Amid sales spree, Hess losses widen

27 October 2017, Week 42, Issue 481

Hess posted a net loss of US$624 million for the third quarter of the year, from a US$339 million loss in the same quarter of 2016. 

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The news came the day after the US company announced a major overseas sales push, offloading assets in Equatorial Guinea and Norway, with plans to sell off its Danish interests also. The sales appear to be driven by Hess’ desire to support its project in Guyana, where it took a final investment decision (FID) in June, on the ExxonMobil-operated Liza plan. 

“We are successfully executing our strategic plan to focus our portfolio by investing in our highest return assets and divesting mature higher cost assets,” the company’s CEO, John Hess, said. “These actions in turn will lower our cash unit costs, bolster our balance sheet and prefund our world-class investment opportunity in Guyana, which will position us to deliver a decade plus of returns-driven growth and increasing cash generation for our shareholders.”

The third-quarter results took a particular hit in the exploration and production segment, with a loss of US$474 million, versus a US$234 million loss for the 2016 quarter. Capital expenditure on exploration and production reached US$558 million in the quarter, up from US$433 million, driven by work in the Bakken and Guyana. 

While the average oil sales price, including hedging, increased to US$46.97 per barrel, from US$41.5, output slipped to 299,000 boepd, versus 314,000 boepd. Even strong prices were achieved on the NGL front, which rose to US$17.22 per barrel, versus US$9.23 per barrel. While the company excludes Libya from its production reporting, volumes increased in the third quarter to 12,000 bpd, averaging 7,000 bpd during 2017. 

Production fell, the company said, as a result of reduced drilling, natural field declines, the impact of hurricanes and an asset sale. Hess’ Permian assets, which were sold in August of this year, contributed 3,000 boepd in the quarter, versus 7,000 boepd in the same quarter of 2016. Output in the fourth quarter will fall further, it said. 

In the Bakken, Hess said production was 103,000 boepd, with an average of four rigs running. The company drilled 24 wells and brought 13 online. Output from the Gulf of Mexico was 59,000 boepd, down from 61,000 boepd year on year. On the Hess-operated Stampede field, the second and third production wells were completed and the project is due to start up in the first quarter of 2018. 

Hess reported a US$550 million non-cash after-tax impairment on its Norway assets, for which it struck a deal to sell for US$2 billion to Aker BP. This sale, combined with the sale of enhanced oil recovery (EOR) programmes in the Permian and its Equatorial Guinea holdings, has garnered the company around US$3.25 billion, it said. Furthermore, combined with the planned sale of its Danish assets, this will remove future abandonment liabilities of around US$3.2 billion. Cash from the Norway sale will go to reducing debt, it said. 

Following these sales, it seems likely that the company may choose to divest other assets. ExxonMobil has been reported as showing an interest in an undeveloped Hess field in Ghana. Furthermore, given the instability in Libya, a sale might be plausible. Assets that may be more appealing to buyers include Hess’ holdings in the Malaysia-Thailand shared area, in addition to the North Malay Basin. 

Hess also reported a US$2.5 billion impairment on its international assets for the quarter. 

 

Edited by

Anna Kachkova

Editor

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