Market Overview

Hess Reports Estimated Results for the Fourth Quarter of 2012

NEW YORK--(BUSINESS WIRE)--

Hess Corporation (NYSE: HES) reported net income of $566 million for the fourth quarter of 2012, compared with a net loss of $131 million for the fourth quarter of 2011.

The after-tax income (loss) by major operating activity was as follows:

   
Three Months Ended Years Ended
December 31, (unaudited) December 31, (unaudited)
2012   2011 2012   2011
(In millions, except per share amounts)
Exploration and Production $ 517 $ 527 $ 2,404 $ 2,675
Marketing and Refining 159 (561) 231 (584)
Corporate (43) (40) (158) (154)
Interest expense   (67)   (57)   (260)   (234)
Net income (loss) attributable to Hess Corporation $ 566 $ (131) $ 2,217 $ 1,703
 
Net income (loss) per share (diluted) $ 1.66 $ (.39) $ 6.52 $ 5.01
 
Weighted average number of shares (diluted)   340.5   337.5   340.3   339.9
 

Note: See page 3 for a table of items affecting comparability of earnings between periods.

 

Exploration and Production earnings were $517 million in the fourth quarter of 2012, compared with $527 million in the fourth quarter of 2011. Fourth quarter oil and gas production was 396,000 barrels of oil equivalent per day, up from 367,000 barrels of oil equivalent per day in the fourth quarter a year ago, primarily reflecting an increase in production from the Bakken oil shale play and the resumption of operations in Libya, partly offset by the shut-in of the Valhall Field in Norway for the quarter due to the redevelopment project. Net production from the Bakken oil shale play averaged 64,000 barrels of oil equivalent per day in the fourth quarter of 2012, an increase of 68% from 38,000 barrels of oil equivalent per day in the same period last year. The Corporation's average worldwide crude oil selling price, including the effect of hedging, was $84.46 per barrel, down from $89.70 per barrel in the same quarter a year ago. The average worldwide natural gas selling price was $6.60 per mcf in the fourth quarter of 2012, up from $6.32 per mcf in the fourth quarter of 2011. Fourth quarter 2012 exploration expenses included total dry hole expenses of $167 million ($102 million after-tax), primarily associated with two exploration wells, Ness Deep in the Gulf of Mexico and Ajek-1 offshore, Indonesia.

In 2012, the Corporation announced divestitures totaling $2.4 billion as part of the strategic reshaping of its Exploration and Production asset portfolio. The sale of the Corporation's interest in the Bittern Field in the United Kingdom North Sea was completed in the fourth quarter of 2012 and follows the completion of the sales of the Schiehallion Field, offshore United Kingdom, and the Snohvit Field, offshore Norway, earlier in the year. The sale of the Corporation's interest in the Beryl Field in the United Kingdom North Sea was completed in January 2013 and the divestiture of our assets in Azerbaijan is expected to be completed by the end of March 2013. In addition, as previously announced, the Corporation has commenced a sales process for its Russian subsidiary, Samara-Nafta, and its Eagle Ford assets in Texas.

Oil and gas proved reserves were 1,553 million barrels of oil equivalent at the end of 2012, 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 and sold 83 million barrels of oil equivalent of proved reserves through asset dispositions. The additions, which are subject to final review, replaced approximately 141 percent of the Corporation's 2012 production, resulting in a reserve life of 10.3 years.

Marketing and Refining generated income of $159 million in the fourth quarter of 2012, compared with a loss of $561 million in the same period in 2011. Marketing earnings were $152 million, up from $48 million in the same quarter of 2011 primarily as a result of income from the partial liquidation of LIFO inventories, and higher margins. Operations at our Port Reading refining facility in New Jersey generated income of $8 million in the fourth quarter of 2012, compared with a loss of $6 million in the fourth quarter of 2011, principally due to higher margins. Trading activities generated a loss of $1 million in the fourth quarter of 2012 and a loss of $11 million in the fourth quarter of last year.

Earlier this week, the Corporation announced that the Port Reading refinery will be closed in February. Upon closure of Port Reading, which follows the shutdown of the HOVENSA L.L.C. refinery in St. Croix, U.S. Virgin Islands in early 2012, the Corporation will have completely exited the refining business. The Corporation also announced that it will commence a process to sell its terminal network. Following these actions, over 90 percent of Hess' capital employed will be in its Exploration and Production business.

