Hess Corp. officials said that although production fell in 2011 and the company suffered a net loss in the final quarter, they are confident 2012 will be a better year as they move forward with promising development in North America’s onshore and the deepwater Gulf of Mexico (GOM).
“Our financial position remains strong,” CEO John Hess told financial analysts in a Wednesday morning conference call. “2011 was a difficult year operationally, but important strategically.”
Hess lost $131 million (minus 39 cents/share) in 4Q2011, compared with net profit of $58 million (18 cents) in the year-ago period. Production last year averaged 367,000 boe/d, an 11% decrease from the 420,000 boe/d in 2010. The CEO attributed most of last year’s production issues to short-term setbacks, including the temporary shut-in of the Llano 3 well in the deepwater GOM and some problems overseas.
“We continue to make progress in restoring these lost production volumes,” Hess told analysts, adding that the company predicts crude oil and natural gas production would rebound to average 370,000-390,000 boe/d during 2012.
Greg Hill, the company’s president for worldwide exploration and production, said the company was making progress in the Tubular Bells deepwater field in the GOM, which the company operates with a 57.14% working interest. Chevron U.S.A. Inc. holds the remaining 42.86% interest (see Daily GPI, Oct. 26, 2011).
“Facilities construction is under way, and drilling is planned to commence in mid-2012,” Hill said. “First production is planned in 2014, with a peak annual net rate of about 25,000 boe/d.” The company also is moving forward with several Miocene prospects in the GOM, bringing them to drill-ready status.
During the question-and-answer session with analysts, Hill characterized the company’s deepwater GOM program as prospect-dependent. “We’re going to go wherever we think the most profitable opportunities are to add reserves and production,” Hill said.
Hess’ 4Q2011 results were adversely affected by an after-tax charge of $525 million for this month’s closure of the Hovensa LLC refinery in St. Croix, U.S. Virgin Islands. Hess had a 50% interest in the refinery, a joint venture (JV) with national oil company Petroleos de Venezuela SA.
“Overall losses at the refinery totaled $1.3 billion in the past three years and were projected to continue,” Hess said, adding that shutdown operations had already started and the facility would eventually become an oil storage terminal. He blamed the global economic slowdown, the addition of new refining capacity and low natural gas prices in the United States for the facility’s closure.
“Hovensa examined every strategic option to maximize value, but ultimately severe financial losses left no other choice but to close,” he said. “With the closure we have completed our transition to being predominantly an exploration and production company.”
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