8-K: Hess Corporation Reports Strong Q1 2024 Results Driven by Increased Production

Hess Corporation's first quarter 2024 net income significantly increased to $972 million, or $3.16 per share, driven by higher production volumes, particularly from Guyana and the Bakken.

Summary

• Hess Corporation reported a net income of $972 million, or $3.16 per share, for the first quarter of 2024, a substantial increase from $346 million, or $1.13 per share, in the same period last year.
• The company's oil and gas net production averaged 476,000 barrels of oil equivalent per day (boepd), a 27% increase compared to 374,000 boepd in the first quarter of 2023.
• Production growth was primarily driven by Guyana, which saw a 70% increase to 190,000 bopd, and the Bakken, which increased by 17% to 190,000 boepd.
• E&P capital and exploratory expenditures were $927 million, up from $765 million in the prior-year quarter, mainly due to increased drilling activity in the Gulf of Mexico.
• The company sanctioned the Whiptail development in Guyana, expected to add approximately 250,000 gross bopd by the end of 2027.
• Cash operating costs decreased to $10.79 per barrel of oil equivalent (boe) from $12.96 per boe in the prior-year quarter, primarily due to higher production volumes.
• Net cash provided by operating activities was $885 million, compared to $638 million in the first quarter of 2023.

Sentiment

Score: 8

Explanation: The document presents a very positive outlook with significant increases in production and profitability. The sanctioning of a major new project further enhances the positive sentiment. However, the pending merger with Chevron and the lack of a conference call introduce some uncertainty.

Positives

• Hess Corporation experienced a substantial increase in net income and earnings per share compared to the same quarter last year.
• The company's production volumes increased significantly, driven by strong performance in Guyana and the Bakken.
• The sanctioning of the Whiptail development in Guyana will add significant future production capacity.
• Cash operating costs per barrel of oil equivalent decreased, indicating improved efficiency.
• Net cash provided by operating activities increased, demonstrating strong cash flow generation.

Negatives

• E&P capital and exploratory expenditures increased to $927 million, up from $765 million in the prior-year quarter.
• Net production from the Gulf of Mexico decreased slightly to 31,000 boepd from 33,000 boepd in the prior-year quarter.
• Changes in operating assets and liabilities decreased cash flow from operating activities by $844 million in the first quarter of 2024.

Risks

• The company's future performance is subject to fluctuations in market prices of crude oil, NGL, and natural gas.
• There are risks associated with increasing oil and gas reserves, including unsuccessful exploration and drilling risks.
• Changes in tax, property, and environmental regulations could impact the company's operations.
• Operational disruptions due to accidents, severe weather, or cyber-attacks could affect production.
• The company faces risks related to its proposed merger with Chevron.

Future Outlook

Hess expects E&P net production to be in the range of 465,000 boepd to 475,000 boepd in the second quarter of 2024, reflecting planned maintenance in the Gulf of Mexico partially offset by growth in the Bakken. Full year 2024 E&P capital and exploratory expenditures are expected to be approximately $4.2 billion. The Whiptail development is expected to add approximately 250,000 gross bopd by the end of 2027.

Management Comments

• Due to the pending merger with Chevron Corporation, the Corporation will not host a conference call to review its first quarter 2024 results.

Industry Context

The strong production growth, particularly in Guyana, aligns with the industry trend of focusing on high-growth, low-cost assets. The sanctioning of the Whiptail development further solidifies Hess's position in the Guyana region. The pending merger with Chevron is a significant event in the industry, reflecting consolidation trends.

Comparison to Industry Standards

• Hess's 27% increase in production is a strong result compared to many of its peers in the oil and gas industry, which are often seeing single-digit growth or even declines.
• The 70% increase in Guyana production is particularly impressive, demonstrating the success of their investments in the Stabroek Block. Companies like ExxonMobil, a partner in the Stabroek Block, are also seeing significant benefits from this region.
• The reduction in cash operating costs to $10.79 per boe is competitive, placing Hess in a good position compared to companies with higher operating costs. Companies like ConocoPhillips and EOG Resources are often used as benchmarks for operational efficiency.
• The sanctioning of the Whiptail development is a positive sign for future growth, similar to other large-scale projects being developed by major oil companies globally. Projects like the Johan Sverdrup field in Norway or the Permian Basin developments in the US are comparable in terms of scale and impact.

Related Party Transactions

• In March 2024, Hess Midstream Operations LP repurchased approximately 2.8 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 will likely view the strong financial results and production growth positively.
• Employees may benefit from the company's improved financial performance and future growth prospects.
• Customers will benefit from increased production volumes.
• Suppliers may see increased business opportunities due to the company's expansion.
• Creditors will likely view the company's improved financial position favorably.

Next Steps

• The company plans to continue operating four drilling rigs in the Bakken in 2024.
• The Yellowtail development is expected to start production in 2025.
• The Uaru development is expected to start production in 2026.
• The Whiptail development is expected to add production capacity by the end of 2027.

Key Dates

Keywords

Hess Corporation, Oil and Gas, Production, Guyana, Bakken, Net Income, Exploration, Capital Expenditures, Stabroek Block, Whiptail, Chevron