Saturday, August 13, 2022

Hess Corporation expects significant returns on Guyana investment

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The announcement by ExxonMobil Corporation on Friday of a 6th oil discovery off the coast of Guyana has further cemented the view that investment in exploration and production activities in the South American country will see significant returns.

Even before exploration of the Ranger-1 reservoir got underway last November, Hess was moving to secure billions of dollars as part of what Bloomberg has described as the building of a ‘war chest’ to fund development in the 6.6 million acre Stabroek Block where the company has a 30 percent stake.  CNOOC Nexen holds a 25 percent stake in the block with ExxonMobil as operator holding 45 percent.

“The Ranger oil discovery demonstrates that the petroleum system is working in a new geologic play in the Guyana Basin more than 60 miles northwest of Liza, and reaffirms the extraordinary exploration potential of the Stabroek Block,” CEO John Hess said on Friday. He was commenting at the time on the announcement that drilling at Ranger-1 had encountered approximately 230 feet (70 meters) of high-quality, oil-bearing carbonate reservoir. The well was safely drilled to 21,161 feet (6,450 meters) depth in 8,973 feet (2,735 meters) of water.

The Ranger-1 well discovery adds to previous world-class discoveries at Liza, Payara, Snoek, Liza Deep and Turbot, which are estimated to total more than 3.2 billion recoverable oil-equivalent barrels in the Stabroek Block.

“We believe the investment opportunity in Guyana offers industry-leading financial returns and will create significant value for our shareholders for many years to come,” Hess further added.

Hess Corporation said in December that it had completed the previously announced sale of its subsidiary Hess Norge, which owns interests in the Valhall and Hod fields in Norway, to Aker BP ASA for total proceeds of $2 billion. The company has also sold drilling rights in offshore Equatorial Guinea for $650 million. Counting a June 2017 deal to sell properties in Texas, the New York-based company sold off almost $3.3 billion in assets last year.

The divestments “all make strategic sense” and “will help bridge the sizable funding gap that Hess faces over the next few years,” Capital One Securities analyst Phillips Johnston said in a note to clients on October 24 last. “These assets have not been competing for capital, so by monetizing them, Hess will prefund part of the development of its major Guyana discoveries,” Johnston stated.

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