HES
$68.22
Hess
$1.45
2.17%
Earnings Details
2nd Quarter June 2018
Wednesday, July 25, 2018 7:30:00 AM
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Summary

Hess Beats

Hess (HES) reported a 2nd Quarter June 2018 loss of $0.23 per share on revenue of $1.6 billion. The consensus estimate was a loss of $0.32 per share on revenue of $1.5 billion. The Earnings Whisper number was for a loss of $0.24 per share. Revenue grew 27.5% 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
($0.23)
Earnings Whisper
($0.24)
Consensus Estimate
($0.32)
Reported Revenue
$1.57 Bil
Revenue Estimate
$1.46 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Hess Reports Estimated Results for the Second Quarter of 2018

Key Highlights:

  • Estimate of gross discovered recoverable resources on the Stabroek Block, offshore Guyana (Hess 30 percent), increased to more than 4 billion barrels of oil equivalent; total discoveries to date have established the potential for up to five FPSOs to produce over 750,000 barrels of oil per day, gross by 2025
  • Announced an eighth oil discovery on the Stabroek Block, offshore Guyana at the Longtail-1 exploration well located approximately five miles to the west of the Turbot-1 well
  • Announced an agreement to sell our joint venture interests in the Utica shale play in eastern Ohio for net cash consideration of approximately $400 million, with closing expected by the end of the third quarter
  • Completed the purchase of $500 million in common stock, as part of our previously announced $1.5 billion share repurchase program, bringing total purchases to $1 billion; the remaining $500 million is expected to be completed during 2018
  • Completed $500 million of total debt repurchases as of quarter-end, including purchases of approximately $110 million of public notes during the second quarter
  • Restarted production at the Conger Field in the Gulf of Mexico in mid-July following repair of the third-party operated Enchilada platform

Second Quarter Financial and Operating Highlights:

  • Net loss was $130 million, or $0.48 per common share, compared with a net loss of $449 million, or $1.46 per common share, in the prior-year quarter
  • Adjusted net loss was $56 million, or $0.23 per common share, in the second quarter of 2018
  • Oil and gas production exceeded guidance: net production averaged 247,000 barrels of oil equivalent per day (boepd), excluding Libya; Bakken production was 114,000 boepd
  • Exploration & Production capital and exploratory expenditures were $525 million in the quarter, compared to $528 million in the prior-year quarter
  • Cash and cash equivalents, excluding Midstream, were $2.5 billion at June 30, 2018

NEW YORK--(BUSINESS WIRE)-- Hess Corporation (NYSE: HES) today reported a net loss of $130 million, or $0.48 per common share, in the second quarter of 2018, compared to a net loss of $449 million, or $1.46 per common share, in the second quarter of 2017. On an adjusted basis, the Corporation reported an after-tax net loss of $56 million, or $0.23 per common share, in the second quarter of 2018. The improved after-tax adjusted results reflect higher realized crude oil selling prices, lower operating costs and depreciation, depletion and amortization expense, partially offset by lower production volumes, primarily due to asset sales.

   “We delivered strong operational performance in the quarter – exceeding our production guidance – and further focused our portfolio with the sale of our joint venture interests in the Utica,” Chief Executive Officer John Hess said. “In June, we announced another significant oil discovery at Longtail, offshore Guyana, and in July we increased the estimate of gross discovered recoverable resources for the Stabroek Block to more than 4 billion barrels of oil equivalent.”

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

                                                Three Months Ended     Six Months Ended
June 30, June 30,
(unaudited) (unaudited)
2018     2017 2018     2017
(In millions, except per share amounts)

Net Income (Loss) Attributable to Hess Corporation

Exploration and Production $ 31 $ (354 ) $ 6 $ (587 )
Midstream 30 16 58 34
Corporate, Interest and Other   (191 )   (111 )   (300 )   (220 )
Net income (loss) attributable to Hess Corporation $ (130 ) $ (449 ) $ (236 ) $ (773 )
 
Net income (loss) per common share (diluted) (a) $ (0.48 ) $ (1.46 ) $ (0.85 ) $ (2.53 )
 

Adjusted Net Income (Loss) Attributable to Hess Corporation (b)

Exploration and Production $ 21 $ (354 ) $ 33 $ (587 )
Midstream 30 16 58 34
Corporate, Interest and Other   (107 )   (111 )   (219 )   (220 )
Adjusted net income (loss) attributable to Hess Corporation $ (56 ) $ (449 ) $ (128 ) $ (773 )
 
Adjusted net income (loss) per common share (diluted) (a) $ (0.23 ) $ (1.46 ) $ (0.50 ) $ (2.53 )
 
Weighted average number of shares (diluted)   297.5   314.4   303.5   314.2
 

(a)

Calculated as net income (loss) attributable to Hess Corporation less preferred stock dividends, divided by weighted average number of diluted shares.

