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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): April 25, 2007
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
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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 April 25, 2007, Hess Corporation issued a news release reporting its
results for the first quarter of 2007. 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 April 25, 2007. A copy of his remarks is attached
as Exhibit 99(2) and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99(1) News release dated April 25, 2007 reporting results for the first
quarter of 2007.
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: April 25, 2007
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 April 25, 2007 reporting results for the
first quarter of 2007.
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 First Quarter of 2007
NEW YORK--(BUSINESS WIRE)--April 25, 2007--Hess Corporation (NYSE:
HES)
Hess Corporation reported net income of $370 million for the first
quarter of 2007 compared with net income of $699 million for the first
quarter of 2006. First quarter 2006 results included an after-tax gain
of $186 million related to the sale of certain United States producing
properties. The after-tax results by major operating activities were
as follows:
Three months ended
March 31 (unaudited)
-------------------------
2007 2006*
---------- ----------
(In millions, except per
share amounts)
Exploration and Production $ 340 $ 706
Marketing and Refining 101 53
Corporate (31) (23)
Interest expense (40) (37)
---------- ----------
Net income $ 370 $ 699
========== ==========
Net income per share (diluted) $ 1.17 $ 2.22
========== ==========
Weighted average number of shares (diluted) 317.3 314.8
========== ==========
* Reflects the retrospective adoption of a new accounting
pronouncement related to refinery turnarounds and the impact of the
Corporation's 3-for-1 stock split on May 31, 2006.
Exploration and Production earnings were $340 million in the first
quarter of 2007 compared with $706 million in the first quarter of
2006. The Corporation's oil and gas production, on a barrel-of-oil
equivalent basis, was 382,000 barrels per day in the first quarter of
2007 compared with 361,000 barrels per day in the first quarter of
2006.
In the first quarter of 2007, the Corporation's average worldwide
crude oil selling price, including the effect of hedging, was $50.74
per barrel, a decrease of $2.56 per barrel from the first quarter of
2006. The Corporation's average worldwide natural gas selling price
was $5.00 per Mcf in the first quarter of 2007, compared to $6.73 per
Mcf in the first quarter of 2006.
Marketing and Refining earnings were $101 million in the first
quarter of 2007 compared with $53 million in the first quarter of
2006. Refining earnings were $54 million in the first quarter of 2007
compared with $25 million in the first quarter of 2006, reflecting
higher refined product margins and volumes. In the first quarter of
2006, refining earnings were affected by the unscheduled shutdown and
maintenance of the fluid catalytic cracking unit at HOVENSA. Marketing
earnings were $43 million in the first quarter of 2007 compared with
$12 million in the same period of 2006, primarily reflecting higher
margins. Earnings from trading operations were $4 million in the first
quarter of 2007 compared to $16 million in the first quarter of 2006.
Net cash provided by operating activities was $639 million in the
first quarter of 2007 compared with $1,198 million in the first
quarter of 2006. Capital and exploratory expenditures for the first
quarter of 2007 amounted to $1,181 million, of which $1,159 million
related to Exploration and Production operations. These expenditures
include $371 million for the acquisition of a 28% interest in the
Genghis Khan oil and gas development in the deepwater Gulf of Mexico.
Capital and exploratory expenditures for the first quarter of 2006
amounted to $1,387 million, of which $1,354 million related to
Exploration and Production operations. These expenditures included
$673 million for the acquisition of assets in Egypt and the re-entry
into Libya.
At March 31, 2007, cash and cash equivalents totaled $249 million
compared with $383 million at December 31, 2006. Total debt was $4,141
million at March 31, 2007 and $3,772 million at December 31, 2006. The
Corporation's debt to capitalization ratio at March 31, 2007 was 32.5%
compared with 31.6% at the end of 2006.
Effective January 1, 2007, the Corporation retrospectively adopted
a new accounting pronouncement related to refinery turnarounds. As a
result of this accounting change, the Corporation's previously
reported first quarter 2006 net income increased by $4 million, fourth
quarter 2006 net income was unchanged and retained earnings as of
December 31, 2006 increased by $36 million. All of the financial
information presented in this release and the accompanying schedules
reflect this retrospective accounting change.
