Hess Reports Estimated Results For The Third Quarter Of 2013


The following excerpt is from the company's SEC filing.

● Production from the Bakken oil shale play increased to 71,000 barrels of oil equivalent per day, up 14 percent; drilling and completion costs per well were $7.8 million, down 18 percent from the third quarter of 2012

● Capital and exploratory expenditures of $1,527 million in the third quarter of 2013 were down 33 percent from the same quarter last year

● Share repurchase program commenced; $500 million of common stock purchased in the third quarter at an average price of $76.60 per share

NEW YORK, October 30, 2013 -- Hess Corporation (NYSE: HES) today reported net in come of $420 million for the quarter ended September 30, 2013.  Adjusted earnings, which exclude items affecting comparability, were $405 million or $1.18 per common share compared with $495 million in the third quarter of 2012.

    Three Months Ended   Nine Months Ended     September 30, (unaudited)   September 30, (unaudited)     2013   2012   2013   2012     (In millions, except per share amounts)   Exploration and Production   $ 455     $ 608     $ 3,274     $ 1,887   Corporate and Other     (89 )     (104 )     (312 )     (313 ) Net income from continuing operations     366       504       2,962       1,574   Discontinued operations - Downstream businesses     54       53       165       77   Net income attributable to Hess Corporation   $ 420     $ 557     $ 3,127     $ 1,651                                     Net income per share (diluted):                                 Continuing operations   $ 1.07     $ 1.48     $ 8.63     $ 4.63   Discontinued operations     0.16       0.16       0.48       0.22   Net income per share   $ 1.23     $ 1.64     $ 9.11     $ 4.85                                     Weighted average number of shares (diluted)     343.3       340.0       343.3       340.3                                     Note: See page 5 for the items affecting comparability of earnings between periods.  

Exploration and Production earnings were $455 million in the third quarter of 2013, compared with $608 million in the third quarter of 2012.  Adjusted earnings were $458 million in the third quarter of 2013 and $546 million in the third quarter of 2012.  Earnings in the third quarter were negatively impacted by an estimated $30 million resulting from sales volumes being underlifted compared to production by 1.2 million barrels.  In addition, extended shutdowns for seasonal maintenance at non-operated fields in the Gulf of Mexico reduced earnings by an estimated $30 million compared to the prior year quarter and $75 million compared to the second quarter of 2013.

Oil and gas production of 310,000 barrels of oil equivalent per day (boepd) was down from 402,000 boepd in the third quarter a year ago.  The decrease was due to asset sales in Russia, the United Kingdom North Sea and Azerbaijan (reduction of 83,000 boepd), extended shutdowns in the Gulf of Mexico and lower production in Libya (reduction of 23,000 boepd), as well as other maintenance and declines (reduction of 24,000 boepd).  Partially offsetting these reductions, net production was up at Valhall by 30,000 boepd and at the Bakken by 8,000 boepd.  Due to civil unrest in Libya, full year 2013 production is expected to be at the low end of the guidance range of 340,000 to 355,000 boepd.  The Corporation’s average worldwide crude oil selling price, including the effect of hedging, was $104.95 per barrel, up from $86.69 per barrel in the same quarter a year ago.  The average worldwide natural gas selling price was $6.52 per mcf in the third quarter of 2013, up from $5.88 per mcf in the third quarter of 2012. Operational Highlights for the Third Quarter of 2013:

Bakken (Onshore U.S.):  Net production from the Bakken oil shale play averaged 71,000 barrels of oil equivalent per day, an increase of approximately 14 percent from the same period last year.  Bakken production guidance remains 64,000 to 70,000 boepd for full year 2013. During the quarter, Hess brought 50 operated wells on production, bringing the year-to-date total to 122 wells.  Drilling and completion costs per operated well averaged $7.8 million in the third quarter of 2013, an improvement of 18 percent versus last year’s third quarter.

Utica (Onshore U.S.):  Seven wells were drilled, eight wells were completed and one well was flow tested during the quarter.  On the Hess 100 percent-owned acreage, the Porterfield C 1H-17 well, in Belmont County, tested at a rate of 3,421 barrels of oil equivalent per day including 21 percent liquids.  To date in 2013, 21 wells have been drilled, 18 wells were completed and nine wells have been tested across both the Corporation’s 100 percent-owned and CONSOL joint venture acreage.

