EX-99.1 2 hes-ex991_7.htm EX-99.1 hes-ex991_7.htm

Exhibit 99.1

 

HESS CORPORATION

 

 

HESS REPORTS ESTIMATED RESULTS FOR THE FOURTH QUARTER OF 2017

 

Key Highlights:

•

A sixth oil discovery on the Stabroek block, offshore Guyana (Hess 30 percent), was announced at the Ranger-1 exploration well located approximately 60 miles to the northwest of the Liza Field

•

Total recoverable resources estimate from five previous Guyana discoveries increased to more than 3.2 billion barrels of oil equivalent (boe) from previous range of 2.5 billion to 2.8 billion boe

•

The Liza Phase 1 development on the Stabroek Block is on plan with first production expected in March 2020; start up of the Liza Phase 2 development is expected by mid 2022

•

The Corporation successfully completed the sale of its interests in Equatorial Guinea and Norway, bringing year-end 2017 cash and cash equivalents to $4.8 billion, which will fund Phases 1 and 2 of the Liza Field development, an increase from four rigs to six rigs in the Bakken, a $500 million stock repurchase program, and $500 million in debt retirement

•

Year-end proved reserves were 1,154 million boe, reserve replacement was 351 percent for 2017 at a finding and development (F&D) cost of $5.15 per boe

 

Fourth Quarter Financial and Operating Highlights:

•

Primarily as a result of non-cash accounting charges, net loss was $2,677 million, or $8.57 per common share, compared with a net loss of $4,892 million, or $15.65 per common share, in the fourth quarter of 2016.  Net after-tax special charges totaling $2,373 million were taken in the fourth quarter of 2017 that include a $1,700 million non-cash accounting charge to reduce the carrying value of Hess’ interests in the Stampede and Tubular Bells Fields in the Gulf of Mexico as a result of a lower long-term crude oil price outlook

•

Adjusted net loss was $304 million, or $1.01 per common share, compared to an adjusted net loss of $305 million, or $1.01 per common share, in the fourth quarter of last year; adjusted pre-tax loss was $104 million in the fourth quarter of 2017, down from $499 million in the year-ago quarter

•

Net production averaged 282,000 barrels of oil equivalent per day (boepd), excluding Libya, reflecting unplanned downtime at the third-party operated Enchilada platform in the Gulf of Mexico which reduced fourth quarter production by approximately 17,000 boepd; Bakken production was 110,000 boepd

•

E&P capital and exploratory expenditures were $568 million in the quarter and $2,047 million for the year ended December 31, 2017

•

The Corporation returned $210 million to shareholders in the quarter through share repurchases and dividends, including the repurchase of 2.6 million common shares for approximately $120 million

1

 

2018 Guidance:

•

E&P capital and exploratory expenditures are expected to be $2.1 billion

•

Oil and gas production, excluding Libya and reflecting an estimated 15,000 boepd reduction due to the extended Enchilada platform shutdown, is forecast to be in the range of 245,000 to 255,000 boepd, compared to full year pro forma 2017 net production, excluding Libya and assets sold, of 242,000 boepd

NEW YORK, February 5, 2018 — Hess Corporation (NYSE: HES) today reported a net loss of $2,677 million, or $8.57 per common share, in the fourth quarter of 2017, compared with a net loss of $4,892 million, or $15.65 per common share, in the fourth quarter of 2016.  Fourth quarter 2017 results reflect net after-tax charges totaling $2,373 million, including a non-cash accounting charge of $1,700 million to reduce the carrying value of Hess’ interests in the Stampede and Tubular Bells Fields in the Gulf of Mexico, as a result of a lower long-term crude oil price outlook.  

On an adjusted basis, the Corporation reported an after-tax net loss of $304 million, or $1.01 per common share, in the fourth quarter of 2017, compared with an adjusted net loss of $305 million, or $1.01 per common share, in the prior-year quarter.  On an adjusted pre-tax basis, the Corporation reported a loss of $104 million in the fourth quarter of 2017, down from $499 million in the year-ago quarter.  The improved pre-tax adjusted results reflect higher realized crude oil selling prices and lower operating costs and depreciation, depletion and amortization.  Fourth quarter 2017 adjusted results were adversely impacted by lower deferred tax benefits, primarily in the United States, compared to the prior-year quarter following a required change in deferred tax accounting.

“In the past year, our company successfully completed an ambitious asset sales program, replaced 351 percent of production at an attractive F&D cost of just over $5 per barrel, continued our extraordinary exploration success on the Stabroek Block in Guyana and sanctioned the Liza Phase 1 development with plans underway for the next two phases,” Chief Executive Officer 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.”


2

 

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

  

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In millions, except per share amounts)

 

Net Income (Loss) Attributable to Hess Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration and Production

 

$

(2,592

)

 

$

(3,949

)

 

$

(3,653

)

 

$

(4,964

)

Midstream

 

 

20

 

 

 

2

 

 

 

42

 

 

 

42

 

Corporate, Interest and Other

 

 

(105

)

 

 

(945

)

 

 

(463

)

 

 

(1,210

)

Net income (loss) attributable to Hess Corporation

 

$

(2,677

)

 

$

(4,892

)

 

$

(4,074

)

 

$

(6,132

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(8.57

)

 

$

(15.65

)

 

$

(13.12

)

 

$

(19.92

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration and Production

 

$

(219

)

 

$

(256

)

 

$

(1,044

)

 

$

(1,265

)

Midstream

 

 

20

 

 

 

23

 

 

 

76

 

 

 

63

 

Corporate, Interest and Other

 

 

(105

)

 

 

(72

)

 

 

(433

)

 

 

(287

)

Adjusted net income (loss) attributable to Hess Corporation

 

$

(304

)

 

$

(305

)

 

$

(1,401

)

 

$

(1,489

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(1.01

)

 

$

(1.01

)

 

$

(4.61

)

 

$

(4.94

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares (diluted)

 

313.6

 

 

 

313.3

 

 

 

314.1

 

 

 

309.9

 

 

(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 summarized on page 7.  A reconciliation of net income (loss) attributable to Hess Corporation to adjusted net income (loss) attributable to Hess Corporation is provided on page 9.