The following table reflects the total after-tax income (expense) of items affecting comparability of earnings between periods:

                         
Three Months Ended Years Ended
December 31, (unaudited) December 31, (unaudited)
2012   2011 2012   2011
(In millions)
Exploration and Production $ 86 $ - $ 148 $ 244
Marketing and Refining   71   (525)   71   (525)
$ 157 $ (525) $ 219 $ (281)
 

Fourth quarter 2012 Exploration and Production results included an after-tax gain of $172 million relating to the sale of the Corporation's interest in the Bittern Field in the United Kingdom North Sea. The results also included an income tax charge of $86 million for a disputed application of an international tax treaty. Fourth quarter 2012 Marketing and Refining results included after-tax income of $104 million from the partial liquidation of LIFO inventories and after-tax charges totaling $33 million for asset impairments and other charges. Fourth quarter 2011 results included an after-tax charge of $525 million related to the shutdown of the HOVENSA refinery.

Net cash provided by operating activities was $1,570 million in the fourth quarter of 2012, compared with $1,138 million in the same quarter of 2011. Capital and exploratory expenditures were $1,914 million, of which $1,887 million related to Exploration and Production operations. Capital and exploratory expenditures for the fourth quarter of 2011 were $2,236 million, of which $2,185 million related to Exploration and Production operations.

At December 31, 2012, cash and cash equivalents totaled $642 million, compared with $351 million at December 31, 2011. Total debt was $8,111 million at December 31, 2012 and $6,057 million at December 31, 2011. The Corporation's debt to capitalization ratio at December 31, 2012 was 27.5 percent, compared with 24.6 percent at the end of 2011.

Hess Corporation will review fourth quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details about the event, refer to the Investor Relations section of our website at http://www.hess.com.

Hess Corporation is a leading global independent energy company primarily engaged in the exploration and production of crude oil and natural gas, and the marketing of refined petroleum products, natural gas and electricity. More information on Hess Corporation is available at http://www.hess.com.

 

Forward-looking Statements

Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, uncertainties inherent in the measurement and interpretation of geological, geophysical and other technical data.

 
           

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Fourth Fourth Third
Quarter Quarter Quarter
2012 2011 2012

Income Statement

Revenues and Non-operating Income
Sales (excluding excise taxes) and other operating revenues $ 9,511 $ 9,733 $ 9,194
Income (loss) from equity investment in HOVENSA L.L.C. - (940) -
Gains on asset sales 172 - 376
Other, net   15     31     49  
 

Total revenues and non-operating income

  9,698     8,824     9,619  
 
Costs and Expenses
Cost of products sold (excluding items shown separately below) 6,250 6,712 6,019
Production expenses 690 613 712
Marketing expenses 282 273 259
Exploration expenses, including dry holes and lease impairment 362 426 259
Other operating expenses 43 44 41
General and administrative expenses 201 187 167
Interest expense 106 93 104
Depreciation, depletion and amortization 751 674 748
Asset impairments   16     -     208  
 
Total costs and expenses   8,701     9,022     8,517  
 
Income (loss) before income taxes 997 (198) 1,102
Provision (benefit) for income taxes   429     (64)     510  
 
Net income (loss) 568 (134) 592
Less: Net income (loss) attributable to noncontrolling interests   2     (3)     35  
Net income (loss) attributable to Hess Corporation $ 566   $ (131)   $ 557  
 

Supplemental Income Statement Information

Foreign currency gains (losses), after-tax $ 7 $ (8) $ 7
Capitalized interest 10 5 8
 

Cash Flow Information

Net cash provided by operating activities (a) $ 1,570 $ 1,138 $ 1,862
 

Capital and Exploratory Expenditures

Exploration and Production
United States $ 1,069 $ 1,372 $ 1,210
International   818     813     1,050  
 
Total Exploration and Production 1,887 2,185 2,260
 
Marketing, Refining and Corporate   27     51     27  
 
Total Capital and Exploratory Expenditures $ 1,914   $ 2,236   $ 2,287  
 
Exploration expenses charged to income included above
United States $ 33 $ 51 $ 39
International   102     70     88  
 
$ 135   $ 121   $ 127  
 

(a) Includes changes in working capital.

