Replies to post #7975 on The Rising Influence of Rising Affluence

[DewDiligence]

HES is a Merrill top pick for 2014…

Good timing insofar as HES shares have been pounded lately due to continuing news coverage of oil-train accidents.

[DewDiligence]

HES up slightly today, despite broad-market sell-off due to solid 2014 outlook and continued execution on new business model. Will post notes from the 4Q13 CC later.

[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

[DewDiligence]

Good news for HES—Libyan production may be back online soon:

http://online.wsj.com/news/articles/SB10001424052702303887804579499283118174854

An oil terminal in eastern Libya, which has been occupied by rebels, is on the cusp of loading its first tanker since the takeover, and another terminal has restarted operations, an oil official said Sunday.

The news is the latest sign Libya's embattled oil industry could be on its way back to recovery follows a deal between the government and the rebels who had occupied terminals in eastern Libya since the summer seeking greater autonomy in the region…

As noted in #msg-96547320, HES’ production guidance for 2014 included zero barrels from Libya.

[DewDiligence]

HES made a new 5-year intraday high of 87.99 today, surpassing by a hair the price reached at the peak of the commodity cycle in Mar 2011.

[DewDiligence]

HES beats 1Q14 consensus EPS; 2Q14 Bakken forecast is 80-90K boe/d (note: this newswire is from 4/30/14):

http://finance.yahoo.com/news/hess-profit-beats-norwegian-output-123027696.html

Oil and natural gas producer Hess Corp reported a higher-than-expected quarterly profit, helped in part by a jump in Norwegian production.. Excluding one-time items, the company posted a profit of $1.38 per share. By that measure, analysts on average expected earnings of $1.04 per share, according to Thomson Reuters I/B/E/S.

Hess produced 318,000 barrels of oil equivalent per day (boed) in the first quarter, down from 389,000 boed a year earlier. [The YoY decline in production is due in large part to divestitures.] For the second quarter, the company expects to produce 295,000 to 300,000 boed, excluding its weakened Libya operations.

Production during the quarter jumped in the company's Valhall field in Norway to 37,000 boed from 5,000 boed in the same period last year due to a redevelopment project.

While North Dakota production fell in the first quarter as the company completed the expansion of its Tioga gas plant, the project is now finished [#msg-99444439], and Bakken production is currently in excess of 80,000 boed… The company expects to produce about 80,000 to 90,000 boed of North Dakota oil in the second quarter.

Executives said they are moving forward on a planned master limited partnership for their North Dakota pipeline assets, and expect the transaction to be completed by 2015. [This—along with the sale or spinoff of HES’ retail business—is one of the moves sought by Elliott Capital Management that HES agreed to undertake in its compromise with the hedge fund.] Hess would keep a majority stake in the MLP, executives said.