Hess activity increase in the Bakken boosts Q4 production

By Patrick C. Miller | February 06, 2018

In the fourth quarter of 2017, Hess Corp. reported a net loss of nearly $2.7 billion—$8.57 per common share—compared to a net loss of $4.9 billion from the same quarter a year ago.

In the Bakken shale play, increased drilling activity during 2017 resulted in a net production increase of 16 percent to 110,000 barrels of oil equivalent per day (boepd), compared to 95,000 boepd a year ago. Hess operated an average of four rigs in the fourth quarter, drilling 27 wells and bringing 34 new wells online.

Company CEO John Hess said, “We enter 2018 well positioned to deliver a decade plus of capital efficient growth with increasing cash generation and returns to shareholders.”

He added that during 2017, Hess successfully completed an asset sales program, replaced 351 percent of production at an F&D cost of just over $5 per barrel, continued to have exploration success on the Stabroek Block in Guyana and sanctioned the Liza Phase 1 development with plans for the next two phases.”

E&P capital and exploratory expenditures were $568 million during the quarter, up from $411 million from the same quarter the previous year. This includes increased drilling activity in the Bakken. Midstream capital expenditures were $46 million for the quarter, down from $89 million in the fourth quarter of 2017.

Hess’ midstream segment—comprised primarily of Hess Infrastructure Partners LP—had net income of $20 million in the fourth quarter of 2017, compared to net income of $2 million a year ago. Excluding items affecting comparability of earnings between periods, fourth quarter 2017 net income attributable to Hess Corp. was $20 million, compared to $23 million in the fourth quarter of 2017.

Net cash provided by operating activities was $343 million in the fourth quarter of 2017, compared to $326 million in the fourth quarter of 2016. Net cash provided by operating activities before changes in working capital was $492 million in the fourth quarter of 2017, up from $128 million in the year-ago quarter. Changes in working capital during the fourth quarter of 2017 was a net outflow of $149 million due to higher accounts receivable from increased crude oil prices, pension contributions and abandonment expenditures.

Hess said it has begun implementation of a cost-reduction program for 2018 which involves restructuring and other measures expected to save $150 million annually. In addition to position reductions as a result of asset sales, Hess eliminated about 400 employee and contractor positions in January and expects to record employee severance of $40 to $50 million in the first quarter this year.

Fourth quarter 2017 results reflect net after-tax charges totaling $2.37 billion, including a non-cash accounting charge of $1.7 billion to reduce the carrying value of Hess’ interests in the Stampede and Tubular Bells Fields in the Gulf of Mexico. This is the result of a lower long-term crude oil price outlook.

The lower fourth quarter 2017 adjusted results primarily reflect the recognition of an entire year of shortfall fees in the fourth quarter of 2016, as a result of changes in commercial agreements at the end of 2016, versus one quarter of shortfall fees recognized in the fourth quarter of 2017, and higher income allocated to noncontrolling interests following the Hess Midstream Partners LP initial public offering in April 2017.