 

Exploration and Production:

Exploration and Production (E&P) net loss in the fourth quarter of 2017 was $2,592 million, compared to a net loss of $3,949 million in the fourth quarter of 2016.  On an adjusted basis, fourth quarter 2017 net loss was $219 million, compared to a net loss of $256 million in the prior-year quarter.  The Corporation’s average realized crude oil selling price, including the effect of hedging, was $55.44 per barrel in the fourth quarter of 2017, up from $45.97 per barrel in the year-ago quarter.  The average realized natural gas liquids selling price in the fourth quarter of 2017 was $22.78 per barrel, versus $14.68 per barrel in the prior-year quarter, while the average realized natural gas selling price was $3.69 per mcf, compared with $3.24 per mcf in the fourth quarter of 2016.

Net production, excluding Libya, was 282,000 boepd in the fourth quarter of 2017, compared to 307,000 boepd in the prior-year quarter.  Lower volumes were due to asset sales (26,000 boepd), unplanned downtime resulting from a fire at the third-party operated Enchilada platform in the Gulf of

3

 

Mexico (17,000 boepd) and natural decline and other net reductions (19,000 boepd), partially offset by higher production in the Bakken (15,000 boepd) and from North Malay Basin (22,000 boepd).

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 $14.72 per boe in the fourth quarter, down 10 percent from $16.35 per boe in the prior-year quarter.  Our fourth quarter 2017 cash operating costs per boe were adversely impacted by the Enchilada platform shutdown.  The E&P effective tax rate, excluding items affecting comparability and Libya, was an expense of 21 percent in the fourth quarter of 2017, compared to a benefit of 43 percent in the fourth quarter of 2016.  

Oil and Gas Reserve Estimates:

Oil and gas proved reserves were 1,154 million boe at December 31, 2017, compared with 1,109 million boe at December 31, 2016.  Proved reserve net additions and technical revisions added 397 million boe in 2017, primarily relating to the Bakken, Guyana and North Malay Basin in Malaysia.  Asset sales reduced proved reserves by 239 million boe.  The net additions and revisions of 397 million boe, which are subject to final review, replaced 351 percent of the Corporation’s 2017 production at a finding and development cost of $5.15 per boe, and resulted in a year-end 2017 reserve life of 10.2 years.

U.S. Tax Cuts and Jobs Act:

The Corporation expects no U.S. federal cash tax on the deemed repatriation of unremitted earnings of foreign subsidiaries under the new law.  The decrease in the corporate tax rate to 21 percent from 35 percent resulted in a $1,475 million reduction to our U.S. net deferred tax asset as of December 31, 2017, with a corresponding reduction in the previously established U.S. valuation allowance.  Consequently, the remeasurement of deferred taxes using the newly enacted tax rate had no impact on net income or the balance sheet.  

Operational Highlights for the Fourth Quarter of 2017:

Bakken (Onshore U.S.):  Net production from the Bakken increased 16 percent to 110,000 boepd from 95,000 boepd in the year-ago quarter due to increased drilling activity in 2017.  The Corporation operated an average of 4 rigs in the fourth quarter, drilling 27 wells and bringing 34 new wells online.

4

 

Gulf of Mexico (Offshore U.S.):  Net production from the Gulf of Mexico was 40,000 boepd, compared to 61,000 boepd in the prior-year quarter primarily due to a fire at the third-party operated Enchilada platform.  Prior to the shutdown in November, we were producing approximately 30,000 boepd from the Llano, Conger, Baldpate and Penn State fields through infrastructure associated with Enchilada.  At the Stampede development (Hess operated - 25 percent), we completed subsea work, received regulatory approval for production operations, and continued drilling at the fourth production well and first water injection well.  First production at Stampede commenced in January 2018.

Guyana (Offshore):  At the Stabroek Block (Hess - 30 percent), operated by Esso Exploration and Production Guyana Limited, the Ranger-1 exploration well encountered approximately 230 feet of high-quality, oil-bearing carbonate reservoir and is the sixth significant oil discovery on the Stabroek Block, offshore Guyana.  Development activities associated with the Liza Phase 1 project are on schedule and first production is expected in March 2020.  Start up of the Liza Phase 2 development is expected by mid 2022.  Excluding Ranger, total discovered recoverable resources on the block are now estimated to be more than 3.2 billion boe.

Midstream:

The Midstream segment, comprised primarily of Hess Infrastructure Partners LP (HIP), our 50/50 midstream joint venture, had net income of $20 million in the fourth quarter of 2017, compared to net income of $2 million in the prior-year quarter.  Excluding items affecting comparability of earnings between periods, fourth quarter 2017 net income attributable to Hess Corporation was $20 million, compared to $23 million in the fourth quarter of 2016.  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.

Corporate, Interest and Other:

Net results were an after-tax loss of $105 million in the fourth quarter of 2017, down from $945 million in the fourth quarter of 2016.  On an adjusted basis, fourth quarter 2017 was an after-tax loss of $105 million compared to a loss of $72 million in the prior-year quarter.  The fourth quarter 2017 effective tax rate benefit of 14 percent was lower than the 36 percent benefit, excluding items affecting comparability, in 2016 due to the required change in deferred tax accounting.  

5

 

Capital and Exploratory Expenditures:

E&P capital and exploratory expenditures were $568 million in the fourth quarter of 2017, up from $411 million in the prior-year quarter, which included increased drilling activity at the Bakken and Liza Phase 1 development activity following sanction in June 2017.   Midstream capital expenditures were $46 million in the fourth quarter of 2017, down from $89 million in the year-ago quarter.

Liquidity:

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.

Excluding the Midstream segment, the Corporation had cash and cash equivalents of $4,491 million and total debt of $5,997 million at December 31, 2017.  The Corporation’s debt to capitalization ratio was 36.1 percent at December 31, 2017 and 30.4 percent at December 31, 2016.

The Midstream segment had cash and cash equivalents of $356 million and total debt of $980 million at December 31, 2017.  In the fourth quarter, HIP issued $800 million of senior notes with a 5.625% coupon rate due in 2026, with the proceeds used to repay $480 million net under its existing credit facilities, to fund a distribution of $50 million to its sponsors and for general partnership purposes.  These notes are non-recourse to Hess Corporation.  In addition, HIP increased commitments under its undrawn revolving credit facility to $600 million, and extended its maturity to November 2022.

