Hess Reports Estimated Results for the Third Quarter of 2018

Oct 31, 2018 07:30 am
NEW YORK -- 

Hess Corporation (NYSE:HES) today reported net income of $52 million, or $0.14 per common share, in the third quarter of 2018, compared to a net loss of $624 million, or $2.02 per common share, in the third quarter of 2017. On an adjusted basis, the Corporation reported net income of $123 million, or $0.38 per common share, in the third quarter of 2018, compared with an adjusted net loss of $324 million, or $1.07 per common share, in the prior-year quarter. Higher realized crude oil selling prices combined with lower operating costs and depreciation, depletion and amortization expense in the third quarter of 2018 more than offset lower production volumes due to asset sales, compared with the prior-year quarter.

   “We achieved another strong quarter, delivering higher production and lower costs than our guidance while keeping capital and exploratory expenditures flat with guidance for the year,” Chief Executive Officer John Hess said. “Our reshaped portfolio is well positioned for a decade plus of capital efficient production growth with increasing cash generation and returns to shareholders.”

   After-tax income (loss) by major operating activity was as follows:

                          Three Months Ended     Nine Months Ended
September 30, September 30,
(unaudited) (unaudited)
2018   2017 2018   2017
(In millions, except per share amounts)

Net Income (Loss) Attributable to Hess Corporation

Exploration and Production $ 144 $ (474 ) $ 150 $ (1,061 )
Midstream 30 (12 ) 88 22
Corporate, Interest and Other   (122 )   (138 )   (422 )   (358 )
Net income (loss) attributable to Hess Corporation $ 52 $ (624 ) $ (184 ) $ (1,397 )
 
Net income (loss) per common share (diluted) (a) $ 0.14 $ (2.02 ) $ (0.73 ) $ (4.55 )
 

Adjusted Net Income (Loss) Attributable to Hess Corporation (b)

Exploration and Production $ 203 $ (238 ) $ 236 $ (825 )
Midstream 30 22 88 56
Corporate, Interest and Other   (110 )   (108 )   (329 )   (328 )
Adjusted net income (loss) attributable to Hess Corporation $ 123 $ (324 ) $ (5 ) $ (1,097 )
 
Adjusted net income (loss) per common share (diluted) (a) $ 0.38 $ (1.07 ) $ (0.13 ) $ (3.60 )
 
Weighted average number of shares (diluted)   297.3   314.5   300.4   314.3
 

(a)

Calculated as net income (loss) attributable to Hess Corporation less preferred stock dividends, divided by weighted average number of diluted shares.

(b)

Adjusted net income (loss) attributable to Hess Corporation excludes items affecting comparability of earnings between periods summarized on page 7. A reconciliation of net income (loss) attributable to Hess Corporation to adjusted net income (loss) attributable to Hess Corporation is provided on page 7.

 

Exploration and Production:

   Exploration and Production (E&P) net income in the third quarter of 2018 was $144 million, compared to a net loss of $474 million in the third quarter of 2017. On an adjusted basis, third quarter 2018 net income was $203 million, compared to a net loss of $238 million in the prior-year quarter. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $66.08 per barrel in the third quarter of 2018, up from $46.97 per barrel in the year-ago quarter. Noncash losses on crude oil hedging contracts reduced third quarter 2018 after-tax results by $49 million. The average realized natural gas liquids selling price in the third quarter of 2018 was $24.29 per barrel, versus $17.22 per barrel in the prior-year quarter, while the average realized natural gas selling price was $4.11 per mcf, compared to $3.35 per mcf in the third quarter of 2017.

   Net production, excluding Libya, was 279,000 boepd in the third quarter of 2018, down from 299,000 boepd in the prior-year quarter. Excluding assets sold in 2017 and Libya, third quarter 2017 net production was 249,000 boepd. Growth in production was driven primarily by the Bakken, North Malay Basin and the Gulf of Mexico. Libya net production was 18,000 boepd in the third quarter of 2018, compared with 12,000 boepd in the year-ago quarter. Full year 2018 production, excluding Libya, is now expected to be approximately 255,000 boepd, which is the upper end of our previous guidance range.

   Excluding items affecting comparability of earnings between periods and including Libya, cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $11.41 per barrel of oil equivalent (boe) in the third quarter, down 17 percent from $13.77 per boe in the prior-year quarter.  This improvement is due to increased low-cost production from the Gulf of Mexico and North Malay Basin, cost savings initiatives, and sales of higher cost assets.  The E&P effective tax rate, excluding items affecting comparability and Libya, was a benefit of 5 percent in the third quarter of 2018, compared to a benefit of 18 percent in the prior-year period.

Operational Highlights for the Third Quarter of 2018:

   Bakken (Onshore U.S.): Net production from the Bakken increased 15 percent to 118,000 boepd from 103,000 boepd in the year-ago quarter due to increased drilling activity, improved well performance, and the impact of severe weather in the third quarter of 2017. The Corporation operated an average of five rigs in the third quarter, drilling 34 wells and bringing 29 new wells online. The Corporation added a sixth rig late in the third quarter of this year. Full year 2018 production guidance for the Bakken remains 115,000 boepd to 120,000 boepd.

   Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 71,000 boepd, compared to 59,000 boepd in the prior-year quarter, reflecting higher production primarily from the Penn State and Stampede fields. Production from the Conger Field resumed in mid-July after being shut-in since the fourth quarter of 2017 due to a shutdown of the third-party operated Enchilada platform.

   North Malay Basin (Offshore Malaysia): Net production from North Malay Basin (Hess operated - 50 percent) was 31,000 boepd, compared to 14,000 boepd in the prior-year quarter. Production from the full field development commenced in July 2017. In July, we entered into a sale and lease-back arrangement for a floating, storage and offloading vessel (FSO) to handle produced condensate from the field and received net proceeds of approximately $130 million.

   Guyana (Offshore): At the Stabroek Block (Hess - 30 percent), the operator, Esso Exploration and Production Guyana Limited, announced a ninth discovery on the Block at the Hammerhead-1 exploration well, which encountered approximately 197 feet of high-quality, oil-bearing sandstone reservoir. The well, located approximately 13 miles southwest of the Liza-1 well, targeted Miocene aged reservoir and proves a new play concept for potential development on the Block. The Hammerhead discovery adds to the eight previous discoveries that are estimated to contain gross recoverable resources of more than 4 billion boe and have established the potential for up to five floating, production, storage and offloading (FPSO) vessels producing over 750,000 gross barrels of oil per day (bopd) by 2025.

   The Liza Phase 1 development, which is expected to begin producing oil by early 2020, will use the Liza Destiny FPSO to produce up to 120,000 gross bopd. Construction of the FPSO and subsea equipment is well advanced. Phase 2 of the Liza development, which will use a second FPSO designed to produce up to 220,000 gross bopd, is expected to be producing by mid-2022. A third phase of development at the Payara Field is expected to use an FPSO designed to produce approximately 180,000 gross bopd, with first production expected as early as 2023.

   A second exploration vessel, the Noble Tom Madden, will commence drilling at the Pluma prospect, which is located approximately 17 miles south of the Turbot discovery, in November.

   Canada (Offshore): In Nova Scotia (Hess – 50 percent), drilling of the Aspy exploration well, which is operated by BP Canada, is ongoing.

   Suriname (Offshore): At Block 42 (Hess – 33 percent), the operator, Kosmos Energy Ltd, completed drilling operations on the Pontoenoe-1 exploration well in October. High-quality reservoir was encountered, but commercial hydrocarbons were not discovered. Well costs incurred through September 30, 2018 of $25 million were expensed in the third quarter. Well results will be integrated in the ongoing evaluation to inform future exploration on the block.

Midstream:

   The Midstream segment, comprised primarily of Hess Infrastructure Partners LP, our 50/50 midstream joint venture, had net income of $30 million in the third quarter of 2018, compared to a net loss of $12 million in the prior-year quarter. Excluding items affecting comparability of earnings between periods, third quarter 2017 net income was $22 million. Third quarter 2017 results attributable to Hess Corporation included an after-tax charge of $34 million related to the sale of Permian Midstream assets that were wholly-owned by Hess Corporation.

Corporate, Interest and Other:

   Net results for Corporate, Interest and Other were an after-tax expense of $122 million in the third quarter of 2018, compared to an after-tax expense of $138 million in the third quarter of 2017. On an adjusted basis, third quarter 2018 after-tax expenses were $110 million, compared to $108 million in the third quarter of 2017. Adjusted corporate expenses of $26 million in the third quarter of 2018 were down $10 million, compared to the year-ago quarter primarily as a result of lower employee related costs. In the third quarter of 2018, interest expense of $84 million was $12 million higher than the year-ago quarter primarily due to lower capitalized interest.

Capital and Exploratory Expenditures:

   E&P capital and exploratory expenditures were $542 million in the third quarter of 2018, compared to $558 million in the prior-year quarter. The 2018 activity primarily reflects ongoing drilling in the Bakken, increased Liza Phase 1 development activity, exploration wells in Canada and Suriname, and lower expenditures in the Gulf of Mexico. For full year 2018, our E&P capital and exploratory expenditures guidance remains unchanged at approximately $2.1 billion.

   Midstream capital expenditures were $83 million in the third quarter of 2018, up from $27 million in the year-ago quarter primarily due to expansion of gathering systems and compression capacity to support Hess and third-party production growth. In addition, Midstream investments in its 50/50 joint venture with Targa Resources were $26 million in the third quarter of 2018.

Liquidity:

   Net cash provided by operating activities was $423 million in the third quarter of 2018, up from $88 million in the third quarter of 2017. Net cash provided by operating activities before changes in working capital was $681 million in the third quarter of 2018, which includes a charge to general and administrative expense of $57 million for vacated office space, compared with $428 million in the year-ago quarter. The third quarter 2018 reduction in cash flow from operating activities resulting from changes in working capital was $258 million, which includes premiums paid on calendar 2019 crude oil hedging contracts of $105 million and payment of previously accrued legal claims of $84 million related to former downstream interests.

