Hess Reports Estimated Results for the Third Quarter of 2018

Hess Corporation (NYSE:HES) today reported net income of $52 million, or $0.14 per common share, in the third quarter of 2018, compared to a net loss of $624 million, or $2.02 per common share, in the third quarter of 2017. On an adjusted basis, the Corporation reported net income of $123 million, or $0.38 per common share, in the third quarter of 2018, compared with an adjusted net loss of $324 million, or $1.07 per common share, in the prior-year quarter. Higher realized crude oil selling prices combined with lower operating costs and depreciation, depletion and amortization expense in the third quarter of 2018 more than offset lower production volumes due to asset sales, compared with the prior-year quarter.

We achieved another strong quarter, delivering higher production and lower costs than our guidance while keeping capital and exploratory expenditures flat with guidance for the year, Chief Executive Officer John Hess said. Our reshaped portfolio is well positioned for a decade plus of capital efficient production growth with increasing cash generation and returns to shareholders.

After-tax income (loss) by major operating activity was as follows:

Three Months EndedNine Months Ended
September 30,September 30,
(unaudited)(unaudited)
2018201720182017
(In millions, except per share amounts)

Net Income (Loss) Attributable to Hess Corporation

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Exploration and Production$144$(474)$150$(1,061)
Midstream30(12)8822
Corporate, Interest and Other(122)(138)(422)(358)
Net income (loss) attributable to Hess Corporation$52$(624)$(184)$(1,397)
Net income (loss) per common share (diluted) (a)$0.14$(2.02)$(0.73)$(4.55)

Adjusted Net Income (Loss) Attributable to Hess Corporation (b)

Exploration and Production$203$(238)$236$(825)
Midstream30228856
Corporate, Interest and Other(110)(108)(329)(328)
Adjusted net income (loss) attributable to Hess Corporation$123$(324)$(5)$(1,097)
Adjusted net income (loss) per common share (diluted) (a)$0.38$(1.07)$(0.13)$(3.60)
Weighted average number of shares (diluted)297.3314.5300.4314.3

(a)

Calculated as net income (loss) attributable to Hess Corporation less preferred stock dividends, divided by weighted average number of diluted shares.

(b)

Adjusted net income (loss) attributable to Hess Corporation excludes items affecting comparability of earnings between periods summarized on page 7. A reconciliation of net income (loss) attributable to Hess Corporation to adjusted net income (loss) attributable to Hess Corporation is provided on page 7.

Exploration and Production:

Exploration and Production (E&P) net income in the third quarter of 2018 was $144 million, compared to a net loss of $474 million in the third quarter of 2017. On an adjusted basis, third quarter 2018 net income was $203 million, compared to a net loss of $238 million in the prior-year quarter. The Corporations average realized crude oil selling price, including the effect of hedging, was $66.08 per barrel in the third quarter of 2018, up from $46.97 per barrel in the year-ago quarter. Noncash losses on crude oil hedging contracts reduced third quarter 2018 after-tax results by $49 million. The average realized natural gas liquids selling price in the third quarter of 2018 was $24.29 per barrel, versus $17.22 per barrel in the prior-year quarter, while the average realized natural gas selling price was $4.11 per mcf, compared to $3.35 per mcf in the third quarter of 2017.

Net production, excluding Libya, was 279,000 boepd in the third quarter of 2018, down from 299,000 boepd in the prior-year quarter. Excluding assets sold in 2017 and Libya, third quarter 2017 net production was 249,000 boepd. Growth in production was driven primarily by the Bakken, North Malay Basin and the Gulf of Mexico. Libya net production was 18,000 boepd in the third quarter of 2018, compared with 12,000 boepd in the year-ago quarter. Full year 2018 production, excluding Libya, is now expected to be approximately 255,000 boepd, which is the upper end of our previous guidance range.

Excluding items affecting comparability of earnings between periods and including Libya, cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $11.41 per barrel of oil equivalent (boe) in the third quarter, down 17 percent from $13.77 per boe in the prior-year quarter.  This improvement is due to increased low-cost production from the Gulf of Mexico and North Malay Basin, cost savings initiatives, and sales of higher cost assets.  The E&P effective tax rate, excluding items affecting comparability and Libya, was a benefit of 5 percent in the third quarter of 2018, compared to a benefit of 18 percent in the prior-year period.

