U.S. energy company Hess Corporation revealed on Monday that it has allocated a whopping US$2.6B towards its 2022 Exploration and Production budget. Interestingly, the American explorer said the majority of this expenditure will go towards projects in Guyana and the Bakken.
Hess said the $2.6 billion budget is allocated as follows: US$1,150 million (44%) for production, US$1,000 million (39%) for offshore Guyana developments and US$450 million (17%) for exploration and appraisal activities.
With respect to allocations for exploration and appraisal, Hess said US$450 million will be used to drill approximately 12 exploration and appraisal wells on the Stabroek Block in Guyana where it has a 30 percent stake, the Huron-1 well in the Green Canyon area of the Gulf of Mexico where it holds a Hess 40% working interest, and the Zanderij-1 well on Block 42 in Suriname where its stake totals 33%. The company said funds are also included for seismic acquisition and processing in Guyana, Suriname and the deepwater Gulf of Mexico, and for license acquisitions.
For its development agenda, Guyana is the featured hub for investments. In this regard, Hess said US$25 million will go towards the Liza Phase 1 development on the Stabroek Block where production optimization work is planned in the first quarter of 2022; US$190 million is allocated for the Liza Phase 2 development with a capacity of approximately 220,000 gross barrels of oil per day with first production expected in the first quarter of 2022; and US$400 million will fund the Payara development with a capacity of approximately 220,000 gross barrels of oil per day, and first production expected in 2024.
Further to this, Hess said US$210 million has been allocated towards the Yellowtail development which is expected to have a capacity of approximately 250,000 gross barrels of oil per day with first production expected in 2025.
And finally for developments, Hess said US$175 million has been set aside primarily for front end engineering and design work for future development phases on the Stabroek Block.
Turning to expenditure for production, Hess said US$790 million will fund a three-rig programme in the Bakken. The company said it expects to drill approximately 90 gross operated wells and to bring online approximately 85 wells in 2022. Funds are also included for investment in non-operated wells.
Additionally, US$270 million will be used for production activities at North Malay Basin (where Hess has 50% working interest and is the operator) offshore Peninsular Malaysia and the Malaysia/Thailand Joint Development Area (Hess 50%) in the Gulf of Thailand. Funds are included for drilling and facilities and also for work that was previously deferred due to COVID-19 and low commodity prices.
OilNOW understands that US$90 million will be used for production activities in the Gulf of Mexico, including drilling one tieback well at the Llano Field (Hess 50%) and seismic acquisition and processing.
The company disclosed that net production is forecast to average between 330,000 and 340,000 barrels of oil equivalent per day in 2022, excluding Libya. Bakken net production is forecast to average between 165,000 and 170,000 barrels of oil equivalent per day in 2022.
On the heels of the announcement, Chief Executive Officer John Hess said, “Our capital programme reflects our continued discipline in investing in high return, low-cost opportunities within our portfolio.
He added, “The majority of our 2022 budget is allocated to Guyana, which is positioned to be one of the highest margins, lowest carbon intensity oil developments in the world, and to the Bakken, our largest operated asset where we have a robust inventory of high return future drilling locations.”
Meanwhile, his Chief Operating Officer Greg Hill said in the Bakken, Hess’ plans to operate a three-rig programme will enable it to generate significant free cash flow, lower unit cash costs and further optimize infrastructure.
In Guyana, Hill said the focus in 2022 will be on advancing high value oil developments on the Stabroek Block, which have a Brent breakeven oil price of between $25 and $35 per barrel and continuing its active exploration and appraisal programme.