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NEW YORK--(BUSINESS WIRE)--Oct. 25, 2006--Hess Corporation (NYSE: HES) reported net income of $297 million for the third quarter of 2006 compared with net income of $272 million for the third quarter of 2005. The third quarter 2006 results include a $105 million charge related to a United Kingdom supplementary tax enacted in July 2006. See the following page for a table and description of items affecting the comparability of earnings between periods. The after-tax results by major operating activity were as follows:
Three months ended Nine months ended
September 30 September 30
(unaudited) (unaudited)
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
(In millions, except per share
amounts)
Exploration and Production $206 $235 $1,413 $760
Marketing and Refining 153 125 323 286
Corporate (31) (54) (83) (151)
Interest expense (31) (34) (96) (105)
--------- -------- -------- --------
Net income $297 $272 $1,557 $790
========= ======== ======== ========
Net income per share (diluted)* $0.94 $0.87 $4.93 $2.54
========= ======== ======== ========
Weighted average number of
shares (diluted)* 316.0 313.2 315.5 311.4
========= ======== ======== ========
* Weighted average number of shares and per-share amounts in all periods reflect the impact of the 3-for-1 stock split on May 31, 2006.
Exploration and Production earnings were $206 million in the third quarter of 2006 compared with $235 million in the third quarter of 2005. Third quarter 2006 results include dry hole costs of $152 million ($93 million after tax), primarily associated with two deepwater Gulf of Mexico exploration wells. The Corporation's oil and gas production, on a barrel-of-oil equivalent basis, was 352,000 barrels per day in the third quarter of 2006 compared with 312,000 barrels per day in the third quarter of 2005.
In the third quarter of 2006, the Corporation's average worldwide crude oil selling price, including the effect of hedging, was $58.81 per barrel, an increase of $23.07 per barrel from the third quarter of 2005. The increase reflects higher crude oil prices and reduced hedge positions in 2006. The Corporation's average worldwide natural gas selling price was $4.94 per Mcf in the third quarter of 2006, compared to $5.26 per Mcf in the third quarter of 2005.
Marketing and Refining earnings were $153 million in the third quarter of 2006 compared with $125 million in the third quarter of 2005. Marketing earnings increased to $63 million in the third quarter of 2006 compared with a loss of $22 million in the same period of 2005, primarily reflecting stronger margins. Refining earnings decreased to $64 million in the third quarter of 2006 compared with $144 million in the third quarter of 2005 principally reflecting lower refined product margins. Earnings from trading operations were $26 million in third quarter of 2006 compared to $3 million in third quarter of 2005.
The following items, on an after-tax basis, are included in net income (in millions):
Three months ended Nine months ended
September 30 September 30
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Exploration and Production
--------------------------------
Gains from asset sales $- $- $236 $11
Income tax adjustments (105) - (45) 11
Accrued office closing costs - - (18) -
Hurricane related costs - (14) - (14)
Legal settlement - - - 11
Corporate
--------------------------------
Tax on repatriated earnings - (31) - (72)
Premiums on bond repurchases - - - (7)
--------- -------- -------- --------
$(105) $(45) $173 $(60)
========= ======== ======== ========
In the third quarter of 2006 the United Kingdom enacted a 10% supplementary tax on petroleum operations with an effective date of January 1, 2006. As a result, the Corporation recorded a charge of $105 million consisting of an incremental income tax of $60 million on operating earnings for the first half of 2006 and $45 million to adjust the United Kingdom deferred tax liability.
The gain from asset sales for the nine months ended September 30, 2006 relates to the sale of certain United States producing properties located in the Permian Basin and Gulf Coast. The results for the first nine months of 2006 also include a charge for vacated leased office space.
Capital and exploratory expenditures for the third quarter of 2006 amounted to $830 million of which $783 million related to Exploration and Production activities. Capital and exploratory expenditures for the third quarter of 2005 amounted to $699 million, including $674 million for Exploration and Production.
At September 30, 2006, cash and cash equivalents totaled $546 million compared with $315 million at December 31, 2005. The Corporation's debt to capitalization ratio at September 30, 2006 was 32.8% compared with 37.6% at the end of 2005. Total debt was $3,775 million at September 30, 2006 and $3,785 million at December 31, 2005.
