Hess Reports Estimated Results for the Third Quarter of 2012

Third Quarter Highlights:

  • Net income was $557 million, compared with $298 million in the third quarter of 2011
  • Net income excluding items affecting comparability between periods was $495 million compared with $379 million in the third quarter of 2011
  • Oil and gas production increased to 402,000 barrels of oil equivalent per day, up from 344,000 in the third quarter of 2011
  • Production from the Bakken oil shale play in North Dakota increased to 62,000 barrels of oil equivalent per day, up from 32,000 in the third quarter of 2011
  • Net cash provided by operating activities was $1,862 million, compared with $1,022 million in the third quarter of 2011

NEW YORK--()--Hess Corporation (NYSE: HES) reported net income of $557 million for the third quarter of 2012, compared with $298 million for the third quarter of 2011. The after-tax income (loss) by major operating activity was as follows:

           
Three Months Ended Nine Months Ended
September 30, (unaudited) September 30, (unaudited)
2012       2011 2012       2011
(In millions, except per share amounts)
Exploration and Production $ 608 $ 422 $ 1,887 $ 2,148
Marketing and Refining 53 (23) 72 (23)
Corporate (38) (44) (115) (114)
Interest expense   (66)   (57)   (193)   (177)
Net income attributable to Hess Corporation $ 557 $ 298 $ 1,651 $ 1,834
 
Net income per share (diluted) $ 1.64 $ .88 $ 4.85 $ 5.40
 
Weighted average number of shares (diluted)   340.0   340.2   340.3   339.8

 

Note: See the following page for a table of items affecting comparability of earnings between periods.

Exploration and Production earnings were $608 million in the third quarter of 2012, compared with $422 million in the third quarter of 2011. The Corporation’s average worldwide crude oil selling price, including the effect of hedging, was $86.69 per barrel, up from $85.81 per barrel in the same quarter a year ago. The average worldwide natural gas selling price was $5.88 per mcf in the third quarter of 2012, up from $5.74 per mcf in the third quarter of 2011. Third quarter oil and gas production was 402,000 barrels of oil equivalent per day, up from 344,000 barrels of oil equivalent per day in the third quarter of 2011, primarily reflecting an increase in production from the Bakken oil shale play and the resumption of operations in Libya. Net production from the Bakken averaged 62,000 barrels of oil equivalent per day in the third quarter of 2012 compared to 32,000 barrels of oil equivalent per day in the same period last year. At the Waha concessions in Libya, net production averaged 23,000 barrels of oil equivalent per day in the third quarter of 2012. Due to civil unrest in the country, there was no production in Libya in the same period last year.

Marketing and Refining generated income of $53 million in the third quarter of 2012, compared with a loss of $23 million in the same period in 2011. Marketing earnings were $17 million in the third quarter of 2012, down from $41 million in the third quarter of 2011 as a result of lower margins. Port Reading refining operations generated income of $18 million in the third quarter of 2012, compared with break even in the same quarter last year. Refining operations generated a loss of $38 million in the third quarter a year ago, almost entirely related to our share of HOVENSA's results. The HOVENSA refinery was shut down in the first quarter of 2012. Trading activities generated income of $18 million in the third quarter of 2012 and a loss of $26 million in the same quarter of last year.

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

           
Three Months Ended Nine Months Ended
September 30, (unaudited) September 30, (unaudited)
2012       2011 2012       2011
(In millions)
Exploration and Production $ 62 $ (81) $ 62 $ 244
 

Third quarter 2012 results included an after-tax gain of $349 million from the sale of the Corporation’s interests in the Schiehallion Field and associated assets in the United Kingdom North Sea for $524 million. The results also included after-tax impairment charges of $116 million that resulted from increases to the Corporation’s estimated abandonment liabilities related to non-producing properties. Additionally, the Corporation recorded a $56 million after-tax charge to write off its assets in Peru following a decision to cease future appraisal and development activities in the country. A one-time charge of $115 million was also recorded to reflect the third quarter change in the United Kingdom’s supplementary income tax rate to 20 percent from 32 percent applicable to deductions for dismantlement expenditures.

