to be in the range of 315,000 to 325,000 boepd, excluding Libya
NEW YORK, July 27, 2016 - Hess Corporation (NYSE: HES) today reported a net loss of
$392 million, or $1.29 per common share, in the second quarter of 2016 compared with a net loss of
$567 million, or $1.99 per common share, in the second quarter of 2015. On an adjusted basis, the Corporation reported a net loss of $335 million, or $1.10 per common share, in the second quarter of
2016 compared with an adjusted net loss of $147 million, or $0.52 per common share, in the prior- year quarter. Lower production and realized selling prices reduced second quarter 2016 after-tax results by approximately $365 million compared to the second quarter of 2015. Operating costs, general and administrative expenses, and depreciation, depletion and amortization expense decreased compared with the prior-year quarter due to lower production and ongoing cost reduction efforts.
"We remain confident in our ability to manage through the current environment and deliver strong production and cash flow growth as oil prices recover," Chief Executive Officer John Hess said. "During the quarter, we continued to pursue further cost reductions and now project our full-year 2016 E&P capital and exploratory expenditures to be about 48 percent below 2015 levels.
"Our resilient portfolio provides an attractive mix of growth options including an unparalleled position in the Bakken, two significant offshore developments that will come online in 2017 and 2018, and the recent world-class oil discovery in Guyana."
After-tax income (loss) by major operating activity was as follows:
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T
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hree Months Ended
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Six Months Ended
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June 30,
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June 30,
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(unaudited)
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(unaudited)
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2016
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2015
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2016
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2015
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(In millions, except per share amounts)
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|
Net Income (Loss) Attributable to Hess Corporation
|
|
Exploration and Production
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$
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(328
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$
|
(502
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$
|
(779
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$
|
(816
|
|
Bakken Midstream
|
11
|
32
|
25
|
59
|
|
Corporate, Interest and Other
|
(75
|
(83
|
(147
|
(172
|
|
Net income (loss) from continuing operations
|
(392
|
(553
|
(901
|
(929
|
|
Discontinued operations
|
-
|
(14
|
-
|
(27
|
|
Net income (loss) attributable to Hess Corporation
|
$
|
(392
|
$
|
(567
|
$
|
(901
|
$
|
(956
|
|
Net income (loss) per common share (diluted)
|
$
|
(1.29
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$
|
(1.99
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$
|
(3.00
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$
|
(3.37
|
|
Adjusted Net Income (Loss) Attributable to Hess Corporation (a)
|
|
Exploration and Production
|
$
|
(271
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$
|
(96
|
$
|
(722
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$
|
(317
|
|
Bakken Midstream
|
11
|
32
|
25
|
59
|
|
Corporate, Interest and Other
|
(75
|
(83
|
(147
|
(168
|
|
Adjusted net income (loss) from continuing operations
|
(335
|
(147
|
(844
|
(426
|
|
Discontinued operations
|
-
|
-
|
-
|
-
|
|
Adjusted net income (loss) attributable to Hess Corporation
|
$
|
(335
|
$
|
(147
|
$
|
(844
|
$
|
(426
|
|
Adjusted net income (loss) per common share (diluted)
|
$
|
(1.10
|
$
|
(0.52
|
$
|
(2.81
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$
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(1.50
|
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Weighted average number of shares (diluted)
|
313.2
|
284.3
|
306.5
|
283.9
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Adjusted net income (loss) attributable to Hess Corporation excludes items affecting comparability summarized on page 6. A reconciliation of net income (loss) attributable to Hess Corporation to adjusted net income (loss) attributable to Hess Corporation is provided on page 7.
Exploration and Production:
The Exploration and Production net loss in the second quarter of 2016 was $328 million compared to a net loss of $502 million in the prior-year quarter. On an adjusted basis, the second quarter 2016 adjusted net loss was $271 million compared to $96 million in the prior-year quarter.
The Corporation's average realized crude oil selling price was $41.95 per barrel in the second quarter of 2016, down 25 percent from $55.83 per barrel in the year-ago quarter, including the effect of hedging. The average realized natural gas liquids selling price in the second quarter of 2016 was
$9.03 per barrel compared to $11.06 per barrel in the prior-year quarter while the average realized natural gas selling price was $3.58 per mcf, down from $4.49 per mcf in the second quarter of 2015.
Net production in the second quarter of 2016 was 313,000 boepd compared to pro forma net production, which excludes assets sold, of 386,000 boepd in the second quarter of 2015. The decrease in production volumes resulted from unplanned downtime due to subsurface safety valve failures at the Tubular Bells Field and a mechanical issue at one well in the Conger Field, both in the Gulf of Mexico, and planned facility downtime at several offshore fields including the Tubular Bells Field and the Valhall Field in Norway. In addition, volumes decreased in the Bakken shale play and Equatorial Guinea due to lower investment levels, as well as the Malaysia/Thailand Joint Development Area primarily due to lower entitlement, which were partially offset by production growth from the Utica shale play.
For the full year 2016, net production is projected to be 315,000 boepd to 325,000 boepd. The decline from our previous guidance of 330,000 boepd to 350,000 boepd primarily reflects unplanned downtime at two Gulf of Mexico fields. At the Tubular Bells Field two wells were shut-in for an extended period in the first half of 2016 due to defective subsurface safety valves. The defective valves have been replaced. In July at the Tubular Bells Field, a subsurface safety valve in a third well failed and is expected to be remediated in the fourth quarter. Full year production is also impacted by a mechanical issue at a well at the Conger Field, which is expected to be remediated in the fourth quarter. The full year impact of these temporary mechanical issues is expected to be approximately 20,000 boepd in 2016.
Operational Highlights for the Second Quarter of 2016:
Bakken (Onshore U.S.): Net production from the Bakken was 106,000 boepd compared to 119,000 boepd in the prior-year quarter due to a reduced drilling program. The Corporation operated an average of three rigs in the quarter and brought 26 gross operated wells on production. Drilling and completion costs averaged $4.8 million per operated well in the second quarter, down 14 percent from the year-ago quarter, while increasing our standard well design to a 50-stage completion from the previous 35-stage completion design.
Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 54,000 boepd compared to 84,000 boepd in the prior-year quarter primarily as a result of unplanned well downtime and extended planned shut-downs on third-party hosted production facilities at the Tubular Bells Field (Hess 57 percent) and the Conger Field (Hess 38 percent). Drilling and construction of production facilities at the Hess operated Stampede development project (Hess 25 percent) continued on schedule with first production targeted for 2018. Due to the current price environment and the limited