The Rising Influence of Rising Affluence

[DewDiligence]

HES 1Q11 results and CC notes:

• EPS was $2.74; almost all operating profit came from upstream.

• Production declined to 399K boe/d (from 420K boe/d in 4Q10) for two reasons: i) suspension of production from the Libyan JV in which HES has an 8% stake; and ii) sale of North Sea assets announced in Apr 2010 that did not close until later in the year (#msg-48538701).

• 73% of production was oil and NGL. Of the 27% of production from NG, only 30% of that was in the US, and hence only 9% of overall production was tied to the Henry Hub price.

• HES’ forecast for 2011 full-year production (assuming no improvement in Libya) is 485-495K boe/d.

• Bakken production of 25K boe/d is expected to reach a run rate of 40k boe/d (~10% of overall production) by the end of 2011 (#msg-56999808).

• HES’ Bakken oil is now getting a $3 premium to the WTI price; previously, this oil sold at a $3.50-4 discount to WTI due to the remote location (#msg-56596659). No reason was cited for the abrupt change in Bakken pricing—comments?

• (Opinion only): HES has considerable buyout vig, as noted in #msg-57036532.

1Q11 PR:
http://finance.yahoo.com/news/Hess-Reports-Estimated-bw-2796171855.html?x=0&.v=1

Webcast slides:
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9OTA5NTh8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1