Hess Corp. Q1 2010 Earnings Call Transcript

Wright Express Corporation (HES)

Q1 2010 Earnings Call

April 28, 2010 05:00 am ET

Executives

Jay Wilson - VP, IR

John Hess - Chairman of the Board and CEO

John Rielly - SVP and CFO

Analysts

Arjun Murti - Goldman Sachs

Mark Gilman - Benchmark Corporation

Doug Leggate - Merrill Lynch

Paul Sankey - Deutsche Bank

Neil McMahon - Sanford Bernstein

Robert Kessler - Simmons & Company

Evan Calio - Morgan Stanley

Ed Westlake - Credit Suisse

Paul Cheng - Barclays Capital

Pavel Molchanov - Raymond James

Blake Fernandez - Howard Weil

Mark Gilman - Benchmark Corporation

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Hess Corporation First Quarter 2010 Earnings Conference Call. My name is Meg and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Jay Wilson, Vice President, Investor Relations. Please proceed, sir.

Jay Wilson

Thank you, Meg, and good morning, everyone. Thank you for participating in our first quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hess.com. Today's conference call contains projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements.

With me today are John Hess, Chairman of the Board and Chief Executive Officer; Greg Hill, President, Worldwide Exploration and Production; and John Rielly, Senior Vice President and Chief Financial Officer.

I'll now turn the call over to John Hess.

John Hess

Thank you, Jay and welcome to our first quarter conference call. I will make a few brief comments after which John Rielly will review our financial results.

Net income for the first quarter of 2010 was $538 million versus a loss of $59 million a year ago. Our earnings were positively impacted by higher crude oil and natural gas selling prices and production volumes that more than offset the impact of weaker refining results.

Exploration and Production earned $551 million. Crude oil and natural gas production averaged 423,000 barrels of oil equivalent per day, which was 8% above the year ago quarter. This increase resulted primarily from higher production from the Shenzi and Conger Fields in the deepwater Gulf of Mexico and the JDA in the Gulf of Thailand.

In January, we closed the previously announced sale of our Jambi Merang asset in Indonesia receiving proceeds of $183 million. At the end of March we announced the sale of a package of mature, non-operated natural gas production and transportation assets in the UK North Sea for $423 million. The sale, which is expected to close in the third quarter, is part of the company's ongoing portfolio management efforts.

We also continue to make progress in finalizing our previously announced strategic asset trade with Shell, which is now expected to close in the second half of this year. In this trade, Hess will assume Shell's 28.09% interest in the Valhall field and 25% interest in the satellite Hod field in Norway. In return, Shell will assume Hess's 9.29% interest in the Clair field, in the United Kingdom and all of Hess' interests in Gabon.

Although the net effect of these asset sales and the strategic asset trade with Shell is to reduce full year 2010 production by approximately 5,000 barrels of oil equivalent per day, our 2010 production forecast remains at 400,000 to 410,000 barrels of oil equivalent per day.

In North Dakota, net production from the Bakken reached 13,000 barrels of oil equivalent per day in March. We currently have five rigs dedicated to drilling Bakken wells and we plan to add five additional rigs over the next 12 months. With regard to exploration, drilling is continuing on permits WA-390-P and WA-404-P in the North West Shelf of Australia. Also, discussions with potential partners regarding the commercialization of natural gas resources on our 100% owned WA-390-P block are ongoing.

In February we spud the Pony No. 3 well on Green Canyon 469 in which Hess has a 100% working interest. This well which is still drilling, is designed to test the eastern extent of the Pony structure. Due to a previous farmed out agreement regarding the Stena Forth drill ship, we plan to release the rig in early June to another operator and then bring it back to finish drilling the well in the fourth quarter.

In Brazil, the operator of Block BM-S-22 is in the process of completing the analysis of seismic, log and core data and plans to drill a third well in the second half of 2010. Hess has a 40% working interest in the block. And Indonesia, we have secured a rig to drill the Semai V prospect in which Hess has a 100% working interest. This well is expected to spud by the first quarter of 2011. With regard to our Deepwater Tano Cape Three Points Block in Ghana, we are seeking a rig and expect to spud the first as well by the first quarter of 2011 as well.

Turning to marketing and refining, we reported a profit of $87 million for the first quarter of 2010. Financial results at our HOVENSA joint venture were below the year ago quarter primarily due to costs associated with the planned turnaround of the FCC and higher refinery costs.

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