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Hess Sets 2014 Capex at $5.8B

Zacks Equity Research

Oil and gas producer Hess Corp. ( HES) intends to spend $5.8 billion on exploration and production in 2014, down 15% from 2013 as it focuses more on greater efficiency in its U.S. shale fields.


The company targets to spend most of its capital in low-risk, high-growth areas such as North Dakota’s Bakken shale as well as focus largely on discovering and developing energy reserves to satisfy activist investor Elliot Management.


Of the total budgeted amount, Hess plans to allocate $2.85 billion (49%) toward unconventional shale resources, $1.475 billion (25%) for production, $925 million (16%) for development and the balance $550 million (10%) for exploration. 


As part of its program, Hess proposes to spend $2.2 billion for the development of the Bakken Shale in North Dakota, flat with 2013. Due to lower well costs and reduced investments in infrastructure projects the company plans to operate 17 rigs versus 14 last year and commission 225 new operated wells in 2014 compared to 168 in 2013. Moreover, the company has increased its expenditures in the emerging Utica shale play to $550 million from $455 million last year.


Hess’ 2014 budget is likely to focus mainly on the development of the Block G in Equatorial Guinea, Block A-18 in the Joint Development Area in the Gulf of Thailand, the South Arne field in Denmark, Tubular Bells Field in the deepwater Gulf of Mexico, the North Malay Basin Project in Malaysia, ongoing drilling at the Valhall field in Norway and the Shenzi Field in the deepwater Gulf of Mexico. The company’s exploration program comprises wells in Ghana and Kurdistan.


Hess carries a Zacks Rank #3 (Hold). There are better-ranked oil and gas drilling firms that offer value. These include Pembina Pipeline Corp. ( PBA), Matrix Service Co. ( MTRX) and Swift Energy Co. ( SFY), all with a Zacks Rank #1 (Strong Buy).

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