2018 Cost Reduction Program:

As part of our portfolio reshaping, we have begun implementation of an organization restructuring and cost reduction effort targeting annual savings of $150 million.  In addition to direct headcount reductions as part of our assets sales, we eliminated approximately 400 employee and contractor positions in January and expect to record employee severance of $40 to $50 million in the first quarter.  Since the end of 2014, total employee and contractor positions have been reduced by approximately 50 percent.  In addition to the workforce reduction, we have identified further cost reductions in logistics, information technology, property, professional fees, and other operating costs

6

 

resulting from our portfolio reshaping.  The benefit from this $150 million annualized cost reduction will begin to be realized over the second half of 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

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In millions)

 

Exploration and Production

 

$

(2,373

)

 

$

(3,693

)

 

$

(2,609

)

 

$

(3,699

)

Midstream

 

 

—

 

 

 

(21

)

 

 

(34

)

 

 

(21

)

Corporate, Interest and Other

 

 

—

 

 

 

(873

)

 

 

(30

)

 

 

(923

)

Total items affecting comparability of earnings between periods

 

$

(2,373

)

 

$

(4,587

)

 

$

(2,673

)

 

$

(4,643

)

The following table summarizes the items affecting comparability of earnings between periods by line item in the income statement:

  

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

(22

)

 

$

—

 

 

$

(22

)

 

$

—

 

Gains (losses) on asset sales, net

 

 

(371

)

 

 

—

 

 

 

(98

)

 

 

27

 

Operating costs and expenses

 

 

—

 

 

 

(128

)

 

 

—

 

 

 

(164

)

Exploration expenses, including dry holes and lease impairment

 

 

(280

)

 

 

(946

)

 

 

(280

)

 

 

(1,029

)

General and administrative expenses

 

 

—

 

 

 

(1

)

 

 

(11

)

 

 

(1

)

Loss on debt extinguishment

 

 

—

 

 

 

(68

)

 

 

—

 

 

 

(148

)

Depreciation, depletion and amortization

 

 

—

 

 

 

—

 

 

 

(19

)

 

 

—

 

Impairment

 

 

(1,700

)

 

 

(67

)

 

 

(4,203

)

 

 

(67

)

Total pre-tax items affecting comparability

 

 

(2,373

)

 

 

(1,210

)

 

 

(4,633

)

 

 

(1,382

)

Provision (benefit) for income taxes (a)

 

 

—

 

 

 

3,410

 

 

 

(1,953

)

 

 

3,294

 

Noncontrolling interests

 

 

—

 

 

 

33

 

 

 

7

 

 

 

33

 

Total items affecting comparability of earnings between periods

 

$

(2,373

)

 

$

(4,587

)

 

$

(2,673

)

 

$

(4,643

)

 

(a)

Amounts include the tax effect associated with pre-tax items affecting comparability of earnings between periods.

Fourth quarter 2017 results include:

 

•

An after-tax gain of $486 million ($486 million pre-tax) from the sale of our interests in Equatorial Guinea in November.

 

•

An after-tax loss of $857 million ($857 million pre-tax) from the sale of our interests in Norway in December.  The after-tax loss from the transaction includes the recognition of $900 million for cumulative translation adjustments that were previously reflected within accumulated other comprehensive income (loss) in stockholders’ equity.

7

 

 

•

After-tax impairment charges totaling $1,700 million ($1,700 million pre-tax) to reduce the carrying value of our interests in the Stampede and Tubular Bells Fields in the Gulf of Mexico, primarily as a result of an updated long-term crude oil price outlook used in our fourth quarter impairment analysis.

 

•

An after-tax charge of $280 million ($280 million pre-tax) to fully impair the carrying value of our interest at the Hess operated offshore Deepwater Tano/Cape Three Points license, offshore Ghana (Hess 50 percent license interest) based on management’s decision to not develop the discoveries.  The Corporation is currently evaluating options to monetize our Ghana asset.

 

•

A noncash after-tax charge of $22 million ($22 million pre-tax) related to de-designated crude oil hedging contracts as a result of the fire at the third-party operated Enchilada platform in the Gulf of Mexico.

Fourth quarter 2016 results include:  

 

•

A noncash charge of $3,749 million (E&P:  $2,920 million; Corporate, Interest and Other: $829 million) to establish valuation allowances against net deferred tax assets as of December 31, 2016, as required under accounting standards following a three-year cumulative loss.

 

•

An after-tax charge of $693 million ($938 million pre-tax) to fully impair the carrying value of our interests in offshore Australia.

 

•

Other after-tax charges attributable to Hess Corporation of $145 million ($272 million pre-tax) related to exit costs for an offshore drilling rig, loss on debt extinguishment, impairment of rail cars (Midstream), severance and other charges.


8

 

Reconciliation of U.S. GAAP to Non-GAAP measures:

The following table reconciles reported income (loss) before income taxes and adjusted income (loss) before income taxes:

  

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In millions)

 

Income (loss) before income taxes

 

$

(2,477

)

 

$

(1,709

)

 

$

(5,778

)

 

$

(3,854

)

Less: Total items affecting comparability of earnings between periods

 

 

(2,373

)

 

 

(1,210

)

 

 

(4,633

)

 

 

(1,382

)

Adjusted income (loss) before income taxes

 

$

(104

)

 

$

(499

)

 

$

(1,145

)

 

$

(2,472

)

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

  

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In millions)

 

Net income (loss) attributable to Hess Corporation

 

$

(2,677

)

 

$

(4,892

)

 

$

(4,074

)

 

$

(6,132

)

Less: Total items affecting comparability of earnings between periods

 

 

(2,373

)

 

 

(4,587

)

 

 

(2,673

)

 

 

(4,643

)

Adjusted net income (loss) attributable to Hess Corporation

 

$

(304

)

 

$

(305

)

 

$

(1,401

)

 

$

(1,489

)

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

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(In millions)

 

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

 

$

492

 

 

$

128

 

 

$

1,725

 

 

$

842

 

Changes in operating assets and liabilities

 

 

(149

)

 

 

198

 

 

 

(780

)

 

 

(47

)

Net cash provided by (used in) operating activities

 

$

343

 

 

$

326

 

 

$

945

 

 

$

795

 

Hess Corporation will review fourth quarter financial and operating results and other matters on a webcast at 10 a.m. today.  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.


9

 

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 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.  “Adjusted income (loss) before income taxes” presented in this release is defined as income (loss) before income taxes 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) and adjusted income (loss) before income taxes to evaluate the Corporation’s operating performance and believes that investors’ understanding of our performance is enhanced by disclosing these measures, 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), a reconciliation of reported income (loss) before income taxes (U.S. GAAP) to adjusted income (loss) before income taxes 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.

