Hess (HES) Provides 2019 E&P Budget Of $2.9B, Up 38.1% Y/Y

Hess Corporation’s (NYSE:HES) 2019 exploration and production (E&P) budget of $2.9 billion, up 38.1% from the previous estimate of $2.1 billion for 2018. About 75% of the budgeted amount will be allocated to high return growth assets in the Bakken and Guyana.

Of the total budget, about 65% or $1,890 million has been allocated for production, 20% or $570 million for offshore developments and 15% or $440 million for exploration as well as appraisal activities.

Production

In 2019, net production is estimated to average between 270,000 and 280,000 barrels of oil equivalent per day, excluding Libya, compared with about 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. In 2019, Bakken net production is projected to average between 135,000 and 145,000 barrels of oil equivalent per day.

In 2019, Hess intends to increase rig count to 6 from an average rig count of 4.8 in 2018. Also, the company will complete the transition to higher intensity plug and perf completions. This shift is estimated to boost the estimated ultimate recovery of oil and natural gas. The company expects to drill about 170 new wells and bring online about 160 new wells in 2019. An amount of $1.425 billion has been allocated for these plans.

About $290 million will be used for production operations in the deepwater Gulf of Mexico, including continued development of the Stampede Field, where Hess operates with a stake of 25%. The company will tieback opportunities in the Llano Field, where it has an interest of 50% and Tubular Bells Field, where Hess is the operator with a stake of 57%.

Another $150 million will be allocated toward production activities in the Gulf of Thailand at North Malay Basin, where Hess is the operator with a stake of 50% and the Malaysia/Thailand Joint Development Area, where it has an interest of 50%.

Developments

The spending in Guyana will peak in 2019 with the Liza phase 1 development scheduled to come online in early 2020. An amount of $260 million has been allotted for Liza Phase 1.Hess will proceed with the spending for the Liza phase 2 development, completion of the plan of development for Payara as well as progress front end engineering and design for future development phases. The company will invest about $310 million for these operations.

Exploration and Appraisal

About $440 million is expected to be spent for drilling exploration and appraisal wells on the Stabroek Block offshore Guyana. The amount includes operations like seismic acquisition and processing in Guyana, Suriname and the deepwater Gulf of Mexico as well as for license acquisitions.

Zacks Rank & Key Picks

Currently, Hess carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Cabot Oil & Gas Corporation (NYSE:COG) , Enterprise Products Partners L.P. (NYSE:EPD) and SunCoke Energy, Inc (NYSE:SXC) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Cabot is an independent oil and gas exploration company with producing properties mainly in the continental U.S. The company delivered an average negative earnings surprise of 5.7% in the last four quarters.

Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off an average positive earnings surprise of 9.3% in the last four quarters.

SunCoke acquires, owns and operates the coke making and coal mining operations. The company delivered an average positive earnings surprise of 302.6% in the last four quarters.

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