Hess Reports Estimated Results for the Third Quarter of 2012

Hess Reports Estimated Results for the Third Quarter of 2012

Third Quarter Highlights:

  • Net income was $557 million, compared with $298 million in the third quarter of 2011

  • Net income excluding items affecting comparability between periods was $495 million compared with $379 million in the third quarter of 2011

  • Oil and gas production increased to 402,000 barrels of oil equivalent per day, up from 344,000 in the third quarter of 2011

  • Production from the Bakken oil shale play in North Dakota increased to 62,000 barrels of oil equivalent per day, up from 32,000 in the third quarter of 2011

  • Net cash provided by operating activities was $1,862 million, compared with $1,022 million in the third quarter of 2011

NEW YORK--(BUSINESS WIRE)-- Hess Corporation (NYS: HES) reported net income of $557 million for the third quarter of 2012, compared with $298 million for the third quarter of 2011. The after-tax income (loss) by major operating activity was as follows:

Three Months Ended

Nine Months Ended

September 30, (unaudited)

September 30, (unaudited)

2012

2011

2012

2011

(In millions, except per share amounts)

Exploration and Production

$

608

$

422

$

1,887

$

2,148

Marketing and Refining

53

(23)

72

(23)

Corporate

(38)

(44)

(115)

(114)

Interest expense

(66)

(57)

(193)

(177)

Net income attributable to Hess Corporation

$

557

$

298

$

1,651

$

1,834

Net income per share (diluted)

$

1.64

$

.88

$

4.85

$

5.40

Weighted average number of shares (diluted)

340.0

340.2

340.3

339.8


Note: See the following page for a table of items affecting comparability of earnings between periods.

Exploration and Production earnings were $608 million in the third quarter of 2012, compared with $422 million in the third quarter of 2011. The Corporation's average worldwide crude oil selling price, including the effect of hedging, was $86.69 per barrel, up from $85.81 per barrel in the same quarter a year ago. The average worldwide natural gas selling price was $5.88 per mcf in the third quarter of 2012, up from $5.74 per mcf in the third quarter of 2011. Third quarter oil and gas production was 402,000 barrels of oil equivalent per day, up from 344,000 barrels of oil equivalent per day in the third quarter of 2011, primarily reflecting an increase in production from the Bakken oil shale play and the resumption of operations in Libya. Net production from the Bakken averaged 62,000 barrels of oil equivalent per day in the third quarter of 2012 compared to 32,000 barrels of oil equivalent per day in the same period last year. At the Waha concessions in Libya, net production averaged 23,000 barrels of oil equivalent per day in the third quarter of 2012. Due to civil unrest in the country, there was no production in Libya in the same period last year.

Marketing and Refining generated income of $53 million in the third quarter of 2012, compared with a loss of $23 million in the same period in 2011. Marketing earnings were $17 million in the third quarter of 2012, down from $41 million in the third quarter of 2011 as a result of lower margins. Port Reading refining operations generated income of $18 million in the third quarter of 2012, compared with break even in the same quarter last year. Refining operations generated a loss of $38 million in the third quarter a year ago, almost entirely related to our share of HOVENSA's results. The HOVENSA refinery was shut down in the first quarter of 2012. Trading activities generated income of $18 million in the third quarter of 2012 and a loss of $26 million in the same quarter of last year.

The following table reflects the total after-tax income (expense) of items affecting comparability of earnings between periods:

Three Months Ended

Nine Months Ended

September 30, (unaudited)

September 30, (unaudited)

2012

2011

2012

2011

(In millions)

Exploration and Production

$

62

$

(81)

$

62

$

244

Third quarter 2012 results included an after-tax gain of $349 million from the sale of the Corporation's interests in the Schiehallion Field and associated assets in the United Kingdom North Sea for $524 million. The results also included after-tax impairment charges of $116 million that resulted from increases to the Corporation's estimated abandonment liabilities related to non-producing properties. Additionally, the Corporation recorded a $56 million after-tax charge to write off its assets in Peru following a decision to cease future appraisal and development activities in the country. A one-time charge of $115 million was also recorded to reflect the third quarter change in the United Kingdom's supplementary income tax rate to 20 percent from 32 percent applicable to deductions for dismantlement expenditures.

Net cash provided by operating activities was $1,862 million in the third quarter of 2012, compared with $1,022 million in the same quarter of 2011. Capital and exploratory expenditures were $2,287 million, of which $2,260 million related to Exploration and Production operations. Capital and exploratory expenditures for the third quarter of 2011 were $2,550 million, of which $2,517 million related to Exploration and Production operations.

At September 30, 2012, cash and cash equivalents totaled $528 million, compared with $351 million at December 31, 2011. Total debt was $7,841 million at September 30, 2012 and $6,057 million at December 31, 2011. The Corporation's debt to capitalization ratio at September 30, 2012 was 27.5 percent, compared with 24.6 percent at the end of 2011.

Hess Corporation will review third quarter financial and operating results and other matters on a webcast at 10 a.m. today. For details about the event, refer to the Investor Relations section of our website at www.hess.com.

Hess Corporation, with headquarters in New York, is a leading global independent energy company engaged in the exploration for and production of crude oil and natural gas, as well as in refining and in marketing refined petroleum products, natural gas and electricity. More information on Hess Corporation is available at www.hess.com.

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Forward-looking Statements

Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, uncertainties inherent in the measurement and interpretation of geological, geophysical and other technical data.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

Third

Third

Second

Quarter

Quarter

Quarter

2012

2011

2012

Income Statement

Revenues and Non-operating Income

Sales (excluding excise taxes) and other operating revenues

$

9,194

$

8,665

$

9,304

Income (loss) from equity investment in HOVENSA L.L.C.

-

(36)

-

Gains on asset sales

376

103

-

Other, net

49

(6)

5

Total revenues and non-operating income

9,619

8,726

9,309

Costs and Expenses

Cost of products sold (excluding items shown separately below)

6,019

6,181

5,969

Production expenses

712

609

677

Marketing expenses

259

266

265

Exploration expenses, including dry holes and lease impairment

259

199

196

Other operating expenses

41

43

41

General and administrative expenses

167

177

172

Interest expense

104

94

105

Depreciation, depletion and amortization

748

586

769

Asset impairments

208

358

59

Total costs and expenses

8,517

8,513

8,253

Income (loss) before income taxes

1,102

213

1,056

Provision (benefit) for income taxes

510

(54)

521

Net income (loss)

592

267

535

Less: Net income (loss) attributable to noncontrolling interests

35

(31)

(14)

Net income (loss) attributable to Hess Corporation

$

557

$

298

$

549

Supplemental Income Statement Information

Foreign currency gains (losses), after-tax

$

7

$

(2)

$

(5)

Capitalized interest

8

4

5

Cash Flow Information

Net cash provided by operating activities (a)

$

1,862

$

1,022

$

1,240

Capital and Exploratory Expenditures

Exploration and Production

United States

$

1,210

$

1,600

$

1,243

International

1,050

917

793

Total Exploration and Production

2,260

2,517

2,036

Marketing, Refining and Corporate

27

33

42

Total Capital and Exploratory Expenditures

$

2,287

$

2,550

$

2,078