Hess Corporation

The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1. Good day, ladies and gentlemen, and welcome to the fourth quarter 2022 Hess Corporation conference call. My name is Kevin, 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. As a reminder, this conference is being recorded for replay purposes. I would like to turn the conference over to Jay Wilson, Vice President of Investor Relations. Please proceed.

Thank you, Kevin. 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 factor section of HESS'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 line 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. Good morning and welcome to our fourth quarter conference call. Today, I will share some thoughts about the oil markets and then discuss our continued progress in executing our strategy. Greg Hill will then cover our operations and John Reilly will review our financial results. Oil and gas will be needed for decades to come and are fundamental to ensure an affordable, just, and secure energy transition. The world faces a massive dual challenge. We will require approximately 20% more energy globally by 2050, and over the same period, we need to reach net zero emissions. At the end of last year, the International Energy Agency, or IEA, published its latest World Energy Outlook, that offers three scenarios, and they are scenarios, not forecasts, for how to meet this dual challenge. In all three of the IEA scenarios, the world is facing a structural deficit in energy supply, and significantly more investment is required both in oil and gas and also in clean energies. According to the IEA, a reasonable estimate for the global oil and gas investment required to meet demand growth is approximately 500 billion dollars each year for the next 10 years as compared with approximately 300 billion to 400 billion invested annually in the last five years. In terms of clean energies, an annual investment of between three trillion dollars and four trillion dollars is needed each year for the next 10 years, significantly more than last year's investment of approximately 1.2 trillion dollars. Business leaders and government officials must have a sober understanding of this investment challenge, especially since capital is becoming more scarce and more expensive in the current financial environment. The energy transition is going to take a long time, cost a lot of money, and require many technologies that do not exist today. To have an orderly energy transition, policymakers must have climate literacy, energy literacy, and economic literacy. Our strategy is to grow our resource base, deliver a low cost of supply, and generate industry-leading cash flow growth, and at the same time maintain our industry leadership in environmental, social, and governance performance and disclosure. Our successful execution of this strategy has uniquely positioned our company to deliver significant value to shareholders for years to come, both by growing intrinsic value and by growing cash returns. In terms of cash flow growth, we have an industry-leading rate of change story and an industry-leading duration story, providing a unique value proposition. Based upon a flat-brent oil price of $65 per barrel, our cash flow is forecast to increase by approximately 25% annually between 2021 and 2026, more than twice as fast as our top-line growth. And our balance sheet will also continue to strengthen. with our debt to EBITDAX ratio currently under one time. As our portfolio becomes increasingly free cash flow positive, we are committed to returning up to 75% of our annual free cash flow to shareholders, with the remainder going to strengthen the balance sheet by increasing our cash position or further reducing our debt to ensure that we can fund our high return investment opportunities through the cycle. Executing this strategy in 2022, we decreased our debt by $500 million, increased our regular quarterly dividend by 50%, and completed a $650 million stock repurchase program. Looking ahead, we plan to continue increasing our regular dividend to a level that is attractive to income-oriented investors, but sustainable in a low oil price environment. As our free cash flow generation steadily increases in future years, share repurchases are expected to represent a growing proportion of our return of capital. By investing only in high-return, low-cost opportunities, we have built a differentiated and balanced portfolio focused on Guyana, the Bakken, Deepwater Gulf of Mexico, and Southeast Asia. Key to our strategy is Guyana, which is home to the Staybrook Block, one of the largest oil provinces discovered in the world over the last 20 years, where Hess is a 30% interest and ExxonMobil is the operator. Since 2015, we have had more than 30 discoveries on the block, including nine last year, underpinning a gross discovered recoverable resource estimate of more than 11 billion barrels of oil equivalent with multi-billion barrels of exploration potential remaining. We are pleased to announce today a significant new oil discovery at the Fangtooth Southeast One Well, located approximately 8 miles southeast of the original