Hess (HES) Q3 Earnings Meet Estimates on Bakken Volumes

Hess Corporation HES reported adjusted third-quarter 2019 loss per share of 32 cents, in line with the Zacks Consensus Estimate. In the year-ago quarter, the company had recorded earnings of 38 cents per share.

Revenues decreased to $1,515 million from $1,828 million in the year-ago quarter. The top line also missed the Zacks Consensus Estimate of $1,543 million.

The quarterly results were favored by higher hydrocarbon production, backed by the prolific Bakken play. It was partially offset by lower commodity price realization and increased operating expenses.

Hess Corporation Price, Consensus and EPS Surprise

Hess Corporation Price, Consensus and EPS Surprise

Hess Corporation price-consensus-eps-surprise-chart | Hess Corporation Quote

Q3 Operational Update

Exploration and Production

In the quarter under review, the Exploration and Production business reported an adjusted net loss of $34 million versus profit of $109 million a year ago. The business was affected by lower realized commodity prices in the quarter.

Quarterly hydrocarbon production was 312 thousand barrels of oil equivalent per day, up 5.1% year over year on contributions from resources in the Bakken play. This was partially offset by downtime at Gulf of Mexico assets due to hurricane.

Crude oil production increased from 155 thousand barrels per day in third-quarter 2018 to 166 thousand barrels per day in third-quarter 2019. Moreover, natural gas liquids production totaled 52 thousand barrels per day, up from 40 thousand barrels in the prior-year quarter. However, natural gas output was 563 thousand cubic feet (Mcf), down from 611 Mcf a year ago.

Worldwide crude oil realization per barrel of $56.03 (including the impact of hedging) declined drastically from $66.08 in the year-ago period. The average worldwide natural gas liquids selling price also fell to $9.41 per barrel from $24.29 in the year-ago quarter. Moreover, worldwide natural gas prices declined to $3.81 per Mcf from the year-ago level of $4.11.

Midstream

From the midstream business, the company generated adjusted net earnings of $39 million, up from $30 million a year ago.

Operating Expenses

Operating expenses in the third quarter totaled $321 million, up 20.7% from the year-ago figure of $266 million.

Financials

Quarterly net cash flow from operations was $443 million at the end of the third quarter. Hess’ capital expenditures for exploration and production activities totaled $661 million, up 22% from $542 million in the prior-year quarter.

As of Sep 30, 2019, the company had $1,863 million in cash & cash equivalents, and $6,526 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was 40%.

Guidance

The company lowered 2019 capital budget for exploration and production activities to $2.7 billion from earlier projection of $2.8 billion.

Through 2019, Hess expects net production volumes — excluding Libya — to be around 285,000 barrels of oil equivalent per day (Boe/D), higher than the previous guided range of 275,000-280,000 Boe/D. For full-year 2019, the company expects net production from Bakken to be about 150,000 Boe/D, up from the previous guidance range of 140,000-145,000 Boe/D.

Zacks Rank and Stocks to Consider

Currently, Hess has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Pembina Pipeline Corp. PBA, Matrix Service Company MTRX and Exterran Corporation EXTN. While Pembina sports a Zacks Rank #1 (Strong Buy), Matrix Service and Exterran hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pembina’s 2019 earnings per share are expected to rise 21.5% year over year.

Matrix Service’s 2019 earnings per share are expected to rise 58.4% year over year.

Exterran’s top line for the current year is expected to rise around 5% year over year.

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