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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): July 26, 2006
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 File Number) Identification No.)
Incorporation)
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))
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1
Item 2.02. Results of Operations and Financial Condition.
On July 26, 2006, Hess Corporation issued a news release reporting its
results for the second quarter of 2006. 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 at a
public conference call held on July 26, 2006. Copies of these remarks are
attached as Exhibit 99(2) and are incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99(1) News release dated July 26, 2006 reporting results for the second
quarter of 2006.
99(2) Prepared remarks of John B. Hess, Chairman of the Board of
Directors and Chief Executive 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: July 26, 2006
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 July 26, 2006 reporting results for the
second quarter of 2006.
99(2) Prepared remarks of John B. Hess, Chairman of the Board of
Directors and Chief Executive Officer.
4
Exhibit 99.1
Hess Reports Estimated Results for the Second Quarter of 2006
NEW YORK--(BUSINESS WIRE)--July 26, 2006--Hess Corporation
(NYSE:HES) reported net income of $565 million for the second quarter
of 2006 compared with net income of $299 million for the second
quarter of 2005. See the following page for a table of items affecting
the comparability of earnings between periods. The after-tax results
by major operating activity were as follows:
Three months Six months
ended ended
June 30 June 30
(unaudited) (unaudited)
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
(In millions,
except per share amounts)
Exploration and Production $ 501 $ 263 $ 1,207 $ 526
Marketing and Refining 121 98 170 161
Corporate (29) (28) (52) (97)
Interest expense (28) (34) (65) (72)
-------- -------- -------- --------
Net income $ 565 $ 299 $ 1,260 $ 518
======== ======== ======== ========
Net income per share (diluted)* $ 1.79 $ 0.96 $ 4.00 $ 1.67
======== ======== ======== ========
Weighted average number of shares
(diluted)* 315.5 311.2 315.2 310.5
======== ======== ======== ========
* 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 $501 million in the
second quarter of 2006 compared with $263 million in the second
quarter of 2005. The Corporation's oil and gas production, on a
barrel-of-oil equivalent basis, was 354,000 barrels per day in the
second quarter of 2006 compared with 355,000 barrels per day in the
second quarter of 2005. In the second quarter of 2006, the
Corporation's average worldwide crude oil selling price, including the
effect of hedging, was $59.00 per barrel, an increase of $26.53 per
barrel from the second quarter of 2005. The increase reflects higher
crude oil prices and reduced hedge positions in 2006. The
Corporation's average United States natural gas selling price was
$6.23 per Mcf in the second quarter of 2006, compared to $6.47 per Mcf
in the second quarter of 2005.
Marketing and Refining earnings were $121 million in the second
quarter of 2006 compared with $98 million in the second quarter of
2005. Refining earnings were $107 million in the second quarter of
2006 compared with $77 million in the second quarter of 2005. The
increased Refining earnings principally reflect higher refined product
margins. Marketing operations generated earnings of $15 million in the
second quarter of 2006, compared with $14 million in the same period
of 2005.
The following items, on an after-tax basis, are included in net income
(in millions):
Three months Six months
ended ended
June 30 June 30
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Exploration and Production
- --------------------------
Gains from asset sales $ 50 $ - $ 236 $ 11
Accrued office closing costs (18) - (18) -
Income tax adjustments - 11 - 11
Legal settlement - - - 11
Corporate
- ---------
Tax on repatriated earnings - - - (41)
Premiums on bond repurchases - (7) - (7)
-------- -------- -------- --------
$ 32 $ 4 $ 218 $ (15)
======== ======== ======== ========
Second quarter 2006 results included a gain related to the sale of
onshore Gulf Coast oil and gas producing assets and a charge for
vacated leased office space. First half 2006 results also included a
gain of $186 million related to the sale of certain producing
properties located in the Permian Basin in Texas and New Mexico.
Capital and exploratory expenditures for the second quarter of
2006 amounted to $808 million of which $766 million related to
Exploration and Production activities. Capital and exploratory
expenditures for the second quarter of 2005 amounted to $527 million,
including $507 million for Exploration and Production.
At June 30, 2006, cash and cash equivalents totaled $486 million
compared with $315 million at December 31, 2005. The Corporation's
debt to capitalization ratio at June 30, 2006 was 34.5% compared with
37.6% at the end of 2005. Total debt was $3,774 million at June 30,
2006 and $3,785 million at December 31, 2005.
