Hess (HES 0.16%) had been one of the best-performing oil stocks for much of 2018. At one point, shares of the oil producer had rocketed nearly 60% thanks to improving oil prices, a needle-moving share buyback plan, and a bounty of new oil discoveries with partner ExxonMobil (XOM 1.41%) in offshore Guyana.

However, Hess' stock has tumbled along with oil prices over the past couple of months, which shaved its year-to-date gain to roughly 7% by mid-December. Because of that, investors are likely wondering if this once high-flying oil stock is a buy. Here's a closer look at whether the oil company can start gaining altitude once again.

Yellow blocks spelling out the word buy in red letters on a man's hand.

Image source: Getty Images.

Stomping on the accelerator in 2019

Hess recently outlined its plans for 2019 and beyond. After keeping its capital budget flat at $2.1 billion for the past two years, Hess announced a jaw-dropping 40% spending increase for 2019. The company plans to earmark 65% of its $2.9 billion budget on development activities, the bulk of which it will spend in the Bakken shale. That will enable Hess to operate six drilling rigs in that region next year, up from an average of 4.8 rigs during 2018.

Those rigs will allow Hess to grow its Bakken production by more than 19% in 2019, which would expand its output in the region to between 135,000 to 145,000 barrels of oil equivalent per day (BOE/D). That would push its overall production rate to between 270,000-280,000 BOE/D in the coming year, a 12% increase from 2018's average rate after adjusting for asset sales.

Another large portion of Hess' spending will be to develop its world-class discovery offshore Guyana with ExxonMobil. The companies are currently building the first phase of that project, which should start producing oil by early 2020. Meanwhile, they expect to begin construction on a second phase next year and could green-light the third one by year-end. If all goes according to plan, they could have five production facilities up and running by 2025 that could produce an average of 750,000 BOE/D. With Hess owning a 30% stake in the field, its share would be 225,000 BOE/D, which is a significant haul for a company on pace to produce 275,000 BOE/D in 2019.

Reaching an inflection point in 2020

Hess expects to continue growing production at a high rate for the next several years. In the company's view, it can expand output at a 10% compound annual growth rate (CAGR) all the way through 2025.

In the near term, the Bakken will be the primary fuel of its growth engine. The company sees its output in the region expanding at a 20% CAGR through 2021, after which it plans to convert the Bakken into a cash engine. At $60 oil, it could generate more than $1 billion in annual free cash flow from the Bakken post-2020.

Replacing the Bakken as the company's main growth engine will be offshore Guyana. As mentioned, Hess expects to commission phase one of its development by early 2020, followed by four more in the 2022 through 2025 time frame. Those two growth engines set Hess up to roughly double its production by 2025, with high-margin oil output growing at a 14% CAGR.

Hess believes its oil-fueled growth should enable it to expand cash flow at a 20% CAGR through 2025. Meanwhile, the company anticipates that it will hit an inflection point in 2020 and begin generating free cash flow assuming oil is around $55 a barrel. With it producing more cash than it needs, Hess would be able to start returning more money to investors above its current dividend level. Those cash returns could climb in the future since Hess is on track to produce significant free cash flow at $55 oil going forward. In the company's view, it could haul in between $2 billion to $4 billion in annual free cash flow by 2025 with oil prices between $55 to $75 a barrel. That's a significant amount of excess cash flow an oil company that currently has a $15 billion market value.

A top-tier oil stock to buy and hold for the long term

Hess is on pace to grow its oil production and cash flow quickly through at least 2025. That puts the company on the path to producing a gusher of free cash flow beginning in 2020, which it plans to return to shareholders. This combination of high-octane growth and increasing cash returns has the potential to create significant value for shareholders in the coming years, making Hess one of the more compelling oil stocks to buy for the long haul.