Net cash provided by operating activities was $1,862 million in the third quarter of 2012, compared with $1,022 million in the same quarter of 2011. Capital and exploratory expenditures were $2,287 million, of which $2,260 million related to Exploration and Production operations. Capital and exploratory expenditures for the third quarter of 2011 were $2,550 million, of which $2,517 million related to Exploration and Production operations.

At September 30, 2012, cash and cash equivalents totaled $528 million, compared with $351 million at December 31, 2011. Total debt was $7,841 million at September 30, 2012 and $6,057 million at December 31, 2011. The Corporation’s debt to capitalization ratio at September 30, 2012 was 27.5 percent, compared with 24.6 percent at the end of 2011.

Hess Corporation will review third quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details about the event, refer to the Investor Relations section of our website at www.hess.com.

Hess Corporation, with headquarters in New York, is a leading global independent energy company engaged in the exploration for and production of crude oil and natural gas, as well as in refining and in marketing refined petroleum products, natural gas and electricity. More information on Hess Corporation is available at www.hess.com.

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Forward-looking Statements

Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, uncertainties inherent in the measurement and interpretation of geological, geophysical and other technical data.

                 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Third Third Second
Quarter Quarter Quarter
2012 2011 2012

Income Statement

Revenues and Non-operating Income
Sales (excluding excise taxes) and other operating revenues $ 9,194 $ 8,665 $ 9,304
Income (loss) from equity investment in HOVENSA L.L.C. - (36) -
Gains on asset sales 376 103 -
Other, net   49   (6)   5
 
Total revenues and non-operating income   9,619   8,726   9,309
 
Costs and Expenses
Cost of products sold (excluding items shown separately below) 6,019 6,181 5,969
Production expenses 712 609 677
Marketing expenses 259 266 265
Exploration expenses, including dry holes and lease impairment 259 199 196
Other operating expenses 41 43 41
General and administrative expenses 167 177 172
Interest expense 104 94 105
Depreciation, depletion and amortization 748 586 769
Asset impairments   208   358   59
 
Total costs and expenses   8,517   8,513   8,253
 
Income (loss) before income taxes 1,102 213 1,056
Provision (benefit) for income taxes   510   (54)   521
 
Net income (loss) 592 267 535
Less: Net income (loss) attributable to noncontrolling interests   35   (31)   (14)
Net income (loss) attributable to Hess Corporation $ 557 $ 298 $ 549
 

Supplemental Income Statement Information

Foreign currency gains (losses), after-tax $ 7 $ (2) $ (5)
Capitalized interest 8 4 5
 

Cash Flow Information

Net cash provided by operating activities (a) $ 1,862 $ 1,022 $ 1,240
 

Capital and Exploratory Expenditures

Exploration and Production
United States $ 1,210 $ 1,600 $ 1,243
International   1,050   917   793
 
Total Exploration and Production 2,260 2,517 2,036
Marketing, Refining and Corporate   27   33   42
 
Total Capital and Exploratory Expenditures $ 2,287 $ 2,550 $ 2,078
 
Exploration expenses charged to income included above
United States $ 39 $ 48 $ 33
International   88   68   67
 
$ 127 $ 116 $ 100
 

(a) Includes changes in working capital.

     

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
Nine Months
2012     2011

Income Statement

Revenues and Non-operating Income
Sales (excluding excise taxes) and other operating revenues $ 28,180 $ 28,733
Income (loss) from equity investment in HOVENSA L.L.C. - (133)
Gains on asset sales 412 446
Other, net   83   1
 
Total revenues and non-operating income   28,675   29,047
 
Costs and Expenses
Cost of products sold (excluding items shown separately below) 18,667 20,062
Production expenses 2,062 1,739
Marketing expenses 775 796
Exploration expenses, including dry holes and lease impairment 708 769
Other operating expenses 123 127
General and administrative expenses 506 515
Interest expense 313 290
Depreciation, depletion and amortization 2,198 1,732
Asset impairments   267   358
 
Total costs and expenses   25,619   26,388
 
Income (loss) before income taxes 3,056 2,659
Provision (benefit) for income taxes   1,369   849
 
