By Ernest Scheyder
Oct 30 (Reuters) - Political and military unrest in Libya sharply curtailed Hess Corp’s output and profits in the third quarter, and forced it to temper expectations for the year, the oil and natural gas producer said on Wednesday.
Hess, which first began Libyan operations in 1955, said political instability in the nation crimped its production in the quarter through Sept. 30, and that it now expects full-year output to be at the low end of an expected range of 340,000 to 355,000 barrels of oil equivalent per day (boe/d).
Libya’s total exports have slumped to around 90,000 barrels per day, less than 10 percent of capacity, as protests and labor strikes at oil export terminals have halted operations at ports and fields.
While Libyan production does not materially affect its profit, the company said it would have to spend more in the OPEC nation due to the uncertainty.
The country’s oil production has been sharply down since uprisings against former leader Muammar Gaddafi began in 2011. Libya’s National Oil Corporation controls the nation’s production and partners with Hess and other international companies, including ConocoPhillips, Marathon Oil and BASF’s Wintershell.
Eni, the largest foreign oil producer in Africa, echoed Hess’s concerns on Wednesday when it cut its 2013 production outlook to reflect shrinking volumes from Libya and Nigeria. Eni, which is based in Italy, now expects its production for the year to be lower than it was in 2012.
Hess’s total oil and gas output fell during the third quarter to 310,000 boe/d from 402,000 boe/d a year earlier.
The company’s asset sales in Russia, the UK and Azerbaijan contributed to the global output drop. In the year-earlier quarter, those assets had boosted production.
Still, the company’s expansion in North Dakota’s Bakken shale field, which boosted its output, was a “silver lining” during the quarter, Capital One Securities analyst Phillips Johnston said in a note to clients. Production in the state, where Hess spent the lion’s share of its $1.53 billion capital budget during the quarter, grew 14 percent to 71,000 boe/d.
Hess plans to open about 170 new wells in the Bakken this year, and has cut the average cost to complete a well there by 7 percent to $7.8 million.
The company plans to shut down part of its Bakken operations in the fourth quarter as it finishes expansion of its Tioga, North Dakota, natural gas fractionation plant. Once completed, the plant will allow Hess to process more natural gas, a byproduct of oil drilling, and reduce flaring.
Hess reported net income of $420 million, or $1.23 per share, in the third quarter, compared with $557 million, or $1.64 per share, a year earlier.
Excluding one-time items, Hess earned $1.18 per share in the third quarter. By that measure, analysts expected $1.44 per share, according to Thomson Reuters I/B/E/S.
Revenue dropped 23 percent from a year earlier to $2.69 billion. Analysts expected $2.67 billion.
Shares of New York-based Hess fell 3.5 percent to $80.56. As of Tuesday’s close, the stock has gained 58 percent this year.
Activist investor Elliot Management took a large stake in Hess earlier this year and put three new directors on the company’s board.