Hess Corporation

Good day, ladies and gentlemen, and welcome to the first quarter 2020 HES Corporation conference call. My name is May, 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, May. Good morning, everyone, and thank you for participating in our first quarter earnings conference call. Our earnings release was issued this morning. It is on our website, www.hess.com. I would first like to express our hope that all of you listening and your families are safe and well. 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 FCC. In light of the COVID-19 pandemic and reduced spending plans we've put in place, many of the forward-looking statements from our previous presentations and investor materials have changed and should not be relied upon. We will provide updated guidance during this call. As a result of the COVID-19 pandemic, our operations and those of our business partners, service companies, and suppliers have experienced and may continue to experience adverse effects, including disruptions, delays, or temporary suspensions of operations and supply chains, temporary closures of facilities, and other employee impacts. In addition, the pandemic has adversely impacted and may continue to adversely impact our oil demand and prices. Export capacity and the availability of commercial storage options which could lead to further curtailments and shut-ins of production by our industry. To the extent we or our business partners, service companies and suppliers experience these or other effects, our production, liquidity, financial condition, results of operations and future growth prospects may be adversely affected. The timeline and potential magnitude of the COVID-19 pandemic is currently unknown. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many other risks described in our annual report on Form 10-K for the year ended December 31st, 2019. 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. On the line with me today are John Hess, Chief Executive Officer, Greg Hill, Chief Operating Officer, and John Riley, Chief Financial Officer. In compliance with social distancing protocols, we are conducting this call remotely, so please bear with us. In case there are audio issues, we will be posting transcripts of each speaker's prepared remarks on www.hess.com following the presentation. I'll now turn the call over to John Hess.

Thank you, Jay. Good morning and welcome to our first quarter conference call. And we hope you and your families are well and staying healthy. Today, I will discuss our strategic response to the market downturn and the steps we are taking to manage in a sustained period of low oil prices. Then Greg Hill will discuss our operations and John Riley will follow to review our financial results. As we all know, the world has been battling a global pandemic and the danger it poses to society. Our hearts go out to those who have lost loved ones to COVID-19. and also to those who are struggling with the loss of jobs. Our top priority throughout this crisis is the safety of our workforce and the communities where we operate. A multidisciplinary HES emergency response team has been overseeing our plans and precautions to reduce the risk of COVID-19 in our work environment. We are grateful to every healthcare worker and first responder for all they are doing during this very difficult time. In addition, the pandemic has had a severe impact on the near-term oil demand, resulting in a sharp decline in oil prices. Our priorities in this low-price environment are to preserve cash, preserve capability, and preserve the long-term value of our assets. In terms of preserving cash, we came into 2020 with approximately 80% of our oil production hedged. with put options for 130,000 barrels per day at $55 per barrel WTI and 20,000 barrels per day at $60 per barrel Brent. To maximize the value of our production, we have charted three very large crude carriers, or VLCCs, to store 2 million barrels each of May, June, and July Bakken crude oil production. which we expect to sell in Asia in the fourth quarter of 2020. As announced on March 17th, we further strengthen the company's cash position and liquidity through a $1 billion three-year term loan underwritten by JPMorgan Chase. We also have a $3.5 billion undrawn revolving credit facility and no material debt maturities until the term loan comes due in 2023. We have further reduced our 2020 capital and exploratory budget down to $1.9 billion, a 37% reduction from our original budget of $3 billion. This reduction will be achieved primarily by shifting from a six-rig program to one rig in the Bakken by the end of this month and the deferral of certain exploratory and development expenditures in Guyana. Continue to operating one rig in the Bakken, our largest operated asset, will help us preserve our capability in lean manufacturing, which over the years has generated significant cost efficiencies and productivity improvements. We plan to stay at one rig until WTI oil prices stabilize in a $50 per barrel range. In terms of preserving the long-term value of our assets, Our top priority is Guyana, which is one of the industry's most attractive investments. On the Stabrook Block, where Hess has a 30% interest and ExxonMobil is the operator, we have made 16 discoveries since 2015. The current estimate of gross discovered recoverable resources for the block stands at more than 8 billion barrels of oil equivalent, with multi-billion barrels of exploration potential remaining. The lease of phase one development achieved first production in December and is expected to reach its full capacity of 120,000 gross barrels of oil per day in June. The lease of phase two development remains on track for a 2022 startup with a production capacity of 220,000 gross barrels of oil per day. Development of the Piara field with a production capacity of 220,000 gross barrels of oil per day, has been deferred 6 to 12 months pending government approval to proceed. In addition, pandemic-related travel restrictions have temporarily slowed our drilling campaign in Guyana. As a result, our production objective of more than 750,000 gross barrels of oil per day has been moved into 2026. In summary, our company is in a strong position to manage through this low-price environment and to prosper when the oil market recovers. With our low cost of supply and high return investments that will drive material cash flow growth and increasing financial returns. Finally, we want to thank our employees for their strong commitment to operating safely and reliably during this pandemic. We are deeply proud of every member of our team. and confident in our ability to meet the challenges ahead. I will now turn the call over to Greg for an operational update.