Jun 14, 2022 News
Kaieteur News – With Guyana recording the largest discovery of oil and gas resources in the last 20 years and with a shift in investment patterns in the industry, at least one of the partners in the Stabroek block has signalled an exit from the US and other developments in order to focus on the likes of Guyana and Suriname.
This was the sentiment of Hess Corporation’s CEO John Hess, who recently confirmed that the company has seen its fortunes grow with its interest in the Stabroek Block, a reservoir that has grown the company’s asset base.
Speaking to the company’s investment strategy during the recently held, 38th Strategic Decisions Conference 2022—organised by Bernstein Anonymous—Hess used the occasion to reiterate, “oil and gas is a resource business, you have to grow your resource over time and invest in growing that resource if your cash flow is going to be greater five or ten years from now.”
To this end, he sought to point out that, “the challenge for shale producers they are not growing their resources they are actually liquidating which is allows them to return a lot of capital to shareholders but not grow their intrinsic value.”
According to Hess, “we are the only oil company that can grow intrinsic value while at the same time, been growing cash returns or cash yields to our shareholders and that’s based upon a strategy of three things, grow the resource, high returns, go down the cost curve, have a low cost to supply, and have industry leading cash flow growth.”
Hess elucidated saying, “on the resource side we are very focused but balanced portfolio and we think to grow that resource you can’t just stay in shale; we have the Bakken Shale, we have gas annuity basically in Malaysia that has certainly another ten years to go in it.’
He said too, “you have the gulf of Mexico where you do have some growth potential and then you have Guyana.”
With this in mind, he sought to remind, “…the important thing is with that portfolio we are able to grow our production 10 percent a year; an investor recently when we are on the road said you are the only growth company left in the oil and gas industry well, that’s because we have focused on growing resource
He recalled too that “we were criticized three years ago for investing; a number of investors said stop investing just give us the cash back, we said look we have higher returns specifically in Guyana we are going to benefit from that investment as we grow the resource we grow the cash flow.”
With regards the investments in the Permian Basin, Hess was quick to point out that while the company plans to add another rig, it intends to cap its investments there, with the intention of focusing on its more lucrative options such as Guyana and more recently Suriname.
Speaking to the returns for its investment in Guyana, Hess told stakeholders “now that we have a second (production) ship on, every ship at US$65 Brent adds US$1B a year of; as a consequence, our cash flow because we have these low cost developments coming on every year, our cash flow growth is 25 percent a year compounded, each year for the next five years and quite frankly with more ships it can actually go out to 2030.”
He credited to positive forecast a decreased cost curve, saying “our cash cost per barrel goes down 25 percent to US$9 per Barrel of Oil by 2026, our breakeven as a company will be US$45 Brent for 2026 and at the end of the day that cash flow growth is going to compound where we grow in intrinsic value but also start to return cash alone way as well.”
Speaking to the focus on the Guyana reservoirs, Hess was adamant, “resource does matter in our business and (in Guyana) it’s actually very low cost high margin, low carbon footprint oil, so it’s going to be needed 20 years from now and it’s a real advantage for our company versus other companies.”
Addressing the advantages of the Stabroek Block, the Hess Corporation CEO also noted that when it comes to the development of an oil field, for “Guyana it’s three years, for the Gulf of Mexico between drilling, appraisal etc., it’s probably about five years
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