UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): October 26, 2011
HESS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
|
DELAWARE
|
No. 1-1204
|
No. 13-4921002
|
|
(State or Other
|
(Commission
|
(IRS Employer
|
|
Jurisdiction of Incorporation)
|
File Number)
|
Identification No.)
|
1185 Avenue of the Americas
New York, New York 10036
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (212) 997-8500
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|
[ ]
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
|
[ ]
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
[ ]
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
|
[ ]
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item 2.02. Results of Operations and Financial Condition.
On October 26, 2011, Hess Corporation issued a news release reporting estimated results for the third quarter of 2011. A copy of this news release is attached hereto as Exhibit 99(1) and is hereby incorporated by reference.
Item 7.01. Regulation FD Disclosure.
Furnished hereunder are the prepared remarks of John B. Hess, Chairman of the Board of Directors and Chief Executive Officer of Hess Corporation, and John P. Rielly, Senior Vice President and Chief Financial Officer of Hess Corporation at a public conference call held on October 26, 2011. Copies of these remarks are attached as Exhibit 99(2) and as Exhibit 99(3), respectively, and are incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
|
(c)
|
Exhibits
|
|
|
99(1)
|
News release dated October 26, 2011 reporting estimated results for the third quarter of 2011.
|
|
|
99(2)
|
Prepared remarks of John B. Hess, Chairman of the Board of Directors and Chief Executive Officer.
|
|
| 99(3) | Prepared remarks of John P. Rielly, Senior Vice President and Chief Financial Officer. |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October 26, 2011
|
HESS CORPORATION
|
||
|
By:
|
/s/John P. Rielly
|
|
|
Name:
|
John P. Rielly
|
|
|
Title:
|
Senior Vice President and
|
|
|
Chief Financial Officer
|
||
3
EXHIBIT INDEX
| Exhibit No. |
Description
|
| 99(1) |
News release dated October 26, 2011 reporting estimated results for the third quarter of 2011.
|
| 99(2) |
Prepared remarks of John B. Hess, Chairman of the Board of Directors and Chief Executive Officer.
|
| 99(3) | Prepared remarks of John P. Rielly, Senior Vice President and Chief Financial Officer. |
4
Exhibit 99(1)
 News Release
|
HESS CORPORATION
Investor Contact: Jay Wilson
(212) 536-8940
Media Contact: Jon Pepper
(212) 536-8550
|
HESS REPORTS ESTIMATED RESULTS FOR THE THIRD QUARTER OF 2011
Third Quarter Highlights:
|
●
|
Net income was $298 million, compared with $1,154 million in the third quarter of 2010
|
|
●
|
Net income excluding items affecting comparability between periods was $379 million, compared with $429 million in the third quarter of 2010
|
|
●
|
Net cash provided by operating activities was $1,022 million, down from $1,246 million in the third quarter of 2010
|
|
●
|
Oil and gas production was 344,000 barrels of oil equivalent per day, compared with 413,000 in the third quarter of 2010
|
|
●
|
Capital and exploratory expenditures were $2,550 million, including $902 million for acquisitions, up from $1,567 million in the third quarter of 2010
|
NEW YORK, October 26, 2011 -- Hess Corporation (NYSE: HES) reported net income of $298 million for the third quarter of 2011 compared with $1,154 million for the third quarter of 2010. The after-tax income (loss) by major operating activity was as follows:
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30, (unaudited)
|
September 30, (unaudited)
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
(In millions, except per share amounts)
|
||||||||||||||||
|
Exploration and Production
|
$ | 422 | $ | 1,277 | $ | 2,148 | $ | 2,316 | ||||||||
|
Marketing and Refining
|
(23 | ) | (38 | ) | (23 | ) | 30 | |||||||||
|
Corporate
|
(44 | ) | (26 | ) | (114 | ) | (116 | ) | ||||||||
|
Interest expense
|
(57 | ) | (59 | ) | (177 | ) | (163 | ) | ||||||||
|
Net income attributable to Hess Corporation
|
$ | 298 | $ | 1,154 | $ | 1,834 | $ | 2,067 | ||||||||
|
Net income per share (diluted)
|
$ | .88 | $ | 3.52 | $ | 5.40 | $ | 6.31 | ||||||||
|
Weighted average number of shares (diluted)
|
340.2 | 327.6 | 339.8 | 327.3 | ||||||||||||
Note: See the following page for a table of items affecting the comparability of earnings between periods.
1
Exploration and Production earnings were $422 million in the third quarter of 2011 compared with $1,277 million in the third quarter of 2010. The Corporation’s average worldwide crude oil selling price, including the effect of hedging, was $85.81 per barrel, up from $64.81 per barrel in the third quarter of 2010. The average worldwide natural gas selling price of $5.74 per Mcf in the third quarter of 2011 was comparable with the selling price for the same quarter a year ago. Third quarter oil and gas production was 344,000 barrels of oil equivalent per day, down from 413,000 barrels of oil equivalent per day in the third quarter a year ago, due to production interruptions in Libya and at the Valhall and Llano fields, the sale of certain natural gas assets in the United Kingdom North Sea in February and natural field declines, partially offset by higher production from the Bakken oil shale play in North Dakota.
Marketing and Refining generated a loss of $23 million in the third quarter of 2011 compared with a loss of $38 million in the same period in 2010. Refining operations incurred a loss of $38 million in the third quarter of 2011 compared with a loss of $50 million in the year ago quarter. Marketing earnings of $41 million were comparable to the earnings for the third quarter of 2010. Trading activities generated a loss of $26 million in the third quarter of 2011 and a loss of $28 million in the third quarter of last year.
