UPDATE 2-Hess profit misses expectations as production sags

Wed Jan 29, 2014 10:52am EST

Jan 29 (Reuters) - Unrest in Libya and maintenance in the U.S. Gulf of Mexico weighed on Hess Corp's output and profit in the fourth quarter, and the oil and natural gas producer reported lower-than-expected results on Wednesday.

New York-based Hess sold $7.8 billion worth of assets last year, including energy storage terminals and other properties, to focus almost exclusively on finding and extracting oil and natural gas.

Despite the sharpened focus, the latest output figures disappointed Wall Street, and Hess' 2014 production forecast came in "soft," Capital One Securities analyst Phillips Johnston said in a note to clients.

Hess produced 307,000 barrels of oil equivalent per day in the fourth quarter, down from 396,000 boe/d a year earlier.

Roughly 20,000 boe/d of the drop was due to political instability in Libya. Hess partners there with Libya's National Oil Corp, which controls the nation's production.

In the U.S. Gulf, production slipped 35,000 boe/d because of a pipeline shutdown.

Part of the production drop also was due to asset sales undertaken to appease unhappy investors. They include hedge fund Elliott Management, which won three seats on the company's board last year.

Hess continued the trend on Wednesday, announcing it sold 74,000 acres in Ohio's Utica shale for $924 million to an undisclosed buyer.

For the fourth quarter, Hess reported net income of $1.93 billion, or $5.76 per share, compared with $374 million, or $1.10 per share, a year earlier.

Excluding one-time gains from asset sales, the company earned 96 cents per share. By that measure, analysts on average had expected $1.08, according to Thomson Reuters I/B/E/S.

Hess expects production to increase 5 percent to 8 percent each year through 2017. Much of the growth will come in North Dakota's Bakken shale formation, where the company holds about 645,000 acres and plans to spend the bulk of its 2014 capital budget.

"This coming year will be one in which the company and its shareholders continue to benefit from our new focus," Chief Executive Officer John Hess said on a conference call with investors.

As part of the shift away from refining and the retail businesses, Hess said earlier this month that it would try to spin off its gas station and convenience store network, which analysts believe could be worth more than $1.5 billion.

Shares of Hess were up 0.8 percent at $77.40 in morning trading on Wednesday.

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