Hess Corp. is considering adding a third rig in the second half of 2021 in the Bakken Shale of North Dakota if oil prices remain strong, executives said during an earnings call.
Adding a fourth rig in the future “would get output to 200,000 b/d and make the Bakken a $1 billion/year free cash flow generator” at $60/bbl West Texas Intermediate prices, executives said.
Hess saw an average realized crude oil selling price, including the effect of hedging, of $50.02/bbl in the first quarter compared with $45.94/bbl in 1Q2021.
“Even as we have seen oil prices recover since the beginning of this year, our priorities continue to be to preserve cash, preserve our operating capability and preserve the long-term value of our assets,” CEO John Hess told investors.
Bakken net production was 158,000 boe/d in the first quarter, compared with 190,000 boe/d in the same period last year.
Net production from the Bakken is forecast to be 155,000-160,000 boe/d for full year 2021. The forecast reflects the impact of lower natural gas liquids volumes received as consideration for gas processing fees, executives said.
The company drilled 11 wells and brought four new wells online in the Bakken in the first quarter. For 2021, the company expects to drill about 55 wells and to bring about 45 new Bakken wells online, COO Greg Hill said.
Hill sees Bakken net production building in the second half of the year to a 2021 exit rate of 170,000-175,000 boe/d.
Executives said they agreed to sell nonstrategic interests in their Bakken acreage for a total consideration of $312 million, with an effective date of March 1, 2021. The sale is expected to close within the next few weeks.
Hess executives are also betting big on their assets offshore Guyana and what they see as “industry-leading” financial returns.
“Guyana is positioned to become a significant cash engine as multiple phases of low-cost oil developments come online, which we expect will drive our portfolio breakeven Brent oil price below $40/bbl by the middle of the decade,” Hess said. “As our portfolio generates increasing free cash flow, we’ll first prioritize debt reduction, and then cash returns to shareholders through dividend increases and opportunistic share repurchases.”
Hess, along with partner ExxonMobil, have three sanctioned oil developments offshore Guyana, which have a Brent breakeven oil price of $25-35/bbl.
At the Stabroek Block, where Hess has a 30% stake, net production to the company from the Liza Field was 31,000 b/d in the first quarter, compared with 15,000 b/d in the prior-year quarter. Startup of Phase 2 of the Liza Field development, with an expected output of 220,000 gross b/d, remains on track for early 2022, executives said.
A new oil discovery at Uaru-2 on Stabroek adds to the previously announced gross discovered recoverable resource estimate for the block of approximately 9 billion boe, the company said.
The New York City-based producer expects to have at least six floating production storage and offloading (FPSO) units on the Stabroek Block by 2027 with the potential for up to 10 FPSOs.
Global oil and gas production net to the company was 333,000 boe/d in the quarter compared to 349,000 boe/d in the first quarter last year.
Executives also said Hess has a five-year emission target through 2025 to reduce operated Scope 1 and Scope 2 greenhouse gas emissions intensity by approximately 44%, and methane emissions intensity by about 50% from 2017 levels.
Net income was $252 million (82 cents/share) in the first quarter, compared with a net loss of $2.43 billion (minus $8.00) in the same period last year.
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