 

(b)

Adjusted net income (loss) attributable to Hess Corporation excludes items affecting comparability of earnings between periods summarized on page 6. A reconciliation of net income (loss) attributable to Hess Corporation to adjusted net income (loss) attributable to Hess Corporation is provided on page 7.

 

Exploration and Production:

   Exploration and Production (E&P) net income in the second quarter of 2018 was $31 million, compared to a net loss of $354 million in the second quarter of 2017. On an adjusted basis, second quarter 2018 net income was $21 million. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $62.65 per barrel in the second quarter of 2018, up from $45.95 per barrel in the year-ago quarter. Noncash losses on crude oil hedging contracts reduced second quarter 2018 after-tax results by $47 million. The average realized natural gas liquids selling price in the second quarter of 2018 was $20.51 per barrel, versus $14.85 per barrel in the prior-year quarter, while the average realized natural gas selling price was $4.12 per mcf, compared to $3.19 per mcf in the second quarter of 2017.

   Net production, excluding Libya, was 247,000 boepd in the second quarter of 2018, compared to 294,000 boepd in the prior-year quarter. Excluding assets sold and Libya, second quarter 2017 net production was 237,000 boepd. Libya net production was 18,000 boepd in the second quarter of 2018, compared with 6,000 boepd in the year-ago quarter. Our full year production guidance, excluding Libya, continues to be 245,000 boepd to 255,000 boepd, even with the loss of volumes from the sale of our Utica joint venture interests.

   Excluding items affecting comparability of earnings between periods and including Libya, cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $13.37 per barrel of oil equivalent (boe) in the second quarter, down eight percent from $14.60 per boe in the prior-year quarter due to increased low-cost production from North Malay Basin, cost savings initiatives, and sales of higher cost assets. Second quarter 2018 cash costs per boe were negatively impacted by deferred production related to downtime at the third-party operated Enchilada platform in the Gulf of Mexico. E&P income tax expense increased in the second quarter of 2018, compared to the prior-year quarter, primarily due to higher Libya sales volumes.

Operational Highlights for the Second Quarter of 2018:

   Bakken (Onshore U.S.): Net production from the Bakken increased six percent to 114,000 boepd from 108,000 boepd in the year-ago quarter due to ongoing drilling activity and improved well performance. Production in the second quarter of 2018 was impacted by weather-related downtime in June. The Corporation operated an average of four rigs in the second quarter, drilling 28 wells and bringing 27 new wells online. The Corporation has added a fifth rig and plans to add a sixth rig early in the fourth quarter of this year. Full year production guidance for the Bakken remains 115,000 boepd to 120,000 boepd.

   Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 47,000 boepd, compared to 51,000 boepd in the prior-year quarter. Production from the Conger Field, which has been shut-in since the fourth quarter of 2017 due to the Enchilada platform shutdown, resumed in mid-July. At the Stampede Field (Hess operated - 25 percent), four production wells are currently online, and two additional wells are expected to be brought online before the end of this year.

   North Malay Basin (Offshore Malaysia): Net production from North Malay Basin (Hess operated - 50 percent) was 26,000 boepd, compared to 1,500 boepd in the prior-year quarter. Production from the full field development commenced in July 2017.

   Guyana (Offshore): At the Stabroek Block (Hess - 30 percent), operated by Esso Exploration and Production Guyana Limited, the Longtail-1 exploration well encountered approximately 256 feet of high-quality, oil-bearing sandstone reservoir and is the eighth significant oil discovery on the Block. The well is located approximately five miles west of the Turbot-1 well and the operator estimates combined gross recoverable resources of Turbot and Longtail to exceed 500 million boe. Additional prospects to be drilled in this area could increase this estimate. The Stena Carron drillship will next drill the Hammerhead-1 well located approximately nine miles southwest of the Liza discovery. The operator plans to add a third drillship in the fourth quarter that will operate in parallel to the Stena Carron to explore and appraise the Block’s numerous high value prospects.

   The Liza phase 1 development sanctioned in June 2017 is progressing rapidly. Development drilling began in May and construction of the floating production, storage and offloading vessel (FPSO) and subsea equipment is under way, laying the foundation for first production of gross 120,000 barrels of oil per day (bopd) by early 2020. Phase 2 of the Liza development, which is targeted for sanction by the end of this year, will use a second FPSO with gross production capacity of approximately 220,000 bopd – start up for Phase 2 is expected by mid-2022. Planning is underway for a third phase of development, which is targeted to be sanctioned in 2019 and will use an FPSO designed to produce approximately 180,000 bopd gross, with first production as early as 2023. The collective discoveries on the Stabroek Block to date are estimated to contain gross recoverable resources of more than 4 billion boe and have established the potential for up to five FPSOs producing over 750,000 bopd, gross by 2025.

