hes-8k_20180425.htm

 

 

 

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):  April 25, 2018

 

HESS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

DELAWARE

 

No. 1-1204

 

No. 13-4921002

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 

 


Item 2.02.  Results of Operations and Financial Condition.

On April 25, 2018, Hess Corporation issued a news release reporting estimated results for the first quarter of 2018.  A copy of this news release is attached hereto as Exhibit 99(1) and is hereby incorporated by reference.

 

 

Item 9.01.  Financial Statements and Exhibits.

(d)

Exhibit

99(1)News release dated April 25, 2018 reporting estimated results for the first quarter of 2018.

 

 

 

 


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, 2018

 

 

HESS CORPORATION

 

 

By:

 

/s/John P. Rielly

 

Name:

John P. Rielly

 

Title:

Senior Vice President and

 

 

Chief Financial Officer

 

 

 

 

 

hes-ex991_6.htm

Exhibit 99.1

 

 

HESS CORPORATION

 

 

HESS REPORTS ESTIMATED RESULTS FOR THE FIRST QUARTER OF 2018

 

Key Highlights:

Increased our share repurchase program by $1.0 billion to a total of $1.5 billion, which is expected to be completed by year-end; repurchased approximately 8 million common shares for $380 million in the first quarter, completing the initial $500 million program

Commenced a $500 million accelerated share repurchase in April, which is expected to be completed in the second quarter, as part of our $1.5 billion share repurchase program

Retired $390 million principal amount of debt, including our 8.125% notes due 2019, in connection with our previously announced $500 million debt reduction initiative

Announced a seventh oil discovery on the Stabroek block, offshore Guyana (Hess 30 percent), at the Pacora-1 exploration well located approximately four miles to the west of the Payara-1 well.  The Payara field, which is planned as the third development, will now include Pacora resources and bring expected gross production from the first three phases of development to more than 500,000 barrels of oil per day (bopd)

 

First Quarter Financial and Operating Highlights:

Net loss was $106 million, or $0.38 per common share, compared with a net loss of $324 million, or $1.07 per common share, in the first quarter of last year

Adjusted net loss was $72 million, or $0.27 per common share, in the first quarter of 2018

Oil and gas production exceeded guidance: net production averaged 233,000 barrels of oil equivalent per day (boepd), excluding Libya; Bakken production was 111,000 boepd

Exploration & Production capital and exploratory expenditures were $384 million in the quarter, compared to $393 million in the prior-year quarter

Cash and cash equivalents were $3.7 billion at March 31, 2018

NEW YORK, April 25, 2018 — Hess Corporation (NYSE: HES) today reported a net loss of $106 million, or $0.38 per common share, in the first quarter of 2018, compared to a net loss of $324 million, or $1.07 per common share, in the first quarter of 2017.  On an adjusted basis, the Corporation reported an after-tax net loss of $72 million, or $0.27 per common share, in the first quarter of 2018.  The improved after-tax adjusted results reflect higher realized crude oil selling prices, lower operating costs and depreciation, depletion and amortization expense, partially offset by

1

 


lower production volumes, primarily due to asset sales.

Our focus for 2018 is on execution and we believe we are off to a very strong start to the year,” Chief Executive Officer John Hess said. “In the first quarter, we increased cash returns to shareholders, reduced debt, exceeded our production guidance, continued to lower our costs and announced two significant oil discoveries offshore Guyana – Ranger and Pacora.

After-tax income (loss) by major operating activity was as follows:

  

 

Three Months Ended

 

 

 

March 31,

 

 

 

(unaudited)

 

 

 

2018

 

 

2017

 

 

 

(In millions, except per share amounts)

 

Net Income (Loss) Attributable to Hess Corporation

 

 

 

 

 

 

 

 

Exploration and Production

 

$

(25

)

 

$

(233

)

Midstream

 

 

28

 

 

 

18

 

Corporate, Interest and Other

 

 

(109

)

 

 

(109

)

Net income (loss) attributable to Hess Corporation

 

$

(106

)

 

$

(324

)

 

 

 

 

 

 

 

 

 

Net income (loss) per common share (diluted) (a)

 

$

(0.38

)

 

$

(1.07

)

 

 

 

 

 

 

 

 

 

Adjusted Net Income (Loss) Attributable to Hess Corporation (b)

 

Exploration and Production

 

$

12

 

 

$

(233

)

Midstream

 

 

28

 

 

 

18

 

Corporate, Interest and Other

 

 

(112

)

 

 

(109

)

Adjusted net income (loss) attributable to Hess Corporation

 

$

(72

)

 

$

(324

)

 

 

 

 

 

 

 

 

 

Adjusted net income (loss) per common share (diluted) (a)

 

$

(0.27

)

 

$

(1.07

)

 

 

 

 

 

 

 

 

 

Weighted average number of shares (diluted)

 

 

309.5

 

 

 

313.9

 

 

(a)

Calculated as net income (loss) attributable to Hess Corporation less preferred stock dividends, divided by weighted average number of diluted shares.

