Profile: Hess Corp (HES.N)
Hess Corporation (Hess), incorporated on February 7, 1920, is a global integrated energy company that operates in two segments: Exploration and Production (E&P) and Marketing and Refining (M&R). The E&P segment explores for, develops, produces, purchases, transports and sells crude oil and natural gas. These exploration and production activities take place principally in Algeria, Australia, Azerbaijan, Brazil, Brunei, China, Denmark, Egypt, Equatorial Guinea, France, Ghana, Indonesia, the Kurdistan region of Iraq, Libya, Malaysia, Norway, Peru, Russia, Thailand, the United Kingdom and the United States. The M&R segment manufactures refined petroleum products and purchases, markets and trades refined petroleum products, natural gas and electricity. The Company owns 50% of HOVENSA L.L.C. (HOVENSA), a joint venture in the United States Virgin Islands. In January 2014, Sprague Resources LP acquired the Commercial Fuels business of Hess Corporation. In January 2014, the Company announced that it has completed the sale of its Pangkah asset to a subsidiary of PT Saka Energi Indonesia.
The Company operates a refining facility, terminals and retail gasoline stations, most of which include convenience stores that are located on the East Coast of the United States. In February 2011, the Company completed the sale of its interests in the Easington Catchment Area (Hess 30%), the Bacton Area (Hess 23%), the Everest Field (Hess 19%) and the Lomond Field (Hess 17%) in the United Kingdom North Sea. In August 2011, it completed the sale of its interests in the Snorre Field (Hess 1%), offshore Norway and the Cook Field (Hess 28%) in the United Kingdom North Sea. In February 2011, the Company sold a package of natural gas producing assets in the United Kingdom North Sea, including its interests in the Easington Catchment Area, the Bacton Area, the Everest Field and the Lomond Field. During the year ended December 31, 2011, it completed the sale of a package of natural gas producing assets including its interests in the Easington Catchment Area (Hess 30%), the Bacton Area (Hess 23%), the Everest Field (Hess 19%) and the Lomond Field (Hess 17%), as well as its interest in the Central Area Transmission System pipeline. It also completed the sale of its interest in the Cook Field (Hess 28%) in August 2011.
Exploration and Production
As of December 31, 2011, 28% of the Company’s total proved reserves were located in the United States. During 2011, 35% of its crude oil and natural gas liquids production and 16% of its natural gas production were from United States operations. Its production in the United States was from offshore properties in the Gulf of Mexico, as well as onshore properties in the Williston Basin of North Dakota and in the Permian Basin of Texas. Its production offshore the United States was from the Shenzi (Hess 28%), Llano (Hess 50%), Conger (Hess 38%), Baldpate (Hess 50%), Hack Wilson (Hess 25%) and Penn State (Hess 50%) fields. At the Shenzi Field, the operator is pursuing water injection equipment and drill additional opportunities. During 2011, it as operator, and its partner sanctioned the development of the Tubular Bells Field (Hess 57%) in the Mississippi Canyon Block 725 Area in the deepwater Gulf of Mexico. As of December 31, 2011, the Company had interests in 289 blocks in the Gulf of Mexico, of which 267 were exploration blocks comprising 1,054,000 net undeveloped acres, with an additional 46,000 net acres held for production and development operations.
In North Dakota, the Company holds more than 900,000 net acres in the Bakken oil shale play (Bakken). In Texas, it holds a 34% interest in the Seminole-San Andres Unit and is operator. It also holds more than 100,000 net acres in the Eagle Ford shale. As of December 31, 2011, 37% of its total proved reserves were located in Europe (Norway 23%, United Kingdom 4%, Denmark 3% and Russia 7%). During 2011, 35% of the Company’s crude oil and natural gas liquids production and 13% of its natural gas production were from European operations. Production of crude oil and natural gas liquids from the United Kingdom North Sea was principally from the Company’s non-operated interests in the Bittern (Hess 28%), Nevis (Hess 27%), Beryl (Hess 22%) and Schiehallion (Hess 16%) fields. Natural gas production from the United Kingdom was from the Nevis (Hess 27%) and Beryl (Hess 22%) fields. It also has interests in the Atlantic (Hess 25%), Cromarty (Hess 90%), Fife, Flora and Angus (Hess 85%), Fergus (Hess 65%), Ivanhoe and Rob Roy (Hess 77%), Renee (Hess 14%) and Rubie (Hess 19%) fields.
Crude oil and natural gas production comes from the Company’s operated interest in the South Arne Field (Hess 62%), offshore Denmark. In October 2011, the Company acquired an additional 4% interest in the South Arne Field increasing its interest to 62% from 58%. Its activities in Russia are conducted through its interest in a subsidiary operating in the Volga-Urals region. During 2011, it acquired an additional 5% interest in its subsidiary, increasing its ownership to 90%. As of December 31, 2011, this subsidiary had exploration and production rights in 22 license areas. The Company’s activities in France are conducted through an agreement with Toreador Resources Corporation (Toreador), under which it can invest in an initial exploration phase and earn up to a 50% working interest in, and become operator of, Toreador’s approximately 680,000 net acres in the Paris Basin. As of December 31, 2011, 17% of its total proved reserves were located in Africa (Equatorial Guinea 5%, Algeria 1% and Libya 11%). During 2011, 25% of its crude oil and natural gas liquids production was from its African operations.
