Hess Corp. upped its year-end 2023 production guidance by 4.7% due to strong operational performance and the anticipated fourth-quarter startup of Payara, its third development offshore Guyana.

The New York City-based oil and gas company offered guidance of average net production of 385,000 boe/d to 390,000 boe/d in 2023 compared to prior guidance of 365,000 boe/d to 375,000 boe/d, Hess said July 26 in its second quarter of 2023 press release.

Higher guidance “reflects strong performance in base assets, contributions from Payara, and Bakken gas and natural gas liquids production uplift from lower NGLs prices,” Goldman Sachs said in a July 26 research note.

Hess reported net production of 387,000 boe/d in second-quarter 2023 compared to 303,000 boe/d, pro forma for assets sold in second-quarter 2022, mainly on the back of higher production in Guyana and the Bakken.

Still, profits slid roughly 82% compared to the same period last year. The company reported net income of $119 million in the second quarter of 2023 compared to net income of $667 million in the second quarter of 2022. Adjusted net income in the second quarter of 2023 was $201 million.

Despite the uptick in production, net income was impacted by significantly lower commodity prices across the board from oil, gas and natural gas liquids, according to operating details in the press release.

Wells Fargo said in a July 26 research note that the results were positive following Hess’ “beat and raise” results. “Hess delivered earnings per share and cash flow from operations beats and raised fiscal year 2023 production guidance on second quarter of 2023 performance and accelerated Guyana startup.”

Bakken and Gulf of Mexico Production Growing

Hess now expects its net Bakken production to come in between 175,000 boe/d to 180,000 boe/d in 2023 compared to prior guidance of 165,000 boe/d to 170,000 boe/d.

Bakken production is still expected to average 200,000 boe/d by 2025 — including average oil production of 100,000 bbl/d – then hold that plateau for nearly a decade, Hess officials said July 26 during a conference call with analysts.

In the second quarter, net Bakken production was 181,000 boe/d, up 29% compared to 140,000 boe/d in the second quarter of 2022, “reflecting increased drilling and completion activity, higher NGL and natural gas volumes received under percentage of proceeds contracts due to lower commodity prices, and higher uptime after weather related shut-ins in the prior year quarter,” Hess said in the release.

NGL and natural gas volumes received under percentage of proceeds contracts were 22,000 boe/d compared to 7,000 boe/d respectively “due to lower realized NGL and natural gas prices increasing volumes received as consideration for gas processing fees,” Hess said.

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During the quarter Hess ran four active rigs, drilled 32 wells, completed 28 and brought 30 new wells online.

In the Gulf of Mexico, Hess second-quarter production averaged 32,000 boe/d compared to 29,000 boe/d in the second quarter of 2022.

Hess also reported an oil discovery in July 2023—the Pickerel-1 exploration well in Mississippi Canyon Block 727. The well found 90 ft of net pay in high quality, oil bearing, Miocene age reservoir. Planning is underway to tie-back the well to the Tubular Bells production facility with first oil expected in mid-2024.

Payara development coming online in Q4

Hess upped its net production guidance for Guyana to 115,000 bbl/d in 2023 compared to prior guidance of 105,000 bbl/d to 110,000 bbl/d reflecting the start of its third offshore development in the Stabroek Block. Payara is expected to have gross capacity of 220,000 bbl/d by early fourth-quarter 2023.

The Payara ramp-up will take around five months and a debottlenecking strategy at the development will likely follow, Hess COO and president of exploration and production Gregory P. Hill said during the conference call.

The first two Stabroek developments utilize the Liza Destiny and Liza Unity FPSOs. Combined, Liza Destiny and Liza Unity FPSOs are producing an average 400,000 bbl/d gross, Hill said during the call.

The Liza Unity FPSO, which commenced production in February 2022, reached its gross production capacity of 220,000 bbl/d in July 2022. At times, production from the FPSO reached 240,000 bbl/d, Hill said, adding that a planned debottlenecking strategy could see production approach 250,000 bbl/d later this year.

In the second quarter of 2023, Hess sold nine oil cargos from Guyana compared to six in the second quarter of 2022.

Yellowtail, Hess’ fourth development in Stabroek, was sanctioned in April 2022 with a production capacity of 250,000 bbl/d gross. First production from Yellowtail is expected in 2025. Uaru, Hess’ fifth development, was sanctioned in April 2023 with a production capacity of 250,000 bbl/d gross. First production from Uaru is expected in 2026.

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During the quarter, Hess extended the expiration of the exploration license for Stabroek for another year from October 2026 to October 2027. Additionally, the end of the first renewal period of the exploration license, which requires the relinquishment of 20% of the acreage not held by discoveries, was extended one year from October 2023 to October 2024, both as a result of force majeure due to the COVID-19 pandemic, Hess said in its earnings release.

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