Hess Corporation (NYSE:HES) said on Monday it intends to plug several hundred million dollars into exploration and development operations offshore Guyana in 2019 as part of what the company describes as its ‘peak spend year’ for the Liza Phase 1 project that will catapult the South American country into the league of oil producing nations.
The company announced its 2019 E&P capital and exploratory budget of $2.9 billion of which approximately 75 percent will be allocated to high return growth assets in the Bakken and Guyana.
Net production is forecast to average between 270,000 and 280,000 barrels of oil equivalent per day in 2019, excluding Libya, compared to approximately 245,000 barrels of oil equivalent per day in 2018 proforma for the sale of the company’s joint venture interests in the Utica shale play. Bakken net production is forecast to average between 135,000 and 145,000 barrels of oil equivalent per day in 2019.
“Our capital and exploratory expenditure program is designed to deliver strong returns, production growth and significant future free cash flow,” CEO John Hess said. “As we focus spending on our high return investment opportunities, we will continue to reduce our unit costs to drive margin expansion and improve profitability.”
Greg Hill, Chief Operating Officer, said: “In 2019, in the Bakken we plan to operate a 6 rig program, up from a 4.8 rig average in 2018; drill 170 wells, up 42 percent from 2018; and complete the transition to higher intensity plug and perf completions, which is expected to generate a significant uplift in net present value and initial production rates while also increasing the estimated ultimate recovery of oil and natural gas.”
“In Guyana, 2019 will be the peak spend year for the Liza phase 1 development, which is on track for first oil by early 2020,” Hill said. “We also will begin Liza phase 2 development spending, complete the plan of development for Payara, and advance front end engineering and design work for future development phases.”
The company will review its long term capital program at its Investor Day in Houston on December 12.
The $2.9 billion capital and exploratory budget is allocated as follows: $1,890 million (65 percent) for production, $570 million (20 percent) for offshore developments and $440 million (15 percent) for exploration and appraisal activities.
- $1.425 billion to fund an increase to six rigs, from an average of 4.8 rigs in 2018, and the shift to higher intensity plug and perf wells in the Bakken. The company expects to drill approximately 170 new wells and to bring online approximately 160 new wells in 2019. Funds are also included for investment in non-operated wells.
- $290 million for production operations in the deepwater Gulf of Mexico, including continued development of the Stampede Field (Hess 25 percent and operator) and tieback opportunities at the Llano Field (Hess 50 percent) and Tubular Bells Field (Hess 57 percent and operator).
- $150 million for production activities in the Gulf of Thailand at North Malay Basin (Hess 50 percent and operator) and theMalaysia/Thailand Joint Development Area (Hess 50 percent).
- $260 million associated with the Liza Phase 1 development offshore Guyana (Hess 30 percent), where first production is expected by 2020.
- $310 million includes spend for Liza Phase 2 development, completing the plan of development for Payara, and front end engineering and design work for future development phases.
Exploration and Appraisal
- $440 million to drill exploration and appraisal wells on the Stabroek Block offshore Guyana (Hess 30 percent). Funds are also included for seismic acquisition and processing in Guyana, Suriname and the deepwater Gulf of Mexico, and for license acquisitions.