Midstream:

   The Midstream segment, comprised primarily of Hess Infrastructure Partners LP, our 50/50 midstream joint venture, had net income of $30 million in the second quarter of 2018, compared to net income of $16 million in the prior-year quarter, reflecting higher throughput volumes and lower operating costs.

Corporate, Interest and Other:

   Net results were an after-tax expense of $191 million in the second quarter of 2018, compared to an after-tax expense of $111 million in the second quarter of 2017. On an adjusted basis, second quarter 2018 results were an after-tax expense of $107 million. Adjusted corporate expenses were down $11 million in the second quarter of 2018, compared to the year-ago quarter, as a result of lower employee related costs and professional fees. In the second quarter of 2018, interest expense was $7 million higher than the year-ago quarter primarily due to lower capitalized interest.

Capital and Exploratory Expenditures:

   E&P capital and exploratory expenditures were $525 million in the second quarter of 2018, compared to $528 million in the prior-year quarter. The 2018 activity primarily reflects ongoing drilling in the Bakken, increased Liza Phase 1 development activity, exploratory well costs in Canada, and lower expenditures in the Gulf of Mexico. For full year 2018, our E&P capital and exploratory expenditures guidance remains unchanged at $2.1 billion.

   Midstream capital expenditures were $84 million in the second quarter of 2018, up from $20 million in the year-ago quarter. In addition, Midstream investments in its 50/50 joint venture with Targa Resources were $17 million in the second quarter of 2018.

Liquidity:

   Net cash provided by operating activities of $425 million in the second quarter of 2018 is up from $165 million in the second quarter of 2017. Net cash provided by operating activities before changes in working capital was $463 million in the second quarter of 2018, which includes a reduction of $58 million resulting from the accrued settlement of legal claims related to former downstream interests, compared with $362 million in the year-ago quarter.

   In the second quarter of 2018, the Corporation completed its previously announced $500 million accelerated share repurchase transaction, bringing total share repurchases under the Corporation’s $1.5 billion repurchase program to $1 billion. The Corporation also purchased approximately $110 million principal amount of its public notes in the second quarter which brings total debt repurchases to $500 million.

   Excluding the Midstream segment, the Corporation had cash and cash equivalents of $2,488 million and total debt of $5,457 million at June 30, 2018. The Corporation’s debt to capitalization ratio was 36.2 percent at June 30, 2018 and 36.1 percent at December 31, 2017.

   The Midstream segment had cash and cash equivalents of $420 million and total debt of $982 million at June 30, 2018.

   In the third quarter, the Corporation expects to complete the sale of our joint venture interests in the Utica shale play for net cash consideration of approximately $400 million with an effective date of April 1, 2018.

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:

                                              Three Months Ended       Six Months Ended
June 30, June 30,
(unaudited) (unaudited)
2018   2017 2018   2017
(In millions)
Exploration and Production $ 10 $ $ (27 ) $
Midstream
Corporate, Interest and Other   (84 )     (81 )  
Total items affecting comparability of earnings between periods $ (74 ) $ $ (108 ) $
 

   Exploration and Production: Second quarter 2018 results included an after-tax gain of $10 million ($10 million pre-tax) associated with the sale of our interests in Ghana.

   Corporate, Interest and Other: Second quarter 2018 results included an after-tax charge of $26 million ($26 million pre-tax) related to the premium paid for debt repurchases, and an after-tax charge of $58 million ($58 million pre-tax) resulting from the settlement of legal claims related to former downstream interests.

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

                                       
Three Months Ended Six Months Ended
June 30, June 30,
(unaudited)   (unaudited)
2018   2017   2018   2017
(In millions)
Net income (loss) attributable to Hess Corporation $ (130 ) $ (449 ) $ (236 ) $ (773 )
Less: Total items affecting comparability of earnings between periods   (74 )       (108 )  
Adjusted net income (loss) attributable to Hess Corporation $ (56 ) $ (449 )   $ (128 ) $ (773 )
 

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

  Three Months Ended     Six Months Ended
June 30, June 30,
(unaudited) (unaudited)
2018   2017 2018   2017
(In millions)

Cash provided by (used in) operating activities before changes in operating assets and
liabilities

$ 463 $ 362 $ 860 $ 805
Changes in operating assets and liabilities   (38 )   (197 )   (225 )   (291 )
Net cash provided by (used in) operating activities $ 425 $ 165 $ 635 $ 514
 

Hess Corporation will review second quarter financial and operating results and other matters on a webcast at 10 a.m. today (EDT). 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 non-GAAP financial measures in this earnings release. “Adjusted net income (loss)” presented in this release is defined as reported net income (loss) attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods. “Cash provided by (used in) operating activities before changes in operating assets and liabilities” presented in this release is defined as Cash provided by (used in) operating activities excluding changes in operating assets and liabilities. Management uses adjusted net income (loss) 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 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 (loss) or net cash provided by (used in) operating activities. A reconciliation of reported net income (loss) attributable to Hess Corporation (U.S. GAAP) to adjusted net income (loss), and a reconciliation of net cash provided by (used in) operating activities (U.S. GAAP) to 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’ 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.

