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Hess cuts $800 million from 2020 capital and exploratory budget

Hess has announced a revised $2.2 billion capital and exploratory budget for 2020, an $800 million reduction from the previous budget of $3.0 billion. The company also announced a new $1 billion three-year term loan agreement. These actions further strengthen the company’s cash position and financial liquidity in response to the sharp decline in oil prices.

“With 80% of our oil production hedged in 2020, our significantly reduced capital and exploratory budget and our new three-year loan agreement, our company is well positioned for this low price environment,” John Hess, CEO, said. “Our focus is on preserving cash and protecting our world-class investment opportunity in Guyana.”

The reductions to the company’s 2020 capital budget will be primarily achieved by shifting from a six-rig program to one rig in the Bakken, which is expected to be completed by the end of May. Most discretionary exploration and offshore drilling activities, excluding Guyana, will also be deferred.

On 16 March 2020, the company entered into a $1 billion three-year term loan agreement with JPMorgan Chase Bank. The term loan contains provisions that require the company to reduce JPMorgan’s initial funded amount, which the company intends to do by syndicating the loan to other banks.

In 2020, approximately 80% of the company’s oil production is hedged by put options, with 130,000 bbl/day at $55/bbl West Texas Intermediate put options and 20,000 bbl/day at $60/bbl Brent put options. In addition, the company entered 2020 with more than $1.5 billion in cash and cash equivalents on its balance sheet and has a $3.5 billion undrawn revolving credit facility and no material debt maturities until 2027.

Net production for 2020 is now forecast to average between 325,000 and 330,000 BOED, excluding Libya, versus previous guidance of between 330,000 and 335,000 BOED. The company’s Bakken net production is forecast to average approximately 175,000 BOED in 2020, versus previous guidance of approximately 180,000 BOED.

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