The Rising Influence of Rising Affluence

[DewDiligence]

Here’s what John Hess (CEO) said on the 2Q12 CC held on 7/25/12:

http://seekingalpha.com/article/748301-hess-management-discusses-q2-2012-results-earnings-call-transcript

Before getting into the details of the quarter, I would like to reflect on this change for a moment, as I think doing so will provide meaningful context to our current and expected future results. This change essentially began in 2009, and should be largely complete in 2014. In that relatively short span of 5 years, Hess has all but exited the refining business with the closure of the HOVENSA joint venture refinery, and we'll have shifted our Exploration and Production growth strategy from one based primarily on high impact exploration to one combining lower risk unconventional development opportunities such as the Bakken, along with the exploitation of existing discoveries like North Malay basin, and more focused and limited exposure to high-impact exploration such as Ghana and Ness Deep in the Deepwater Gulf of Mexico.

This shift in Exploration and Production has required a substantial upfront increase in capital spend, largely related to the Bakken. Approximately 35% of this year's capital and exploratory expenditures are devoted to the Bakken compared to 11% in 2009.

The majority of our total spend has been funded with cash flow from operations. Any shortfall has been and is expected to be funded mostly, if not entirely, through asset sales as we rebalance our oil and gas reserve and production portfolio in favor of lower risk, geographically more secure and higher return assets.