Net income (loss) 1,687 1,810
Less: Net income (loss) attributable to noncontrolling interests   36   (24)
Net income (loss) attributable to Hess Corporation $ 1,651 $ 1,834
 

Supplemental Income Statement Information

Foreign currency gains (losses), after-tax $ 11 $ (7)
Capitalized interest 18 8
 

Cash Flow Information

Net cash provided by operating activities (a) $ 4,090 (b) $ 3,846
 

Capital and Exploratory Expenditures

Exploration and Production
United States $ 3,694 $ 2,933
International   2,565   2,226
 
Total Exploration and Production 6,259 5,159
Marketing, Refining and Corporate   92   67
 
Total Capital and Exploratory Expenditures $ 6,351 $ 5,226
 
Exploration expenses charged to income included above
United States $ 109 $ 146
International   226   189
 
$ 335 $ 335
 

(a)

Includes changes in working capital.

(b)

Net of payments to HOVENSA L.L.C. totaling $487 million to fully fund our share of previously accrued refining shutdown costs.

           

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 
September 30, December 31,
2012 2011

Balance Sheet Information

 
Cash and cash equivalents $ 528 $ 351
Other current assets 7,629 7,988
Investments 401 384
Property, plant and equipment – net 28,144 24,712
Other long-term assets   5,510   5,701
Total assets $ 42,212 $ 39,136
 
Short-term debt and current maturities of long-term debt $ 621 $ 52
Other current liabilities 7,227 8,048
Long-term debt 7,220 6,005
Other long-term liabilities 6,492 6,439
Total equity excluding other comprehensive income (loss) 21,327 19,659
Accumulated other comprehensive income (loss)   (675)   (1,067)
Total liabilities and equity $ 42,212 $ 39,136

     

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 
Third Quarter 2012
United States       International       Total
Sales and other operating revenues $ 1,022 $ 1,685 $ 2,707
Gains on asset sales - 376 376
Other, net   18   26   44
 
Total revenues and non-operating income   1,040   2,087   3,127
Costs and expenses
Production expenses, including related taxes 241 471 712
Exploration expenses, including dry holes and lease impairment 68 191 259
General, administrative and other expenses 49 30 79
Depreciation, depletion and amortization 393 332 725
Asset impairments   58   150   208
 
Total costs and expenses   809   1,174   1,983
 
Results of operations before income taxes 231 913 1,144
Provision (benefit) for income taxes   91   445   536
 
Results of operations attributable to Hess Corporation $ 140 (a) $ 468 (b) $ 608
 
Third Quarter 2011
United States International Total
Sales and other operating revenues $ 830 $ 1,307 $ 2,137
Gains on asset sales - 103 103
Other, net   4   (10)   (6)
 
Total revenues and non-operating income   834   1,400   2,234
Costs and expenses
Production expenses, including related taxes 174 435 609
Exploration expenses, including dry holes and lease impairment 120 79 199
General, administrative and other expenses 44 27 71
Depreciation, depletion and amortization 209 355 564
Asset impairments   16   342   358
 
Total costs and expenses   563   1,238   1,801
 
Results of operations before income taxes 271 162 433
Provision (benefit) for income taxes   108   (97)   11
 
Results of operations attributable to Hess Corporation $ 163 $ 259 (b) $ 422
 
Second Quarter 2012
United States International Total
Sales and other operating revenues $ 1,043 $ 1,946 $ 2,989
Gains on asset sales - - -
Other, net   1   -   1
 
Total revenues and non-operating income   1,044   1,946   2,990
Costs and expenses
Production expenses, including related taxes 253 424 677
Exploration expenses, including dry holes and lease impairment 75 121 196
General, administrative and other expenses 50 29 79
Depreciation, depletion and amortization 335 408 743
Asset impairments   59   -   59
 
Total costs and expenses   772   982   1,754
 
Results of operations before income taxes 272 964 1,236
Provision (benefit) for income taxes   112   480   592
 
Results of operations attributable to Hess Corporation $ 160 (a) $ 484 (b) $ 644
 

(a)

The after-tax losses from crude oil hedging activities were $5 million in the third quarter of 2012 and $3 million in the second quarter of 2012.

