Why Hess Is Focusing on Its Bakken and Offshore Guyana Operations

Hess’s 2017 production guidance

Hess Corporation’s (HES) production guidance for 2017 is 305 Mboepd–310 Mboepd (thousand barrels of oil equivalent per day). This represents a fall of 4.5% at the midpoint compared with 2016 levels.

Why Hess Is Focusing on Its Bakken and Offshore Guyana Operations

Hess (HES) noted that its Malaysia, Gulf of Mexico, and Utica operations are its “cash engines,” while its Bakken and offshore Guyana operations are its “growth engines.”

The so-called cash engine regions are forecast to receive 20% of Hess’s capital expenditure in 2018–2020 and will account for ~70% of the company’s cash flow from operations in the same period. The so-called growth engine regions are believed to have cash costs of less than $10 per boe and are expected to see compounded-annual production growth of 20% through 2020.

Regions with cash costs of over $20 per boe and low growth have been ear-marked as regions for future asset sales. These regions include Equatorial Guinea, Permian, and Denmark.

One of the key things that activist hedge fund Elliott Management is pushing for is the divestment of Hess’s operations in Malaysia and Thailand. Hess has already sold its interests in Norway and offshore Equatorial Guinea as part of an asset-sale program that stemmed from Elliott’s 2013 activism campaign. This caused Hess’s focus areas to be in the two major places—in the Bakken and in offshore Guyana.

For more on this, read Market Realist’s “Why Elliott Is Targeting Hess.”

Hess’s 3Q17 production

Hess’s total production in 3Q17 was 311 Mboepd, compared with 314 Mboepd in 3Q16 and 300 in 2Q17. US onshore production contributed ~60% to Hess’s total production, with the Bakken accounting for ~55% of its total US onshore production.