Cautionary Note to Investors

We use certain terms in this release relating to resources other than proved reserves, such as unproved reserves or resources. Investors are urged to consider closely the oil and gas disclosures in Hess’ Form 10-K, File No. 1-1204, available from Hess Corporation, 1185 Avenue of the Americas, New York, New York 10036 c/o Corporate Secretary and on our website at www.hess.com. You can also obtain this form from the SEC on the EDGAR system.

 

For Hess Corporation

Investor Contact:

Jay Wilson

(212) 536-8940

Media Contact:

Patrick Scanlan

Sard Verbinnen & Co

(212) 687-8080


10

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

Fourth

 

 

Fourth

 

 

Third

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2017

 

 

2016

 

 

2017

 

Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

1,663

 

 

$

1,388

 

 

$

1,348

 

Gains (losses) on asset sales, net

 

 

(362

)

 

 

(4

)

 

 

274

 

Other, net

 

 

(5

)

 

 

2

 

 

 

22

 

Total revenues and non-operating income

 

 

1,296

 

 

 

1,386

 

 

 

1,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas

 

 

476

 

 

 

375

 

 

 

338

 

Operating costs and expenses

 

 

359

 

 

 

568

 

 

 

352

 

Production and severance taxes

 

 

31

 

 

 

27

 

 

 

27

 

Exploration expenses, including dry holes and lease impairment

 

 

356

 

 

 

1,033

 

 

 

40

 

General and administrative expenses

 

 

125

 

 

 

105

 

 

 

113

 

Interest expense

 

 

80

 

 

 

84

 

 

 

79

 

Loss on debt extinguishment

 

 

—

 

 

 

68

 

 

 

—

 

Depreciation, depletion and amortization

 

 

646

 

 

 

768

 

 

 

759

 

Impairment

 

 

1,700

 

 

 

67

 

 

 

2,503

 

Total costs and expenses

 

 

3,773

 

 

 

3,095

 

 

 

4,211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(2,477

)

 

 

(1,709

)

 

 

(2,567

)

Provision (benefit) for income taxes

 

 

158

 

 

 

3,189

 

 

 

(1,974

)

Net income (loss)

 

 

(2,635

)

 

 

(4,898

)

 

 

(593

)

Less: Net income (loss) attributable to noncontrolling interests

 

 

42

 

 

 

(6

)

 

 

31

 

Net income (loss) attributable to Hess Corporation

 

 

(2,677

)

 

 

(4,892

)

 

 

(624

)

Less: Preferred stock dividends

 

 

12

 

 

 

11

 

 

 

11

 

Net income (loss) attributable to Hess Corporation common stockholders

 

$

(2,689

)

 

$

(4,903

)

 

$

(635

)


11

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and non-operating income

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

5,466

 

 

$

4,762

 

Gains (losses) on asset sales, net

 

 

(86

)

 

 

23

 

Other, net

 

 

25

 

 

 

59

 

Total revenues and non-operating income

 

 

5,405

 

 

 

4,844

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas

 

 

1,267

 

 

 

1,063

 

Operating costs and expenses

 

 

1,445

 

 

 

1,880

 

Production and severance taxes

 

 

119

 

 

 

101

 

Exploration expenses, including dry holes and lease impairment

 

 

507

 

 

 

1,442

 

General and administrative expenses

 

 

434

 

 

 

415

 

Interest expense

 

 

325

 

 

 

338

 

Loss on debt extinguishment

 

 

—

 

 

 

148

 

Depreciation, depletion and amortization

 

 

2,883

 

 

 

3,244

 

Impairment

 

 

4,203

 

 

 

67

 

Total costs and expenses

 

 

11,183

 

 

 

8,698

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(5,778

)

 

 

(3,854

)

Provision (benefit) for income taxes

 

 

(1,837

)

 

 

2,222

 

Net income (loss)

 

 

(3,941

)

 

 

(6,076

)

Less: Net income (loss) attributable to noncontrolling interests

 

 

133

 

 

 

56

 

Net income (loss) attributable to Hess Corporation

 

 

(4,074

)

 

 

(6,132

)

Less: Preferred stock dividends

 

 

46

 

 

 

41

 

Net income (loss) attributable to Hess Corporation common stockholders

 

$

(4,120

)

 

$

(6,173

)

 


12

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

  

 

December 31,

 

 

 

2017

 

 

2016

 

Balance Sheet Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,847

 

 

$

2,732

 

Other current assets

 

 

1,310

 

 

 

1,544

 

Property, plant and equipment – net

 

 

16,192

 

 

 

23,595

 

Other long-term assets

 

 

763

 

 

 

750

 

Total assets

 

$

23,112

 

 

$

28,621

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

580

 

 

$

112

 

Other current liabilities

 

 

1,855

 

 

 

2,139

 

Long-term debt

 

 

6,397

 

 

 

6,694

 

Other long-term liabilities

 

 

1,926

 

 

 

4,085

 

Total equity excluding other comprehensive income (loss)

 

 

11,737

 

 

 

16,238

 

Accumulated other comprehensive income (loss)

 

 

(686

)

 

 

(1,704

)

Noncontrolling interests

 

 

1,303

 

 

 

1,057

 

Total liabilities and equity

 

$

23,112

 

 

$

28,621

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

Total Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hess

 

$

5,997

 

 

$

6,073

 

Midstream (a)

 

 

980

 

 

 

733

 

Hess Consolidated

 

$

6,977

 

 

$

6,806

 

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

 

  

 

December 31,

 

 

 

2017

 

 

2016

 

Debt to capitalization ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hess Consolidated

 

 

36.1

%

 

 

30.4

%

 


13

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

Fourth

 

 

Fourth

 

 

Third

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2017

 

 

2016

 

 

2017

 

Cash Flow Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(2,635

)

 

$

(4,898

)

 

$

(593

)

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

 

 

 

 

 

 

 

 

 

 

 

 

(Gains) losses on asset sales, net

 

 

362

 

 

 

4

 

 

 

(274

)

Depreciation, depletion and amortization

 

 

646

 

 

 

768

 

 

 

759

 

Impairment

 

 

1,700

 

 

 

67

 

 

 

2,503

 

Exploratory dry hole costs

 

 

268

 

 

 

830

 

 

 

—

 

Exploration lease and other impairment

 

 

22

 

 

 

112

 

 

 

7

 

Stock compensation expense

 

 

21

 

 

 

4

 

 

 

21

 

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

 

 

54

 

 

 

—

 

 

 

13

 

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

 

 

54

 

 

 

3,173

 

 

 

(2,008

)

Loss on debt extinguishment

 

 

—

 

 

 

68

 

 

 

—

 

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

 