(b)

The after-tax losses from crude oil hedging activities were $89 million in the third quarter of 2012, $82 million in the third quarter of 2011 and $86 million in the second quarter of 2012.

     

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

 
Nine Months 2012
United States       International       Total
Sales and other operating revenues $ 2,988 $ 5,328 $ 8,316
Gains on asset sales - 412 412
Other, net   19   53   72
 
Total revenues and non-operating income   3,007   5,793   8,800
Costs and expenses
Production expenses, including related taxes 725 1,337 2,062
Exploration expenses, including dry holes and lease impairment 221 487 708
General, administrative and other expenses 137 86 223
Depreciation, depletion and amortization 1,007 1,120 2,127
Asset impairments   117   150   267
 
Total costs and expenses   2,207   3,180   5,387
 
Results of operations before income taxes 800 2,613 3,413
Provision (benefit) for income taxes   313   1,213   1,526
 
Results of operations attributable to Hess Corporation $ 487 (a) $ 1,400 (b) $ 1,887
 
Nine Months 2011
United States International Total
Sales and other operating revenues $ 2,434 $ 5,014 $ 7,448
Gains on asset sales - 446 446
Other, net   (10)   -   (10)
 
Total revenues and non-operating income   2,424   5,460   7,884
Costs and expenses
Production expenses, including related taxes 490 1,249 1,739
Exploration expenses, including dry holes and lease impairment 357 412 769
General, administrative and other expenses 141 90 231
Depreciation, depletion and amortization 527 1,127 1,654
Asset impairments   16   342   358
 
Total costs and expenses   1,531   3,220   4,751
 
Results of operations before income taxes 893 2,240 3,133
Provision (benefit) for income taxes   340   645   985
 
Results of operations attributable to Hess Corporation $ 553 $ 1,595 (b) $ 2,148
 

(a)

The after-tax losses from crude oil hedging activities were $34 million in the first nine months of 2012.

(b)

The after-tax losses from crude oil hedging activities were $300 million in the first nine months of 2012 and $244 million in the first nine months of 2011.

                 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA (UNAUDITED)

 
Third Third Second
Quarter Quarter Quarter
2012 2011 2012

Operating Data

Net Production Per Day (in thousands)

Crude oil - barrels
United States 109 82 109
Europe 80 68 98
Africa 75 59 79
Asia   17   15   18
Total   281   224   304
 
Natural gas liquids - barrels
United States 16 13 15
Europe 2 3 3
Asia   1   1   1
Total   19   17   19
 
Natural gas - mcf
United States 116 102 121
Europe 36 55 53
Asia and other   462   458   465
Total   614   615   639
Barrels of oil equivalent   402   344   429
 

Average Selling Price

Crude oil - per barrel (including hedging)
United States $ 90.17 $ 95.12 $ 91.97
Europe 75.08 65.92 76.20
Africa 90.78 89.41 89.01
Asia 102.85 112.31 105.89
Worldwide 86.69 85.81 86.86
 
Crude oil - per barrel (excluding hedging)
United States $ 90.87 $ 95.12 $ 92.48
Europe 75.36 65.92 76.58
Africa 110.33 113.03 105.72
Asia 103.20 112.31 106.17
Worldwide 92.35 92.33 91.83
 
Natural gas liquids - per barrel
United States $ 38.35 $ 57.72 $ 40.75
Europe 56.82 82.18 66.15
Asia 64.67 71.30 75.16
Worldwide 41.71 63.64 45.56
 
Natural gas - per mcf
United States $ 2.18 $ 3.43 $ 1.55
Europe 9.15 8.93 9.98
Asia and other 6.56 5.86 6.61
Worldwide 5.88 5.74 5.94

     

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION SUPPLEMENTAL OPERATING DATA (UNAUDITED)

 
Nine Months
2012       2011

Operating Data

Net Production Per Day (in thousands)

Crude oil - barrels
United States 104 78
Europe 91 86
Africa 75 70
Asia   17   14
Total   287   248
 
Natural gas liquids - barrels
United States 15 13
Europe 3 3
Asia   1   1
Total   19   17
 
