Report
Valens Research

HES - Embedded Expectations Analysis - 2021 06 02

Hess Corporation (HES:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 31.3x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to inflect positively, but management may have concerns about debottlenecking project execution, Gulf of Mexico production, and FPSO vessel investments

Specifically, management may lack confidence in their ability to execute optimization and debottlenecking projects for their vessels, meet their Gulf of Mexico net production guidance, and ramp-up 6 floating production storage and offloading (FPSO) vessels by 2027. Moreover, they may have concerns about the crude oil hedging contract premiums, the progress of the Liza Phase 2 project, and low Bakken production volumes due to extreme weather conditions. Furthermore, management may lack confidence in their ability to improve free cash flow generation, meet their Midstream segment net income guidance, and lower their Brent oil breakeven price to $40 per barrel. Finally, they may be exaggerating the potential of the Starbroek Block exploration program, their current liquidity strength, and available tieback opportunities
Underlying
Hess Corporation

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.

Provider
Valens Research
Valens Research

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