Hess Corporation, a 30 percent stakeholder in Guyana’s Stabroek Block, has said the South American country is a major part of its growth plans in the coming years and this has seen the company take a number of steps to ensure there is a free cash flow to fund projects there.
Just recently, the company announced that it has entered into an agreement to sell its 28% working interest in the Shenzi Field in the deepwater Gulf of Mexico to BHP Billiton, the field’s operator, for a total consideration of $505 million.
“The deal price of US$505 million reflects an asset value of US$1.8 billion,” said Wood Mackenzie’s Principal analyst, Justin Rostant. “This was a strategic move for both Hess and BHP. The sale allows Hess to generate a sizeable amount of cash needed to fund its capital-intensive projects in Guyana.”
Rosant said for BHP, the deal was opportunistic and adds low-cost barrels to its US Gulf of Mexico portfolio.
Hess’ Gulf of Mexico asset sale follows its commitment of around US$1.8 billion for the recently sanctioned Payara development, representing its net share of development costs, excluding pre-sanction and FPSO purchase costs.
In March, Hess announced a revised $2.2 billion Exploration and Production capital budget of which more than 80% was allocated to high return investments, including Guyana.
“Our focus is on preserving cash and protecting our world class investment opportunity in Guyana,” CEO John Hess stated.
The CEO has said the Stabroek Block reservoirs rank among the best in the world for quality and are expected to deliver high productivity. “The reservoirs rank among the highest quality in the world with high porosity and permeability that are expected to deliver very high recovery factors and production rates.”
He said since the producing horizons are relatively shallow, “the wells can be drilled in approximately one third of the time and cost of those in the deepwater Gulf of Mexico.”
The Stabroek Block co-venturers have found more than 8 billion barrels of oil equivalent resources in Guyana since 2015. They have already sanctioned three projects that will be producing a combined 560,000 barrels of oil per day by 2024 and production is expected to surpass 750,000 bpd by 2026 as other developments come on stream.
ExxonMobil is operator on the block with a 45 percent interest while China’s CNOOC holds 25 percent.