Operational Highlights for the Third Quarter of 2018:

   Bakken (Onshore U.S.): Net production from the Bakken increased 15 percent to 118,000 boepd from 103,000 boepd in the year-ago quarter due to increased drilling activity, improved well performance, and the impact of severe weather in the third quarter of 2017. The Corporation operated an average of five rigs in the third quarter, drilling 34 wells and bringing 29 new wells online. The Corporation added a sixth rig late in the third quarter of this year. Full year 2018 production guidance for the Bakken remains 115,000 boepd to 120,000 boepd.

   Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 71,000 boepd, compared to 59,000 boepd in the prior-year quarter, reflecting higher production primarily from the Penn State and Stampede fields. Production from the Conger Field resumed in mid-July after being shut-in since the fourth quarter of 2017 due to a shutdown of the third-party operated Enchilada platform.

   North Malay Basin (Offshore Malaysia): Net production from North Malay Basin (Hess operated – 50 percent) was 31,000 boepd, compared to 14,000 boepd in the prior-year quarter. Production from the full field development commenced in July 2017. In July, we entered into a sale and lease-back arrangement for a floating, storage and offloading vessel (FSO) to handle produced condensate from the field and received net proceeds of approximately $130 million.

   Guyana (Offshore): At the Stabroek Block (Hess – 30 percent), the operator, Esso Exploration and Production Guyana Limited, announced a ninth discovery on the Block at the Hammerhead-1 exploration well, which encountered approximately 197 feet of high-quality, oil-bearing sandstone reservoir. The well, located approximately 13 miles southwest of the Liza-1 well, targeted Miocene aged reservoir and proves a new play concept for potential development on the Block. The Hammerhead discovery adds to the eight previous discoveries that are estimated to contain gross recoverable resources of more than 4 billion boe and have established the potential for up to five floating, production, storage and offloading (FPSO) vessels producing over 750,000 gross barrels of oil per day (bopd) by 2025.

The Liza Phase 1 development, which is expected to begin producing oil by early 2020, will use the Liza Destiny FPSO to produce up to 120,000 gross bopd. Construction of the FPSO and subsea equipment is well advanced. Phase 2 of the Liza development, which will use a second FPSO designed to produce up to 220,000 gross bopd, is expected to be producing by mid-2022. A third phase of development at the Payara Field is expected to use an FPSO designed to produce approximately 180,000 gross bopd, with first production expected as early as 2023.

A second exploration vessel, the Noble Tom Madden, will commence drilling at the Pluma prospect, which is located approximately 17 miles south of the Turbot discovery, in November.

   Canada (Offshore): In Nova Scotia (Hess “ 50 percent), drilling of the Aspy exploration well, which is operated by BP Canada, is ongoing.

   Suriname (Offshore): At Block 42 (Hess “ 33 percent), the operator, Kosmos Energy Ltd, completed drilling operations on the Pontoenoe-1 exploration well in October. High-quality reservoir was encountered, but commercial hydrocarbons were not discovered. Well costs incurred through September 30, 2018 of $25 million were expensed in the third quarter. Well results will be integrated in the ongoing evaluation to inform future exploration on the block.

Midstream:

The Midstream segment, comprised primarily of Hess Infrastructure Partners LP, our 50/50 midstream joint venture, had net income of $30 million in the third quarter of 2018, compared to a net loss of $12 million in the prior-year quarter. Excluding items affecting comparability of earnings between periods, third quarter 2017 net income was $22 million. Third quarter 2017 results attributable to Hess Corporation included an after-tax charge of $34 million related to the sale of Permian Midstream assets that were wholly-owned by Hess Corporation.

Corporate, Interest and Other:

Net results for Corporate, Interest and Other were an after-tax expense of $122 million in the third quarter of 2018, compared to an after-tax expense of $138 million in the third quarter of 2017. On an adjusted basis, third quarter 2018 after-tax expenses were $110 million, compared to $108 million in the third quarter of 2017. Adjusted corporate expenses of $26 million in the third quarter of 2018 were down $10 million, compared to the year-ago quarter primarily as a result of lower employee related costs. In the third quarter of 2018, interest expense of $84 million was $12 million higher than the year-ago quarter primarily due to lower capitalized interest.

Capital and Exploratory Expenditures:

E&P capital and exploratory expenditures were $542 million in the third quarter of 2018, compared to $558 million in the prior-year quarter. The 2018 activity primarily reflects ongoing drilling in the Bakken, increased Liza Phase 1 development activity, exploration wells in Canada and Suriname, and lower expenditures in the Gulf of Mexico. For full year 2018, our E&P capital and exploratory expenditures guidance remains unchanged at approximately $2.1 billion.