     Valhall (Offshore Norway):  Net production averaged 37,000 boepd during the third quarter, compared with 7,000 boepd in the same period last year, and 13,000 boepd in the second quarter of 2013.  The Field was shut down from July 2012 through January 2013 to install a new production, utilities and accommodation platform.  Production resumed at reduced rates until the Field was shut down during June for planned maintenance at a third party processing facility.  Full year 2013 production for Valhall is expected to be at the low end of the guidance range of 24,000 to 28,000 barrels of oil equivalent per day.  The Corporation’s higher depreciation, depletion and amortization expense in the third quarter as compared to the second quarter of 2013, reflected this greater production contribution from the Valhall Field, which has a higher depreciation rate per barrel than the portfolio average due to a combination of the recently completed field redevelopment project and prior acquisition costs.  While this higher depreciation rate and the high Norwegian statutory income tax rate lowers Valhall’s net income per barrel contribution to the portfolio, its cash margin per barrel is accretive to the portfolio average, since cash taxes are expected to be deferred for the next several years.  

North Malay Basin (Offshore Malaysia):  The five well development drilling program, which commenced in June 2013, was completed ahead of schedule and the rig has now been demobilized.  The project achieved first production in October 2013. Progress continues on the full field development where first gas is anticipated by 2017.

Kurdistan Region of Iraq (Onshore):  The Corporation spud its first exploration well on the Shakrok block.  A second exploration well in Kurdistan, which will be on the Dinarta block, is due to be spud in November 2013.

Capital and Exploratory Expenditures: Capital and exploratory expenditures in the third quarter of 2013 were $1,527 million, of which $1,491 million related to Exploration and Production operations, including $579 million invested in the Bakken.  Capital and exploratory expenditures for the third quarter of 2012 were $2,287 million, of which $2,260 million related to Exploration and Production operations, including $766 million for the Bakken.  Full year 2013 capital and exploratory expenditures guidance remains $6.8 billion, which is down approximately 18 percent from 2012 levels.

To date in 2013, the Corporation has sold its subsidiary in Russia and its interests in the Beryl area fields in the United Kingdom North Sea, the Azeri-Chirag-Guneshli fields offshore Azerbaijan, and its Eagle Ford shale assets in Texas.  In addition, the Corporation has announced the sale of its energy marketing business and its terminal network.  Total proceeds from these completed and announced asset sales, including an expected release of working capital, amount to approximately $6.3 billion.  During the quarter, the Corporation also advanced divestiture processes for its upstream assets in Indonesia and Thailand, as well as the retail and trading businesses.

Net cash provided by operating activities was $1,254 million in the third quarter of 2013, compared with $1,862 million in the same quarter of 2012.  At September 30, 2013, cash and cash equivalents totaled $321 million, compared with $642 million at December 31, 2012.  Total debt of $6,209 million at September 30, 2013 is down 23 percent from $8,111 million at December 31, 2012.  The Corporation’s debt to capitalization ratio at September 30, 2013 was 20.7 percent, compared with 27.7 percent at the end of 2012.

During the third quarter, the Corporation increased its returns to shareholders through a 150 percent increase in the quarterly dividend to 25 cents per common share, and the purchase of approximately 6,530,000 shares of common stock at a cost of approximately $500 million under the Corporation’s authorized $4 billion share repurchase program.

    Three Months Ended   Nine Months Ended     September 30, (unaudited)   September 30, (unaudited)     2013   2012   2013   2012     (In millions)   Exploration and Production   $ (3 )   $ 62     $ 1,518     $ 62   Corporate and Other     (5 )     -       (17 )     -   Total items affecting comparability of earnings                                 from continuing operations     (8 )     62       1,501       62   Discontinued operations - Downstream businesses     23       -       32       -   Total items affecting comparability of earnings                                 between periods   $ 15     $ 62     $ 1,533     $ 62  

Third quarter 2013 net income from continuing operations included after-tax charges of $8 million for employee severance expenses associated with the Corporation’s transformation to a pure play E&P company.

The downstream businesses, comprised of retail, energy marketing, refining and energy trading, reported income of $54 million in the third quarter of 2013, compared with $53 million in the same period in 2012.  Third quarter 2013 results included after-tax income totaling $23 million resulting from the net impact of a gain on the liquidation of LIFO inventories, largely offset by non-cash mark-to-market adjustments in energy marketing, employee severance, Port Reading refinery shutdown costs and other charges.