The following table reflects the total after-tax income (expense) of items affecting the comparability of earnings between periods:
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
September 30, (unaudited)
|
September 30, (unaudited)
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
(Millions of dollars)
|
||||||||||||||||
|
Exploration and Production
|
$ | (81 | ) | $ | 725 | $ | 244 | $ | 783 | |||||||
|
Corporate
|
- | - | - | (7 | ) | |||||||||||
| $ | (81 | ) | $ | 725 | $ | 244 | $ | 776 | ||||||||
Third quarter 2011 results include after-tax impairment charges of $140 million that resulted from increases to the Corporation’s abandonment liabilities, primarily for non-producing properties. A charge of $44 million was also recorded as a result of the third quarter enactment of an additional 12 percent supplementary tax on petroleum operations in the United Kingdom with an effective date of March 24, 2011. The charge consists of incremental income tax of $15 million on earnings from the effective date to the end of the second quarter and a charge of $29 million to increase the United Kingdom deferred tax liability. The results
2
also include after-tax gains of $103 million from the sales of the Corporation’s interests in the Snorre Field, offshore Norway, and the Cook Field in the United Kingdom North Sea.
Net cash provided by operating activities was $1,022 million in the third quarter of 2011, compared with $1,246 million in the same quarter of 2010. Capital and exploratory expenditures were $2,550 million, of which $2,517 million related to Exploration and Production operations, including $902 million for acreage acquisitions in the Utica Shale play in eastern Ohio and in the Kurdistan region of Iraq. Capital and exploratory expenditures for the third quarter of 2010 were $1,567 million, of which $1,548 million related to Exploration and Production operations.
At September 30, 2011, cash and cash equivalents totaled $827 million compared with $1,608 million at December 31, 2010. Total debt was $5,592 million at September 30, 2011 and $5,583 million at December 31, 2010. The Corporation’s debt to capitalization ratio at September 30, 2011 was 22.8 percent compared with 24.9 percent at the end of 2010.
Hess Corporation will review third quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details about 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, production, purchase, transportation and sale of crude oil and natural gas, as well as the production and sale of refined petroleum products. More information on Hess Corporation is available at www.hess.com.
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.
3
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
|
Third
|
Third
|
Second
|
||||||||||
|
Quarter
|
Quarter
|
Quarter
|
||||||||||
|
2011
|
2010
|
2011
|
||||||||||
|
Income Statement
|
||||||||||||
|
Revenues and Non-operating Income
|
||||||||||||
|
Sales (excluding excise taxes) and other operating revenues
|
$ | 8,665 | $ | 7,864 | $ | 9,853 | ||||||
|
Income (loss) from equity investment in HOVENSA L.L.C.
|
(36 | ) | (83 | ) | (49 | ) | ||||||
|
Other, net
|
97 | 1,172 | 2 | |||||||||
|
Total revenues and non-operating income
|
8,726 | 8,953 | 9,806 | |||||||||
|
Costs and Expenses
|
||||||||||||
|
Cost of products sold (excluding items shown separately below)
|
6,181 | 5,330 | 6,841 | |||||||||
|
Production expenses
|
609 | 475 | 599 | |||||||||
|
Marketing expenses
|
266 | 232 | 247 | |||||||||
|
Exploration expenses, including dry holes
|
||||||||||||
|
and lease impairment
|
199 | 225 | 257 | |||||||||
|
Other operating expenses
|
43 | 39 | 42 | |||||||||
|
General and administrative expenses
|
177 | 151 | 174 | |||||||||
|
Interest expense
|
94 | 94 | 97 | |||||||||
|
Depreciation, depletion and amortization
|
586 | 584 | 588 | |||||||||
|
Asset impairments
|
358 | 532 | - | |||||||||
|
Total costs and expenses
|
8,513 | 7,662 | 8,845 | |||||||||
|
Income before income taxes
|
213 | 1,291 | 961 | |||||||||
|
Provision (benefit) for income taxes
|
(54 | ) | 200 | 392 | ||||||||
|
Net income
|
267 | 1,091 | 569 | |||||||||
|
Less: Net income (loss) attributable to noncontrolling interests
|
(31 | ) | (63 | ) | (38 | ) | ||||||
|
Net income attributable to Hess Corporation
|
$ | 298 | $ | 1,154 | $ | 607 | ||||||
|
Supplemental Income Statement Information
|
||||||||||||
|
Foreign currency gains (losses), after-tax
|
$ | (2 | ) | $ | (5 | ) | $ | (2 | ) | |||
|
Capitalized interest
|
4 | 1 | 2 | |||||||||
|
Cash Flow Information
|
||||||||||||
|
Net cash provided by operating activities (*)
|
$ | 1,022 | $ | 1,246 | $ | 1,689 | ||||||
|
Capital and Exploratory Expenditures
|
||||||||||||
|
Exploration and Production
|
||||||||||||
|
United States
|
$ | 1,600 | $ | 379 | $ | 793 | ||||||
|
International
|
917 | 1,169 | 676 | |||||||||
|
Total Exploration and Production
|
2,517 | 1,548 | 1,469 | |||||||||
|
Marketing, Refining and Corporate
|
33 | 19 | 21 | |||||||||
|
Total Capital and Exploratory Expenditures
|
$ | 2,550 | $ | 1,567 | $ | 1,490 | ||||||
|
Exploration expenses charged to income included above
|
||||||||||||
|
United States
|
$ | 48 | $ | 46 | $ | 56 | ||||||
|
International
|
68 | 59 | 59 | |||||||||
| $ | 116 | $ | 105 | $ | 115 | |||||||
(*) Includes changes in working capital
4
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
|
Nine Months
|
||||||||
|
2011
|
2010
|
|||||||
|
Income Statement
|
||||||||
|
Revenues and Non-operating Income
|
||||||||
|
Sales (excluding excise taxes) and other operating revenues
|
$ | 28,733 | $ | 24,855 | ||||
|
Income (loss) from equity investment in HOVENSA L.L.C.