Hess Corporation will review second 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)
Second Second First
Quarter Quarter Quarter
2006 2005 2006
-------- -------- --------
Income Statement
- ----------------
Revenues and Non-operating Income
Sales (excluding excise taxes) and other
operating revenues $ 6,718 $ 4,963 $ 7,159
Non-operating income
Equity in income (loss) of HOVENSA L.L.C. 103 108 (2)
Gain on asset sales 80 -- 289
Other, net 19 11 15
-------- -------- --------
Total revenues and non-operating income 6,920 5,082 7,461
-------- -------- --------
Costs and Expenses
Cost of products sold (excluding items
shown separately below) 4,724 3,621 5,229
Production expenses 303 242 265
Marketing expenses 225 205 231
Exploration expenses, including dry holes
and lease impairment 79 87 112
Other operating expenses 31 38 31
General and administrative expenses 134 86 106
Interest expense 44 54 57
Depreciation, depletion and amortization 283 261 266
-------- -------- --------
Total costs and expenses 5,823 4,594 6,297
-------- -------- --------
Income before income taxes 1,097 488 1,164
Provision for income taxes 532 189 469
-------- -------- --------
Net income $ 565 $ 299 $ 695
======== ======== ========
Preferred stock dividends 12 12 12
-------- -------- --------
Net income applicable to common
stockholders $ 553 $ 287 $ 683
======== ======== ========
Supplemental Income Statement Information
- -----------------------------------------
Foreign currency gains (losses), after-tax $ (2) $ 8 $ 7
Capitalized interest 26 22 24
Cash Flow Information
- ---------------------
Net cash provided by operating
activities (*) $ 686 $ 606 $ 1,198
Capital and Exploratory Expenditures
- ------------------------------------
Exploration and Production
United States $ 226 $ 93 $ 160
International 540 414 1,194
-------- -------- --------
Total Exploration and Production 766 507 1,354
Marketing and Refining 42 20 33
-------- -------- --------
Total Capital and Exploratory
Expenditures $ 808 $ 527 $ 1,387
======== ======== ========
Exploration expenses charged to income
included above
United States $ 25 $ 23 $ 24
International 24 11 27
-------- -------- --------
$ 49 $ 34 $ 51
======== ======== ========
(*)Includes changes in working capital
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
First Half
-----------------
2006 2005
-------- --------
Income Statement
- ----------------
Revenues and Non-operating Income
Sales (excluding excise taxes) and other operating
revenues $13,877 $ 9,920
Non-operating income
Equity in income of HOVENSA L.L.C. 101 158
Gain on asset sales 369 18
Other, net 34 56
-------- --------
Total revenues and non-operating income 14,381 10,152
-------- --------
Costs and Expenses
Cost of products sold (excluding items shown
separately below) 9,955 7,250
Production expenses 569 466
Marketing expenses 456 402
Exploration expenses, including dry holes
and lease impairment 191 220
Other operating expenses 61 69
General and administrative expenses 239 171
Interest expense 101 115
Depreciation, depletion and amortization 548 515
-------- --------
Total costs and expenses 12,120 9,208
-------- --------
Income before income taxes 2,261 944
Provision for income taxes 1,001 426
-------- --------
Net income $ 1,260 $ 518
======== ========
Preferred stock dividends 24 24
-------- --------
Net income applicable to common stockholders $ 1,236 $ 494
======== ========
Supplemental Income Statement Information
- -----------------------------------------
Foreign currency gains, after-tax $ 5 $ 14
Capitalized interest 50 36
Cash Flow Information
- ---------------------
Net cash provided by operating activities (*) $ 1,884 $ 1,067
Capital and Exploratory Expenditures
- ------------------------------------
Exploration and Production
United States $ 387 $ 183
International 1,733 778
-------- --------
Total Exploration and Production 2,120 961
Marketing and Refining 75 48
-------- --------
Total Capital and Exploratory Expenditures $ 2,195 $ 1,009
======== ========
Exploration expenses charged to income included
above
United States $ 49 $ 31
International 51 19
-------- --------
$ 100 $ 50
======== ========
(*)Includes changes in working capital
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
June 30 December 31
2006 2005
-------------- --------------
Balance Sheet Information
- -------------------------
Cash and cash equivalents $ 486 $ 315
Other current assets 4,507 4,975
Investments 1,301 1,389
Property, plant and equipment - net 11,682 9,512
Other long-term assets 3,268 2,924
-------------- --------------
Total assets $ 21,244 $ 19,115
============== ==============