Midstream capital expenditures were $83 million in the third quarter of 2018, up from $27 million in the year-ago quarter primarily due to expansion of gathering systems and compression capacity to support Hess and third-party production growth. In addition, Midstream investments in its 50/50 joint venture with Targa Resources were $26 million in the third quarter of 2018.

Liquidity:

Net cash provided by operating activities was $423 million in the third quarter of 2018, up from $88 million in the third quarter of 2017. Net cash provided by operating activities before changes in working capital was $681 million in the third quarter of 2018, which includes a charge to general and administrative expense of $57 million for vacated office space, compared with $428 million in the year-ago quarter. The third quarter 2018 reduction in cash flow from operating activities resulting from changes in working capital was $258 million, which includes premiums paid on calendar 2019 crude oil hedging contracts of $105 million and payment of previously accrued legal claims of $84 million related to former downstream interests.

In the third quarter of 2018, the Corporation purchased a total of $250 million of common shares, bringing total share repurchases under the Corporations previously announced $1.5 billion repurchase program to $1.25 billion. The remaining $250 million is expected to be purchased during the fourth quarter. In the third quarter, the Corporation also completed the sale of our joint venture interests in the Utica shale play for net cash consideration of approximately $400 million.

Excluding the Midstream segment, the Corporation had cash and cash equivalents of $2.6 billion and total debt of $5.7 billion at September 30, 2018. The Corporations debt to capitalization ratio was 37.5 percent at September 30, 2018 and 36.1 percent at December 31, 2017.

The Midstream segment had cash and cash equivalents of $395 million and total debt of $983 million at September 30, 2018.

Items Affecting Comparability of Earnings Between Periods:

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

Three Months EndedNine Months Ended
September 30,September 30,
(unaudited)(unaudited)
2018201720182017
(In millions)
Exploration and Production$(59)$(236)$(86)$(236)
Midstream(34)(34)
Corporate, Interest and Other(12)(30)(93)(30)
Total items affecting comparability of earnings between periods$(71)$(300)$(179)$(300)

   Third Quarter 2018: E&P results include a pre-tax charge of $73 million ($73 million after-tax) in connection with vacated office space, of which $57 million is included in General and administrative expenses and $16 million is included in Depreciation, depletion and amortization. In addition, E&P results include a pre-tax gain of $14 million ($14 million after-tax) from the sale of our joint venture interests in the Utica shale play. As required under accounting standards, Corporate, Interest and Other results include an allocation of noncash income tax expense of $12 million to offset the recognition of a noncash income tax benefit recorded in other comprehensive income resulting from changes in fair value of our 2019 crude oil hedging program.

   Third Quarter 2017: Results included an after-tax gain attributable to Hess Corporation of $280 million associated with the sale of our enhanced oil recovery assets in the Permian Basin. This transaction, which included upstream and midstream assets, was allocated to the E&P segment ($314 million after-tax gain) and to the Midstream segment ($34 million after-tax loss). E&P results also included a noncash after-tax charge of $550 million to impair the carrying value of our former assets in Norway. Corporate, Interest and Other results included an after-tax charge of $30 million in connection with vacated office space.

The following table reconciles reported net income (loss) attributable to Hess Corporation and adjusted net income (loss):

Three Months EndedNine Months Ended
September 30,September 30,
(unaudited)(unaudited)
2018201720182017
(In millions)
Net income (loss) attributable to Hess Corporation$52$(624)$(184)$(1,397)
Less: Total items affecting comparability of earnings between periods(71)(300)(179)(300)
Adjusted net income (loss) attributable to Hess Corporation$123$(324)$(5)$(1,097)

The following table reconciles reported net cash provided by (used in) operating activities from cash provided by (used in) operating activities before changes in operating assets and liabilities:

Three Months EndedNine Months Ended
September 30,September 30,
(unaudited)(unaudited)
2018201720182017
(In millions)

Cash provided by (used in) operating activities before changes in operating assets and liabilities

$681$428$1,541$1,233
Changes in operating assets and liabilities(258)(340)(483)(631)
Net cash provided by (used in) operating activities$423$88$1,058$602

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

Hess Corporation is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas. More information on Hess Corporation is available at www.hess.com.