Natural gas - mcf
United States 112 103
Europe 50 78
Asia and other   459   453
Total   621   634
Barrels of oil equivalent   409   371
 

Average Selling Price

Crude oil - per barrel (including hedging)
United States $ 92.53 $ 97.71
Europe 77.13 81.19
Africa 89.56 89.85
Asia 107.88 112.03
Worldwide 87.71 90.22
 
Crude oil - per barrel (excluding hedging)
United States $ 94.46 $ 97.71
Europe 78.18 81.19
Africa 111.28 111.20
Asia 109.92 112.03
Worldwide 94.58 95.89
 
Natural gas liquids - per barrel
United States $ 42.60 $ 58.86
Europe 75.67 78.09
Asia 75.95 74.18
Worldwide 49.05 63.70
 
Natural gas - per mcf
United States $ 1.83 $ 3.66
Europe 9.56 8.64

Asia and other

6.64 5.85
Worldwide 6.01 5.84

                 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA (UNAUDITED)

 
Third Third Second
Quarter Quarter Quarter
2012 2011 2012

Financial Information (in millions)

 

Marketing and Refining Results

Income (loss) before income taxes $ 84 $ (23) $ 7
Provision (benefit) for income taxes   31   -   (1)
Results of operations attributable to Hess Corporation $ 53 $ (23) $ 8
 

Summary of Marketing and Refining Results

Marketing $ 17 $ 41 $ 18
Refining 18 (38) 8
Trading   18   (26)   (18)
Results of operations attributable to Hess Corporation $ 53 $ (23) $ 8
                               
 

Operating Data

 

Sales Volumes

Refined petroleum products (thousands of barrels per day)

Gasoline 214 222 212
Distillates 102 100 108
Residuals 48 53 54
Other   10   14   17

Total

  374   389   391
 
Natural gas (thousands of mcf per day)   1,900   1,800   1,860
 
Electricity (megawatts round the clock)   4,765   4,900   4,405
 

Retail Marketing

Number of retail stations (a) 1,361 1,358 1,361
Convenience store revenue (in millions) (b) $ 295 $ 316 $ 288
Average gasoline volume per station (thousands of gallons per month) (b) 196 201 194
 

Port Reading

Refinery throughput (thousands of barrels per day) 68 63 69
Refinery utilization (capacity - 70,000 barrels per day) 97.0% 90.0% 98.0%
 

(a)

Includes company operated, Wilco-Hess, dealer and branded retailer.

(b)

Company operated only.

           

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

MARKETING AND REFINING SUPPLEMENTAL FINANCIAL AND OPERATING DATA (UNAUDITED)

 
Nine Months
2012 2011

Financial Information (in millions)

 

Marketing and Refining Results

Income (loss) before income taxes $ 111 $ 28
Provision (benefit) for income taxes   39   51
Results of operations attributable to Hess Corporation $ 72 $ (23)
 

Summary of Marketing and Refining Results

Marketing $ 57 $ 137
Refining 20 (130)
Trading   (5)   (30)
Results of operations attributable to Hess Corporation $ 72 $ (23)
                     
 

Operating Data

 

Sales Volumes

Refined petroleum products (thousands of barrels per day)

Gasoline 212 226
Distillates 109 116
Residuals 54 65
Other   15   20
Total   390   427
 
Natural gas (thousands of mcf per day)   2,105   2,200
 
Electricity (megawatts round the clock)   4,475   4,500
 

Retail Marketing

Number of retail stations (a) 1,361 1,358
Convenience store revenue (in millions) (b) $ 855 $ 899
Average gasoline volume per station (thousands of gallons per month) (b) 192 195
 

Port Reading

Refinery throughput (thousands of barrels per day) 61 65
Refinery utilization (capacity - 70,000 barrels per day) 87.6% 92.5%
 

(a)

Includes company operated, Wilco-Hess, dealer and branded retailer.

(b)

Company operated only.

Contacts

Hess Corporation
Investor Contact:
Jay Wilson, 212-536-8940
or
Media Contact:
Jon Pepper, 212-536-8550

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Contacts

Hess Corporation
Investor Contact:
Jay Wilson, 212-536-8940
or
Media Contact:
Jon Pepper, 212-536-8550