   In the third quarter of 2018, the Corporation purchased a total of $250 million of common shares, bringing total share repurchases under the Corporation’s previously announced $1.5 billion repurchase program to $1.25 billion. The remaining $250 million is expected to be purchased during the fourth quarter. In the third quarter, the Corporation also completed the sale of our joint venture interests in the Utica shale play for net cash consideration of approximately $400 million.

   Excluding the Midstream segment, the Corporation had cash and cash equivalents of $2.6 billion and total debt of $5.7 billion at September 30, 2018. The Corporation’s debt to capitalization ratio was 37.5 percent at September 30, 2018 and 36.1 percent at December 31, 2017.

   The Midstream segment had cash and cash equivalents of $395 million and total debt of $983 million at September 30, 2018.

Items Affecting Comparability of Earnings Between Periods:

   The following table reflects the total after-tax income (expense) of items affecting comparability of earnings between periods:

                  Three Months Ended     Nine Months Ended
September 30, September 30,
(unaudited) (unaudited)
2018   2017 2018   2017
(In millions)
Exploration and Production $     (59 ) $ (236 ) $ (86 ) $   (236 )
Midstream — (34 ) — (34 )
Corporate, Interest and Other       (12 )   (30 )   (93 )     (30 )
Total items affecting comparability of earnings between periods $     (71 ) $ (300 ) $ (179 ) $   (300 )
 

   Third Quarter 2018: E&P results include a pre-tax charge of $73 million ($73 million after-tax) in connection with vacated office space, of which $57 million is included in General and administrative expenses and $16 million is included in Depreciation, depletion and amortization. In addition, E&P results include a pre-tax gain of $14 million ($14 million after-tax) from the sale of our joint venture interests in the Utica shale play. As required under accounting standards, Corporate, Interest and Other results include an allocation of noncash income tax expense of $12 million to offset the recognition of a noncash income tax benefit recorded in other comprehensive income resulting from changes in fair value of our 2019 crude oil hedging program.

   Third Quarter 2017: Results included an after-tax gain attributable to Hess Corporation of $280 million associated with the sale of our enhanced oil recovery assets in the Permian Basin. This transaction, which included upstream and midstream assets, was allocated to the E&P segment ($314 million after-tax gain) and to the Midstream segment ($34 million after-tax loss). E&P results also included a noncash after-tax charge of $550 million to impair the carrying value of our former assets in Norway. Corporate, Interest and Other results included an after-tax charge of $30 million in connection with vacated office space.

   The following table reconciles reported net income (loss) attributable to Hess Corporation and adjusted net income (loss):

                Three Months Ended     Nine Months Ended
September 30, September 30,
(unaudited) (unaudited)
2018   2017 2018   2017
(In millions)
Net income (loss) attributable to Hess Corporation $   52 $ (624 ) $ (184 ) $ (1,397 )
Less: Total items affecting comparability of earnings between periods     (71 )   (300 )   (179 )   (300 )
Adjusted net income (loss) attributable to Hess Corporation $   123 $ (324 ) $ (5 ) $ (1,097 )
 

   The following table reconciles reported net cash provided by (used in) operating activities from cash provided by (used in) operating activities before changes in operating assets and liabilities:

    Three Months Ended     Nine Months Ended
September 30, September 30,
(unaudited) (unaudited)
2018   2017 2018   2017
(In millions)

Cash provided by (used in) operating activities before changes in operating
assets and liabilities

$ 681 $ 428 $ 1,541 $ 1,233
Changes in operating assets and liabilities   (258 )   (340 )   (483 )   (631 )
Net cash provided by (used in) operating activities $ 423 $ 88 $ 1,058 $ 602
 

Hess Corporation will review third quarter financial and operating results and other matters on a webcast at 10 a.m. today (EDT). 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.

Forward-looking Statements

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 Corporation’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.

Non-GAAP financial measure

The Corporation has used non-GAAP financial measures in this earnings release. “Adjusted net income (loss)” presented in this release is defined as reported net income (loss) attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods. “Cash provided by (used in) operating activities before changes in operating assets and liabilities” presented in this release is defined as Cash provided by (used in) operating activities excluding changes in operating assets and liabilities. Management uses adjusted net income (loss) to evaluate the Corporation’s operating performance and believes that investors’ understanding of our performance is enhanced by disclosing this measure, which excludes certain items that management believes are not directly related to ongoing operations and are not indicative of future business trends and operations. Management believes that cash provided by (used in) operating activities before changes in operating assets and liabilities demonstrates the Corporation’s ability to internally fund capital expenditures, pay dividends and service debt. These measures are not, and should not be viewed as, a substitute for U.S. GAAP net income (loss) or net cash provided by (used in) operating activities. A reconciliation of reported net income (loss) attributable to Hess Corporation (U.S. GAAP) to adjusted net income (loss), and a reconciliation of net cash provided by (used in) operating activities (U.S. GAAP) to cash provided by (used in) operating activities before changes in operating assets and liabilities are provided in the release.

