HES
$42.09
Hess
$.72
1.74%
Earnings Details
1st Quarter March 2017
Wednesday, April 26, 2017 7:30:04 AM
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Summary

Hess (HES) Recent Earnings

Hess (HES) reported a 1st Quarter March 2017 loss of $1.07 per share on revenue of $1.3 billion. The consensus estimate was a loss of $1.10 per share on revenue of $1.5 billion. Revenue grew 28.4% on a year-over-year basis.

Hess Corp is a Exploration and Production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas. The Company operates in two segments: E&P and Retail Marketing.

Results
Reported Earnings
($1.07)
Earnings Whisper
-
Consensus Estimate
($1.10)
Reported Revenue
$1.28 Bil
Revenue Estimate
$1.45 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hess Reports Estimated Results for the First Quarter of 2017

Net loss was $324 million, or $1.07 per common share, compared with a net loss of $509 million, or $1.72 per common share, in the first quarter of 2016

Oil and gas production exceeded guidance; total production was 307,000 barrels of oil equivalent per day (boepd), excluding Libya; Bakken production was 99,000 boepd

Hess Midstream Partners LP launched its initial public offering (IPO) in the first quarter of 2017; net proceeds from the upsized offering of approximately $350 million ($175 million attributable to Hess Corporation) were received in April 2017

Another oil discovery on the Stabroek block, offshore Guyana (Hess 30 percent) was confirmed at the Snoek well located approximately five miles southeast of the Liza-1 discovery

E&P capital and exploratory expenditures were $393 million, down 28 percent from $543 million in the prior-year quarter

--Cash and cash equivalents were $2.7 billion at March 31, 2017 and December 31, 2016

Hess Corporation (HES) today reported a net loss of $324 million, or $1.07 per common share, in the first quarter of 2017 compared with a net loss of $509 million, or $1.72 per common share, in the first quarter of 2016. The first quarter 2017 results were improved as higher realized crude oil selling prices and lower operating costs and exploration expenses more than offset the change in deferred income taxes and lower production volumes.

"Production momentum returns to our portfolio starting in the second half of 2017, underpinned by the Bakken, the North Malay Basin and Stampede developments, and offshore Guyana, one of the industry’s largest oil discoveries in the past 10 years," Chief Executive Officer John Hess said. "With more than a decade of visible production growth, our company is well positioned to deliver compelling long-term value for our shareholders."

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

Three Months Ended
March 31,
(unaudited)
2017
2016
(In millions, except per share
amounts)
Net Income (Loss) Attributable to Hess
Corporation
Exploration and Production
$
(233 )
$
(453 )
Midstream
18
16
Corporate, Interest and Other
(109 )
(72 )
Net income (loss) attributable to Hess Corporation
$
(324 )
$
(509 )
Net income (loss) per common share (diluted) (a)
$
(1.07 )
$ (1.72 )
Weighted average number of shares (diluted)
313.9
299.8
(a)
Calculated as net income (loss) attributable to Hess
Corporation less preferred stock dividends, divided by weighted
average number of diluted shares.

Exploration and Production:

The Exploration and Production net loss in the first quarter of 2017 was $233 million compared to a net loss of $453 million in the first quarter of 2016. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $48.58 per barrel in the first quarter of 2017, up from $28.50 per barrel in the year-ago quarter. The average realized natural gas liquids selling price in the first quarter of 2017 was $18.71 per barrel, versus $7.44 per barrel in the prior-year quarter, while the average realized natural gas selling price was $3.20 per mcf compared with $3.42 per mcf in the first quarter of 2016.

Excluding production from Libya, pro forma net production in the first quarter of 2017 was 307,000 boepd, compared to 350,000 boepd in the first quarter of 2016. Lower volumes were due to a reduced drilling program across our portfolio, natural field declines and lower entitlement in Asia. Net production in Libya, which recommenced in the fourth quarter of 2016, was 4,000 boepd in the first quarter of 2017.

Operational Highlights for the First Quarter of 2017:

Bakken (Onshore U.S.): Net production from the Bakken averaged 99,000 boepd, which exceeded guidance due to strong well performance, despite negative operational impacts from severe winter weather. The Corporation operated an average of two rigs in the first quarter, drilling eleven wells and bringing eight new wells online. A third rig was added in March and a fourth rig was added in April. We plan to add two additional rigs in the fourth quarter to end the year with six rigs.

Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 66,000 boepd compared to 69,000 boepd in the prior-year quarter, primarily reflecting lower production at the Conger and Shenzi fields. At the Stampede development (Hess operated - 25 percent), the first production well was completed, preparatory work for platform installation was finalized, and the second rig commenced drilling operations in February. First production is expected in the first half of 2018.

North Malay Basin Full-field Development (Offshore Malaysia): At the North Malay Basin project (Hess operated - 50 percent), the topsides for the central processing platform were shipped from the fabrication yard to the field and installed on the platform. Commissioning of the central processing platform is underway. The fourteenth and final well of the Phase I development drilling campaign was completed in the current quarter. The floating, storage, and offloading vessel is currently expected to be transported to the field in the second quarter. Production is expected to commence in the third quarter.

Guyana (Offshore): At the Stabroek Block (Hess 30 percent), operated by Esso Exploration and Production Guyana Limited, results from the Snoek well confirmed another oil discovery on the block, located approximately 5 miles (9 kilometers) southeast of the Liza-1 discovery well. The Snoek well encountered more than 82 feet (25 meters) of high-quality, oil-bearing sandstone reservoirs. The co-venture partners continue to evaluate the resource potential on the broader Stabroek Block and the operator is currently drilling the Liza-4 appraisal well.

Midstream:

Effective January 1, 2017, the Midstream segment includes our interest in a Permian Basin gas plant in West Texas and related CO2 assets, and water handling assets in North Dakota. These assets are wholly-owned by the Corporation and are not included in our Hess Infrastructure Partners (HIP) joint venture, which is 50 percent owned by Hess. The Midstream segment had net income of $18 million in the first quarter of 2017 compared to $16 million in the prior-year quarter.

In the first quarter of 2017, Hess Midstream Partners LP (the Partnership), launched its IPO of common units with net proceeds of approximately $350 million ($175 million attributable to Hess Corporation) received upon completion of the offering in April. The Partnership owns a 20 percent interest in the joint venture assets, with the remaining 80 percent interest held by HIP. Hess Corporation owns approximately 35 percent of the Partnership, including its indirect ownership of the general partner through HIP.

Capital and Exploratory Expenditures:

Exploration and Production capital and exploratory expenditures were $393 million in the first quarter of 2017, down 28 percent from $543 million in the prior-year quarter, reflecting our reduced work program in response to the low commodity price environment.

Midstream capital expenditures were $28 million in the first quarter of 2017 and $36 million in the prior-year quarter.

Liquidity:

Net cash provided by operating activities was $349 million in the first quarter of 2017 compared to a net use of cash from operating activities of $60 million in the first quarter of 2016. Net cash provided by operating activities before changes in operating assets and liabilities was $443 million in the first quarter of 2017, up from $148 million in the year-ago quarter. At March 31, 2017, the Corporation had cash and cash equivalents of $2,686 million and total debt, excluding the Midstream segment, of $6,054 million. The Corporation’s debt to capitalization ratio was 30.8 percent at March 31, 2017 and 30.4 percent at December 31, 2016.

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

The following table reconciles reported net cash provided by (used in) operating activities to cash provided by operating activities before changes in operating assets and liabilities:

Three Months Ended
March 31,
(unaudited)
2017
2016
(In millions)
Cash provided by operating activities before changes in operating
$
443
$
148
assets
and liabilities
Changes in operating assets and liabilities
(94 )
(208 )
Net cash provided by (used in) operating activities
$
349
$
(60 )

Hess Corporation will review first quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details about the event, refer to the Investor Relations section of our website at www.hess.com.

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

Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, uncertainties inherent in the measurement and interpretation of geological, geophysical and other technical data. Estimates and projections contained in this release are based on the Corporation’s current understanding and assessment based on reasonable assumptions. Actual results may differ materially from these estimates and projections due to certain risk factors discussed in the Corporation’s periodic filings with the Securities and Exchange Commission and other factors.

