While many of its industry counterparts have been hard hit by the inflation that has resulted from the war in Ukraine and the COVID-19 pandemic, Hess Corporation which has a 30% working interest in the Stabroek Block was pleased to report that its US$2.8B budget has only seen a minimal inflationary impact of 3-4%.
This was disclosed by the Chief Executive Officer (CEO) of the company, John Hess, during his recent participation at the Bernstein’s 38th Annual Strategic Decisions Conference. There, he was asked to inform shareholders and potential investors about the extent to which its projects have been affected by the high inflation rate. Hess was quick to note that Guyana has seen no impact. But it has not been the same for the Bakken.
Hess said, “Our cost in the Bakken is up this year about 7% … Drilling costs have gone from US$5.8 million to US$6.2 million per well but what is interesting is Guyana which is US$1 billion in our budget and the Bakken is about US$800 million; our Guyana costs have stayed flat because we pre-committed to them and that is really for the first, second, third and fourth ships.”
The CEO said Exxon has done a great job of getting ahead of inflation and keeping that under control by committing to costs early on. “So, we are not seeing cost inflation because we already had those costs committed so our overall budget of US$2.8 billion, inflation has been minimally affected, specifically a 3-4% impact while for other plays, say those in the Permian, the figures go up to 20%.”
As regards inflation at this point in time of its exploration and oil production cycle, Hess said it views such a factor as a positive since it means demand is greater than supply. “And if that is the case then the price goes up and that is good for oil. We are a long oil company; 80% of our resource is oil which is in the ground and 20% is natural gas which is a good place for us to be. So, it is a net plus but obviously, the challenge that comes out of it is the inflation in the supply chain,” expressed the Hess Boss.
As the Stabroek Block partners progress major projects set to come on stream by 2025, he expressed confidence in Exxon’s project management skills in insulating many others in the future.
In the Stabroek Block which measures 6.6 million acres, ExxonMobil affiliate Esso Exploration and Production Guyana Limited (EEPGL) is the operator and holds 45% interest. Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Petroleum Guyana Limited holds 25% interest.