Hess Corporation will review third quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details on the event, refer to the Investor Relations section of our website at www.hess.com.
Hess Corporation, with headquarters in New York, is a global integrated energy company engaged in the exploration for and the development, production, purchase, transportation and sale of crude oil and natural gas. The Corporation also manufactures, purchases, trades and markets refined petroleum and other energy products.
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.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
Third Third Second
Quarter Quarter Quarter
2006 2005 2006
-------- -------- --------
Income Statement
------------------------------------------
Revenues and Non-operating Income
Sales (excluding excise taxes) and other
operating revenues $ 7,035 $ 5,769 $ 6,718
Non-operating income
Equity in income of HOVENSA L.L.C. 70 151 103
Gain on asset sales -- -- 80
Other, net 25 36 19
-------- -------- --------
Total revenues and non-operating
income 7,130 5,956 6,920
-------- -------- --------
Costs and Expenses
Cost of products sold (excluding items
shown separately below) 4,899 4,424 4,724
Production expenses 323 256 303
Marketing expenses 230 202 225
Exploration expenses, including dry
holes and lease impairment 221 91 79
Other operating expenses 34 31 31
General and administrative expenses 115 83 134
Interest expense 49 54 44
Depreciation, depletion and amortization 323 251 283
-------- -------- --------
Total costs and expenses 6,194 5,392 5,823
-------- -------- --------
Income before income taxes 936 564 1,097
Provision for income taxes 639 292 532
-------- -------- --------
Net income $ 297 $ 272 $ 565
======== ======== ========
Preferred stock dividends 12 12 12
-------- -------- --------
Net income applicable to common
stockholders $ 285 $ 260 $ 553
======== ======== ========
Supplemental Income Statement Information
------------------------------------------
Foreign currency gains (losses), after-
tax $ -- $ 2 $ (2)
Capitalized interest 25 22 26
Cash Flow Information
------------------------------------------
Net cash provided by operating activities
(*) $ 828 $ 484 $ 686
Capital and Exploratory Expenditures
------------------------------------------
Exploration and Production
United States $ 252 $ 74 $ 226
International 531 600 540
-------- -------- --------
Total Exploration and Production 783 674 766
Marketing and Refining 47 25 42
-------- -------- --------
Total Capital and Exploratory
Expenditures $ 830 $ 699 $ 808
======== ======== ========
Exploration expenses charged to income
included above
United States $ 19 $ 30 $ 25
International 23 12 24
-------- -------- --------
$ 42 $ 42 $ 49
======== ======== ========
(*) Includes changes in working capital
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
Nine Months
-----------------
2006 2005
-------- --------
Income Statement
--------------------------------------------------
Revenues and Non-operating Income
Sales (excluding excise taxes) and other operating
revenues $20,912 $15,688
Non-operating income
Equity in income of HOVENSA L.L.C. 171 309
Gain on asset sales 369 18
Other, net 59 93
-------- --------
Total revenues and non-operating income 21,511 16,108
-------- --------
Costs and Expenses
Cost of products sold (excluding items shown
separately below) 14,854 11,674
Production expenses 892 722
Marketing expenses 686 604
Exploration expenses, including dry holes and
lease impairment 412 310
Other operating expenses 95 100
General and administrative expenses 354 254
Interest expense 150 169
Depreciation, depletion and amortization 871 767
-------- --------
Total costs and expenses 18,314 14,600
-------- --------
Income before income taxes 3,197 1,508
Provision for income taxes 1,640 718
-------- --------
Net income $ 1,557 $ 790
======== ========
Preferred stock dividends 36 36
-------- --------
Net income applicable to common stockholders $ 1,521 $ 754
======== ========
Supplemental Income Statement Information
--------------------------------------------------
Foreign currency gains, after-tax $ 5 $ 16
Capitalized interest 75 57
Cash Flow Information
--------------------------------------------------
Net cash provided by operating activities (*) $ 2,712 $ 1,551
Capital and Exploratory Expenditures
--------------------------------------------------
Exploration and Production
United States $ 639 $ 258
International 2,264 1,377
