Since the onset of the COVID-9 pandemic, Hess Corporation’s response has been hinged on three key principles—preserve cash, preserve capability, and preserve the long-term value of its assets. In terms of preserving cash, the company’s Chief Executive Officer (CEO), John Hess noted that 80 percent of its oil is hedged for 2020.
Speaking during a fireside chat at the J.P. Morgan 2020 Energy, Power and Renewables Conference, Hess stated that the company has hedged 130,000 barrels of oil per day at US$55 a barrel (West Texas Intermediate) and 20,000 barrels of oil per day from its Guyana operations in the Stabroek Block at US$60 (Brent).
Hess has a 30 percent stake in the Stabroek Block where US oil major, ExxonMobil is operator.
Even as it makes other decisions regarding budget cuts to preserve its capability to ride the economic downturn, Hess stressed that its Guyana asset remains the company’s top priority. He said, “The Stabroek Block is extraordinary, and it keeps getting bigger and better. We have a 30 percent interest and Exxon has done a fantastic job managing the block and we have multi-billion barrels to go. We are still in the early innings,” the CEO expressed.
With respect to the effects of the COVID-19 pandemic on the operations at the Stabroek Block, Hess was pleased to report that the Liza Destiny remains on schedule with production despite some mechanical issues. In this regard, the CEO was alluding to the fact that ExxonMobil was left with no choice but to flare gas as a result of issues with the compressor system on the Liza Destiny FPSO. To reduce the amount of gas being flared, Hess noted that ExxonMobil engaged in production cuts but stressed that it was only temporary. Hess said that production is now back up to 75,000 barrels of oil per day.
As for work on the Liza Phase Two FPSO, he noted that there were no major impacts. However, he did highlight that the real implication has been for the Payara project which is poised to produce more than 200,000 barrels of oil per day during peak period. Once a new government is installed in Guyana, the CEO said that the Stabroek Block partners will be pursuing approvals for the project.
He said as well that the company was able to save about US$200M this year as a result of delayed spending on Payara and for two other ships that will be operating offshore Guyana by 2026.
The official said, “We are looking at optimizing those investments in terms of resources to be developed and positioning ourselves for a lower point in the cost cycle. So, it should improve the value of the investments.”
He said Guyana is the company’s best investment and that is where the majority of its capital is going.