HESS CORP (HES)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 was operationally solid with 17% YoY production growth (461k boepd) driven by Guyana and the Bakken, but reported EPS fell to $1.62 on non‑cash charges; adjusted EPS was $2.14, reflecting underlying strength despite lower realized oil prices vs last year .
• Revenue was essentially flat sequentially (Sales & other operating revenues: $3.19B vs $3.20B in Q2), while adjusted net income of $660M outpaced GAAP net income of $498M due to a $92M Conger impairment, ~$38M after‑tax plug & abandonment updates, and a ~$32M after‑tax UK pension plan charge .
• Guidance: FY24 E&P capex raised to $(4.9)B (from $4.2B) to accelerate purchase of the Liza Destiny and Prosperity FPSOs ($635M impact); Q4 production guided to 475–485k boepd on recovery from Q3 downtime (offset by Tubular Bells maintenance) .
• Corporate actions/catalysts: Quarterly dividend increased ~14% to $0.50/share beginning Q3; HSR/FTC antitrust review of the Chevron–Hess merger cleared, with closing still subject to Stabroek pre‑emption arbitration resolution; no earnings call was held this quarter due to the pending merger .

What Went Well and What Went Wrong

• What Went Well

  • Production growth: Net production rose 17% YoY to 461k boepd; Guyana +57% YoY to 170 kbopd; Bakken +8% YoY to 206k boepd, underscoring sustained volume momentum .
  • Capital return and balance sheet: Dividend raised ~14% to $0.50/share; Hess Corporation debt-to-capitalization in debt covenants improved to 28.9% vs 33.6% at YE23 .
  • Strategic positioning: “We are very pleased that our merger with Chevron has cleared this significant regulatory hurdle… [and] will create a premier integrated energy company,” said CEO John Hess, highlighting strategic scale and transition readiness .

• What Went Wrong

  • Pricing headwind: Realized worldwide oil prices fell to $77.06/bbl from $81.53/bbl YoY, pressuring revenue and reported profitability .
  • Non‑cash charges: GAAP results included a $92M impairment at Conger, ~$38M after‑tax abandonment liability updates, and a ~$32M after‑tax UK pension charge—key drivers of the gap vs adjusted results .
  • Operational downtime: Q3 experienced downtime in Guyana and Southeast Asia; Q4 production guide implies recovery, but Tubular Bells maintenance will partially offset .

Financial Results

Segment after-tax income (loss) ($USD Millions):

Key operating and pricing KPIs:

Notes on non‑GAAP: Adjusted net income excludes items affecting comparability; reconciliation provided in the release. Net cash from operations before changes in working capital is presented to illustrate cash generation capacity; reconciliation provided .

Guidance Changes

Earnings Call Themes & Trends

Note: Hess did not host an earnings call this quarter due to the pending Chevron merger . Themes are compiled from quarterly materials and related press releases.

Management Commentary

• “We are very pleased that our merger with Chevron has cleared this significant regulatory hurdle… This transaction continues to be an outstanding deal for Hess and Chevron shareholders and will create a premier integrated energy company that is ideally positioned for the energy transition.” — John Hess, CEO .
• “We delivered another strong quarter, thanks to strong operations and project execution.” — John Gatling, President & COO, Hess Midstream (context: HES Midstream Q3 results) .

Q&A Highlights

No conference call or Q&A was held due to the pending merger with Chevron . Press release clarifications included:

• Q4 production guidance and drivers (recovery from Q3 downtime; Tubular Bells maintenance) .
• FY24 capex raised to $4.9B to accelerate FPSO purchases ($635M) .
• Identification of non‑cash and one‑time items impacting GAAP results (Conger impairment, abandonment updates, UK pension plan) .

Estimates Context

• S&P Global (Capital IQ) consensus estimates for Q3 2024 EPS and revenue were unavailable through our SPGI mapping at the time of analysis; therefore, comparisons to Street estimates cannot be provided. We will update this section if/when S&P Global data becomes accessible [GetEstimates errors documented].
• In the absence of consensus, we note that sequential revenue was flat while adjusted EPS declined due to identified non‑cash and one‑time items and lower realized prices; Q4 guidance indicates a near‑term production recovery that may influence forward estimates once incorporated .

Key Takeaways for Investors

• Underlying operations remain strong: Adjusted EPS of $2.14 on 17% YoY production growth shows core momentum despite pricing and non‑cash headwinds .
• Near‑term production catalyst: Q4 guided to 475–485k boepd with recovery from Q3 downtime; Bakken and Guyana volumes support trajectory into 2025 .
• Strategic capex acceleration: FY24 capex raised to ~$4.9B to pull forward FPSO purchases—supporting long‑term Guyana capacity and value capture .
• Capital returns stepping up: Dividend increased ~14% to $0.50/share in Q3; balance sheet leverage trending better under covenant metrics (28.9% vs 33.6% at YE23) .
• One‑time items distorted GAAP: Impairment and abandonment updates plus a UK pension plan adjustment drove GAAP/adjusted spread; focus on adjusted metrics for run‑rate profitability .
• Merger progress is a key overhang/catalyst: HSR clearance achieved; timing still linked to Stabroek arbitration; no earnings calls while merger is pending .
• Watch realized pricing and operating costs: Realized oil prices were lower YoY and cash operating costs ticked up sequentially; mix and maintenance timing remain quarter‑to‑quarter variables .

Additional Detail: Segment and Operating Commentary (from Q3 materials)

• E&P: U.S. loss in Q3 due to impairment; International E&P generated $724M pre‑tax contribution; cash operating costs were $13.84/boe vs $14.04 last year .
• Guyana: Q3 production 170 kbopd (net); Q4 185–190 kbopd expected; 14 cargos sold in Q3; 15 expected in Q4; Yellowtail (2025), Uaru (2026), Whiptail (by end‑2027); Hammerhead permit filed .
• Bakken: Q3 206k boepd; Q4 guide 200–205k boepd; four rigs operating through Q4 .
• Gulf of Mexico: Q3 38k boepd, boosted by Pickerel tieback; Tubular Bells maintenance planned in Q4 .
• SEA: Q3 47k boepd impacted by planned/unplanned maintenance; recovery expected in Q4 .

Sources: Hess Q3 2024 8‑K (Item 2.02 & Ex. 99.1, including supplemental tables) ; Q2 2024 8‑K ; Q1 2024 8‑K ; Dividend press release (Sep 4, 2024) ; HSR clearance press release (Sep 30, 2024) ; Earnings release scheduling (Oct 2, 2024) .