January 29, 2020 / 12:46 PM / in 2 months

Hess posts bigger-than-expected quarterly loss on natgas hit

(Reuters) - Hess Corp (HES.N) reported a bigger-than-expected quarterly loss on Wednesday, as lower prices for its natural gas and natural gas liquids more than offset higher output from its Bakken shale assets in North Dakota.

FILE PHOTO: Pumpjacks taken out of production temporarily stand idle at a Hess site while new wells are fracked near Williston, North Dakota November 12, 2014. REUTERS/Andrew Cullen/File Photo

Shares fell 7% to $57.73 in afternoon trading.

Natural gas prices have hovered near two-decade lows as a long and steady increase in U.S. production due to the shale oil boom has led to ample supplies.

Hess said average selling prices for natural gas fell 27.8% and natural gas liquids slumped 34.5% in the fourth quarter.

The extended weak prices have forced Chevron Corp (CVX.N), Range Resources (RRC.N) and EQT Corp (EQT.N) to warn of impairments on their gas-producing assets.

Hess said it expects to spend $3 billion in 2020, compared with $2.74 billion last year, as it bets big on Bakken and offshore Guyana, which has emerged as one of the most important oil and gas discoveries of the last decade.

The company is part of a consortium led by oil major Exxon Mobil Corp (XOM.N) and has forecast total recoverable oil and gas resources of more than 8 billion barrels in offshore Guyana.

The higher budget comes as the U.S. shale industry has reined in spending under pressure to produce higher shareholder returns.

“Investors are worried that the losses that they incur in 2020 might be as big, if not bigger, than 2019,” said Bill Selesky, a senior analyst at Argus Research, adding they are also concerned about Hess’ higher spending in 2020.

Hess expects net production in Guyana to average about 25,000 barrels of oil per day for 2020, while it estimates net production in Bakken to average about 180,000 barrels of oil equivalent per day (boe/d).

The two areas will become significant cash generators over the next several years, Chief Executive Officer John Hess said on a post-earnings call with analysts.

Hess said production from Bakken rose 38% to 174,000 boe/d pushing up total production, excluding Libya, by 18.4% to 316,000 boe/d in the quarter.

Analysts had expected net production of 309,814 boe/d.

Excluding items, Hess reported a loss of 60 cents per share, bigger than estimates of 52 cents, according to IBES data from Refinitiv.

Reporting by Shanti S Nair in Bengaluru; Editing by Amy Caren Daniel

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