 

492

 

 

 

128

 

 

 

428

 

Changes in operating assets and liabilities

 

 

(149

)

 

 

198

 

 

 

(340

)

Net cash provided by (used in) operating activities

 

 

343

 

 

 

326

 

 

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment - E&P

 

 

(513

)

 

 

(399

)

 

 

(489

)

Additions to property, plant and equipment - Midstream

 

 

(41

)

 

 

(88

)

 

 

(24

)

Proceeds from asset sales, net of cash sold

 

 

2,513

 

 

 

60

 

 

 

604

 

Other, net

 

 

—

 

 

 

3

 

 

 

(1

)

Net cash provided by (used in) investing activities

 

 

1,959

 

 

 

(424

)

 

 

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(168

)

 

 

57

 

 

 

11

 

Debt with maturities of greater than 90 days

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings

 

 

800

 

 

 

—

 

 

 

—

 

Repayments

 

 

(352

)

 

 

(649

)

 

 

(30

)

Common stock acquired and retired

 

 

(110

)

 

 

—

 

 

 

—

 

Cash dividends paid

 

 

(90

)

 

 

(90

)

 

 

(91

)

Noncontrolling interests, net

 

 

(35

)

 

 

(23

)

 

 

(33

)

Other, net

 

 

(26

)

 

 

6

 

 

 

(1

)

Net cash provided by (used in) financing activities

 

 

19

 

 

 

(699

)

 

 

(144

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

2,321

 

 

 

(797

)

 

 

34

 

Cash and Cash Equivalents at Beginning of Period

 

 

2,526

 

 

 

3,529

 

 

 

2,492

 

Cash and Cash Equivalents at End of Period

 

$

4,847

 

 

$

2,732

 

 

$

2,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures incurred

 

$

(547

)

 

$

(409

)

 

$

(553

)

Increase (decrease) in related liabilities

 

 

(7

)

 

 

(78

)

 

 

40

 

Additions to property, plant and equipment

 

$

(554

)

 

$

(487

)

 

$

(513

)


14

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

Cash Flow Information

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows From Operating Activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,941

)

 

$

(6,076

)

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

 

 

 

 

 

 

 

 

(Gains) losses on asset sales, net

 

 

86

 

 

 

(23

)

Depreciation, depletion and amortization

 

 

2,883

 

 

 

3,244

 

Impairment

 

 

4,203

 

 

 

67

 

Exploratory dry hole costs

 

 

268

 

 

 

1,064

 

Exploration lease and other impairment

 

 

44

 

 

 

145

 

Stock compensation expense

 

 

86

 

 

 

73

 

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

 

 

97

 

 

 

—

 

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

 

 

(2,001

)

 

 

2,200

 

Loss on debt extinguishment

 

 

—

 

 

 

148

 

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

 

 

1,725

 

 

 

842

 

Changes in operating assets and liabilities

 

 

(780

)

 

 

(47

)

Net cash provided by (used in) operating activities

 

 

945

 

 

 

795

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment - E&P

 

 

(1,788

)

 

 

(1,974

)

Additions to property, plant and equipment - Midstream

 

 

(149

)

 

 

(277

)

Proceeds from asset sales, net of cash sold

 

 

3,296

 

 

 

140

 

Other, net

 

 

(1

)

 

 

21

 

Net cash provided by (used in) investing activities

 

 

1,358

 

 

 

(2,090

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

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

 

 

(153

)

 

 

43

 

Debt with maturities of greater than 90 days

 

 

 

 

 

 

 

 

Borrowings

 

 

800

 

 

 

1,496

 

Repayments

 

 

(459

)

 

 

(1,455

)

Proceeds from issuance of Hess Midstream Partnership LP units

 

 

366

 

 

 

—

 

Proceeds from issuance of preferred stock

 

 

—

 

 

 

557

 

Proceeds from issuance of common stock

 

 

—

 

 

 

1,087

 

Common stock acquired and retired

 

 

(110

)

 

 

—

 

Cash dividends paid

 

 

(363

)

 

 

(350

)

Noncontrolling interests, net

 

 

(243

)

 

 

(23

)

Other, net

 

 

(26

)

 

 

(44

)

Net cash provided by (used in) financing activities

 

 

(188

)

 

 

1,311

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

2,115

 

 

 

16

 

Cash and Cash Equivalents at Beginning of Year

 

 

2,732

 

 

 

2,716

 

Cash and Cash Equivalents at End of Year

 

$

4,847

 

 

$

2,732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Capital expenditures incurred

 

$

(1,973

)

 

$

(1,921

)

Increase (decrease) in related liabilities

 

 

36

 

 

 

(330

)

Additions to property, plant and equipment

 

$

(1,937

)

 

$

(2,251

)

 

15

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

Fourth

 

 

Fourth

 

 

Third

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2017

 

 

2016

 

 

2017

 

Capital and Exploratory Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E&P Capital and exploratory expenditures

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

$

200

 

 

$

99

 

 

$

186

 

Other Onshore

 

 

5

 

 

 

2

 

 

 

8

 

Total Onshore

 

 

205

 

 

 

101

 

 

 

194

 

Offshore

 

 

162

 

 

 

171

 

 

 

191

 

Total United States

 

 

367

 

 

 

272

 

 

 

385

 

Europe

 

 

51

 

 

 

2

 

 

 

34

 

Africa

 

 

—

 

 

 

3

 

 

 

13

 

Asia and other

 

 

150

 

 

 

134

 

 

 

126

 

E&P Capital and exploratory expenditures

 

$

568

 

 

$

411

 

 

$

558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exploration expenses charged to income included above

 

$

67

 

 

$

91

 

 

$

32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Midstream Capital expenditures

 

$

46

 

 

$

89

 

 

$

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

 

 

 

 

2017

 

 

2016

 

Capital and Exploratory Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E&P Capital and exploratory expenditures

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

 

 

 

$

624

 

 

$

429

 

Other Onshore

 

 

 

 

 

 

30

 

 

 

46

 

Total Onshore

 

 

 

 

 

 

654

 

 

 

475

 

Offshore

 

 

 

 

 

 

702

 

 

 

735

 

Total United States

 

 

 

 

 

 

1,356

 

 

 

1,210

 

Europe

 

 

 

 

 

 

142

 

 

 

65

 

Africa

 

 

 

 

 

 

30

 

 

 

10

 

Asia and other

 

 

 

 

 

 

519

 

 

 

586

 

E&P Capital and exploratory expenditures

 