|
(133 | ) | (174 | ) | ||||
|
Other, net
|
447 | 1,242 | ||||||
|
Total revenues and non-operating income
|
29,047 | 25,923 | ||||||
|
Costs and Expenses
|
||||||||
|
Cost of products sold (excluding items shown separately below)
|
20,062 | 17,186 | ||||||
|
Production expenses
|
1,739 | 1,392 | ||||||
|
Marketing expenses
|
796 | 730 | ||||||
|
Exploration expenses, including dry holes
|
||||||||
|
and lease impairment
|
769 | 548 | ||||||
|
Other operating expenses
|
127 | 171 | ||||||
|
General and administrative expenses
|
515 | 465 | ||||||
|
Interest expense
|
290 | 261 | ||||||
|
Depreciation, depletion and amortization
|
1,732 | 1,684 | ||||||
|
Asset impairments
|
358 | 532 | ||||||
|
Total costs and expenses
|
26,388 | 22,969 | ||||||
|
Income before income taxes
|
2,659 | 2,954 | ||||||
|
Provision (benefit) for income taxes
|
849 | 899 | ||||||
|
Net income
|
1,810 | 2,055 | ||||||
|
Less: Net income (loss) attributable to noncontrolling interests
|
(24 | ) | (12 | ) | ||||
|
Net income attributable to Hess Corporation
|
$ | 1,834 | $ | 2,067 | ||||
|
Supplemental Income Statement Information
|
||||||||
|
Foreign currency gains (losses), after-tax
|
$ | (7 | ) | $ | (10 | ) | ||
|
Capitalized interest
|
8 | 3 | ||||||
|
Cash Flow Information
|
||||||||
|
Net cash provided by operating activities (*)
|
$ | 3,846 | $ | 3,052 | ||||
|
Capital and Exploratory Expenditures
|
||||||||
|
Exploration and Production
|
||||||||
|
United States
|
$ | 2,933 | $ | 1,115 | ||||
|
International
|
2,226 | 2,204 | ||||||
|
Total Exploration and Production
|
5,159 | 3,319 | ||||||
|
Marketing, Refining and Corporate
|
67 | 72 | ||||||
|
Total Capital and Exploratory Expenditures
|
$ | 5,226 | $ | 3,391 | ||||
|
Exploration expenses charged to income included above
|
||||||||
|
United States
|
$ | 146 | $ | 108 | ||||
|
International
|
189 | 132 | ||||||
| $ | 335 | $ | 240 | |||||
(*) Includes changes in working capital
5
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
|
September 30,
|
December 31,
|
|||||||
|
2011
|
2010
|
|||||||
|
Balance Sheet Information
|
||||||||
|
Cash and cash equivalents
|
$ | 827 | $ | 1,608 | ||||
|
Other current assets
|
6,652 | 7,172 | ||||||
|
Investments
|
391 | 443 | ||||||
|
Property, plant and equipment – net
|
24,167 | 21,127 | ||||||
|
Other long-term assets
|
5,302 | 5,046 | ||||||
|
Total assets
|
$ | 37,339 | $ | 35,396 | ||||
|
Current maturities of long-term debt
|
$ | 44 | $ | 46 | ||||
|
Other current liabilities
|
6,562 | 7,567 | ||||||
|
Long-term debt
|
5,548 | 5,537 | ||||||
|
Other long-term liabilities
|
6,271 | 5,437 | ||||||
|
Total equity excluding other comprehensive income (loss)
|
19,781 | 17,968 | ||||||
|
Accumulated other comprehensive income (loss)
|
(867 | ) | (1,159 | ) | ||||
|
Total liabilities and equity
|
$ | 37,339 | $ | 35,396 | ||||
6
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
|
Third Quarter 2011
|
||||||||||||
|
United
|
||||||||||||
|
States
|
International
|
Total
|
||||||||||
|
Sales and other operating revenues
|
$ | 830 | $ | 1,307 | $ | 2,137 | ||||||
|
Other, net
|
4 | 93 | 97 | |||||||||
|
Total revenues and non-operating income
|
834 | 1,400 | 2,234 | |||||||||
|
Costs and Expenses
|
||||||||||||
|
Production expenses, including related taxes
|
174 | 435 | 609 | |||||||||
|
Exploration expenses, including dry holes
|
||||||||||||
|
and lease impairment
|
120 | 79 | 199 | |||||||||
|
General, administrative and other expenses
|
44 | 27 | 71 | |||||||||
|
Depreciation, depletion and amortization
|
209 | 355 | 564 | |||||||||
|
Asset impairments
|
16 | 342 | 358 | |||||||||
|
Total costs and expenses
|
563 | 1,238 | 1,801 | |||||||||
|
Results of operations before income taxes
|
271 | 162 | 433 | |||||||||
|
Provision (benefit) for income taxes
|
108 | (97 | ) | 11 | ||||||||
|
Results of operations attributable to Hess Corporation
|
$ | 163 | $ | 259 | $ | 422 | ||||||
|
Third Quarter 2010
|
||||||||||||
|
United
|
||||||||||||
|
States
|
International
|
Total
|
||||||||||
|
Sales and other operating revenues
|
$ | 622 | $ | 1,657 | $ | 2,279 | ||||||
|
Other, net
|
(2 | ) | 1,159 | 1,157 | ||||||||
|
Total revenues and non-operating income
