Hess’s production volumes in 4Q15
For 4Q15, Hess (HES) reported global production of 368 Mboepd (thousand barrels of oil equivalent per day) compared to 362 Mboepd in 4Q14.
Hess’s earnings presentation noted that the increase was due to increased production from the Bakken Shale play, the Utica Shale play, and the Gulf of Mexico. The chart below, taken from a Hess presentation on March 22, 2016, indicates its annual production forecast in 2016 from its major assets and shale plays.
Hess provided a 2016 production guidance of 330–350 Mboepd. This represents a decline of 7% at mid-point compared to 2015 levels.
Upstream companies Oasis Petroleum (OAS) and Apache (APA) have also lowered their fiscal 2016 production growth guidances by ~6% and ~9%, respectively, at mid-point. Newfield Exploration (NFX) has lowered its fiscal 2016 production growth guidance by ~3%. These companies make up ~9.2% of the iShares US Oil & Gas Exploration & Production ETF (IEO).
Hess’s steps to counter low prices
Hess has improved its drilling performance by 64% since 2011. Drilling costs have declined 62% since 2012. Additionally, the company reduced its 2016 capex (capital expenditures) by 40% compared to 2015.
Hess plans to focus on the following two important growth projects in 2016:
- joint venture with state-run Petronas in the North Malay Basin in Malaysia
- Stampede development project in the Gulf of Mexico
Hess anticipates improvement in its free cash flow from 2017–2018 when these projects come online. For a detailed overview of Hess, read Hess Overview: Looking Up after a Volatile 2015.
Next, let’s take a look at Hess’s stock performance year-over-year.