Cautionary Note to Investors

We use certain terms in this release relating to resources other than proved reserves, such as unproved reserves or resources. Investors are urged to consider closely the oil and gas disclosures in Hess’ Form 10-K, File No. 1-1204, available from Hess Corporation, 1185 Avenue of the Americas, New York, New York 10036 c/o Corporate Secretary and on our website at www.hess.com. You can also obtain this form from the SEC on the EDGAR system.

 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

                             
Third Third Second

   Quarter   

   Quarter   

 Quarter 

2018 2017 2018

Income Statement

 
Revenues and non-operating income
Sales and other operating revenues $ 1,793 $ 1,348 $ 1,534
Gains (losses) on asset sales, net 14 274 11
Other, net   21   22   21
Total revenues and non-operating income   1,828   1,644   1,566
 
Costs and expenses
Marketing, including purchased oil and gas 491 338 450
Operating costs and expenses 266 353 288
Production and severance taxes 47 27 42
Exploration expenses, including dry holes and lease impairment 75 41 62
General and administrative expenses 143 111 129
Interest expense 99 79 98
Loss on debt extinguishment — — 26
Depreciation, depletion and amortization 489 759 444
Impairment   —   2,503   —
Total costs and expenses   1,610   4,211   1,539
 
Income (loss) before income taxes 218 (2,567 ) 27
Provision (benefit) for income taxes   121   (1,974 )   114
Net income (loss) 97 (593 ) (87 )
Less: Net income (loss) attributable to noncontrolling interests   45   31   43
Net income (loss) attributable to Hess Corporation 52 (624 ) (130 )
Less: Preferred stock dividends   11   11   12
Net income (loss) attributable to Hess Corporation common stockholders $ 41 $ (635 ) $ (142 )
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

                         
Nine Months Ended September 30,
2018 2017

Income Statement

 
Revenues and non-operating income
Sales and other operating revenues $ 4,673 $ 3,803
Gains (losses) on asset sales, net 32 276
Other, net   79   21
Total revenues and non-operating income   4,784   4,100
 
Costs and expenses
Marketing, including purchased oil and gas 1,299 791
Operating costs and expenses 842 1,085
Production and severance taxes 128 88
Exploration expenses, including dry holes and lease impairment 177 151
General and administrative expenses 382 301
Interest expense 300 245
Loss on debt extinguishment 53 —
Depreciation, depletion and amortization 1,350 2,237
Impairment   —   2,503
Total costs and expenses   4,531   7,401
 
Income (loss) before income taxes 253 (3,301 )
Provision (benefit) for income taxes   308   (1,995 )
Net income (loss) (55 ) (1,306 )
Less: Net income (loss) attributable to noncontrolling interests   129   91
Net income (loss) attributable to Hess Corporation (184 ) (1,397 )
Less: Preferred stock dividends   34   34
Net income (loss) attributable to Hess Corporation common stockholders $ (218 ) $ (1,431 )
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

                                                                     

September 30,

December 31,
2018 2017

Balance Sheet Information

 
Cash and cash equivalents $ 3,004 $ 4,847
Other current assets

1,497

1,310
Property, plant and equipment – net

16,107

16,192
Other long-term assets   953   763
Total assets $

21,561

$ 23,112
 
Current maturities of long-term debt $ 85 $ 580
Other current liabilities

1,873

1,855
Long-term debt 6,609 6,397
Other long-term liabilities 1,854 1,926
Total equity excluding other comprehensive income (loss) 10,246 11,737
Accumulated other comprehensive income (loss) (502 ) (686 )
Noncontrolling interests   1,396   1,303
Total liabilities and equity $

21,561

$ 23,112
 
September 30, December 31,
2018 2017

Total Debt

 
Hess Corporation $ 5,711 $ 5,997
Midstream (a)   983   980
Hess Consolidated $ 6,694 $ 6,977

(a)  Midstream debt is non-recourse to Hess Corporation.

 
September 30, December 31,
2018 2017

Debt to Capitalization Ratio

 
Hess Consolidated 37.5 % 36.1 %
                                                                         
Three Months Ended Nine Months Ended
September 30, September 30,

  2018  

 

  2017  

  2018  

 

  2017  

Interest Expense
 
Gross interest expense – Hess Corporation $ 89 $ 95 $ 269 $ 288
Less: Capitalized interest – Hess Corporation   (5 )   (23 )   (14 )   (61 )
Interest expense – Hess Corporation 84 72 255 227
Interest expense – Midstream (a)   15   7   45   18
Interest expense – Consolidated $ 99 $ 79 $ 300 $ 245

(a)  Midstream interest expense is reported in the Midstream operating segment.