|
620 | 2,816 | 3,436 | |||||||||
|
Costs and Expenses
|
||||||||||||
|
Production expenses, including related taxes
|
117 | 358 | 475 | |||||||||
|
Exploration expenses, including dry holes
|
||||||||||||
|
and lease impairment
|
105 | 120 | 225 | |||||||||
|
General, administrative and other expenses
|
37 | 32 | 69 | |||||||||
|
Depreciation, depletion and amortization
|
172 | 388 | 560 | |||||||||
|
Asset impairments
|
- | 532 | 532 | |||||||||
|
Total costs and expenses
|
431 | 1,430 | 1,861 | |||||||||
|
Results of operations before income taxes
|
189 | 1,386 | 1,575 | |||||||||
|
Provision (benefit) for income taxes
|
71 | 227 | 298 | |||||||||
|
Results of operations attributable to Hess Corporation
|
$ | 118 | $ | 1,159 | $ | 1,277 | ||||||
|
Second Quarter 2011
|
||||||||||||
|
United
|
||||||||||||
|
States
|
International
|
Total
|
||||||||||
|
Sales and other operating revenues
|
$ | 858 | $ | 1,840 | $ | 2,698 | ||||||
|
Other, net
|
(13 | ) | 8 | (5 | ) | |||||||
|
Total revenues and non-operating income
|
845 | 1,848 | 2,693 | |||||||||
|
Costs and Expenses
|
||||||||||||
|
Production expenses, including related taxes
|
179 | 420 | 599 | |||||||||
|
Exploration expenses, including dry holes
|
||||||||||||
|
and lease impairment
|
128 | 129 | 257 | |||||||||
|
General, administrative and other expenses
|
49 | 27 | 76 | |||||||||
|
Depreciation, depletion and amortization
|
166 | 387 | 553 | |||||||||
|
Asset impairments
|
- | - | - | |||||||||
|
Total costs and expenses
|
522 | 963 | 1,485 | |||||||||
|
Results of operations before income taxes
|
323 | 885 | 1,208 | |||||||||
|
Provision (benefit) for income taxes
|
120 | 341 | 461 | |||||||||
|
Results of operations attributable to Hess Corporation
|
$ | 203 | $ | 544 | $ | 747 | ||||||
7
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
|
Nine Months 2011
|
||||||||||||
|
United
|
||||||||||||
|
States
|
International
|
Total
|
||||||||||
|
Sales and other operating revenues
|
$ | 2,434 | $ | 5,014 | $ | 7,448 | ||||||
|
Other, net
|
(10 | ) | 446 | 436 | ||||||||
|
Total revenues and non-operating income
|
2,424 | 5,460 | 7,884 | |||||||||
|
Costs and Expenses
|
||||||||||||
|
Production expenses, including related taxes
|
490 | 1,249 | 1,739 | |||||||||
|
Exploration expenses, including dry holes
|
||||||||||||
|
and lease impairment
|
357 | 412 | 769 | |||||||||
|
General, administrative and other expenses
|
141 | 90 | 231 | |||||||||
|
Depreciation, depletion and amortization
|
527 | 1,127 | 1,654 | |||||||||
|
Asset impairments
|
16 | 342 | 358 | |||||||||
|
Total costs and expenses
|
1,531 | 3,220 | 4,751 | |||||||||
|
Results of operations before income taxes
|
893 | 2,240 | 3,133 | |||||||||
|
Provision (benefit) for income taxes
|
340 | 645 | 985 | |||||||||
|
Results of operations attributable to Hess Corporation
|
$ | 553 | $ | 1,595 | $ | 2,148 | ||||||
|
Nine Months 2010
|
||||||||||||
|
United
|
||||||||||||
|
States
|
International
|
Total
|
||||||||||
|
Sales and other operating revenues
|
$ | 1,774 | $ | 4,678 | $ | 6,452 | ||||||
|
Other, net
|
2 | 1,223 | 1,225 | |||||||||
|
Total revenues and non-operating income
|
1,776 | 5,901 | 7,677 | |||||||||
|
Costs and Expenses
|
||||||||||||
|
Production expenses, including related taxes
|
346 | 1,046 | 1,392 | |||||||||
|
Exploration expenses, including dry holes
|
||||||||||||
|
and lease impairment
|
243 | 305 | 548 | |||||||||
|
General, administrative and other expenses
|
105 | 96 | 201 | |||||||||
|
Depreciation, depletion and amortization
|
465 | 1,148 | 1,613 | |||||||||
|
Asset impairments
|
- | 532 | 532 | |||||||||
|
Total costs and expenses
|
1,159 | 3,127 | 4,286 | |||||||||
|
Results of operations before income taxes
|
617 | 2,774 | 3,391 | |||||||||
|
Provision (benefit) for income taxes
|
232 | 843 | 1,075 | |||||||||
|
Results of operations attributable to Hess Corporation
|
$ | 385 | $ | 1,931 | $ | 2,316 | ||||||
8
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA (UNAUDITED)
|
Third
|
Third
|
Second
|
||||||||||
|
Quarter
|
Quarter
|
Quarter
|
||||||||||
|
2011
|
2010
|
2011
|
||||||||||
|
Operating Data
|
||||||||||||
|
Net Production Per Day (in thousands)
|
||||||||||||
