Hess Reports Estimated Results for the Fourth Quarter of 2022

NEW YORK–(BUSINESS WIRE)–   Hess Corporation (NYSE: HES) today reported net income of $624 million, or $2.03 per common share, in the fourth quarter of 2022 compared with net income of $265 million, or $0.85 per common share, in the fourth quarter of 2021. On an adjusted basis, the Corporation had net income of $548 million or $1.78 per common share in the fourth quarter of 2022. The improvement in adjusted after-tax earnings compared with the prior-year period was primarily due to increased sales volumes in Guyana in the fourth quarter of 2022.

“Our strategy is to grow our resource base, deliver a low cost of supply and generate industry leading cash flow growth – and at the same time maintain our industry leadership in environmental, social and governance performance and disclosure,” CEO John Hess said. “Our successful execution of this strategy has uniquely positioned our company to deliver significant value to shareholders by both growing intrinsic value and growing cash returns.”

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

Three Months Ended
December 31,
(unaudited)

Year Ended
December 31,
(unaudited)

2022

2021

2022

2021

(In millions, except per share amounts)

Net Income Attributable to Hess Corporation

Exploration and Production

$

667

$

309

$

2,422

$

770

Midstream

64

74

269

286

Corporate, Interest and Other

(107)

(118)

(468)

(497)

Net income attributable to Hess Corporation

$

624

$

265

$

2,223

$

559

Net income per common share (diluted)

$

2.03

$

0.85

$

7.18

$

1.81

Adjusted Net Income Attributable to Hess Corporation

Exploration and Production

$

591

$

309

$

2,400

$

888

Midstream

64

74

269

286

Corporate, Interest and Other

(107)

(118)

(467)

(497)

Adjusted net income attributable to Hess Corporation

$

548

$

265

$

2,202

$

677

Adjusted net income per common share (diluted)

$

1.78

$

0.85

$

7.11

$

2.19

Weighted average number of shares (diluted)

308.1

310.0

309.6

309.3

Exploration and Production:

E&P net income was $667 million in the fourth quarter of 2022, compared with $309 million in the fourth quarter of 2021. On an adjusted basis, fourth quarter 2022 E&P net income was $591 million. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $76.07 per barrel in the fourth quarter of 2022, compared with $71.04 per barrel in the prior-year quarter. The average realized natural gas liquids (NGL) selling price in the fourth quarter of 2022 was $26.93 per barrel, compared with $36.47 per barrel in the prior-year quarter, while the average realized natural gas selling price was $5.17 per mcf, compared with $4.77 per mcf in the fourth quarter of 2021.

Net production, excluding Libya, was 376,000 boepd in the fourth quarter of 2022, compared with 295,000 boepd in the fourth quarter of 2021, primarily due to higher production in Guyana.

Cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $12.49 per boe (excluding Libya: $12.72 per boe) in the fourth quarter of 2022, compared with $12.17 per boe (excluding Libya: $12.84 per boe) in the prior-year quarter.

Oil and Gas Reserves Estimates:

Oil and gas proved reserves at December 31, 2022, which are subject to final review, were 1.26 billion boe, compared with 1.31 billion boe at December 31, 2021. Proved reserve additions and net revisions in 2022 totaled 184 million boe, primarily from Guyana, which included sanctioning of the Yellowtail development, and the Bakken. Asset sales during 2022 reduced proved reserves by 109 million boe.

Excluding asset sales, the Corporation replaced 144 percent of its 2022 production at a finding and development cost of approximately $14.80 per boe.

Operational Highlights for the Fourth Quarter of 2022:

   Bakken (Onshore U.S.): Net production from the Bakken of 158,000 boepd in the fourth quarter was impacted by unplanned production shut-ins caused by severe winter weather in December. Net production in the fourth quarter of 2021 was 159,000 boepd. The Corporation added a fourth drilling rig in July 2022, and drilled 19 wells, completed 14 wells, and brought 15 new wells online during the fourth quarter. Net production is forecast to be in the range of 165,000 boepd to 170,000 boepd in 2023.

   Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 35,000 boepd in the fourth quarter of 2022, compared with 39,000 boepd in the prior-year quarter.

   Guyana (Offshore): At the Stabroek Block (Hess – 30%), net production from the Liza Destiny and the Liza Unity floating production, storage and offloading vessels (FPSOs) totaled 116,0002 bopd in the fourth quarter of 2022 compared with 31,000 bopd2 in the prior-year quarter. The Liza Unity FPSO, which commenced production in February 2022, reached its production capacity of 220,000 gross bopd in July 2022. In the fourth quarter, we sold ten cargos of crude oil from Guyana compared with three cargos in the prior year quarter. Net production is forecast to be approximately 100,0002 bopd in 2023.

The third development, Payara, will utilize the Prosperity FPSO with an expected capacity of 220,000 gross bopd, with first production expected by the end of 2023. The fourth development, Yellowtail, was sanctioned in April 2022 and will utilize the ONE GUYANA FPSO with an expected capacity of 250,000 gross bopd, with first production expected in 2025. A fifth development, Uaru, was submitted for approval to the Government of Guyana in the fourth quarter. Pending Government approvals and project sanctioning, the project is expected to have a capacity of approximately 250,000 gross bopd with first oil anticipated at the end of 2026.

