27.07.2016, 18:55
Hess Corporation today reported a net loss of $392 million, or $1.29 per common share
Hess Corporation (NYSE: HES) today reported a net loss of $392 million, or $1.29 per common share, in the second quarter of 2016 compared with a net loss of $567 million, or $1.99 per common share, in the second quarter of 2015. On an adjusted basis, the Corporation reported a net loss of $335 million, or $1.10 per common share, in the second quarter of 1 2016 compared with an adjusted net loss of $147 million, or $0.52 per common share, in the prioryear quarter. Lower production and realized selling prices reduced second quarter 2016 after-tax results by approximately $365 million compared to the second quarter of 2015. Operating costs, general and administrative expenses, and depreciation, depletion and amortization expense decreased compared with the prior-year quarter due to lower production and ongoing cost reduction efforts.
“We remain confident in our ability to manage through the current environment and deliver strong production and cash flow growth as oil prices recover,” Chief Executive Officer John Hess said. “During the quarter, we continued to pursue further cost reductions and now project our full-year 2016 E&P capital and exploratory expenditures to be about 48 percent below 2015 levels. “Our resilient portfolio provides an attractive mix of growth options including an unparalleled position in the Bakken, two significant offshore developments that will come online in 2017 and 2018, and the recent world-class oil discovery in Guyana.”
Exploration and Production:
The Exploration and Production net loss in the second quarter of 2016 was $328 million compared to a net loss of $502 million in the prior-year quarter. On an adjusted basis, the second quarter 2016 adjusted net loss was $271 million compared to $96 million in the prior-year quarter. The Corporation’s average realized crude oil selling price was $41.95 per barrel in the second quarter of 2016, down 25 percent from $55.83 per barrel in the year-ago quarter, including the effect of hedging. The average realized natural gas liquids selling price in the second quarter of 2016 was $9.03 per barrel compared to $11.06 per barrel in the prior-year quarter while the average realized natural gas selling price was $3.58 per mcf, down from $4.49 per mcf in the second quarter of 2015.
Net production in the second quarter of 2016 was 313,000 boepd compared to pro forma net production, which excludes assets sold, of 386,000 boepd in the second quarter of 2015. The decrease in production volumes resulted from unplanned downtime due to subsurface safety valve failures at the Tubular Bells Field and a mechanical issue at one well in the Conger Field, both in the Gulf of Mexico, and planned facility downtime at several offshore fields including the Tubular Bells Field and the Valhall Field in Norway. In addition, volumes decreased in the Bakken shale play and Equatorial Guinea due to lower investment levels, as well as the Malaysia/Thailand Joint Development Area primarily due to lower entitlement, which were partially offset by production growth from the Utica shale play. For the full year 2016, net production is projected to be 315,000 boepd to 325,000 boepd. The decline from our previous guidance of 330,000 boepd to 350,000 boepd primarily reflects unplanned downtime at two Gulf of Mexico fields. At the Tubular Bells Field two wells were shut-in for an extended period in the first half of 2016 due to defective subsurface safety valves. The defective valves have been replaced. In July at the Tubular Bells Field, a subsurface safety valve in a third well failed and is expected to be remediated in the fourth quarter. Full year production is also impacted by a mechanical issue at a well at the Conger Field, which is expected to be remediated in the fourth quarter. The full year impact of these temporary mechanical issues is expected to be approximately 20,000 boepd in 2016.
Operational Highlights for the Second Quarter of 2016:
Bakken (Onshore U.S.): Net production from the Bakken was 106,000 boepd compared to 119,000 boepd in the prior-year quarter due to a reduced drilling program. The Corporation operated an average of three rigs in the quarter and brought 26 gross operated wells on production. Drilling and completion costs averaged $4.8 million per operated well in the second quarter, down 14 percent from the year-ago quarter, while increasing our standard well design to a 50-stage completion from the previous 35-stage completion design.
Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 54,000 boepd compared to 84,000 boepd in the prior-year quarter primarily as a result of unplanned well downtime and extended planned shut-downs on third-party hosted production facilities at the Tubular Bells Field (Hess 57 percent) and the Conger Field (Hess 38 percent). Drilling and construction of production facilities at the Hess operated Stampede development project (Hess 25 percent) continued on schedule with first production targeted for 2018. Due to the current price environment and the limited 4 time remaining on the leases, the Company chose not to pursue the project at the non-operated Sicily exploration prospect (Hess 25 percent) where hydrocarbons were encountered. Costs of both wells drilled at Sicily were expensed in the quarter.
Valhall (Offshore Norway): Net production from the Valhall Field (Hess 64 percent) averaged 19,000 boepd in the second quarter of 2016, down from 35,000 boepd in the year-ago quarter, as a result of a planned maintenance shutdown.
North Malay Basin (Offshore): Net production from the Early Production System in the North Malay Basin (Hess 50 percent) averaged 6,000 boepd in the second quarter of 2016. Progress continues on Full Field Development with first gas projected in 2017. During the quarter, three wellhead platforms were installed and the Phase 1 development drilling campaign remains on schedule with eight out of eleven planned wells now drilled.
