The operator welcomes everyone to the Hess Corporation conference call and introduces Jay Wilson, Vice President of Investor Relations. Jay Wilson explains the projections and forward-looking statements in the conference call and provides a link to the company's website. John Hess, Chief Executive Officer, will be discussing the energy transition and Greg Hill, Chief Operating Officer, and John Rielly, Chief Financial Officer, will be covering the company's operations and financial results.

The International Energy Agency (IEA) reports that the global median temperature increase prior to the Paris Agreement was 3.5 degrees Celsius, but the world is on a trajectory to a median temperature increase of 2.5 degrees. To meet the Paris Agreement's goal of 1.5 degrees, the world needs to invest $4 trillion each year in clean energies and $500 billion each year in oil and gas. Additionally, developed countries must increase their investment to meet their emission reduction pledges and developing countries must find the right balance between energy affordability and emission reduction commitments.

Hess offers a unique value proposition for investors, with the potential for high-return resource growth, low cost of supply, and industry-leading cash flow growth. The company plans to deliver production growth of more than 10% annually through 2027, with cash unit costs declining by 25% to approximately $10 per BOE. Additionally, cash flow is forecast to increase by approximately 25% annually between 2022 and 2027.

Hess has a 30% interest in Guyana's Stabroek Block, which has an estimated 11 billion barrels of oil equivalent and multibillion barrels of exploration potential. Hess has been recognized as E&P Explorer of the Year for two years in a row, and has plans to develop the discovered resources with up to 10 FPSOs. In the Bakken, Hess plans to operate a 4-rig program to maximize infrastructure, lower unit cash costs, and generate free cash flow. Offshore, Hess plans to continue operating assets.

Hess Corporation had a successful oil discovery in the Gulf of Mexico during the quarter and is looking to tie it back to the Tubular Bells Production Facility. In Southeast Asia, they are looking to maximize cash flow and production at the North Malay Basin and extend the PSC agreement at the JDA. They recently published their 26th Annual Sustainability Report and are committed to net zero emissions. They are looking to deliver value to shareholders by growing intrinsic value and cash returns.

Company-wide net production averaged 387,000 barrels of oil equivalent per day in the first half of 2023, and is expected to average 385,000 barrels of oil equivalent per day in the third quarter. For the full year, net production is expected to average between 385,000 and 390,000 barrels of oil equivalent per day. In the Bakken, net production was above guidance in the second quarter, with strong operational performance and higher production entitlements due to lower NGL prices. For the third quarter, 32 wells are expected to be drilled and 30 new wells brought online. For the full year, 110 new wells are expected to be drilled and brought online, with individual well results meeting or exceeding expectations. Net production in the Bakken is expected to average 185,000 barrels of oil equivalent per day in the third quarter, and 175,000-180,000 barrels of oil equivalent per day for the full year. Offshore production is also discussed.

In the Gulf of Mexico, Hess has announced an oil discovery and is planning to drill two more wells. For the full year 2023, Hess expects Gulf of Mexico net production to average 30,000 barrels of oil equivalent per day. In Southeast Asia, net production is expected to average 65,000 barrels of oil equivalent per day, and in Guyana, net production is expected to average 110,000 barrels of oil per day.

ExxonMobil is expecting third quarter net production from Guyana to average 110,000 barrels of oil per day, with full year 2023 production estimated to be 115,000 barrels of oil per day. The company is developing five projects in the area, with the sixth, Whiptail, expected to have a plan of development submitted to the government in the fourth quarter and first oil targeted for 2027. Exploration of the Stabroek Block has been extended by 1 year due to the COVID-19 pandemic, and ExxonMobil is planning to drill two wells in the Fangtooth area.

In the second quarter of 2023, the company had net income of $119 million and adjusted net income of $201 million. Exploration and appraisal activities are planned in the southeastern portion of the block to better understand the potential of the area. These activities include drilling and exploration of a prospect called Blue Fin. The company also experienced higher sales volumes and lower realized selling prices, but higher cash costs and Midstream tariffs, as well as higher exploration expenses, all contributed to a decrease in earnings of $168 million from the first quarter of 2023.

In the second quarter of 2023, Hess Corporation's E&P oil sale volumes were overlifted compared to production by 100,000 barrels, resulting in an insignificant impact on after-tax results. Midstream net income was $62 million, and EBITDA before noncontrolling interest was $247 million. Cash and cash equivalents were $2.2 billion, total liquidity was $5.6 billion, and net cash provided by operating activities before changes in working capital was $974 million. E&P cash costs were $13.97 per barrel of oil equivalent, and DD&A expense was $12.79 per barrel of oil equivalent. Guidance for the third quarter is $14 to $14.50 per barrel of oil equivalent, and for the full year, it is $13.50 to $14 per barrel of oil equivalent.

