Hess Corp. (HES) filed Quarterly Report for the period ended 2009-09-30.
Hess Corporation is a global integrated energy company engaged in the exploration for and the production purchase transportation and sale of crude oil and natural gas as well as the production and sale of refined petroleum products electricity. Hess Corp. has a market cap of $18.64 billion; its shares were traded at around $56.98 with a P/E ratio of 79.1 and P/S ratio of 0.4. The dividend yield of Hess Corp. stocks is 0.7%. Hess Corp. had an annual average earning growth of 19.2% over the past 10 years. GuruFocus rated Hess Corp. the business predictability rank of 3.5-star.
Highlight of Business Operations:
Exploration and Production: E&P reported income of $397 million for the third quarter of 2009, compared with income of $699 million in the third quarter of 2008. The decrease in earnings mainly reflects significantly lower average oil and gas selling prices. Reported E&P earnings for the third quarter of 2009 included after-tax income of $89 million related to the resolution of a U.S. royalty dispute.
In the third quarter of 2009, the Corporation’s average worldwide crude oil selling price, including the effect of hedging, was $56.07 per barrel compared with $93.36 per barrel in the third quarter of 2008. The Corporation’s average worldwide natural gas selling price was $4.60 per thousand cubic feet (mcf) in the third quarter of 2009 compared with $7.60 per mcf in the third quarter of 2008.
In October 2008, the Corporation closed its Brent crude oil cash flow hedges, covering 24,000 barrels per day from 2009 through 2012, by entering into offsetting contracts with the same counterparty. The deferred after tax loss as of the date the hedge positions were closed will be recorded in earnings as the contracts mature. The estimated annual after-tax loss from the closed positions will be approximately $335 million from 2009 through 2012. Crude oil hedges reduced E&P earnings by $84 million and $249 million in the third quarter and first nine months of 2009 ($134 million and $398 million before income taxes). Crude oil and natural gas hedges reduced Exploration and Production earnings by $138 million and $377 million in the third quarter and first nine months of 2008, respectively ($224 million and $610 million before income taxes).
Foreign exchange: The after-tax foreign currency gains related to E&P activities were $4 million in the third quarter of 2009 compared with losses of $8 million in the third quarter of 2008. The after-tax foreign currency loss in the nine months ended September 30, 2009 was $1 million compared with a gain of $3 million for the nine months ended September 30, 2008.
In the second quarter of 2009, after-tax charges of $31 million ($51 million before income taxes) were recorded to reduce the carrying values of production equipment in the U.K. North Sea and materials inventory in Equatorial Guinea and the United States. In the first quarter of 2009, the Corporation recorded an after-tax charge of $13 million ($26 million before income taxes) to reduce the carrying values of two short-lived fields in the U.K. North Sea. The pre-tax amount of the reductions in carrying value of production equipment and the short-lived fields was reported in Depreciation, depletion and amortization and the majority of the reduction in carrying values of inventory of $25 million was reported in Production expenses in the Statement of Consolidated Income.
M&R activities generated income of $38 million and $110 million in the third quarter and first nine months of 2009 compared with $161 million and $125 million for the corresponding periods of 2008. The Corporation’s downstream operations include HOVENSA L.L.C. (HOVENSA), a 50% owned refining joint venture with a subsidiary of Petroleos de Venezuela S.A. (PDVSA), which is accounted for using
HES is in the portfolios of George Soros of Soros Fund Management LLC, NWQ Managers of NWQ Investment Management Co, John Rogers of ARIEL CAPITAL MANAGEMENT LLC, PRIMECAP Management, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Dodge & Cox.
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