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. Estimates and projections contained in this release are based on the Corporations current understanding and assessment based on reasonable assumptions. Actual results may differ materially from these estimates and projections due to certain risk factors discussed in the Corporations periodic filings with the Securities and Exchange Commission and other factors.

Non-GAAP financial measure

The Corporation has used non-GAAP financial measures in this earnings release. Adjusted net income (loss) presented in this release is defined as reported net income (loss) attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods. Cash provided by (used in) operating activities before changes in operating assets and liabilities presented in this release is defined as Cash provided by (used in) operating activities excluding changes in operating assets and liabilities. Management uses adjusted net income (loss) to evaluate the Corporations operating performance and believes that investors understanding of our performance is enhanced by disclosing this measure, which excludes certain items that management believes are not directly related to ongoing operations and are not indicative of future business trends and operations. Management believes that cash provided by (used in) operating activities before changes in operating assets and liabilities demonstrates the Corporations ability to internally fund capital expenditures, pay dividends and service debt. These measures are not, and should not be viewed as, a substitute for U.S. GAAP net income (loss) or net cash provided by (used in) operating activities. A reconciliation of reported net income (loss) attributable to Hess Corporation (U.S. GAAP) to adjusted net income (loss), and a reconciliation of net cash provided by (used in) operating activities (U.S. GAAP) to cash provided by (used in) operating activities before changes in operating assets and liabilities are provided in the release.

Cautionary Note to Investors

We use certain terms in this release relating to resources other than proved reserves, such as unproved reserves or resources. Investors are urged to consider closely the oil and gas disclosures in Hess Form 10-K, File No. 1-1204, available from Hess Corporation, 1185 Avenue of the Americas, New York, New York 10036 c/o Corporate Secretary and on our website at www.hess.com. You can also obtain this form from the SEC on the EDGAR system.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

ThirdThirdSecond

   Quarter

   Quarter

 Quarter

201820172018

Income Statement

Revenues and non-operating income
Sales and other operating revenues$1,793$1,348$1,534
Gains (losses) on asset sales, net1427411
Other, net212221
Total revenues and non-operating income1,8281,6441,566
Costs and expenses
Marketing, including purchased oil and gas491338450
Operating costs and expenses266353288
Production and severance taxes472742
Exploration expenses, including dry holes and lease impairment754162
General and administrative expenses143111129
Interest expense997998
Loss on debt extinguishment26
Depreciation, depletion and amortization489759444
Impairment2,503
Total costs and expenses1,6104,2111,539
Income (loss) before income taxes218(2,567)27
Provision (benefit) for income taxes121(1,974)114
Net income (loss)97(593)(87)
Less: Net income (loss) attributable to noncontrolling interests453143
Net income (loss) attributable to Hess Corporation52(624)(130)
Less: Preferred stock dividends111112
Net income (loss) attributable to Hess Corporation common stockholders$41$(635)$(142)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

Nine Months Ended September 30,
20182017

Income Statement

Revenues and non-operating income
Sales and other operating revenues$4,673$3,803
Gains (losses) on asset sales, net32276
Other, net7921
Total revenues and non-operating income4,7844,100
Costs and expenses
Marketing, including purchased oil and gas1,299791
Operating costs and expenses8421,085
Production and severance taxes12888
Exploration expenses, including dry holes and lease impairment177151
General and administrative expenses382301
Interest expense300245
Loss on debt extinguishment53
Depreciation, depletion and amortization1,3502,237
Impairment2,503
Total costs and expenses4,5317,401
Income (loss) before income taxes253(3,301)
Provision (benefit) for income taxes308(1,995)
Net income (loss)(55)(1,306)
Less: Net income (loss) attributable to noncontrolling interests12991
Net income (loss) attributable to Hess Corporation(184)(1,397)
Less: Preferred stock dividends3434
Net income (loss) attributable to Hess Corporation common stockholders$(218)$(1,431)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

September 30,

December 31,
20182017

Balance Sheet Information

Cash and cash equivalents$3,004$4,847
Other current assets

1,497

1,310
Property, plant and equipment “ net

16,107

16,192
Other long-term assets953763
Total assets$

21,561

$23,112
Current maturities of long-term debt$85$580
Other current liabilities

1,873

1,855
Long-term debt6,6096,397
Other long-term liabilities1,8541,926
Total equity excluding other comprehensive income (loss)10,24611,737
Accumulated other comprehensive income (loss)(502)(686)
Noncontrolling interests1,3961,303
Total liabilities and equity$

21,561

$23,112
September 30,December 31,
20182017

Total Debt

Hess Corporation$5,711$5,997
Midstream (a)983980
Hess Consolidated$6,694$6,977

(a)  Midstream debt is non-recourse to Hess Corporation.