Guyana (Offshore): On the Stabroek Block (Hess 30 percent), the operator, Esso Exploration and Production Guyana Limited, completed drilling of the Liza #2 well. The well reached a total depth of 17,963 feet and encountered more than 190 feet of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The results confirm a world-class oil discovery with estimated gross recoverable resource for the Liza discovery of between 800 million and 1.4 billion barrels of oil equivalent. The operator is currently drilling the Skipjack exploration well, which is a separate prospect 25 miles northwest of the Liza discovery.
“We remain confident in our ability to manage through the current environment and deliver strong production and cash flow growth as oil prices recover,” Chief Executive Officer John Hess said. “During the quarter, we continued to pursue further cost reductions and now project our full-year 2016 E&P capital and exploratory expenditures to be about 48 percent below 2015 levels. “Our resilient portfolio provides an attractive mix of growth options including an unparalleled position in the Bakken, two significant offshore developments that will come online in 2017 and 2018, and the recent world-class oil discovery in Guyana.”
Exploration and Production:
The Exploration and Production net loss in the second quarter of 2016 was $328 million compared to a net loss of $502 million in the prior-year quarter. On an adjusted basis, the second quarter 2016 adjusted net loss was $271 million compared to $96 million in the prior-year quarter. The Corporation’s average realized crude oil selling price was $41.95 per barrel in the second quarter of 2016, down 25 percent from $55.83 per barrel in the year-ago quarter, including the effect of hedging. The average realized natural gas liquids selling price in the second quarter of 2016 was $9.03 per barrel compared to $11.06 per barrel in the prior-year quarter while the average realized natural gas selling price was $3.58 per mcf, down from $4.49 per mcf in the second quarter of 2015.
Net production in the second quarter of 2016 was 313,000 boepd compared to pro forma net production, which excludes assets sold, of 386,000 boepd in the second quarter of 2015. The decrease in production volumes resulted from unplanned downtime due to subsurface safety valve failures at the Tubular Bells Field and a mechanical issue at one well in the Conger Field, both in the Gulf of Mexico, and planned facility downtime at several offshore fields including the Tubular Bells Field and the Valhall Field in Norway. In addition, volumes decreased in the Bakken shale play and Equatorial Guinea due to lower investment levels, as well as the Malaysia/Thailand Joint Development Area primarily due to lower entitlement, which were partially offset by production growth from the Utica shale play. For the full year 2016, net production is projected to be 315,000 boepd to 325,000 boepd. The decline from our previous guidance of 330,000 boepd to 350,000 boepd primarily reflects unplanned downtime at two Gulf of Mexico fields. At the Tubular Bells Field two wells were shut-in for an extended period in the first half of 2016 due to defective subsurface safety valves. The defective valves have been replaced. In July at the Tubular Bells Field, a subsurface safety valve in a third well failed and is expected to be remediated in the fourth quarter. Full year production is also impacted by a mechanical issue at a well at the Conger Field, which is expected to be remediated in the fourth quarter. The full year impact of these temporary mechanical issues is expected to be approximately 20,000 boepd in 2016.
Operational Highlights for the Second Quarter of 2016:
Bakken (Onshore U.S.): Net production from the Bakken was 106,000 boepd compared to 119,000 boepd in the prior-year quarter due to a reduced drilling program. The Corporation operated an average of three rigs in the quarter and brought 26 gross operated wells on production. Drilling and completion costs averaged $4.8 million per operated well in the second quarter, down 14 percent from the year-ago quarter, while increasing our standard well design to a 50-stage completion from the previous 35-stage completion design.
Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 54,000 boepd compared to 84,000 boepd in the prior-year quarter primarily as a result of unplanned well downtime and extended planned shut-downs on third-party hosted production facilities at the Tubular Bells Field (Hess 57 percent) and the Conger Field (Hess 38 percent). Drilling and construction of production facilities at the Hess operated Stampede development project (Hess 25 percent) continued on schedule with first production targeted for 2018. Due to the current price environment and the limited 4 time remaining on the leases, the Company chose not to pursue the project at the non-operated Sicily exploration prospect (Hess 25 percent) where hydrocarbons were encountered. Costs of both wells drilled at Sicily were expensed in the quarter.
Valhall (Offshore Norway): Net production from the Valhall Field (Hess 64 percent) averaged 19,000 boepd in the second quarter of 2016, down from 35,000 boepd in the year-ago quarter, as a result of a planned maintenance shutdown.
North Malay Basin (Offshore): Net production from the Early Production System in the North Malay Basin (Hess 50 percent) averaged 6,000 boepd in the second quarter of 2016. Progress continues on Full Field Development with first gas projected in 2017. During the quarter, three wellhead platforms were installed and the Phase 1 development drilling campaign remains on schedule with eight out of eleven planned wells now drilled.
Guyana (Offshore): On the Stabroek Block (Hess 30 percent), the operator, Esso Exploration and Production Guyana Limited, completed drilling of the Liza #2 well. The well reached a total depth of 17,963 feet and encountered more than 190 feet of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The results confirm a world-class oil discovery with estimated gross recoverable resource for the Liza discovery of between 800 million and 1.4 billion barrels of oil equivalent. The operator is currently drilling the Skipjack exploration well, which is a separate prospect 25 miles northwest of the Liza discovery.
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