                                           

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Second Second First
Quarter Quarter Quarter
2018 2017 2018

Income Statement

 
Revenues and non-operating income
Sales and other operating revenues $ 1,534 $ 1,197 $ 1,346
Gains (losses) on asset sales, net 11 2 7
Other, net   21   3   37
Total revenues and non-operating income   1,566   1,202   1,390
 
Costs and expenses
Marketing, including purchased oil and gas 450 253 358
Operating costs and expenses 288 374 288
Production and severance taxes 42 30 39
Exploration expenses, including dry holes and lease impairment 62 52 40
General and administrative expenses 129 95 110
Interest expense 98 82 103
Loss on debt extinguishment 26 27
Depreciation, depletion and amortization   444   741   417
Total costs and expenses   1,539   1,627   1,382
 
Income (loss) before income taxes 27 (425 ) 8
Provision (benefit) for income taxes   114   (8 )   73
Net income (loss) (87 ) (417 ) (65 )
Less: Net income (loss) attributable to noncontrolling interests   43   32   41
Net income (loss) attributable to Hess Corporation (130 ) (449 ) (106 )
Less: Preferred stock dividends   12   11   11
Net income (loss) attributable to Hess Corporation common stockholders $ (142 ) $ (460 ) $ (117 )
                                       
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Six Months Ended June 30,
2018     2017

Income Statement

 
Revenues and non-operating income
Sales and other operating revenues $ 2,880 $ 2,455
Gains (losses) on asset sales, net 18 2
Other, net   58   (1 )
Total revenues and non-operating income   2,956   2,456
 
Costs and expenses
Marketing, including purchased oil and gas 808 453
Operating costs and expenses 576 732
Production and severance taxes 81 61
Exploration expenses, including dry holes and lease impairment 102 110
General and administrative expenses 239 190
Interest expense 201 166
Loss on debt extinguishment 53
Depreciation, depletion and amortization   861   1,478
Total costs and expenses   2,921   3,190
 
Income (loss) before income taxes 35 (734 )
Provision (benefit) for income taxes   187   (21 )
Net income (loss) (152 ) (713 )
Less: Net income (loss) attributable to noncontrolling interests   84   60
Net income (loss) attributable to Hess Corporation (236 ) (773 )
Less: Preferred stock dividends   23   23
Net income (loss) attributable to Hess Corporation common stockholders $ (259 ) $ (796 )
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

                                                                       

    June 30,    

December 31,
2018 2017

Balance Sheet Information

 
Cash and cash equivalents $ 2,908 $ 4,847
Other current assets 1,786 1,310
Property, plant and equipment – net 15,869 16,192
Other long-term assets   901   763
Total assets $ 21,464 $ 23,112
 
Current maturities of long-term debt $ 87 $ 580
Other current liabilities 1,858 1,855
Long-term debt 6,352 6,397
Other long-term liabilities 1,831 1,926
Total equity excluding other comprehensive income (loss) 10,494 11,737
Accumulated other comprehensive income (loss) (522 ) (686 )
Noncontrolling interests   1,364   1,303
Total liabilities and equity $ 21,464 $ 23,112
 

    June 30,    

December 31,
2018 2017

Total Debt

 
Hess Corporation $ 5,457 $ 5,997
Midstream (a)   982   980
Hess Consolidated $ 6,439 $ 6,977

(a)   Midstream debt is non-recourse to Hess Corporation.

 

    June 30,    

December 31,
2018 2017

Debt to Capitalization Ratio

 
Hess Consolidated 36.2 % 36.1 %
 
                                                                               
Three Months Ended Six Months Ended
June 30, June 30,
2018     2017 2018     2017

Interest Expense

 
Gross interest expense - Hess Corporation $ 88 $ 97 $ 180 $ 193
Less: Capitalized interest - Hess Corporation   (5 )   (21 )   (9 )   (38 )
Interest expense - Hess Corporation 83 76 171 155
Interest expense - Midstream   15   6   30   11
Interest expense - Consolidated $ 98 $ 82 $ 201 $ 166
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