September 30,December 31,
20182017

Debt to Capitalization Ratio

Hess Consolidated37.5%36.1%
Three Months EndedNine Months Ended
September 30,September 30,

  2018

  2017

  2018

  2017

Interest Expense
Gross interest expense “ Hess Corporation$89$95$269$288
Less: Capitalized interest “ Hess Corporation(5)(23)(14)(61)
Interest expense “ Hess Corporation8472255227
Interest expense “ Midstream (a)1574518
Interest expense “ Consolidated$99$79$300$245

(a)  Midstream interest expense is reported in the Midstream operating segment.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

ThirdThirdSecond

   Quarter

   Quarter

 Quarter

201820172018

Cash Flow Information

Cash Flows from Operating Activities
Net income (loss)$97$(593)$(87)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

(Gains) losses on asset sales, net(14)(274)(11)
Depreciation, depletion and amortization489759444
Impairment2,503
Exploratory dry hole costs2513
Exploration lease and other impairment8710
Stock compensation expense212119
Noncash (gains) losses on commodity derivatives, net491347
Provision (benefit) for deferred income taxes and other tax accruals6(2,008)2
Loss on debt extinguishment26

Cash provided by (used in) operating activities before changes in operating assets and liabilities

681428463
Changes in operating assets and liabilities(258)(340)(38)
Net cash provided by (used in) operating activities42388425
Cash Flows from Investing Activities
Additions to property, plant and equipment – E&P(472)(489)(430)
Additions to property, plant and equipment – Midstream(68)(24)(63)
Payments for Midstream equity investments(26)(17)
Proceeds from asset sales, net of cash sold57460427
Other, net(3)(1)(1)
Net cash provided by (used in) investing activities590(484)
Cash Flows from Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less11
Debt with maturities of greater than 90 days
Borrowings
Repayments(19)(30)(157)
Common stock acquired and retired(230)(519)
Cash dividends paid(86)(91)(87)
Noncontrolling interests, net(13)(33)(11)
Other, net16(1)15
Net cash provided by (used in) financing activities(332)(144)(759)
Net Increase (Decrease) in Cash and Cash Equivalents9634(818)
Cash and Cash Equivalents at Beginning of Period2,9082,4923,726
Cash and Cash Equivalents at End of Period$3,004$2,526$2,908

Additions to Property, Plant and Equipment included within Investing Activities:

Capital expenditures incurred$(583)$(553)$(570)
Increase (decrease) in related liabilities434077
Additions to property, plant and equipment$(540)$(513)$(493)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

Nine Months Ended

September 30,

     2018

   2017

Cash Flow Information

Cash Flows from Operating Activities

Net income (loss)$(55)$(1,306)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

(Gains) losses on asset sales, net(32)(276)
Depreciation, depletion and amortization1,3502,237
Impairment2,503
Exploratory dry hole costs38
Exploration lease and other impairment2822
Stock compensation expense5365
Noncash (gains) losses on commodity derivatives, net13443
Provision (benefit) for deferred income taxes and other tax accruals(28)(2,055)
Loss on debt extinguishment53

Cash provided by (used in) operating activities before changes in operating assets and liabilities

1,5411,233
Changes in operating assets and liabilities(483)(631)
Net cash provided by (used in) operating activities1,058602
Cash Flows from Investing Activities
Additions to property, plant and equipment – E&P(1,265)(1,275)
Additions to property, plant and equipment – Midstream(168)(108)
Payments for Midstream equity investments(67)
Proceeds from asset sales, net of cash sold607783
Other, net(8)(1)
Net cash provided by (used in) investing activities(901)(601)
Cash Flows from Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less15
Debt with maturities of greater than 90 days
Borrowings
Repayments(610)(107)
Proceeds from issuance of Hess Midstream Partnership LP units366
Common stock acquired and retired(1,120)
Cash dividends paid(262)(273)
Noncontrolling interests, net(36)(208)
Other, net28
Net cash provided by (used in) financing activities(2,000)(207)
Net Increase (Decrease) in Cash and Cash Equivalents(1,843)(206)
Cash and Cash Equivalents at Beginning of Period4,8472,732
Cash and Cash Equivalents at End of Period$3,004$2,526