Short-term debt and current maturities
of long-term debt $ 95 $ 26
Other current liabilities 6,716 6,421
Long-term debt 3,679 3,759
Other long-term liabilities 3,596 2,623
Stockholders' equity excluding other
comprehensive income (loss) 9,038 7,812
Accumulated other comprehensive income
(loss) (1,880) (1,526)
-------------- --------------
Total liabilities and stockholders'
equity $ 21,244 $ 19,115
============== ==============
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
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
======== =============== =======
Second Quarter 2005
--------------------------------
United
States International Total
-------- --------------- -------
Sales and other operating revenues $ 269 $ 769 $1,038
Non-operating income (expenses) (3) 2 (1)
-------- --------------- -------
Total revenues 266 771 1,037
-------- --------------- -------
Costs and expenses
Production expenses, including
related taxes 58 184 242
Exploration expenses, including dry
holes and lease impairment 51 36 87
General, administrative and other
expenses 18 17 35
Depreciation, depletion and
amortization 42 205 247
-------- --------------- -------
Total costs and expenses 169 442 611
-------- --------------- -------
Results of operations before income
taxes 97 329 426
Provision for income taxes 34 129 163
-------- --------------- -------
Results of operations $ 63 $ 200 $ 263
======== =============== =======
First Quarter 2006
--------------------------------
United
States International Total
-------- --------------- -------
Sales and other operating revenues $ 344 $ 1,207 $1,551
Non-operating income 288 13 301
-------- --------------- -------
Total revenues 632 1,220 1,852
-------- --------------- -------
Costs and expenses
Production expenses, including
related taxes 52 213 265
Exploration expenses, including dry
holes and lease impairment 62 50 112
General, administrative and other
expenses 20 25 45
Depreciation, depletion and
amortization 29 222 251
-------- --------------- -------
Total costs and expenses 163 510 673
-------- --------------- -------
Results of operations before income
taxes 469 710 1,179
Provision for income taxes 167 306 473
-------- --------------- -------
Results of operations $ 302 $ 404 $ 706
======== =============== =======
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
First Half 2006
--------------------------------
United
States International Total
-------- --------------- -------
Sales and other operating revenues $ 674 $ 2,503 $3,177
Non-operating income 368 24 392
-------- --------------- -------
Total revenues 1,042 2,527 3,569
-------- --------------- -------
Costs and expenses
Production expenses, including
related taxes 107 462 569
Exploration expenses, including dry
holes and lease impairment 95 96 191
General, administrative and other
expenses 44 73 117
Depreciation, depletion and
amortization 61 456 517
-------- --------------- -------
Total costs and expenses 307 1,087 1,394
-------- --------------- -------
Results of operations before income
taxes 735 1,440 2,175
Provision for income taxes 264 704 968
-------- --------------- -------
Results of operations $ 471 $ 736 $1,207
======== =============== =======
First Half 2005
--------------------------------
United
States International Total
-------- --------------- -------
Sales and other operating revenues $ 548 $ 1,520 $2,068
Non-operating income (expenses) (4) 50 46
-------- --------------- -------
Total revenues 544 1,570 2,114
-------- --------------- -------
Costs and expenses
Production expenses, including
related taxes 107 359 466
Exploration expenses, including dry
holes and lease impairment 160 60 220
General, administrative and other
expenses 38 28 66
Depreciation, depletion and
amortization 86 402 488
-------- --------------- -------
Total costs and expenses 391 849 1,240
-------- --------------- -------
Results of operations before income
taxes 153 721 874
Provision for income taxes 57 291 348
-------- --------------- -------
Results of operations $ 96 $ 430 $ 526
======== =============== =======
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT FOR AVERAGE SELLING PRICES)
Second Second First
Quarter Quarter Quarter
2006 2005 2006
---------- ---------- ----------
Operating Data
- --------------
Net Production Per Day
----------------------
Crude oil - barrels
United States 38 47 41
Europe 110 117 113
Africa 84 68 82
Asia and other 12 7 10
---------- ---------- ----------
Total 244 239 246
========== ========== ==========
Natural gas liquids - barrels
United States 10 14 9
Europe 4 5 4
---------- ---------- ----------
Total 14 19 13
========== ========== ==========