       
Second Second First
Quarter Quarter Quarter
2018 2017 2018

Cash Flow Information

 
Cash Flows from Operating Activities
Net income (loss) $ (87 ) $ (417 ) $ (65 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
(Gains) losses on asset sales, net (11 ) (2 ) (7 )
Depreciation, depletion and amortization 444 741 417
Exploratory dry hole costs 13
Exploration lease and other impairment 10 8 10
Stock compensation expense 19 22 13
Noncash (gains) losses on commodity derivatives, net 47 30 38
Provision (benefit) for deferred income taxes and other tax accruals 2 (20 ) (36 )
Loss on debt extinguishment   26     27

Cash provided by (used in ) operating activities before changes in operating assets and liabilities

463 362 397
Changes in operating assets and liabilities   (38 )   (197 )   (187 )
Net cash provided by (used in) operating activities   425   165   210
 
Cash Flows from Investing Activities
Additions to property, plant and equipment - E&P (430 ) (446 ) (363 )
Additions to property, plant and equipment - Midstream (63 ) (34 ) (37 )
Payments for Midstream equity investments (17 ) (24 )
Proceeds from asset sales, net of cash sold 27 79 6
Other, net   (1 )     (4 )
Net cash provided by (used in) investing activities   (484 )   (401 )   (422 )
 
Cash Flows from Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less (1 )
Debt with maturities of greater than 90 days
Borrowings
Repayments (157 ) (51 ) (434 )
Proceeds from issuance of Hess Midstream Partnership LP units 366
Common stock acquired and retired (520 ) (371 )
Cash dividends paid (87 ) (90 ) (89 )
Noncontrolling interests, net (11 ) (175 ) (12 )
Other, net   16   (7 )   (3 )
Net cash provided by (used in) financing activities   (759 )   42   (909 )
 
Net Increase (Decrease) in Cash and Cash Equivalents (818 ) (194 ) (1,121 )
Cash and Cash Equivalents at Beginning of Period   3,726   2,686   4,847
Cash and Cash Equivalents at End of Period $ 2,908 $ 2,492 $ 3,726
 
 

Additions to Property, Plant and Equipment included within Investing Activities:

Capital expenditures incurred $ (570 ) $ (503 ) $ (391 )
Increase (decrease) in related liabilities   77   23   (9 )
Additions to property, plant and equipment $ (493 ) $ (480 ) $ (400 )
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Six Months Ended June 30,
2018     2017

Cash Flow Information

 

Cash Flows from Operating Activities

Net income (loss) $ (152 ) $ (713 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
(Gains) losses on asset sales, net (18 ) (2 )
Depreciation, depletion and amortization 861 1,478
Exploratory dry hole costs 13
Exploration lease and other impairment 20 15
Stock compensation expense 32 44
Noncash (gains) losses on commodity derivatives, net 85 30
Provision (benefit) for deferred income taxes and other tax accruals (34 ) (47 )
Loss on debt extinguishment   53  

Cash provided by (used in) operating activities before changes in operating assets and liabilities

860 805
Changes in operating assets and liabilities   (225 )   (291 )
Net cash provided by (used in) operating activities   635   514
 
Cash Flows from Investing Activities
Additions to property, plant and equipment - E&P (793 ) (786 )
Additions to property, plant and equipment - Midstream (100 ) (84 )
Payments for Midstream equity investments (41 )
Proceeds from asset sales, net of cash sold 33 179
Other, net   (5 )  
Net cash provided by (used in) investing activities   (906 )   (691 )
 
Cash Flows from Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less 4
Debt with maturities of greater than 90 days
Borrowings
Repayments (591 ) (77 )
Proceeds from issuance of Hess Midstream Partnership LP units 366
Common stock acquired and retired (891 )
Cash dividends paid (176 ) (182 )
Noncontrolling interests, net (23 ) (175 )
Other, net   13   1
Net cash provided by (used in) financing activities   (1,668 )   (63 )
 
Net Increase (Decrease) in Cash and Cash Equivalents (1,939 ) (240 )
Cash and Cash Equivalents at Beginning of Period   4,847   2,732
Cash and Cash Equivalents at End of Period $ 2,908 $ 2,492
 
 

Additions to Property, Plant and Equipment included within Investing Activities:

Capital expenditures incurred $ (961 ) $ (873 )
Increase (decrease) in related liabilities   68   3
Additions to property, plant and equipment $ (893 ) $ (870 )
 
                                                                   

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Second Second First
Quarter Quarter Quarter
2018 2017 2018

Capital and Exploratory Expenditures

 
E&P Capital and exploratory expenditures
United States
Bakken $ 242 $ 148 $ 166
Other Onshore   25   9   10
Total Onshore 267 157 176
Offshore   92   191   83
Total United States   359   348   259
South America 73 61 75
Europe 4 42 1
Asia and other   89   77   49
E&P Capital and exploratory expenditures $ 525 $ 528 $ 384
 
