Last10K.com

Hess Corp (HES) SEC Filing 10-K Annual report for the fiscal year ending Monday, December 31, 2018

Hess Corp

CIK: 4447 Ticker: HES

 

Exhibit 99.1

 

HESS CORPORATION

 

 

HESS REPORTS ESTIMATED RESULTS FOR THE FOURTH QUARTER OF 2018

Key Highlights:

A tenth discovery on the Stabroek Block, offshore Guyana, was announced at the Pluma-1 exploration well located approximately 17 miles south of the Turbot-1 well

Estimate of gross discovered recoverable resources for the Stabroek Block increased to more than 5 billion barrels of oil equivalent (boe); growing resource base further underpins the potential for at least five floating production, storage and offloading vessels (FPSOs) producing more than 750,000 gross barrels of oil per day (bopd) by 2025

Year-end proved reserves were 1,192 million boe, organic reserve replacement for 2018 was 166 percent at a finding and development cost of approximately $11.80 per boe

The Corporation purchased $250 million in common stock to complete our previously announced $1.5 billion share repurchase program

Fourth Quarter Financial and Operating Highlights:

Net loss was $4 million, or $0.05 per common share, compared with a net loss of $2,677 million, or $8.57 per common share, in the prior-year quarter

Adjusted net loss was $77 million, or $0.31 per common share, compared to an adjusted net loss of $304 million, or $1.01 per common share, in the fourth quarter of last year

Oil and gas production averaged 267,000 barrels of oil equivalent per day (boepd), excluding Libya; Bakken net production was 126,000 boepd, up 15 percent from 110,000 boepd in the year-ago quarter

E&P capital and exploratory expenditures were $618 million in the quarter, compared to $568 million in the prior-year quarter

Cash and cash equivalents, excluding Midstream, were $2.6 billion at December 31, 2018

2019 Guidance:

E&P capital and exploratory expenditures are expected to be $2.9 billion

Oil and gas production, excluding Libya is forecast to be in the range of 270,000 to 280,000 boepd, compared to full year 2018 net production, excluding Libya and assets sold, of 248,000 boepd

NEW YORK, January 30, 2019 —

Hess Corporation (NYSE: HES) today reported a net loss of $4 million, or $0.05 per common share, in the fourth quarter of 2018, compared to a net loss of $2,677

1

 


The following information was filed by Hess Corp (HES) on Wednesday, January 30, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission File Number 1-1204

 

Hess Corporation

(Exact name of Registrant as specified in its charter)

DELAWARE

 

13-4921002

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

1185 AVENUE OF THE AMERICAS,

 

10036

NEW YORK, N.Y.

 

(Zip Code)

(Address of principal executive offices)

 

 

(Registrant’s telephone number, including area code, is (212) 997-8500)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange on Which Registered

Common Stock (par value $1.00)

 

New York Stock Exchange

 

 

 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  No 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,”  “smaller reporting company” and “emerging growth company”  in Rule 12b-2 of the Exchange Act:

 

  

Large accelerated filer                  

                                                                      Accelerated filer                              

  

 

 

  

Non-accelerated filer                    

Emerging Growth Company        

                                                                      Smaller reporting company            

  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The aggregate market value of voting stock held by non-affiliates of the Registrant amounted to $17,510,000,000, computed using the outstanding common shares and closing market price on June 29, 2018, the last business day of the Registrant’s most recently completed second fiscal quarter.

At January 31, 2019, there were 303,034,262 shares of Common Stock outstanding.

Part III is incorporated by reference from the Proxy Statement for the 2019 annual meeting of stockholders.

 

 

 


 

 

HESS CORPORATION

Form 10-K

TABLE OF CONTENTS

 

Item No.

 

 

 

Page

 

 

PART I

 

 

1 and 2.

 

Business and Properties

 

4

1A.

 

Risk Factors

 

14

1B.

 

Unresolved Staff Comments

 

17

3.

 

Legal Proceedings

 

17

4.

 

Mine Safety Disclosures

 

18

 

 

PART II

 

 

5.

 

Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

19

6.

 

Selected Financial Data

 

21

7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

42

8.

 

Financial Statements and Supplementary Data

 

43

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

94

9A.

 

Controls and Procedures

 

94

9B.

 

Other Information

 

94

 

 

PART III

 

 

10.