 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

       
Third Third Second

   Quarter   

   Quarter  

 Quarter 

2018 2017 2018

Cash Flow Information

 
Cash Flows from Operating Activities
Net income (loss) $ 97 $ (593 ) $ (87 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities

(Gains) losses on asset sales, net (14 ) (274 ) (11 )
Depreciation, depletion and amortization 489 759 444
Impairment — 2,503 —
Exploratory dry hole costs 25 — 13
Exploration lease and other impairment 8 7 10
Stock compensation expense 21 21 19
Noncash (gains) losses on commodity derivatives, net 49 13 47
Provision (benefit) for deferred income taxes and other tax accruals 6 (2,008 ) 2
Loss on debt extinguishment   —   —   26

Cash provided by (used in) operating activities before changes in operating
assets and liabilities

681 428 463
Changes in operating assets and liabilities   (258 )   (340 )   (38 )
Net cash provided by (used in) operating activities   423   88   425
 
Cash Flows from Investing Activities
Additions to property, plant and equipment - E&P (472 ) (489 ) (430 )
Additions to property, plant and equipment - Midstream (68 ) (24 ) (63 )
Payments for Midstream equity investments (26 ) — (17 )
Proceeds from asset sales, net of cash sold 574 604 27
Other, net   (3 )   (1 )   (1 )
Net cash provided by (used in) investing activities   5   90   (484 )
 
Cash Flows from Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less — 11 —
Debt with maturities of greater than 90 days
Borrowings — — —
Repayments (19 ) (30 ) (157 )
Common stock acquired and retired (230 ) — (519 )
Cash dividends paid (86 ) (91 ) (87 )
Noncontrolling interests, net (13 ) (33 ) (11 )
Other, net   16   (1 )   15
Net cash provided by (used in) financing activities   (332 )   (144 )   (759 )
 
Net Increase (Decrease) in Cash and Cash Equivalents 96 34 (818 )
Cash and Cash Equivalents at Beginning of Period   2,908   2,492   3,726
Cash and Cash Equivalents at End of Period $ 3,004 $ 2,526 $ 2,908
 
 
 

Additions to Property, Plant and Equipment included within Investing Activities:

Capital expenditures incurred $ (583 ) $ (553 ) $ (570 )
Increase (decrease) in related liabilities   43   40   77
Additions to property, plant and equipment $ (540 ) $ (513 ) $ (493 )
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

       

Nine Months Ended

September 30,

     2018     

 

   2017   

Cash Flow Information

     

Cash Flows from Operating Activities

Net income (loss) $ (55 ) $ (1,306 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

(Gains) losses on asset sales, net (32 ) (276 )
Depreciation, depletion and amortization 1,350 2,237
Impairment — 2,503
Exploratory dry hole costs 38 —
Exploration lease and other impairment 28 22
Stock compensation expense 53 65
Noncash (gains) losses on commodity derivatives, net 134 43
Provision (benefit) for deferred income taxes and other tax accruals (28 ) (2,055 )
Loss on debt extinguishment   53         —

Cash provided by (used in) operating activities before changes in operating assets and
liabilities

1,541 1,233
Changes in operating assets and liabilities   (483 )         (631 )
Net cash provided by (used in) operating activities   1,058         602
 
Cash Flows from Investing Activities
Additions to property, plant and equipment - E&P (1,265 ) (1,275 )
Additions to property, plant and equipment - Midstream (168 ) (108 )
Payments for Midstream equity investments (67 ) —
Proceeds from asset sales, net of cash sold 607 783
Other, net   (8 )         (1 )
Net cash provided by (used in) investing activities   (901 )         (601 )
 
Cash Flows from Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less — 15
Debt with maturities of greater than 90 days
Borrowings — —
Repayments (610 ) (107 )
Proceeds from issuance of Hess Midstream Partnership LP units — 366
Common stock acquired and retired (1,120 ) —
Cash dividends paid (262 ) (273 )
Noncontrolling interests, net (36 ) (208 )
Other, net   28         —
Net cash provided by (used in) financing activities   (2,000 )         (207 )
 
Net Increase (Decrease) in Cash and Cash Equivalents (1,843 ) (206 )
Cash and Cash Equivalents at Beginning of Period   4,847         2,732
Cash and Cash Equivalents at End of Period $ 3,004 $       2,526
 
 
 

Additions to Property, Plant and Equipment included within Investing Activities:

Capital expenditures incurred $ (1,544 ) $ (1,426 )
Increase (decrease) in related liabilities   111         43
Additions to property, plant and equipment $ (1,433 ) $       (1,383 )
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

                                                   
Third Third Second

   Quarter   

   Quarter   

 Quarter 

2018 2017 2018

Capital and Exploratory Expenditures

 
E&P Capital and exploratory expenditures
United States
Bakken $ 245 $ 186 $ 242
Other Onshore  

6

  8   25
Total Onshore

251

194 267
Offshore  

88

  191   92
Total United States   339   385   359
South America 136 55 73
Europe 1 34 4
Asia and other   66   84   89
E&P Capital and exploratory expenditures $ 542 $ 558 $ 525
 
