Hess Expects $2.6B Budget for 2016

Hess Corporation Lowers Budget Guidance for 2016

Hess Corporation (NYSE: HES) ended 2015 with E&P capital and exploratory expenditures of just over $4 billion with $1.6 billion being spend on onshore U.S. activity. Onshore U.S. spending was down 36.4% from the previous year. The chart below shows the companies permit and completion activity in the Bakken over the last 2 years.

Bakken Completions Increase Number of Stages

• Hess averaged 8 rigs during 2015 starting the year with 12 and dropping that number to 7 for the second half of the year
• As expected drilling and completion activity weakened in 2015
  • Number of wells drilled, 2014– 261, 2015 – 182
  • Number of wells completed: 2014– 230, 2015– 212
  • Increased number of stages per well from an average of 34 in 2014 to 37 in 2015
  • D&C costs down to an average of $5.8 million from $7.3 million last year (drilling costs down 19% and completion costs down 23%)
  • The number of wells brought onto production during the fourth quarter (34 wells) decreased by over 50% since the first quarter of the year and ~64% from the same quarter in 2014

D&C Costs Drop by 30% in the Utica

• Production averaged 24 MBoepd in 2015 up from 9 MBoepd in 2014
• Rig counts decreased from 2 in the first half of the year to only one in the last to quarters
• Drilling and completion activity declined in 2015
  • Number of wells drilled: 2014 – 38, 2015 – 24
  • Number of wells completed: 2014 – 36, 2015– 32
  • Drilling and completion costs decrease by 30% to an average of $9.6 million per well

What’s Next for Hess? Continued Bakken Focus

• Announced $2.4 billion budget for 2016
  • 40% below 2015 actual spend of $4 billion
  • 20% below initial guidance of $2.9 to $3.1 billion
• Bakken outlook: 2 rigs will be running with 80 wells brought online
• Utica outlook: 1 rig until the 5 planned wells are drilled then it will be released and bring 14 wells onto production

Read more operator profiles – Midstates Petroleum, EOG Resources, and Continental Resources.

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