Fangtooth One discovery. The Fangtooth Southeast One Well encountered approximately 200 feet of oil-bearing sandstone reservoirs and was drilled to 5,397 feet of water. Fangtooth was our first standalone deep exploration prospect on the Saybrook Block. And this area has the potential to underpin a future oil development. Our four sanctioned oil developments on the Staybrook block have a break-even Brent oil price of between $25 and $35 per barrel. We have line of sight to six floating production, storage, and offloading vessels, or FBS. $7 billion, of which more than 80% will be allocated to Guyana and the Bakken. Our financial priorities are to continue to allocate capital to our high-return, low-cost investment opportunities, to keep a strong cash position and balance sheet, and to grow our dividend and, as market conditions in our return of capital framework provide, to increase share repurchases. In Guyana, the Lisa Phase 1 and Lisa Phase 2 developments are currently operating at their combined gross production capacity of more than 360,000 barrels of oil per day. Our third development, Payara, remains on schedule for startup by the end of 2023, with a gross production capacity of approximately 220,000 barrels of oil per day. Our fourth development, Yellowtail, is expected to come online in 2025 with a gross production capacity of approximately 250,000 barrels of oil per day. A plan of development for our fifth development at Waru, with a gross production capacity of approximately 250,000 barrels of oil per day, was submitted to the government of Guyana in November, and final approval is expected by the end of the first quarter. We also will continue an active exploration and appraisal program in Guyana with approximately 10 wells planned for the Staybrook block in 2023. In the Bakken, we plan to continue operating a four rig program which will enable us to generate significant free cash flow, lower our unit cash costs, and further optimize our infrastructure. We have a robust inventory of high return drilling locations to enable us to grow net production to an average of 200,000 barrels of oil equivalent per day in 2025. Greg and his team continue to do an outstanding job of applying lean manufacturing principles to create a culture of innovation, improve efficiency, and manage inflationary cost pressures. We will continue to invest in our operated cash engines offshore in 2023, where we also see attractive investment opportunities. In the Gulf of Mexico, we plan to drill two infrastructure tieback wells and two exploration wells. And in Southeast Asia, we will invest in drilling and production facilities at both the North Malay Basin and joint development area assets. As we continue to execute our strategy, our commitment to sustainability will remain a top priority. In December, we announced one of the largest private sector forest preservation agreements in the world. to purchase high-quality, independently verified REDD Plus carbon credits for a minimum of $750 million between 2022 and 2032 directly from the government of Guyana. Protecting the world's forests and the important role they play as natural carbon sinks is foundational to the Paris Agreement's aim of limiting the global average temperature rise to well below 2 degrees Celsius. Avoiding global deforestation was one of the major commitments made at the COP26 climate summit, where more than 130 countries, including Guyana, pledged to end deforestation by 2030. The government of Guyana plans to invest the proceeds from our carbon credits purchase agreement in sustainable development to improve the lives of the people of Guyana, with 15% of the proceeds directed to indigenous communities. This agreement adds to our company's ongoing and successful emissions reduction efforts and is an important part of our commitment to achieve net zero scope one and scope two greenhouse gas emissions on a net equity basis by 2050. The agreement further strengthens our strategic partnership with Guyana and demonstrates our long-term commitment to the country and its people, building upon the national healthcare initiative we announced earlier in 2022. We are proud to have been recognized throughout 2022 as an industry leader in our environmental, social, and governance performance and disclosure. In November, HES earned a place on the Dow Jones Sustainability Index for North America for the 13th consecutive year, and for the first time, was included in the Dow Jones Sustainability World Index. In December, we also achieved leadership status in CDP's annual global climate analysis, for the 14th consecutive year. In summary, we continue to successfully execute our strategy, which offers a unique value proposition, both to grow our intrinsic value and to grow our cash returns by increasing our resource base, delivering a low cost of supply, and generating industry-leading cash flow growth. As our portfolio becomes increasingly free cash flow positive, We will continue to prioritize the return of capital to our shareholders through further dividend increases and share repurchases. I will now turn the call over to Greg Hill for an operational update.