Total exploration expenses charged to income included above $ 42 $ 32 $ 39
 
Midstream Capital expenditures $ 83 $ 27 $ 84
                                             
Nine Months Ended September 30,
2018   2017

Capital and Exploratory Expenditures

           
 
E&P Capital and exploratory expenditures
United States
Bakken $ 653 $ 424
Other Onshore        

41

        25
Total Onshore

694

449
Offshore        

263

        540
Total United States         957         989
South America 284 161
Europe 6 91
Asia and other         204         238
E&P Capital and exploratory expenditures $       1,451 $       1,479
 
Total exploration expenses charged to income included above $       111 $       128
 
Midstream Capital expenditures $       204 $       75
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

                     
Third Quarter 2018

Income Statement

 United States 

 

 International 

 

     Total     

         
Total revenues and non-operating income
Sales and other operating revenues $ 1,394 $ 399 $ 1,793
Gains (losses) on asset sales, net 14 — 14
Other, net       5   7         12
Total revenues and non-operating income       1,413   406         1,819
 
Costs and expenses
Marketing, including purchased oil and gas (a) 490 16 506
Operating costs and expenses 153 62 215
Production and severance taxes 46 1 47
Midstream tariffs 169 — 169
Exploration expenses, including dry holes and lease impairment 33 42 75
General and administrative expenses 100 6 106
Depreciation, depletion and amortization       343   114         457
Total costs and expenses       1,334   241         1,575
 
Results of operations before income taxes 79 165 244
Provision (benefit) for income taxes       (21 )   121         100
Net income (loss) attributable to Hess Corporation $     100 (b) $ 44 $       144
 
Third Quarter 2017

Income Statement

 United States 

 International 

     Total     

 
Total revenues and non-operating income
Sales and other operating revenues $ 901 $ 446 $ 1,347
Gains (losses) on asset sales, net 330 — 330
Other, net       (7 )   25         18
Total revenues and non-operating income       1,224   471         1,695
 
Costs and expenses
Marketing, including purchased oil and gas (a) 337 14 351
Operating costs and expenses 149 162 311
Production and severance taxes 26 1 27
Midstream tariffs 140 — 140
Exploration expenses, including dry holes and lease impairment 16 25 41
General and administrative expenses 52 4 56
Depreciation, depletion and amortization 437 272 709
Impairments       —   2,503         2,503
Total costs and expenses       1,157   2,981         4,138
 
Results of operations before income taxes 67 (2,510 ) (2,443 )
Provision (benefit) for income taxes       2   (1,971 )         (1,969 )
Net income (loss) attributable to Hess Corporation $     65 (c) $ (539 ) (d) $       (474 )
 

 

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $49 million (noncash premium amortization: $49 million; cash paid: $- million).

(c)

After-tax losses from realized crude oil hedging activities totaled $7 million (noncash premium amortization: $20 million; cash received: $13 million). After-tax gains from unrealized crude oil hedging activities totaled $8 million.

(d)

After-tax gains from realized crude oil hedging activities totaled $1 million (noncash premium amortization: $5 million; cash received: $6 million). After-tax gains from unrealized crude oil hedging activities totaled $4 million.
 
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

                     
Second Quarter 2018

Income Statement

 United States 

 

 International 

       

      Total      

         
Total revenues and non-operating income
Sales and other operating revenues $ 1,181 $ 353 $ 1,534
Gains (losses) on asset sales, net — 11 11
Other, net       3   6         9
Total revenues and non-operating income       1,184   370         1,554
 
Costs and expenses
Marketing, including purchased oil and gas (a) 462 1 463
Operating costs and expenses 181 60 241
Production and severance taxes 41 1 42
Midstream tariffs 163 — 163
Exploration expenses, including dry holes and lease impairment 34 28 62
General and administrative expenses 33 7 40
Depreciation, depletion and amortization       298   109         407
Total costs and expenses       1,212   206         1,418
 
Results of operations before income taxes (28 ) 164 136
Provision (benefit) for income taxes       (9 )   114         105
Net income (loss) attributable to Hess Corporation $     (19 ) (b) $ 50 $       31
 

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $49 million (noncash premium amortization: $44 million; cash paid: $5 million). After-tax losses from unrealized crude oil hedging activities totaled $3 million.