Additions to Property, Plant and Equipment included within Investing Activities:

Capital expenditures incurred$(1,544)$(1,426)
Increase (decrease) in related liabilities11143
Additions to property, plant and equipment$(1,433)$(1,383)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

ThirdThirdSecond

   Quarter

   Quarter

 Quarter

201820172018

Capital and Exploratory Expenditures

E&P Capital and exploratory expenditures
United States
Bakken$245$186$242
Other Onshore

6

825
Total Onshore

251

194267
Offshore

88

19192
Total United States339385359
South America1365573
Europe1344
Asia and other668489
E&P Capital and exploratory expenditures$542$558$525
Total exploration expenses charged to income included above$42$32$39
Midstream Capital expenditures$83$27$84
Nine Months Ended September 30,
20182017

Capital and Exploratory Expenditures

E&P Capital and exploratory expenditures
United States
Bakken$653$424
Other Onshore

41

25
Total Onshore

694

449
Offshore

263

540
Total United States957989
South America284161
Europe691
Asia and other204238
E&P Capital and exploratory expenditures$1,451$1,479
Total exploration expenses charged to income included above$111$128
Midstream Capital expenditures$204$75

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

Third Quarter 2018

Income Statement

 United States

 International

     Total

Total revenues and non-operating income
Sales and other operating revenues$1,394$399$1,793
Gains (losses) on asset sales, net1414
Other, net5712
Total revenues and non-operating income1,4134061,819
Costs and expenses
Marketing, including purchased oil and gas (a)49016506
Operating costs and expenses15362215
Production and severance taxes46147
Midstream tariffs169169
Exploration expenses, including dry holes and lease impairment334275
General and administrative expenses1006106
Depreciation, depletion and amortization343114457
Total costs and expenses1,3342411,575
Results of operations before income taxes79165244
Provision (benefit) for income taxes(21)121100
Net income (loss) attributable to Hess Corporation$100(b)$44$144
Third Quarter 2017

Income Statement

 United States

 International

     Total

Total revenues and non-operating income
Sales and other operating revenues$901$446$1,347
Gains (losses) on asset sales, net330330
Other, net(7)2518
Total revenues and non-operating income1,2244711,695
Costs and expenses
Marketing, including purchased oil and gas (a)33714351
Operating costs and expenses149162311
Production and severance taxes26127
Midstream tariffs140140
Exploration expenses, including dry holes and lease impairment162541
General and administrative expenses52456
Depreciation, depletion and amortization437272709
Impairments2,5032,503
Total costs and expenses1,1572,9814,138
Results of operations before income taxes67(2,510)(2,443)
Provision (benefit) for income taxes2(1,971)(1,969)
Net income (loss) attributable to Hess Corporation$65(c)$(539)(d)$(474)

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $49 million (noncash premium amortization: $49 million; cash paid: $- million).

(c)

After-tax losses from realized crude oil hedging activities totaled $7 million (noncash premium amortization: $20 million; cash received: $13 million). After-tax gains from unrealized crude oil hedging activities totaled $8 million.

(d)

After-tax gains from realized crude oil hedging activities totaled $1 million (noncash premium amortization: $5 million; cash received: $6 million). After-tax gains from unrealized crude oil hedging activities totaled $4 million.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

Second Quarter 2018

Income Statement

 United States

 International

      Total

Total revenues and non-operating income
Sales and other operating revenues$1,181$353$1,534
Gains (losses) on asset sales, net1111
Other, net369
Total revenues and non-operating income1,1843701,554
Costs and expenses
Marketing, including purchased oil and gas (a)4621463
Operating costs and expenses18160241
Production and severance taxes41142
Midstream tariffs163163
Exploration expenses, including dry holes and lease impairment342862
General and administrative expenses33740
Depreciation, depletion and amortization298109407
Total costs and expenses1,2122061,418
Results of operations before income taxes(28)164136
Provision (benefit) for income taxes(9)114105
Net income (loss) attributable to Hess Corporation$(19)(b)$50$31

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $49 million (noncash premium amortization: $44 million; cash paid: $5 million). After-tax losses from unrealized crude oil hedging activities totaled $3 million.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)

(IN MILLIONS)