Non-GAAP financial measure

The Corporation has used a non-GAAP financial measure in this earnings release. "Net cash provided by operating activities before changes in operating assets and liabilities" is defined as Cash provided by operating activities excluding changes in operating assets and liabilities. Management believes that net cash provided by operating activities before changes in operating assets and liabilities demonstrates the Corporation’s ability to internally fund capital expenditures, pay dividends and service debt. This measure is not, and should not be viewed as, a substitute for net cash provided by (used in) operating activities, which includes changes in operating assets and liabilities. A reconciliation of net cash provided by (used in) operating activities (U.S. GAAP) to net cash provided by operating activities before changes in operating assets and liabilities is provided in the release.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS)
First
First
Fourth
Quarter
Quarter
Quarter
2017
2016
2016
Income Statement
Revenues and non-operating income
Sales and other operating revenues
$
1,277
$
973
$
1,388
Other, net
(2 )
20
(2 )
Total revenues and non-operating income
1,275
993
1,386
Costs and expenses
Cost of products sold (excluding items shown separately below)
219
189
375
Operating costs and expenses
359
436
568
Production and severance taxes
31
19
27
Exploration expenses, including dry holes and lease impairment
58
132
1,033
General and administrative expenses
96
98
105
Interest expense
84
85
84
Loss on debt extinguishment
--
--
68
Depreciation, depletion and amortization
737
868
768
Impairments
--
--
67
Total costs and expenses
1,584
1,827
3,095
Income (loss) before income taxes
(309 )
(834 )
(1,709 )
Provision (benefit) for income taxes
(13 )
(346 )
3,189
Net income (loss)
(296 )
(488 )
(4,898 )
Less: Net income (loss) attributable to noncontrolling interests
28
21
(6 )
Net income (loss) attributable to Hess Corporation
(324 )
(509 )
(4,892 )
Less: Preferred stock dividends
12
6
11
Net income (loss) applicable to Hess Corporation common
$
(336 )
$
(515 )
$
(4,903 )
stockholders
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS)
March 31,
December 31,
2017
2016
Balance Sheet Information
Cash and cash equivalents
$
2,686
$
2,732
Other current assets
1,485
1,544
Property, plant and equipment - net
23,201
23,595
Other long-term assets
728
750
Total assets
$
28,100
$
28,621
Current maturities of long-term debt
$
116
$
112
Other current liabilities
2,010
2,139
Long-term debt
6,669
6,694
Other long-term liabilities
4,072
4,085
Total equity excluding other comprehensive income (loss)
15,815
16,238
Accumulated other comprehensive income (loss)
(1,667 )
(1,704 )
Noncontrolling interests
1,085
1,057
Total liabilities and equity
$
28,100
$
28,621
March 31,
December 31,
2017
2016
Total Debt
Hess
$
6,054
$
6,073
Midstream (a)
731
733
Hess Consolidated
$
6,785
$
6,806
(a) Midstream debt is non-recourse to Hess Corporation.
March 31,
December 31,
2017
2016
Debt to Capitalization Ratio
Hess Consolidated
30.8 %
30.4 %
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS)
First
First
Fourth
Quarter
Quarter
Quarter
2017
2016
2016
Cash Flow Information
Cash Flows from Operating Activities
Net income (loss)
$
(296 )
$
(488 )
$
(4,898 )
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating
activities
(Gains) losses on asset sales, net
--
--
4
Depreciation, depletion and amortization
737
868
768
Impairments
--
--
67
Exploratory dry hole costs
--
85
830
Exploration lease and other impairment
7
9
112
Stock compensation expense
22
25
4
Provision (benefit) for deferred income taxes and other tax accruals
(27 )
(351 )
3,173
Loss on debt extinguishment
--
--
68
443
148
128
Cash provided by operating activities before changes in operating
assets and
liabilities
Changes in operating assets and liabilities
(94 )
(208 )
198
Net cash provided by (used in) operating activities
349
(60 )
326
Cash Flows from Investing Activities
Additions to property, plant and equipment - E&P
(340 )
(567 )
(399 )
Additions to property, plant and equipment - Midstream
(50 )
(53 )
(88 )
Proceeds from asset sales
100
--
60
Other, net
--
7
3
Net cash provided by (used in) investing activities
(290 )
(613 )
(424 )
Cash Flows from Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or
5
5
57
less
Debt with maturities of greater than 90 days
Borrowings
--
--
--
Repayments
(26 )
(17 )
(649 )
Proceeds from issuance of preferred stock
--
557
--
Proceeds from issuance of common stock
--
1,087
--
Cash dividends paid
(92 )
(80 )
(90 )
Noncontrolling interests, net
--
--
(23 )
Other, net
8
(38 )
6
Net cash provided by (used in) financing activities
(105 )
1,514
(699 )
Net Increase (Decrease) in Cash and Cash Equivalents
(46 )
841
(797 )
Cash and Cash Equivalents at Beginning of Period
2,732
2,716
3,529
Cash and Cash Equivalents at End of Period
$
2,686
$
3,557
$
2,732
Additions to Property, Plant and
Equipment included within Investing Activities:
Capital expenditures incurred
$
(370 )
$
(540 )
$
(409 )
Increase (decrease) in related liabilities
(20 )
(80 )
(78 )
Additions to property, plant and equipment
$
(390 )
$
(620 )
$
(487 )
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS)
First
First
Fourth
Quarter
Quarter
Quarter
2017
2016
2016
Capital and Exploratory Expenditures
E&P Capital and exploratory expenditures
United States
Bakken
$
90
$
116
$
99
Other Onshore
8
21
2
Total Onshore
98
137
101
Offshore
158
205
171
Total United States
256
342
272
Europe
15
48
2
Africa
6
3
3
Asia and other
116
150
134
E&P Capital and exploratory expenditures
