Strong output drives good first quarter

HES's initial FY18 output guidance issued in January, of +3% YoY growth, was seen as underwhelming at the time but the Q1 performance indicates management were conservative in their view. Q1 output (ex-Libya) of 233kboed beat guidance of 220-225kboed and, while the FY18 outlook is maintained, investor confidence that guidance can be met/exceeded should be raised. On our raised crude price deck (e.g. WTI $65/bl in 2020) we raise our price target to $60 and retain our Neutral rating. High oil gearing is an upside risk if crude prices continue to firm.