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Hess (HES) Beats on Q4 Earnings, Hikes Exploration Budget

Hess Corporation HES has reported fourth-quarter 2022 earnings per share of $1.78, beating the Zacks Consensus Estimate of $1.72. The bottom line improved from the year-ago quarter’s 85 cents per share.

Total quarterly revenues increased to $3,054 million from $2,255 million a year ago. The top line also beat the Zacks Consensus Estimate of $2,709 million.

The strong quarterly results have been driven by higher oil and natural gas price realizations, and production.

Hess Corporation Price, Consensus and EPS Surprise

 

Hess Corporation Price, Consensus and EPS Surprise
Hess Corporation Price, Consensus and EPS Surprise

Hess Corporation price-consensus-eps-surprise-chart | Hess Corporation Quote

Operational Update

Exploration and Production:

For the quarter under review, the Exploration and Production business has reported adjusted earnings of $591 million, improving from $309 million a year ago. The business was favored by higher realized commodity prices.

Quarterly hydrocarbon production was 386 thousand barrels of oil equivalent per day (MBoe/d), up from 316 MBoe/d in the year-ago period primarily due to higher production in Guyana.

Crude oil production increased from 158 thousand barrels per day (MBbls/d) in fourth-quarter 2021 to 228 MBbls/d in the quarter under review. Natural gas liquid production totaled 62 MBbls/d, up from 56 MBbls/d in the prior-year quarter. However, natural gas output was 576 thousand cubic feet per day (Mcf/d), down from 611 Mcf/d a year ago.

Worldwide crude oil realization per barrel of $83.50 (excluding the impacts of hedging) significantly improved from $75.22 in the year-ago period. Also, worldwide natural gas prices rose to $5.17 per Mcf from the year-ago figure of $4.77. Yet, the average worldwide natural gas liquids’ selling price declined to $26.93 per barrel from $36.47 a year ago.

Midstream:

From the midstream business, the company generated adjusted net earnings of $64 million, down from $74 million a year ago.

Operating Expenses

Operating expenses for the fourth quarter totaled $385 million versus the year-ago level of $316 million. Marketing costs increased to $821 million from $672 million a year ago. However, exploration expenses declined to $40 million from $45 million in the year-ago period.

Total costs and expenses increased to $2,045 million for the quarter from $1,687 million a year ago.

Financials

Net cash provided by operating activities was $1,252 million for the fourth quarter. Hess’ capital expenditure for exploration and production activities totaled $818 million.

As of Dec 31, 2022, the company had $2,486 million in cash and cash equivalents. Its long-term debt was $8,278 million at the fourth-quarter end.

Reserves

As of 2022 end, Hess’ proved reserves were 1.26 billion oil-equivalent barrels compared with 1.31 billion oil-equivalent barrels on Dec 31, 2021. The segment recorded an adjusted profit of $2,400 million in 2022. Total production in 2022 was 344 thousand barrels of oil equivalent per day.

Guidance

For 2023, Hess expects net production guidance (excluding Libya) of 355,000-365,000 barrels of oil equivalent per day (Boe/d). Net production at Bakken is expected to be 165,000-170,000 Boe/d and 100,000 Boe/d in Guyana.

For 2023, Hess revealed its capital and exploratory budget of $3.7 billion, of which more than 80% would be directed toward Guyana and North Dakota’s Bakken Shale field. The metric suggests an increase from $2.7 billion reported in 2022.

Of the total, $1.45 billion will be allocated for production, $1.7 billion for offshore Guyana developments, and $550 million for exploration and appraisal activities. Beside this, $1.21 billion will be allocated for developing the Payara, Yellowtail and Uaru projects in the Stabroek Block.

Hess added that $90 million was allocated to the Liza Phase 1 and Phase 2 developments on the Stabroek Block offshore Guyana, which are currently operating at a combined gross production capacity of more than 360,000 barrels of oil equivalent per day.

Zacks Rank & Stocks to Consider

Hess currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco LP SUN is among the largest motor fuel distributors in the U.S. wholesale market by volume. In the trailing four quarters, SUN beat the Zacks Consensus Estimate twice and missed the same twice, the earnings surprise being 28.8%, on average.

Sunoco is scheduled to report fourth-quarter results on Feb 15. The Zacks Consensus Estimate for SUN’s earnings is pegged at 75 cents per share. For 2022, Sunoco revised its adjusted EBITDA guidance upward to $845-$865 million from the previously mentioned $795-$835 million.

ProPetro Holding Corp. PUMP is an oilfield service provider operating primarily in the Permian Basin over west Texas and New Mexico. PUMP is expected to see an earnings rise of 160.4% in 2022.

ProPetro is scheduled to report fourth-quarter results on Feb 21. The Zacks Consensus Estimate for PUMP’s earnings is pegged at 34 cents per share. As of Sept 30, ProPetro had $43.2 million in cash and cash equivalents, and total liquidity of $155 million. ProPetro’s balance sheet is debt-free, which provides a potential lifeline amid the difficult operating environment.

Murphy USA Inc. MUSA is a leading independent retailer of motor fuel and convenience merchandise in the United States. MUSA is expected to see an earnings surge of 82.7% in 2022.

Murphy USA is scheduled to report fourth-quarter results on Feb 1. The Zacks Consensus Estimate for MUSA’s earnings is pegged at $3.67 per share. MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer approved a repurchase authorization of up to $1 billion, which can be completed by Dec 31, 2026.

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