Jan 26, 2022 News
– US$450M set aside to drill more wells
Kaieteur News – Hess Corporation which holds a 30 percent stake in the Stabroek Block announced on Tuesday that its 2022 Exploration and Production budget totals US$2.6 billion. Approximately 80% will be allocated to its major projects in Guyana and the USA.
Expounding further, Hess said it plans to spend US$1B on its Guyana projects with US$25 million going towards the Liza Phase 1 development on the Stabroek Block where production optimization work is planned in the first quarter of 2022. Kaieteur News understands that US$190 million will go towards the Liza Phase 2 development, which has a capacity of approximately 220,000 gross barrels of oil per day. Production is expected in the first quarter of 2022.
Also, US$400 million has been budgeted for the Payara development with a capacity of approximately 220,000 gross barrels of oil per day, and first production expected in 2024. It was noted that US$210 million for the Yellowtail development with a capacity of approximately 250,000 gross barrels of oil per day. Hess said this project is scheduled to commence in 2025.
Furthermore, US$175 million has been set aside primarily for front end engineering and design work for future development phases on the Stabroek Block.
Hess was keen to note that US$450 million will be allocated to drilling approximately 12 exploration and appraisal wells on the Stabroek Block in Guyana, the Huron-1 well in the Green Canyon area of the Gulf of Mexico (Hess 40%) and the Zanderij-1 well on Block 42 in Suriname (Hess 33%). Funds are also included for seismic acquisition and processing in Guyana, Suriname and the deepwater Gulf of Mexico, and for license acquisitions.
Following the announcement, Chief Executive Officer (CEO), John Hess said the majority of his company’s 2022 budget is allocated to Guyana since it is positioned to be one of the highest margins, lowest carbon intensity oil developments in the world. As for his Chief Operating Officer Greg Hill, he said the focus in Guyana for 2022 will be on advancing high value oil developments on the Stabroek Block, which have a Brent breakeven oil price of between US$25 and US$35 per barrel, and continuing its active exploration and appraisal programme.
BILLION DOLLAR PROFITS
Kaieteur News previously reported that after a mere three years of shrewd mega-investments in Guyana’s oil rich Stabroek Block, Hess Corporation 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 earlier this month, 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 had 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 that 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.”
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