8-K: Hess Corporation Reports Estimated Results for Q1 2025; Yellowtail Development on Track

Hess Corporation announces its estimated financial and operational results for the first quarter of 2025, highlighting the progress of the Yellowtail development in Guyana.

Summary

• Hess Corporation reported net income of $430 million, or $1.39 per share, for the first quarter of 2025, compared to $972 million, or $3.16 per share, in the first quarter of 2024.
• Adjusted net income for Q1 2025 was $559 million, or $1.81 per share.
• The decrease in adjusted after-tax earnings primarily reflects lower realized oil selling prices and sales volumes.
• Oil and gas net production remained consistent at 476,000 boepd in both the first quarter of 2025 and 2024.
• E&P capital and exploratory expenditures increased to $1,085 million from $927 million in the prior-year quarter.
• The Yellowtail development in the Stabroek Block is on track to start up in the third quarter of 2025 with an initial gross production capacity of approximately 250,000 bopd.
• Second quarter 2025 E&P net production is expected to be in the range of 480,000 boepd to 490,000 boepd.
• Full year 2025 E&P capital and exploratory expenditures are expected to be approximately $4.5 billion.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While net income is down, the Yellowtail development is on track, and production levels are stable. The decrease in earnings is a concern, but the progress in Guyana provides a positive outlook.

Positives

• The Yellowtail development is on track for startup in Q3 2025.
• Bakken net production increased to 195,000 boepd in Q1 2025.
• Net cash provided by operating activities increased to $1,401 million in Q1 2025.
• The Midstream segment had net income of $70 million in Q1 2025, compared with $67 million in the prior-year quarter.
• The Corporation continues to own approximately 37.8% of HESM on a consolidated basis.

Negatives

• Net income decreased to $430 million in Q1 2025 from $972 million in Q1 2024.
• Average realized crude oil selling price decreased to $71.22 per barrel in Q1 2025 from $80.06 per barrel in Q1 2024.
• Guyana net production decreased to 183,000 bopd in Q1 2025 from 190,000 bopd in Q1 2024.
• Net production at North Malay Basin and JDA was 57,000 boepd in Q1 2025, compared with 65,000 boepd in the prior-year quarter.
• Cash operating costs increased to $12.27 per boe in Q1 2025 from $10.79 per boe in the prior-year quarter.

Risks

• Fluctuations in market prices of crude oil, NGL, and natural gas could impact future earnings.
• Potential failures or delays in increasing oil and gas reserves could affect production levels.
• Changes in laws and regulations, including environmental regulations, could impact the business.
• Disruptions to operations due to accidents, weather, or cyber-attacks could affect production.
• The ability of contractual counterparties to satisfy their obligations could impact operations.
• There are risks and uncertainties associated with the proposed merger with Chevron.

Future Outlook

E&P net production is expected to be in the range of 480,000 boepd to 490,000 boepd in the second quarter of 2025. Full year 2025 E&P capital and exploratory expenditures are expected to be approximately $4.5 billion. The Yellowtail development is on track to start up in the third quarter of 2025.

Industry Context

Hess's Q1 2025 results reflect the broader industry trend of fluctuating oil prices impacting earnings. The focus on Guyana's Stabroek Block aligns with the industry's increasing interest in offshore developments with significant production potential. The progress of the Yellowtail development is a key indicator of Hess's ability to execute large-scale projects in a timely manner.

Comparison to Industry Standards

• Hess's production levels of 476,000 boepd are comparable to other independent energy companies of similar size, such as Devon Energy or Marathon Oil.
• The average realized crude oil selling price of $71.22 per barrel is slightly below the average for major oil companies like ExxonMobil or Chevron, which often benefit from integrated operations.
• E&P capital expenditures of $1,085 million are in line with the investment strategies of companies focused on developing large offshore projects, such as those seen by Petrobras in Brazil.
• The expected gross production capacity of 250,000 bopd from the Yellowtail development is significant and positions Hess as a major player in the Guyana region, similar to ExxonMobil's impact on the Permian Basin.

Legal Proceedings

• E&P results include a pre-tax charge of $129 million ($129 million after income taxes) for anticipated settlement of legal claims related to post production gathering, processing and transportation fees in North Dakota.

Related Party Transactions

• In January 2025, Hess Midstream Operations LP (HESM Opco), a consolidated subsidiary of Hess Midstream LP (HESM), repurchased approximately 2.6 million HESM Opco Class B units held by Hess Corporation and Global Infrastructure Partners for $100 million, of which the Corporation received $38 million.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income but encouraged by the progress in Guyana.
• Employees are likely to be affected by the ongoing operations and development projects.
• Customers will continue to receive crude oil and natural gas from Hess's production activities.
• Suppliers will benefit from the ongoing capital expenditures and development projects.
• Creditors will monitor Hess's debt levels and financial performance.

Next Steps

• Start up the Yellowtail development in the third quarter of 2025.
• Continue operating four drilling rigs in the Bakken in 2025.
• Await government and regulatory approval and project sanctioning for the Hammerhead development.
• Monitor the progress of the Uaru and Whiptail developments for expected first production in 2026 and 2027, respectively.

Key Dates

Keywords

Hess Corporation, Q1 2025, Financial Results, Oil and Gas, Production, Exploration, Yellowtail, Guyana, Bakken, Midstream