Amerada Hess's 4Q 2002 earnings pulled down by Ceiba field assets writedown

By OGJ editors

HOUSTON, Jan. 30 -- Amerada Hess Corp. reported Thursday a net loss, including special items, of $371 million for fourth quarter 2002 compared with a net income of $54 million for the same quarter in 2001. For the full year, the company reported a net loss of $218 million compared with a net income of $914 million in 2001.

Amerada Hess recorded an after-tax impairment charge of $530 million in the fourth quarter to reduce the carrying value of Equatorial Guinea's Ceiba field, the company said. "The noncash charge principally results from a reduction in probable reserves and higher field development costs associated with extending the field life," the company noted.

No revision was made to Ceiba's proved oil reserves, Amerada Hess added.

Following Amerada Hess's earnings announcement, Moody's Investors Service placed under review for possible downgrade the company's Baa2 long-term debt and Prime-2 commercial paper ratings in direct response to the company's "writedown of a portion of its investment in the Ceiba field reserves, and expectations for lower oil production in 2003 and the medium term."

Moody's noted that Amerada Hess's investment in Ceiba field was on of the main assets gained as part of the $3.2 billion acquisition of Triton Energy Ltd. in 2001 (OGJ Online, July 10, 2001).

"The writedown reflects expected lower production from Ceiba and higher development costs in the medium term," Moody's said, adding, "the former primarily related to reservoir performance management issues.

"The reduced production, in combination with recent and planned asset sales for 2003, is expected to result in total production some 20% lower than originally expected in 2003 and for the next few years, during development and exploration of Ceiba and other Equatorial Guinea discoveries," Moody's noted.