Morningstar | Hess Exceeds Guidance in Fourth Quarter, Outlook Unchanged
No-moat rated Hess delivered production of 269 mboe/d in the fourth quarter, excluding Libya. This was 4% lower sequentially but 2% higher year over year and exceeded guidance of 265 mboe/d. Full-year volumes were slightly ahead of prior expectations, too, primarily due to outperformance in the Gulf of Mexico (where the early re-start of the Conger field helped push volumes to 57 mboe/d, 7 mboe/d above guidance). The firm’s Bakken and Asia assets performed as expected over the year. Likewise, the firm’s financial results for the fourth quarter were ahead of Street expectations, with adjusted EBITDA and adjusted earnings per share coming in at $693 million and negative $0.31 respectively, above/below consensus estimates of $590 million and negative $0.40. After incorporating these results, we have nudged our fair value estimate to $62 per share (from $61).The firm’s proved reserves were just 3% higher at year-end, but after accounting for mid-year divestitures, 170% of produced reserves were replaced in the period. Additions mainly came from the Bakken, as Stabroek Block reserves will mainly be booked when wells come online. According to management, the firm still anticipates first production from Liza Phase 1 in 2020. Further, the company expects to sanction Liza Phase 2 during the first quarter of 2019, and a final investment decision on the Payara development is due by the end of the year. This timeline is consistent with our previous expectations, and there was no change to the block’s estimated resources (5 billion barrels of oil equivalent). Guidance for 2019 production from the firm’s other assets was also unchanged, and the $2.9 billion capital budget remains in place, though management did comment that if oil prices remain low for an extended period it may dial back the cadence of development in the Bakken. We interpret this to mean WTI must remain below $50/bbl for several months, with no line of sight to higher prices, before any rigs are let go.
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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