 

(b)

Adjusted net income (loss) attributable to Hess Corporation excludes items affecting comparability of earnings between periods summarized on page 6.  A reconciliation of net income (loss) attributable to Hess Corporation to adjusted net income (loss) attributable to Hess Corporation is provided on page 7.

 


2

 


Exploration and Production:

Exploration and Production (E&P) net loss in the first quarter of 2018 was $25 million, compared to a net loss of $233 million in the first quarter of 2017.  On an adjusted basis, first quarter 2018 net income was $12 million.  The Corporation’s average realized crude oil selling price, including the effect of hedging, was $59.32 per barrel in the first quarter of 2018, up from $48.58 per barrel in the year-ago quarter.  The average realized natural gas liquids selling price in the first quarter of 2018 was $21.11 per barrel, versus $18.71 per barrel in the prior-year quarter, while the average realized natural gas selling price was $3.86 per mcf, compared to $3.20 per mcf in the first quarter of 2017.

Net production, excluding Libya, was 233,000 boepd in the first quarter of 2018, compared to 307,000 boepd in the prior-year quarter.  Lower volumes were primarily due to prior-year asset sales, the previously announced unplanned downtime at the third-party operated Enchilada platform in the Gulf of Mexico, and natural decline.  These lower volumes were partially offset by higher production in the Bakken and from North Malay Basin.  First quarter 2017 net production, excluding asset sales and Libya, was 241,000 boepd.  Libya net production was 22,000 boepd in the first quarter of 2018, compared to 4,000 boepd in the prior-year quarter.

Excluding items affecting comparability of earnings between periods, cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $13.46 per barrel of oil equivalent (boe) in the first quarter, down 5 percent from $14.16 per boe in the prior-year quarter due to increased low-cost production from North Malay Basin and sales of higher cost assets.  First quarter 2018 per unit cash costs were also negatively impacted by deferred production and maintenance costs incurred related to downtime at the Enchilada platform.  E&P income tax expense increased in the first quarter of 2018, compared to the prior-year quarter, primarily due to higher Libya production.

Operational Highlights for the First Quarter of 2018:

Bakken (Onshore U.S.):  Net production from the Bakken increased 12 percent to 111,000 boepd from 99,000 boepd in the year-ago quarter due to increased drilling activity and improved well performance.  The Corporation operated an average of four rigs in the first quarter, drilling 23 wells and bringing 13 new wells online.  The Corporation plans to add a fifth rig in the third quarter and a sixth rig in the fourth quarter of this year.

Gulf of Mexico (Offshore U.S.):  Net production from the Gulf of Mexico was 41,000 boepd, compared to 66,000 boepd in the prior-year quarter primarily due to the ongoing shutdown at the

3

 


third-party operated Enchilada platform from the fourth quarter of 2017.  Production recommenced at the Baldpate, Penn State and Llano Fields during the first quarter of 2018, while production is expected to restart at the Conger Field by the end of the third quarter of 2018.  At the Stampede development (Hess operated - 25 percent), first production commenced in January 2018 and is expected to ramp up over the next 18 months as we complete additional wells.

North Malay Basin (Offshore Malaysia):  Net production from North Malay Basin (Hess - 50 percent) was 22,000 boepd, compared to 2,000 boepd in the prior-year quarter, which commenced production from its full field development in July 2017.  In the first quarter, production was impacted by approximately 4,000 boepd due to downtime for planned maintenance of condensate export equipment.

Guyana (Offshore):  At the Stabroek Block (Hess - 30 percent), operated by Esso Exploration and Production Guyana Limited, the Pacora-1 exploration well encountered approximately 65 feet of high-quality, oil-bearing sandstone reservoir and is the seventh significant oil discovery on the Block.  The well is located approximately four miles west of the Payara-1 well and the operator plans to integrate the discovery into a third phase of development, with first production from this phase planned for late 2023 or early 2024.  The Operator also completed drilling at the Liza-5 well with the Stena Carron drillship, and is conducting a series of production tests.  In April, drilling commenced at the Sorubim-1 well with the Noble Bob Douglas drillship.  

