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Gauging Hess’s Debt Position

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Hess’s net debt-to-EBITDA

Hess’s (HES) net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) has mostly been on a rising trend since 2Q14.

In 2Q16, the company’s net debt-to-adjusted EBITDA ratio was ~2.5x.

Hess’s net debt-to-adjusted EBITDA ratio rose consistently between 3Q14 and 2Q15, matching movements in the company’s net debt. While its net debt levels have fallen since they peaked in 2Q15, HES’s net debt-to-adjusted EBITDA ratio continues to inch higher, as we can see in the graph above. This is on account of its falling EBITDA.

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Hess’s 2Q16 net debt was ~$3.5 billion, compared to ~$5 billion in 2Q15 and $3 billion in 1Q16. Its trailing-12-month EBITDA as of 2Q16 was ~$1.4 billion, compared to ~$3.9 billion in 2Q15. Thus, while its net debt has fallen since 2Q15, its trailing-12-month EBITDA has fallen more significantly. So its net debt-to-adjusted EBITDA ratio in 2Q16 remains higher compared to 2Q15.

Peers, liquidity, and financial position

By comparison, upstream companies such as Continental Resources (CLR), Concho Resources (CXO), and Apache (APA) saw their 2Q16 EBITDAs for the trailing 12 months fall ~49%, 3%, and ~58%, respectively, compared to 2015. These companies make up 7.8% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Hess noted that it had $3.1 billion in cash and cash equivalents as of June 20, 2016. Its debt-to-capitalization ratio, excluding its Bakken Midstream project, was 23.5%.

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