    Three Months Ended   Nine Months Ended     September 30, (unaudited)   September 30, (unaudited)     2013   2012   2013   2012     (In millions)   Net income attributable to Hess Corporation   $ 420     $ 557     $ 3,127     $ 1,651   Less: Total items affecting comparability of earnings                                 between periods     15       62       1,533       62   Adjusted earnings   $ 405     $ 495     $ 1,594     $ 1,589  

Hess Corporation will review third quarter financial and operating results and other matters on a webcast at 10 a.m. today.  For details about the event, refer to the Investor Relations section of our website at www.hess.com.

Hess Corporation is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas.  More information on Hess Corporation is available at www.hess.com.

Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, uncertainties inherent in the measurement and interpretation of geological, geophysical and other technical data. Estimates and projections contained in this release are based on the Company’s current understanding and assessment based on reasonable assumptions. Actual results may differ materially from these estimates and projections due to certain risk factors discussed in the Corporation’s periodic filings with the Securities and Exchange Commission and other factors.

The Corporation has used a non-GAAP financial measure in this earnings release. “Adjusted earnings” presented in this release is defined as reported net income attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods. We believe that investors' understanding of our performance is enhanced by disclosing this measure. This measure is not, and should not be viewed as, a substitute for U.S. GAAP net income.  A reconciliation of reported net income attributable to Hess Corporation (U.S. GAAP) to adjusted earnings is provided in the release.

                  Third   Third   Second     Quarter   Quarter   Quarter     2013   2012   2013 Income Statement                   Revenues and Non-operating Income                   Sales and other operating revenues   $ 2,706     $ 3,072     $ 3,011   Gains (losses) on asset sales     (5 )     376       1,111   Other, net      (3 )     46       (17 )                           Total revenues and non-operating income      2,698       3,494       4,105                             Costs and Expenses                         Cost of products sold (excluding items shown separately below)     374       359       421   Operating costs and expenses     475       568       510   Production and severance taxes     84       144       97   Exploration expenses, including dry holes and lease impairment     154       259       200   General and administrative expenses     153       134       167   Interest expense     86       104       99   Depreciation, depletion and amortization      681       728       613   Asset impairments     -       208       -                             Total costs and expenses      2,007       2,504       2,107                             Income from continuing operations before income taxes     691       990       1,998   Provision for income taxes      325       480       409                             Income from continuing operations     366       510       1,589   Income (loss) from discontinued operations     52       82       27                             Net income     418       592       1,616   Less: Net income (loss) attributable to noncontrolling interests     (2 )     35       185   Net income attributable to Hess Corporation   $ 420     $ 557     $ 1,431                             Cash Flow Information                         Cash provided by operating activities from continuing operations   $ 1,022     $ 1,818     $ 1,211   Cash provided by operating activities from discontinued operations     232       44       36   Net cash provided by operating activities (a)     1,254       1,862       1,247                             Cash provided by (used in) investing activities from continuing operations     (1,463 )     (1,595 )     962   Cash provided by (used in) investing activities from discontinued operations     (24 )     (22 )     (26 ) Net cash provided by (used in) investing activities     (1,487 )     (1,617 )     936                             Cash provided by (used in) financing activities from continuing operations     (171 )     (126 )     (1,893 ) Cash provided by (used in) financing activities from discontinued operations     -       -       (9 ) Net cash provided by (used in) financing activities     (171 )     (126 )     (1,902 )                           Net increase (decrease) in cash and cash equivalents   $ (404 )   $ 119     $ 281                            