$
393
$
543
$
411
Total exploration expenses charged to income included above
$
51
$
39
$
91
Midstream Capital expenditures
$
28
$
36
$
89
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS)
First Quarter 2017
Income Statement
United States
International
Total
Total revenues and non-operating income
Sales and other operating revenues
$
922
$
353
$
1,275
Other, net
(5 )
--
(5 )
Total revenues and non-operating income
917
353
1,270
Costs and expenses
Cost of products sold (excluding items shown separately below) (a)
295
(53 )
242
Operating costs and expenses
174
135
309
Production and severance taxes
31
--
31
Midstream tariffs
124
--
124
Exploration expenses, including dry holes and lease impairment
22
36
58
General and administrative expenses
51
5
56
Depreciation, depletion and amortization
445
258
703
Total costs and expenses
1,142
381
1,523
Results of operations before income taxes
(225 )
(28 )
(253 )
Provision (benefit) for income taxes
(14 )
(6 )
(20 )
Net income (loss) attributable to Hess Corporation
$
(211 )
$
(22 )
$
(233 )
First Quarter 2016
Income Statement
United States
International
Total
Total revenues and non-operating income
Sales and other operating revenues
$
597
$
374
$
971
Other, net
6
4
10
Total revenues and non-operating income
603
378
981
Costs and expenses
Cost of products sold (excluding items shown separately below) (a)
192
12
204
Operating costs and expenses
214
170
384
Production and severance taxes
17
2
19
Midstream tariffs
118
--
118
Exploration expenses, including dry holes and lease impairment
108
24
132
General and administrative expenses
50
5
55
Depreciation, depletion and amortization
532
305
837
Total costs and expenses
1,231
518
1,749
Results of operations before income taxes
(628 )
(140 )
(768 )
Provision (benefit) for income taxes
(242 )
(73 )
(315 )
Net income (loss) attributable to Hess Corporation
$
(386 )
$
(67 )
$
(453 )
(a) Includes amounts charged from the Midstream.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS)
Fourth Quarter 2016
Income Statement
United States
International
Total
Total revenues and non-operating income
Sales and other operating revenues
$
942
$
445
$
1,387
Other, net
(8 )
(3 )
(11 )
Total revenues and non-operating income
934
442
1,376
Costs and expenses
Cost of products sold (excluding items shown separately below) (a)
350
41
391
Operating costs and expenses
315
195
510
Production and severance taxes
26
1
27
Midstream tariffs
148
--
148
Exploration expenses, including dry holes and lease impairment
41
992
1,033
General and administrative expenses
55
2
57
Depreciation, depletion and amortization
471
261
732
Total costs and expenses
1,406
1,492
2,898
Results of operations before income taxes
(472 )
(1,050 )
(1,522 )
Provision (benefit) for income taxes (b)
969
1,458
2,427
Net income (loss) attributable to Hess Corporation
$
(1,441 )
$
(2,508 )
$
(3,949 )
(a)
Includes amounts charged from the Midstream.
(b)
Includes charges of $1,144 million (U.S.) and $1,776 million
(International) to establish valuation allowances against net
deferred tax assets.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA
(UNAUDITED)
First
First
Fourth
Quarter
Quarter
Quarter
2017
2016
2016
Net Production Per Day (in thousands)
Crude oil - barrels
United States
Bakken
67
73
62
Other Onshore
8
10
8
Total Onshore
75
83
70
Offshore
47
51
45
Total United States
122
134
115
Europe
31
35
37
Africa (a)
35
37
32
Asia
2
2
2
Total
190
208
186
Natural gas liquids - barrels
United States
Bakken
23
27
24
Other Onshore
10
13
10
Total Onshore
33
40
34
Offshore
6
6
5
Total United States
39
46
39
Europe
1
1
1
Total
40
47
40
Natural gas - mcf
United States
Bakken
53
67
52
Other Onshore
106
135
123
Total Onshore
159
202
175
Offshore
75
74
68
Total United States
234
276
243
Europe
38
45
45
Asia
212
250
224
Total
484
571
512
Barrels of oil equivalent
311
350
311
(a)
Production from Libya recommenced in the fourth quarter of
2016. Production was 4,000 barrels of oil per day (bopd) in the
first quarter of 2017 and in the fourth quarter of 2016.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA
(UNAUDITED)
First
First
Fourth
Quarter
Quarter
Quarter
2017
2016
2016
Sales Volumes Per Day (in thousands)
Crude oil - barrels
175
214
190
Natural gas liquids - barrels
40
47
40
Natural gas - mcf
484
571
512
Barrels of oil equivalent
296
356
315
Sales Volumes (in thousands)
Crude oil - barrels
15,744
19,449
17,432
Natural gas liquids - barrels
3,623
4,254
3,666
Natural gas - mcf
43,544
51,970
47,101
Barrels of oil equivalent
26,624
32,365
28,948
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA
(UNAUDITED)
First
First
Fourth
Quarter
Quarter
Quarter
2017
2016
2016
Average Selling Prices
Crude oil - per barrel (including hedging)
United States
Onshore
$
46.47
$
26.90
$
42.82
Offshore
47.18
27.02
44.73
Total United States
46.74
26.94
43.57
Europe
54.04
32.52
50.37
Africa
51.25
28.87
49.15
Asia
54.70
39.13
40.96
Worldwide
48.58
28.50
45.97
Crude oil - per barrel (excluding hedging)
United States
Onshore
$
46.47
$
26.90
$
42.82
Offshore
47.18
27.02
44.73
Total United States
46.74
26.94
43.57
Europe
54.18
32.52
50.37
Africa
51.37
28.87
49.15
Asia
54.70
39.13
40.96
Worldwide
48.61
28.50
45.97
Natural gas liquids - per barrel
United States
Onshore
$
18.07
$
6.87
$
13.70
Offshore
20.55
9.66
18.89
Total United States
18.43
7.20
14.38
Europe
28.06
16.24
25.05
Worldwide
18.71
7.44
14.68
Natural gas - per mcf
United States
Onshore
$
2.32
$
1.20
$
1.99
Offshore
2.40
1.47
2.66
Total United States
2.35
1.27
2.18
Europe
3.99
4.59
3.75
Asia
4.01
5.58
4.30
Worldwide
3.20
3.42
3.24

