Hess Corp: Time To Regroup And Take A Breather by Fun Trading

Summary

In the third quarter of 2019, Hess' revenues decreased to $1,515 million from $1,828 million in the same quarter a year ago.
HES produced 312K net Boe/d in 3Q'19 (including Libya). It was up 4.7% from the same quarter a year ago.
The investment thesis that I recommend for Hess Corporation is a general binary strategy combining a long-term oil investment with a particular portion allocated to short term trading.

Courtesy: Hess Corporation

Investment Strategy

Hess Corporation (HES) is a US-based independent oil and gas producer with substantial revenue primarily originating from the US with a significant Shale play in the Bakken (North Dakota) and offshore in the Gulf of Mexico.

These productions represent 77.5% of the total output in 3Q'19, including production from Libya. The company also owns a midstream segment focusing exclusively on the Bakken region that I will detail later.

The investment thesis that I recommend for Hess Corporation is a general binary strategy combining a long-term oil investment with a particular portion allocated to short term trading to take full advantage of the oil volatility.

Hess Corp. is a promising oil and gas producer primarily because of its diversified revenue streams and potential gross from the Guyana prospect, which has been funded without issuing additional equity or debt.

One remote potential to consider when holding a long term position is that HES is also a potential takeover candidate for Exxon Mobil (XOM). The company owns attractive assets in the Bakken and is a 30% partner in the Stabroek block offshore Guyana. Both assets present an interest to XOM.

I recommend reading my recent article on ExxonMobil's third-quarter results here.

However, while I consider HES as an excellent long-term investment, two apparent reasons not to invest a significant dollar amount in this stock are the small dividend yield of 1.43% received at the moment and the risk attached to substantial investment in Guyana.

Hess's business model relies heavily on two primary segments

First, a strong presence in the Bakken shale, with production expected to increase to 200K Boe/d by 2021 and with an actual 163K Boep/d achieved in 3Q'19.

Second, an ongoing effort focusing on the company's massive offshore project in Guyana conducted in collaboration with Exxon Mobil (XOM), which will begin producing commercially (Phase I) in 2020 with about 120K Boep/d. Phase II has been already approved as well:

On the Stabroek Block where Hess has a 30% interest and ExxonMobil is the operator, gross discovered recoverable resources are estimated at more than six billion barrels of oil equivalent with multibillion barrels of future exploration potential remaining. In September, we announced a 1fourth discovery on the Block at the Tripletail-1 well located in the Turbot area approximately three miles northeast of the Longtail discovery.

Hess Guyana Exploration, a subsidiary of Hess Corp., owns 30% working interest, while Exxon Mobil is the operator of the prolific Stabroek block and owns 45% working interests.

Hess and Exxon announced their 14th discovery in the Stabroek block, called the Tripletail #1 well (In the Turbot hub), on September 16, 2019.

The XOM/HES Stabroek prospect represents now over 6 MMoe/d recoverable resources.

Source: HES

The company expects that it can install up to five production platforms in the block over the coming years, with a total production of 750k Boe/d by 2025.

On August 29, 2019, the company announced that the Liza Destiny, Guyana’s first oil production vessel, arrived at the Stabroek block.

HES owns a working interest in the Stabroek block, but also acquired 15% interest in the Kaieteur block, which is adjacent to Stabroek in Guyana:

...Read the Full Post On Seeking Alpha

Author Bio:

Steem Account: @funtrading Seeking Alpha Account: Fun Trading

Steem Account Status: Unclaimed***

Are you Fun Trading? If so, you have a Steem account that is unclaimed with pending cryptocurrency rewards sitting in it from your content. Your account was reserved by the Steemleo team and is receiving the rewards of all posts syndicated from your content on other sites.

If you want to claim this account and the rewards that it has been collecting, please contact the Steemleo team via twitter or discord to claim the account. You can also view the rewards currently sitting in the account by visiting the wallet page for this account.

What is Steemleo Content Syndication?

The Steemleo community is syndicating high-quality financial content from across the internet. We're also creating free Steem accounts for the authors of that content who have not yet discovered the Steem blockchain as a means to monetizing their content and we're listing those accounts as the 100% beneficiaries to all the rewards. If you want to learn more about Steemleo's content syndication strategy, click here.