Analyzing Trends in Hess’s Total Debt



Trends in Hess’s debt

Since 2Q14, Hess’s (HES) total debt has risen significantly. In 2Q16, the company’s total debt was $6.5 billion compared to ~$6.1 billion in 2Q14 and $5.9 billion in 2Q15.

Hess’s total debt-to-equity ratio also rose from ~25% in 2Q14 to ~31% in 2Q16. Its total debt-to-equity ratio was 28% in 2Q15. This stemmed from the fact that the company’s equity had been falling since 2Q14, as crude oil prices (USO) had fallen significantly.

HES’s upstream peers Continental Resources (CLR), Concho Resources (CXO), and Cimarex Energy (XEC) have debt-to-equity ratios of 152%, 48%, and 53%, respectively. Together, these companies make up ~9.5% of the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).

A higher debt-to-equity ratio usually indicates that a company has been aggressively financing its growth through debt.

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Hess’s net debt-to-capital ratio: A peer comparison

In a presentation released by Hess on September 8, 2016, it noted its net debt-to-capital ratio versus its peers’ ratios.

The company noted that it had one of the lowest net debt-to-capital ratios among its peers at 11%. In comparison, Chesapeake Energy (CHK) had a ratio of 98%, Continental Resources (CLR) had a ratio of 62%, and Apache (APA) had a ratio of 43%. The industry average is 38%.

The debt-to-capital ratio reflects a company’s leverage and capital structure. A company with a high debt-to-capital ratio may reflect high risk.


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