The Rising Influence of Rising Affluence

[DewDiligence]

HES 4Q13 CC notes:

Overall production
4Q13: 307K boe/d; 2014 guidance: 305-315K boe/d. (Neither figure includes any contribution from Libya, which is shut-in due to political instability.) 5-year forecast: 5-8% average compounded growth from 2012-2017.

Bakken production
4Q13: 68K boe/d. 2014 guidance: 80-90K boe/d ramping up from a slow start in 1Q14 until Tioga plant comes online. 2016 forecast: 125K boe/d; 2018 (peak flow) forecast: 180K boe/d. (This is a 50%[!] increase from the old peak-flow forecast of 120K boe/d.)

Bakken average well cost
4Q13: $7.6M, a 16% reduction relative to 4Q12. (No specific 2014 guidance but drilling costs are expected to continue to drop as HES gains more scale in the Bakken.)

Tubular Bells (GoM)
Production to begin in 3Q14 at 25K boe/d net to HES. (Field is operated and is 57% owned by HES; CVX is minority partner.)

Valhall (Norway) production
4Q13: 37K boe/d; 2014 guidance 30-35K boe/d; 2017 (peak flow) forecast: 40-50K boe/d. (These figures are net to HES, who owns 64%; BP is minority partner and operator.)

Gulf of Thailand NG production
4Q13: 46K boe/d; 2017 (peak flow): 70K boe/d, which is expected to be sustained for 20 years! (This NG is priced according to oil benchmark.)

Utica shale
RoI is eventually expected to be comparable to Bakken production.

OTHER ITEMS:

• Cash + non-cash production cost per boe approximately $50 in 2013; expected to be roughly the same in 2014.

• 2013 reserve-replacement ratio and average reserve life were 148% and 12.8 years on a non-GAAP basis and were 118% and 11.5 years on a GAAP basis.

• 4Q13 non-GAAP EPS: $0.96, excluding gains from all divestitures. (HES does not give forward guidance for GAAP or non-GAAP EPS.)

• Total divestitures completed in 2013: $7.8B.

• Debt/capital ratio at 12/31/13 was 19%, down from 28% at 12/31/12 due to divestitures.

• Share buybacks completed pursuant to existing $4B authorization (including buybacks in January 2014 to date): 23.5M shares at average cost of $79.55 ($1.9B spent). These buybacks have reduced the diluted shares outstanding by 6.5%.

• Decision whether to sell or spinoff retail business (service stations and convenience stores) has not yet been made. If decision ends up being a sale, HES will use the proceeds to increase the $4B buyback authorization.

HES’ PR on 4Q13 results:
http://finance.yahoo.com/news/hess-reports-estimated-results-fourth-123000062.html