Hess Cuts 2020 Spend by $800mn

Hess Corporation March 17 announced a revised $2.2bn capital and exploratory budget for 2020, an $800mn reduction from the previous budget of $3bn. The company also announced a new $1bn three-year term loan agreement.

“With 80% of our oil production hedged in 2020, our significantly reduced capital and exploratory budget and our new three-year loan agreement, our company is well positioned for this low-price environment,” CEO John Hess said. “Our focus is on preserving cash and protecting our world class investment opportunity in Guyana.”

Oil prices have seen a sharp decline this month after Saudi Arabia announced it would increase oil production to 12.3mn b/d in April, after Russia rejected Opec’s proposal on March 6 to cut crude output by 1.5mn b/d by Opec+. The expectation of a drop in demand due to Covid-19 outbreak has put additional downward pressure on the oil prices. At the time of press, Brent crude was trading at $30/b.

The reductions to the company’s 2020 capital budget will be primarily achieved by shifting from a six-rig programme to one rig in the Bakken, which is expected to be completed by the end of May, Hess said, adding most discretionary exploration and offshore drilling activities, excluding Guyana, will also be deferred. 

Net production for 2020 is now forecast to average between 325,000 and 330,000 barrels of oil equivalent/day, excluding Libya, versus previous guidance of between 330,000 and 335,000 boe/d. The company said its Bakken net production is forecast to average approximately 175,000 boe/d in 2020, versus previous guidance of approximately 180,000 boe/d.