The second quarter was one of the most challenging periods in the oil market's history. Demand collapsed as the global economy shut down to help slow the spread of COVID-19, which caused oil prices to crater. That forced oil companies to take a variety of actions to navigate through this turbulent period.

One of the many oil companies that had to shift gears quickly was Hess (NYSE:HES). However, thanks to its solid balance sheet, its oil hedging program, and the low-cost nature of its operations, Hess' moves were more about preserving value than ensuring its survival. That's put it in an excellent position to cash in on higher oil prices during the second half of the year. 

An oil pumping unit at sunset.

Image source: Getty Images.

Filling up the tankers with Bakken crude

Unlike most peers, Hess' production surged during the second quarter because the company didn't turn off its oil pumps in the face of lower prices. Overall, the company produced 334,000 barrels of oil equivalent per day (BOE/D) during the period, up 22% year over year. Fueling that growth was the strength of its Bakken shale operations in North Dakota -- where output surged 39% from the prior-year period -- and the recent start-up of the first phase of its offshore Guyana development with ExxonMobil (NYSE:XOM).

What's worth noting about Hess surging Bakken output is that it didn't flood the U.S. market with this oil. Instead, the company chartered three very large crude carriers (VLCCs) during May, June, and July capable of holding 6 million barrels of oil. It loaded 3.7 million barrels of oil onto these ships during the second quarter and will fill the rest in the third quarter. Hess plans to deliver the first ship to China in September and sell the oil at a premium to the current global benchmark price. Meanwhile, the company intends to sell the remaining 4 million barrels to customers in Asia during the fourth quarter.

Hess' strategy could pay big dividends in the second half of the year. Instead of selling its oil into an oversaturated U.S. market during the second quarter, Hess loaded it onto ships that will deliver it to customers in Asia later this year. That should allow it to capture much higher pricing.

Perfectly timed maintenance for the current conditions

Another move Hess made during the market turbulence was to defer some planned maintenance at the Tioga Gas Plant in the Bakken, operated by its midstream arm Hess Midstream (NYSE:HESM). Instead of completing that project during the third quarter, Hess Midstream moved it to 2021 because of COVID-19. That will allow Hess to produce an additional 10,000 BOE/D from the region this year since this infrastructure won't go offline for maintenance this quarter. 

Meanwhile, ExxonMobil is currently commissioning an injection system that will enable the Liza facility offshore Guyana to reach its full production capacity in August. After producing 22,000 barrels of oil per day (BPD) during the second quarter, that facility should soon reach its maximum of 120,000 BPD.

With higher than expected production coming from the Bakken, and the anticipation of Guyana's first phase reaching its full production capacity, Hess' output will remain strong during the second half. That puts it in an excellent position to benefit if prices keep rebounding. Meanwhile, it's well protected on the downside, as the company has hedging contracts in place that put a firm floor under 80% of its expected second-half production.

Repositioning for a rebound

Many of Hess' peers focused their efforts on staying afloat during these challenging times for the oil sector. However, thanks to Hess' strong financial position, it sought ways to capture the eventual rebound by loading its oil on ships and holding back on a key maintenance project. Add that to the embedded upside as Exxon finishes up work in offshore Guyana, and Hess' earnings and stock price could soar if oil market conditions continue rebounding during the second half.