 

Directors, Executive Officers and Corporate Governance

 

94

11.

 

Executive Compensation

 

96

12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

96

13.

 

Certain Relationships and Related Transactions, and Director Independence

 

96

14.

 

Principal Accounting Fees and Services

 

96

 

 

PART IV

 

 

15.

 

Exhibits, Financial Statement Schedules

 

97

 

 

Signatures

 

100

 

Unless the context indicates otherwise, references to “Hess”, the “Corporation”, the “Company”, “Registrant”, “we”, “us”, “our” and “its” refer to the consolidated business operations of Hess Corporation and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain sections in this Annual Report on Form 10-K, including information incorporated by reference herein, and those made under the captions Business and Properties, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk contain “forward-looking” statements, as defined under the Private Securities Litigation Reform Act of 1995.  Generally, the words “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which generally are not historical in nature.  Forward-looking statements related to our operations are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future.  Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements.  As and when made, we believe that these forward-looking statements are reasonable.  However, given these uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make.  Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.  Risk factors that could materially impact future actual results are discussed under Item 1A. Risk Factors within this document.

 

 

 


Glossary

Throughout this report, the following company or industry specific terms and abbreviations are used:

Appraisal well – An exploration well drilled to confirm the results of a discovery well, or a well that is used to determine the boundaries of a productive formation.

Bbl – One stock tank barrel, which is 42 United States gallons liquid volume.

Barrel of oil equivalent or Boe – This reflects natural gas reserves converted on the basis of relative energy content of six mcf equals one barrel of oil equivalent (one mcf represents one thousand cubic feet).  Barrel of oil equivalence does not necessarily result in price equivalence, as the equivalent price of natural gas on a barrel of oil equivalent basis has been substantially lower than the corresponding price for crude oil over the recent past.

Boepd – Barrels of oil equivalent per day.

Bopd – Barrels of oil per day.

Condensate – A mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that when produced, is in the liquid phase at surface pressure and temperature.

Development well – A well drilled within the proved area of an oil and/or natural gas reservoir with the intent of producing oil and/or natural gas from that area of the reservoir.

Dry hole or dry well – An exploratory or development well that does not find oil or natural gas in commercial quantities.

Exploratory well – A well drilled to find oil or natural gas in an unproved area or find a new reservoir in a field previously found to be productive by another reservoir.

Fractionation – Fractionation is the process by which the mixture of natural gas liquids that results from natural gas processing is separated into the NGL components, such as ethane, propane, butane, isobutane, and natural gasoline, prior to their sale to various petrochemical and industrial end users.  Fractionation is accomplished by controlling the temperature of the stream of mixed liquids in order to take advantage of the difference in boiling points of separate products.

Field – An area consisting of a single reservoir or multiple reservoirs all grouped or related to the same individual geological structural feature and/or stratigraphic condition.

FPSO – Floating production, storage, and offloading vessel.

Gross acreage Acreage in which a working interest is held by the Corporation.

Gross well – A well in which a working interest is held by the Corporation.

Mcf – One thousand cubic feet of natural gas.

Mmcfd – One thousand mcf of natural gas per day.

Net acreage or Net wells – The sum of the fractional working interests owned by us in gross acres or gross wells.

NGLs or Natural gas liquids – Naturally occurring substances that are separated and produced by fractionating natural gas, including ethane, butane, isobutane, propane and natural gasoline.  NGLs do not sell at prices equivalent to crude oil.

Non-operated – Projects in which the Corporation has a working interest but does not perform the role of Operator.

OPEC – Organization of Petroleum Exporting Countries.

Operator – The entity responsible for conducting and managing exploration, development, and/or production operations for an oil or gas project.

Participating interest – Reflects the proportion of exploration and production costs each party will bear or the proportion of production each party will receive, as set out in an operating agreement.

Production entitlement – The share of gross production the Corporation is entitled to receive under the terms of a production sharing contract.

Production sharing contract – An agreement between a host government and the owners (or co-owners) of a well or field regarding the percentage of production each party will receive after the parties have recovered a specified amount of capital and operational expenses.

 

2

 


Productive well – A well that is capable of producing hydrocarbons in sufficient quantities to justify commercial exploitation.

Proved properties – Properties with proved reserves.