Development activities for Liza Phase 1, which include a floating, production, storage, and offloading vessel (FPSO) with a gross capacity of 120,000 bopd, are on schedule and first production is expected by 2020.  Planning continues for a second phase of development, that is expected to include a larger FPSO with a gross capacity of approximately 220,000 bopd, with first production planned by mid-2022.

Ghana (Offshore):  In February, we entered into an agreement to sell our interests in Ghana for total consideration of $100 million, consisting of a $25 million payment upon closing and a further payment of $75 million payable upon approval of the Plan of Development for the Deepwater Tano Cape Three Points block, which is expected by year-end 2018.  The transaction is subject to government approval and customary closing conditions.


4

 


Midstream:

The Midstream segment, comprised primarily of Hess Infrastructure Partners LP, our 50/50 midstream joint venture, had net income of $28 million in the first quarter of 2018, compared to net income of $18 million in the prior-year quarter, reflecting higher throughput volumes and lower operating costs.

Corporate, Interest and Other:

Net results were an after-tax expense of $109 million in the first quarters of 2018 and 2017.  On an adjusted basis, first quarter 2018 was an after-tax expense of $112 million.  Capitalized interest in the first quarter of 2018 was $13 million less than the year-ago quarter primarily due to first production commencing at the Stampede Field in January 2018.

Impact of Changes in Accounting Standards – Presentation of Net Periodic Pension Cost:

Effective January 1, 2018, the Corporation adopted Accounting Standards Update 2017-07, Compensation – Retirement Benefits (ASU 2017-07), which requires disaggregated disclosure of service cost from other components of net periodic benefit cost, including interest cost, expected return on plan assets, and amortization of unrecognized actuarial gains or losses.  Prior to adoption, all net periodic pension cost was included in expenses.  Following the adoption of ASU 2017-07, other components of net periodic pension cost are reported in other, net within non-operating income, with prior periods recast to conform to the current year presentation.  For the three months ended March 31, 2018 and 2017, other components of net periodic pension cost reported in non-operating income amounted to income of $16 million and an expense of $2 million, respectively.

Capital and Exploratory Expenditures:

E&P capital and exploratory expenditures were $384 million in the first quarter of 2018, compared to $393 million in the prior-year quarter.  The 2018 activity primarily reflects increased drilling in the Bakken and ongoing Liza Phase 1 development, partially offset by lower expenditures in the Gulf of Mexico, Malaysia and for exploration activities.  Midstream capital expenditures were $37 million in the first quarter of 2018, up from $28 million in the year-ago quarter.  Midstream investments in its 50/50 joint venture with Targa Resources were $24 million in the first quarter of 2018.


5

 


Liquidity:

Net cash provided by operating activities was $210 million in the first quarter of 2018, compared to $349 million in the first quarter of 2017.  Net cash provided by operating activities before changes in working capital was $397 million in the first quarter of 2018, including a reduction of $37 million related to severance charges, compared with $443 million in the year-ago quarter.  Changes in working capital during the first quarter of 2018 was a net outflow of $187 million due to a reduction in accounts payable and accrued liabilities, premiums paid on commodity contracts, and the timing of interest payments.

The Corporation purchased approximately eight million shares of common stock for $380 million in the first quarter of 2018 completing the initial $500 million program.  In April, we entered into a $500 million accelerated share repurchase agreement.  The Corporation also paid $415 million to retire debt in the first quarter, including the redemption of $350 million principal amount of 8.125% notes due in 2019, and the purchase of other notes.

Excluding the Midstream segment, the Corporation had cash and cash equivalents of $3,351 million and total debt of $5,587 million at March 31, 2018.  The Corporation’s debt to capitalization ratio was 35.5 percent at March 31, 2018 and 36.1 percent at December 31, 2017.

The Midstream segment had cash and cash equivalents of $375 million and total debt of $981 million at March 31, 2018.  

Items Affecting Comparability of Earnings Between Periods:

The following table reflects the total after-tax income (expense) of items affecting comparability of earnings between periods:

 

Three Months Ended

 

 

 

March 31,

 

 

 

(unaudited)

 

 

 

2018

 

 

2017

 

 

 

(In millions)

 

Exploration and Production

 

$

(37

)

 

$

 

Midstream

 

 

 

 

 

 

Corporate, Interest and Other

 

 

3

 

 

 

 

Total items affecting comparability of earnings between periods

 

$

(34

)

 

$

 

Exploration and Production:  First quarter 2018 results included a net after-tax severance charge of $37 million related to the previously disclosed cost reduction program.  The pre-tax

6

 


amounts are reported in operating costs and expenses ($19 million), general and administrative costs ($15 million), and exploration expense ($3 million).