|
Crude oil - barrels
|
||||||||||||
|
United States
|
82 | 78 | 77 | |||||||||
|
Europe
|
68 | 82 | 93 | |||||||||
|
Africa
|
59 | 117 | 66 | |||||||||
|
Asia
|
15 | 13 | 12 | |||||||||
|
Total
|
224 | 290 | 248 | |||||||||
|
Natural gas liquids - barrels
|
||||||||||||
|
United States
|
13 | 15 | 13 | |||||||||
|
Europe
|
3 | 3 | 3 | |||||||||
|
Asia
|
1 | - | 1 | |||||||||
|
Total
|
17 | 18 | 17 | |||||||||
|
Natural gas - mcf
|
||||||||||||
|
United States
|
102 | 120 | 100 | |||||||||
|
Europe
|
55 | 104 | 72 | |||||||||
|
Asia and other
|
458 | 406 | 471 | |||||||||
|
Total
|
615 | 630 | 643 | |||||||||
|
Barrels of oil equivalent
|
344 | 413 | 372 | |||||||||
|
Average Selling Price
|
||||||||||||
|
Crude oil - per barrel (including hedging)*
|
||||||||||||
|
United States
|
$ | 95.12 | $ | 71.92 | $ | 106.62 | ||||||
|
Europe
|
65.92 | 57.28 | 87.75 | |||||||||
|
Africa
|
89.41 | 64.78 | 97.74 | |||||||||
|
Asia
|
112.31 | 75.95 | 113.44 | |||||||||
|
Worldwide
|
85.81 | 64.81 | 97.20 | |||||||||
|
Crude oil - per barrel (excluding hedging)
|
||||||||||||
|
United States
|
$ | 95.12 | $ | 71.92 | $ | 106.62 | ||||||
|
Europe
|
65.92 | 57.28 | 87.75 | |||||||||
|
Africa
|
113.03 | 75.70 | 118.19 | |||||||||
|
Asia
|
112.31 | 75.95 | 113.44 | |||||||||
|
Worldwide
|
92.33 | 69.47 | 102.73 | |||||||||
|
Natural gas liquids - per barrel
|
||||||||||||
|
United States
|
$ | 57.72 | $ | 43.20 | $ | 61.57 | ||||||
|
Europe
|
82.18 | 57.69 | 69.99 | |||||||||
|
Asia
|
71.30 | 53.60 | 79.63 | |||||||||
|
Worldwide
|
63.64 | 46.10 | 64.05 | |||||||||
|
Natural gas - per mcf
|
||||||||||||
|
United States
|
$ | 3.43 | $ | 3.56 | $ | 3.71 | ||||||
|
Europe
|
8.93 | 6.50 | 8.97 | |||||||||
|
Asia and other
|
5.86 | 6.18 | 5.94 | |||||||||
|
Worldwide
|
5.74 | 5.73 | 5.93 | |||||||||
| * | The after-tax losses from crude oil hedging activities were $82 million in the third quarter of 2011, $85 million in the third quarter of 2010 and $81 million in the second quarter of 2011. |
9
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA (UNAUDITED)
|
Nine Months
|
||||||||
|
2011
|
2010
|
|||||||
|
Operating Data
|
||||||||
|
Net Production Per Day (in thousands)
|
||||||||
|
Crude oil - barrels
|
||||||||
|
United States
|
78 | 74 | ||||||
|
Europe
|
86 | 83 | ||||||
|
Africa
|
70 | 117 | ||||||
|
Asia
|
14 | 14 | ||||||
|
Total
|
248 | 288 | ||||||
|
Natural gas liquids - barrels
|
||||||||
|
United States
|
13 | 13 | ||||||
|
Europe
|
3 | 3 | ||||||
|
Asia
|
1 | 1 | ||||||
|
Total
|
17 | 17 | ||||||
|
Natural gas - mcf
|
||||||||
|
United States
|
103 | 107 | ||||||
|
Europe
|
78 | 133 | ||||||
|
Asia and other
|
453 | 432 | ||||||
|
Total
|
634 | 672 | ||||||
|
Barrels of oil equivalent
|
371 | 417 | ||||||
|
Average Selling Price
|
||||||||
|
Crude oil - per barrel (including hedging)*
|
||||||||
|
United States
|
$ | 97.71 | $ | 73.05 | ||||
|
Europe
|
81.19 | 56.29 | ||||||
|
Africa
|
89.85 | 63.67 | ||||||
|
Asia
|
112.03 | 75.97 | ||||||
|
Worldwide
|
90.22 | 64.44 | ||||||
|
Crude oil - per barrel (excluding hedging)
|
||||||||
|
United States
|
$ | 97.71 | $ | 73.05 | ||||
|
Europe
|
81.19 | 56.29 | ||||||
|
Africa
|
111.20 | 76.19 | ||||||
|
Asia
|
112.03 | 75.97 | ||||||
|
Worldwide
|
95.89 | 69.56 | ||||||
|
Natural gas liquids - per barrel
|
||||||||
|
United States
|
$ | 58.86 | $ | 46.49 | ||||
|
Europe
|
78.09 | 57.28 | ||||||
|
Asia
|
74.18 | 60.15 | ||||||
|
Worldwide
|
63.70 | 48.84 | ||||||
|
Natural gas - per mcf
|
||||||||
|
United States
|
$ | 3.66 | $ | 3.91 | ||||
|
Europe
|
8.64 | 5.67 | ||||||
|
Asia and other
|
5.85 | 6.21 | ||||||
|
Worldwide
|
5.84 | 5.74 | ||||||
| * | The after-tax losses from crude oil hedging activities were $244 million for the nine months ended September 30, 2011 and $252 million for the nine months ended September 30, 2010. |
10
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA (UNAUDITED)
|
Third
|
Third
|
Second
|
|||||||||||||
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
|
2011
|
2010
|
2011
|
|||||||||||||
|
Financial Information (in millions of dollars)
|
|||||||||||||||
|
Marketing and Refining Results
|
|||||||||||||||
|
Income (loss) before income taxes
|
