Jan 09, 2022 News
– Cash flow from 2022 will clear off debts, increase profits for their shareholders
By Kiana Wilburg
Kaieteur News – After a mere three years of shrewd mega-investments in Guyana’s oil rich Stabroek Block, Hess Corporation says it is poised to join the top tier group of companies on America’s Standard & Poor’s (S&P) Index which is a stock market that monitors 500 publicly traded companies with outstanding cash flow performance.
Speaking at Goldman Sachs’ Energy Conference last week, Chief Executive Officer (CEO) of Hess Corporation, John Hess, said 2022 is going to mark the beginning of billion dollar profits for the Stabroek Block partner as the Liza Phase Two Project is on stream for start up in the first quarter. Once this comes into play, the revenue blowout would allow Hess to clear its debt and begin to increase profits for shareholders.
During the conference, the CEO said, “Our strategy has been, and continues to be, to deliver high return resource growth; deliver a low cost of supply and deliver industry leading cash flow growth while keeping industry leadership in ESG (Environment, Social, and Governance). In terms of our resource growth, we do have a differentiated portfolio and we have been very disciplined in allocating capital to the best rocks for the best returns.”
Hess added, “We have been very focused on our portfolio which includes, Deep water Gulf of Mexico, the Bakken, Malaysia and Guyana and all four of those assets are free cash flow generative in 2022.”
In terms of the low cost of supply, Hess said because of the investments his company has been making, its cash costs are projected to decline by 25 percent to US$9 dollars per barrel of oil equivalent by 2026, while its portfolio breakeven will be one of the lowest in the business, as it will see a decreasing of US$45 per barrel Brent by 2026. “So you know, it really does position us as we go forward and ultimately focuses on cash flow,” he noted.
In terms of delivering industry leading cash flow, the Hess Boss said there are two components to be considered, the first being rate of change and the other, durability. In terms of the former, he said Hess’ cash flow for 2024 compounds at 20 percent a year, which is three times greater in comparison to its peers. He said too that cash flow is expected to compound that 25 percent by 2026. Hess said the growth in cash flow that is poised to come will actually put Hess “in the top five percent of the S&P…and I think that is underappreciated.”
Once this is known, he said it is his hope that the company will begin to generate “generous investors” not just in oil and gas but outside of that industry as Hess is about to become “a cash flow growth story to behold.”
ABOUT THE LIZA TWO PROJECT
Once installed, the Liza Unity floating, production, storage and offloading vessel is poised to produce up to 220,000 barrels of oil per day, which is double the current production of the Liza Destiny oil ship.
Kaieteur News had previously reported that Dutch conglomerate, SBM Offshore, was awarded the front end engineering and design (FEED) contract for the Liza Unity FPSO in July 2018. The FPSO design is based on SBM Offshore’s Fast4Ward, which incorporates a new build, multipurpose hull combined with several standardised topsides modules.
The FPSO in early September 2021 had sailed from Singapore to Guyana.
Once production kicks off, Liza Phase Two is expected to develop approximately 600 million barrels of oil. The project is set to cost Guyana approximately US$6 billion. It includes a lease capitalisation cost of approximately US$1.6 billion, for the Liza Unity FPSO vessel, which will be moored in water depth of about 1,600 metres and will be able to store around two million barrels of crude oil from the Stabroek Block which is 6.6 million acres, or 26,800 square kilometres.
Current discovered recoverable resources are estimated at more than 5.5 billion barrels of oil equivalent. The more than 20 discoveries on the block to date, have established the potential for at least 10 FPSO vessels producing more than 1,000,000 barrels of oil per day by 2025.
ExxonMobil subsiduary Esso Exploration and Production Guyana Limited is operator of the Stabroek Block and holds 45 percent interest. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds 25 percent interest.
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