Corporate, Interest and Other: First quarter 2018 results included an after-tax charge of $27 million related to the premium paid for the retirement of debt.  In addition, as required under accounting standards’ intraperiod allocation rules, we recognized a noncash income tax benefit of $30 million, which offsets a noncash income tax charge recorded in other comprehensive income resulting from the $125 million reduction in the Corporation’s pension liabilities.  

The following table reconciles reported net income (loss) attributable to Hess Corporation and adjusted net income (loss):

  

 

Three Months Ended

 

 

 

March 31,

 

 

 

(unaudited)

 

 

 

2018

 

 

2017

 

 

 

(In millions)

 

Net income (loss) attributable to Hess Corporation

 

$

(106

)

 

$

(324

)

Less: Total items affecting comparability of earnings between periods

 

 

(34

)

 

 

 

Adjusted net income (loss) attributable to Hess Corporation

 

$

(72

)

 

$

(324

)

The following table reconciles reported net cash provided by (used in) operating activities from cash provided by operating activities before changes in operating assets and liabilities:

 

Three Months Ended

 

 

 

March 31,

 

 

 

(unaudited)

 

 

 

2018

 

 

2017

 

 

 

(In millions)

 

Cash provided by operating activities before changes in operating assets and liabilities

 

$

397

 

 

$

443

 

Changes in operating assets and liabilities

 

 

(187

)

 

 

(94

)

Net cash provided by (used in) operating activities

 

$

210

 

 

$

349

 

 

Hess Corporation will review first quarter financial and operating results and other matters on a webcast at 10 a.m. today (EDT).  For details about the event, refer to the Investor Relations section of our website at www.hess.com.

Hess Corporation is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas.  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.  Estimates and projections contained in this release are based on the Corporation’s current understanding and assessment based

7

 


on reasonable assumptions.  Actual results may differ materially from these estimates and projections due to certain risk factors discussed in the Corporation’s periodic filings with the Securities and Exchange Commission and other factors.

Non-GAAP financial measure

The Corporation has used non-GAAP financial measures in this earnings release.  “Adjusted net income (loss)” presented in this release is defined as reported net income (loss) attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods.  “Cash provided by operating activities before changes in operating assets and liabilities” presented in this release is defined as Cash provided by operating activities excluding changes in operating assets and liabilities.  Management uses adjusted net income (loss) to evaluate the Corporation’s operating performance and believes that investors’ understanding of our performance is enhanced by disclosing this measure, which excludes certain items that management believes are not directly related to ongoing operations and are not indicative of future business trends and operations.  Management believes that cash provided by operating activities before changes in operating assets and liabilities demonstrates the Corporation’s ability to internally fund capital expenditures, pay dividends and service debt.  These measures are not, and should not be viewed as, a substitute for U.S. GAAP net income (loss) or net cash provided by (used in) operating activities.  A reconciliation of reported net income (loss) attributable to Hess Corporation (U.S. GAAP) to adjusted net income (loss), and a reconciliation of net cash provided by (used in) operating activities (U.S. GAAP) to cash provided by operating activities before changes in operating assets and liabilities are provided in the release.

 

For Hess Corporation

Investor Contact:

Jay Wilson

(212) 536-8940

Media Contacts:

Lorrie Hecker

(212) 536-8250

 

Jamie Tully

Sard Verbinnen & Co

(212) 687-8080


8

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

 

 

 

 

First

 

 

First

 

 

Fourth

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2018

 

 

2017

 

 

2017

 

Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

1,346

 

 

$

1,258

 

 

$

1,663

 

Gains (losses) on asset sales, net

 

 

7

 

 

 

 

 

 

(362

)

Other, net

 

 

37

 

 

 

(4

)

 

 

(11

)

Total revenues and non-operating income

 

 

1,390

 

 

 

1,254

 

 

 

1,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas

 

 

358

 

 

 

200

 

 

 

476

 

Operating costs and expenses

 

 

288

 

 

 

358

 

 

 

358

 

Production and severance taxes

 

 

39

 

 

 

31

 

 

 

31

 

Exploration expenses, including dry holes and lease impairment

 

 

40

 

 

 

58

 

 

 

356

 

General and administrative expenses

 

 

110

 

 

 