$ | (23 | ) | $ | (78 | ) | $ | (45 | ) | ||||||
|
Provision (benefit) for income taxes
|
- | (40 | ) | (6 | ) | ||||||||||
|
Results of operations attributable to Hess Corporation
|
$ | (23 | ) | $ | (38 | ) | $ | (39 | ) | ||||||
|
Summary of Marketing and Refining Results
|
|||||||||||||||
|
Refining
|
$ | (38 | ) | $ | (50 | ) | $ | (44 | ) | ||||||
|
Marketing
|
41 | 40 | 28 | ||||||||||||
|
Trading
|
(26 | ) | (28 | ) | (23 | ) | |||||||||
|
Results of operations attributable to Hess Corporation
|
$ | (23 | ) | $ | (38 | ) | $ | (39 | ) | ||||||
|
|
|||||||||||||||
|
Operating Data (barrels and gallons in thousands)
|
|||||||||||||||
|
Refined Product Sales (barrels per day)
|
|||||||||||||||
|
Gasoline
|
222 | 253 | 228 | ||||||||||||
|
Distillates
|
100 | 96 | 114 | ||||||||||||
|
Residuals
|
53 | 56 | 56 | ||||||||||||
|
Other
|
14 | 41 | 28 | ||||||||||||
|
Total
|
389 | 446 | 426 | ||||||||||||
|
Refinery Throughput (barrels per day)
|
|||||||||||||||
|
HOVENSA - Crude runs
|
297 | 408 | 303 | ||||||||||||
|
HOVENSA - Hess 50% share
|
149 | 204 | 152 | ||||||||||||
|
Port Reading
|
63 | 61 | 66 | ||||||||||||
|
Refinery Utilization
|
Refinery Capacity
|
||||||||||||||
|
HOVENSA
|
(barrels per day)
|
||||||||||||||
|
Crude
|
350 (a) | 84.9% | 81.6% | 86.7% | |||||||||||
|
FCC
|
150 | 79.2% | 76.1% | 77.8% | |||||||||||
|
Coker
|
58 | 91.0% | 73.0% | 96.0% | |||||||||||
|
Port Reading
|
70 | 90.0% | 87.7% | 93.6% | |||||||||||
|
Retail Marketing
|
|||||||||||||||
|
Number of retail stations (b)
|
1,358 | 1,360 | 1,356 | ||||||||||||
|
Convenience store revenue (in millions of dollars) (c)
|
$ | 316 | $ | 322 | $ | 305 | |||||||||
|
Average gasoline volume per station (gallons per month) (c)
|
201 | 204 | 199 | ||||||||||||
| (a) |
HOVENSA’s refining crude capacity was reduced to 350,000 from 500,000 barrels per day in the first quarter of 2011.
|
|
| (b) |
Includes company operated, Wilco-Hess, dealer and branded retailer.
|
|
| (c) |
Company operated only.
|
11
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA (UNAUDITED)
|
Nine Months
|
|||||||||||
|
2011
|
2010
|
||||||||||
|
Financial Information (in millions of dollars)
|
|||||||||||
|
Marketing and Refining Results
|
|||||||||||
|
Income (loss) before income taxes
|
$ | 28 | $ | 24 | |||||||
|
Provision (benefit) for income taxes
|
51 | (6 | ) | ||||||||
|
Results of operations attributable to Hess Corporation
|
$ | (23 | ) | $ | 30 | ||||||
|
Summary of Marketing and Refining Results
|
|||||||||||
|
Refining
|
$ | (130 | ) | $ | (137 | ) | |||||
|
Marketing
|
137 | 178 | |||||||||
|
Trading
|
(30 | ) | (11 | ) | |||||||
|
Results of operations attributable to Hess Corporation
|
$ | (23 | ) | $ | 30 | ||||||
|
|
|||||||||||
|
Operating Data (barrels and gallons in thousands)
|
|||||||||||
|
Refined Product Sales (barrels per day)
|
|||||||||||
|
Gasoline
|
226 | 247 | |||||||||
|
Distillates
|
116 | 112 | |||||||||
|
Residuals
|
65 | 66 | |||||||||
|
Other
|
20 | 40 | |||||||||
|
Total
|
427 | 465 | |||||||||
|
Refinery Throughput (barrels per day)
|
|||||||||||
|
HOVENSA - Crude runs
|
288 | 392 | |||||||||
|
HOVENSA - Hess 50% share
|
144 | 196 | |||||||||
| Port Reading | 65 | 53 | |||||||||
|
Refinery Utilization
|
Refinery Capacity
|
||||||||||
|
HOVENSA
|
(barrels per day)
|
||||||||||
|
Crude
|
350 (a) | 82.3% | 78.4% | ||||||||
|
FCC
|
150 | 74.3% | 69.5% | ||||||||
|
Coker
|
58 | 76.4% | 80.0% | ||||||||
|
Port Reading
|
70 | 92.5% | 75.4% | ||||||||
|
Retail Marketing
|
|||||||||||
|
Number of retail stations (b)
|
1,358 | 1,360 | |||||||||
|
Convenience store revenue (in millions of dollars) (c)
|
$ | 899 | $ | 915 | |||||||
|
Average gasoline volume per station (gallons per month) (c)
|
195 | 198 | |||||||||
| (a) |
HOVENSA’s refining crude capacity was reduced to 350,000 from 500,000 barrels per day in the first quarter of 2011.
|
|
| (b) |
Includes company operated, Wilco-Hess, dealer and branded retailer.
|
|
| (c) |
Company operated only.
|
12
Exhibit 99(2)
2011 Third Quarter Earnings Conference Call
Thank you Jay and welcome to our third quarter conference call. I will make a few brief comments after which John Rielly will review our financial results.