 

 

 

 

$

2,047

 

 

$

1,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exploration expenses charged to income included above

 

 

 

 

 

$

195

 

 

$

233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Midstream Capital expenditures

 

 

 

 

 

$

121

 

 

$

283

 

 


 

16

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

 

 

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

 

 

(4

)

 

 

(10

)

 

 

(14

)

Total revenues and non-operating income

 

 

1,055

 

 

 

225

 

 

 

1,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

477

 

 

 

12

 

 

 

489

 

Operating costs and expenses

 

 

159

 

 

 

155

 

 

 

314

 

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

 

 

52

 

 

 

9

 

 

 

61

 

Depreciation, depletion and amortization

 

 

453

 

 

 

163

 

 

 

616

 

Impairment

 

 

1,700

 

 

 

—

 

 

 

1,700

 

Total costs and expenses

 

 

3,054

 

 

 

657

 

 

 

3,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter 2016

 

Income Statement

 

United States

 

 

International

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

942

 

 

$

445

 

 

$

1,387

 

Other, net

 

 

(8

)

 

 

(3

)

 

 

(11

)

Total revenues and non-operating income

 

 

934

 

 

 

442

 

 

 

1,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

350

 

 

 

41

 

 

 

391

 

Operating costs and expenses

 

 

315

 

 

 

195

 

 

 

510

 

Production and severance taxes

 

 

26

 

 

 

1

 

 

 

27

 

Midstream tariffs

 

 

148

 

 

 

—

 

 

 

148

 

Exploration expenses, including dry holes and lease impairment

 

 

41

 

 

 

992

 

 

 

1,033

 

General and administrative expenses

 

 

55

 

 

 

2

 

 

 

57

 

Depreciation, depletion and amortization

 

 

471

 

 

 

261

 

 

 

732

 

Total costs and expenses

 

 

1,406

 

 

 

1,492

 

 

 

2,898

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of operations before income taxes

 

 

(472

)

 

 

(1,050

)

 

 

(1,522

)

Provision (benefit) for income taxes

 

 

969

 

(d)

 

1,458

 

(d)

 

2,427

 

Net income (loss) attributable to Hess Corporation

 

$

(1,441

)

 

$

(2,508

)

 

$

(3,949

)

(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.

(d)  Includes charges of $1,144 million (U.S.) and $1,776 million (International) to establish valuation allowances against net deferred tax assets.


17

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

 

 

 

Third Quarter 2017

 

Income Statement

 

United States

 

 

International

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

901

 

 

$

446

 

 

$

1,347

 

Gain on asset sales, net

 

 

330

 

 

 

—

 

 

 

330

 

Other, net

 

 

(5

)

 

 

20

 

 

 

15

 

Total revenues and non-operating income

 

 

1,226

 

 

 

466

 

 

 

1,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

337

 

 

 

14

 

 

 

351

 

Operating costs and expenses

 

 

148

 

 

 

162

 

 

 

310

 

Production and severance taxes

 

 

26

 

 

 

1

 

 

 

27

 

Midstream tariffs

 

 

140

 

 

 

—

 

 

 

140

 

Exploration expenses, including dry holes and lease impairment

 

 

16

 

 

 

24

 

 

 

40

 

General and administrative expenses

 

 

55

 

 

 

—

 

 

 

55

 

Depreciation, depletion and amortization

 

 

437

 

 

 

272

 

 

 

709

 

Impairment

 

 

—

 

 

 

2,503

 

 

 

2,503

 

Total costs and expenses

 

 

1,159

 

 

 

2,976

 

 

 

4,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of operations before income taxes

 

 

67

 

 

 

(2,510

)

 

 

(2,443

)

Provision (benefit) for income taxes

 

 

2

 

 

 

(1,971

)

 

 

(1,969

)

Net income (loss) attributable to Hess Corporation

 

$

65

 

(b)

$

(539

)

(c)

$

(474

)

(a)  Includes amounts charged from the Midstream segment.

(b)  After-tax results from crude oil hedging activities included $7 million of option premium amortization, net of settlement proceeds, for contracts settling in the quarter, and unrealized gains of $8 million.

(c)  After-tax results from crude oil hedging activities included a gain of $1 million of option premium amortization, net of settlement proceeds, for contracts settling in the quarter, and unrealized gains of $4 million.


18

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

 

Year Ended December 31, 2017

 

Income Statement

 

United States

 

 

International

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

3,686

 

 

$

1,774

 

 

$

5,460

 

Gains (losses) on asset sales, net

 

 

325

 

 

 

(364

)

 

 

(39

)

Other, net

 

 

(19

)

 

 

21

 

 

 

2

 

Total revenues and non-operating income

 

 

3,992

 

 

 

1,431

 

 

 

5,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

1,354

 

 

 

(19

)

 

 

1,335

 

Operating costs and expenses

 

 

652

 

 

 

598

 

 

 

1,250

 

Production and severance taxes

 

 

116

 

 

 

3

 

 

 

119

 

Midstream tariffs

 

 

543

 

 

 

—

 

 

 

543

 

Exploration expenses, including dry holes and lease impairment

 

 

106

 

 

 

401

 

 

 

507

 

General and administrative expenses

 

 

208

 

 

 

17

 

 

 

225

 

Depreciation, depletion and amortization

 

 

1,819

 

 

 

917

 

 

 

2,736

 

Impairment

 

 

1,700

 

 

 

2,503

 

 

 

4,203

 

Total costs and expenses

 

 

6,498

 

 

 

4,420

 

 

 

10,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of operations before income taxes

 

 

(2,506

)

 

 

(2,989

)

 

 

(5,495

)

Provision (benefit) for income taxes

 

 

(31

)

 

 

(1,811

)

 

 

(1,842

)

Net income (loss) attributable to Hess Corporation

 

$

(2,475

)

(b)

$

(1,178

)

(c)

$

(3,653

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2016

 

Income Statement

 

United States

 

 

International

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues and non-operating income

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

3,078

 

 

$

1,677

 

 

$

4,755

 

Gains on asset sales, net

 

 

27

 

 

 

—

 

 

 

27

 

Other, net

 

 

(12

)

 

 

28

 

 

 

16

 

Total revenues and non-operating income

 

 

3,093

 

 

 

1,705

 

 

 

4,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas (a)

 

 

1,023

 

 

 

105

 

 

 

1,128

 

Operating costs and expenses

 

 

920

 

 

 

742

 

 

 

1,662

 

Production and severance taxes

 

 

94

 

 

 

7

 

 

 

101

 

Midstream tariffs

 

 

497

 

 

 

—

 

 

 

497

 

Exploration expenses, including dry holes and lease impairment

 

 

342

 

 

 

1,100

 

 

 

1,442

 

General and administrative expenses

 

 

215

 

 

 

17

 

 

 

232

 

Depreciation, depletion and amortization

 

 

2,012

 

 

 

1,101

 

 

 

3,113

 

Total costs and expenses

 

 

5,103

 

 

 

3,072

 

 

 

8,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of operations before income taxes

 

 

(2,010

)

 

 

(1,367

)

 

 

(3,377

)

Provision (benefit) for income taxes

 

 

385

 

(d)

 

1,202

 

(d)

 

1,587

 

Net income (loss) attributable to Hess Corporation

 

$

(2,395

)

 

$

(2,569

)

 

$

(4,964

)

 

(a)

Includes amounts charged from the Midstream segment.

