Hess records second quarter net loss of $73 million
Hess Corp. reported a net loss of $73 million in second-quarter 2021, compared with a net loss of $320 million in second-quarter 2020. On an adjusted basis, net income in second-quarter 2021 was $74 million. The improvement in adjusted after-tax results compared with the prior-year period primarily reflects higher realized selling prices in second-quarter 2021.
Exploration and Production
Exploration and production (E&P) net loss was $25 million in second-quarter 2021, compared with a net loss of $249 million in second-quarter 2020. On an adjusted basis, E&P's second-quarter 2021 net income was $122 million.
Net production, excluding Libya, was 307,000 boe/d in second-quarter 2021, compared with 334,000 boe/d in second-quarter 2020, or 322,000 boe/d pro forma for assets sold. Net production for Libya was 21,000 boe/d in second-quarter 2021 compared with zero in second-quarter 2020 due to force majeure declared by the Libyan National Oil Corp.
Net production from the Bakken was 159,000 boe/d compared with 194,000 boe/d in the prior-year quarter, primarily due to lower drilling activity caused by a reduction in rig count to one from 6 last year, and lower NGL and natural gas volumes received under percentage of proceeds contracts due to higher commodity prices. Net oil production was 79,000 b/d of oil in second-quarter 2021 and 108,000 b/d of oil in the prior year quarter. NGL and natural gas volumes received under percentage of proceeds contracts were 14,000 boe/d in second-quarter 2021 compared with 22,000 boe/d in second-quarter 2020 due to higher realized NGL prices lowering volumes received as consideration for gas processing fees. Hess added a second rig in February 2021 and drilled 17 wells, completed 9 wells, and brought 9 new wells online during the second quarter. In September, Hess plans to add a third rig in the field.
In April, Hess completed the sale of its Little Knife and Murphy Creek acreage interests in the Bakken for net proceeds of $297 million. The sale consisted of about 78,700 net acres in the southernmost portion of the company’s Bakken position and not connected to Hess Midstream LP infrastructure.
Net production from the Gulf of Mexico was 52,000 boe/d, compared with 68,000 boe/d in the prior-year quarter, primarily due to the sale of the company’s interest in Shenzi field in fourth-quarter 2020. Net production from Shenzi was 12,000 boe/d in second-quarter 2020.
Work continued offshore Guyana. At Stabroek block (30%), operator Esso Exploration and Production Guyana noted a new oil discovery at Whiptail. Drilling continues at Whiuptail-1 and Whiptail-2 to test deeper targets.
Net production from Liza field was 26,000 b/d of oil in second-quarter 2021 compared with 22,000 b/d of oil in the prior-year quarter. Startup of Phase, which will utilize the Liza Unity floating production, storage and offloading vessel (FPSO) with an expected capacity of 220,000 gross b/d of oil, remains on track for early 2022.
The third development, Payara, will utilize the Prosperity FPSO with an expected capacity of 220,000 gross b/d of oil; first oil is expected in 2024. A fourth development, Yellowtail, has been identified on the block with anticipated startup in 2025, pending government approvals and project sanctioning. The Mako-2 appraisal well completed in the second quarter confirmed the quality, thickness, and areal extent of the reservoir. Combined discovered resource at Mako and Uaru is expected to support a fifth FPSO on the block. At least six FPSOs are expected by 2027 with the potential for up to 10.
The Longtail-3 well encountered 230 ft of net pay, including newly identified, high quality hydrocarbon bearing reservoirs below the original Longtail-1 discovery intervals. The well was drilled in more than 6,100 ft of water and lies about 2 miles south of Longtail-1.
The Koebi-1 exploration well was drilled to a depth of 20,700 ft and did not encounter commercial quantities of hydrocarbons. Second quarter results include a charge of $12 million in exploration expenses for well costs incurred.
Offshore South East Asia, net production at North Malay basin and JDA was 66,000 boe/d, compared with 44,000 boe/d in the prior-year quarter, reflecting higher natural gas nominations due to a recovery in economic activity.
Midstream
The midstream segment had net income of $76 million in second-quarter 2021, compared with net income of $51 million in the prior-year quarter, primarily due to higher revenue from minimum volume commitments and tariff rates.
Capital and Exploratory Expenditures:
E&P capital and exploratory expenditures were $429 million in second-quarter 2021 compared with $453 million in the prior-year quarter, primarily due to lower drilling activity in the Bakken and Gulf of Mexico, partially offset by increased exploration and development activity in Guyana. Midstream capital expenditures were $47 million in the quarter, down from $79 million in the prior-year quarter.