Hess records third quarter net income of $115 million

Hess Corp. reported net income of $115 million in third-quarter 2021, compared with a net loss of $243 million in third-quarter 2020, and a net loss of $73 million in second-quarter 2021 (OGJ Online, July 28, 2021). On an adjusted basis, the operator reported net income of $86 million in the quarter, compared with an adjusted loss of $216 million in the prior-year quarter. 

The improvement in adjusted after-tax results compared with the prior-year period was primarily due to higher realized selling prices in third-quarter 2021, partially offset by the impact of lower net production, including curtailed production in the Bakken related to the Tioga Gas plant maintenance turnaround, and reduced Gulf of Mexico production due to Hurricane Ida.

Net cash provided by operating activities was $615 million in third-quarter 2021, up from $136 million in third-quarter 2020. Net cash provided by operating activities before changes in operating assets and liabilities was $631 million in the quarter, compared with $468 million in the prior-year quarter primarily due to higher realized selling prices, partially offset by the impact of lower net production.

Exploration and production net income was $178 million in the quarter, compared with a net loss of $182 million in third-quarter 2020. On an adjusted basis, E&P's third-quarter 2021 net income was $149 million compared with an adjusted net loss of $156 million in the prior-year quarter.

Production

Net production, excluding Libya, was 265,000 boe/d in third-quarter 2021, compared with 321,000 boe/d in third-quarter 2020, due to lower production in the Bakken and Gulf of Mexico, partially offset by higher production in Guyana. Net production for Libya was 19,000 boe/d in the quarter compared with zero in third-quarter 2020 due to force majeure declared by the Libyan National Oil Corp.

Net production from the Bakken was 148,000 boe/d compared with 198,000 boe/d in the prior-year quarter, primarily due to the impact of lower drilling activity caused by a reduction in rig count from six to one during first-half 2020, lower NGL and natural gas volumes received under percentage of proceeds contracts due to higher commodity prices, curtailed production related to the planned Tioga Gas plant maintenance turnaround completed in the quarter, and second-quarter 2021 sale of Little Knife and Murphy Creek acreage interests.

Net oil production was 78,000 b/d of oil in third-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 9,000 boe/d in third-quarter 2021 compared with 22,000 boe/d in third-quarter 2020 due to higher realized NGL prices lowering volumes received as consideration for gas processing fees.

Net production from the Gulf of Mexico was 32,000 boe/d, compared with 49,000 boe/d in the prior-year quarter, primarily due to the sale of the company’s interest in Shenzi field in fourth-quarter 2020, higher hurricane related downtime in the third quarter, and natural field decline. Net production from Shenzi field was 9,000 boe/d in third-quarter 2020.

At the Stabroek block offshore Guyana (Hess – 30%), the company’s net production from Liza field was 32,000 b/d of oil in third-quarter 2021 compared with 19,000 b/d of oil in the prior year quarter. The Liza Unity FPSO, with an expected capacity of 220,000 gross b/d of oil, arrived at the block on Oct. 25, and startup of Phase 2 of Liza development remains on track for early 2022.

The third development, Payara, will use 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. Hess expects to have at least six FPSOs on the block by 2027, with the potential for up to 10 FPSOs to develop the current discovered recoverable resource base.

Net production at North Malay basin and JDA offshore southeast Asia was 50,000 boe/d in both the current quarter and prior-year quarter.

In August, Hess completed the sale of its interests in offshore Denmark for $130 million. Net production from Denmark was 3,000 boe/d in third-quarter 2021 compared with 5,000 boe/d in the prior-year quarter.

Midstream

The midstream segment had net income of $61 million in third-quarter 2021, compared with net income of $56 million in the prior-year quarter, primarily due to higher revenue from minimum volume commitments and tariff rates partially offset by costs associated with the planned Tioga Gas plant maintenance turnaround.

Capital and exploratory expenditures

E&P capital and exploratory expenditures were $498 million in third-quarter 2021 compared with $331 million in the prior-year quarter, primarily due to higher drilling activity in the Bakken, Guyana, and JDA, partially offset by lower drilling activity in the Gulf of Mexico.

Midstream capital expenditures were $59 million in the quarter, down from $66 million in the prior year quarter.