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Hess (HES) Beats on Q2 Earnings, Discovers New Oil in Guyana

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Hess Corporation HES reported adjusted second-quarter 2021 earnings per share of 24 cents, beating the Zacks Consensus Estimate of 19 cents and improving from the year-ago loss of $1.05.

Quarterly revenues increased to $1,598 million from $842 million a year ago. The top line also beat the Zacks Consensus Estimate of $1,508 million.

Its strong second-quarter results were supported by higher commodity price realizations despite encountering lower crude oil and natural gas liquids production.

Hess Corporation Price, Consensus and EPS Surprise

Hess Corporation Price, Consensus and EPS Surprise
Hess Corporation Price, Consensus and EPS Surprise

Hess Corporation price-consensus-eps-surprise-chart | Hess Corporation Quote

New Discovery in Stabroek

Hess made a significant hydrocarbon discovery at Whiptail-1, located in the famous Stabroek Block offshore Guyana, wherein it has made numerous world-class oil discoveries so far. The new find adds to the previous estimate of gross recoverable resource of 9 billion barrels of oil equivalent. The location of the new find is around 4 miles southeast of Uaru-1 discovery.

Operational Update

Exploration and Production

For the quarter under review, the Exploration and Production business reported adjusted earnings of $122 million against a loss of $249 million a year ago. The business was favored by higher realized commodity prices.

Quarterly hydrocarbon production was 328 thousand barrels of oil equivalent per day (MBoe/d), down from 334 MBoe/d in the year-ago period owing to lower contributions from Gulf of Mexico and the Bakken play.

Crude oil production decreased from 183 thousand barrels per day (MBbls/d) in second-quarter 2020 to 166MBbls/d. Also, natural gas liquids production totaled 57 MBbls/d, down from 63 MBbls/d in the prior-year quarter. Nonetheless, natural gas output was 632 thousand cubic feet per day (Mcf/d), up from 528 Mcf/d a year ago.

Worldwide crude oil realization per barrel of $64.27 (excluding the impact of hedging) improved from $20.63 in the year-ago period. Also, worldwide natural gas prices rose to $4.05 per Mcf from the year-ago figure of $2.41. The average worldwide natural gas liquids selling price increased to $23.12 per barrel from $7.32 a year ago.

Midstream

From the midstream business, the company generated adjusted net earnings of $76 million, significantly up from $51 million a year ago on improvement in tariff rates and minimum volume commitments.

Operating Expenses

Operating expenses for the second quarter totaled $315 million versus the year-ago level of $294 million. Marketing costs increased to $322 million from $56 million a year ago. Exploration expenses also increased to $48 million from $31 million in the year-ago period.

Total costs and expenses increased to $1,463 million for the quarter from $1,114 million a year ago.

Financials

Net cash flow from operations was $785 million for the second quarter, reflecting a significant improvement from the year-ago figure of $266 million. Hess’ capital expenditure for exploration and production activities totaled $429 million, down from $453 million in the prior-year quarter.

As of Jun 30, 2021, the company had $2,430 million in cash & cash equivalents, up from $1,866 million in the previous quarter. Its long-term debt was recorded at $7,712 million at first quarter-end, down sequentially from $8,273 million. Current maturity of the long-term debt is $511 million. Debt to capitalization at quarter-end was 56.4%.

Guidance

The company expects 2021 net production (excluding Libya) to be 295,000 Boe/d. It intends to increase rig count in the Bakken Shale Play to three in September. Total upstream expenditure is estimated at $1.9 billion.

In the September quarter, the company expects to receive $375 million in net proceeds following Hess Midstream LP’s HESM decision to repurchase a significant number of Hess Midstream Operations LP units.

Zacks Rank & Other Stocks to Consider

The company currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks from the energy space include Southwestern Energy Company SWN and W&T Offshore, Inc. WTI, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwestern’s profits for 2021 are expected to jump 197.4% year over year.

W&T Offshore’s bottom line for 2021 is expected to surge 387.5% year over year.


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