Hess Corporation

Good day, ladies and gentlemen, and welcome to the first quarter 2021 HESS Corporation conference call. My name is Katherine, and I'll 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 any time you require operator assistance, please press star followed by the 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, Catherine. Good morning, everyone, and thank you for participating in our first 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. As we have done in recent quarters, we will be posting transcripts of each speaker's prepared remarks on our website following their presentations. On the line 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 first quarter conference call. We hope you and your families are all well. Today, I will review our continued progress in executing our strategy. Then Greg Hill will discuss our operations, and John Riley will then review our financial performance. Let's begin with our strategy, which has been and continues to be to grow our resource base, have a low cost of supply, and sustain cash flow growth. By investing only in high return, low cost opportunities, we have built a differentiated portfolio that is balanced between short cycle and long cycle assets, with Guyana as our growth engine and the Bakken, Gulf of Mexico, and Southeast Asia as our cash engines. Guyana is positioned to become a significant cash engine as multiple phases of low cost oil developments come online. which we expect will drive our portfolio break-even Brent oil price below $40 per barrel by the middle of the decade. As our portfolio generates increasing free cash flow, we will first prioritize debt reduction and then cash returns to shareholders through dividend increases and opportunistic share repurchases. Even as we have seen oil prices recover since the beginning of this year, our priorities continue to be to preserve cash, preserve our operating capability, and preserve the long-term value of our assets. In terms of preserving cash, at the end of March, we had $1.86 billion of cash on the balance sheet, a $3.5 billion revolving credit facility, which is undrawn and was recently extended by one year to 2024, and no debt maturities until 2023. We have maintained a disciplined capital and exploratory budget for 2021 of $1.9 billion. More than 80% of this year's capital spend is allocated to Guyana, where our three sanctioned oil developments have a break-even oil price of between $25 and $35 per barrel, and to the Bakken, where we have a large inventory of future drilling locations that generate attractive financial returns at $50 per barrel WTI. To manage downside risks, in 2021, we have hedged 120,000 barrels of oil per day with $55 per barrel WTI put options and 30,000 barrels of oil per day with $60 per barrel Brent put options. To further optimize our portfolio and strengthen our cash and liquidity position, we recently announced two asset sales. In March, we entered into an agreement to sell our oil and gas interests in Denmark for a total consideration of $150 million, effective January 1, 2021. This transaction is expected to close in the third quarter. On April 8, we announced the sale of our Little Knife and Murphy Creek non-strategic acreage interests in the Bakken for a total consideration of $312 million, effective March 1, 2021. This acreage is located in the southernmost portion of our Bakken position and is connected to Hess Midstream infrastructure. The sale of this acreage, most of which we were not planning to drill before 2026, brings material value forward. This transaction is expected to close within the next few weeks. During the quarter, we also received $70 million in net proceeds from the public offering of a small portion of our Class A shares in Hess Midstream LP. The Bakken remains a core part of our portfolio. In February, as WTI oil prices moved above $50 per barrel, we added a second rig, which will allow us to sustain production and strong cash flow generation from our largest operated asset. In terms of preserving the long-term value of our assets, Guyana, with its low cost of supply and industry-leading financial returns, remains a top priority. On the Staybrook Block, where Hess has a 30% interest and ExxonMobil is the operator, we have made 18 significant discoveries to date with gross discovered recoverable resources of approximately 9 billion barrels of oil equivalent, and we continue to see multi-billion barrels of future exploration potential remaining. We have an active exploration and appraisal program this year on the Staybrook Block. Yesterday, we announced a discovery at the Waru 2 well, with encouraging results that further define the large aerial extent of this accumulation, underpinning a potential future oil development. In addition, drilling activities are underway for appraisal at the Long Tail III well and for exploration at the Coibi I prospect. Production from phase one ran at its full capacity of 120,000 gross barrels of oil per day during the first quarter. In mid-April, production was curtailed for several days after a minor leak was detected in the flash gas compressor discharge silencer. Production has since ramped back up and is expected to remain in the range of 100,000 to 110,000 gross barrels of oil per day until repairs to the discharge silencer are completed in approximately three months. Following this repair, production is expected to return two or above Lisa Destiny's nameplate capacity of 120,000 barrels of oil per day. The Lisa Phase II development is on track to achieve first oil in early 2022 with a capacity of 220,000 gross barrels of oil per day. Our third oil development on the Stabrook Block at the Piara Field is expected to achieve first oil in 2024, also with a capacity of 220,000 gross barrels of oil per day. Engineering work for Yellowtail, a fourth development on the Staybrook block, is underway with anticipated startup in 2025 pending government approvals and project sanctioning. We continue to see the potential for at least six FPSOs on the block by 2027 and longer term for up to 10 FPSOs to develop the discovered resources on the block. As we execute our company strategy, we will continue to be guided by our long-standing commitment to sustainability and are proud to be an industry leader in this area. We support the aim of the Paris Agreement and also a global ambition to achieve net zero emissions by 2050. As part of our sustainability commitment, our board and our senior leadership have set aggressive targets for greenhouse gas emissions reduction. In 2020, we significantly surpassed our five-year emission reduction targets reducing operated scope 1 and scope 2 greenhouse gas emissions intensity by approximately 40 percent and flaring intensity by approximately 60 percent compared to 2014 levels. We recently announced our new five-year emission reduction targets for 2025 which are to reduce operated scope 1 and scope 2 greenhouse gas emissions intensity by approximately 44%, and methane emissions intensity by approximately 50% from 2017 levels. In addition, we are investing in technological and scientific advances designed to reduce, capture, and store carbon emissions, including groundbreaking work being conducted by the Salk Institute to develop plants with larger root systems that, according to the Salk Institute, are capable of absorbing and storing potentially billions of tons of carbon per year from the atmosphere. In summary, our company is executing our strategy that will deliver increasing financial returns, visible and low-risk production growth, and accelerating cash flow growth well into this decade. As we generate increasing free cash flow, we will first prioritize debt reduction and then the return of capital to our shareholders through dividend increases and opportunistic share purchases. I will now turn the call over to Greg for an operational update.