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What do Hess Corporation (HES) Earnings Tell Us About the State of the Oil Industry?

Wednesday, January 26, 2022 01:31 PM | Kyle Depontes
What do Hess Corporation (HES) Earnings Tell Us About the State of the Oil Industry?

Hess Corporation (HES) stock declined 2% today after the oil and gas producer, which has assets in Guyana, the Gulf of Mexico, and Southeast Asia, announced financial results for the fourth quarter of 2021.

The company reported a net income of $265 million, or $0.85 per share, in the fourth quarter of 2021, compared with a net loss of $97 million, or $0.32 per share, in the fourth quarter of 2020.

Exploration & Production Growth

Hess CEO John Hess highlighted the company's commitment to growing its diverse portfolio and driving shareholder returns.

“This year marks an inflection point in the execution of our strategy,” said Hess.

“We have built a differentiated portfolio offering a unique value proposition – delivering durable cash flow growth that enables us to continue to invest in some of the highest return projects in the industry and to start growing our cash returns to our shareholders.”

Hess' strategy paid dividends in its Exploration & Production division, which saw E&P net income rise from $39 million in the fourth quarter of 2020 to $309 million in the fourth quarter of 2021.

Hess was helped by market forces, such as the corporation’s average realized crude oil selling price, which was $71.04 per barrel in the fourth quarter of 2021, compared with $45.32 per barrel in the prior-year quarter.

Higher Oil and Gas Reserves

Oil and gas proved reserves at December 31, 2021, which are subject to final review, were 1,309 million boe (barrels of oil equivalent), compared with 1,170 million boe on December 31, 2020.

Although asset sales in 2021 reduced proved reserves by 91 million boe, Hess was able to replace 295% of its 2021 production (204 percent excluding price revisions) at a finding and development cost of approximately $5.25 per boe (approximately $7.60 per boe excluding price revisions).

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