8-K: Hess Corporation Reports Strong Second Quarter 2024 Results Driven by Increased Production and Higher Prices

Hess Corporation's second quarter 2024 net income significantly increased to $757 million, or $2.46 per share, compared to $119 million, or $0.39 per share, in the same period last year.

Summary

• Hess Corporation reported a substantial increase in net income for the second quarter of 2024, reaching $757 million, or $2.46 per share, compared to $119 million, or $0.39 per share, in the second quarter of 2023.
• Adjusted net income for the quarter was $809 million, or $2.62 per share, up from $201 million, or $0.65 per share, in the prior-year quarter.
• The increase in earnings was primarily driven by higher production volumes and increased realized selling prices.
• Oil and gas net production averaged 494,000 barrels of oil equivalent per day (boepd), a 28% increase from 387,000 boepd in the second quarter of 2023.
• Bakken net production rose to 212,000 boepd, a 17% increase year-over-year, while Guyana net production surged to 192,000 barrels of oil per day (bopd), a 75% increase from the prior-year quarter.
• E&P capital and exploratory expenditures were $1,151 million, compared to $933 million in the prior-year quarter.
• The average realized crude oil selling price was $80.29 per barrel, compared to $71.13 per barrel in the second quarter of 2023.
• Cash operating costs decreased to $11.69 per barrel of oil equivalent (boe), compared to $13.97 per boe in the prior-year quarter.
• Net cash provided by operating activities was $1,893 million, compared to $974 million in the second quarter of 2023.

Sentiment

Score: 9

Explanation: The document reflects a very positive sentiment due to the significant improvements in financial performance, production volumes, and operational efficiency. The company's strong results and positive outlook suggest a high level of confidence in its future prospects.

Positives

• Hess Corporation experienced a substantial increase in net income and adjusted net income compared to the same quarter last year.
• The company saw significant production growth in both the Bakken and Guyana regions.
• Realized selling prices for crude oil, natural gas liquids, and natural gas all increased year-over-year.
• Cash operating costs per barrel of oil equivalent decreased, indicating improved efficiency.
• Net cash provided by operating activities nearly doubled compared to the prior-year quarter.
• The company's debt to capitalization ratio improved from 33.6% at the end of 2023 to 30.8% at the end of June 2024.

Negatives

• Net production from the Gulf of Mexico decreased to 24,000 boepd from 32,000 boepd in the prior-year quarter due to planned maintenance.
• E&P capital and exploratory expenditures increased to $1,151 million from $933 million in the prior-year quarter.
• The company incurred a $48 million charge to write-off previously capitalized exploration wells and an $18 million charge related to materials and supplies inventory in the JDA.
• Third quarter production is expected to be lower due to planned downtime in Guyana and Southeast Asia.

Risks

• The company faces risks related to fluctuations in market prices of crude oil, NGL, and natural gas.
• There are potential risks associated with increasing oil and gas reserves and achieving expected production levels.
• Changes in tax, property, contract, and other laws and regulations could impact the business.
• Operational disruptions due to accidents, severe weather, or cyber-attacks could affect production.
• The company is exposed to risks associated with its proposed merger with Chevron.
• The company faces risks related to environmental obligations and litigation.

Future Outlook

E&P net production is expected to be in the range of 460,000 boepd to 470,000 boepd in the third quarter of 2024, primarily reflecting planned downtime in Guyana and Southeast Asia. Bakken net production is forecasted to be in the range of 200,000 boepd to 205,000 boepd in the third quarter of 2024. Guyana net production is forecasted to be in the range of 170,000 bopd to 175,000 bopd in the third quarter. Third quarter 2024 E&P capital and exploratory expenditures are expected to be approximately $1,125 million. The company expects first production from the Yellowtail development in 2025, Uaru in 2026, and Whiptail by the end of 2027. First oil from the Hammerhead development is anticipated in 2029.

Management Comments

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

Industry Context

The strong results reported by Hess Corporation reflect the current positive environment in the oil and gas industry, characterized by higher crude oil prices and increased demand. The company's focus on key production areas like Guyana and the Bakken aligns with industry trends of prioritizing high-growth, low-cost assets. The planned merger with Chevron also indicates a broader trend of consolidation within the sector.

Comparison to Industry Standards

• Hess's 28% increase in oil and gas production is significantly higher than the average production growth seen in many of its peers, such as ConocoPhillips and EOG Resources, which have reported more modest production increases in recent quarters.
• The 75% increase in Guyana production is particularly noteworthy, as it demonstrates the success of Hess's investments in this region, which is becoming a major oil-producing area globally, similar to the growth seen in the Permian Basin for other companies.
• Hess's average realized crude oil price of $80.29 per barrel is in line with the average prices reported by other major oil producers, such as ExxonMobil and Chevron, indicating that the company is benefiting from the current market conditions.
• The reduction in cash operating costs to $11.69 per boe is a positive sign, as it shows that Hess is becoming more efficient in its operations, which is a key focus for many companies in the industry, including Occidental Petroleum and Devon Energy.
• The company's debt to capitalization ratio of 30.8% is also a positive indicator, as it suggests that Hess is managing its debt effectively, which is important for long-term financial stability, similar to the strategies employed by companies like Pioneer Natural Resources.

Related Party Transactions

• In June 2024, Hess Midstream Operations LP (HESM Opco), a consolidated subsidiary of Hess Midstream LP (HESM), repurchased approximately 2.7 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 benefit from the increased profitability and production growth.
• Employees may see increased job security and potential for career advancement.
• Customers will benefit from the increased supply of oil and gas.
• Suppliers may see increased demand for their products and services.
• Creditors will benefit from the company's improved financial position.

Next Steps

• The company will continue operating four drilling rigs in the Bakken in 2024.
• The company will continue development activities in Guyana.
• The company will continue exploration activities in the Gulf of Mexico.
• The company will continue to progress the Yellowtail, Uaru, and Whiptail developments.
• The company will seek government and regulatory approval for the Hammerhead development.

Key Dates

Keywords

Hess Corporation, Oil and Gas, Production, Net Income, Exploration, Bakken, Guyana, Crude Oil, Financial Results, Capital Expenditures