Hess Corporation

Good day, ladies and gentlemen, and welcome to the fourth quarter 2021 Hess Corporation conference call. My name is Josh, 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, Josh. 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 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. On the call with me today are John Hess, Chief Executive Officer, Greg Hill, Chief Operating Officer, and John Reilly, Chief Financial Officer. In case of any 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. Welcome to our fourth quarter conference call. I hope all of you and your families are well and staying healthy. Today I will review our continued progress in executing our strategy and provide a look at the year ahead. Then Greg Hill will discuss our operations and John Reilly will cover our financial results. 2022 marks an inflection point in the execution of our strategy as we go from investment mode to return of capital mode while still being able to invest to grow our business. Our strategy has been and continues to be to deliver high-return resource growth, deliver a low cost of supply, and deliver industry-leading cash flow growth, while at the same time maintain our industry leadership in environmental, social, and governance and disclosure. In terms of resource growth, we have been disciplined in allocating capital to the best frocks for the best returns and have built a differentiated portfolio focused on the Bakken, deep border Gulf of Mexico, Southeast Asia, and Guyana with its multiple phases of low-cost oil developments. We expect all four of these assets to be free cash flow generative in 2022. In terms of the low cost of supply, because of the investments we are making, our cash costs by 2026 are forecast to decline approximately 25% to $9 per barrel of oil equivalent versus 2021. And our portfolio breakeven is positioned to be one of the lowest in the industry by 2026, decreasing to $45 per barrel Brent. In terms of cash flow growth, We have an industry-leading rate of change and durability story. We are positioned to grow our cash flow at a compound rate of 25% per year out to 2026 based upon a Brent price of $65 per barrel. And any business that can grow its cash flow at twice the rate of its top line is a business you want to have in your investment portfolio. Our company has been in the investment mode for the last several years, building our portfolio to where it can deliver durable cash flow growth. The Lisa Phase 2 project, which is on track for first oil this quarter, will add $1 billion of net operating cash flow annually at $65 Brent. Following project startup, we plan to repay the remaining $500 million in term loan and to increase our base dividend. As our portfolio becomes increasingly free cash flow positive in the coming years, our top priority will be both to grow the base dividend and also accelerate our share repurchases. Key to our strategy is Guyana, the industry's largest new oil province discovered in the last decade, which is positioned to be one of the highest margin, lowest carbon intensity oil developments globally, according to a study by Wood Mackenzie. The world will need these low-cost, high-value resources to meet growing energy demand, particularly given underinvestment by our industry in recent years. The International Energy Agency's latest World Energy Outlook provides multiple scenarios for addressing the dual challenge of growing global energy supply by about 20% over the next 20 years and reaching net zero emissions by 2050. In all of the IEA scenarios, oil and gas will be needed for decades to come, and significantly more investment will be required, much more in renewables and much more in oil and gas. A reasonable estimate for global oil and gas investment from these IEA scenarios is approximately $450 billion each year over the next 10 years. In 2020, that number was $300 billion. Last year's investment was $340 billion. So while investors in oil and gas companies need to remain capital disciplined, we also need to invest more in oil and gas than we are currently to ensure an affordable, just, and secure energy transition. Turning to our plans for the year ahead, our 2022 capital and exploratory budget is $2.6 billion, of which approximately 80% will be allocated to Guyana and the Bakken. On the Staybrook block in Guyana, where Hess has a 30% interest and ExxonMobil is the operator, we continue to see the potential for at least six floating production storage and offloading vessels, or FBSOs, in 2027, with a production capacity of more than 1 million gross barrels of oil per day and up to 10 FBSOs to develop the discovered resources on the block. Our three sanctioned oil developments on the block have a Brent breakeven oil price of between $25 and $35 per barrel. In terms of our Guyana oil developments, production capacity at the lease of Phase I development is expected to increase to more than 140,000 gross barrels of oil per day following production optimization work. The lease of phase two development is on track for startup this quarter with a gross production capacity of approximately 220,000 barrels of oil per day. Our third development on the Staybrook block at the Payara field is on track for production startup in 2024, also with gross capacity of approximately 220,000 barrels of oil per day. The Yellowtail development has world-class economics and will be the largest to date on the Staybrook block. developing nearly 1 billion barrels of oil, with a gross production capacity of approximately 250,000 barrels of oil per day. The Yellowtail project continues to make progress, has the full support of the government of Guyana, which is finalizing its third-party review, and remains on track for production startup in 2025. We will continue to invest in an active exploration and appraisal program in Guyana in 2022, with approximately 12 wells planned for the Staybrook block. Earlier this month, we announced two more significant discoveries on the block at the Fangtooth and Laulau wells. With these discoveries, the gross discovered recoverable resource estimate for the block is more than 10 billion barrels of oil equivalent, and we continue to see multi-billion barrels of future exploration potential remaining. Positive results at Fangtooth, our first standalone deep exploration prospect, confirmed the deeper exploration potential of the block. Both discoveries further underpin our queue of future low-cost oil development opportunities. In the Bakken, we plan to operate a three-rig program in 2022, which will enable us to generate significant free cash flow, lower our unit cash costs, and further optimize our infrastructure. Greg and our Bakken team to continue to do an outstanding job of applying lean manufacturing principles to keep driving down costs and building a culture of innovation and efficiency. We will also continue to invest in our operated cash engines offshore. In the Gulf of Mexico, we will drill the Huron No. 1 exploration well and also a tieback well at the Llano Field. And in Southeast Asia, we will invest in drilling and facilities, some of which was previously deferred due to COVID and low commodity prices. We are proud of our workforce for living that has values by working safely and delivering strong operating results, especially during the pandemic. As we continue to execute our strategy, our commitment to sustainability will remain a top priority. Our board and senior leadership have set aggressive five-year targets for greenhouse gas emissions reduction for 2025. Most recently, we endorsed the World Bank's Zero Routine Flaring by 2030 initiative and have set a target to eliminate routine flaring from our operations by the end of 2025. We are honored to have been recognized throughout 2021 as an industry leader in our environmental, social, and governance performance and disclosure. In December, we achieved leadership status in CDP's annual global climate analysis for the 13th consecutive year. And in November, earned a place on the Dow Jones Sustainability Index for North America for the 12th consecutive year. In summary, 2022 marks an inflection point in the execution of our strategy. We have built a differentiated portfolio offering a unique value proposition. delivering durable cash flow growth that enables us to continue to invest in some of the highest return projects in the industry and also to start growing our cash returns to our shareholders. I will now turn the call over to Greg for an operational update.