Net income for the third quarter of 2011 was $298 million versus $1.154 billion a year ago. Our third quarter results included charges of $140 million for abandonment liabilities primarily in the UK North Sea and $44 million for an increase in the UK supplemental petroleum tax rate. These charges were partially offset by a $103 million gain from the sale of Hess’ interests in the Snorre Field in Norway and the Cook Field in the United Kingdom. Also, last year’s third quarter results included a net non-recurring gain of $725 million. Excluding these adjustments, earnings for the third quarter of 2011 were $379 million versus $429 million a year ago.
Exploration and Production reported net income of $422 million. Crude oil and natural gas production averaged 344
- 1 -
thousand barrels of oil equivalent per day, which was 17 percent below the year ago period. Aside from the sale of mature UK natural gas assets earlier in the year, most of the year over year production decline was due to several short term setbacks. We are pleased to say that most of these issues are being resolved and that with the exception of Libya we are in the process of recovering lost volumes.
In Norway, a fire at the outside operated Valhall Field in July resulted in the field being shut in for more than two months, negatively impacting third quarter production by approximately 20 thousand barrels of oil equivalent per day. Operations resumed September 17th and net production is currently averaging more than 30 thousand barrels of oil equivalent per day.
In the Gulf of Mexico, the Llano #3 well was producing at a net rate of approximately 10 thousand barrels of oil equivalent per day prior to being shut in due to mechanical issues in the first
- 2 -
quarter of this year. The operator plans to perform a workover and restore production in the first half of 2012.
In Libya, approximately 23 thousand barrels per day of net production remains shut in due to civil unrest. We cannot estimate when production will resume until security returns to the country.
With regard to the Bakken, net production averaged 32 thousand barrels of oil equivalent per day in the third quarter, up from 25 thousand barrels of oil equivalent per day in the second quarter. Currently net production from the Bakken is approximately 39 thousand barrels of oil equivalent per day. As a result of the increased acreage position from last year’s acquisitions and positive well results year to date, we forecast net production from the Bakken will increase to 60 thousand barrels of oil equivalent per day in 2012 and to 120 thousand barrels of oil equivalent per day in 2015.
- 3 -
In September we announced the acquisition of 185,000 net acres in the emerging Utica Shale play in eastern Ohio principally through two separate transactions. We entered into an agreement with CONSOL Energy, which closed last week, to acquire a 50 percent interest in nearly 200,000 acres for aggregate payments of $593 million over five years. We also acquired Marquette Exploration and other leasehold interests, which added another 85,000 net acres at a cost of approximately $750 million. With these transactions, we have built a strategic acreage position in the Utica Shale – strengthening our portfolio of high quality unconventional assets, leveraging our operating expertise and creating significant potential for future growth in reserves and production. Appraisal activities on this acreage are planned to commence in the fourth quarter.
Yesterday, we also announced that we will proceed with the development of the Hess operated Tubular Bells Field in the Mississippi Canyon area of the Gulf of Mexico. The plan calls
- 4 -
for three subsea production wells and two water injection wells tied back to a third-party owned spar production facility. Drilling is scheduled to begin in 2012 and initial production is expected in 2014, subject to the receipt of necessary government permits. Annual net production is expected to peak at approximately 25,000 barrels of oil equivalent per day and net recoverable resources are estimated at more than 65 million barrels of oil equivalent. The net cost of the development is expected to be approximately $1.3 billion. Following government approval of the recent assignment of BP’s interest, Hess will hold a 57.14 percent interest and Chevron will hold the remaining 42.86 percent interest.
With regard to deepwater exploration, the Stena DrillMAX drillship has been contracted and we currently plan to drill a minimum of three exploration wells on our 90 percent owned Deepwater Tano Cape Three Points Block in Ghana commencing in the first quarter of 2012.
- 5 -
In Indonesia, we spud the Andalan well on the Semai V block July 12th. We are currently drilling below 17,000 feet and expect to reach total depth of about 22,000 feet during the fourth quarter. Hess has a 100 percent working interest in the block.
In Brunei, the operator of Block CA-1, in which Hess has a 13.5 percent interest, spud the Julong Centre well on September 1st.. The well is expected to reach total depth in the fourth quarter and additional wells are planned in 2012.
Turning to Marketing and Refining, we reported a loss of $23 million for the third quarter of 2011. Our share of the Hovensa refinery’s losses was $36 million, which was an improvement over the year ago quarter as a result of stronger gasoline and distillate crack spreads. While the refinery effectively broke even in July and August, a significant drop in gasoline refining margins in September contributed to the third quarter loss.
- 6 -
Marketing earnings of $41 million were comparable to last year’s third quarter. In Retail Marketing, gasoline volumes on a per site basis and convenience store sales were both down nearly 2 percent – reflecting the weak economy. In Energy Marketing, electricity sales volumes were up versus the year ago quarter while natural gas and fuel oil sales volumes were relatively flat.