Nine Months Ended September 30, 2018

Income Statement

 United States

 International

     Total

Total revenues and non-operating income
Sales and other operating revenues$3,569$1,104$4,673
Gains (losses) on asset sales, net141327
Other, net162036
Total revenues and non-operating income3,5991,1374,736
Costs and expenses
Marketing, including purchased oil and gas (a)1,299441,343
Operating costs and expenses524179703
Production and severance taxes1253128
Midstream tariffs483483
Exploration expenses, including dry holes and lease impairment9285177
General and administrative expenses18419203
Depreciation, depletion and amortization9273221,249
Total costs and expenses3,6346524,286
Results of operations before income taxes(35)485450
Provision (benefit) for income taxes(39)339300
Net income (loss) attributable to Hess Corporation$4(b)$146$150
Nine Months Ended September 30, 2017

Income Statement

 United States

 International

     Total

Total revenues and non-operating income
Sales and other operating revenues$2,622$1,175$3,797
Gains (losses) on asset sales, net330330
Other, net(29)4617
Total revenues and non-operating income2,9231,2214,144
Costs and expenses
Marketing, including purchased oil and gas (a)877(31)846
Operating costs and expenses492443935
Production and severance taxes86288
Midstream tariffs399399
Exploration expenses, including dry holes and lease impairment6784151
General and administrative expenses14323166
Depreciation, depletion and amortization1,3667542,120
Impairments2,5032,503
Total costs and expenses3,4303,7787,208
Results of operations before income taxes(507)(2,557)(3,064)
Provision (benefit) for income taxes(21)(1,982)(2,003)
Net income (loss) attributable to Hess Corporation$(486)(c)$(575)(d)$(1,061)

(a)

Includes amounts charged from the Midstream segment.

(b)

After-tax losses from realized crude oil hedging activities totaled $129 million (noncash premium amortization: $124 million; cash paid: $5 million). After-tax losses from unrealized crude oil hedging activities totaled $10 million.

(c)

After-tax losses from realized crude oil hedging activities totaled $6 million (noncash premium amortization: $30 million; cash received: $24 million). After-tax gains from unrealized crude oil hedging activities totaled $1 million.

(d)

After-tax gains from realized crude oil hedging activities totaled $3 million (noncash premium amortization: $11 million; cash received: $14 million). After-tax losses from unrealized crude oil hedging activities totaled $3 million.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

ThirdThirdSecond

   Quarter

   Quarter

 Quarter

201820172018

Net Production Per Day (in thousands)

Crude oil – barrels
United States
Bakken766372
Other Onshore (a)

2

42
Total Onshore

78

6774
Offshore

50

4334
Total United States128110108
Europe (b)7255
Africa (c) (d)163916
Asia424
Total155176133
Natural gas liquids – barrels
United States
Bakken302931
Other Onshore (a)485
Total Onshore343736
Offshore654
Total United States404240
Europe (b)1
Total404340
Natural gas – mcf
United States
Bakken726368
Other Onshore (a)478561
Total Onshore119148129
Offshore896952
Total United States208217181
Europe (b)8296
Asia and other (d)395306366
Total611552553
Barrels of oil equivalent297311265

(a)

The Corporation sold its Permian assets in August 2017. Production was 3,000 boepd in the third quarter of 2017.

In addition, the Corporation sold its Utica assets in August 2018. Production was 10,000 boepd in the third quarter of 2018, 17,000 boepd in third quarter of 2017 and 13,000 boepd in the second quarter of 2018.

(b)

The Corporation sold its Norway assets in December 2017. Production was 20,000 boepd in the third quarter of 2017.

(c)

The Corporation sold its Equatorial Guinea assets in November 2017. Production was 27,000 boepd in the third quarter of 2017.

(d)

Production from Libya was 18,000 boepd in the third quarter of 2018, 12,000 boepd in the third quarter of 2017 and 18,000 boepd in the second quarter of 2018.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

Nine Months Ended September 30,
20182017

Net Production Per Day (in thousands)

Crude oil – barrels
United States
Bakken7366
Other Onshore (a)17
Total Onshore7473
Offshore3943
Total United States113116
Europe (b)628
Africa (c) (d)1835
Asia42
Total141181
Natural gas liquids – barrels
United States
Bakken2927
Other Onshore (a)59
Total Onshore3436
Offshore54
Total United States3940
Europe (b)1
Total3941
Natural gas – mcf
United States
Bakken6961
Other Onshore (a)5897
Total Onshore127158
Offshore5965
Total United States186223
Europe (b)833
Asia and other (d)363252
Total557508
Barrels of oil equivalent273307

(a)

The Corporation sold its Permian assets in August 2017. Production was 6,000 boepd in the first nine months of 2017.

