Hess Corp. continues to push its operations in the Bakken—and enjoy higher than expected offshore Guyana production—while waiting for Chevron to wrap up its pending $53 billion acquisition of the company that is now delayed until at least the back half of 2025.
Hess’ focus remains on execution ahead of the pending Chevron deal, TD Cowen managing director David Deckelbaum wrote in a July 31 analysis. Chevron’s acquisition of Hess is tied up in arbitration over with Exxon Mobil over Hess’ Guyana rights. But Chevron and Hess announced July 31 that the critical arbitration hearing is delayed until May 2025 with the results not coming for another three months afterwards.
“HESS’ 2Q report highlighted a 4% production beat and 5% DCPS [discretionary cash flow per share] beat driven by Bakken” volumes, Deckelbaum said. However, third-quarter guidance is “4% below our estimates on downtime at Guyana and Asia with guided capex in line."
In the Bakken, Hess ran four rigs during the second quarter, drilling 38 wells, completing 37 and bringing 31 new wells online.
Net Bakken production averaged 212,000 boe/d in the second quarter 2024, up 17% compared to 181,000 boe/d in the second quarter of 2023, mainly due to increased drilling and completion activity. NGL and natural gas received under percentage of proceeds contracts was also up about 18%, averaged 26,000 boe/d in the second quarter of 2024, up from 22,000 boe/d during the same time period last year.
For the remainder of 2024, Hess expects to continue to operate four Bakken drilling rigs. The company expects net Bakken production to range between 200,000 boe/d and 205,000 boe/d in the third quarter of 2024, owing to lower anticipated volumes received under percentage of proceeds contracts and planned maintenance at its gas infrastructure, the company said in the release.
Hess’ Bakken production is expected to level out at 200,000 boe/d in 2024 and remain at that level for eight to 10 years, CEO John Hess said earlier this year.
Corporate-wide, Hess reported total net production averaged 494,000 boe/d in the second quarter, compared to 387,000 boe/d in the same quarter last year, primarily because of higher volumes in Guyana and the Bakken. In the third quarter, net production is expected to be between 460,000 boe/d and 470,000 boe/d, primarily reflecting planned downtime in Guyana and Southeast Asia, according to Hess.
Capex up, up, up
Hess reported E&P capex of $1.15 billion in the second-quarter 2024, up 23% compared to $0.9 billion in the second quarter 2023, the company announced July 31 in its second-quarter press release.
Second quarter capex trended up primarily due to higher drilling activity in the U.S. Gulf of Mexico (GoM), up 68% year-over-year (yoy) and in the Bakken, where it was up 20% yoy. Heightened development activities offshore Guyana in South America also raised capex there by 26% yoy.
In terms of capex cost centers, Guyana led the pack in the second quarter 2024, representing 56% of the total capex, followed by Bakken (28%) and GoM (12%).
In the third quarter 2024, Hess expects E&P capex of $1.12 billion, the company said in the release.
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In the Gulf, Hess reported net production of 24,000 boe/d in second quarter 2024 compared to 32,000 boe/d in the second quarter 2023, reflecting planned maintenance at the Conger and Tubular Bells fields.
Due to the pending merger with Chevron, Hess did not host a second quarter 2024 conference call with analysts.
Guyana keeps on giving
Hess’ net production in Stabroek, where it has a 30% interest, averaged 192,000 bbl/d in the second quarter 2024, up 75% compared to 110,000 bbl/d in the second quarter 2023. Higher production was due to the start of Hess’ third development on the block, Payara, in November 2023.
Payara reached its initial gross production capacity of 220,000 bbl/d in January.
In the second quarter, 14 oil cargos were sold from Guyana, compared to nine in the second quarter of 2023. In the third quarter of this year, Hess expects 14 oil cargos to be sold.
Also in the third quarter, Hess expects net production to be dip to between 170,000 bbl/d and 175,000 bbl/d, reflecting downtime associated with the Liza Destiny and the Liza Unity FPSOs. The downtime is related to pipeline and field hook-up for a planned gas-to-energy project and production optimization work at the Liza Unity.
Production in Stabroek is expected to continue rising as additional FPSOs are brought online by operator Exxon Mobil Corp.
Yellowtail, the fourth development, was sanctioned in April 2022. It will have a gross production capacity of 250,000 bbl/d. First production is expected in 2025.
Uaru, the fifth development, was sanctioned in April 2023. It will have a gross production capacity of 250,000 bbl/d. First production is expected in 2026.
Whiptail, the sixth development, was sanctioned in April 2024. It will have a gross production capacity of 250,000 bbl/d. First production is expected by year- end 2027.
An application for the environmental permit for the seventh development, Hammerhead, has been filed with Guyana's Environmental Protection Agency. Pending government and regulatory approval and project sanctioning, Hammerhead is expected to have a gross production capacity of 120,000 bbl/d to 180,000 bbl/d with first oil expected in 2029.
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