-------- --------
Total Exploration and Production 2,903 1,635
Marketing and Refining 122 73
-------- --------
Total Capital and Exploratory Expenditures $ 3,025 $ 1,708
======== ========
Exploration expenses charged to income included
above
United States $ 68 $ 61
International 74 31
-------- --------
$ 142 $ 92
======== ========
(*) Includes changes in working capital
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
September 30 December 31
2006 2005
-------------- -------------
Balance Sheet Information
----------------------------------------
Cash and cash equivalents $ 546 $ 315
Other current assets 4,709 4,975
Investments 1,279 1,389
Property, plant and equipment - net 11,942 9,512
Other long-term assets 3,151 2,924
-------------- -------------
Total assets $ 21,627 $ 19,115
============== =============
Current maturities of long-term debt $ 29 $ 26
Other current liabilities 6,358 6,421
Long-term debt 3,746 3,759
Other long-term liabilities 3,764 2,623
Stockholders' equity excluding other
comprehensive income (loss) 9,332 7,812
Accumulated other comprehensive income
(loss) (1,602) (1,526)
-------------- -------------
Total liabilities and stockholders'
equity $ 21,627 $ 19,115
============== =============
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
Third Quarter 2006
------------------------------
United
States International Total
------- -------------- -------
Sales and other operating revenues $314 $1,351 $1,665
Non-operating income 14 1 15
------- -------------- -------
Total revenues 328 1,352 1,680
------- -------------- -------
Costs and expenses
Production expenses, including related
taxes 55 268 323
Exploration expenses, including dry
holes and lease impairment 164 57 221
General, administrative and other
expenses 21 25 46
Depreciation, depletion and
amortization 35 271 306
------- -------------- -------
Total costs and expenses 275 621 896
------- -------------- -------
Results of operations before income
taxes 53 731 784
Provision for income taxes 20 558 578
------- -------------- -------
Results of operations $33 $173 $206
======= ============== =======
Third Quarter 2005
------------------------------
United
States International Total
------- -------------- -------
Sales and other operating revenues $275 $767 $1,042
Non-operating income -- 16 16
------- -------------- -------
Total revenues 275 783 1,058
------- -------------- -------
Costs and expenses
Production expenses, including related
taxes 76 180 256
Exploration expenses, including dry
holes and lease impairment 40 51 91
General, administrative and other
expenses 13 19 32
Depreciation, depletion and
amortization 36 200 236
------- -------------- -------
Total costs and expenses 165 450 615
------- -------------- -------
Results of operations before income
taxes 110 333 443
Provision for income taxes 41 167 208
------- -------------- -------
Results of operations $69 $166 $235
======= ============== =======
Second Quarter 2006
------------------------------
United
States International Total
------- -------------- -------
Sales and other operating revenues $330 $1,295 $1,625
Non-operating income 80 12 92
------- -------------- -------
Total revenues 410 1,307 1,717
------- -------------- -------
Costs and expenses
Production expenses, including related
taxes 56 247 303
Exploration expenses, including dry
holes and lease impairment 34 45 79
General, administrative and other
expenses 22 50 72
Depreciation, depletion and
amortization 32 235 267
------- -------------- -------
Total costs and expenses 144 577 721
------- -------------- -------
Results of operations before income
taxes 266 730 996
Provision for income taxes 97 398 495
------- -------------- -------
Results of operations $169 $332 $501
======= ============== =======
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS
(IN MILLIONS OF DOLLARS)
Nine Months 2006
------------------------------
United
States International Total
------- ----------------------
Sales and other operating revenues $988 $3,854 $4,842
Non-operating income 382 25 407
------- -------------- -------
Total revenues 1,370 3,879 5,249
------- -------------- -------
Costs and expenses
Production expenses, including related
taxes 162 730 892
Exploration expenses, including dry
holes and lease impairment 259 153 412
General, administrative and other
expenses 65 98 163
Depreciation, depletion and
amortization 96 727 823
------- -------------- -------
Total costs and expenses 582 1,708 2,290
