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

Hess focuses on Guyana, announces $800 million cut in exploration budget

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

Hess Corporation, a leading shale oil and gas producer, today declared that it is focusing on its oil interest in Guyana, as it announced a US$800 million reduction in its 2020 oil exploratory budget.

The company has announced a revised US 2.2 billion capital and exploratory budget for 2020, which is a reduction of US $800 million reduction from the previous budget of US$3 billion. The company also announced a new $1 billion three-year term loan agreement.

These actions are geared towards further strengthening the company’s cash position and financial liquidity in response to the sharp decline in oil prices. “With 80 per cent of our oil production hedged in 2020, our significantly reduced capital and exploratory budget and our new three-year loan agreement, our company is well positioned for this low-price environment,” CEO John Hess said.

Hess Corporation CEO, John Hess (Photo: hess.com)

Hess made the point that, “Our focus is on preserving cash and protecting our world-class investment opportunity in Guyana.” The reduction to the company’s 2020 capital budget will be primarily achieved by shifting from a six-rig program to one rig in the Bakken, which is expected to be completed by the end of May.

Most discretionary exploration and offshore drilling activities, excluding Guyana, will also be deferred. Yesterday, the company entered into a $1.0 billion three-year term loan agreement with JP Morgan Chase Bank, N.A.

An aerial view of Georgetown, the capital of Guyana.

The term loan contains provisions that require the company to reduce JP Morgan’s initial funded amount, which the company intends to do by syndicating the loan to other banks. In 2020, approximately 80 per cent of the company’s oil production is hedged by put options, with 130,000 barrels a day at $55 per barrel West Texas Intermediate put options and 20,000 barrels a day at $60 per barrel Brent put options.

In addition, the company entered 2020 with more than $1.5 billion in cash and cash equivalents on its balance sheet and has a $3.5 billion undrawn revolving credit facility and no material debt maturities until 2027. Net production for 2020 is  forecast to average between 325,000 and 330,000 barrels a day excluding Libya, versus previous guidance of between 330,000 and 335,000 barrels a day.

Hess Corporation said it will cut its oil exploration budget by US$800 million.

The company’s Bakken net production is forecast to average approximately 175,000 barrels a day in 2020 versus previous guidance of approximately 180,000 barrels a day.

Hess Corporation, which is based in the United States, is one of the largest producers in the deep water Gulf of Mexico and a key natural gas producer and supplier to Peninsular Malaysia and Thailand. The company is also engaged in exploration and appraisal activities offshore Guyana, participating in one of the industry’s largest oil discoveries in the past decade, as well as the Gulf of Mexico and Suriname.