Hess Corporation will review first 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,
transports, 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)
First First Fourth
Quarter Quarter Quarter
2007 2006 2006
-------- -------- --------
Income Statement
- -----------------------------------------
Revenues and Non-operating Income
Sales (excluding excise taxes) and
other operating revenues $ 7,319 $ 7,159 $ 7,155
Non-operating income
Equity in income of HOVENSA L.L.C. 56 3 29
Gain on asset sales -- 289 --
Other, net (1) 15 22
-------- -------- --------
Total revenues and non-operating
income 7,374 7,466 7,206
-------- -------- --------
Costs and Expenses
Cost of products sold (excluding
items shown separately below) 5,410 5,229 5,058
Production expenses 347 265 358
Marketing expenses 222 231 254
Exploration expenses, including dry
holes and lease impairment 93 112 140
Other operating expenses 33 29 33
General and administrative expenses 131 106 117
Interest expense 64 57 51
Depreciation, depletion and
amortization 327 266 353
-------- -------- --------
Total costs and expenses 6,627 6,295 6,364
-------- -------- --------
Income before income taxes 747 1,171 842
Provision for income taxes 377 472 483
-------- -------- --------
Net income $ 370 $ 699 $ 359
======== ======== ========
Preferred stock dividends -- 12 8
-------- -------- --------
Net income applicable to common
stockholders $ 370 $ 687 $ 351
======== ======== ========
Supplemental Income Statement Information
- -----------------------------------------
Foreign currency gains (losses) net,
after-tax $ (4) $ 7 $ 5
Capitalized interest 15 24 25
Cash Flow Information
- -----------------------------------------
Net cash provided by operating
activities * $ 639 $ 1,198 $ 779
Capital and Exploratory Expenditures
- -----------------------------------------
Exploration and Production
United States $ 651 $ 160 $ 269
International 508 1,194 715
-------- -------- --------
Total Exploration and Production 1,159 1,354 984
Marketing, Refining and Corporate 22 33 47
-------- -------- --------
Total Capital and Exploratory
Expenditures $ 1,181 $ 1,387 $ 1,031
======== ======== ========
Exploration expenses charged to income
included above
United States $ 40 $ 24 $ 42
International 35 27 28
-------- -------- --------
$ 75 $ 51 $ 70
======== ======== ========
* includes changes in working capital
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS OF DOLLARS)
March 31 December 31
2007 2006
--------- -----------
Balance Sheet Information
- -------------------------------------------------
Cash and cash equivalents $ 249 $ 383
Other current assets 4,978 5,465
Investments 1,234 1,243
Property, plant and equipment - net 13,143 12,308
Other long-term assets 3,123 3,043
--------- -----------
Total assets $ 22,727 $ 22,442
========= ===========
Current maturities of long-term debt $ 30 $ 27
Other current liabilities 6,155 6,712
Long-term debt 4,111 3,745
Other long-term liabilities 3,818 3,811
Stockholders' equity excluding other
comprehensive income (loss) 10,118 9,711
Accumulated other comprehensive income (loss) (1,505) (1,564)
--------- -----------
Total liabilities and stockholders' equity $ 22,727 $ 22,442
========= ===========
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
First Quarter 2007
---------------------------------
United
States International Total
-------- -------------- ---------
Sales and other operating revenues $ 241 $ 1,270 $ 1,511
Non-operating income 8 (14) (6)
-------- -------------- ---------
Total revenues 249 1,256 1,505
-------- -------------- ---------
Costs and expenses
Production expenses, including
related taxes 59 288 347
Exploration expenses, including
dry holes and lease impairment 50 43 93
General, administrative and other
expenses 33 24 57
Depreciation, depletion and
amortization 37 272 309
-------- -------------- ---------
Total costs and expenses 179 627 806
-------- -------------- ---------
Results of operations before
income taxes 70 629 699
Provision for income taxes 26 333 359
-------- -------------- ---------
Results of operations $ 44 $ 296 $ 340
======== ============== =========
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
======== ============== =========
Fourth Quarter 2006
---------------------------------
United
States International Total
-------- -------------- ---------
Sales and other operating revenues $ 244 $ 1,438 $ 1,682
Non-operating income 3 18 21
-------- -------------- ---------
Total revenues 247 1,456 1,703
-------- -------------- ---------
