Hess - $HES.US

What’s Hess Business Model?

Hess Corporation operates as a global independent energy company. The Company focuses on the exploration, development, production, transportation, purchase, and sale of crude oil, natural gas liquids, and natural gas. Hess manages production operations around the world.

What Hess is doing in more details?

Hess Corporation is a global exploration and production company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas. It can profess to owning about 1.2 billion barrels of oil equivalent worldwide.

Its primary operations are in the US, but it also has producing interests in Denmark, Malaysia, and Thailand. It also offers midstream services including gathering, compressing and processing natural gas and fractionating, and transporting crude oil and NGL as well as propane storage.

Prospecting for oil since the 1920s, Hess generates more than 75% of sales from the US.

Where Hess is Operating?

Hess has two operating segments: Exploration and Production and Midstream.

Exploration and Production accounts for almost 80% of the company’s revenue. The segment and explores for, develops, produces, purchases, and sells crude oil (about 70% of total sales), NGLs (around 5%), and natural gas (nearly15%).

The Midstream segment provides fee-based services including crude oil and natural gas gathering, processing of natural gas and the fractionation of natural gas liquids, terminaling and loading crude oil and NGLs, transportation of crude oil by rail car and the storage and terminals of propane, primarily in the Bakken, and water handling services primarily in the Bakken shale play of North Dakota.

Midstream segment represents almost 20% of company’s total revenue. Hess operates about 1,685 production wells.

Its offshore production on the Gulf of Mexico principally comes from a handful of fields in which it which holds stakes ? Tubular Bells (Hess more than 55%), Llano (some 50%), Baldpate (approximately 50%), Penn State ( around 50%), Conger (nearly 40%), Shenzi (Hess nearly 30%), Hack Wilson (approximately 25%), and Stampede (around 25%).

Where is the geographical reach of Hess?

New York-based Hess has operations in Canada, Denmark, Guyana, Libya, Malaysia, Suriname, Thailand, and the US.

Revenue from US accounts for more than 75% of Hess’ total sales. Malaysia and JDA and Guyana represent about 10% each. Other regions generate the remaining.

What is Hess’ Sales and Marketing Strategy?

Marketing expense is mainly comprised of costs to purchase crude oil, NGL and natural gas from our partners in Hess operated wells or other third parties, primarily in the US, and transportation and other distribution costs for US marketing activities.

The marketing expenses are $1,067 million, $1,849 million, and $1,833 million, for the year 2020, 2019, and 2018, respectively.

What is Hess Financial Performance?

The company had a net sales of $4.7 billion in 2020, a 28% decrease from the previous year.

Net loss attributable to Hess was $3.1 billion in 2020, an increase of $2.7 billion from the previous year’s net loss of $408 million.

The company’s cash at the end of 2020 was $1.7 billion. Operating activities generated $1.3 billion, while investing activities used $1.7 billion, mainly for additions to property, plant and equipment. Financing activities generated $568 million.

What is Hess Future Strategy?

Hess’ E&P capital and exploratory expenditures are projected to be approximately $1.9 billion in 2021. Capital investment for its Midstream operations is expected to be approximately $160 million.

Oil and gas net production in 2021 is forecast to be approximately 310,000 boepd excluding Libya. For 2021, it has WTI put options with an average monthly floor price of $50 per barrel for 120,000 bopd, and Brent put options with an average monthly floor price of $55 per barrel for 30,000 bopd.

What is Hess’ History?

In 1919 British oil entrepreneur Lord Cowdray formed Amerada Corporation to explore for oil in North America. Cowdray soon hired geophysicist Everette DeGolyer, a pioneer in oil geology research.

DeGolyer’s systematic methods helped Amerada not only find oil deposits faster but also pick up fields missed by competitors. DeGolyer became president of Amerada in 1929 but left in 1932 to work independently.

After WWII Amerada began exploring overseas and during the 1950s entered pipelining and refining. It continued its overseas exploration through Oasis, a consortium formed in 1964 with Marathon, Shell, and Continental to explore in Libya.

Leon Hess began to buy stock in Amerada in 1966. The son of immigrants, he had entered the oil business during the Depression, selling “resid” — thick refining leftovers that refineries discarded — from a 1929 Dodge truck in New Jersey.

He bought the resid cheap and sold it as heating fuel to hotels. Hess also speculated, buying oil at low prices in the summer and selling it for a profit in the winter.

