The American independent Hess Corp. expects another tight oil market next year and is increasing its capital spending for the coming year by $1 billion with a focus on exploration and production (E&P).
“I have to say that while we have seen a slowdown in demand in China and Europe, overall global oil demand continues to be quite resilient and we are not seeing a major impact from inflation and the high dollar. oil demand itself,” CEO John Hess said on a third-quarter conference call. He said with the reopening of the Chinese economy and an overall increase in air travel, he expects global oil demand to rise by 1 million barrels a day next year.
“I don’t think if there’s a pullback in the economy, where that affects oil demand, I don’t think it’s going to be anywhere near what it was during the global financial crisis. … So we see the market, if anything, having a stronger impact on winter tailwinds and as such I would say there is more upside in the price from where we are now that there were any cons.
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Hess had a good third quarter, with net oil and natural gas production, excluding Libya, up 32% year-on-year. Production was 351,000 boe/d, compared to 265,000 boe/d in the third quarter of 2021.
The company reported net production from its Bakken Shale assets of 166,000 boe/d in the third quarter, up 12% from 148,000 boe/d in the same period last year. Guyana’s net production was 98,000 bpd, compared to 32,000 bpd in the year-ago quarter.
The company’s portfolio focuses on Guyana, the Bakken, the deep waters of the Gulf of Mexico and Southeast Asia. Hess sees production growth of 10% per year over the next five years, led by Guyana and the Bakken.
In the Bakken, society is experiencing 15-20% inflation this year compared to last year. Hess was able to maintain that number at 8.5%, “and we did it through manufacturing, strategic contracts and technology,” management said.
Hess predicts another 15-20% inflation in oil tubular products in the Bakken next year, with 15-20% inflation in drilling rigs and 5-10% inflation in hydraulic fracturing spreads, sand and manpower.
The company recently added a fourth platform to its Bakken program and plans to spend an additional $250 million on it next year.
In Guyana, Hess pointed to the fact that the company has a breakeven Brent oil price of $25-35/bbl. Two other discoveries were announced on Wednesday in the huge Stabroek block off Guyana.
Stabroek is operated by ExxonMobil subsidiary Esso Exploration and Production Guyana Ltd., which holds a 45% interest. Hess Guyana Exploration Ltd. holds a 30% stake and CNOOC Petroleum Guyana Ltd. holds a 25% stake.
Leaders said that although Guyana’s offshore fields contain natural gas, the focus would be on oil. A gas pipeline to deliver fuel to a combined-cycle power station in Guyana’s capital, Georgetown, is under development. Any liquefied natural gas export project would take many years, if at all.
E&P capital and exploration spending is expected to be $2.7 billion for 2022, in line with forecasts. E&P capital and exploration expenditures in the third quarter were $701 million, compared to $498 million in the year-ago quarter. Overall capital expenditure on company assets will increase to $3.7 billion in 2023.
Net production, excluding Libya, should be 370,000 boe/d in the fourth quarter and 325,000 boe/d for the full year.
Total cash returned to shareholders during the quarter through share buybacks and dividends was $265 million.
Net income was $515 million ($1.67/share) in the third quarter, compared to net income of $115 million (37 cents) in the third quarter of 2021.