95

 

 

 

120

 

Interest expense (a)

 

 

103

 

 

 

84

 

 

 

80

 

Loss on debt extinguishment

 

 

27

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

417

 

 

 

737

 

 

 

646

 

Impairment

 

 

 

 

 

 

 

 

1,700

 

Total costs and expenses

 

 

1,382

 

 

 

1,563

 

 

 

3,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

8

 

 

 

(309

)

 

 

(2,477

)

Provision (benefit) for income taxes

 

 

73

 

 

 

(13

)

 

 

158

 

Net income (loss)

 

 

(65

)

 

 

(296

)

 

 

(2,635

)

Less: Net income (loss) attributable to noncontrolling interests

 

 

41

 

 

 

28

 

 

 

42

 

Net income (loss) attributable to Hess Corporation

 

 

(106

)

 

 

(324

)

 

 

(2,677

)

Less: Preferred stock dividends

 

 

11

 

 

 

12

 

 

 

12

 

Net income (loss) attributable to Hess Corporation common stockholders

 

$

(117

)

 

$

(336

)

 

$

(2,689

)

 

(a)

Capitalized interest was $4 million in the first quarter of 2018, $17 million in the first quarter of 2017 and $25 million in the fourth quarter of 2017.


9

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

 

 

 

  

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Balance Sheet Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,726

 

 

$

4,847

 

Other current assets

 

 

1,288

 

 

 

1,310

 

Property, plant and equipment – net

 

 

16,181

 

 

 

16,192

 

Other long-term assets

 

 

877

 

 

 

763

 

Total assets

 

$

22,072

 

 

$

23,112

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

196

 

 

$

580

 

Other current liabilities

 

 

1,708

 

 

 

1,855

 

Long-term debt

 

 

6,372

 

 

 

6,397

 

Other long-term liabilities

 

 

1,859

 

 

 

1,926

 

Total equity excluding other comprehensive income (loss)

 

 

11,176

 

 

 

11,737

 

Accumulated other comprehensive income (loss)

 

 

(571

)

 

 

(686

)

Noncontrolling interests

 

 

1,332

 

 

 

1,303

 

Total liabilities and equity

 

$

22,072

 

 

$

23,112

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Total Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hess

 

$

5,587

 

 

$

5,997

 

Midstream (a)

 

 

981

 

 

 

980

 

Hess Consolidated

 

$

6,568

 

 

$

6,977

 

(a)  Midstream debt is non-recourse to Hess Corporation.

 

  

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Debt to Capitalization Ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hess Consolidated

 

 

35.5

%

 

 

36.1

%

 


10

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

 

 

 

 

First

 

 

First

 

 

Fourth

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2018

 

 

2017

 

 

2017

 

Cash Flow Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(65

)

 

$

(296

)

 

$

(2,635

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

 

 

 

 

(Gains) losses on asset sales, net

 

 

(7

)

 

 

 

 

 

362

 

Depreciation, depletion and amortization

 

 

417

 

 

 

737

 

 

 

646

 

Impairment

 

 

 

 

 

 

 

 

1,700

 

Exploratory dry hole costs

 

 

 

 

 

 

 

 

268

 

Exploration lease and other impairment

 

 

10

 

 

 

7

 

 

 

22

 

Stock compensation expense

 

 

13

 

 

 

22

 

 

 

21

 

Non-cash (gains) losses on commodity derivatives, net

 

 

38

 

 

 

 

 

 

54

 

Provision (benefit) for deferred income taxes and other tax accruals

 

 

(36

)

 

 

(27

)

 

 

54

 

Loss on debt extinguishment

 

 

27

 

 

 

 

 

 

 

Cash provided by operating activities before changes in operating assets and liabilities

 

 

397

 

 

 

443

 

 

 

492

 

Changes in operating assets and liabilities

 

 

(187

)

 

 

(94

)

 

 

(149

)

Net cash provided by (used in) operating activities

 

 

210

 

 

 

349

 

 

 

343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment - E&P

 

 

(363

)

 

 

(340

)

 

 

(513

)

Additions to property, plant and equipment - Midstream

 

 

(37

)

 

 

(50

)

 

 

(41

)

Payments for Midstream equity investments

 

 

(24

)

 

 

 

 

 

 

Proceeds from asset sales, net of cash sold

 

 

6

 

 

 

100

 

 

 

2,513

 

Other, net

 

 

(4

)

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

 

(422

)

 

 

(290

)

 

 

1,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings (repayments) of debt with maturities of 90 days or less

 