Total exploration expenses charged to income included above $ 39 $ 45 $ 30
 
Midstream Capital expenditures $ 84 $ 20 $ 37
 
                                                              Six Months Ended June 30,
2018         2017

Capital and Exploratory Expenditures

 
E&P Capital and exploratory expenditures
United States
Bakken $ 408 $ 238
Other Onshore   35   17
Total Onshore 443 255
Offshore   175   349
Total United States   618   604
South America 148 106
Europe 5 57
Asia and other   138   154
E&P Capital and exploratory expenditures $ 909 $ 921
 
Total exploration expenses charged to income included above $ 69 $ 96
 
Midstream Capital expenditures $ 121 $ 48
 
                             

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 
Second Quarter 2018

Income Statement

United States   International   Total
     
Total revenues and non-operating income
Sales and other operating revenues $ 1,181 $ 353 $ 1,534
Gains (losses) on asset sales, net 11 11
Other, net   3   6         9
Total revenues and non-operating income   1,184   370         1,554
 
Costs and expenses
Marketing, including purchased oil and gas (a) 462 1 463
Operating costs and expenses 181 60 241
Production and severance taxes 41 1 42
Midstream tariffs 163 163
Exploration expenses, including dry holes and lease impairment 34 28 62
General and administrative expenses 33 7 40
Depreciation, depletion and amortization   298   109         407
Total costs and expenses   1,212   206         1,418
 
Results of operations before income taxes (28 ) 164 136
Provision (benefit) for income taxes   (9 )   114         105
Net income (loss) attributable to Hess Corporation $ (19 ) (b) $ 50 $       31
 
Second Quarter 2017

Income Statement

United States International Total
 
Total revenues and non-operating income
Sales and other operating revenues $ 818 $ 376 $ 1,194
Other, net   (12 )   16         4
Total revenues and non-operating income   806   392         1,198
 
Costs and expenses
Marketing, including purchased oil and gas (a) 264 8 272
Operating costs and expenses 170 146 316
Production and severance taxes 29 1 30
Midstream tariffs 135 135
Exploration expenses, including dry holes and lease impairment 29 23 52
General and administrative expenses 44 9 53
Depreciation, depletion and amortization   484   224         708
Total costs and expenses   1,155   411         1,566
 
Results of operations before income taxes (349 ) (19 ) (368 )
Provision (benefit) for income taxes   (9 )   (5 )         (14 )
Net income (loss) attributable to Hess Corporation $ (340 ) (c) $ (14 ) (d) $       (354 )
 

(a)

 

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $49 million (noncash premium amortization: $44 million; cash paid:  $5 million).  After-tax losses from unrealized crude oil hedging activities totaled $3 million.

(c)

After-tax gains from realized crude oil hedging activities totaled $1 million (noncash premium amortization: $10 million; cash received: $11 million).  After-tax losses from unrealized crude oil hedging activities totaled $7 million.

(d)

After-tax gains from realized crude oil hedging activities totaled $2 million (noncash premium amortization: $5 million; cash received: $7 million).  After-tax losses from unrealized crude oil hedging activities totaled $8 million.

 
                                 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 
First Quarter 2018

Income Statement

United States   International       Total
     
Total revenues and non-operating income
Sales and other operating revenues $ 994 $ 352 $ 1,346
Gains (losses) on asset sales, net 2 2
Other, net   8   7         15
Total revenues and non-operating income   1,002   361         1,363
 
Costs and expenses
Marketing, including purchased oil and gas (a) 347 27 374
Operating costs and expenses 190 57 247
Production and severance taxes 38 1 39
Midstream tariffs 151 151
Exploration expenses, including dry holes and lease impairment 25 15 40
General and administrative expenses 51 6 57
Depreciation, depletion and amortization   286   99         385
Total costs and expenses   1,088   205         1,293
 
Results of operations before income taxes (86 ) 156 70
Provision (benefit) for income taxes   (9 )   104         95
Net income (loss) attributable to Hess Corporation $ (77 ) (b) $ 52 $       (25 )
 

(a)

 

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $31 million (noncash premium amortization: $31 million).  After-tax losses from unrealized crude oil hedging activities totaled $7 million.