Proved reserves – In accordance with the Securities and Exchange Commission regulations and practices recognized in the publication of the Society of Petroleum Engineers entitled, “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information,” those quantities of crude oil and condensate, NGLs and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.  The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

Proved developed reserves – Proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or for which the cost of the required equipment is relatively minor compared to the cost of a new well.

Proved undeveloped reserves – Proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.  Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

Unproved properties – Properties with no proved reserves.

Working interest – An interest in an oil and gas property that provides the owner of the interest the right to drill for and produce oil and gas on the relevant acreage and requires the owner to pay a share of the costs of drilling and production operations.

 

 

 

3

 


PART I

Items 1 and 2.  Business and Properties

Hess Corporation, incorporated in the State of Delaware in 1920, is a global Exploration and Production (E&P) company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas with production operations located primarily in the United States (U.S.), Denmark, the Malaysia/Thailand Joint Development Area (JDA) and Malaysia.  We conduct exploration activities primarily offshore Guyana, Suriname, Canada and in the U.S. Gulf of Mexico.  At the Stabroek Block (Hess 30%), offshore Guyana, we have participated in twelve significant discoveries. The Liza Phase 1 development was sanctioned in 2017 and is expected to startup in early 2020 with production reaching up to 120,000 gross bopd.  The discovered resources to date on the Stabroek Block are expected to underpin the potential for at least five FPSOs producing more than 750,000 gross bopd by 2025.

Our Midstream operating segment provides fee-based services, including gathering, compressing and processing natural gas and fractionating NGLs; gathering, terminaling, loading and transporting crude oil and NGLs; storing and terminaling propane, and water handling services primarily in the Bakken and Three Forks Shale plays in the Williston Basin area of North Dakota.

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further details.

Exploration and Production

Proved Reserves

Proved reserves are calculated using the average price during the twelve-month period ending December 31 determined as an unweighted arithmetic average of the price on the first day of each month within the year, unless prices are defined by contractual agreements, and exclude escalations based on future conditions.  Crude oil prices used in the determination of proved reserves at December 31, 2018 were $65.55 per barrel for West Texas Intermediate (WTI) (2017: $51.19) and $72.08 per barrel for Brent (2017: $54.87).  Our total proved developed and undeveloped reserves at December 31 were as follows:

 

 

Crude Oil & Condensate

 

 

Natural Gas Liquids

 

 

Natural Gas

 

 

Total Barrels of Oil Equivalent (BOE)

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(Millions of bbls)

 

 

(Millions of bbls)

 

 

(Millions of mcf)

 

 

(Millions of bbls)

 

Developed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

266

 

 

 

239

 

 

 

85

 

 

 

87

 

 

 

432

 

 

 

526

 

 

 

423

 

 

 

414

 

Europe

 

 

38

 

 

 

45

 

 

 

 

 

 

 

 

 

77

 

 

 

80

 

 

 

51

 

 

 

58

 

Africa

 

 

111

 

 

 

112

 

 

 

 

 

 

 

 

 

115

 

 

 

117

 

 

 

130

 

 

 

132

 

Asia and other

 

 

4

 

 

 

5

 

 

 

 

 

 

 

 

 

585

 

 

 

696

 

 

 

102

 

 

 

121

 

 

 

 

419

 

 

 

401

 

 

 

85

 

 

 

87

 

 

 

1,209

 

 

 

1,419

 

 

 

706

 

 

 

725

 

Undeveloped

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

235

 

 

 

194

 

 

 

90

 

 

 

84

 

 

 

381

 

 

 

354

 

 

 

389

 

 

 

337

 

Europe

 

 

1

 

 

 

4

 

 

 

 

 

 

 

 

 

1

 

 

 

12

 

 

 

1

 

 

 

6

 

Africa

 

 

15

 

 

 

16

 

 

 

 

 

 

 

 

 

13

 

 

 

7

 

 

 

17

 

 

 

17

 

Asia and other (a)

 

 

44

 

 

 

44

 

 

 

 

 

 

 

 

 

211

 

 

 

149

 

 

 

79

 

 

 

69

 

 

 

 

295

 

 

 

258

 

 

 

90

 

 

 

84

 

 

 

606

 

 

 

522

 

 

 

486

 

 

 

429

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

501

 

 

 

433

 

 

 

175

 

 

 

171

 

 

 

813

 

 

 

880

 

 

