Integrated oil company
) reported adjusted fourth quarter 2012 earnings of $1.20 per
share, up 2.6% from $1.17 reported in the fourth quarter of 2011.
The increase was mainly attributable to higher volumes in the
Bakken and resumption of operations in Libya that resulted in
higher oil production. However, earnings missed the Zacks
Consensus Estimate of $1.26.
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Full-year 2012 earnings came at $5.87 per share, up 0.5% from
year-earlier earnings of $5.84 per share. The earnings missed the
Zacks Consensus Estimate of $5.95.
Total revenue increased 9.9% year over year to $9,698 million in
the quarter from $8,824 million but failed to meet the Zacks
Consensus Estimate of $10,276 million.
For 2012, total revenue increased 1.3% to reach $38,373 million
from $37,871 million in 2011 and beat the Zacks Consensus
Estimate of $38,254 million.
Exploration and Production (E&P):
The segment posted profits of $517 million in the fourth quarter,
down 1.9% from the year-earlier profit of $527 million.
Quarterly hydrocarbon production was 396 thousand barrels of oil
equivalent per day (MBOE/d), up 7.9% year over year.
Crude oil production was 275 thousand barrels per day (up from
251 thousand barrels per day in the year-ago quarter), natural
gas liquids production totaled 21 thousand barrels (up from 18
thousand barrels) while natural gas output was 601 thousand cubic
feet (Mcf) (up from 590 Mcf).
Worldwide crude oil realization per barrel of $84.46 (including
the impact of hedging) decreased 5.8% year over year. Worldwide
natural gas prices (including the impact of hedging) upped 4.4%
year over year to $6.60 per Mcf.
At the end of 2012, oil and gas proved reserves were 1,553
million barrels of oil equivalent compared with 1,573 million
barrels at the end of 2011. During 2012, the Corporation added
214 million barrels of oil equivalent to proved reserves. Subject
to final review, these additions, replaced approximately 141% of
the Corporation's 2012 production, resulting in a reserve life of
Marketing and Refining
: The segment posted earnings of $159 million in the fourth
quarter, improving significantly from a loss of $561 million in
the year-earlier period.
Refinery operations generated an income of $8 million compared
with a loss of $598 million in the year-ago quarter. However,
Marketing earnings were $152 million, up from the year-ago
earnings of $48 million. Trading activities generated a loss of
$1 million versus a loss of $11 million in the year-ago period.
Quarterly net cash flow from operations was $1,570 million. Hess'
capital expenditures totaled $1,914 million, of which
approximately $1,887 million were expended toward E&P.
As of December 31, 2012, the company had approximately $642
million in cash and $8,111 million in long-term debt (including
current maturities). Hess' debt-to-capitalization ratio at the
end of the quarter was 27.0% versus 26.9% in the preceding
New York-based Hess Corporation is an integrated energy company
engaged in oil and gas exploration, production and refining as
well as marketing.
The quarterly production grew on an annualized basis. We believe
that Hess has a competitive advantage over its peers from its
improving fundamentals, commodity price leverage and exposure to
areas with high resource potential like Brazil, Ghana, Libya and
Recently, Hess agreed to the sale terms of its stake in the Beryl
area fields and the Scottish Area Gas Evacuation System with
Royal Dutch Shell Plc
). Hess also inked an agreement with the London-listed oil
and gas exploration company Egdon Resources to acquire a
considerable stake in the Mairy permit onshore France. These
deals are in sync with its strategy to balance high risk; high
return offshore exploration with the expected lower risk and long
reserve life, liquids-rich alternative resource plays onshore
Hess remains on track with its strategy of becoming purely an
E&P company while boosting its shareholders value, much like
Marathon Oil Corporation
). In this regard, it may be mentioned that Hess plans to pursue
the sale of 20 oil storage terminals in the U.S. and the
Caribbean and exit its refining business.
We believe that the company's strong exploration upside in Ghana
and continued improvement in Bakken productivity hold a lot of
However, Hess' sensitivity to gas/oil price volatility, as well
as drilling results, costs, geo-political risks and project
delays limit the upside potential of its shares.
Hess retains a Zacks #3 Rank, which translates into a short-term