 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

                     

 

Nine Months Ended September 30, 2018

Income Statement

 United States 

 

 International 

 

     Total     

         
Total revenues and non-operating income
Sales and other operating revenues $ 3,569 $ 1,104 $ 4,673
Gains (losses) on asset sales, net 14 13 27
Other, net       16   20         36
Total revenues and non-operating income       3,599   1,137         4,736
 
Costs and expenses
Marketing, including purchased oil and gas (a) 1,299 44 1,343
Operating costs and expenses 524 179 703
Production and severance taxes 125 3 128
Midstream tariffs 483 — 483
Exploration expenses, including dry holes and lease impairment 92 85 177
General and administrative expenses 184 19 203
Depreciation, depletion and amortization       927   322         1,249
Total costs and expenses       3,634   652         4,286
 
Results of operations before income taxes (35 ) 485 450
Provision (benefit) for income taxes       (39 )   339         300
Net income (loss) attributable to Hess Corporation $     4 (b) $ 146 $       150
 
Nine Months Ended September 30, 2017

Income Statement

 United States 

 International 

     Total     

 
Total revenues and non-operating income
Sales and other operating revenues $ 2,622 $ 1,175 $ 3,797
Gains (losses) on asset sales, net 330 — 330
Other, net       (29 )   46         17
Total revenues and non-operating income       2,923   1,221         4,144
 
Costs and expenses
Marketing, including purchased oil and gas (a) 877 (31 ) 846
Operating costs and expenses 492 443 935
Production and severance taxes 86 2 88
Midstream tariffs 399 — 399
Exploration expenses, including dry holes and lease impairment 67 84 151
General and administrative expenses 143 23 166
Depreciation, depletion and amortization 1,366 754 2,120
Impairments       —   2,503         2,503
Total costs and expenses       3,430   3,778         7,208
 
Results of operations before income taxes (507 ) (2,557 ) (3,064 )
Provision (benefit) for income taxes       (21 )   (1,982 )         (2,003 )
Net income (loss) attributable to Hess Corporation $     (486 ) (c) $ (575 ) (d) $       (1,061 )
 

(a)

 

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $129 million (noncash premium amortization: $124 million; cash paid: $5 million). After-tax losses from unrealized crude oil hedging activities totaled $10 million.

(c)

After-tax losses from realized crude oil hedging activities totaled $6 million (noncash premium amortization: $30 million; cash received: $24 million). After-tax gains from unrealized crude oil hedging activities totaled $1 million.

(d)

After-tax gains from realized crude oil hedging activities totaled $3 million (noncash premium amortization: $11 million; cash received: $14 million). After-tax losses from unrealized crude oil hedging activities totaled $3 million.

 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

 

                                                                                                       
Third Third Second

   Quarter   

   Quarter   

 Quarter 

2018 2017 2018

Net Production Per Day (in thousands)

 
Crude oil - barrels
United States
Bakken 76 63 72
Other Onshore (a)

2

4 2
Total Onshore

78

67 74
Offshore

50

43 34
Total United States 128 110 108
Europe (b) 7 25 5
Africa (c) (d) 16 39 16
Asia 4 2 4
Total 155 176 133
 
Natural gas liquids - barrels
United States
Bakken 30 29 31
Other Onshore (a) 4 8 5
Total Onshore 34 37 36
Offshore 6 5 4
Total United States 40 42 40
Europe (b) — 1 —
Total 40 43 40
 
Natural gas - mcf
United States
Bakken 72 63 68
Other Onshore (a) 47 85 61
Total Onshore 119 148 129
Offshore 89 69 52
Total United States 208 217 181
Europe (b) 8 29 6
Asia and other (d) 395 306 366
Total 611 552 553
 
Barrels of oil equivalent 297 311 265
 

(a)

The Corporation sold its Permian assets in August 2017. Production was 3,000 boepd in the third quarter of 2017.

In addition, the Corporation sold its Utica assets in August 2018. Production was 10,000 boepd in the third quarter of 2018, 17,000 boepd in third quarter of 2017 and 13,000 boepd in the second quarter of 2018.

(b)

The Corporation sold its Norway assets in December 2017. Production was 20,000 boepd in the third quarter of 2017.

(c)

The Corporation sold its Equatorial Guinea assets in November 2017. Production was 27,000 boepd in the third quarter of 2017.

(d)

Production from Libya was 18,000 boepd in the third quarter of 2018, 12,000 boepd in the third quarter of 2017 and 18,000 boepd in the second quarter of 2018.

 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

                                                                                               
Nine Months Ended September 30,
2018   2017

Net Production Per Day (in thousands)

 
Crude oil - barrels
United States
Bakken 73 66
Other Onshore (a) 1 7
Total Onshore 74 73
Offshore 39 43
Total United States 113 116
Europe (b) 6 28
Africa (c) (d) 18 35
Asia 4 2
Total 141 181
 
Natural gas liquids - barrels
United States
Bakken 29 27
Other Onshore (a) 5 9
Total Onshore 34 36
Offshore 5 4
Total United States 39 40
Europe (b) — 1
Total 39 41
 
Natural gas - mcf
United States
Bakken 69 61
Other Onshore (a) 58 97
Total Onshore 127 158
Offshore 59 65
Total United States 186 223
Europe (b) 8 33
Asia and other (d) 363 252
Total 557 508
 
Barrels of oil equivalent 273 307
 

(a)

The Corporation sold its Permian assets in August 2017. Production was 6,000 boepd in the first nine months of 2017.