       

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Years Ended December 31,
2012   2011

Income Statement

Revenues and Non-operating Income
Sales (excluding excise taxes) and other operating revenues $ 37,691 $ 38,466
Income (loss) from equity investment in HOVENSA L.L.C. - (1,073)
Gains on asset sales 584 446
Other, net   98   32
 
Total revenues and non-operating income   38,373   37,871
 
Costs and Expenses
Cost of products sold (excluding items shown separately below) 24,917 26,774
Production expenses 2,752 2,352
Marketing expenses 1,057 1,069
Exploration expenses, including dry holes and lease impairment 1,070 1,195
Other operating expenses 166 171
General and administrative expenses 707 702
Interest expense 419 383
Depreciation, depletion and amortization 2,949 2,406
Asset impairments   283   358
 
Total costs and expenses   34,320   35,410
 
Income (loss) before income taxes 4,053 2,461
Provision (benefit) for income taxes   1,798   785
 
Net income (loss) 2,255 1,676
Less: Net income (loss) attributable to noncontrolling interests   38   (27)
Net income (loss) attributable to Hess Corporation $ 2,217 $ 1,703
 

Supplemental Income Statement Information

Foreign currency gains (losses), after-tax $ 18 $ (15)
Capitalized interest 28 13
 

Cash Flow Information

Net cash provided by operating activities (a) $ 5,660 $ 4,984
 

Capital and Exploratory Expenditures

Exploration and Production
United States $ 4,763 $ 4,305
International   3,383   3,039
 
Total Exploration and Production 8,146 7,344
 
Marketing, Refining and Corporate   119   118
 
Total Capital and Exploratory Expenditures $ 8,265 $ 7,462
 
Exploration expenses charged to income included above
United States $ 142 $ 197
International   328   259
 
$ 470 $ 456
 

(a) Includes changes in working capital.

       

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
December 31,
2012   2011

Balance Sheet Information

 
Cash and cash equivalents $ 642 $ 351
Other current assets

7,667

7,988
Investments 443 384
Property, plant and equipment – net 29,122 24,712
Other long-term assets   5,720   5,701
Total assets $

43,594

$ 39,136
 
Short-term debt and current maturities of long-term debt $ 787 $ 52
Other current liabilities

7,556

8,048
Long-term debt 7,324 6,005
Other long-term liabilities 6,532 6,439
Total equity excluding other comprehensive income (loss) 21,888 19,659
Accumulated other comprehensive income (loss)   (493)   (1,067)
Total liabilities and equity $

43,594

$ 39,136
 
       

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 
Fourth Quarter 2012
United States International Total
Sales and other operating revenues $ 1,116 $ 1,461 $         2,577
Gains on asset sales - 172 172
Other, net   (1)   28           27
 
Total revenues and non-operating income   1,115   1,661           2,776
 
Costs and expenses
Production expenses, including related taxes 232 458 690
Exploration expenses, including dry holes and lease impairment 205 157 362
General, administrative and other expenses 59 32 91
Depreciation, depletion and amortization 399 327 726
Asset impairments   -   -           -
 
Total costs and expenses   895   974           1,869
 
Results of operations before income taxes 220 687 907
Provision (benefit) for income taxes   77   313           390
 
Results of operations attributable to Hess Corporation $ 143 (a) $ 374 (b) $         517
 
Fourth Quarter 2011
United States International Total
Sales and other operating revenues $ 937 $ 1,662 $ 2,599
Gains on asset sales - - -
Other, net   3   25           28
 
Total revenues and non-operating income   940   1,687           2,627
 
Costs and expenses
Production expenses, including related taxes 170 443 613

Exploration expenses, including dry holes and lease impairment

118 308 426
General, administrative and other expenses 49 33 82
Depreciation, depletion and amortization 273 378 651
Asset impairments   -   -           -
Total costs and expenses   610   1,162           1,772
Results of operations before income taxes 330 525 855
Provision (benefit) for income taxes   130   198           328
Results of operations attributable to Hess Corporation $ 200 $ 327 (b) $         527
 
Third Quarter 2012
United States International Total
Sales and other operating revenues $ 1,022 $ 1,685 $ 2,707
Gains on asset sales - 376 376
Other, net   18   26           44
 
Total revenues and non-operating income   1,040   2,087           3,127
 
Costs and expenses
Production expenses, including related taxes 241 471 712
Exploration expenses, including dry holes and lease impairment 68 191 259
General, administrative and other expenses 49 30 79
Depreciation, depletion and amortization 393 332 725
Asset impairments   58   150           208
 
Total costs and expenses   809   1,174           1,983
 
Results of operations before income taxes 231 913 1,144
Provision (benefit) for income taxes   91   445           536
 
Results of operations attributable to Hess Corporation $ 140 (a) $ 468 (b) $         608
 

(a) The after-tax losses from crude oil hedging activities were $5 million in both the third and fourth quarter of 2012.