 

(b)

After-tax results from crude oil hedging activities included $31 million of option premium amortization, net of settlement proceeds, for contracts settling in the year, and unrealized losses of $26 million.

 

(c)

After-tax results from crude oil hedging activities included $2 million of option premium amortization, net of settlement proceeds, for contracts settling in the year.

 

(d)

Includes charges of $1,144 million (U.S.) and $1,776 million (International) to establish valuation allowances against net deferred tax assets.


19

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

 

Fourth

 

 

Fourth

 

 

Third

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2017

 

 

2016

 

 

2017

 

Net Production Per Day (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

69

 

 

 

62

 

 

 

63

 

Other Onshore (a)

 

 

2

 

 

 

8

 

 

 

4

 

Total Onshore

 

 

71

 

 

 

70

 

 

 

67

 

Offshore

 

 

30

 

 

 

45

 

 

 

43

 

Total United States

 

 

101

 

 

 

115

 

 

 

110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe (b)

 

 

27

 

 

 

37

 

 

 

25

 

Africa (c) (d)

 

 

35

 

 

 

32

 

 

 

39

 

Asia

 

 

3

 

 

 

2

 

 

 

2

 

Total

 

 

166

 

 

 

186

 

 

 

176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas liquids - barrels

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

30

 

 

 

24

 

 

 

29

 

Other Onshore (a)

 

 

6

 

 

 

10

 

 

 

8

 

Total Onshore

 

 

36

 

 

 

34

 

 

 

37

 

Offshore

 

 

4

 

 

 

5

 

 

 

5

 

Total United States

 

 

40

 

 

 

39

 

 

 

42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe (b)

 

 

1

 

 

 

1

 

 

 

1

 

Total

 

 

41

 

 

 

40

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas - mcf

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

66

 

 

 

52

 

 

 

63

 

Other Onshore

 

 

77

 

 

 

123

 

 

 

85

 

Total Onshore

 

 

143

 

 

 

175

 

 

 

148

 

Offshore

 

 

34

 

 

 

68

 

 

 

69

 

Total United States

 

 

177

 

 

 

243

 

 

 

217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe (b)

 

 

30

 

 

 

45

 

 

 

29

 

Asia and other

 

 

349

 

 

 

224

 

 

 

306

 

Total

 

 

556

 

 

 

512

 

 

 

552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Barrels of oil equivalent

 

 

300

 

 

 

311

 

 

 

311

 

 

(a)

The Corporation sold its Permian assets in August 2017.  Production was 7,000 boepd in the fourth quarter of 2016 and 3,000 boepd in the third quarter of 2017.

 

(b)

The Corporation sold its Norway assets in December 2017.  Production was 24,000 boepd in the fourth quarter of 2017, 32,000 boepd in the fourth quarter of 2016 and 20,000 boepd in the third quarter of 2017.

 

(c)

The Corporation sold its Equatorial Guinea assets in November 2017. Production was 17,000 boepd in the fourth quarter of 2017, 28,000 boepd in the fourth quarter of 2016 and 27,000 boepd in the third quarter of 2017.

 

(d)

Production from Libya recommenced in the fourth quarter of 2016.  Production was 18,000 boepd in the fourth quarter of 2017, 4,000 bopd in the fourth quarter of 2016 and 12,000 bopd in the third quarter of 2017.

  

 


20

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

Net Production Per Day (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

Bakken

 

 

67

 

 

 

68

 

Other Onshore (a)

 

 

6

 

 

 

9

 

Total Onshore

 

 

73

 

 

 

77

 

Offshore

 

 

39

 

 

 

45

 

Total United States

 

 

112

 

 

 

122

 

Europe (b)

 

 

28

 

 

 

33

 

Africa (c) (d)

 

 

35

 

 

 

34

 

Asia

 

 

2

 

 

 

2

 

Total

 

 

177

 

 

 

191

 

 

 

 

 

 

 

 

 

 

Natural gas liquids - barrels

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

Bakken

 

 

28

 

 

 

27

 

Other Onshore (a)

 

 

8

 

 

 

11

 

Total Onshore

 

 

36

 

 

 

38

 

Offshore

 

 

5

 

 

 

5

 

Total United States

 

 

41

 

 

 

43

 

Europe (b)

 

 

1

 

 

 

1

 

Total

 

 

42

 

 

 

44

 

 

 

 

 

 

 

 

 

 

Natural gas - mcf

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

Bakken

 

 

62

 

 

 

61

 

Other Onshore

 

 

92

 

 

 

133

 

Total Onshore

 

 

154

 

 

 

194

 

Offshore

 

 

57

 

 

 

64

 

Total United States

 

 

211

 

 

 

258

 

Europe (b)

 

 

33

 

 

 

43

 

Asia and other

 

 

276

 

 

 

222

 

Total

 

 

520

 

 

 

523

 

 

 

 

 

 

 

 

 

 

Barrels of oil equivalent

 

 

306

 

 

 

322

 

 

(a)

The Corporation sold its Permian assets in August 2017.  Production was 4,000 boepd for the year ended December 31, 2017 and 7,000 boepd for the year ended December 31, 2016.

 

(b)

The Corporation sold its Norway assets in December 2017.  Production was 24,000 boepd for the year ended December 31, 2017 and 28,000 boepd for the year ended December 31, 2016.

 

(c)

The Corporation sold its Equatorial Guinea assets in November 2017.  Production was 25,000 boepd for the year ended December 31, 2017 and 33,000 boepd for the year ended December 31, 2016.