 

 

 

 

5

 

 

 

(168

)

Debt with maturities of greater than 90 days

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings

 

 

 

 

 

 

 

 

800

 

Repayments

 

 

(434

)

 

 

(26

)

 

 

(352

)

Common stock acquired and retired

 

 

(371

)

 

 

 

 

 

(110

)

Cash dividends paid

 

 

(89

)

 

 

(92

)

 

 

(90

)

Noncontrolling interests, net

 

 

(12

)

 

 

 

 

 

(35

)

Other, net

 

 

(3

)

 

 

8

 

 

 

(26

)

Net cash provided by (used in) financing activities

 

 

(909

)

 

 

(105

)

 

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

(1,121

)

 

 

(46

)

 

 

2,321

 

Cash and Cash Equivalents at Beginning of Period

 

 

4,847

 

 

 

2,732

 

 

 

2,526

 

Cash and Cash Equivalents at End of Period

 

$

3,726

 

 

$

2,686

 

 

$

4,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to Property, Plant and Equipment included within Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures incurred

 

$

(391

)

 

$

(370

)

 

$

(547

)

Increase (decrease) in related liabilities

 

 

(9

)

 

 

(20

)

 

 

(7

)

Additions to property, plant and equipment

 

$

(400

)

 

$

(390

)

 

$

(554

)


11

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

 

 

 

 

 

First

 

 

First

 

 

Fourth

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2018

 

 

2017

 

 

2017

 

Capital and Exploratory Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E&P Capital and exploratory expenditures

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

$

166

 

 

$

90

 

 

$

200

 

Other Onshore

 

 

10

 

 

 

8

 

 

 

5

 

Total Onshore

 

 

176

 

 

 

98

 

 

 

205

 

Offshore

 

 

83

 

 

 

158

 

 

 

162

 

Total United States

 

 

259

 

 

 

256

 

 

 

367

 

South America

 

 

75

 

 

 

45

 

 

 

81

 

Europe

 

 

1

 

 

 

15

 

 

 

51

 

Asia and other

 

 

49

 

 

 

77

 

 

 

69

 

E&P Capital and exploratory expenditures

 

$

384

 

 

$

393

 

 

$

568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exploration expenses charged to income included above

 

$

30

 

 

$

51

 

 

$

67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Midstream Capital expenditures

 

$

37

 

 

$

28

 

 

$

46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

12

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 

 

 

 

 

First Quarter 2018

 

Income Statement

 

United States

 

 

International

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

994

 

 

$

352

 

 

$

1,346

 

Gains (losses) on asset sales, net

 

 

 

 

 

2

 

 

 

2

 

Other, net

 

 

8

 

 

 

7

 

 

 

15

 

Total revenues and non-operating income

 

 

1,002

 

 

 

361

 

 

 

1,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

347

 

 

 

27

 

 

 

374

 

Operating costs and expenses

 

 

190

 

 

 

57

 

 

 

247

 

Production and severance taxes

 

 

38

 

 

 

1

 

 

 

39

 

Midstream tariffs

 

 

151

 

 

 

 

 

 

151

 

Exploration expenses, including dry holes and lease impairment

 

 

25

 

 

 

15

 

 

 

40

 

General and administrative expenses

 

 

51

 

 

 

6

 

 

 

57

 

Depreciation, depletion and amortization

 

 

286

 

 

 

99

 

 

 

385

 

Total costs and expenses

 

 

1,088

 

 

 

205

 

 

 

1,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of operations before income taxes

 

 

(86

)

 

 

156

 

 

 

70

 

Provision (benefit) for income taxes

 

 

(9

)

 

 

104

 

 

 

95

 

Net income (loss) attributable to Hess Corporation

 

$

(77

)

(b)

$

52

 

 

$

(25

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter 2017

 

Income Statement

 

United States

 

 

International

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

903

 

 

$

353

 

 

$

1,256

 

Other, net

 

 

(10

)

 

 

5

 

 

 

(5

)

Total revenues and non-operating income

 

 

893

 

 

 

358

 

 

 

1,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

276

 

 

 

(53

)

 

 

223

 

Operating costs and expenses

 

 

173

 

 

 

135

 

 

 

308

 

Production and severance taxes

 

 

31

 

 

 

 

 

 

31

 

Midstream tariffs

 

 

124

 

 

 

 

 

 

124

 

Exploration expenses, including dry holes and lease impairment

 

 

22

 

 

 

36

 

 

 

58

 

General and administrative expenses

 

 

47

 

 

 

10

 

 

 

57

 

Depreciation, depletion and amortization

 

 

445

 

 

 

258

 

 

 

703

 

Total costs and expenses

 

 

1,118

 

 

 

386

 

 

 

1,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of operations before income taxes

 

 

(225

)

 

 

(28

)

 

 

(253

)

Provision (benefit) for income taxes

 

 

(14

)

 

 

(6

)

 

 

(20

)

Net income (loss) attributable to Hess Corporation

 

$

(211

)

 

$

(22

)

(c)

$

(233

)

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax results from crude oil hedging activities included $30 million of option premium amortization for contracts expiring in the quarter, and unrealized losses of $8 million.