(b) The after-tax losses from crude oil hedging activities were $92 million in the fourth quarter of 2012, $83 million in the fourth quarter of 2011 and $89 million in the third quarter of 2012.

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 
Year Ended December 31, 2012
United States International Total
Sales and other operating revenues $ 4,104 $ 6,789 $       10,893
Gains on asset sales - 584 584
Other, net   18   81         99
 
Total revenues and non-operating income   4,122   7,454         11,576
 
Costs and expenses
Production expenses, including related taxes 957 1,795 2,752
Exploration expenses, including dry holes and lease impairment 426 644 1,070
General, administrative and other expenses 196 118 314
Depreciation, depletion and amortization 1,406 1,447 2,853
Asset impairments   117   150         267
 
Total costs and expenses   3,102   4,154         7,256
 
Results of operations before income taxes 1,020 3,300 4,320
Provision (benefit) for income taxes   390   1,526         1,916
 
Results of operations attributable to Hess Corporation $ 630 (a) $ 1,774 (b) $       2,404
 
Year Ended December 31, 2011
United States International Total
Sales and other operating revenues $ 3,371 $ 6,676 $ 10,047
Gains on asset sales - 446 446
Other, net   (7)   25         18
 
Total revenues and non-operating income   3,364   7,147         10,511
 
Costs and expenses
Production expenses, including related taxes 660 1,692 2,352
Exploration expenses, including dry holes and lease impairment 475 720 1,195
General, administrative and other expenses 190 123 313
Depreciation, depletion and amortization 800 1,505 2,305
Asset impairments   16   342         358
 
Total costs and expenses   2,141   4,382         6,523
 
Results of operations before income taxes 1,223 2,765 3,988
Provision (benefit) for income taxes   470   843         1,313
 
Results of operations attributable to Hess Corporation $ 753 $ 1,922 (b) $       2,675
 

(a) The after-tax losses from crude oil hedging activities were $39 million for the year ended December 31, 2012.

(b) The after-tax losses from crude oil hedging activities were $392 million for the year ended December 31, 2012 and $327 million for the corresponding period of 2011.

           

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA (UNAUDITED)

 
Fourth Fourth Third
Quarter Quarter Quarter
2012 2011 2012

Operating Data

Net Production Per Day (in thousands)

Crude oil - barrels
United States 118 89 109
Europe 64 95 80
Africa 77 54 75
Asia   16   13   17
Total   275   251   281
 
Natural gas liquids - barrels
United States 18 13 16
Europe 2 4 2
Asia   1   1   1
Total   21   18   19
 
Natural gas - mcf
United States 138 90 116
Europe 22 92 36
Asia and other   441   408   462
Total   601   590   614
Barrels of oil equivalent   396   367   402
 

Average Selling Price

Crude oil - per barrel (including hedging)
United States $ 91.74 $ 100.76 $ 90.17
Europe 61.01 77.18 75.08
Africa 87.27 85.49 90.78
Asia 106.28 111.08 102.85
Worldwide 84.46 89.70 86.69
 
Crude oil - per barrel (excluding hedging)
United States $ 92.63 $ 100.76 $ 90.87
Europe 61.29 77.18 75.36
Africa 109.76 109.28 110.33
Asia 107.86 111.08 103.20
Worldwide 90.86 95.16 92.35
 
Natural gas liquids - per barrel
United States $ 36.21 $ 57.86 $ 38.35
Europe 85.62 66.47 56.82
Asia 85.24 66.18 64.67
Worldwide 44.66 59.81 41.71
 
Natural gas - per mcf
United States $ 2.72 $ 2.50 $ 2.18
Europe 9.06 8.88 9.15
Asia and other 7.68 6.57 6.56
Worldwide 6.60 6.32 5.88
 
       

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA (UNAUDITED)

