USA: Hess Reports Estimated Results for the Fourth Quarter of 2010

Hess Corporation reported net income of $58 million for the fourth quarter of 2010 compared with net income of $358 million for the fourth quarter of 2009.

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

Exploration and Production earnings were $420 million in the fourth quarter of 2010 compared with $494 million in the fourth quarter of 2009. Fourth quarter 2010 results included higher exploration expenses reflecting dry hole costs of $111 million ($72 million after-tax) associated with two exploration wells (Sabia and Azulão) located on Block BM-S-22 offshore Brazil. Fourth quarter oil and gas production was 420,000 barrels of oil equivalent per day, up from 415,000 barrels of oil equivalent per day in the fourth quarter a year ago.

The Corporation’s average worldwide crude oil selling price, including the effect of hedging, was $71.73 per barrel, an increase from $63.74 per barrel in the fourth quarter of 2009. The average worldwide natural gas selling price was $5.30 per Mcf in the fourth quarter of 2010 compared with $5.19 per Mcf in the same quarter a year ago. Oil and gas proved reserves were 1,537 million barrels of oil equivalent at the end of 2010, compared to 1,437 million barrels at the end of 2009. During 2010, the Corporation added 274 million barrels of oil equivalent to proved reserves. These additions, which are subject to final review, replaced approximately 176 percent of the Corporation’s 2010 production, resulting in a reserve life of 9.9 years.

Marketing and Refining results were a loss of $261 million in the fourth quarter of 2010 compared with income of $17 million in the same period of 2009. Refining operations incurred a loss of $308 million in the fourth quarter of 2010, including the impairment charge discussed below, and a loss of $40 million in the fourth quarter a year ago. Marketing earnings were $37 million compared with $45 million in the same quarter of 2009. Trading activities generated income of $10 million in the fourth quarter of 2010 and $12 million in the fourth quarter of last year.

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

Fourth quarter 2010 results included an after-tax charge of $51 million related to dry hole costs associated with the Azulão exploration well located offshore Brazil, which was drilled in 2009. The results also included an after-tax charge of $289 million to reduce the carrying value of the Corporation’s equity investment in HOVENSA L.L.C.

Net cash provided by operating activities was $1,478 million in the fourth quarter of 2010, compared with $1,271 million in the same quarter of 2009. Capital and exploratory expenditures were $2,464 million, of which $2,438 million related to Exploration and Production operations including $1,067 million for the acquisition of 167,000 net acres in the Bakken oil play in North Dakota from TRZ Energy, LLC. Capital and exploratory expenditures for the fourth quarter of 2009 were $992 million, of which $957 million related to Exploration and Production operations.

At December 31, 2010, cash and cash equivalents totalled $1,608 million compared with $1,362 million at December 31, 2009. Total debt was $5,583 million at December 31, 2010 and $4,467 million at December 31, 2009. The Corporation’s debt to capitalization ratio at December 31, 2010 was 24.9 percent compared with 24.8 percent at the end of 2009.

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Source: Hess, January 26, 2011;