Hess (NYSE:HES) has been one of the hottest stocks in the oil patch this year. Shares of the independent exploration and production company have rocketed nearly 65% so far in 2019, fueled by a big bounce-back in oil prices and its strong fourth-quarter results.

The oil company should be able to maintain that momentum after posting excellent first-quarter numbers this week. Here's a closer look at those results.

Drilling down into the numbers

Metric

Q1 2019

Guidance or Expectations

Difference

Production

278,000 BOE/D

270,000 BOE/D

8,000 BOE/D

Adjusted earnings (loss)

$0.09

($0.27)

$0.36

Data source: Hess. BOE/D = barrels of oil equivalent per day.

Hess posted a surprising profit during the first quarter. That allowed the company to continue its streak of delivering earnings well ahead of analysts' expectations. While the rebound in oil prices certainly helped, Hess contributed to its cause by producing well above its forecast. Overall, output surged 19% year over year, even though last year's first quarter benefited from some assets it sold later in 2018.

The company delivered decent results from its position in North Dakota's Bakken shale. Production from the region rose 17% to 130,000 BOE/D, which was at the low end of its guidance range for 130,000 to 135,000 BOE/D. The company more than made up for that less-than-stellar result by delivering a gusher out of the Gulf of Mexico. Output from that area surged 71% to 70,000 BOE/D due to higher production from the Conger, Penn State, and Llano fields, which bounced back from the shutdown of a third-party platform in the year-ago period.

Hess generated $238 million in cash during the quarter, up from $210 million in the year-ago period. The company did outspend cash flow on capital expenses -- which totaled $542 million during the quarter -- due to the company's decision to accelerate its 2019 activities in the Bakken, as well as to support its offshore Guyana joint venture with ExxonMobil (NYSE:XOM) and China's CNOOC. Even with that outspend, Hess ended the quarter with $2.3 billion in cash.

An oil rig and platform at sunset

Image source: Getty Images.

A look at what's ahead

The ExxonMobil-led exploration efforts off the shore of Guyana continue to uncover more oil: The company announced three more discoveries, bringing the total to 13. Exxon now estimates that they hold more than 5.5 billion BOE of recoverable resources, which is an increase from its last projection of 5 billion BOE in December. These resource additions further support Exxon's view that it can build five floating production, storage, and offloading vessels in the region capable of pumping out 750,000 barrels of oil per day (BPD) by 2025. Hess would get 30% of that output, which is significant considering its current production rate.

Hess, Exxon, and CNOOC remain on track with phase 1 of their development, which should start producing 120,000 BPD by the first quarter of next year. Hess expects to soon sanction the second phase, which would be capable of producing 220,000 BPD by mid-2022. Meanwhile, Exxon anticipates greenlighting the third by year-end, putting it on track to pump another 180,000 to 220,000 BPD by 2023.

The staged growth in Guyana should allow Hess to grow production at a 10% compound annual growth rate (CAGR) through 2025, while cash flow would expand at a 20% CAGR, assuming $60 oil. Hess should hit a cash flow inflection point next year once the first phase comes online, which could allow it to start sending more cash back to investors above its current dividend.

One of the brightest outlooks in the oil patch

Hess continues to deliver impressive quarterly results, thanks to its U.S. operations. Its growth engine, however, will shift to Guyana next year. That region should fuel strong production and cash flow growth for years to come, which could give Hess' stock the boost needed to continue outperforming.