Hess narrows quarterly loss. Axes 400 jobs

U.S. oil company Hess Corporation narrowed its net loss in the fourth quarter 2017 as its revenues fell when compared to the same period last year. As part of its restructuring, Hess in January eliminated about 400 positions. 

Hess on Monday posted a net loss of $2.68 billion in the fourth quarter of 2017, compared with a net loss of $4.89 billion in the fourth quarter of 2016.

Hess explained that the fourth quarter 2017 results reflect net after-tax charges totaling $2.37 billion, including a non-cash accounting charge of $1.7 billion to reduce the carrying value of Hess’ interests in the Stampede and Tubular Bells Fields in the Gulf of Mexico, as a result of a lower long-term crude oil price outlook.

On an adjusted basis, Hess reported an after-tax net loss of $304 million in the fourth quarter of 2017, compared with an adjusted net loss of $305 million in the prior-year quarter.

On an adjusted pre-tax basis, Hess reported a loss of $104 million in the fourth quarter of 2017, down from $499 million in the year-ago quarter.

According to the company, the improved pre-tax adjusted results reflect higher realized crude oil selling prices and lower operating costs and depreciation, depletion and amortization. Fourth quarter 2017 adjusted results were adversely impacted by lower deferred tax benefits, primarily in the United States, compared to the prior-year quarter following a required change in deferred tax accounting.

Exploration and Production (E&P) net loss in the fourth quarter of 2017 was $2.59 billion, compared to a net loss of $3.94 billion in the fourth quarter of 2016.

The company’s revenues for the fourth quarter 2017 fell to $1.29 billion from $1.39 billion in the prior-year quarter.

The company’s average realized crude oil selling price, including the effect of hedging, was $55.44 per barrel in the fourth quarter of 2017, up from $45.97 per barrel in the year-ago quarter.

The average realized natural gas liquids selling price in the fourth quarter of 2017 was $22.78 per barrel, versus $14.68 per barrel in the prior-year quarter, while the average realized natural gas selling price was $3.69 per mcf, compared with $3.24 per mcf in the fourth quarter of 2016.

Asset sales & downtime bring production down 

Net production, excluding Libya, was 282,000 boepd in the fourth quarter of 2017, compared to 307,000 boepd in the prior-year quarter. Lower volumes were due to asset sales (26,000 boepd), unplanned downtime resulting from a fire at the third-party operated Enchilada platform in the Gulf of Mexico (17,000 boepd) and natural decline and other net reductions (19,000 boepd), partially offset by higher production in the Bakken (15,000 boepd) and from North Malay Basin (22,000 boepd).

E&P capital and exploratory expenditures were $568 million in the fourth quarter of 2017, up from $411 million in the prior-year quarter, which included increased drilling activity at the Bakken and Liza Phase 1 development activity following sanction in June 2017.

Hess last week said it would spend about two thirds of its 2018 budget on Guyana asset and Bakken shale play.

Cost cuts 

As part of portfolio reshaping, Hess has started implementation of an organization restructuring and cost reduction effort targeting annual savings of $150 million. In addition to direct headcount reductions as part of assets sales, Hess eliminated approximately 400 employee and contractor positions in January and expects to record employee severance of $40 to $50 million in the first quarter.

Since the end of 2014, total employee and contractor positions have been reduced by approximately 50 percent. In addition to the workforce reduction, Hess has identified further cost reductions in logistics, information technology, property, professional fees, and other operating costs resulting from the portfolio reshaping.