Hess Slashes 2020 Capital Budget As Oil Price Remains Soft

Hess Corporation (NYSE:HES) announced that it has revised downward its 2020 capital budget in the wake of a weak crude pricing scenario.

The company’s revised capital budget for this year is at $2.2 billion. In comparison, Hess’ earlier guidance for capital and exploratory spending in 2020 was at $3 billion. With oil price now in the bearish territory since the coronavirus pandemic is hurting global energy demand, the outlook for exploration and production business seems gloomy. Thus, upstream energy players are restricting their operational activities and thereby reducing capital budget. Other energy firms that followed suit are Cimarex Energy Co. (NYSE:XEC) , Pioneer Natural Resources Company (NYSE:PXD) and EOG Resources Inc. (NYSE:EOG) .

In its latest operational update, triggered by a lower capital budget, Hess revealed its plan to reduce its Bakken shale play drilling program to one rig from the existing six rigs. The upstream firm added that it will defer most of its discretionary offshore drilling and exploration activities, which exclude operations in Guyana.

Reduced operating activities also compelled the upstream firm to lower its production guidance for this year. Hess’ revised projected net production volumes for 2020 lies in the band of 325,000 to 330,000 barrels of oil equivalent per day, excluding Libya. The company’s prior production guidance for 2020 was in the band of 330,000 to 335,000 barrels of oil equivalent per day.

On the brighter side, soft crude prices are unlikely to affect the company to a great extent since the upstream firm has already hedged almost 80% of its 2020 oil production by put options.

Along with the announcement for capital budget revisions, Hess revealed its agreement for a new $1 billion three-year term loan. This along with lower capital budget strengthens the company’s liquidity.

Headquartered in New York, Hess currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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