Hess Corporation

Good day, ladies and gentlemen, and welcome to the fourth quarter 2019 Hess Corporation conference call. My name is Liz, and I will be your operator for today. At this time, all participants are in 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, Liz. Good morning, everyone, and thank you for participating in our fourth 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 factors 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. As usual with me today are John Hess, Chief Executive Officer, Greg Hill, Chief Operating Officer, and John Reilly, Chief Financial Officer. I'll now turn the call over to John Hess.

Thank you, Jay. Welcome everyone to our fourth quarter conference call. I will review our continued progress in executing our strategy then Greg Hill will discuss our operating performance, and then John Riley will review our financial results. We had an outstanding year in terms of operational performance and continued execution of our long-term strategy, achieving a number of important milestones in delivering higher production and lower capital exploratory expenditures than our original guidance. With Guyana and the Bakken as our growth engines and Malaysia and the Deepwater Gulf of Mexico as our cash engines, our portfolio is on track to deliver increasing and strong financial returns, visible and low-risk production growth, and industry-leading cash flow growth. It is important to note that both Guyana and the Bakken will become significant cash generators over the next several years. As we have stated in our investor presentations, where we provide a financial outlook through 2025. Our portfolio is positioned to generate approximately 20% compound annual cash flow growth and more than 10% compound annual production growth. And our portfolio break-even is projected to decrease to below $40 per barrel Brent by 2025. As our free cash flow grows, we will prioritize return of capital to shareholders both in terms of dividends and opportunistic share repurchases. Another key element of our strategy is maintaining a strong balance sheet and liquidity position and managing risk. We ended the year with more than $1.5 billion in cash and cash equivalents on the balance sheet and have hedged 150,000 barrels of oil per day in 2020 using put options, with 130,000 barrels per day at $55 per barrel WTI, and 20,000 barrels per day at $60 per barrel Brent. With outstanding execution throughout our portfolio, we were able to reduce our full year 2019 capital and exploratory expenditures to $2.74 billion, down approximately $150 million from our original guidance. We have kept our 2020 capital and exploratory budget to $3 billion, in line with the guidance we provided at our December 2018 Investor Day. During the fourth quarter, we closed the previously announced transaction in which Hess Midstream converted to an up-sea corporate structure and acquired Hess Infrastructure Partners. As a result of the transaction, we received approximately $300 million in cash and own 47% of Hess Midstream. Turning to Guyana. where Hess has a 30% interest in the Staybrook block and ExxonMobil is the operator. 2019 was an outstanding year in terms of both exploration and developments. On December 20th, the LISA Phase I development achieved first production and is expected to reach its full capacity of 120,000 gross barrels of oil per day in the coming months. We recognize this pivotal moment in Guyana's history and are committed to working collaboratively with the government, our partners, and the people of Guyana to build a safe and sustainable industry that fulfills the promise of shared prosperity. The LISA Unity Floating Production Storage and Offloading Vessel, or FPSO, is under construction for the second phase of LISA development. It is expected to start production in Guyana by mid-2022, with a production capacity of 220,000 gross barrels of oil per day. Front-end engineering design for a third FPSO, the Prosperity, is underway to develop the Piara field, pending government approvals and project sanctioning. Production from Piara could start as early as 2023, reaching an estimated 220,000 gross barrels of oil per day. From an exploration perspective, 2019 was a banner year with five new discoveries at Haimara, Tilapia, Yellowtail, Tripletail, and Mako. On Monday, we announced an increase in the estimate of gross discovered recoverable resources for the Staybrook Block to more than 8 billion barrels of oil equivalent. We continue to see multi-billion barrels of exploration potential remaining. We also announced a significant oil discovery at Wauru, marking the 16th discovery on the Staybrook Block. The Wauru discovery will be incremental to the new resources estimate. Turning to the Bakken, our largest operated asset, our team had a very strong year. Full year net production in 2019 for the Bakken averaged 152,000 barrels of oil equivalent per day, well above our original guidance range of 135,000 to 145,000 barrels of oil equivalent per day, and nearly 30% higher than 2018. Our Bakken performance showed the benefits of our successful transition to plug and perf completions. As a result, net oil production for 2019 was up 22% compared to 2018, and we are on track for Bakken production to average approximately 200,000 barrels of oil equivalent per day in 2021. In the Deepwater Gulf of Mexico, Our successful oil discovery last quarter at ESOX will be brought online next month as a low-cost tieback to the Tubular Bells production facilities. Hess is the operator and holds a 57.14% interest. Now turning to our 2019 financial results for the fourth quarter. Our adjusted net loss was $180 million compared to adjusted net loss of $77 million in the fourth quarter of 2018. primarily reflecting the effects of lower realized prices. Full year 2019 net production was 290,000 barrels of oil equivalent per day, excluding Libyan, 17% higher than the pro forma 248,000 barrels of oil equivalent per day produced in 2018. In 2020, our net production is forecast to average between 330,000 and 335,000 barrels of oil equivalent per day, excluding Libya. Bakken net production is forecast to average approximately 180,000 barrels of oil equivalent per day in 2020. As we continue to execute our strategy, our board, our leadership team, and each of our employees will be guided by our long-standing commitment to sustainability in terms of safety, protecting the environment, and making a positive impact on the communities where we operate. We are gratified to have been recognized by a number of third-party organizations for the quality of our environmental, social, and governance performance and disclosure, most recently achieving leadership status in CDP's global climate analysis for the 11th consecutive year. In summary, we are proud of our 2019 performance and look forward to continuing this momentum into 2020 and future years as we execute our differentiated long-term strategy. With increasing cash margins and production volumes, our cash flow through 2025 is projected to grow at a rate that outpaces our industry peers and most companies in the S&P 500. As our portfolio generates increasing cash flow, the majority will be deployed toward increased return of capital to our shareholders through dividend increases and opportunistic share repurchases. I will now turn the call over to Greg for an operational update.