 

(d)

Production from Libya recommenced in the fourth quarter of 2016.  Production was approximately 10,000 bopd for the year ended December 31, 2017 and 1,000 bopd for the year ended December 31, 2016.

21

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

 

  

 

Fourth

 

 

Fourth

 

 

Third

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2017

 

 

2016

 

 

2017

 

Sales Volumes Per Day (in thousands) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

173

 

 

 

190

 

 

 

172

 

Natural gas liquids - barrels

 

 

41

 

 

 

40

 

 

 

43

 

Natural gas - mcf

 

 

556

 

 

 

512

 

 

 

552

 

Barrels of oil equivalent

 

 

307

 

 

 

315

 

 

 

307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales Volumes (in thousands) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

15,969

 

 

 

17,432

 

 

 

15,897

 

Natural gas liquids - barrels

 

 

3,760

 

 

 

3,666

 

 

 

3,920

 

Natural gas - mcf

 

 

51,346

 

 

 

47,101

 

 

 

50,808

 

Barrels of oil equivalent

 

 

28,287

 

 

 

28,948

 

 

 

28,285

 

 

  

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

Sales Volumes Per Day (in thousands) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

173

 

 

 

198

 

Natural gas liquids - barrels

 

 

42

 

 

 

44

 

Natural gas - mcf

 

 

520

 

 

 

523

 

Barrels of oil equivalent

 

 

302

 

 

 

329

 

 

 

 

 

 

 

 

 

 

Sales Volumes (in thousands) (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - barrels

 

 

63,367

 

 

 

72,462

 

Natural gas liquids - barrels

 

 

15,152

 

 

 

16,055

 

Natural gas - mcf

 

 

190,089

 

 

 

191,482

 

Barrels of oil equivalent

 

 

110,201

 

 

 

120,431

 

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

22

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

 

  

 

Fourth

 

 

Fourth

 

 

Third

 

 

 

Quarter

 

 

Quarter

 

 

Quarter

 

 

 

2017

 

 

2016

 

 

2017

 

Average Selling Prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - per barrel (including hedging)

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

51.66

 

 

$

42.82

 

 

$

42.14

 

Offshore

 

 

52.73

 

 

 

44.73

 

 

 

46.11

 

Total United States

 

 

51.98

 

 

 

43.57

 

 

 

43.66

 

Europe

 

 

62.10

 

 

 

50.37

 

 

 

53.89

 

Africa

 

 

58.98

 

 

 

49.15

 

 

 

51.62

 

Asia

 

 

61.26

 

 

 

40.96

 

 

 

—

 

Worldwide

 

 

55.44

 

 

 

45.97

 

 

 

46.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - per barrel (excluding hedging)

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

54.06

 

 

$

42.82

 

 

$

42.85

 

Offshore

 

 

56.07

 

 

 

44.73

 

 

 

46.72

 

Total United States

 

 

54.66

 

 

 

43.57

 

 

 

44.33

 

Europe

 

 

63.13

 

 

 

50.37

 

 

 

53.77

 

Africa

 

 

59.58

 

 

 

49.15

 

 

 

51.51

 

Asia

 

 

61.26

 

 

 

40.96

 

 

 

—

 

Worldwide

 

 

57.32

 

 

 

45.97

 

 

 

47.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas liquids - per barrel

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

21.98

 

 

$

13.70

 

 

$

16.56

 

Offshore

 

 

26.32

 

 

 

18.89

 

 

 

20.41

 

Total United States

 

 

22.42

 

 

 

14.38

 

 

 

17.04

 

Europe

 

 

36.98

 

 

 

25.05

 

 

 

26.44

 

Worldwide

 

 

22.78

 

 

 

14.68

 

 

 

17.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas - per mcf

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

1.70

 

 

$

1.99

 

 

$

1.58

 

Offshore

 

 

1.67

 

 

 

2.66

 

 

 

2.26

 

Total United States

 

 

1.69

 

 

 

2.18

 

 

 

1.80

 

Europe

 

 

4.99

 

 

 

3.75

 

 

 

4.58

 

Asia and other

 

 

4.59

 

 

 

4.30

 

 

 

4.34

 

Worldwide

 

 

3.69

 

 

 

3.24

 

 

 

3.35

 

 

23

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA

 

  

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

Average Selling Prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - per barrel (including hedging)

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

Onshore

 

$

46.04

 

 

$

36.92

 

Offshore

 

 

47.34

 

 

 

37.47

 

Total United States

 

 

46.50

 

 

 

37.13

 

Europe

 

 

55.03

 

 

 

43.33

 

Africa

 

 

53.17

 

 

 

41.88

 

Asia

 

 

56.99

 

 

 

42.98

 

Worldwide

 

 

49.23

 

 

 

39.20

 

 

 

 

 

 

 

 

 

 

Crude oil - per barrel (excluding hedging)

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

Onshore

 

$

46.76

 

 

$

36.92

 

Offshore

 

 

48.15

 

 

 

37.47

 

Total United States

 

 

47.25

 

 

 

37.13

 

Europe

 

 

55.14

 

 

 

43.33

 

Africa

 

 

53.25

 

 

 

41.88

 

Asia

 

 

56.99

 

 

 

42.98

 

Worldwide

 

 

49.75

 

 

 

39.20

 

 

 

 

 

 

 

 

 

 

Natural gas liquids - per barrel

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

Onshore

 

$

17.67

 

 

$

9.18

 

Offshore

 

 

21.34

 

 

 

13.96

 

Total United States

 

 

18.10

 

 

 

9.71

 

Europe

 

 

29.04

 

 

 

19.48

 

Worldwide

 

 

18.35

 

 

 

9.95

 

 

 

 

 

 

 

 

 

 

Natural gas - per mcf

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

Onshore

 

$

1.96

 

 

$

1.48

 

Offshore

 

 

2.22

 

 

 

1.99

 

Total United States

 

 

2.03

 

 

 

1.61

 

Europe

 

 

4.42

 

 

 

3.97

 

Asia and other

 

 

4.27

 

 

 

5.31

 

Worldwide

 

 

3.37

 

 

 

3.37

 

 

 

The following is a summary of the Corporation’s outstanding commodity hedging program by calendar year:

 

 

2018

 

 

 

Brent

 

 

West Texas

Intermediate

 

Outstanding average barrels of oil per day

 

 

—

 

 

 

115,000

 

Average monthly ceiling price

 

 

—

 

 

$65

 

Average monthly floor price

 

 

—

 

 

$50

 

 

 

24