Hess Corp. is making "significant progress" in making a return to profitability, officials said Feb. 5, even though the company reported its 13th consecutive quarterly loss.
Hess reported an adjusted net loss of $304 million, or $1.01 per share, for the fourth quarter of 2017. That was nearly identical to its fourth quarter in 2016, when it posted a loss of $305 million. It also missed the S&P Global Capital IQ consensus estimate of a 91-cent-per-share loss. Hess last turned an adjusted profit in the fourth quarter of 2014 and was last in the black under GAAP accounting in the third quarter that year.
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Hess, which has been under consistent fire from major shareholder Elliott Management Corp. for its lack of profitability, said it is sticking to its established plans to cut costs and expand production in the near term, then expand into more profitable plays by the end of the decade.
"Our company is making significant progress in our strategy: to grow our resource base in a capital-disciplined manner, to move down the cost curve so that we are resilient in a low-oil-price environment and to be cash-generative at a $50-per-barrel Brent oil price post-2020," CEO John Hess said. "Our portfolio is now focused on Guyana and the Bakken as our growth engines, and Malaysia and the deepwater Gulf of Mexico as our cash engines."
Hess said the company sold $3.4 billion worth of assets during 2017 and intends to sell its interests in Denmark by the end of 2018. The proceeds from assets sales, he said, would fund its investment in Guyana, while the company expands its drilling program in the Bakken Shale from four rigs to six. The company also intends to buy back up to $500 million worth of stock and reduce another $500 million in debt.
"Key to our strategy is our position in Guyana, an extraordinary oil investment opportunity that is uniquely advantaged by its scale, reservoir quality, cost, rapid cash paybacks and superior financial returns," Hess said. "We have an industry-leading position [in the Bakken], with more than 500,000 net acres in the core of the play, and are on track to grow production to approximately 175,000 barrels of oil equivalent per day by 2021, compared to 105,000 barrels of oil equivalent per day in 2017."
Analysts reviewing Hess' plans tended to give a tepid assessment, with Credit Suisse referring to the company's stock as "overpriced" and CreditSights noting potential problems which could develop from its strategy.
"Recently announced asset sales of mature, stable, cash flow producing properties will result in higher-than-expected leverage through 2020 and result in increasing operational and financial risk as the company now finds itself with a smaller scale, less diversified asset base and reliance on a third party … to hit its growth and returns targets," the firm said.
Hess stock was trading at $44.99 in midafternoon trading Feb. 5, down 5.9% on the day.