------- -------------- -------
Results of operations before income
taxes 788 2,171 2,959
Provision for income taxes 284 1,262 1,546
------- -------------- -------
Results of operations $504 $909 $1,413
======= ============== =======
Nine Months 2005
------------------------------
United
States International Total
------- ----------------------
Sales and other operating revenues $823 $2,287 $3,110
Non-operating income (expenses) (4) 67 63
------- -------------- -------
Total revenues 819 2,354 3,173
------- -------------- -------
Costs and expenses
Production expenses, including related
taxes 183 539 722
Exploration expenses, including dry
holes and lease impairment 200 110 310
General, administrative and other
expenses 51 49 100
Depreciation, depletion and
amortization 122 602 724
------- -------------- -------
Total costs and expenses 556 1,300 1,856
------- -------------- -------
Results of operations before income
taxes 263 1,054 1,317
Provision for income taxes 98 459 557
------- -------------- -------
Results of operations $165 $595 $760
======= ============== =======
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT FOR AVERAGE SELLING PRICES)
Third Third Second
Quarter Quarter Quarter
2006 2005 2006
------- ------- -------
Operating Data
--------------------------------------------
Net Production Per Day
-------------------------------------------
Crude oil - barrels
United States 34 42 38
Europe 102 102 110
Africa 86 67 84
Asia and other 13 7 12
------- ------- -------
Total 235 218 244
======= ======= =======
Natural gas liquids - barrels
United States 11 11 10
Europe 5 2 4
------- ------- -------
Total 16 13 14
======= ======= =======
Natural gas - mcf
United States 109 125 117
Europe 274 218 244
Asia and other 226 141 214
------- ------- -------
Total 609 484 575
======= ======= =======
Barrels of oil equivalent 352 312 354
======= ======= =======
Average Selling Price
-------------------------------------------
Crude oil - per barrel (including hedging)
United States $65.41 $34.86 $64.53
Europe 59.97 34.59 60.63
Africa 54.52 35.16 53.04
Asia and other 67.24 62.04 68.64
Worldwide 58.81 35.74 59.00
Crude oil - per barrel (excluding hedging)
United States $65.41 $58.32 $64.53
Europe 62.79 59.47 63.27
Africa 66.43 59.30 67.18
Asia and other 67.24 62.04 68.64
Worldwide 64.73 59.28 65.03
Natural gas liquids - per barrel
United States $49.17 $40.90 $47.35
Europe 50.30 36.77 47.44
Worldwide 49.54 39.92 47.38
Natural gas - per mcf
United States $5.99 $8.53 $6.23
Europe 5.37 4.12 5.55
Asia and other 3.91 4.12 3.85
Worldwide 4.94 5.26 5.06
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT FOR AVERAGE SELLING PRICES)
Nine Months
---------------
2006 2005
------- -------
Operating Data
------------------------------------------------------
Net Production Per Day
-----------------------------------------------------
Crude oil - barrels
United States 38 46
Europe 109 113
Africa 84 67
Asia and other 11 6
------- -------
Total 242 232
======= =======
Natural gas liquids - barrels
United States 10 12
Europe 4 5
------- -------
Total 14 17
======= =======
Natural gas - mcf
United States 116 146
Europe 266 281
Asia and other 218 127
------- -------
Total 600 554
======= =======
Barrels of oil equivalent 356 341
======= =======
Average Selling Price
-----------------------------------------------------
Crude oil - per barrel (including hedging)
United States $62.22 $33.10
Europe 58.41 33.00
Africa 51.86 31.34
Asia and other 64.39 54.25
Worldwide 57.10 33.13
Crude oil - per barrel (excluding hedging)
United States $62.22 $50.16
Europe 60.85 51.93
Africa 65.52 50.54
Asia and other 64.39 54.25
Worldwide 62.75 51.23
Natural gas liquids - per barrel
United States $47.07 $35.98
Europe 48.50 34.40
Worldwide 47.51 35.53
Natural gas - per mcf
United States $6.68 $6.94
Europe 6.47 4.79
Asia and other 3.93 4.01
Worldwide 5.59 5.18
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION SUPPLEMENTAL HEDGING INFORMATION
(UNAUDITED)
The following is a summary of the Corporation's outstanding crude oil
hedges at September 30, 2006:
Brent Crude Oil*
-------------------------------------
Average Selling Thousands of
Maturity Price barrels per day
------------------- ----------------- -----------------
2006 (4th Quarter) $ 27.75 30
2007 25.85 24
2008 25.56 24
2009 25.54 24
2010 25.78 24
2011 26.37 24
2012 26.90 24
---------------------------------
* There were no WTI crude oil or natural gas hedges outstanding at
September 30, 2006.