Capital and exploratory expenditures in the first nine months of 2011 were approximately $5.2 billion. For the full year, our capital and exploratory expenditures forecast has been increased to $7.2 billion from $6.2 billion. The acquisitions of acreage in the Utica and an additional 4 percent interest in the Hess operated South Arne Field in the Danish sector of the North Sea account for the increase.
We are excited to have acquired a strategic position in the emerging Utica Shale play, which strengthens our portfolio of unconventional resources. We remain committed to
- 7 -
maintaining a strong balance sheet to fund our future investment opportunities and profitably grow our reserves and production.
I will now turn the call over to John Rielly.
- 8 -
Exhibit 99(3)
HESS CORPORATION
THIRD QUARTER 2011 ANALYSTS' CONFERENCE CALL
Introduction
Hello everyone. In my remarks today, I will compare third quarter 2011 results to the second quarter.
Consolidated Results of Operations
The Corporation generated consolidated net income of $298 million in the third quarter of 2011 compared with $607 million in the second quarter. The third quarter results included net after-tax charges of $81 million from items affecting comparability of earnings between periods.
Exploration and Production
Exploration and Production had income of $422 million in the third quarter of 2011 compared with $747 million in the second quarter. Third quarter results included several items affecting the comparability of earnings between periods that were described earlier by John Hess. Excluding these items, the changes in the after-tax components of earnings are as follows:
|
Increase
|
||||
|
(decrease)
|
||||
|
in earnings
|
||||
|
Lower sales volumes decreased earnings by
|
$ | (171 | ) | |
|
Lower selling prices decreased earnings by
|
(98 | ) | ||
|
Lower exploration expense increased earnings by
|
33 | |||
|
Higher operating costs decreased income by
|
(25 | ) | ||
|
All other items net to an increase in earnings of
|
17 | |||
|
For an overall decrease in third quarter adjusted earnings of
|
$ | (244 | ) | |
Our E&P operations were underlifted in the quarter compared with production, resulting in decreased after-tax income of approximately $30 million.
Our E&P total production unit costs were approximately $39.35 per barrel in the third quarter. We estimate our total production unit costs will be approximately $39 per barrel in the fourth quarter.
The charge of $44 million for the additional 12% supplementary tax in the United Kingdom includes a provision of approximately $15 million representing the incremental tax on earnings from the effective date of March 24, 2011 through the end of the second quarter and a charge of $29 million to increase the United Kingdom deferred tax liabilities on the balance sheet. Excluding the impact of the items affecting comparability of earnings between periods, the E&P effective income tax rate was 27% for the third quarter, primarily reflecting the mix of earnings, and 37% for the first nine months of 2011.
- 1 -
HESS CORPORATION
THIRD QUARTER 2011 ANALYSTS' CONFERENCE CALL
Marketing and Refining
Marketing and Refining generated a loss of $23 million in the third quarter of 2011 compared with a loss of $39 million in the second quarter.
Refining losses were $38 million in the third quarter of 2011 compared with a loss of $44 million in the second quarter. The Corporation’s losses from its equity investment in HOVENSA were $36 million in the third quarter of 2011 compared with $49 million in the second quarter. Port Reading broke even in the third quarter of 2011, down from earnings of $5 million in the second quarter.
Marketing earnings were $41 million in the third quarter of 2011, an increase from $28 million in the second quarter, principally reflecting higher margins in energy marketing. Trading activities generated a loss of $26 million in the third quarter of 2011 compared with a loss of $23 million in the second quarter.
Corporate and Interest
Net Corporate expenses were $44 million in the third quarter of 2011 compared with $42 million in the second quarter. After-tax interest expense was $57 million in the third quarter of 2011 compared with $59 million in the second quarter.
Consolidated Cash Flows
Turning to cash flow –
|
Net cash provided by operating activities in the
|
||||
|
third quarter, including a decrease of $11 million
|
||||
|
from changes in working capital, was
|
$ | 1,022 | ||
|
Capital expenditures were
|
(2,434 | ) | ||
|
Proceeds from asset sales were
|
131 | |||
|
All other items amounted to a decrease in cash of
|
(86 | ) | ||
|
Resulting in a net decrease in cash and cash equivalents
|
||||
|
in the third quarter of
|
$ | (1,367 | ) | |
We had $827 million of cash and cash equivalents at September 30, 2011 and $1,608 million at December 31, 2010. Total debt was $5,592 million at September 30, 2011 and $5,583 million at December 31, 2010. The Corporation’s debt to capitalization ratio at September 30, 2011 was 22.8% compared with 24.9% at the end of 2010.
This concludes my remarks. We will be happy to answer any questions. I will now turn the call over to the operator.
************
- 2 -
HESS CORPORATION
THIRD QUARTER 2011 ANALYSTS' CONFERENCE CALL
Cautionary Note
The forgoing prepared remarks include certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.
|
Reconciliation of Segment Earnings to Earnings
|
||||||||
|
Excluding Items Affecting Comparability Between Periods
|
||||||||
|
Third Quarter
|
Second Quarter
|
|||||||
|
2011
|
2011
|
|||||||
|
Exploration & Production Segment Results
|
$ | 422 | $ | 747 | ||||
|
Items Affecting Comparability
|
||||||||
|
Asset impairments
|
140 | ― | ||||||
|
Charge for United Kingdom supplementary tax increase
|
44 | ― | ||||||
|
Gains on asset sales
|
(103 | ) | ― | |||||
| Exploration & Production Income Excluding | ||||||||
|
Items Affecting Comparability
|
$ | 503 | $ | 747 | ||||
- 3 -