Hess vows to protect “sweet” Guyana operations from recession, inflationary pressures

Aug 01, 2022 News

Kaieteur News – Hess Corporation recently told investors that while recessionary fears are weighing on financial markets, it will be closely monitoring its budgetary spending for the remainder of 2022 into 2023 to ensure scheduled investments in Guyana remain unaffected.

Hess Corporation CEO, John Hess

The company said the returns in Guyana are so sweet that it pays to keep pumping more money into the Stabroek Block given the industry leading deal (2016 Stabroek Block Production Sharing Agreement) it is tied to. Hess during its second quarter earnings call said all companies are dealing with the risk of a recession risk given that there is an economic slowdown now. It also said it predicts a tighter oil market in the coming months since demand is outstripping the rate of supply as markets in China open up.

Having said that, Hess said its Board will definitely stress test its budget for next year. It said definitely there will be a recession scenario in that, while adding that it will be prepared should there be a recession to stay ahead of it to keep the balance sheet strong. Hess was keen to note as well that it will do everything in its power to keep investments on track for its high-return opportunity in Guyana, and “we’ll also take steps as we normally do as we get to the end of the year to make sure we have some price protection….”

The company added, “So we’ll be prepared in case a recession occurs. It’s certainly going to be one of the scenarios that the Board has with our senior leadership to make sure we’re financially disciplined going into next year.” With how well its Guyana assets have been performing Hess Corporation revealed that it intends to buy back US$650 million worth of shares by year end. Hess said it already repurchased approximately 1.8 million shares of common stock for US$190 million.

Hess said it intends to opportunistically repurchase the remaining amount by year-end. The company explained that buy backs will allow for a direct transfer of cash to shareholders while allowing Hess to hold more shares in its treasure chest and watch as its value increases in the years to come. In terms of sanctioned oil developments on the Stabroek Block, 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 optimization 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 multi billion barrels of future exploration potential remaining.