Hess Corporation (ticker: HES) reported a net loss of $2.677 billion, ($8.57) per share, in the fourth quarter of 2017. For reference, the company had a net loss of $4.892 billion in the fourth quarter of 2016.
Fourth quarter 2017 results reflect net after-tax charges totaling $2.373 billion, including a non-cash accounting charge of $1.7 billion, the company said. This charge reduced the carrying value of Hess’ interests in the Stampede and Tubular Bells Fields in the Gulf of Mexico. The company forecasts a lower long-term crude oil price outlook.
For FY 2017, the company reported a net income loss of $4.074 billion. Total revenues and non-operating income amounted to $5.405 billion, but total costs and expenses totaled $11.183 billion – resulting in a $5.778 billion income loss (before income taxes).
A provision benefit for income taxes of $1.837 billion and a net income loss attributable to noncontrolling interests of $133 million were included in the FY 2017 net income loss calculation.
“In the past year, our company successfully completed an ambitious asset sales program, replaced 351 percent of production at an attractive F&D cost of just over $5 per barrel, continued our extraordinary exploration success on the Stabroek Block in Guyana and sanctioned the Liza Phase 1 development with plans underway for the next two phases,” CEO John Hess said.
E&P – 282,000 BOEPD net production
- The company’s E&P section reported a net loss of $2.592 billion in the fourth quarter of 2017, compared to a net loss of $3.949 billion in the fourth quarter of 2016
Net production, excluding Libya, was 282,000 BOEPD in the fourth quarter of 2017, compared to 307,000 BOEPD in the fourth quarter of 2016. Lower volumes were due to asset sales (26,000 BOEPD), unplanned downtime resulting from a fire at the third-party operated Enchilada platform in the Gulf of Mexico (17,000 BOEPD), natural decline and other net reductions (19,000 BOEPD), partially offset by higher production in the Bakken (15,000 BOEPD) and from North Malay Basin (22,000 BOEPD).
Bakken
Hess said that net production from the Bakken increased 16% to 110,000 BOEPD from 95,000 BOEPD in the fourth quarter of 2016, this was due to increased drilling activity in 2017. The corporation operated an average of 4 rigs in the fourth quarter, drilling 27 wells and bringing 34 new wells online.
Gulf of Mexico
Net production from the Gulf of Mexico was 40,000 BOEPD, compared to 61,000 BOEPD in the prior-year quarter, primarily due to a fire at the third-party operated Enchilada platform. Prior to the shutdown in November, Hess was producing approximately 30,000 BOEPD from the Llano, Conger, Baldpate and Penn State fields through infrastructure associated with Enchilada.
At the Stampede development (25% Hess operated), Hess completed subsea work, received regulatory approval for production operations and continued drilling at the fourth production well and first water injection well. First production at Stampede commenced in January 2018.
Stabroek
At the Stabroek Block (30% Hess), operated by Esso Exploration and Production Guyana Limited, the Ranger-1 exploration well encountered approximately 230 feet of high-quality, oil-bearing carbonate reservoir.
Development activities associated with the Liza Phase 1 project are on schedule and first production is expected in March 2020, Hess said, and the start-up of the Liza Phase 2 development is expected by mid-2022. Excluding Ranger, total discovered recoverable resources on the block is now estimated to be more than 3.2 billion BOE.
CapEx
E&P capital and exploratory expenditures were $568 million in the fourth quarter of 2017, up from $411 million in the prior-year quarter, which included increased drilling activity at the Bakken and Liza Phase 1 development activity, following sanction in June 2017.
Midstream capital expenditures were $46 million in the fourth quarter of 2017, down from $89 million in the year-ago quarter.
Proved reserves – 1.154 billion BOE untapped
Hess’ proved oil and gas reserves were 1.154 billion BOE in December 31, 2017. This is an increased amount from the previous year-end count of 1.109 billion BOE. Proved reserve net additions and technical revisions added 397 million BOE in 2017, primarily relating to the Bakken, Guyana and North Malay Basin in Malaysia.
Asset sales reduced proved reserves by 239 million BOE. The net additions and revisions of 397 million BOE replaced 351% of the corporation’s 2017 production at a finding and development cost of $5.15 per BOE, resulting in a year-end 2017 reserve life of 10.2 years.
U.S. tax cut
The decrease in the corporate tax rate to 21% from 35% resulted in a $1.475 billion reduction to Hess’ U.S. net deferred tax asset, as of December 31, 2017. The re-measurement of deferred taxes using the newly enacted tax rate had no impact on net income or the balance sheet, Hess said.