DD&A expense is expected to be between $12.50 and $13.50 per barrel of oil equivalent for the third quarter and full year, exploration expenses excluding dry haul costs are projected to be $60 million in the third quarter and $170 million for the full year, Midstream tariff is expected to be between $320 million and $330 million for the third quarter and $1.230 billion to $1.250 billion for the full year, E&P income tax expense is expected to be between $170 million and $180 million for the third quarter and $670 million to $680 million for the full year, noncash option premium amortization will be $52 million for the third quarter and $190 million for the full year, and E&P capital and exploratory expenditures are expected to be approximately $1.025 billion in the third quarter and approximately $3.7 billion for the full year. Midstream net income is expected to be between $55 million and $60 million for the third quarter and $240 million to $250 million for the full year.

Exxon and the company have submitted a 35-well program that has been approved by the government to extend the timeline of production. This will involve a debottlenecking strategy to increase production at Payara, which is expected to come online early in the fourth quarter and ramp up over a period of five months. Corporate expenses are estimated to be lower than the previous guidance for the third quarter and full year due to higher interest income, with interest expense estimated to be in the range of $75 million to $80 million for the third quarter and $300 million to $310 million for the full year.

John Hess and Doug Leggate discussed the 11 billion barrels of oil equivalent on the Stabroek Block and the appraisal work being done in the Fangtooth area. Greg Hill then provided an update on the debottlenecking efforts at Liza 1 and Liza 2, noting that Liza Phase 1 is comfortably operating in the 145 to 150 range.

John Rielly reiterated the full year budget of $3.7 billion, but the first half of the year was lower. In the second half of the year, there will be a ramp up in spending due to the progression of developments in Guyana, such as Payara, Yellowtail, and Uaru, as well as the Gulf of Mexico rig. ExxonMobil is doing an outstanding job of debottlenecking and increasing reliability.

John Rielly explains that there was no payment for the one year extension of exploration in Guyana due to COVID-19 and the force majeure. He also explains that the deferred taxes for Q2 were approximately $45 million and $36 million in Q1. He reiterates that the company plans to spend the full $3.7 billion for the year.

The extension of the acreage relinquishment and exploration license in Guyana does not affect the pace of development in the basin, as the company plans to drill 10-12 exploration appraisal wells each year. Greg Hill also mentions that in the Bakken, they have observed inflation of between 10-15% in the first half of 2023.

ExxonMobil has been able to mitigate some of the costs associated with the Bakken through strategic contracting, lean manufacturing and technology, and they are seeing deflation in the area. However, costs have not moderated in the offshore, but most of ExxonMobil's spend is in Guyana, where they are using a Design One, Build Many strategy to mitigate inflationary effects. The overall capital guidance of $3.7 billion for 2023 remains unchanged. In regards to the Bakken, ExxonMobil expects to reach an average of 200,000 barrels a day in 2025 and hold that plateau for nearly a decade. Lastly, the framework for increasing return of capital as they progress through the Guyana program is discussed.

John Rielly outlines the company's financial priorities, which include investing in high-return opportunities, maintaining a strong balance sheet, and returning up to 75% of free cash flow to shareholders through dividend increases and share repurchases. He also mentions that the company has been hedging around 130,000 to 150,000 barrels of oil per day with put options to give investors the upside.

Greg Hill explains that the wells in Guyana are performing better than expected and the capacity is driven by physical constraints on the vessel, while they are debottlenecking to increase the capacity as much as possible. He also mentions that the Gulf of Mexico exploration program is offsetting risk by shooting ocean bottom node surveys in and around all of their hubs, as well as using new algorithms such as Full Waveform Inversion.

John Rielly and Greg Hill discussed how the company's oil production will continue to increase from Q1 to Q2 and beyond, leading to a production increase of 200,000 barrels per day by 2025. They also discussed how each FPSO vessel will be designed with bespoke tolerance to maximize production uplift.

Greg Hill is discussing the debottlenecking of vessels in the Bakken and Guyana. In Guyana, they are exploring the southwestern part of the block to understand the higher GOR developments. The discoveries in this area are all Upper Campanians and have high-quality reservoirs. When they reach their plateau of 200,000 barrels a day, they can expect about 100,000 barrels a day of oil.

Hess is participating in non-operated projects in the Gulf of Mexico that will be part of the mix in the next 2-3 years. They are also evaluating the well results of the Pickerel project, which is expected to be on stream mid-2024 with peak gross production rates of 8,000 to 10,000 barrels a day and 100% interest.

John Rielly, Greg Hill, and John Hess provide information to Paul Cheng about the development cost and recoverable resource for a tieback well. The costs are estimated to be $10 per barrel or lower and the resource is a mix of oil and gas, with 80% oil and 20% gas. The Yellowtail and Uaru projects are expected to come on in 2025 and 2026, respectively, but it is too early to say when in those years. The second quarter production is higher due to greater reliability across the board.

John Rielly of Hess Midstream discussed the company's investment in Hess Midstream and the decision to sell a unit in Q2 for $200 million. He explained that the company remains committed to maximizing the long-term value of Hess Midstream and that they are able to maintain operational control even with a lower ownership percentage. Rielly also noted that the company has set a zero routine flaring goal by 2025 and that Hess Midstream has more than $1 billion of financial flexibility through 2025 to support potential incremental share repurchases.

This summary was generated with AI and may contain some inaccuracies.