(c)

After-tax results from crude oil hedging activities included $1 million of option premium amortization for contracts expiring in the quarter, and unrealized gains of $1 million.


13

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 

 

 

 

 

 

Fourth Quarter 2017

 

Income Statement

 

United States

 

 

International

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

1,064

 

 

$

599

 

 

$

1,663

 

Gains (losses) on asset sales, net

 

 

(5

)

 

 

(364

)

 

 

(369

)

Other, net

 

 

(7

)

 

 

(11

)

 

 

(18

)

Total revenues and non-operating income

 

 

1,052

 

 

 

224

 

 

 

1,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

477

 

 

 

12

 

 

 

489

 

Operating costs and expenses

 

 

158

 

 

 

155

 

 

 

313

 

Production and severance taxes

 

 

30

 

 

 

1

 

 

 

31

 

Midstream tariffs

 

 

144

 

 

 

 

 

 

144

 

Exploration expenses, including dry holes and lease impairment

 

 

39

 

 

 

317

 

 

 

356

 

General and administrative expenses

 

 

50

 

 

 

8

 

 

 

58

 

Depreciation, depletion and amortization

 

 

453

 

 

 

163

 

 

 

616

 

Impairment

 

 

1,700

 

 

 

 

 

 

1,700

 

Total costs and expenses

 

 

3,051

 

 

 

656

 

 

 

3,707

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of operations before income taxes

 

 

(1,999

)

 

 

(432

)

 

 

(2,431

)

Provision (benefit) for income taxes

 

 

(10

)

 

 

171

 

 

 

161

 

Net income (loss) attributable to Hess Corporation

 

$

(1,989

)

(b)

$

(603

)

(c)

$

(2,592

)

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax results from crude oil hedging activities included $25 million of option premium amortization for contracts expiring in the quarter, and unrealized losses of $27 million.

(c)

After-tax results from crude oil hedging activities included $5 million of option premium amortization for contracts expiring in the quarter, and unrealized gains of $3 million.

 

14

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 

 

 

 

 

First

 

 

First

 

 

Fourth

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2018

 

 

2017

 

 

2017

 

Net Production Per Day (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

72

 

 

 

67

 

 

 

69

 

Other Onshore (a)

 

 

1

 

 

 

8

 

 

 

2

 

Total Onshore

 

 

73

 

 

 

75

 

 

 

71

 

Offshore

 

 

31

 

 

 

47

 

 

 

30

 

Total United States

 

 

104

 

 

 

122

 

 

 

101

 

Europe (b)

 

 

6

 

 

 

31

 

 

 

27

 

Africa (c) (d)

 

 

20

 

 

 

35

 

 

 

35

 

Asia

 

 

4

 

 

 

2

 

 

 

3

 

Total

 

 

134

 

 

 

190

 

 

 

166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas liquids - barrels

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

28

 

 

 

23

 

 

 

30

 

Other Onshore (a)

 

 

5

 

 

 

10

 

 

 

6

 

Total Onshore

 

 

33

 

 

 

33

 

 

 

36

 

Offshore

 

 

4

 

 

 

6

 

 

 

4

 

Total United States

 

 

37

 

 

 

39

 

 

 

40

 

Europe (b)

 

 

 

 

 

1

 

 

 

1

 

Total

 

 

37

 

 

 

40

 

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas - mcf

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

66

 

 

 

53

 

 

 

66

 

Other Onshore

 

 

65

 

 

 

106

 

 

 

77

 

Total Onshore

 

 

131

 

 

 

159

 

 

 

143

 

Offshore

 

 

37

 

 

 

75

 

 

 

34

 

Total United States

 

 

168

 

 

 

234

 

 

 

177

 

Europe (b)

 

 

10

 

 

 

38

 

 

 

30

 

Asia and other (d)

 

 

326

 

 

 

212

 

 

 

349

 

Total

 

 

504

 

 

 

484

 

 

 

556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Barrels of oil equivalent

 

 

255

 

 

 

311

 

 

 

300

 

 

(a)

The Corporation sold its Permian assets in August 2017.  Production was 8,000 boepd in the first quarter of 2017.