Natural gas - mcf
United States 117 148 123
Europe 244 289 280
Asia and other 214 138 207
---------- ---------- ----------
Total 575 575 610
========== ========== ==========
Barrels of oil equivalent 354 355 361
========== ========== ==========
Average Selling Price
---------------------
Crude oil - per barrel (including
hedging)
United States $ 64.53 $ 32.44 $ 57.39
Europe 60.63 33.22 54.98
Africa 53.04 28.43 45.67
Asia and other 68.64 51.78 59.04
Worldwide 59.00 32.47 53.30
Crude oil - per barrel (excluding
hedging)
United States $ 64.53 $ 47.83 $ 57.39
Europe 63.27 50.10 56.89
Africa 67.18 47.27 61.61
Asia and other 68.64 51.78 59.04
Worldwide 65.03 49.01 58.26
Natural gas liquids - per barrel
United States $ 47.35 $ 34.98 $ 44.21
Europe 47.44 35.49 47.16
Worldwide 47.38 35.14 44.98
Natural gas - per mcf
United States $ 6.23 $ 6.47 $ 7.73
Europe 5.55 4.60 8.39
Asia and other 3.85 3.95 3.89
Worldwide 5.06 4.92 6.73
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT FOR AVERAGE SELLING PRICES)
First Half
-----------------
2006 2005
-------- --------
Operating Data
- --------------
Net Production Per Day
----------------------
Crude oil - barrels
United States 40 48
Europe 111 118
Africa 84 67
Asia and other 10 6
-------- --------
Total 245 239
======== ========
Natural gas liquids - barrels
United States 9 13
Europe 4 6
-------- --------
Total 13 19
======== ========
Natural gas - mcf
United States 120 156
Europe 262 312
Asia and other 211 121
-------- --------
Total 593 589
======== ========
Barrels of oil equivalent 357 356
======== ========
Average Selling Price
---------------------
Crude oil - per barrel (including hedging)
United States $ 60.81 $ 32.31
Europe 57.69 32.30
Africa 50.01 29.33
Asia and other 63.54 49.44
Worldwide 56.21 31.90
Crude oil - per barrel (excluding hedging)
United States $ 60.81 $ 46.49
Europe 59.95 48.60
Africa 64.89 45.93
Asia and other 63.54 49.44
Worldwide 61.72 47.45
Natural gas liquids - per barrel
United States $ 45.87 $ 33.94
Europe 47.33 33.69
Worldwide 46.30 33.86
Natural gas - per mcf
United States $ 7.00 $ 6.30
Europe 7.06 5.03
Asia and other 3.87 3.95
Worldwide 5.91 5.15
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION HEDGED PRICES AND VOLUMES (UNAUDITED)
Brent Crude Oil
---------------------------------------------
Thousands of barrels
Maturity Average Selling Price per day
- ------------------- ---------------------------------------------
2006
3rd Quarter $27.96 30
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
Note: There were no WTI crude oil or natural gas hedges outstanding at
June 30, 2006.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA
(UNAUDITED)
Second Second First
Quarter Quarter Quarter
2006 2005 2006
-------- -------- --------
Financial Information
(in millions of dollars)
- ------------------------
Marketing and Refining Earnings
-------------------------------
Income before income taxes $ 188 $ 151 $ 76
Provision for income taxes 67 53 27
-------- -------- --------
Marketing and Refining Earnings $ 121 $ 98 $ 49
======== ======== ========
Summary of Marketing and Refining
Earnings
---------------------------------
Refining $ 107 $ 77 $ 21
Marketing 15 14 12
Trading (1) 7 16
-------- -------- --------
Total Marketing and Refining
Earnings $ 121 $ 98 $ 49
======== ======== ========
- ----------------------------------------------------------------------
Operating Data (in thousands unless noted)
- ------------------------------------------
Refined Product Sales (barrels per day)
---------------------------------------
Gasoline 223 227 226
Distillates 112 104 166
Residuals 42 59 85
Other 35 45 43
-------- -------- --------
Total 412 435 520
======== ======== ========
Refinery Throughput (barrels per day)
-------------------------------------
HOVENSA - Crude runs 430 500 420
HOVENSA - Hess 50% share 215 250 210
Port Reading 63 58 64
----------
Refinery Utilization Refinery
-------------------- Capacity
----------
(barrels
HOVENSA per day)
Crude 500 85.9% 100.1% 84.0%
FCC 150 87.3% 93.3% 66.4%
Coker 58 73.2% 100.9% 85.7%
Port Reading 65 96.9% 89.2% 98.6%
----------
Retail Marketing
----------------
Number of retail stations (a) 1,343 1,352 1,343
Convenience store revenue (in
millions of dollars) (b) $ 258 $ 254 $ 233
Average gasoline volume per
station (gallons per month) (b) 222 213 195
(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)
First Half
---------------------
2006 2005
---------- ----------
Financial Information (in millions of dollars)
- ----------------------------------------------
Marketing and Refining Earnings
-------------------------------
Income before income taxes $ 264 $ 253
