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Hess (HES) Beats Q2 Earnings Estimates on Bakken Volumes

Zacks Equity Research

Hess Corporation HES reported adjusted second-quarter 2019 loss per share of 9 cents, narrower than the Zacks Consensus Estimate of a loss of 10 cents and the year-ago quarter’s loss of 23 cents.

Revenues increased to $1,697 million from $1,566 million in the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate of $1,550 million.

The strong second-quarter results can be attributed to higher hydrocarbon production, backed by prolific plays like Bakken and Gulf of Mexico.

Q2 Operational Update

Exploration and Production

In the quarter under review, the Exploration and Production business reported an adjusted net profit of $46 million, improving from earnings of $21 million a year ago.

Quarterly hydrocarbon production was 293 thousand barrels of oil equivalent per day, up 10.6% year over year on contributions from resources in Bakken play and Gulf of Mexico.

Crude oil production increased from 133 thousand barrels per day in second-quarter 2018 to 161 thousand barrels per day in second-quarter 2019.

Natural gas liquids production totaled 43 thousand barrels per day, up from 40 thousand barrels in the prior-year quarter. However, natural gas output was 535 thousand cubic feet (Mcf), down from 553 Mcf a year ago.

Worldwide crude oil realization per barrel of $60.45 (including the impact of hedging) declined 3.5% year over year. The average worldwide natural gas liquids selling price also fell to $12.18 per barrel from $20.51 in the year-ago quarter. Moreover, worldwide natural gas prices declined almost 5% to $3.92 per Mcf.

Midstream

From the midstream business, the company generated adjusted net earnings of $35 million, up from $30 million a year ago.

Operating Expenses

Operating expenses in the second quarter totaled $285 million, marginally down from the year-ago quarter’s $288 million.

Financials

Quarterly net cash flow from operations was $675 million at the end of the second quarter. Hess’ capital expenditures for exploration and production activities totaled $664 million, up 26.5% from $525 million in the prior-year quarter.

As of Jun 30, 2019, the company had $2,208 million in cash & cash equivalents and $6,511 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was 39.2%. 

Outlook

The company has lowered its 2019 capital budget for exploration and production activities to $2.8 billion from the earlier projection of $2.9 billion.

Through 2019, Hess expects net production volumes, excluding Libya, in the band of 275,000 (BoE/D) to 280,000 BoE/D.

Zacks Rank & Stocks to Consider

Hess currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include MPLX LP MPLX, Oasis Midstream Partners LP OMP and Plains Group Holdings, L.P. PAGP. All the stocks sport a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

MPLX is likely to see earnings growth of 23.6% through 2019.

Oasis Midstream has an average positive earnings surprise of 0.3% for the past four quarters.

Plains Group is likely to see earnings growth of 7.6% through 2019.

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