Costs and expenses
Production expenses, including
related taxes 59 299 358
Exploration expenses, including
dry holes and lease impairment 94 46 140
General, administrative and other
expenses 30 16 46
Depreciation, depletion and
amortization 31 305 336
-------- -------------- ---------
Total costs and expenses 214 666 880
-------- -------------- ---------
Results of operations before
income taxes 33 790 823
Provision for income taxes 12 461 473
-------- -------------- ---------
Results of operations $ 21 $ 329 $ 350
======== ============== =========
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT FOR AVERAGE SELLING PRICES)
First First Fourth
Quarter Quarter Quarter
2007 2006 2006
------- ------- -------
Operating Data
- ----------------------------------------------
Net Production Per Day
- ----------------------------------------------
Crude oil - barrels
United States 29 41 29
Europe 110 113 111
Africa 99 82 89
Asia and other 15 10 13
------- ------- -------
Total 253 246 242
======= ======= =======
Natural gas liquids - barrels
United States 9 9 9
Europe 7 4 7
------- ------- -------
Total 16 13 16
======= ======= =======
Natural gas - mcf
United States 90 123 91
Europe 348 280 336
Asia and other 243 207 223
------- ------- -------
Total 681 610 650
======= ======= =======
Barrels of oil equivalent 382 361 366
======= ======= =======
Average Selling Price
- ----------------------------------------------
Crude oil - per barrel (including hedging)
United States $53.19 $57.39 $53.64
Europe 51.32 54.98 50.01
Africa 48.17 45.67 49.77
Asia and other 56.44 59.04 57.09
Worldwide 50.74 53.30 50.76
Crude oil - per barrel (excluding hedging)
United States $53.19 $57.39 $53.64
Europe 51.32 56.89 51.79
Africa 56.09 61.61 57.11
Asia and other 56.44 59.04 57.09
Worldwide 53.75 58.26 54.46
Natural gas liquids - per barrel
United States $42.44 $44.21 $43.68
Europe 45.90 47.16 45.19
Worldwide 43.97 44.98 44.33
Natural gas - per mcf
United States $ 7.21 $ 7.73 $ 6.27
Europe 4.74 8.39 5.55
Asia and other 4.56 3.89 4.39
Worldwide 5.00 6.73 5.25
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 March 31, 2007:
Brent Crude Oil*
-----------------------------------
Average Thousands of
Maturity Selling Price barrels per day
---------------- -------------- -------------------
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
March 31, 2007.
The after-tax losses from crude oil hedges were $39 million in the
first quarter of 2007, $65 million in first quarter of 2006, and
$57 million in the fourth quarter of 2006. The after-tax deferred
hedge loss included in accumulated other comprehensive income at
March 31, 2007 amounted to $1.3 billion.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA
(UNAUDITED)
First First Fourth
Quarter Quarter Quarter
2007 2006 2006
-------- -------- --------
Financial Information (in millions
of dollars)
- ----------------------------------
Marketing and Refining Earnings
- ----------------------------------
Income before income taxes $ 159 $ 83 $ 104
Provision for income taxes 58 30 37
-------- -------- --------
Marketing and Refining
Earnings $ 101 $ 53 $ 67
======== ======== ========
Summary of Marketing and
Refining Earnings
- ----------------------------------
Refining $ 54 $ 25 $ 45
Marketing 43 12 17
Trading 4 16 5
-------- -------- --------
Total Marketing and
Refining Earnings $ 101 $ 53 $ 67
======== ======== ========
- ----------------------------------------------------------------------
Operating Data (in thousands
unless noted)
- ----------------------------------
Refined Product Sales (barrels
per day)
- ----------------------------------
Gasoline 194 226 210
Distillates 174 166 169
Residuals 94 85 57
Other 29 43 33
-------- -------- --------
Total 491 520 469
======== ======== ========
Refinery Throughput (barrels per
day)
- ----------------------------------
HOVENSA - Crude runs 470 420 469
HOVENSA - Hess 50% share 235 210 234
Port Reading 55 64 64
---------
Refinery Utilization Refinery
Capacity
- ---------------------------------- ---------
HOVENSA (barrels
per day)
Crude 500 94.1% 84.0% 93.7%
FCC 150 93.2% 66.4% 91.2%
Coker 58 88.6% 85.7% 89.8%
Port Reading 65 84.7% 98.6% 98.1%
---------
Retail Marketing
- ----------------------------------
Number of retail stations * 1,345 1,343 1,350
Convenience store revenue (in
millions of dollars) ** $ 244 $ 233 $ 253
Average gasoline volume per
station (gallons per month)
** 191 195 202
* Includes company operated, Wilco-Hess, dealer and branded retailer.
