Hess Reports Estimated Results for the Fourth Quarter of 2012
Fourth Quarter Highlights:
- Net income was $566 million, compared with a net loss of $131 million in the fourth quarter of 2011
- Net income excluding items affecting comparability between periods was $409 million compared with $394 million in the fourth quarter of 2011
- Oil and gas production increased to 396,000 barrels of oil equivalent per day, up from 367,000 in the fourth quarter of 2011
- Net cash provided by operating activities was $1,570 million, compared with $1,138 million in the fourth quarter of 2011
- Year-end total proved reserves were 1,553 million barrels of oil equivalent; reserve replacement for 2012 was 141 percent
The after-tax income (loss) by major operating activity was as follows:
|Three Months Ended||Years Ended|
|December 31, (unaudited)||December 31, (unaudited)|
|(In millions, except per share amounts)|
|Exploration and Production||$||517||$||527||$||2,404||$||2,675|
|Marketing and Refining||159||(561)||231||(584)|
|Net income (loss) attributable to Hess Corporation||$||566||$||(131)||$||2,217||$||1,703|
|Net income (loss) per share (diluted)||$||1.66||$||(.39)||$||6.52||$||5.01|
|Weighted average number of shares (diluted)||340.5||337.5||340.3||339.9|
Note: See page 3 for a table of items affecting comparability of earnings between periods.
Exploration and Production earnings were $517 million in the fourth quarter of 2012, compared with $527 million in the fourth quarter of 2011. Fourth quarter oil and gas production was 396,000 barrels of oil equivalent per day, up from 367,000 barrels of oil equivalent per day in the fourth quarter a year ago, primarily reflecting an increase in production from the Bakken oil shale play and the resumption of operations in Libya, partly offset by the shut-in of the Valhall Field in Norway for the quarter due to the redevelopment project. Net production from the Bakken oil shale play averaged 64,000 barrels of oil equivalent per day in the fourth quarter of 2012, an increase of 68% from 38,000 barrels of oil equivalent per day in the same period last year. The Corporation's average worldwide crude oil selling price, including the effect of hedging, was $84.46 per barrel, down from $89.70 per barrel in the same quarter a year ago. The average worldwide natural gas selling price was $6.60 per mcf in the fourth quarter of 2012, up from $6.32 per mcf in the fourth quarter of 2011. Fourth quarter 2012 exploration expenses included total dry hole expenses of $167 million ($102 million after-tax), primarily associated with two exploration wells, Ness Deep in the Gulf of Mexico and Ajek-1 offshore, Indonesia.
In 2012, the Corporation announced divestitures totaling $2.4 billion as part of the strategic reshaping of its Exploration and Production asset portfolio. The sale of the Corporation's interest in the Bittern Field in the United Kingdom North Sea was completed in the fourth quarter of 2012 and follows the completion of the sales of the Schiehallion Field, offshore United Kingdom, and the Snohvit Field, offshore Norway, earlier in the year. The sale of the Corporation's interest in the Beryl Field in the United Kingdom North Sea was completed in January 2013 and the divestiture of our assets in Azerbaijan is expected to be completed by the end of March 2013. In addition, as previously announced, the Corporation has commenced a sales process for its Russian subsidiary, Samara-Nafta, and its Eagle Ford assets in Texas.
Oil and gas proved reserves were 1,553 million barrels of oil equivalent at the end of 2012, compared with 1,573 million barrels at the end of 2011. During 2012, the Corporation added 214 million barrels of oil equivalent to proved reserves and sold 83 million barrels of oil equivalent of proved reserves through asset dispositions. The additions, which are subject to final review, replaced approximately 141 percent of the Corporation's 2012 production, resulting in a reserve life of 10.3 years.
Marketing and Refining generated income of $159 million in the fourth quarter of 2012, compared with a loss of $561 million in the same period in 2011. Marketing earnings were $152 million, up from $48 million in the same quarter of 2011 primarily as a result of income from the partial liquidation of LIFO inventories, and higher margins. Operations at our Port Reading refining facility in New Jersey generated income of $8 million in the fourth quarter of 2012, compared with a loss of $6 million in the fourth quarter of 2011, principally due to higher margins. Trading activities generated a loss of $1 million in the fourth quarter of 2012 and a loss of $11 million in the fourth quarter of last year.
