Oil company tells investors to bank on Guyana to weather any storm

Jul 31, 2022 News

As recession fears increase in the US…

– says cash flow to increase 25% yearly

By Kiana Wilburg

Kaieteur News – Even as fears increase about a recession on the horizon for the American economy, Hess Corporation has assured potential investors and shareholders that it continues to be a safe bet since its 30 percent interest in Guyana’s oil-rich-Stabroek Block can weather any storm.

CEO of Hess Corporation, John Hess

Specifically making this known during his company’s second-quarter earnings call was Chief Executive Officer (CEO), John Hess.

Hess was keen to note that by investing only in high return, low-cost opportunities, the oil conglomerate has built a balanced portfolio; one that is focused on Guyana, the Bakken in the USA, the deepwater Gulf of Mexico, and Southeast Asia. With multiple phases of low-cost oil developments coming online in Guyana and given its robust inventory of high-return drilling locations in the Bakken, the CEO told shareholders that his company is set to deliver highly profitable production growth of more than 10 percent annually over the next five years.

Hess said, “Through the continued development of our high-quality resource base, we are steadily moving down the cost curve. Our four sanctioned oil developments in Guyana have a breakeven Brent oil price of between US$25 and US$35 per barrel.”

In terms of cash flow growth, the CEO further noted that his company has an industry-leading rate of change and durability story.

“Based upon a flat Brent oil price of US$65 per barrel, our cash flow is forecast to increase by approximately 25 percent annually between 2021 and 2026 – more than twice as fast as our top-line growth. Our balance sheet will also continue to strengthen in the coming years…”

“As our portfolio becomes increasingly free cash flow positive in the coming years, we are committed to returning up to 75 percent of our annual free cash flow to shareholders, with the remainder going to strengthen the balance sheet by increasing our cash position or further reducing our debt,” the Hess boss said.

Given the company’s strong cash flow growth, he shared that Hess commenced a share repurchase programme during the second quarter, repurchasing approximately 1.8 million shares of common stock for US$190 million.

Looking ahead, Hess said his company plans to continue increasing its regular dividend to a level that is attractive to income-oriented investors, but sustainable in a low oil price environment.

He was keen to reiterate that the key to his company’s strategy is Guyana – the industry’s largest oil province discovered in the last decade. On the Stabroek Block in Guyana, where Hess has a 30 percent interest and ExxonMobil is the operator, the CEO said his company continues to see the potential for at least six floating production storage and offloading vessels (FPSOs) in 2027 with a gross production capacity of more than one million barrels of oil per day and up to 10 FPSOs to develop the discovered resources on the block.

In terms of our sanctioned oil developments, Kaieteur News understands that production at the Liza Phase One development reached its new production capacity of more than 140, 000 gross barrels of oil per day in the second quarter following production optimisation work on the Liza Destiny FPSO.

As for the Liza Phase Two development, which achieved first oil in February, it reached its gross production capacity of approximately 220, 000 barrels of oil per day earlier this month.

The third development on the Stabroek Block at the Payara Field, with a gross production capacity of approximately 220, 000 barrels of oil per day, is on track for start-up in late 2023.

In early April, Hess and its partners announced the sanction of the US$10B Yellowtail Project which will be the largest development to date on the Stabroek Block. The project will develop an estimated recoverable resource base of approximately 925 million barrels of oil and have a gross production capacity of approximately 250, 000 barrels of oil per day, with first oil expected in 2025.

In terms of exploration and appraisal in Guyana, Hess said the partners continue to invest in an active programme, with approximately 12 wells planned for the Stabroek Block in 2022.

Last week, the partners announced two new discoveries on the block at the Seabob-1 and Kiru-Kiru-1 wells, bringing its total this year to seven. These discoveries will add to the previously announced gross discovered recoverable resource estimate for the Stabroek Block of approximately 11 billion barrels of oil equivalent.

Hess and its partners continue to see multibillion barrels of future exploration potential remaining.