In addition, the Corporation sold its Utica assets in August 2018. Production was 12,000 boepd in the first nine months of 2018 and 20,000 boepd in the first nine months of 2017.

(b)

The Corporation sold its Norway assets in December 2017. Production was 24,000 boepd in the first nine months of 2017.

(c)

The Corporation sold its Equatorial Guinea assets in November 2017. Production was 28,000 boepd in the first nine months of 2017.

(d)

Production from Libya was 20,000 boepd in the first nine months of 2018 and 7,000 boepd in the first nine months of 2017.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

ThirdThirdSecond

   Quarter

   Quarter

 Quarter

201820172018

Sales Volumes Per Day (in thousands) (a)

Crude oil – barrels153172135
Natural gas liquids – barrels404340
Natural gas – mcf611552553
Barrels of oil equivalent295307267

Sales Volumes (in thousands) (a)

Crude oil – barrels14,08515,89712,259
Natural gas liquids – barrels3,6963,9203,620
Natural gas – mcf56,25150,80850,303
Barrels of oil equivalent27,15628,28524,263
Nine Months Ended September 30,

     2018

     2017

Sales Volumes Per Day (in thousands) (a)

Crude oil – barrels139174
Natural gas liquids – barrels3941
Natural gas – mcf557508
Barrels of oil equivalent271300

Sales Volumes (in thousands) (a)

Crude oil – barrels38,15547,398
Natural gas liquids – barrels10,62411,391
Natural gas – mcf151,946138,742
Barrels of oil equivalent74,10381,913

(a)

Sales volumes from purchased crude oil, natural gas liquids, and natural gas are not included in the sales volumes reported.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

ThirdThirdSecond

   Quarter

   Quarter

 Quarter

201820172018

Average Selling Prices

Crude oil – per barrel (including hedging)
United States
Onshore$62.92$42.14$59.03
Offshore66.6246.1162.80
Total United States64.3843.6660.25
Europe74.7153.8975.26
Africa73.3451.6273.85
Asia73.6772.55
Worldwide66.0846.9762.65
Crude oil – per barrel (excluding hedging)
United States
Onshore$66.76$42.85$63.47
Offshore70.4446.7267.14
Total United States68.2244.3364.66
Europe74.7153.7775.26
Africa73.3451.5173.85
Asia73.6772.55
Worldwide69.2247.3666.28
Natural gas liquids – per barrel
United States
Onshore$22.99$16.56$20.08
Offshore31.2720.4124.54
Total United States24.2917.0420.51
Europe26.44
Worldwide24.2917.2220.51
Natural gas – per mcf
United States
Onshore$1.99$1.58$1.94
Offshore2.222.262.19
Total United States2.091.802.01
Europe3.554.583.53
Asia and other5.224.345.17
Worldwide4.113.354.12

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXPLORATION AND PRODUCTION OPERATING DATA

Nine Months Ended September 30,
20182017

Average Selling Prices

Crude oil – per barrel (including hedging)
United States
Onshore$59.54$44.20
Offshore63.4946.04
Total United States60.9044.88
Europe72.3752.68
Africa71.1450.51
Asia70.6852.83
Worldwide62.8947.16
Crude oil – per barrel (excluding hedging)
United States
Onshore$63.38$44.38
Offshore67.2946.24
Total United States64.7245.06
Europe72.3752.49
Africa71.1450.36
Asia70.6852.83
Worldwide65.9847.22
Natural gas liquids – per barrel
United States
Onshore$21.27$16.22
Offshore27.6319.95
Total United States22.0116.67
Europe26.26
Worldwide22.0116.89
Natural gas – per mcf
United States
Onshore$2.14$2.04
Offshore2.182.32
Total United States2.152.12
Europe3.504.24
Asia and other4.964.12
Worldwide4.003.25

The following is a summary of the Corporations outstanding West Texas Intermediate hedging program by calendar year:

20182019

    Barrels of oil per day

115,00095,000

Monthly floor price of put options

$50$60
Start dateOctober 1January 1
Finish date

     December 31

     December 31

For Hess Corporation
Investors:
Jay Wilson,
212-536-8940
or
Media:
Lorrie Hecker, 212-536-8250
or
Sard
Verbinnen & Co
Jamie Tully, 212-687-8080