Provision for income taxes 94 92
---------- ----------
Marketing and Refining Earnings $ 170 $ 161
========== ==========
Summary of Marketing and Refining Earnings
------------------------------------------
Refining $ 127 $ 119
Marketing 28 27
Trading 15 15
---------- ----------
Total Marketing and Refining
Earnings $ 170 $ 161
========== ==========
- ----------------------------------------------------------------------
Operating Data (in thousands unless noted)
- ------------------------------------------
Refined Product Sales (barrels per day)
---------------------------------------
Gasoline 225 204
Distillates 139 135
Residuals 63 67
Other 39 42
---------- ----------
Total 466 448
========== ==========
Refinery Throughput (barrels per day)
-------------------------------------
HOVENSA - Crude runs 425 475
HOVENSA - Hess 50% share 212 238
Port Reading 64 47
----------
Refinery Utilization Refinery
-------------------- Capacity
----------
(barrels
HOVENSA per day)
Crude 500 85.0% 95.0%
FCC 150 76.9% 75.3%
Coker 58 79.4% 96.9%
Port Reading 65 97.8% 72.8%
----------
Retail Marketing
----------------
Number of retail stations (a) 1,343 1,352
Convenience store revenue
(in millions of dollars) (b) $ 492 $ 472
Average gasoline volume per station
(gallons per month) (b) 208 204
(a) Includes company operated, Wilco-Hess, dealer and branded
retailer.
(b) Company operated only.
CONTACT: Hess Corporation
Investors:
Jay Wilson, 212-536-8940
or
Media:
James Allen, 212-536-8550
Exhibit 99.2
Hess Corporation - 2nd Quarter 2006 Conference Call
Comments by John Hess
Thank you Jay, and welcome to our second quarter conference call. As usual, I
will make a few brief comments after which John Rielly will review the financial
results for the quarter.
Turning to Exploration and Production, our second quarter results, compared to a
year ago, benefited from strong oil prices, offset partially by higher
international income taxes. Production averaged 354 thousand barrels of oil
equivalent per day, which was essentially flat with the second quarter of 2005.
For 2006, our current production forecast is 360-370 thousand barrels of oil
equivalent per day, which is at the lower end of the range of our original
guidance. Price effects from our production sharing contracts and asset sales
account for the bulk of this revision.
We continue to make excellent progress in advancing our field developments. The
Okume Complex, Pangkah, and Phu Horm developments are all on schedule to
commence production in early 2007.
Also, in the second quarter, the Shenzi development in the deepwater Gulf of
Mexico, where we have a 28% interest, was sanctioned by the operator BHP
Billiton. Major contracts have been committed and the project is scheduled to
commence production in 2009.
In the United Kingdom, production from the Atlantic and Cromarty Fields
commenced in June and averaged 13 million cubic feet per day for the second
quarter. Net production from the fields is currently averaging about 80 million
cubic feet per day.
Regarding our exploration activities, during the second quarter we announced a
discovery at our 100% owned Pony prospect on Green Canyon Block 468, in the
deepwater Gulf of Mexico. The well was drilled to a total depth of 32,448 feet,
and encountered 475 feet of oil saturated sandstones in Miocene age reservoirs.
After we complete data gathering, we will drill a sidetrack which is intended to
evaluate the prospective section 4,000 feet to the northeast of the discovery
well.
Also in the deepwater Gulf of Mexico, we are drilling our Ouachita and Alsace
prospects on Green Canyon 376 and Garden Banks 243, respectively, as well as a
Tubular Bells appraisal well on Mississippi Canyon 682. These wells have not yet
reached their targeted objectives.
With regard to Marketing and Refining, refining was the major contributor to
improved earnings in the second quarter versus the prior year period. The
HOVENSA and Port Reading refineries both benefited from the strong margin
environment. Similar to last year, retail marketing margins were squeezed during
the second quarter as wholesale prices rose more quickly than pump prices.
Our current estimate of 2006 capital and exploratory expenditures is $4.1-4.3
billion. This level of spending is up from our previous forecast of $4.0
billion. The increase largely reflects: our success at Pony which has resulted
in the addition of a sidetrack well and an appraisal well into our 2006 program;
the acquisition of new leases in the deepwater Gulf of Mexico; and accelerated
development drilling at the Okume Complex.
I will now turn the call over to John Rielly.