Hess to boost capital budget after two years of stagnation
- Business & Finance
U.S. independent Hess Corporation will allocate 75% of its 2019 E&P capital and exploratory budget of $2.9 billion to high return assets in the Bakken and Guyana. About $570 million will be spent on offshore developments.
Hess announced its 2019 E&P capital and exploratory budget of $2.9 billion on Monday. This is an increase compared to this year’s E&P capital and exploratory budget of $2.1 billion, which was the same as the one in 2017.
The company said that its net production is forecast to average between 270,000 and 280,000 barrels of oil equivalent per day in 2019, excluding Libya, compared to approximately 245,000 barrels of oil equivalent per day in 2018 proforma for the sale of the company’s joint venture interests in the Utica shale play. Bakken net production is forecast to average between 135,000 and 145,000 barrels of oil equivalent per day in 2019.
CEO John Hess said: “As we focus spending on our high return investment opportunities, we will continue to reduce our unit costs to drive margin expansion and improve profitability.”
Greg Hill, Chief Operating Officer, said: “In 2019, in the Bakken we plan to operate a 6 rig program, up from a 4.8 rig average in 2018; drill 170 wells, up 42 percent from 2018; and complete the transition to higher intensity plug and perf completions, which is expected to generate a significant uplift in net present value and initial production rates while also increasing the estimated ultimate recovery of oil and natural gas.”
“In Guyana, 2019 will be the peak spend year for the Liza phase 1 development, which is on track for first oil by early 2020,” Hill said.
“We also will begin Liza phase 2 development spending, complete the plan of development for Payara, and advance front end engineering and design work for future development phases.”
The company said it will review its long term capital program at its Investor Day in Houston on December 12.
20 pct on offshore developments
Out of the $2.9 billion capital and exploratory budget, $1.89 billion (65 percent) will be spent on production, $570 million (20 percent) on offshore developments and $440 million (15 percent) on exploration and appraisal activities.
Hess said that $290 million will be used for production operations in the deepwater Gulf of Mexico, including continued development of the Stampede Field (Hess 25 percent and operator) and tieback opportunities at the Llano Field (Hess 50 percent) and Tubular Bells Field (Hess 57 percent and operator).
In addition, $150 million will go to production activities in the Gulf of Thailand at North Malay Basin (Hess 50 percent and operator) and the Malaysia/Thailand Joint Development Area (Hess 50 percent).
When it comes to developments, Hess will allocate $260 million for the Liza Phase 1 development offshore Guyana (Hess 30 percent), where first production is expected by 2020.
In addition, $310 million includes spend for Liza Phase 2 development, completing the plan of development for Payara, and front end engineering and design work for future development phases.
In the exploration and appraisal business, Hess will use $440 million to drill exploration and appraisal wells on the Stabroek Block offshore Guyana (Hess 30 percent). Funds are also included for seismic acquisition and processing in Guyana, Suriname and the deepwater Gulf of Mexico, and for license acquisitions.
Also on Monday, ConocoPhillips revealed that its capital expenditure budget for 2019 would be flat compared to expected full-year 2018 capital expenditures. On the other hand, Chevron last week announced a $20 billion-dollar capex for 2019, marking a first budget boost after it had lowered capex for four years in a row. The budget for 2018 was $18.3 billion.