Morningstar | Hammerhead Success Is Another Positive Step for Hess in Guyana
On Aug. 30 no-moat Hess announced a positive result from the Hammerhead exploration well in the Stabroek Block (Guyana). This marks the ninth discovery in the block, and further extends the partnership's exploration track record in what is clearly a very prolific oil province. The well encountered 197 feet of high-quality oil-bearing sandstone, putting it on par with the block's previous discoveries. However, success at Hammerhead was already factored into our model on a risked basis, and while positive, the announcement does not move the needle on our $65 fair value estimate.As a reminder, the partnership previously pegged the recoverable resources of the Stabroek Block at around 4 billion recoverable barrels of oil (making Hess' 30% share equivalent to almost 4 times its current proved reserves). No estimate was given for the incremental resources associated with Hammerhead, but it would be incremental to the 4 billion total. The latest development plan, announced after the second quarter, calls for five development phases with production reaching 750 mb/d by 2025 (which would by then account for 40% of Hess' output). Even before the Hammerhead result was announced this plan seemed conservative, given the scale of the discoveries announced to date. Our model still assumes output will reach 860 mb/d by year-end 2025, with five phases on line, and a total capacity of 1.2 mmb/d from seven phases, peaking around 2028.
Our sum-of-the-parts valuation is detailed in "Hess: Guyana Deep Dive Supports Fair Value Increase."
Hess is a global exploration and production company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquid (NGL), and natural gas with production operations located primarily in the United States, Guyana, the Malaysia/Thailand Joint Development Area, Malaysia and Denmark. The company's Midstream operating segment provides fee-based services, including gathering, compressing and processing natural gas and fractionating NGL; gathering, terminaling, loading and transporting crude oil and NGL; storing and terminaling propane, and water handling services primarily in the Bakken shale play in the Williston Basin area of North Dakota.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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