Hess Corp. plans to spend big on the Bakken and offshore Guyana in 2023 — capex that will come in handy after the company revealed Jan. 25 that it had made a significant discovery in the Stabroek Block where the Fangtooth SE-1 well encountered 200 ft of pay.

On Jan. 24, the company had detailed its spending plans for the Bakken and Guyana. Approximately $1.45 billion (39%) will be for production, $1.7 billion (46%) for offshore Guyana developments and $550 million (15%) for exploration and appraisal activities, the company said Jan. 24 in a press release.

In 2023, Hess said its net production is expected to average between 355,000 boe/d and 365,000 boe/d with the Bakken coming in between 165,000 boe/d to 170,000 boe/d and Guyana at 100,000 bbl/d, which includes tax barrels of 10,000 bbl/d.

Hess Corp. Sets 2023 Capex Budget at $3.7 Billion
John Hess (Source: Hart Energy)

“Our capital program reflects continued execution of our strategy to invest only in high return, low cost opportunities within our portfolio.” —  John Hess, Hess Corp.

“The E&P budget… at midpoint is 4% above our estimate as consensus of $3.7 billion likely includes midstream,” Cowen analyst David Deckelbaum wrote Jan. 24 in a research note. Hess’ production was guided 3% below Cowen’s estimate and 5.5% below consensus.

“In general Hess guides conservatively, and we do not anticipate a material reaction to shares today,” Deckelbaum wrote.

“Our capital program reflects continued execution of our strategy to invest only in high return, low cost opportunities within our portfolio,” CEO John Hess said. “More than 80% of our 2023 budget is allocated to Guyana, which is positioned to be one of the highest margin, lowest carbon intensity oil developments in the world, and to the Bakken, our largest operated asset where we have a robust inventory of high return future drilling locations.”

Four-rig program in the Bakken

New York-based Hess will allocate $1.1 billion in the Bakken in 2023 where it will drill 110 gross operated wells and bring online 110 wells. Funds are also included for investment in non-operated wells, the company said.

“In the Bakken, we plan to operate a four rig program, which will enable us to maximize free cash flow generation, optimize our in-basin infrastructure and drive further reductions in our unit cash costs,” Hess COO Greg Hill said.


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New oil found at Fangtooth SE-1 well

Hess announced a significant new oil discovery at the Fangtooth SE-1 well on Stabroek, company executives announced Jan. 25 during Hess’ quarterly webcast.

The well, drilled using the Stena Carron drillship, encountered 200 feet of oil-bearing sandstone reservoirs. The well is approximately 8 miles southeast of the original Fangtooth-1 well, which encountered 164 feet of oil-bearing sandstone reservoirs.

Additional appraisal work is underway at Fangtooth, but the find will add to the block's gross discovered recoverable resource estimate of more than 11 bboe and “has the potential to underpin a future oil development on the Stabroek Block,” John Hess said during the webcast.

“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 and our return of capital framework provide, to increase share repurchases,” Hess said.

Stabroek Block production ramp-up

The discovery gives additional context to remarks the company made Jan. 24 regarding Guyana.

“In Guyana, our focus in 2023 will be on advancing our high value oil developments and continuing an active exploration and appraisal program on the Stabroek Block,” Hill said.

Hess will allocate $90 million to the Liza Phase 1 and Phase 2 developments on Stabroek, where combined production is over 360,000 bbl/d. Hess holds a 30% interest in the block with partners Exxon Mobil (45%, operator) and CNOOC (25%).

The bulk of Hess’ Capex in Guyana, $1.21 billion, will be destined for three developments: Payara, Yellowtail and Uaru.

Payara is slated to start up by year-end 2023 with a gross production of 220,000 bbl/d. Yellowtail and Uaru are slated to come online in 2025 and at the end of 2026, respectively, with a gross production of 250,000 bbl/d each.

Hess will also look to allocate $250 million primarily for FEED work for future development phases on Stabroek, while another $150 million has been allocated for the company’s “Gas to Energy” project with first gas expected by year-end 2024.

The Gas to Energy project is part of Hess’ production sharing contract in Guyana and will take about 50 MMcf/d of gas and provide Guyana with low cost electricity, John Hess said earlier this month during a Goldman Sachs conference.