He later bought more trucks, a transportation network, refineries, and gas stations and went into oil exploration. Expansion pushed up debt, so in 1962 Leon’s company went public as Hess Oil and Chemical after merging with Cletrac Corporation.

Hess acquired Amerada in 1969, after an ownership battle with Phillips Petroleum. During the Arab oil embargo of the 1970s, Amerada Hess began drilling on Alaska’s North Slope.

Oilman T. Boone Pickens bought up a chunk of Amerada Hess stock during the 1980s, spurring takeover rumors. They proved premature.

Amerada Hess completed a pipeline in 1993 to carry natural gas from the North Sea to the UK. In 1995 Leon Hess stepped down as CEO (he died in 1999), and his son John took the position.

Amerada Hess sold its 81% interest in the Northstar oil field in Alaska to BP, and the next year Petro-Canada bought the company’s Canadian operations. In 1996 the company acquired a 25% stake (sold in 2002) in UK-based Premier Oil.

The company teamed with Dixons Stores Group in 1997 to market gas in the UK. It also purchased 66 Pick Wick convenience store/service stations.

In 1998 Amerada Hess signed production-sharing contracts with a Malaysian oil firm as part of its strategy to move into Southeast Asia and began to sell natural gas to retail customers in the UK.

To offset losses brought on by depressed oil prices, Amerada Hess sold assets worth more than $300 million in 1999, including its southeastern pipeline network, gas stations in Georgia and South Carolina, and Gulf Coast terminals. It also moved into Latin America, acquiring stakes in fields in offshore Brazil.

In 2000 Amerada Hess acquired Statoil Energy Services, which markets natural gas and electricity to industrial and commercial customers in the northeastern US. It also announced its intention to buy LASMO, a UK-based exploration and production company, before Italy’s Eni topped the Amerada Hess offer.

Undeterred, in 2001 the company bought Dallas-based exploration and production company Triton Energy for $2.7 billion in cash and $500 million in assumed debt. Amerada Hess also acquired the Gulf of Mexico assets of LLOG Exploration Company for $750 million.

That year, however, stiff competition prompted Amerada Hess to put its UK gas and electricity supply business on the auction block. The unit was sold to TXU (now Energy Future Holdings) in 2002.

In 2003 Amerada Hess sold 26 oil and gas fields in the Gulf of Mexico to Anadarko Petroleum. Amerada Hess was granted permission by the Equatorial Guinea government in 2004 to develop 29 new wells in that country.

That year Amerada Hess acquired a 65% stake in Trabant Holdings International, a Russia-based production and exploration company.

The company re-entered its former oil and gas production operations in the Waha concessions in Libya in 2006. Also that year it changed its name to Hess Corporation.

Looking to grow its position in the lucrative Bakken oil shale play in North Dakota, in 2010 the company acquired American Oil and Gas in a $450 million stock deal that added 85,000 net acres to Hess’ holdings. It also bought 167,000 acres in the Bakken play from TRZ Energy, LLC for $1 billion.

Hess’ former refinery in the US Virgin Islands was operated as a joint venture with Venezuela’s state oil company Petróleos de Venezuela S.A (PDVSA). However, the loss-making HOVENSA refinery was shut down in 2012 and converted to an oil storage terminal.

In 2013 Hess announced that it completed its exit from the refining business by closing its Port Reading, New Jersey refinery.

As part of its strategy of unwinding its refining and marketing assets, in 2013 Hess sold Russian subsidiary Samara-Nafta to LUKOIL for $2.05 billion. It also sold its energy marketing business to Direct Energy for a $1.2 billion.

To raise cash it also sold its 2.7% interest in in India’s Azeri, Chirag and Guneshli Fields and its 2.4% stake in the associated BTC pipeline to ONGC Videsh for $1 billion. It also sold its Indonesian oil and gas assets for $1.3 billion.

That year it also sold 20 liquid petroleum products terminals along the US East Coast with total storage capacity of 39 million barrels to Buckeye Partners for $850 million.

The Utica Shale in Ohio was a growth area. However, in 2014 low gas prices prompted Hess agreed to sell 74,000 acres of dry gas acreage in the Utica Shale for $924 million, in order to focus on more lucrative oil plays.

That year it also sold its oil and gas assets in Thailand to PTT Exploration and Production for $1 billion.

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