          Nine Months     2013   2012 Income Statement             Revenues and Non-operating Income             Sales and other operating revenues   $ 9,183     $ 9,292   Gains (losses) on asset sales     1,794       412   Other, net      (57 )     72                     Total revenues and non-operating income      10,920       9,776                     Costs and Expenses                 Cost of products sold (excluding items shown separately below)     1,391       961   Operating costs and expenses     1,570       1,653   Production and severance taxes     311       409   Exploration expenses, including dry holes and lease impairment     573       708   General and administrative expenses     469       410   Interest expense     291       313   Depreciation, depletion and amortization      1,973       2,136   Asset impairments     -       267                     Total costs and expenses      6,578       6,857                     Income from continuing operations before income taxes     4,342       2,919   Provision for income taxes      1,204       1,330                     Income from continuing operations     3,138       1,589   Income (loss) from discontinued operations     169       98                     Net income     3,307       1,687   Less: Net income (loss) attributable to noncontrolling interests     180       36   Net income attributable to Hess Corporation   $ 3,127     $ 1,651                     Cash Flow Information                 Cash provided by operating activities from continuing operations   $ 3,019     $ 3,995   Cash provided by operating activities from discontinued operations     301       95   Net cash provided by operating activities (a)     3,320       4,090                     Cash provided by (used in) investing activities from continuing operations     (750 )     (5,298 ) Cash provided by (used in) investing activities from discontinued operations     (62 )     (84 ) Net cash provided by (used in) investing activities     (812 )     (5,382 )                   Cash provided by (used in) financing activities from continuing operations     (2,820 )     1,472   Cash provided by (used in) financing activities from discontinued operations     (9 )     (3 ) Net cash provided by (used in) financing activities     (2,829 )     1,469                     Net increase (decrease) in cash and cash equivalents   $ (321 )   $ 177                                      

                                                            September 30,   December 31,     2013   2012 Balance Sheet Information                           Cash and cash equivalents   $ 321     $ 642   Assets held for sale     5,642       1,092   Other current assets     3,294       6,653   Investments     441       443   Property, plant and equipment – net     27,414       28,807   Other long-term assets     4,784       5,804   Total assets   $ 41,896     $ 43,441                     Short-term debt and current maturities of long-term debt   $ 791     $ 787   Liabilities associated with assets held for sale     2,511       539   Other current liabilities     3,621       7,056   Long-term debt     5,418       7,324   Other long-term liabilities     5,713       6,532   Total equity excluding other comprehensive income (loss)     24,289       21,696   Accumulated other comprehensive income (loss)     (447 )     (493 ) Total liabilities and equity   $ 41,896     $ 43,441  

    Third Quarter 2013     United States   International   Total                         Sales and other operating revenues   $ 1,472       $ 1,234       $ 2,706   Gains (losses) on asset sales     (1 )       (7 )       (8 ) Other, net     (1 )       (2 )       (3 )                               Total revenues and non-operating income     1,470         1,225         2,695                                 Costs and Expenses                             Cost of products sold (excluding items shown separately below)     398         (24 )       374   Operating costs and expenses     191         284         475   Production and severance taxes     64         20         84   Exploration expenses, including dry holes and lease impairment     71         83         154   General and administrative expenses     58         38         96   Depreciation, depletion and amortization     346         330         676                                 Total costs and expenses     1,128         731         1,859                                 Results of operations before income taxes     342         494         836   Provision for income taxes     134         247         381                                 Net income     208         247         455   Less: Net income attributable to noncontrolling interests     -         -         -                                 Net income attributable to Hess Corporation   $ 208   (a)    $ 247   (b)    $ 455                                                                   Third Quarter 2012     United States   International   Total                               Sales and other operating revenues   $ 1,298       $ 1,774       $ 3,072   Gains (losses) on asset sales     -         376         376   Other, net     18         26         44                                 Total revenues and non-operating income     1,316         2,176         3,492                                 Costs and Expenses                             Cost of products sold (excluding items shown separately below)     276         83         359   Operating costs and expenses     188         380         568   Production and severance taxes     53         91         144   Exploration expenses, including dry holes and lease impairment     68         191         259   General and administrative expenses     49         30         79   Depreciation, depletion and amortization     393         332         725   Asset impairments     58         150         208                                 Total costs and expenses     1,085         1,257         2,342                                 Results of operations before income taxes     231         919         1,150   Provision for income taxes     91         445         536                                 Net income     140         474         614   Less: Net income attributable to noncontrolling interests     -         6         6                                 Net income attributable to Hess Corporation   $ 140   (a)    $ 468   (b)    $ 608                                

(a)   The results from crude oil hedging activities comprised after-tax realized income of $0.3 million in the third quarter of 2013, and losses of $5 million in the third quarter of 2012.

(b)   The results from crude oil hedging activities comprised after-tax realized income of $0.5 million in the third quarter of 2013, and losses of $89 million in the third quarter of 2012.

