Oil and natural gas exploration and production specialist Hess (HES +0.00%) reported fourth-quarter and full-year 2024 earnings on Wednesday, Jan. 29, that topped analyst consensus estimates. Stronger-than-expected adjusted EPS came in at $1.76 while revenue and non-operating income reached $3.23 billion, exceeding forecasts of $2.94 billion. This was primarily driven by increased production, particularly from Guyana and the Bakken regions.
Overall, the quarter highlighted Hess's ability to deliver strong financial performance despite challenges from lower commodity prices.
| Metric | Q4 2024 | Analysts' Estimate | Q4 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $1.76 | $1.49 | $1.63 | 8% |
| Revenue and non-operating income | $3.23 billion | $2.94 billion | $3.04 billion | 6.3% |
| Net production (boepd) | 495,000 | N/A | 418,000 | 18.4% |
| Capital expenditures | $1.68 billion | N/A | $1.48 billion | 13.3% |
Source: Hess. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. boepd = barrels of oil equivalent per day
Business Overview and Focus Areas
Hess Corporation is primarily engaged in the exploration and production of crude oil and natural gas. It holds key assets globally, with major operations in offshore Guyana and the onshore Bakken shale in North Dakota. Guyana stands out as a strategic growth area due to its prolific resource base in the Stabroek Block. Hess aims for long-term value creation by focusing on high-return assets and efficient capital allocation.
Recently, the company has emphasized expanding production capacity, particularly in Guyana, where significant discoveries have boosted potential outputs. Efficiency in operations and strategic investments, such as Guyana’s Floating Production Storage and Offloading (FPSO) units, are vital success factors contributing to Hess's growth trajectory.
NYSE: HES
Key Data Points
Quarterly Developments
During the fourth quarter, Hess showed solid performance despite market headwinds. Its Guyana operations saw net production increase significantly to 195,000 barrels of oil equivalent per day (boepd), supported by the newly operational Payara development. This expansion in Guyana underscored Hess's growing production capabilities in the region.
The Bakken shale also contributed, with production reaching 208,000 boepd, a 7% increase from the previous year. However, certain external factors, such as seasonal maintenance and winter weather, are expected to slightly temper production in the first quarter of 2025.
From a market perspective, Hess faced pricing pressures with a drop in the average realized crude oil price per barrel to $72.10 from $76.63 in the previous year. This trend in decreasing commodity prices poses an ongoing challenge for margins, compounded by a similar trend in natural gas prices.
Capital expenditures were reported at $1.68 billion, reflecting Hess’s deliberate focus on expanding its high-potential production areas, especially Guyana. The company was also able to boost its year-end proved reserves to 1.44 billion barrels of oil equivalent, primarily contributed by Guyana and the Bakken resources. This expansion signals a strong reserve replacement strategy, marked by a 138% replacement rate.
Looking Ahead
Looking forward, Hess expects variability in its production guidance for the first quarter of 2025 due to anticipated operational factors. Nonetheless, steady growth is projected as further developments in Guyana come online. The effective integration of the anticipated merger with Chevron (CVX 0.04%) promises to strategically benefit Hess by allowing for synergy realization and enhancement in scale.
The Chevron merger, expected to finalize by mid-2025, is set to align Hess shareholders with Chevron’s broader operational strengths. This comes through a favorable exchange ratio of 1.025 Chevron shares per Hess share. As such, managing these transitions will remain an area of keen interest for investors moving forward.
