The Rising Influence of Rising Affluence

[DewDiligence]

HES Reports 2Q09 Results

[EPS was 0.31, much higher than the Street consensus of 0.02, despite a $150M dry-hole charge for the Guarani well in Brazil. 2Q09 production was 407,000 BOE, +4% vs both 1Q09 and 2Q08; roughly 2/3 of this production was oil and 1/3 gas.

Roughly 85% of HES’ revenue comes from refining and marketing, but this is a highly misleading stat insofar as all of HES’ new investments are in upstream operations. The downstream business is the cash cow that makes HES’ aggressive worldwide exploration program possible.

For the sake of brevity, I’ve omitted several financial tables from this PR.]

http://finance.yahoo.com/news/Hess-Reports-Estimated-bw-3012822272.html?x=0&.v=1

›July 29, 2009, 7:30 am EDT

Second Quarter Highlights:

* Net Income was $100 million compared with $900 million in second quarter 2008

* Oil and gas production was 407,000 barrels per day, up from 393,000 in second quarter 2008

* Capital and exploratory expenditures of $785 million, down from $1,240 million in the second quarter of 2008

Wednesday July 29, 2009, 7:30 am EDT

NEW YORK--(BUSINESS WIRE)--Hess Corporation (NYSE: HES ) reported net income of $100 million for the second quarter of 2009 compared with net income of $900 million for the second quarter of 2008. The after-tax results by major operating activity were as follows:

Three Months Ended Six Months Ended

June 30, (unaudited)
June 30, (unaudited)
2009 2008 2009 2008
(In millions, except per share amounts)
Exploration and Production $ 215 $ 1,025 $ 151 $ 1,849
Marketing and Refining (30 ) (52 ) 72 (36 )
Corporate (26 ) (33 ) (75 ) (72 )
Interest expense (59 ) (40 ) (107 ) (82 )

Net income attributable to Hess Corporation $ 100 $ 900 $ 41 $ 1,659

Net income per share (diluted) $ .31 $ 2.76 $ .13 $ 5.11

Weighted average number of shares (diluted) 325.8 326.2 325.7 325.0


Exploration and Production earnings were $215 million in the second quarter of 2009 compared with $1,025 million in the second quarter of 2008. Second quarter 2009 results include dry hole costs of $153 million ($92 million after-tax), primarily associated with a well offshore Brazil and two wells in the Gulf of Mexico. The Corporation’s oil and gas production, on a barrel-of-oil equivalent basis, was 407,000 barrels per day in the second quarter of 2009, an increase of 4% from the second quarter of 2008. The Corporation’s average worldwide crude oil selling price, including the effect of hedging, was $49.27 per barrel in the second quarter of 2009 compared with $104.29 per barrel in the second quarter of 2008. The Corporation’s average worldwide natural gas selling price was $4.56 per Mcf in the second quarter of 2009 compared with $7.81 per Mcf in the second quarter of 2008.

Marketing and Refining generated a loss of $30 million in the second quarter of 2009 compared with a loss of $52 million in the second quarter of 2008, primarily reflecting improved energy marketing and trading results. Refining operations generated a loss of $26 million in the second quarter of 2009 compared with income of $3 million in the second quarter of 2008, due to lower refining margins. Marketing results generated a loss of $13 million in the second quarter of 2009, compared with a loss of $40 million in the second quarter of 2008. Trading activities produced income of $9 million in the second quarter of 2009, an increase of $24 million from the second quarter of 2008.

The following table reflects the total after-tax impact of items affecting comparability of earnings between periods (in millions):


Three Months Ended Six Months Ended


June 30,
June 30,
2009 2008 2009 2008
Exploration and Production $ (31 ) $ - $ (44 ) $ -

Corporate
- - (16 ) -
$ (31 ) $ - $ (60 ) $ -


In the second quarter of 2009, the Corporation recorded after-tax charges of $31 million to reduce the carrying value of production equipment in the United Kingdom North Sea and materials inventory in Equatorial Guinea and the United States.

Net cash provided by operating activities was $616 million in the second quarter of 2009 compared with $1,732 million in the second quarter of 2008. Capital and exploratory expenditures for the second quarter of 2009 amounted to $785 million, of which $770 million related to Exploration and Production operations. Capital and exploratory expenditures for the second quarter of 2008 amounted to $1,240 million, of which $1,205 million related to Exploration and Production operations.

At June 30, 2009, cash and cash equivalents totaled $1,063 million compared with $908 million at December 31, 2008. Total debt was $4,313 million at June 30, 2009 and $3,955 million at December 31, 2008. The Corporation’s debt to capitalization ratio at June 30, 2009 was 25.8 percent compared with 24.2 percent at the end of 2008.

Hess Corporation will review second quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details on the event, refer to the Investor Relations section of our website at www.hess.com.

Hess Corporation, with headquarters in New York, is a leading global independent energy company engaged in the exploration for and production of crude oil and natural gas, as well as in refining and marketing refined petroleum products, natural gas and electricity. More information on Hess Corporation is available at www.hess.com.‹