Hess reports estimated results for the third quarter of 2023

Key Development:

• On October 23^rd the Corporation entered into an agreement to merge with Chevron. The transaction is expected to close in the first half of 2024

Third Quarter Financial and Operational Highlights:

• Net income was $504 million, or $1.64 per share, compared with net income of $515 million, or $1.67 per share, in the third quarter of 2022; adjusted net income¹ in the third quarter of 2022 was $583 million, or $1.89 per share
• Oil and gas net production was 395,000 barrels of oil equivalent per day (boepd), up 13% from 351,000 boepd, proforma for asset sold, in the third quarter of 2022
• Bakken net production was 190,000 boepd, up 14% from 166,000 boepd in the third quarter of 2022; Guyana net production was 108,000 barrels of oil per day (bopd), compared with 98,000 bopd in the prior-year quarter
• E&P capital and exploratory expenditures were $998 million, compared with $701 million in the prior-year quarter

Updated 2023 Full Year Guidance:

• Net production is now forecast to be approximately 390,000 boepd, which is at the upper end of the previous guidance range of 385,000 boepd to 390,000 boepd
• E&P capital and exploratory expenditures are expected to be approximately $4.1 billion, up from previous guidance of $3.7 billion, reflecting the decision to purchase the Liza Unity floating production, storage and offloading vessel (FPSO) in the fourth quarter of 2023 instead of the first quarter of 2024

NEW YORK–(BUSINESS WIRE)–   Hess Corporation (NYSE: HES) today reported net income of $504 million, or $1.64 per share, in the third quarter of 2023, compared with net income of $515 million, or $1.67 per share, in the third quarter of 2022. On an adjusted basis, the Corporation reported net income of $583 million, or $1.89 per share, in the third quarter of 2022. The decrease in adjusted after-tax results compared with the prior-year quarter reflects lower realized selling prices, partially offset by the net impact of higher production volumes, in the third quarter of 2023.

After-tax income (loss) by major operating activity was as follows:

Exploration and Production:

E&P net income was $529 million in the third quarter of 2023, compared with $572 million in the third quarter of 2022. On an adjusted basis, E&P third quarter 2022 net income was $626 million. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $81.53 per barrel in the third quarter of 2023, compared with $85.32 per barrel in the prior-year quarter. The average realized natural gas liquids (NGL) selling price in the third quarter of 2023 was $20.17 per barrel, compared with $35.44 per barrel in the prior-year quarter, while the average realized natural gas selling price was $4.57 per mcf, compared with $5.85 per mcf in the third quarter of 2022.

Net production was 395,000 boepd in the third quarter of 2023, compared with 351,000 boepd, proforma for asset sold, in the third quarter of 2022, primarily due to higher production in the Bakken, Guyana, and Southeast Asia.

Cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $14.04 per barrel of oil equivalent (boe) in the third quarter of 2023, compared with $13.64 per boe, proforma for asset sold, in the prior-year quarter.

Operational Highlights for the Third Quarter of 2023:

   Bakken (Onshore U.S.): Net production from the Bakken was 190,000 boepd in the third quarter of 2023, compared with 166,000 boepd in the prior-year quarter, reflecting increased drilling and completion activity and higher NGL and natural gas volumes received under percentage of proceeds contracts due to lower commodity prices. NGL and natural gas volumes received under percentage of proceeds contracts were 19,000 boepd in the third quarter of 2023, compared with 11,000 boepd in the third quarter of 2022, due to lower realized NGL and natural gas prices increasing volumes received as consideration for gas processing fees. During the third quarter of 2023, the Corporation drilled 28 wells, completed 41 wells, and brought 26 new wells online.

   Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico in the third quarter of 2023 was 28,000 boepd, compared with 30,000 boepd in the prior-year quarter.

   Guyana (Offshore): At the Stabroek Block (Hess – 30%), net production from the Liza Destiny and the Liza Unity FPSOs totaled 108,000² bopd in the third quarter of 2023, compared with 98,000² bopd in the prior-year quarter. In the third quarter of 2023, we sold nine cargos of crude oil from Guyana, compared with eight cargos in the prior-year quarter.

During the third quarter of 2023, a mechanical issue on the Liza Destiny reduced production during the quarter. Repairs were completed by the operator in October that resolved the issue, and production is currently in the range of 150,000 gross bopd to 160,000 gross bopd.

The third development, Payara, with a production capacity of approximately 220,000 gross bopd, will startup in the fourth quarter. The fourth development, Yellowtail, was sanctioned in April 2022 with a production capacity of approximately 250,000 gross bopd and first production expected in 2025. The fifth development, Uaru, was sanctioned in April 2023 with a production capacity of approximately 250,000 gross bopd and first production expected in 2026. The operator submitted the field development plan for the sixth development, Whiptail, to the Government of Guyana in October.

