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Hess announces $2.25 billion for 2017 E&P capital and exploratory budget

Hess Corp has announced a 2017 E&P capital and exploratory budget of $2.25 billion, compared with its 2016 actual spend of $1.9 billion. This includes increased capital for additional rigs in the Bakken, development activities at the Liza Field in Guyana and restart of drilling at the Valhall Field in Norway.

The $2.25 billion budget is allocated as follows: $700 million (31%) for unconventional shale resources, $375 million (17%) for production, $825 million (37%) for developments and $350 million (15%) for exploration and appraisal activities.

Net 2017 production is forecast to average between 300,000 and 310,000 bbl of oil equivalent per day (BOEPD), excluding Libya. Production is expected to increase 8% to 12% from the beginning of 2017 to the end of the year as a result of additional rigs in the Bakken, restart of drilling at Valhall and startup of North Malay Basin in Q3. Bakken net production in 2017 is forecast to average between 95,000 and 105,000 boepd.

“Our 2017 budget reflects our balanced approach to investing in short-cycle and long-cycle growth options while maintaining our financial flexibility,” CEO John Hess said. “With our leadership position in the Bakken, two offshore developments – North Malay Basin and Stampede – that will become significant cash generators starting in 2017 and 2018, respectively, and the world-class Liza discovery on track for sanction in 2017, Hess is well positioned to deliver sustainable growth, cash generation and returns for our shareholders.”

President and COO Greg Hill said: “We’re excited about the year ahead. With oil prices starting to recover, we will ramp up our Bakken rig count from two currently to six by year-end. We plan to resume drilling at the Valhall Field from the existing platform rig, and we will continue to progress our two offshore developments to first production, which will add a combined 35,000 BOEPD once online.”

Unconventionals

  • $700 million primarily to increase from two rigs to six rigs by the end of 2017 and to bring online approximately 75 new wells in the Bakken Shale in North Dakota. Funds are also included for non-operated wells and pad construction in preparation for 2018 drilling.

Production

  • $375 million primarily for production activities in the deepwater Gulf of Mexico, including the drilling and completion of a production well at the Penn State Field (Hess 50% and operator) and for operations at the Valhall Field in Norway (Hess 64%, Aker BP operator), where drilling will restart in late Q1 2017.

Developments

  • $425 million to drill two wells and complete three wells, install the tension leg platform and progress development of the Stampede Field in the deepwater Gulf of Mexico (Hess 25% and operator) to achieve first oil in 2018.
  • $275 million to complete initial full field development of North Malay Basin in Malaysia (Hess 50% and operator) to achieve first production in the third quarter of 2017.
  • $125 million for development activities at the Liza Field in Guyana (Hess 30%, Esso Exploration and Production Guyana operator).

Exploration and Appraisal Spend

  • $350 million to drill wells on the Stabroek Block offshore Guyana that include appraising the significant Liza Field, the recent Payara discovery and new exploration prospects. Additional funds are included for seismic acquisition and processing and for license acquisitions.
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