HOUSTON (Reuters) - Hess Corp said on Wednesday it expects oil and gas output to grow more than 10 percent a year compounded through 2025, touting development of its Bakken shale and offshore Guyana projects.
The company projects higher margins will drive compound annual cash flow growth of 20 percent through 2025, it said ahead of a meeting with Wall Street investors.
Hess shrugged off a recent dip in oil prices and said it was moving from growth and investment mode to where its major assets will start producing free cash flow. “We are at a transformative inflection point,” Chief Executive John Hess said during the investor meeting, broadcast over the internet.
Hess boosted the production forecast for its Bakken shale field in North Dakota to 200,000 barrels of oil equivalent per day (boepd) by 2021, from 175,000 boepd. The shale acreage, the jewel in the crown of the company’s onshore production, will produce $5 billion in free cash flow between 2019 and 2025.
Hess expects the first production from the offshore Guyana discovery to be tapped in 2020, and said the region had the potential to produce more than 750,000 boepd by 2025. Hess is working with Exxon Mobil Corp on fields projected to hold up to 5 billion barrels of recoverable oil and gas.
Guyana through 2025 will generate $4 billion free cash flow for Hess, said Greg Hill, president and chief operating officer.
The New York-based company earlier this week set a 2019 capital budget of $2.9 billion, up 38 percent from this year’s projected spending plan. The budget reflects “peak” spending for the first phase of offshore Guyana oil discoveries.
Hess plans to keep capital spending flat around $3 billion annually through 2025 and will be able to return money to shareholders in, “any type of price environment,” said Chief Financial Officer John Rielly.
Investors for a year have pressured oil and gas producers to rein in spending and instead focus on profits. Companies are starting to disclose their 2019 budgets, which generally are released in December and January.
Hess will complete a $1.5 billion share repurchase program by the end of the year. It does not plan additional share buybacks now, but if profits exceed expectations, a “priority would be more share buybacks,” Hess said.
Hess stock was down a fraction at $51.74 a share on Wednesday. The stock is up about 12 percent year to date.
Reporting by Jennifer Hiller; editing by Peter Cooney and Chris Reese