 

812

 

 

 

751

 

Europe

 

 

39

 

 

 

49

 

 

 

 

 

 

 

 

 

78

 

 

 

92

 

 

 

52

 

 

 

64

 

Africa

 

 

126

 

 

 

128

 

 

 

 

 

 

 

 

 

128

 

 

 

124

 

 

 

147

 

 

 

149

 

Asia and other (a)

 

 

48

 

 

 

49

 

 

 

 

 

 

 

 

 

796

 

 

 

845

 

 

 

181

 

 

 

190

 

 

 

 

714

 

 

 

659

 

 

 

175

 

 

 

171

 

 

 

1,815

 

 

 

1,941

 

 

 

1,192

 

 

 

1,154

 

(a)

Asia and other includes proved undeveloped reserves in Guyana of 42 million boe at December 31, 2018 (2017: 45 million boe).

Proved undeveloped reserves were 41% of our total proved reserves at December 31, 2018 on a boe basis (2017: 37%).  Proved reserves held under production sharing contracts totaled 7% of our crude oil reserves and 44% of our natural gas reserves at December 31, 2018 (2017: 7% and 44%, respectively).

For additional information regarding our proved oil and gas reserves, see the Supplementary Oil and Gas Data to the Consolidated Financial Statements presented on pages 82 through 92.

 

 

4

 


 

 

Production

Worldwide crude oil, natural gas liquids, and natural gas net production was as follows:

 

 

2018

 

 

2017

 

 

2016

 

Crude oil - Thousands of barrels

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

27,663

 

 

 

24,439

 

 

 

24,881

 

Other Onshore (a)

 

 

389

 

 

 

2,053

 

 

 

3,209

 

Total Onshore

 

 

28,052

 

 

 

26,492

 

 

 

28,090

 

Offshore

 

 

15,026

 

 

 

14,411

 

 

 

16,649

 

Total United States

 

 

43,078

 

 

 

40,903

 

 

 

44,739

 

Europe

 

 

 

 

 

 

 

 

 

 

 

 

Norway (a)

 

 

 

 

 

7,236

 

 

 

8,387

 

Denmark

 

 

2,231

 

 

 

2,988

 

 

 

3,636

 

 

 

 

2,231

 

 

 

10,224

 

 

 

12,023

 

Africa

 

 

 

 

 

 

 

 

 

 

 

 

Equatorial Guinea (a)

 

 

 

 

 

9,201

 

 

 

11,898

 

Libya

 

 

6,654

 

 

 

3,542

 

 

 

387

 

 

 

 

6,654

 

 

 

12,743

 

 

 

12,285

 

Asia

 

 

 

 

 

 

 

 

 

 

 

 

JDA

 

 

546

 

 

 

586

 

 

 

616

 

Malaysia

 

 

851

 

 

 

289

 

 

 

152

 

 

 

 

1,397

 

 

 

875

 

 

 

768

 

Total

 

 

53,360

 

 

 

64,745

 

 

 

69,815

 

 

Natural gas liquids - Thousands of barrels

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

10,767

 

 

 

10,107

 

 

 

9,701

 

Other Onshore (a)

 

 

1,647

 

 

 

2,972

 

 

 

4,205

 

Total Onshore

 

 

12,414

 

 

 

13,079

 

 

 

13,906

 

Offshore

 

 

1,703

 

 

 

1,733

 

 

 

1,724

 

Total United States

 

 

14,117

 

 

 

14,812

 

 

 

15,630

 

Europe - Norway (a)

 

 

 

 

 

340

 

 

 

408

 

Total

 

 

14,117

 

 

 

15,152

 

 

 

16,038

 

 

Natural gas - Thousands of mcf

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Bakken

 

 

25,625

 

 

 

22,621

 

 

 

22,312

 

Other Onshore (a)

 

 

16,167

 

 

 

33,478

 

 

 

48,597

 

Total Onshore

 

 

41,792

 

 

 

56,099

 

 

 

70,909

 

Offshore

 

 

24,452

 

 

 

20,987

 

 

 

23,603

 

Total United States

 

 

66,244

 

 

 

77,086

 

 

 

94,512

 

Europe

 

 

 

 

 

 

 

 

 

 

 

 

Norway (a)

 

 

 

 

 

6,739

 

 

 

8,541

 

Denmark

 