The Company is an operator and owns an interest in Block G (Hess 85%) which contains the Ceiba Field and Okume Complex. It has a 49% interest in a venture with the Algerian national oil company that redeveloped three oil fields. It also has an interest in Bir El Msana (BMS) Block 401C (Hess 45%). During 2011, it sanctioned a small development project at the BMS Field. The Company in conjunction with its Oasis Group partners, has oil and gas production operations in the Waha concessions in Libya (Hess 8%). It also owns a 100% interest in offshore exploration Area 54 in the Mediterranean Sea. Its Libyan production averaged 4,000 barrels of oil equivalent per day during 2011. It had proved reserves of 166 million barrels of oil equivalent in Libya as of December 31, 2011.
The Company holds a 90% interest and is operator in the Deepwater Tano Cape Three Points License where it drilled an exploration well during 2011 that encountered an estimated 490 net feet of oil and gas condensate pay over three separate intervals. It owns an 80% interest in Block 1 offshore Egypt in the North Red Sea. As of December 31, 2011, 18% of the Company’s total proved reserves were located in the Asia region (JDA 8%, Indonesia 5%, Thailand 3%, Azerbaijan 1% and Malaysia 1%). During 2011, 5% of the Company’s crude oil and natural gas liquids production and 71% of its natural gas production were from its Asian operations. The Company owns an interest in Block A-18 of the JDA (Hess 50%) in the Gulf of Thailand. During 2011, the operator continued development drilling and wellhead platform construction and installation activities.
The Company’s production in Malaysia comes from its interest in Block PM301 (Hess 50%), which is adjacent to Block A-18 of the JDA where the natural gas is processed. It also owns interests in Block PM302 (Hess 50%) and Block SB302 (Hess 40%). The Company’s production in Indonesia comes from its interests offshore in the Ujung Pangkah project (Hess 75%), and the Natuna A Field (Hess 23%). During 2011, a second wellhead platform and central processing facility were installed at Ujung Pangkah. At the Natuna A Field, the operator completed construction and installed a second wellhead platform and a central processing platform. The Company holds a 100% working interest in the offshore Semai V Block, where it drilled two exploration wells during 2011, which were both expensed in the fourth quarter. It also owns a 100% working interest in the offshore South Sesulu Block, a 49% interest in the West Timor Block, which includes onshore and offshore acreage, and a 100% interest in the Timor Sea Block 1, offshore Indonesia.
The Company’s natural gas production in Thailand comes from the offshore Pailin Field (Hess 15%) and the onshore Sinphuhorm Block (Hess 35%). The Company has an interest in the Azeri-Chirag-Guneshli (ACG) fields (Hess 3%) in the Caspian Sea and also owns an interest in the Baku-Tbilisi-Ceyhan oil transportation pipeline company (Hess 2%). The Company has an interest in Block CA-1 (Hess 14%). During 2011, the operator drilled the Julong Center exploration well which was subsequently expensed. It is operator and has an 80% paying interest (64% participating interest) in the blocks, which have a combined area of more than 670 square miles. It has signed a joint study agreement with Sinopec to evaluate unconventional oil and gas resource opportunities covering approximately 1.7 million acres in China. It holds a 100% interest in an exploration license covering approximately 780,000 acres in the Carnarvon basin offshore Western Australia (WA-390-P Block, also known as Equus). It has drilled all of the 16 commitment wells on the block, 13 of which were natural gas discoveries. During 2011, the Company continued its appraisal program by drilling and flow testing certain wells. It has an interest in Block 64 in Peru (Hess 50%). The operator has drilled several exploratory wells on the block that have encountered hydrocarbons. It has a 40% interest in block BM-S-22 located offshore Brazil.
Marketing and Refining
The Company owns a 50% interest in HOVENSA L.L.C. (HOVENSA), a joint venture with a subsidiary of Petroleos de Venezuela S.A. (PDVSA) that operated a refinery in the United States Virgin Islands. In addition, it owns and operates a refining facility in Port Reading, New Jersey. Refining operations at HOVENSA consists of crude units, a fluid catalytic cracking (FCC) unit and a delayed coker unit. During 2011, gross crude runs at HOVENSA averaged 284,000 barrels per day. It owns and operates an FCC facility in Port Reading, New Jersey, with a capacity of 70,000 barrels per day. During 2011, this facility, which processes residual fuel oil and vacuum gas oil, operated at a rate of approximately 63,000 barrels per day.
The Company markets refined petroleum products, natural gas and electricity on the East Coast of the United States to the motoring public, wholesale distributors, industrial and commercial users, other petroleum companies, governmental agencies and public utilities. As of December 31, 2010, the Company had 1,360 HESS gasoline stations, including stations owned by its WilcoHess joint venture (Hess 44%). Approximately 92% of the gasoline stations are operated by the Company’s or WilcoHess. Of the operated stations, 95% has convenience stores on the sites. The Company’s gasoline stations are in New York, New Jersey, Pennsylvania, Florida, Massachusetts, North Carolina and South Carolina. As of December 31, 2011, the Company owned 20 terminals with an aggregate storage capacity of 21 million barrels in its East Coast marketing areas. It also owns a terminal in St. Lucia with a storage capacity of 10 million barrels, which is operated for third party storage. It has a 50% interest in Bayonne Energy Center, LLC, a joint venture established to build and operate a 512-megawatt natural gas fueled electric generating station in Bayonne, New Jersey.
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