 

(b)

The Corporation sold its Norway assets in December 2017.  Production was 27,000 boepd in the first quarter of 2017 and 24,000 boepd in the fourth quarter of 2017.

 

(c)

The Corporation sold its Equatorial Guinea assets in November 2017.  Production was 31,000 boepd in the first quarter of 2017 and 17,000 boepd in the fourth quarter of 2017.

 

(d)

Production from Libya was 22,000 boepd in the first quarter of 2018, 4,000 boepd in the first quarter of 2017 and 18,000 boepd in the fourth quarter of 2017.

  

 


15

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 

 

 

 

  

 

First

 

 

First

 

 

Fourth

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2018

 

 

2017

 

 

2017

 

Sales Volumes Per Day (in thousands) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

131

 

 

 

175

 

 

 

173

 

Natural gas liquids - barrels

 

 

37

 

 

 

40

 

 

 

41

 

Natural gas - mcf

 

 

504

 

 

 

484

 

 

 

556

 

Barrels of oil equivalent

 

 

252

 

 

 

296

 

 

 

307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales Volumes (in thousands) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

11,811

 

 

 

15,744

 

 

 

15,969

 

Natural gas liquids - barrels

 

 

3,308

 

 

 

3,623

 

 

 

3,760

 

Natural gas - mcf

 

 

45,392

 

 

 

43,544

 

 

 

51,346

 

Barrels of oil equivalent

 

 

22,684

 

 

 

26,624

 

 

 

28,287

 

(a) Sales volumes from purchased crude oil, natural gas liquids, and natural gas are not included in the sales volumes reported.

16

 


HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 

 

 

 

 

 

First

 

 

First

 

 

Fourth

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2018

 

 

2017

 

 

2017

 

Average Selling Prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - per barrel (including hedging)

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

56.40

 

 

$

46.47

 

 

$

51.66

 

Offshore

 

 

59.14

 

 

 

47.18

 

 

 

52.73

 

Total United States

 

 

57.23

 

 

 

46.74

 

 

 

51.98

 

Europe

 

 

67.37

 

 

 

54.04

 

 

 

62.10

 

Africa

 

 

66.27

 

 

 

51.25

 

 

 

58.98

 

Asia

 

 

67.69

 

 

 

54.70

 

 

 

61.26

 

Worldwide

 

 

59.32

 

 

 

48.58

 

 

 

55.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - per barrel (excluding hedging)

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

59.61

 

 

$

46.47

 

 

$

54.06

 

Offshore

 

 

62.31

 

 

 

47.18

 

 

 

56.07

 

Total United States

 

 

60.43

 

 

 

46.74

 

 

 

54.66

 

Europe

 

 

67.37

 

 

 

54.18

 

 

 

63.13

 

Africa

 

 

66.27

 

 

 

51.37

 

 

 

59.58

 

Asia

 

 

67.69

 

 

 

54.70

 

 

 

61.26

 

Worldwide

 

 

61.82

 

 

 

48.61

 

 

 

57.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas liquids - per barrel

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

20.78

 

 

$

18.07

 

 

$

21.98

 

Offshore

 

 

24.28

 

 

 

20.55

 

 

 

26.32

 

Total United States

 

 

21.11

 

 

 

18.43

 

 

 

22.42

 

Europe

 

 

 

 

 

28.06

 

 

 

36.98

 

Worldwide

 

 

21.11

 

 

 

18.71

 

 

 

22.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas - per mcf

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

2.47

 

 

$

2.32

 

 

$

1.70

 

Offshore

 

 

2.08

 

 

 

2.40

 

 

 

1.67

 

Total United States

 

 

2.38

 

 

 

2.35

 

 

 

1.69

 

Europe

 

 

3.44

 

 

 

3.99

 

 

 

4.99

 

Asia and other

 

 

4.63

 

 

 

4.01

 

 

 

4.59

 

Worldwide

 

 

3.86

 

 

 

3.20

 

 

 

3.69

 

 

 

The following is a summary of the Corporation’s outstanding 2018 commodity hedging program as of March 31, 2018:

Hedge duration

 

Barrels of oil per day

 

 

Average monthly WTI floor price

April 1 to December 31

 

 

115,000

 

 

$50

 

17