 
                         

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 
Six Months Ended June 30, 2018

Income Statement

United States     International     Total
     
Total revenues and non-operating income
Sales and other operating revenues $ 2,175 $ 705 $ 2,880
Gains (losses) on asset sales, net 13 13
Other, net   11   13         24
Total revenues and non-operating income   2,186   731         2,917
 
Costs and expenses
Marketing, including purchased oil and gas (a) 809 28 837
Operating costs and expenses 371 117 488
Production and severance taxes 79 2 81
Midstream tariffs 314 314
Exploration expenses, including dry holes and lease impairment 59 43 102
General and administrative expenses 84 13 97
Depreciation, depletion and amortization   584   208         792
Total costs and expenses   2,300   411         2,711
 
Results of operations before income taxes (114 ) 320 206
Provision (benefit) for income taxes   (18 )   218         200
Net income (loss) attributable to Hess Corporation $ (96 ) (b) $ 102 $       6
 
Six Months Ended June 30, 2017

Income Statement

United States International Total
 
Total revenues and non-operating income
Sales and other operating revenues $ 1,721 $ 729 $ 2,450
Other, net   (22 )   21         (1 )
Total revenues and non-operating income   1,699   750         2,449
 
Costs and expenses
Marketing, including purchased oil and gas (a) 540 (45 ) 495
Operating costs and expenses 343 281 624
Production and severance taxes 60 1 61
Midstream tariffs 259 259
Exploration expenses, including dry holes and lease impairment 51 59 110
General and administrative expenses 91 19 110
Depreciation, depletion and amortization   929   482         1,411
Total costs and expenses   2,273   797         3,070
 
Results of operations before income taxes (574 ) (47 ) (621 )
Provision (benefit) for income taxes   (23 )   (11 )         (34 )
Net income (loss) attributable to Hess Corporation $ (551 ) (c) $ (36 ) (d) $       (587 )
 

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $80 million (noncash premium amortization: $75 million; cash paid:  $5 million).  After-tax losses from unrealized crude oil hedging activities totaled $10 million.

(c)

After-tax gains from realized crude oil hedging activities totaled $1 million (noncash premium amortization: $10 million; cash received: $11 million). After-tax losses from unrealized crude oil hedging activities totaled $7 million.

(d)

After-tax gains from realized crude oil hedging activities totaled $2 million (noncash premium amortization: $6 million; cash received: $8 million). After-tax losses from unrealized crude oil hedging activities totaled $7 million.

 
                                                                                                                       

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 
Second Second First
Quarter Quarter Quarter
2018 2017 2018

Net Production Per Day (in thousands)

     
 
Crude oil - barrels
United States
Bakken 72 68 72
Other Onshore (a)   2   9   1
Total Onshore 74 77 73
Offshore   34   38   31
Total United States   108   115   104
Europe (b) 5 28 6
Africa (c) (d) 16 32 20
Asia   4   2   4
Total   133   177   134
 
Natural gas liquids - barrels
United States
Bakken 31 29 28
Other Onshore (a)   5   8   5
Total Onshore 36 37 33
Offshore   4   4   4
Total United States   40   41   37
Europe (b)     1  
Total   40   42   37
 
Natural gas - mcf
United States
Bakken 68 66 66
Other Onshore   61   99   65
Total Onshore 129 165 131
Offshore   52   51   37
Total United States   181   216   168
Europe (b) 6 33 10
Asia and other (d)   366   238   326
Total   553   487   504
 
Barrels of oil equivalent   265   300   255
 

(a)

The Corporation sold its Permian assets in August 2017. Production was 7,000 boepd in the second quarter of 2017.

(b)

The Corporation sold its Norway assets in December 2017. Production was 24,000 boepd in the second quarter of 2017.

(c)

The Corporation sold its Equatorial Guinea assets in November 2017. Production was 26,000 boepd in the second quarter of 2017.

(d)

Production from Libya was 18,000 boepd in the second quarter of 2018, 6,000 boepd in the second quarter of 2017 and 22,000 boepd in the first quarter of 2018.

 
                                                                                                                 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 
Six Months Ended June 30,
2018         2017

Net Production Per Day (in thousands)

   
 
Crude oil - barrels
United States
Bakken 72 68
Other Onshore (a)   1   8
Total Onshore 73 76
Offshore   33   43
Total United States   106   119
Europe (b) 6 30
Africa (c)(d) 18 33
Asia   4   2
Total   134   184
 
Natural gas liquids - barrels
United States
Bakken 29 26
Other Onshore (a)   5   9
Total Onshore 34 35
Offshore   4   5
Total United States   38   40
Europe (b)     1
Total   38   41
 
Natural gas - mcf
United States
Bakken 67 59
Other Onshore   63   103
Total Onshore 130 162
Offshore   44   63
Total United States   174   225
Europe (b) 8 36
Asia and other (d)   347   225
Total   529   486
 
Barrels of oil equivalent   260   306
 

(a)

 

The Corporation sold its Permian assets in August 2017. Production was 8,000 boepd in the first six months of 2017.

(b)

The Corporation sold its Norway assets in December 2017. Production was 26,000 boepd in the first six months of 2017.

