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Noble Bob Douglas drillship photographed here in the Guyana-Suriname basin during an exploration. (Photo courtesy of Noble Corp)

Stabroek partners cut losses but prioritise Guyanese projects

Noble Bob Douglas drillship photographed here in the Guyana-Suriname basin during an exploration. (Photo courtesy of Noble Corp)

Despite the devastating impact of the COVID-19 crisis on the global oil and gas prices, and by extension players in that industry, ExxonMobil Corporation and Hess Corporation are still bullish on their prospects in Guyana’s Stabroek Block.

Both companies recently reported significant losses from their oil exploration and production (E&P) operations; however, they remain resolute in protecting both their balance sheets and shareholder value.

Shifting to low-cost operations

In fact, CEO of Hess Corporation John Hess is most optimistic about the future of the company’s operations in Guyana. The company is a junior operator in the Stabroek Block and holds 30 per cent interest.

CEO of Hess Corporation John Cess (File photo)

“We continue to execute our strategy and achieve strong operational performance while prioritising the preservation of cash, capability and the long term value of our assets during this low price environment,” he noted in a report on results for the third quarter of 2020.

“Our differentiated portfolio of assets, including multiple phases of low-cost Guyana oil developments, positions us to deliver industry-leading cash flow growth and drive our company’s break-even price to under [US]$40 per barrel Brent by mid-decade,” he added.

For the third quarter, which ended on September 30, Hess Corporation disclosed that it realised an increase in net production of crude, though the company recorded US$243 million in net loss. Of the amount, the company’s upstream operation, E&P, accounted for US$182 million

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

“The improved performance primarily resulted from a 21 per cent increase in Bakken production and production from the Liza Field, offshore Guyana, which commenced in December 2019, partially offset by hurricane-related downtime in the Gulf of Mexico and lower production in South East Asia,” a section of the report outlined.

Cash injection in Guyana

Since the publishing of its third-quarter results, Hess has announced the divestment of its operation in the Gulf of Mexico, in keeping with the disclosure it made in the attached report.

“Our differentiated portfolio of assets, including multiple phases of low-cost Guyana oil developments, positions us to deliver industry-leading cash flow growth and drive our company’s break-even price to under [US]$40 per barrel Brent by mid-decade.”

— John Hess, CEO, Hess Corporation

On November 6, in a press release, the company declared that it completed the sale of its 28 per cent working interest in the Shenzi Field in the deepwater Gulf of Mexico to BHP, the field’s operator, for a total consideration of US$505 million.

According to the CEO, “This transaction brings value forward in the current low-price environment and further strengthens our cash and liquidity position… Proceeds will be used to fund our world-class investment opportunity in Guyana.”

More discoveries, new opportunities

At the same time, ExxonMobil, the primary operator at the Liza 1 project with 45 per cent interest, reported a third-quarter 2020 loss of US$680 million.

(Photo: businessinsider.com)

Notwithstanding, the company pointed to two new discoveries in Stabroek Block — Yellowtail-2 and Redtail-1 — and a renegotiated contract for the development of the Payara well as vital signs of a healthy company.

“ExxonMobil continues to improve its industry-leading development opportunities, as illustrated by the growth of the recoverable resource base in Guyana to nearly 9 billion barrels of oil equivalent, and other high-value assets in the US Permian Basin, Mozambique, Papua New Guinea and Brazil,” the attached report said.

(File photo)

“Given the high-quality opportunities in ExxonMobil’s portfolio and the constraints of the current market environment, the corporation is assessing its full portfolio to prioritise assets with the highest value potential within its broad range of available opportunities. This effort includes an ongoing re-assessment of North American dry gas assets currently included in the corporation’s development plan,” it continued.

Both ExxonMobil and Hess have begun investing in the Payara development. The latter revealed that, at present, it estimates costs related to the project to be US$1.8 billion, excluding expenses to contract a floating production, storage and offloading vessel.

Exxon, on the other hand, estimates the development of the Payara project will be US$9 billion.

“ExxonMobil is committed to building on the capabilities from our Liza Phase 1 and 2 offshore oil developments as we sanction the Payara field and responsibly develop Guyana’s natural resources,” Liam Mallon, president of ExxonMobil Upstream Oil & Gas Company, said in a recent press release.

Liam Mallon, president, ExxonMobil Upstream Oil & Gas Company (Photo: Oil Now)

“We continue to prioritize high-potential prospects in close proximity to discoveries and maximize value for our partners, which includes the people of Guyana.”

ExxonMobil’s first offshore Guyana project, Liza Phase 1, began producing in late 2019, well ahead of the industry average for development time. Liza Phase 2, remains on track to begin producing oil by early 2022. It will produce up to 220,000 barrels of oil per day at peak rates using the Liza Unity FPSO, which is under construction in Singapore. 

ExxonMobil is evaluating additional development opportunities in the Stabroek Block, including Redtail, Yellowtail, Mako and Uaru resources, and plans to have five drillships operating offshore Guyana by the end of this year. 

The other E&P partner in Guyana’s Stabroek Block is CNOOC Limited from China.

(Photo: Oil and Gas Vision)