 

2,958

 

 

 

5,124

 

 

 

7,128

 

 

 

 

2,958

 

 

 

11,863

 

 

 

15,669

 

Asia and Other

 

 

 

 

 

 

 

 

 

 

 

 

JDA

 

 

68,477

 

 

 

73,444

 

 

 

68,031

 

Malaysia (b)

 

 

59,995

 

 

 

27,225

 

 

 

13,151

 

Other

 

 

4,288

 

 

 

 

 

 

 

 

 

 

132,760

 

 

 

100,669

 

 

 

81,182

 

Total

 

 

201,962

 

 

 

189,618

 

 

 

191,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Barrels of Oil Equivalent (in millions) (a) (b)

 

 

101

 

 

 

112

 

 

 

118

 

(a)

In August 2018, the Corporation sold its Utica Assets, onshore U.S. Utica production averaged 9,000 boepd for calendar year 2018 (2017: 19,000 boepd; 2016: 29,000 boepd).  In 2017, the Corporation sold its assets in Equatorial Guinea (November), Norway (December), and the Permian, onshore U.S. (August).  Permian production averaged 4,000 boepd for calendar year 2017 (2016: 7,000 boepd).

(b)

Includes 6,442 thousand mcf of production for 2018 (2017: 4,256 thousand mcf; 2016: 3,624 thousand mcf) from Block PM301 which is unitized into Block A-18 of the JDA.

 

5


 

 

E&P Operations

At December 31, 2018, our significant E&P assets included the following:

United States

Our production in the U.S. was from onshore properties, principally in the Bakken oil shale play in the Williston Basin of North Dakota (Bakken) and from offshore properties in the Gulf of Mexico.

Onshore:

Bakken:  At December 31, 2018, we held approximately 543,000 net acres in the Bakken with varying working interest percentages.  During 2018, we operated an average of 4.8 rigs, drilled 121 wells, completed 118 wells, and brought 104 wells on production, bringing the total operated production wells to 1,414 by year-end.  During 2018, we transitioned from utilizing sliding sleeve completion designs to plug and perf completions.  During 2019, we plan to operate six rigs, drill approximately 170 wells and bring approximately 160 wells on production.  From 2019, all production wells will use plug and perf completions, which we expect will allow us to increase peak net production to approximately 200,000 boepd by 2021.  We forecast net production for full year 2019 to be in the range of 135,000 boepd to 145,000 boepd, compared to production of 117,000 boepd in 2018.

Offshore:

Gulf of Mexico:  At December 31, 2018, we held approximately 75,000 net developed acres, with our production operations principally at the Baldpate (Hess 50%), Conger (Hess 38%), Hack Wilson (Hess 25%), Llano (Hess 50%), Penn State (Hess 50%), Shenzi (Hess 28%), Stampede (Hess 25%) and Tubular Bells (Hess 57%) Fields.  At December 31, 2018, we held approximately 270,000 net undeveloped acres, of which leases covering approximately 37,000 acres are due to expire in the next three years.

Production from the Baldpate, Conger, Llano, and Penn State Fields were shut-in following a fire at the third-party operated Enchilada platform in November 2017.  In 2018, production restarted at the Baldpate, Llano, and Penn State Fields in the first quarter, and at the Conger Field in the third quarter.  At the Hess operated Stampede Field, production commenced in January 2018.  In 2019, we plan to drill one production well and two water injection wells at the Stampede Field, one production well at the Llano Field, and one exploration well at the Esox prospect which, if successful, can be tied back into production facilities at the Tubular Bells Field.

Asia

Malaysia/Thailand Joint Development Area (JDA):  At the Carigali Hess operated offshore Block A-18 in the Gulf of Thailand (Hess 50%), no drilling is planned for 2019 as contracted volumes are expected to be met from the booster compression project that came online in 2016.

Malaysia:  Our production in Malaysia comes from our interest in Block PM301 (Hess 50%), which is adjacent to and is unitized with Block A‑18 of the JDA and our 50% interest in Block PM302 located in the North Malay Basin (NMB), offshore Peninsular Malaysia.  Production from full-field development commenced in July 2017.  In 2019, we plan to continue the drilling program and development activities.

