Hess’s production volumes
Hess Corporation’s (HES) 3Q15 net production volumes (excluding Libya) averaged 380 Mboe (thousand barrels of oil equivalent) per day. This was a rise of 21% compared to 3Q14. The rise was due to more production from the Bakken shale play, the Utica shale play, the Gulf of Mexico, and Norway.
Sequentially, Hess’s production volume was flat. 4Q15 production volumes are forecast to average 360 Mboe per day, with Bakken contributing 100,000–105,000 barrels of oil equivalent per day. Hess’s 2016 production volumes are expected to fall in the range of 330,000–350,000 barrels of oil equivalent per day. This indicates a fall that’s less than 10% in production volumes against the fiscal 2015 forecast production volumes of 370,000–375,000 barrels of oil equivalent per day.
Like Hess, many upstream companies have been ramping up production and raised their initial 2015 guidance. Concho Resources (CXO), Apache (APA), and Marathon Oil (MRO) raised their fiscal 2015 production guidances by 28%, 2%, and 7%, respectively. These companies combined—including Hess–make up ~4% of the Vanguard Energy ETF (VDE).
Steps to counter low prices
However, Hess has taken other steps to counter lower commodity prices. In the 3Q15 earnings conference, the company’s CEO and director John Hess said that the company has captured $600 million in reductions year-to-date that are evenly split between capital expenditure and operating costs.
Additionally, Hess plans to focus on two important growth projects. First, there’s a joint venture with state-run PETRONAS in the North Malay Basin in Malaysia. Second, there’s the Stampede development project in the Gulf of Mexico. Hess anticipates a positive free cash flow from 2017–2018 when these projects come online. Read “Outlook for Hess: Will Crucial Projects, Cost-Cuts Be Enough?” for a detailed overview on Hess.