Hess (NYSE:HES) recently released its 2019 budget. The oil company is planning to significantly increase spending compared to 2018's level, which was flat from the prior year. That makes it an outlier among its exploration and production peers, since some are cutting spending while others are aiming to keep it flat. Hess, on the other hand, believes that its increased investment will pay big dividends down the road.

Drilling down into Hess' 2019 budget

Hess plans to invest $2.9 billion in capital projects during 2019. That's nearly 40% higher than the $2.1 billion it spent in both 2017 and 2018. The company plans to earmark 65% of that money to boost production in the near term, 20% on longer-term offshore development projects, and 15% on exploration and appraisal activities.

An oil pumping unit at sunset.

Image source: Getty Images.

The bulk of Hess' production-focused spending will be on the Bakken Shale, where the company plans to invest $1.425 billion so that it can operate an average of six drilling rigs. That's an increase from $900 million in 2018, which enabled it to run an average of 4.8 rigs. In addition to that, Hess plans to invest $290 million in its Gulf of Mexico operations to continue developing its Stampede Field, as well as some others in the region, and $150 million in Malaysia and Thailand.

Meanwhile, all of Hess' development money will go toward the first two phases of ExxonMobil's (NYSE:XOM) Liza discovery offshore Guyana. Hess plans to spend $260 million on phase one, which should start producing next year, and has earmarked $310 million toward phase two, which Exxon expects to sanction in 2019.

Finally, Hess will invest $440 million in continuing its exploration activities offshore Guyana with Exxon as well as further exploring the deepwater Gulf of Mexico and offshore Suriname, which is to the east of Guyana in South America.

Fast growth in 2019 and beyond

Hess' spending increase positions the company to grow production and cash flow at a fast pace over the next few years. In 2019, the company expects to produce an average of 270,000 to 280,000 barrels of oil equivalent per day (BOE/D), which at the midpoint is an 8% increase from 2018's anticipated level or 12% after adjusting for asset sales. Fueling Hess' growth will be its position in the Bakken, where production should average between 135,000 and 145,000 BOE/D, a more than 19% increase from the midpoint of both guidance ranges.

Meanwhile, Hess' investments in offshore Guyana put it on track to deliver a gusher of production beginning in 2020. ExxonMobil currently believes that it can build five production platforms in the region by 2025 that could produce more than 750,000 BOE/D. With Hess entitled to 30% of that output, its share would be 225,000 BOE/D.

That production from Guyana, when combined with continued growth in the Bakken, has Hess on pace to increase its output by a 10% compound annual growth rate (CAGR) from 2017's base through 2023. Meanwhile, the company anticipates that it could expand cash flow at a 25% CAGR over that time frame given the low anticipated production costs of Guyana. That positions Hess to generate significant free cash flow in the coming years, which it could use to increase its dividend, repurchase more stock, or invest in additional oil growth projects.

An oil stock for the long haul

While Hess expects to step on the gas in the coming year to boost production in the Bakken, this oil stock is looking much further ahead. That's because the first phase of its needle-moving Guyana development should come online in 2020, followed by as many as four more by 2025. Those projects, when added to the Bakken, have Hess on pace to deliver high-octane production and cash flow growth for the next several years, making it an ideal oil stock for long-term investors to consider.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.