The following is a summary of the Corporation’s commodity hedging program:

Brent
West Texas
Intermediate
Outstanding Hedging Contracts - Oil Price
Collars
Q2 average barrels of oil per day
19,500
56,700
Q3 and Q4 average barrels of oil per day
20,000
60,000
Ceiling price
$75
$70
Floor price
$55
$50
December 31, 2017
December 31, 2017
End date
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
MIDSTREAM EARNINGS (UNAUDITED)
(IN MILLIONS)
First
First
Fourth
Quarter
Quarter
Quarter
2017
2016
2016
Income Statement
Revenues and non-operating income
Total revenues and non-operating income
$
149
$
135
$
165
Costs and expenses
Operating costs and expenses
50
52
58
General and administrative expenses
5
5
5
Depreciation, depletion and amortization
32
28
33
Impairments
--
--
67
Interest expense
5
4
5
Total costs and expenses
92
89
168
Results of operations before income taxes
57
46
(3 )
Provision (benefit) for income taxes
11
9
1
Net income (loss)
46
37
(4 )
Less: Net income attributable to noncontrolling interests
28
21
(6 )
Net income (loss) attributable to Hess Corporation
$
18
$
16
$
2

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SOURCE: Hess Corporation

For Hess Corporation
Investors:
Jay Wilson, (212) 536-8940
or
Media:
Sard Verbinnen & Co
Michael Henson/Patrick Scanlan
(212) 687-8080