(c)

The Corporation sold its Equatorial Guinea assets in November 2017. Production was 28,000 boepd in the first six months of 2017.

(d)

Production from Libya was 20,000 boepd in the first six months of 2018 and 5,000 boepd in the first six months of 2017.

 
                                                                                                             

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 
Second Second First

 Quarter 

 Quarter 

 Quarter 

2018 2017 2018

Sales Volumes Per Day (in thousands) (a)

     
 
Crude oil - barrels 135 174 131
Natural gas liquids - barrels 40 42 37
Natural gas - mcf   553   487   504
Barrels of oil equivalent   267   297   252
 

Sales Volumes (in thousands) (a)

 
Crude oil - barrels 12,259 15,757 11,811
Natural gas liquids - barrels 3,620 3,848 3,308
Natural gas - mcf   50,303   44,390   45,392
Barrels of oil equivalent   24,263   27,003   22,684
                                                                                                           
Six Months Ended June 30,
2018         2017

Sales Volumes Per Day (in thousands) (a)

   
 
Crude oil - barrels 133 174
Natural gas liquids - barrels 38 41
Natural gas - mcf   529   486
Barrels of oil equivalent   259   296
 

Sales Volumes (in thousands) (a)

 
Crude oil - barrels 24,070 31,501
Natural gas liquids - barrels 6,928 7,471
Natural gas - mcf   95,695   87,934
Barrels of oil equivalent   46,947   53,628
 

(a)

 

Sales volumes from purchased crude oil, natural gas liquids, and natural gas are not included in the sales volumes reported.

 
                                                                                                               

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 
Second Second First
Quarter Quarter Quarter
2018 2017 2018

Average Selling Prices

 
Crude oil - per barrel (including hedging)
United States
Onshore $ 59.03 $ 43.83 $ 56.40
Offshore 62.80 44.60 59.14
Total United States 60.25 44.09 57.23
Europe 75.26 50.27 67.37
Africa 73.85 48.81 66.27
Asia 72.55 41.95 67.69
Worldwide 62.65 45.95 59.32
 
Crude oil - per barrel (excluding hedging)
United States
Onshore $ 63.47 $ 43.72 $ 59.61
Offshore 67.14 44.60 62.31
Total United States 64.66 44.01 60.43
Europe 75.26 49.72 67.37
Africa 73.85 48.40 66.27
Asia 72.55 41.95 67.69
Worldwide 66.28 45.74 61.82
 
Natural gas liquids - per barrel
United States
Onshore $ 20.08 $ 14.25 $ 20.78
Offshore 24.54 18.47 24.28
Total United States 20.51 14.64 21.11
Europe 23.95
Worldwide 20.51 14.85 21.11
 
Natural gas - per mcf
United States
Onshore $ 1.94 $ 2.20 $ 2.47
Offshore 2.19 2.29 2.08
Total United States 2.01 2.22 2.38
Europe 3.53 4.22 3.44
Asia and other 5.17 3.93 4.63
Worldwide 4.12 3.19 3.86
                                                                                                         
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 
Six Months Ended June 30,
2018       2017

Average Selling Prices

 
Crude oil - per barrel (including hedging)
United States
Onshore $ 57.73 $ 45.13
Offshore 61.08 46.01
Total United States 58.77 45.45
Europe 70.04 52.01
Africa 70.06 49.84
Asia 69.53 52.55
Worldwide 60.98 47.25
 
Crude oil - per barrel (excluding hedging)
United States
Onshore $ 61.56 $ 45.07
Offshore 64.87 46.01
Total United States 62.59 45.41
Europe 70.04 51.78
Africa 70.06 49.66
Asia 69.53 52.55
Worldwide 64.05 47.16
 
Natural gas liquids - per barrel
United States
Onshore $ 20.42 $ 16.04
Offshore 24.42 19.70
Total United States 20.80 16.47
Europe 26.19
Worldwide 20.80 16.72
 
Natural gas - per mcf
United States
Onshore $ 2.20 $ 2.26
Offshore 2.15 2.35
Total United States 2.19 2.28
Europe 3.47 4.10
Asia and other 4.92 3.96
Worldwide 3.99 3.20

The following is a summary of the Corporation’s outstanding West Texas Intermediate hedging program by calendar year:

                                                                                              2018           2019

    Outstanding average barrels of oil per day

          115,000 35,000

    Average monthly floor price

$50 $60

    Start date

July 1 January 1

    Finish date

December 31 December 31
 

For Hess Corporation
Investors:
Jay Wilson, 212-536-8940
or
Media:
Lorrie Hecker, 212-536-8250
or
Sard Verbinnen & Co
Jamie Tully, 212-687-8080

Source: Hess Corporation