Hess records $320-million Q2 net loss while y-o-y production increases

Hess Corp. reported a net loss of $320 million in second-quarter 2020, compared with a net loss of $6 million in second-quarter 2019.

Exploration and production net loss was $249 million in the second quarter, compared with net income of $68 million in the same quarter a year earlier.

The midstream segment had net income of $51 million in second-quarter 2020, compared with net income of $35 million in the prior-year quarter. The improved results are primarily driven by higher throughput volumes.

E&P capital and exploratory expenditures were $453 million in the quarter, down from $664 million in the prior-year quarter. The decrease is primarily driven by the lower rig count in the Bakken and reduced development drilling in the Gulf of Mexico during the quarter.

For full year 2020, Hess is maintaining E&P capital and exploratory expenditures guidance at $1.9 billion.

Midstream capital expenditures were $79 million in the second quarter, up from $69 million in the prior-year quarter.

Net cash provided by operating activities was $266 million in second quarter, down from $675 million in second-quarter 2019 primarily due to lower realized crude oil selling prices and the impact on cash flows from deferring sales for the 3.7 million bbl loaded on VLCCs in the quarter.

Production

Net production, excluding Libya, was 334,000 boe/d in second-quarter 2020, up 22% from second-quarter 2019 net production of 273,000 boe/d. The improved performance primarily resulted from a 39% increase in Bakken production and production from Liza Field, offshore Guyana, which began in December 2019. There was no net production for Libya in second-quarter 2020 due to the declaration of force majeure by the Libyan National Oil Corp. Net production for Libya was 20,000 boe/d in second-quarter 2019.

Net production from the Bakken increased to 194,000 boe/d from 140,000 boe/d in the prior-year quarter, with net oil production up 26% to 108,000 b/d of oil from 86,000 b/d of oil, primarily due to increased wells online and improved well performance.

Natural gas and NGL production also increased from higher wells online, additional natural gas captured and processed at the Little Missouri 4 natural gas processing plant that commenced operations in July 2019, and additional volumes received under percentage of proceeds contracts resulting from lower prices.

Planned maintenance turnaround at the Tioga Gas Plant originally scheduled for third-quarter 2020 will be deferred until 2021 in light of the COVID-19 pandemic.

Net production from the US Gulf of Mexico was 68,000 boe/d, compared with 65,000 boe/d in the prior-year quarter. The Esox-1 well, which began production in February, is expected to reach its gross peak rate of 17,000 boe/d, or 9,000 boe/d net to Hess, in the third quarter, and is expected to average 5,000 boe/d net to Hess in 2020. Hess is participating in the BP-operated Galapagos Deep exploration well (25%) which is a hub-class, Cretaceous-aged opportunity in the Mississippi Canyon area. The well spud in May and is still drilling.

On the Stabroek Block offshore Guyana, (Hess 30%), Hess’s net production from Liza field, which began in December 2019, averaged 22,000 b/d of oil in second-quarter 2020. Operator Esso Exploration and Production Guyana Ltd is currently commissioning water injection equipment and bringing natural gas injection fully online that should enable the Liza Destiny floating production, offloading, and storage vessel (FPSO) to reach its capacity of 120,000 gross b/d of oil in August. Phase two of Liza field development, which will utilize the Liza Unity FPSO with an expected capacity of 220,000 gross b/d of oil, remains on target to achieve first oil in early 2022.

As previously stated, some activities for a third development, Payara, with expected production capacity of 220,000 gross b/d of oil, have been deferred pending government approval of the project creating a potential delay in production startup of 6-12 months.

As a result of COVID-19 related travel restrictions in Guyana, the operator temporarily idled two drillships but both drillships resumed drilling operations by the end of the second quarter. The Stena Carron recently completed appraisal drilling at Yellowtail-2, about 1 mile southeast of Yellowtail-1.

The well identified two additional high-quality reservoirs, one adjacent to, and the other below Yellowtail field. The additional resource is being evaluated to help form the basis for a potential future development. The Noble Don Taylor commenced drilling of the Redtail exploration well, about is 1.25 miles northwest of Yellowtail-1, in July. The other two drillships, the Noble Bob Douglas and the Noble Tom Madden, are drilling and completing Liza Phase 1 and Phase 2 development wells.

Net production at North Malay basin and JDA offshore southeast Asia was 44,000 boe/d, compared with 59,000 boe/d in the prior-year quarter, reflecting reduced natural gas nominations caused by COVID-19 impacts on economic activity in Malay