HES - Embedded Expectations Analysis - 2021 02 08
Hess Corporation (HES:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 57.7x Uniform P/E. At these levels, the market has expectations for Uniform ROA to improve, and management is confident about their cost improvements, the Payara project, and FPSOsSpecifically, management is confident oil and gas would still be 46% of the energy mix in 2040 if all pledges of the Paris Climate Agreement are met. Furthermore, management is confident they reduced their cash operating costs by $275 million and that all costs and contingencies for the Payara project have been accounted for in the Brent breakeven calculation. In addition, they are confident there will be no purchase cost for Liza Phase 1 in 2021, that the Payara project is on pace to generate its first oil by 2024, and that floating production, storage, and offloading vessels (FPSOs) will drive down the overall breakeven level for their portfolio. Furthermore, they are confident in their ability to reduce their drilling and completions (D&C) costs even further through the application of technology and manufacturing techniques, and they are also confident that corporate cash flow needs govern their development rates at Bakken
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.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
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