The Corporation today announced a significant oil discovery at the Fangtooth SE-1 well on the Stabroek Block, offshore Guyana. The Fangtooth SE-1 well encountered approximately 200 feet of oil bearing sandstone reservoirs.  The well was drilled in 5,397 feet of water by the Stena Carron and is located approximately 8 miles southeast of the original Fangtooth-1 well, which had encountered approximately 164 feet of oil bearing sandstone reservoirs.  Further appraisal activities are underway.  Fangtooth will add to the block’s gross discovered recoverable resource estimate of more than 11 billion boe and has the potential to underpin a future oil development on the Stabroek Block.

   Southeast Asia (Offshore): Net production at North Malay Basin and JDA was 67,000 boepd in the fourth quarter of 2022 compared with 66,000 boepd in the prior-year quarter.

   Libya (Onshore): In November 2022, the Corporation completed the sale of its 8% interest in the Waha Concession for net proceeds of $150 million. Net production from Libya was 10,000 boepd in the fourth quarter of 2022 compared with 21,000 boepd in the prior-year quarter.

Midstream:

The Midstream segment had net income of $64 million in the fourth quarter of 2022, compared with net income of $74 million in the prior-year quarter.

Corporate, Interest and Other:

After-tax expense for Corporate, Interest and Other was $107 million in the fourth quarter of 2022, compared with $118 million in the fourth quarter of 2021.

Capital and Exploratory Expenditures:

E&P capital and exploratory expenditures were $818 million in the fourth quarter of 2022 compared with $593 million in the prior-year quarter, primarily due to higher drilling and development activities in the Bakken and Guyana. Midstream capital expenditures were $63 million in the fourth quarter of 2022 and $54 million in the prior-year quarter.

Liquidity:

Excluding the Midstream segment, Hess Corporation had cash and cash equivalents of $2.48 billion and debt and finance lease obligations totaling $5.60 billion at December 31, 2022. The Midstream segment had cash and cash equivalents of $4 million and total debt of $2.9 billion at December 31, 2022. The Corporation’s debt to capitalization ratio as defined in its debt covenants was 35.8% at December 31, 2022 and 42.3% at December 31, 2021.

Net cash provided by operating activities was $1,252 million in the fourth quarter of 2022, up from $899 million in the fourth quarter of 2021. Net cash provided by operating activities before changes in operating assets and liabilities3 was $1,402 million in the fourth quarter of 2022, compared with $886 million in the prior-year quarter primarily due to higher sales volumes.

During the fourth quarter, the Corporation received net proceeds of $150 million from the sale of its interest in the Waha Concession in Libya and purchased 5 million REDD+ carbon credits from the Government of Guyana for $75 million.

Total cash returned to stockholders in the fourth quarter through common stock repurchases and dividends amounted to $405 million. The Corporation repurchased approximately 2.3 million shares of common stock for $310 million during the fourth quarter, bringing total share repurchases in 2022 to $650 million at an average price of approximately $120 per share.

2. Net production from Guyana in the fourth quarter of 2022 included 22,000 bopd of tax barrels. There were no tax barrels in the fourth quarter of 2021. Net production guidance for Guyana in 2023 of approximately 100,000 bopd includes approximately 10,000 bopd of tax barrels.

3. “Net cash provided by (used in) operating activities before changes in operating assets and liabilities” is a non-GAAP financial measure. The definition of this non-GAAP measure and a reconciliation to its nearest GAAP equivalent measure appears on pages 6 and 7.

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
December 31,
(unaudited)

Year Ended
December 31,
(unaudited)

2022

2021

2022

2021

(In millions)

Exploration and Production

$

76

$

$

22

$

(118)

Midstream

Corporate, Interest and Other

(1)

Total items affecting comparability of earnings between periods

$

76

$

$

21

$

(118)

    Fourth Quarter 2022: E&P results include a pre-tax gain of $76 million ($76 million after income taxes) associated with the sale of the Corporation’s interest in the Waha Concession in Libya.

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

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

Three Months Ended
December 31,
(unaudited)

Year Ended
December 31,
(unaudited)

2022

2021

2022

2021

(In millions)

Net income attributable to Hess Corporation

$

624

$

265

$

2,223

$

559

Less: Total items affecting comparability of earnings between periods

76

21

 (118)

Adjusted net income attributable to Hess Corporation

$

548

$

265

$

2,202

$

677

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

Three Months Ended
December 31,
(unaudited)

Year Ended
December 31,
(unaudited)

2022

2021

2022

2021

(In millions)

Net cash provided by (used in) operating activities before changes in operating assets and liabilities

$

1,402

$

886

$

5,222

$

2,991

Changes in operating assets and liabilities

(150)

13

(1,278)

(101)

Net cash provided by (used in) operating activities

$

1,252

$

899

$

3,944

$

2,890

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.