 
Years Ended December 31,
2012   2011

Operating Data

Net Production Per Day (in thousands)

Crude oil - barrels
United States 108 81
Europe 84 89
Africa 75 66
Asia   17   13
Total   284   249
 
Natural gas liquids - barrels
United States 16 13
Europe 2 3
Asia   1   1
Total   19   17
 
Natural gas - mcf
United States 119 100
Europe 43 81
Asia and other   454   442
Total   616   623
Barrels of oil equivalent   406   370
 

Average Selling Price

Crude oil - per barrel (including hedging)
United States $ 92.32 $ 98.56
Europe 74.14 80.18
Africa 89.02 88.46
Asia 107.45 111.71
Worldwide 86.94 89.99
 
Crude oil - per barrel (excluding hedging)
United States $ 93.96 $ 98.56
Europe 75.06 80.18
Africa 110.92 110.28
Asia 109.35 111.71
Worldwide 93.70 95.60
 
Natural gas liquids - per barrel
United States $ 40.75 $ 58.59
Europe 78.43 75.49
Asia 77.92 72.29
Worldwide 47.81 62.72
 
Natural gas - per mcf
United States $ 2.09 $ 3.39
Europe 9.50 8.79
Asia and other 6.90 6.02
Worldwide 6.16 5.96
 
         

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA (UNAUDITED)

 
Fourth Fourth Third
Quarter Quarter Quarter
2012 2011 2012

Financial Information (in millions)

 

Marketing and Refining Results

Income (loss) before income taxes $ 265 $ (885) $ 84
Provision (benefit) for income taxes   106     (324)     31  
Results of operations attributable to Hess Corporation $ 159   $ (561)   $ 53  
 

Summary of Marketing and Refining Results

Marketing $ 152 $ 48 $ 17
Refining 8 (598) 18
Trading   (1)     (11)     18  

Results of operations attributable to Hess Corporation

$ 159   $ (561)   $ 53  
       
 

Operating Data

 

Sales Volumes

Refined petroleum products (thousands of barrels per day)
Gasoline 201 214 214
Distillates 126 143 102
Residuals 49 65 48
Other   10     19     10  
Total   386     441     374  
 
Natural gas (thousands of mcf per day)   2,700     2,200     1,900  
 
Electricity (megawatts round the clock)   4,400     4,100     4,800  
 

Retail Marketing

Number of retail stations (a) 1,361 1,360 1,361
Convenience store revenue (in millions) (b) $ 268 $ 290 $ 295
Average gasoline volume per station (thousands of gallons per month) (b) 194 195 196
 

Port Reading

Refinery throughput (thousands of barrels per day) 50 58 68
Refinery utilization (capacity - 70,000 barrels per day) 72.0% 82.9% 97.0%
 

(a) Includes company operated, Wilco-Hess, dealer and branded retailer.
(b) Company operated only.

         

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA (UNAUDITED)

 
Years Ended December 31,
2012 2011

Financial Information (in millions)

 

Marketing and Refining Results

Income (loss) before income taxes $ 376 $ (857)
Provision (benefit) for income taxes   145   (273)
Results of operations attributable to Hess Corporation $ 231 $ (584)
 

Summary of Marketing and Refining Results

Marketing $ 209 $ 185
Refining 28 (728)
Trading   (6)   (41)

Results of operations attributable to Hess Corporation

$ 231 $ (584)
                   
 

Operating Data

 

Sales Volumes

Refined petroleum products (thousands of barrels per day)
Gasoline 209 222
Distillates 113 123
Residuals 53 65
Other   14   20

Total

 

  389   430
 
Natural gas (thousands of mcf per day)   2,300   2,200
 
Electricity (megawatts round the clock)   4,500   4,400
 

Retail Marketing

Number of retail stations (a) 1,361 1,360
Convenience store revenue (in millions) (b) $ 1,123 $ 1,189
Average gasoline volume per station (thousands of gallons per month) (b) 192 195
 

Port Reading

Refinery throughput (thousands of barrels per day) 59 63
Refinery utilization (capacity - 70,000 barrels per day) 83.6% 90.0%
 

(a) Includes company operated, Wilco-Hess, dealer and branded retailer.
(b) Company operated only.

Hess Corporation
Investor Contact:
Jay Wilson, 212-536-8940
or
Media Contact:
Jon Pepper, 212-536-8550

 

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