The after-tax losses from crude oil hedges were $81 million in the third quarter of 2006, $294 million in third quarter of 2005, and $83 million in the second quarter of 2006. Hedge losses totaled $228 million and $720 million for the nine months ended September 30, 2006 and 2005, respectively. The after-tax deferred hedge loss included in accumulated other comprehensive income at September 30, 2006 amounted to $1.4 billion.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA
(UNAUDITED)
Third Third Second
Quarter Quarter Quarter
2006 2005 2006
-------- -------- --------
Financial Information (in millions of
dollars)
-------------------------------------------
Marketing and Refining
Earnings
---------------------------
Income before income taxes $ 245 $ 202 $ 188
Provision for income taxes 92 77 67
-------- -------- --------
Marketing and Refining
Earnings $ 153 $ 125 $ 121
======== ======== ========
Summary of Marketing and Refining
Earnings
-----------------------------------------
Refining $ 64 $ 144 $ 107
Marketing 63 (22) 15
Trading 26 3 (1)
-------- -------- --------
Total Marketing and
Refining Earnings $ 153 $ 125 $ 121
======== ======== ========
----------------------------------------------------------------------
Operating Data (in thousands unless noted)
-------------------------------------------
Refined Product Sales (barrels per day)
-----------------------------------------
Gasoline 212 226 223
Distillates 130 104 112
Residuals 54 43 42
Other 37 37 35
-------- -------- --------
Total 433 410 412
======== ======== ========
Refinery Throughput (barrels per day)
-----------------------------------------
HOVENSA - Crude runs 475 413 430
HOVENSA - Hess 50% share 237 206 215
Port Reading 62 62 63
--------------
Refinery
Refinery Utilization Capacity
-----------------------------------------
HOVENSA (barrels per
day)
Crude 500 94.9% 82.5% 85.9%
FCC 150 92.0% 89.7% 87.3%
Coker 58 88.3% 92.4% 73.2%
Port Reading 65 95.8% 95.5% 96.9%
--------------
Retail Marketing
---------------------------
Number of retail stations (a) 1,347 1,358 1,343
Convenience store revenue (in millions
of dollars) (b) $ 271 $ 260 $ 258
Average gasoline volume per station
(gallons per month) (b) 216 211 222
(a) Includes company operated, Wilco-Hess, dealer and branded
retailer.
(b) Company operated only.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA
(UNAUDITED)
Nine Months
---------------
2006 2005
------- -------
Financial Information (in millions of dollars)
------------------------------------------------------
Marketing and Refining Earnings
--------------------------------------
Income before income taxes $ 509 $ 455
Provision for income taxes 186 169
------- -------
Marketing and Refining Earnings $ 323 $ 286
======= =======
Summary of Marketing and Refining Earnings
----------------------------------------------------
Refining $ 191 $ 263
Marketing 91 5
Trading 41 18
------- -------
Total Marketing and Refining
Earnings $ 323 $ 286
======= =======
----------------------------------------------------------------------
Operating Data (in thousands unless noted)
------------------------------------------------------
Refined Product Sales (barrels per day)
----------------------------------------------------
Gasoline 220 211
Distillates 136 125
Residuals 61 59
Other 38 40
------- -------
Total 455 435
======= =======
Refinery Throughput (barrels per day)
--------------------------------------
HOVENSA - Crude runs 442 454
HOVENSA - Hess 50% share 221 227
Port Reading 63 52
-------------
Refinery
Refinery Utilization Capacity
-------------------------------------- -------------
HOVENSA (barrels per
day)
Crude 500 88.3% 90.8%
FCC 150 82.0% 80.2%
Coker 58 82.4% 95.4%
Port Reading 65 97.1% 80.4%
-------------
Retail Marketing
--------------------------------------
Number of retail stations (a) 1,347 1,358
Convenience store revenue (in millions of dollars)
(b) $ 762 $ 732
Average gasoline volume per station (gallons per
month) (b) 211 206
(a) Includes company operated, Wilco-Hess, dealer and branded
retailer.
(b) Company operated only.
CONTACT: Hess Corporation
Investor:
Jay Wilson, 212-536-8940
or
Media:
James Allen, 212-536-8550
SOURCE: Hess Corporation