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What Are Hess’s Key Management Objectives and Strategies?

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Hess’s key management objectives

One of Hess Corporation’s (HES) key management objectives is to “preserve growth options.”

In its 1Q16 earnings conference, Hess said, “Our resilient portfolio is linked to our top quartile operating capabilities and is balanced between unconventionals and offshore providing an attractive mix of short cycle and long cycle investment opportunities. This balanced portfolio also casts a wider net for future long-term growth options.”

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In the above image, we can see that Hess has growth opportunities in the Bakken and Utica plays. It also has several growth projects offshore, including its North Malay Basin and its Stampede projects. Hess also sees growth opportunities in its international operations in Guyana and the Gulf of Mexico.

Another key strategy deployed by Hess this year is a reduction in its rig count. In its 1Q16 earnings conference, Hess noted that its Bakken rig count would be reduced from three rigs to two rigs in 3Q16 and that it would maintain rigs at that level until crude oil prices were ~$60 per barrel.

Other companies focusing on lower rigs this year are Anadarko Petroleum (APC) and Apache (APA). These companies make up a combined 2.7% of the iShares Global Energy ETF (IXC).

Key management comments from Hess

In its 1Q16 earnings conference call, HES’s management said, “At $60 a barrel, we can add rigs and Bakken will grow and generate free cash flow.”

Management also said, “We want to come out of that low point in the cycle with this strong balance sheet. So our plan is because our portfolio is so levered to oil, $1.00 for us gives us $75 million of annual cash flow. So we want to bank that cash flow as you move up to $60 a barrel again to improve the balance sheet. “

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