Earlier this week, the Corporation announced that the Port Reading refinery will be closed in February. Upon closure of Port Reading, which follows the shutdown of the HOVENSA L.L.C. refinery in St. Croix, U.S. Virgin Islands in early 2012, the Corporation will have completely exited the refining business. The Corporation also announced that it will commence a process to sell its terminal network. Following these actions, over 90 percent of Hess' capital employed will be in its Exploration and Production business.
The following table reflects the total after-tax income (expense) of items affecting comparability of earnings between periods:
|Three Months Ended||Years Ended|
|December 31, (unaudited)||December 31, (unaudited)|
|Exploration and Production||$||86||$||-||$||148||$||244|
|Marketing and Refining||71||(525)||71||(525)|
Fourth quarter 2012 Exploration and Production results included an after-tax gain of $172 million relating to the sale of the Corporation's interest in the Bittern Field in the United Kingdom North Sea. The results also included an income tax charge of $86 million for a disputed application of an international tax treaty. Fourth quarter 2012 Marketing and Refining results included after-tax income of $104 million from the partial liquidation of LIFO inventories and after-tax charges totaling $33 million for asset impairments and other charges. Fourth quarter 2011 results included an after-tax charge of $525 million related to the shutdown of the HOVENSA refinery.
Net cash provided by operating activities was $1,570 million in the fourth quarter of 2012, compared with $1,138 million in the same quarter of 2011. Capital and exploratory expenditures were $1,914 million, of which $1,887 million related to Exploration and Production operations. Capital and exploratory expenditures for the fourth quarter of 2011 were $2,236 million, of which $2,185 million related to Exploration and Production operations.
At December 31, 2012, cash and cash equivalents totaled $642 million, compared with $351 million at December 31, 2011. Total debt was $8,111 million at December 31, 2012 and $6,057 million at December 31, 2011. The Corporation's debt to capitalization ratio at December 31, 2012 was 27.5 percent, compared with 24.6 percent at the end of 2011.
Hess Corporation will review fourth quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details about the event, refer to the Investor Relations section of our website at http://www.hess.com.
Hess Corporation is a leading global independent energy company primarily engaged in the exploration and production of crude oil and natural gas, and the marketing of refined petroleum products, natural gas and electricity. More information on Hess Corporation is available at http://www.hess.com.
Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, uncertainties inherent in the measurement and interpretation of geological, geophysical and other technical data.
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
|Revenues and Non-operating Income|
|Sales (excluding excise taxes) and other operating revenues||$||9,511||$||9,733||$||9,194|
|Income (loss) from equity investment in HOVENSA L.L.C.||-||(940)||-|
|Gains on asset sales||172||-||376|
Total revenues and non-operating income
|Costs and Expenses|
|Cost of products sold (excluding items shown separately below)||6,250||6,712||6,019|
|Exploration expenses, including dry holes and lease impairment||362||426||259|
|Other operating expenses||43||44||41|
|General and administrative expenses||201||187||167|
|Depreciation, depletion and amortization||751||674||748|
|Total costs and expenses||8,701||9,022||8,517|
|Income (loss) before income taxes||997||(198)||1,102|
|Provision (benefit) for income taxes||429||(64)||510|
|Net income (loss)||568||(134)||592|
|Less: Net income (loss) attributable to noncontrolling interests||2||(3)||35|
|Net income (loss) attributable to Hess Corporation||$||566||$||(131)||$||557|
Supplemental Income Statement Information
|Foreign currency gains (losses), after-tax||$||7||$||(8)||$||7|
Cash Flow Information
|Net cash provided by operating activities (a)||$||1,570||$||1,138||$||1,862|
Capital and Exploratory Expenditures
|Exploration and Production|
|Total Exploration and Production||1,887||2,185||2,260|
|Marketing, Refining and Corporate||27||51||27|
|Total Capital and Exploratory Expenditures||$||1,914||$||2,236||$||2,287|
|Exploration expenses charged to income included above|
(a) Includes changes in working capital.