Hess’ Liza-3 well offshore Guyana confirms a major oil discovery with breakeven below $40 per barrel
Hess Corporation (ticker: HES) released its third-quarter earnings Wednesday, reporting a loss of $1.12 per share, but the company also updated the markets on its offshore Guyana project, saying that the company now believes recoverable resources are on the high-end of the company’s previous estimate of 0.8-1.4 billion BOE.
Given the updated resource estimate, the net present value of the Liza-3 exploratory well could be $6.2 billion ($1.9 billion net to HES) based on calculations from BMO Capital Markets. “Our base case valuation for Liza was $4.1Bn ($1.2Bn net to HES) using $70Bbl Brent, 10% discount rate, and the mid-point of 0.8-1.4BBoe resource,” said BMO. “Under our base case assumptions, Liza would break even at an oil price <$40Bbl.”
The Liza well will use a FPSO designed to process 100 MMBOPD on average for at least 20 years, with the ability to sustain peak rates up to 120 MMBOPD. At the peak of Phase 1 production, the FPSO will offload up to 1 MMBOPD of oil every 10 days. The project’s operator, ExxonMobil (ticker: XOM), plans to use two drillships to simultaneously drill development wells beginning in 2019, according to a BMO report.
Exxon holds a 45% interest in the project, with Hess holding 30%, and the remaining 25% belonging to China state-owned offshore oil producer CNOOC.
The Skipjack exploration well at a separate prospect 25 miles northwest of Liza was a dry hole and expensed during the third quarter, according to Hess.
