Hess Corporation

Good day, ladies and gentlemen, and welcome to the second quarter 2019 HES Corporation conference call. My name is Amanda, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If at any time you require operator assistance, please press star followed by zero, and we will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Jay Wilson, Vice President of Investor Relations. Please proceed.

Thank you, Amanda. Good morning, everyone, and thank you for participating in our second quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hess.com. Today's conference call contains projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements. These risks include those set forth in the risk factor section of HESA's annual and quarterly reports filed with the SEC. Also, on today's conference call, we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website. Now, as usual, with me today are John Hess, Chief Executive Officer, Greg Hill, Chief Operating Officer, and John Riley, Chief Financial Officer. I'll now turn the call over to John Hess.

Thank you, Jay. Welcome to our second quarter conference call. I will provide a strategy update. Greg Hill will then discuss our operating performance. and John Riley will review our financial results. In the second quarter, we continue to execute our strategy and deliver strong operational performance, with our full-year production now expected to come in at the upper end of our guidance range and our capital and exploratory expenditures projected to come in under our original guidance. Our portfolio, which is balanced between our growth engines in Guyana and the Bakken, and our cash engines in the Deepwater Gulf of Mexico and the Gulf of Thailand, is on track to generate industry-leading cash flow growth, with a portfolio break-even that is expected to decrease to less than $40 per barrel Brent by 2025. A key driver of our strategy is our position in Guyana. The 6.6 million acres Staybrook block, where Hess has a 30% interest and ExxonMobil is the operator, is a massive world-class resource that is uniquely advantaged by its scale, reservoir quality, cost, rapid cash paybacks, and strong financial returns. In April, we announced our 13th discovery on the Slaybrook Block at Yellowtail. The Yellowtail No. 1 well encountered approximately 292 feet of high-quality oil-bearing sandstone reservoir and is the fifth discovery in the Turbo area. which is expected to become a major development hub. Total discoveries on the Staybrook Block to date have established the potential for at least five floating production storage and offloading vessels, or FPSOs, producing over 750,000 barrels of oil per day by 2025. Drilling and appraisal activities were completed at the Hammerhead II and Hammerhead III wells with encouraging results. including a successful drill stem test in July. These results are being evaluated for a potential future development. Exploration and appraisal drilling continues on the block at the Triple Tail Prospect in the Greater Turbo Area and at the Ranger discovery where a second well is underway. As a result of this year's discoveries and further evaluation of previous discoveries, We have increased the estimate of gross discovered recoverable resources for the Staybrook Block to more than 6 billion barrels of oil equivalent, up from the previous estimate of more than 5.5 billion barrels of oil equivalent. And we continue to see multi-billion barrels of additional exploration potential. In terms of our developments, LISA Phase I continues to advance. On July 18th, the LISA Destiny FPSO, which has the capacity to produce up to 120,000 gross barrels of oil per day, sets sail from Singapore and is expected to arrive in Guyana in September. First production is expected by the first quarter of 2020. Phase 2 of the LISA development, which was sanctioned in May, will use a second FPSO, the LISA Unity, with production capacity of up to 220,000 gross barrels of oil per day, Startup is expected by mid-2022. Planning is underway for a third phase at Piara, which will use a FPSO with the capacity to produce between 180,000 to 220,000 gross barrels of oil per day. First production is on track for 2023. In the Bakken, we have a premier acreage position and a robust inventory of high-return drilling locations. We plan to continue operating six rigs, which is expected to grow net production to approximately 200,000 barrels of oil equivalent per day by 2021, along with a meaningful increase in free cash flow generation over this period. Now, turning to our financial results, in the second quarter, we posted a net loss of $6 million, or 2 cents per share, compared to a net loss of $130 million, or 48 cents per share, in the year-ago quarter. On an adjusted basis, we posted a net loss of $28 million, or 9 cents per share, compared with an adjusted net loss of $56 million, or 23 cents per share, in the second quarter of 2018. Compared to second quarter 2018, our improved financial results primarily reflect increased U.S. crude oil production and reduced exploration expenses, which were partially offset by lower realized selling prices and higher DDNA expenses. Second quarter net production averaged 273,000 barrels of oil equivalent per day, excluding Libya, up from 247,000 barrels of oil equivalent per day in the year-ago quarter. For the full year 2019, we forecast that net production will average between 275,000 and 280,000 barrels of oil equivalent per day, excluding Libya, which is also at the upper end of our previous guidance range. Second quarter net production in the Bakken averaged 140,000 barrels of oil equivalent per day, up 23 percent from 114,000 barrels of oil equivalent per day a year ago. For the full year 2019, we now forecast that the Bakken net production will average between 140,000 and 145,000 barrels of oil equivalent per day at the upper end of our previous guidance range. Before closing, I would like to note that we published our annual sustainability report earlier this month for the 22nd year. We believe sustainability practices create value for our shareholders and position us to continuously improve our business performance. Our sustainability report is available on our company website at www.hest.com. In summary, we are successfully executing our strategy and which will deliver increasing and strong financial returns, visible and low-risk production growth, and significant future free cash flow. I will now turn the call over to Greg for an operational update.