Europe

Denmark:  Production comes from our operated interest in the South Arne Field (Hess 62%).  In 2018, we decided to retain our interest in the field after offers received in a previously announced sale process did not meet our value expectations.  During 2019, we plan to drill an exploration well on License 06/16, located approximately 19 miles from South Arne.

Africa

Libya:  At the onshore Waha concession in Libya, which includes the Defa, Faregh, Gialo, North Gialo and Belhedan Fields (Hess 8%), net production averaged approximately 20,000 boepd in 2018, 10,000 boepd in 2017, and 1,000 boepd in 2016.  Production was shut-in by the operator for extended periods in 2016 due to force majeure caused by civil unrest.  The Company’s net investment in Libya was approximately $55 million at December 31, 2018.

 

6


 

 

Other Non-Producing Countries

Guyana:  At the Stabroek Block (Hess 30%), which covers approximately 6.6 million acres offshore Guyana, the operator Esso Exploration and Production Guyana Limited has made twelve significant discoveries to date.  The first phase of the Liza Field development, which was sanctioned in 2017, is expected to begin producing oil by early 2020.  Phase 1 will use the Liza Destiny FPSO to produce up to 120,000 gross bopd.  Drilling of development wells in the Liza Field is continuing, subsea equipment is being prepared for installation, and the topside facilities modules have been installed on the Liza Destiny FPSO in Singapore, which is expected to arrive offshore Guyana in the third quarter of 2019.  Preparations are also underway for the installation of subsea umbilicals, risers and flowlines at the Liza Field in the spring of 2019.

Phase 2 of the Liza Field development is expected to start production by mid-2022.  Pending government and regulatory approvals, project sanction for Phase 2 is expected by the operator in the first quarter of 2019 and will include a second FPSO vessel designed to produce up to 220,000 gross bopd.  Project sanction for a third phase of development at the Payara Field is expected in 2019 with first production expected to start up as early as 2023.  In addition to the first three phases, development planning is underway for additional FPSOs.  The ultimate sizing and timing will be a function of further exploration and appraisal drilling.

The operator is currently utilizing three drillships on the block.  The Stena Carron and the Noble Tom Madden, which arrived in the third quarter of 2018, are involved in exploration and appraisal drilling.  The Noble Bob Douglas is drilling development wells for Liza Phase 1.  In 2018, the following explorations wells were drilled on the Stabroek Block (in chronological order):

Ranger-1:  The well, located approximately 60 miles northwest of the Liza discovery, encountered approximately 230 feet of high-quality, oil-bearing carbonate reservoir.

Pacora-1: The well encountered approximately 65 feet of high-quality, oil-bearing sandstone reservoir, and is located approximately four miles west of the Payara-1 well, which was drilled in 2017.  The operator plans to integrate this discovery into the Payara Field development.

Liza-5: The well encountered 77 feet of high-quality, oil-bearing sandstone reservoir and is located approximately six miles northwest of the Liza-1 well, which was drilled in 2016.

Sorubim-1: The well did not encounter commercial quantities of hydrocarbons.

Longtail-1: The well encountered approximately 256 feet of high-quality, oil-bearing sandstone reservoir and is located approximately five miles west of the Turbot-1 well, which was drilled in 2017.  

Hammerhead-1: The well encountered approximately 197 feet of high-quality, oil-bearing sandstone reservoir and is located approximately 13 miles to the southwest of the Liza-1 well.

Pluma-1: The well encountered approximately 121 feet of high-quality, hydrocarbon-bearing sandstone reservoir and represents the tenth discovery on the Block.  The well is located approximately 17 miles south of the Turbot-1 well.

In February 2019, the operator announced the eleventh and twelfth discoveries on the Stabroek Block at the Tilapia-1 and Haimara-1 wells. The Tilapia-1 well encountered approximately 305 feet of high-quality, oil-bearing sandstone reservoir, and is located approximately three miles west of the Longtail-1 well.  The Haimara-1 well encountered approximately 207 feet of high-quality, gas condensate-bearing sandstone reservoir, and is located approximately 19 miles east of the Pluma-1 well.

In 2019, additional drilling is planned, including appraisal of the Hammerhead, Ranger and Turbot discoveries, as well as a wider exploration program that will target additional prospects and play types on the block.

In 2018, we acquired a participating interest in the Kaieteur Block (Hess 15%), which is adjacent to the Stabroek Block.  The operator, Esso Exploration and Production Guyana Limited, expects to complete a 2D seismic shoot in 2019.