The successful Lancetfish-2 appraisal well encountered approximately 125 feet of net oil pay in appraisal reservoirs and approximately 65 feet of net oil pay in a new discovery interval. The well was drilled in 5,649 feet of water and is located approximately 4 miles southeast of the Lancetfish-1 discovery well.

   Southeast Asia (Offshore): Net production at North Malay Basin and JDA was 69,000 boepd in the third quarter of 2023, compared with 57,000 boepd in the prior-year quarter, primarily due to planned maintenance at both North Malay Basin and JDA during the third quarter of 2022.

Midstream:

The Midstream segment had net income of $66 million in the third quarter of 2023, compared with net income of $68 million in the prior-year quarter.

In September 2023, Hess Midstream Operations LP (HESM Opco), a consolidated subsidiary of Hess Midstream LP (HESM), repurchased approximately 3.3 million HESM Opco Class B units held by Hess Corporation and Global Infrastructure Partners for $100 million, of which the Corporation received $50 million. The repurchase of the Class B units was financed by HESM Opco’s revolving credit facility. After giving effect to the transaction, the Corporation owns approximately 38% of HESM on a consolidated basis.

Corporate, Interest and Other:

After-tax expense for Corporate, Interest and Other was $91 million in the third quarter of 2023, compared with $125 million in the third quarter of 2022. On an adjusted basis, after-tax expense for Corporate, Interest and Other was $111 million in the third quarter of 2022. Adjusted corporate and other expenses decreased by $6 million in the third quarter of 2023, primarily due to higher interest income. Interest expense decreased by $14 million in the third quarter of 2023, reflecting higher capitalized interest.

Capital and Exploratory Expenditures:

E&P capital and exploratory expenditures were $998 million in the third quarter of 2023, compared with $701 million in the prior-year quarter, primarily due to development activities in Guyana and higher drilling activity in the Bakken. Full year 2023 E&P capital and exploratory expenditures are expected to be approximately $4.1 billion, up from previous guidance of $3.7 billion, reflecting the decision to purchase the Liza Unity FPSO in the fourth quarter of 2023 instead of the first quarter of 2024.

Midstream capital expenditures were $65 million in the third quarter of 2023 and $60 million in the prior-year quarter.

Liquidity:

Excluding the Midstream segment, Hess Corporation had cash and cash equivalents of $2.0 billion and debt and finance lease obligations totaling $5.6 billion at September 30, 2023. The Midstream segment had cash and cash equivalents of $4 million and total debt of $3.1 billion at September 30, 2023. The Corporation’s debt to capitalization ratio as defined in its debt covenants was 34.3% at September 30, 2023 and 36.1% at December 31, 2022.

Net cash provided by operating activities was $986 million in the third quarter of 2023, compared with $1,339 million in the third quarter of 2022. Net cash provided by operating activities before changes in operating assets and liabilities³ was $1,249 million in the third quarter of 2023, compared with $1,405 million in the prior-year quarter. During the third quarter of 2023 and the third quarter of 2022, changes in operating assets and liabilities decreased cash flow from operating activities by $263 million and $66 million, respectively.

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:

   Third Quarter 2022: E&P results included impairment charges of $28 million ($28 million after income taxes) that resulted from updates to the Corporation’s estimated abandonment liabilities for non-producing properties in the Gulf of Mexico and $26 million ($26 million after income taxes) related to the Penn State Field in the Gulf of Mexico. Results for Corporate, Interest and Other included a charge of $14 million ($14 million after income taxes) for legal costs related to a former downstream business.

Reconciliation of U.S. GAAP to Non-GAAP Measures:

The following table reconciles reported net income attributable to Hess Corporation and adjusted net income:

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:

Investor Conference Call:

Due to the pending merger with Chevron, the Company will not host a conference call to review its third quarter 2023 results.

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; information about sustainability goals and targets and planned social, safety and environmental policies, programs and initiatives; future economic and market conditions in the oil and gas industry; and expected timing and completion of our proposed merger with Chevron.

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; reduced demand for our products, including due to 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 and other events, such as accidents, severe weather, geological events, shortages of skilled labor, cyber-attacks, public health measures, 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, rising interest rates 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 HESM; risks and uncertainties associated with our proposed merger with Chevron; 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” presented in this release is defined as reported net income 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 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 or net cash provided by (used in) operating activities. A reconciliation of reported net income attributable to Hess Corporation (U.S. GAAP) to adjusted net income, 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.

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

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