In addition, the Corporation sold its Utica assets in August 2018. Production was 12,000 boepd in the first nine months of 2018 and 20,000 boepd in the first nine months of 2017.

(b)

The Corporation sold its Norway assets in December 2017. Production was 24,000 boepd in the first nine months of 2017.

(c)

The Corporation sold its Equatorial Guinea assets in November 2017. Production was 28,000 boepd in the first nine months of 2017.

(d)

Production from Libya was 20,000 boepd in the first nine months of 2018 and 7,000 boepd in the first nine months of 2017.

   
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

                                                                                                   
Third Third Second

   Quarter   

   Quarter   

 Quarter 

2018 2017 2018

Sales Volumes Per Day (in thousands) (a)

 
Crude oil - barrels 153 172 135
Natural gas liquids - barrels 40 43 40
Natural gas - mcf 611 552 553
Barrels of oil equivalent 295 307 267
 

Sales Volumes (in thousands) (a)

 
Crude oil - barrels 14,085 15,897 12,259
Natural gas liquids - barrels 3,696 3,920 3,620
Natural gas - mcf 56,251 50,808 50,303
Barrels of oil equivalent 27,156 28,285 24,263
                                                                                                 
Nine Months Ended September 30,

     2018     

 

     2017     

Sales Volumes Per Day (in thousands) (a)

 
Crude oil - barrels 139 174
Natural gas liquids - barrels 39 41
Natural gas - mcf 557 508
Barrels of oil equivalent 271 300
 

Sales Volumes (in thousands) (a)

 
Crude oil - barrels 38,155 47,398
Natural gas liquids - barrels 10,624 11,391
Natural gas - mcf 151,946 138,742
Barrels of oil equivalent 74,103 81,913
 

(a)

Sales volumes from purchased crude oil, natural gas liquids, and natural gas are not included in the sales volumes reported.

 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

                                                                                             
Third Third Second

   Quarter   

   Quarter   

 Quarter 

2018 2017 2018

Average Selling Prices

 
Crude oil - per barrel (including hedging)
United States
Onshore $ 62.92 $ 42.14 $ 59.03
Offshore 66.62 46.11 62.80
Total United States 64.38 43.66 60.25
Europe 74.71 53.89 75.26
Africa 73.34 51.62 73.85
Asia 73.67 — 72.55
Worldwide 66.08 46.97 62.65
 
Crude oil - per barrel (excluding hedging)
United States
Onshore $ 66.76 $ 42.85 $ 63.47
Offshore 70.44 46.72 67.14
Total United States 68.22 44.33 64.66
Europe 74.71 53.77 75.26
Africa 73.34 51.51 73.85
Asia 73.67 — 72.55
Worldwide 69.22 47.36 66.28
 
Natural gas liquids - per barrel
United States
Onshore $ 22.99 $ 16.56 $ 20.08
Offshore 31.27 20.41 24.54
Total United States 24.29 17.04 20.51
Europe — 26.44 —
Worldwide 24.29 17.22 20.51
 
Natural gas - per mcf
United States
Onshore $ 1.99 $ 1.58 $ 1.94
Offshore 2.22 2.26 2.19
Total United States 2.09 1.80 2.01
Europe 3.55 4.58 3.53
Asia and other 5.22 4.34 5.17
Worldwide 4.11 3.35 4.12
 
 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

                                                                                       
Nine Months Ended September 30,
2018   2017

Average Selling Prices

           
 
Crude oil - per barrel (including hedging)
United States
Onshore $ 59.54 $ 44.20
Offshore 63.49 46.04
Total United States 60.90 44.88
Europe 72.37 52.68
Africa 71.14 50.51
Asia 70.68 52.83
Worldwide 62.89 47.16
 
Crude oil - per barrel (excluding hedging)
United States
Onshore $ 63.38 $ 44.38
Offshore 67.29 46.24
Total United States 64.72 45.06
Europe 72.37 52.49
Africa 71.14 50.36
Asia 70.68 52.83
Worldwide 65.98 47.22
 
Natural gas liquids - per barrel
United States
Onshore $ 21.27 $ 16.22
Offshore 27.63 19.95
Total United States 22.01 16.67
Europe — 26.26
Worldwide 22.01 16.89
 
Natural gas - per mcf
United States
Onshore $ 2.14 $ 2.04
Offshore 2.18 2.32
Total United States 2.15 2.12
Europe 3.50 4.24
Asia and other 4.96 4.12
Worldwide 4.00 3.25
                 

The following is a summary of the Corporation’s outstanding West Texas Intermediate hedging program by calendar year:

                                                   
                            2018                           2019            

    Barrels of oil per day    

115,000 95,000

Monthly floor price of put options

$50 $60
Start date October 1 January 1
Finish date

     December 31     

     December 31     

 

For Hess Corporation
Investors:
Jay Wilson, 212-536-8940
or
Media:
Lorrie Hecker, 212-536-8250
or
Sard Verbinnen & Co
Jamie Tully, 212-687-8080