Suriname:  We hold a 33% non-operated participating interest in Block 42, offshore Suriname.  In 2018, the operator, Kosmos Energy Ltd., completed drilling operations on the Pontoenoe-1 exploration well.  Commercial quantities of hydrocarbons were not discovered and well results will be integrated into the ongoing evaluation for future exploration on the block.  We also hold a 33% non-operated participating interest in Block 59, offshore Suriname, where the operator ExxonMobil Exploration and Production Suriname B.V. commenced a seismic program in 2018.  

Canada:  We hold a 50% participating interest in four exploration licenses offshore Nova Scotia.  In 2018, the operator, BP Canada, completed drilling of the Aspy exploration well, which did not encounter commercial quantities of hydrocarbons.  In January 2019, the partnership relinquished 50% of the Nova Scotia acreage in accordance with the license agreement timeline.  The retained acreage of approximately 1.75 million gross acres remains under evaluation.  We also hold a 25% participating interest in three BP Canada operated exploration licenses offshore Newfoundland.

 

7


 

 

Sales Commitments

We have certain long-term contracts with fixed minimum sales volume commitments for natural gas and NGLs production.  At the JDA in the Gulf of Thailand, we have annual minimum net sales commitments of approximately 80 billion cubic feet of natural gas per year through 2025 and approximately 40 billion cubic feet per year in 2026 and 2027.  At the North Malay Basin development project offshore Peninsular Malaysia, we have annual net sales commitments of approximately 55 billion cubic feet per year through 2024.  Our estimated total volume of production subject to these sales commitments is approximately 950 billion cubic feet of natural gas.  We also have NGLs minimum delivery commitments, primarily in the Bakken through 2023, of approximately 10 million barrels per year, or approximately 55 million barrels over the remaining life of the contracts.

We have not experienced any significant constraints in satisfying the committed quantities required by our sales commitments, and we anticipate being able to meet future requirements from available proved and probable reserves and projected third-party supply.


 

8


 

 

Selling Prices and Production Costs

The following table presents our average selling prices and average production costs:

 

 

2018

 

 

2017

 

 

2016

 

Average selling prices (a)

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil - per barrel (including hedging)

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

56.90

 

 

$

46.04

 

 

$

36.92

 

Offshore

 

 

62.02

 

 

 

47.34

 

 

 

37.47

 

Total United States

 

 

58.69

 

 

 

46.50

 

 

 

37.13

 

Europe (b)

 

 

70.08

 

 

 

55.03

 

 

 

43.33

 

Africa

 

 

69.64

 

 

 

53.17

 

 

 

41.88

 

Asia

 

 

70.42

 

 

 

56.99

 

 

 

42.98

 

Worldwide

 

 

60.77

 

 

 

49.23

 

 

 

39.20

 

Crude oil - per barrel (excluding hedging)

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

60.64

 

 

$

46.76

 

 

$

36.92

 

Offshore

 

 

65.73

 

 

 

48.15

 

 

 

37.47

 

Total United States

 

 

62.41

 

 

 

47.25

 

 

 

37.13

 

Europe (b)

 

 

70.08

 

 

 

55.14

 

 

 

43.33

 

Africa

 

 

69.64

 

 

 

53.25

 

 

 

41.88

 

Asia

 

 

70.42

 

 

 

56.99

 

 

 

42.98

 

Worldwide

 

 

63.80

 

 

 

49.75

 

 

 

39.20

 

Natural gas liquids - per barrel

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

21.29

 

 

$

17.67

 

 

$

9.18

 

Offshore

 

 

25.58

 

 

 

21.34

 

 

 

13.96

 

Total United States

 

 

21.81

 

 

 

18.10

 

 

 

9.71

 

Europe (b)

 

 

 

 

 

29.04

 

 

 

19.48

 

Worldwide

 

 

21.81

 

 

 

18.35

 

 

 

9.95

 

Natural gas - per mcf

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore

 

$

2.29

 

 

$

1.96

 

 

$

1.48

 

Offshore

 

 

2.68

 

 

 

2.22

 

 

 

1.99

 

Total United States

 

 

2.43

 

 

 

2.03

 

 

 

1.61

 

Europe (b)

 

 

3.61

 

 

 

4.42

 