** Company operated only.
CONTACT: Hess Corporation
Jay Wilson, 212-536-8940
EXHIBIT 99(2)
2007 First Quarter Earnings Conference Call
Thank you Jay, and welcome to our first quarter conference call. I will make a
few brief comments after which John Rielly will review our financial results.
Our first quarter 2007 Exploration and Production financial results were lower
than the year ago quarter as the result of weaker commodity prices and higher
production costs, which were partially offset by higher production volumes.
First quarter 2007 oil and natural gas production averaged 382 thousand barrels
of oil equivalent per day, which was about 6% above the year ago period. Our
full year 2007 production forecast remains 370-380 thousand barrels of oil
equivalent per day. Looking at the balance of the year, worldwide production is
anticipated to average in the range of 350-360 thousand barrels of oil
equivalent per day for the second and third quarters and then to increase to
more than 400 thousand barrels of oil equivalent per day for the fourth quarter.
-1-
Our worldwide oil and natural gas production in 2007 is expected to be affected
by several factors.
Reductions in the second and third quarters will result from:
o The sale of our interests in the Scott and Telford Fields in the UK
North Sea,
o A decision to reduce natural gas sales from the Cromarty Field during
the second and third quarters, in response to market conditions in the
United Kingdom,
o The scheduled maintenance of our North Sea facilities, and
o A 40 day planned shut down at the Malaysia-Thailand JDA during the
third quarter to install facilities required for Phase 2 development.
Growth during the year will come from:
o The ramp-up in production from the Okume Complex in Equatorial Guinea
throughout the year,
o The start-up of natural gas production from the Pangkah Field, in
Indonesia, in May, and
o The commencement of production from the Genghis Khan Field, in the
deepwater Gulf of Mexico, in the third quarter.
-2-
Our field developments continue to make good progress. In the deepwater Gulf of
Mexico, our Shenzi development, in which Hess has a 28% interest, remains on
schedule for initial production in mid-2009. The CR Luigs drillship is on
location drilling development wells and all major contracts have been awarded.
Construction of the TLP and topsides is underway and is on schedule and on
budget.
The focus of our exploration drilling program this year will be appraisal
drilling in the deepwater Gulf of Mexico and the commencement of exploration
drilling in Australia in the fourth quarter.
In the deepwater Gulf of Mexico, appraisal drilling at our Pony discovery, in
which we have a 100% interest, is continuing. The results of the Pony #2 well
are expected by the end of the second quarter. In addition, appraisal activities
at the Tubular Bells discovery in which Hess has a 20% working interest will
include a #3 well which is expected to spud in the fourth quarter of 2007. As a
result of the success of the #2 well and sidetrack, we have increased the gross
reserve estimate to 200-400 million barrels.
-3-
Lastly, in the first quarter we acquired a 100% interest in an exploration
license in the Carnarvon Basin offshore Western Australia. During the fourth
quarter of 2007 and extending into early 2008, we will acquire 3-D seismic over
the entire 780,000 acre block and drill four exploration wells.
With regard to Marketing and Refining, our first quarter 2007 financial results
strengthened versus the year ago quarter. In Refining, our results benefited
from strong margins and operations, especially at our HOVENSA joint venture. In
Energy Marketing, increased natural gas sales and higher margins contributed to
improved financial performance. Lastly, in Retail Marketing, our business
benefited from increased convenience store sales and higher gasoline margins
than a year ago, but was negatively impacted by rising wholesale gasoline prices
throughout the quarter.
I will now turn the call over to John Rielly.
-4-