Bakken production up, drilling accelerating
Hess (ticker: HES) reported second quarter results today, showing a net loss of $130 million, or $0.48 per share. This result significantly exceeds the $449 million loss Hess took in Q2 2017, primarily due to higher oil prices and lower operating expenses.
Considered in isolation, Hess’ E&P business segment earned $31 million in Q2, compared to a net loss of $354 million at this point last year. The company’s production was up quarter over quarter, rising from 233 MBOPD to 247 MBOPD, or 6% quarterly growth.
Much of this growth was due to Hess’ operations in the Bakken, where Hess produced 114 MBOEPD. Despite weather-related downtime in June, improved well performance and accelerating drilling activity mean the company will average around 117 MBOEPD from the Bakken this year. Hess added a fifth rig since Q2 ended and plans to add a sixth early in Q4.
Eight oil discoveries in Guyana, additional appraisal in progress
The most important recent news for Hess, though, is the continued positive results from the Stabroek Block in Guyana, where Hess owns a 30% interest. The Longtail-1 well, drilled in late Q2, marks the eighth significant discovery in the area. Longtail follows up on the nearby Turbot discovery, meaning the overall area may be a focus location when Hess and its partners ultimately develop the field. Hess estimates that the Turbot Longtail area has recoverable resources of over 500 MMBOE.
Hess continues to appraise its Guyana position, and plans to now drill the Hammerhead well southwest of the original Liza discovery. A third drillship will begin activities in Q4, accelerating the appraisal process.
Offshore Guyana is by far the largest growth opportunity for Hess, though production activities are still several years out. Phase 1 of development is currently in progress, after the partners approved the $3.2 billion project in June 2017. The floating production, storage and offloading vessel (FPSO) is currently under construction, and production is scheduled to begin in early 2020. Phase 1 is expected to produce 120 MBOPD gross, 36 MBOPD of which will be attributable to Hess.
Additional phases are under consideration, and phase 2 should be approved this year, with start up in mid 2022. In total, Hess estimates the discoveries in Guyana could support five FPSOs and produce 750 MBOPD. If this production is achieved Hess’ share will be 225 MBOPD, or nearly double its current company-wide oil output of 133 MBOPD.