    Second Quarter 2013     United States   International   Total                         Sales and other operating revenues   $ 1,517       $ 1,494       $ 3,011   Gains (losses) on asset sales     (17 )       1,128          1,111   Other, net     (4 )       (14 )        (18 )                               Total revenues and non-operating income     1,496         2,608          4,104                                 Costs and Expenses                             Cost of products sold (excluding items shown separately below)     371         50          421   Operating costs and expenses     200         310          510   Production and severance taxes     55         42          97   Exploration expenses, including dry holes and lease impairment     63         137          200   General and administrative expenses     47         40          87   Depreciation, depletion and amortization     335         274          609                                 Total costs and expenses     1,071         853          1,924                                 Results of operations before income taxes     425         1,755          2,180   Provision for income taxes     171         307          478                                 Net income     254         1,448          1,702   Less: Net income attributable to noncontrolling interests     -         169          169                                 Net income attributable to Hess Corporation   $  254   (a)    $  1,279   (b)   $ 1,533                                

    Nine Months 2013     United States     International     Total                         Sales and other operating revenues   $  4,680       $  4,503       $  9,183   Gains (losses) on asset sales     (18 )       1,809         1,791   Other, net     (11 )       (45 )       (56 )                               Total revenues and non-operating income     4,651         6,267         10,918                                 Costs and Expenses                             Cost of products sold (excluding items shown separately below)     1,346         45         1,391   Operating costs and expenses     582         988         1,570   Production and severance taxes     176         135         311   Exploration expenses, including dry holes and lease impairment     242         331         573   General and administrative expenses     146         122         268   Depreciation, depletion and amortization     1,046         915         1,961                                 Total costs and expenses     3,538         2,536         6,074                                 Results of operations before income taxes     1,113         3,731         4,844   Provision for income taxes     450         944         1,394                                 Net income     663         2,787         3,450   Less: Net income attributable to noncontrolling interests     -         176         176                                 Net income attributable to Hess Corporation   $  663   (a)    $  2,611   (b)    $  3,274                                                                   Nine Months 2012     United States     International     Total                               Sales and other operating revenues   $  3,840       $  5,452       $  9,292   Gains (losses) on asset sales     -         412         412   Other, net     19         53         72                                 Total revenues and non-operating income     3,859         5,917         9,776                                 Costs and Expenses                             Cost of products sold (excluding items shown separately below)     852         109         961   Operating costs and expenses     582         1,071         1,653   Production and severance taxes     143         266         409   Exploration expenses, including dry holes and lease impairment     221         487         708   General and administrative expenses     137         86         223   Depreciation, depletion and amortization     1,007         1,120         2,127   Asset impairments     117         150         267                                 Total costs and expenses     3,059         3,289         6,348                                 Results of operations before income taxes     800         2,628         3,428   Provision for income taxes     313         1,213         1,526                                 Net income     487         1,415         1,902   Less: Net income attributable to noncontrolling interests     -         15         15                                 Net income attributable to Hess Corporation   $  487   (a)    $  1,400   (b)    $  1,887                                

(a)   The results from crude oil hedging activities comprised after-tax realized income of $9 million in the first nine months of 2013, and losses of $34 million in the first nine months of 2012.

(b)   The results from crude oil hedging activities comprised after-tax realized income of $14 million in the first nine months of 2013, and losses of $300 million in the first nine months of 2012.

                  Third   Third   Second     Quarter   Quarter   Quarter     2013   2012   2013                     Sales Volumes Per Day (in thousands)                   Crude oil - barrels     194       284       233   Natural gas liquids - barrels     17       19       18   Natural gas - mcf     515       616       582   Barrels of oil equivalent     296       406       347                             Sales Volumes (in thousands)                         Crude oil - barrels     17,857       26,158       21,180   Natural gas liquids - barrels     1,519       1,727       1,593   Natural gas - mcf     47,406       56,628       52,969   Barrels of oil equivalent     27,277       37,323       31,601                                                                   Nine Months               2013     2012                           Sales Volumes Per Day (in thousands)                         Crude oil - barrels             234       283   Natural gas liquids - barrels             17       19   Natural gas - mcf             564       622   Barrels of oil equivalent             345       405                             Sales Volumes (in thousands)                         Crude oil - barrels             63,804       77,583   Natural gas liquids - barrels             4,759       5,121   Natural gas - mcf             154,037       170,385   Barrels of oil equivalent             94,236       111,102  

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here. Hess Corporation next reports earnings on October 30, 2013.

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President and COO of Hess Corporation just disposed of 2,000 shares - Sept. 12, 2014

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