Hess expects a 37% increase in capital spending next year in Bakken, Guyana


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.


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