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Hess signage displayed on a gas station in the United States. (Photo: Business Insider)

Hess Corp commits majority of 2021 budget to Guyana

Hess signage displayed on a gas station in the United States. (Photo: Business Insider)

Just days before United Stated-based Hess Corporation released its fourth-quarter results, the company revealed that it would commit a huge chunk of its budget for 2021 to operations in Guyana.

On Moday, January 25, the company disclosed in a press release that it will allocate over 80 per cent of its US$1.9 billion exploration and production budget to Guyana and the Bakken Block in North Dakota, USA.

“Our capital programme reflects our disciplined approach in the current oil price environment to preserve cash, core capabilities and the long-term value of our assets,” CEO John Hess said.

CEO of Hess Corporation John Cess (File photo)

“The majority of our 2021 budget is allocated to Guyana, where our three sanctioned oil developments have a Brent breakeven oil price of between $25 and $35 per barrel… By investing only in high-return, low-cost opportunities, we have built a differentiated portfolio of assets that we believe will provide industry leading cash flow growth over the course of the decade,” he added.

To this, Hess Chief Operating Officer Greg Hill added that within this year the company will begin work that will accelerate production at its other developments in that territory.

“Offshore Guyana, our focus in 2021 will be on advancing our next two sanctioned developments to first oil — Liza Phase 2 in early 2022 and Payara in 2024 — and on front-end engineering and design work for future development phases on the Stabroek Block. We also will continue to invest in an active exploration and appraisal program, with 12-15 wells planned on the Stabroek Block.”

Developments in Guyana

Hess Corporation, with its 30 per cent interest, shares exploration and production rights to the Stabroek Block with operator Esso Exploration and Production Guyana Limited — a subsidiary of ExxonMobil — and China’s CNOOC.

(Photo: businessinsider.com)

In December last year, the Liza-1 well reached capacity of 120,000 gross barrels of oil per day (bopd). Along with its partners, the company plans to increase the production capacity to 220,000 gross bopd.

“The Payara development was sanctioned in September 2020 and will utilise the Prosperity FPSO with an expected capacity of 220,000 gross bopd, with first oil targeted in 2024,” the company outlined in another release.

Still, the E&P company shares yet another partnership with the ExxonMobil subsidiary in Guyana’s Kaieteur Block.

Update on Guyana projects

Last week Hess provided a thorough update on its projects offshore Guyana in a report attached to results for the 2020 fourth quarter.

“At the Kaieteur Block (Hess – 15%), the operator, Esso Exploration and Production Guyana Limited, completed drilling of the Tanager-1 exploration well, which did not encounter commercial quantities of hydrocarbons on a stand-alone basis. Fourth-quarter results include a charge of [US]$14 million in exploration expense for well costs incurred,” the company shared.

“After drilling the Tanager-1 well, the Stena Carron drillship completed appraisal work at the Redtail-1 well before moving to the Canje Block, offshore Guyana.

Stena Carron drillship arriving at Tanager-1 well in the Kaieteur Block offshore Guyana.(Photo: Panormana Insurance Brokers)

Again, in the Stabroek Block, the company said it discovered approximately 50 feet of oil bearing reservoir at the Hassa-1 well.

“After drilling the Hassa-1 well, the Noble Don Taylor drillship began development drilling at Liza Phase 2. The Noble Bob Douglas and the Noble Tom Madden drillships are currently drilling and completing Liza Phase 2 development wells,” Hess also informed.

Losses continue

Despite the bountiful discoveries, Hess Corporation continued to record losses in Q4 2020, registering US$97 million. This, however, was lower than net loss of US$222 million reported in the corresponding period in 2019.

For financial year 2020, net losses topped US$3.093 billion, compared to US$412 a year earlier.

Liza Destiny floating, production, storage and offloading vessel in Guyana’s offshore oil field. (File photo)

To stem the cash-bleed, Hess disposed of its assets in the Gulf of Mexico in the fourth quarter and redistributed the proceeds from the sale to its Guyana and Bakken (North Dakota, USA) operations.

“We are successfully executing our strategy which has positioned our company to deliver industry leading cash flow growth over the next decade,” CEO John Hess said.

“In 2021, our priorities remain to preserve cash, capability and the long-term value of our assets, with more than 80 percent of our capital expenditures allocated to our high-return investments in Guyana and the Bakken.”