 

 

3.97

 

Asia and other

 

 

5.07

 

 

 

4.27

 

 

 

5.31

 

Worldwide

 

 

4.18

 

 

 

3.37

 

 

 

3.37

 

Average production (lifting) costs per barrel of oil equivalent produced (c)

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

Onshore (d)

 

$

22.34

 

 

$

19.64

 

 

$

18.40

 

Offshore

 

 

13.80

 

 

 

11.89

 

 

 

18.88

 

Total United States

 

 

19.74

 

 

 

17.42

 

 

 

18.54

 

Europe (b)

 

 

26.23

 

 

 

21.95

 

 

 

21.28

 

Africa

 

 

4.42

 

 

 

14.40

 

 

 

20.53

 

Asia and other

 

 

6.16

 

 

 

7.83

 

 

 

11.91

 

Worldwide

 

 

15.73

 

 

 

16.07

 

 

 

18.29

 

(a)

Includes inter‑company transfers valued at approximate market prices, primarily onshore U.S., which include certain processing and distribution fees.

(b)

In 2017, we sold our assets in Norway.  See Note 3, Dispositions in the Notes to Consolidated Financial Statements.  The average selling prices in Norway for 2016 were $43.32 per barrel for crude oil (including hedging), $43.32 per barrel for crude oil (excluding hedging), $19.48 per barrel for NGLs and $5.22 per mcf for natural gas.  The average production (lifting) costs in Norway were $24.70 per boe in 2016.

(c)

Production (lifting) costs consist of amounts incurred to operate and maintain our producing oil and gas wells, related equipment and facilities and transportation costs, including Midstream tariff expense.  Lifting costs do not include costs of finding and developing proved oil and gas reserves, production and severance taxes, or the costs of related general and administrative expenses, interest expense and income taxes.

(d)

Includes Midstream tariff expense of $13.69 per boe in 2018 (2017: $11.10 per boe; 2016: $9.24 per boe).

 

9


 

 

Gross and Net Undeveloped Acreage

At December 31, 2018, gross and net undeveloped acreage amounted to:

 

 

Undeveloped

 

 

 

Acreage (a)

 

 

 

Gross

 

 

Net

 

 

 

(In thousands)

 

United States

 

 

436

 

 

 

383

 

South America

 

 

14,332

 

 

 

3,943

 

Europe

 

 

169

 

 

 

91

 

Africa

 

 

3,334

 

 

 

272

 

Asia and other (b)

 

 

6,350

 

 

 

2,755

 

Total (c)

 

 

24,621

 

 

 

7,444

 

(a)

Includes acreage held under production sharing contracts.

(b)

Includes 5.1 million gross acres (2.1 million net acres) offshore Canada.

(c)

At December 31, 2018, 26% of our net undeveloped acreage is scheduled to expire during the next three years pending results of exploration activities.  In addition, we relinquished 1.75 million gross acres (0.9 million net acres) offshore Nova Scotia, Canada in January 2019.

Gross and Net Developed Acreage, and Productive Wells

At December 31, 2018 gross and net developed acreage and productive wells amounted to:

 

 

Developed Acreage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Applicable to

 

 

Productive Wells (a)

 

 

 

Productive Wells

 

 

Oil

 

 

Gas

 

 

 

Gross

 

 

Net

 

 

Gross

 

 

Net

 

 

Gross

 

 

Net

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

953

 

 

 

554

 

 

 

2,693

 

 

 

1,281

 

 

 

29

 

 

 

21

 

Europe

 

 

23

 

 

 

14

 

 

 

19

 

 

 

12

 

 

 

 

 

 

 

Africa

 

 

9,564

 

 

 

782

 

 

 

1,032

 

 

 

84

 

 

 

9

 

 

 

1

 

Asia and other

 

 

452

 

 

 

226

 

 

 

 

 

 

 

 

 

118

 

 

 

60

 

Total

 

 

10,992

 

 

 

1,576

 

 

 

3,744

 

 

 

1,377

 

 

 

156

 

 

 

82

 

(a)

Includes multiple completion wells (wells producing from different formations in the same bore hole) totaling 105 gross wells and 61 net wells.

Exploratory and Development Wells

Net exploratory and net development wells completed during the years ended December 31 were:

 

Net Exploratory Wells

 

 

Net Development Wells