U.S. oil company Hess Corporation will spend about two thirds of its 2018 budget on Guyana asset and Bakken shale play.
Hess on Wednesday announced that its E&P capital and exploratory budget for 2018 will be $2.1 billion, the same as 2017.
The 2018 budget allocates increased capital for continuing exploration and development activities offshore Guyana and for the Bakken, which includes growing the rig count from four rigs to six rigs. These increases are offset by lower capital allocated to the Gulf of Mexico and Malaysia compared to 2017, the company explained.
Also in line with this plan, Hess in October 2017 sold its assets offshore Equatorial Guinea for a total consideration of $650 million to raise cash for its offshore development project in Guyana.
Hess Corporation CEO, John Hess, said: “We are allocating approximately two thirds of our 2018 budget to our transformative investment opportunity in Guyana that continues to get bigger and better and to our low cost position in the core of the Bakken, which together are expected to drive industry leading returns for Hess shareholders for many years to come.
Hess also added: “Our 2018 budget is consistent with our strategy to grow our resource base in a capital disciplined manner, move down the cost curve so we are resilient in a low oil price environment, and be cash generative at a $50 per barrel Brent oil price post 2020.”
Out of its $2.1 billion budget, $1.17 billion or 56 percent will be used for production; $555 million or 26 percent will be used for offshore developments, and $375 million or 18 percent will be used for exploration and appraisal activities.
According to Hess, $900 million will be used primarily to increase from four rigs to six rigs by the end of 2018 and to drill approximately 120 new wells and to bring online approximately 95 new wells in the Bakken Shale in North Dakota. Funds are also included for non-operated wells and pad construction in preparation for 2018-2019 drilling.
Furthermore, Hess allocated $175 million for production activities at North Malay Basin (Hess 50 percent and operator) and the Malaysia/Thailand Joint Development Area (Hess 50 percent) in the Gulf of Thailand.
Finally, Hess allocated $95 million for production operations in the deepwater Gulf of Mexico, completion of five previously drilled wells in the Utica Shale in Ohio (Hess 50 percent and operator), production operations in Libya (Hess 8.16 percent), and production operations at the South Arne Field (Hess 61.5 percent and operator) in Denmark, where a sales process is underway that is expected to be completed in 2018.
When it comes to the developments part of business, Hess devoted $250 million for the Liza Phase 1 development offshore Guyana (Hess 30 percent), where development drilling is expected to start in the second quarter of 2018 with first production expected by 2020. The Liza development is operated by ExxonMobil. The final investment decision for the project was taken by both partners back in June 2017.
Further in this section, Hess allocated $65 million for front end engineering and design work for future development phases and capitalized interest in Guyana.
Also, $240 million for continued development of the Stampede Field in the deepwater Gulf of Mexico (Hess 25 percent and operator), which is on track to start up in the first quarter of 2018.
Exploration & appraisal
For E&P part of business, Hess is putting aside $375 million to drill exploration and appraisal wells on the Stabroek Block offshore Guyana (Hess 30 percent), one exploration well on Block 42 in Suriname (Hess 33 percent) and one exploration well offshore Nova Scotia, Canada (Hess 50 percent).
Funds are also included for seismic acquisition and processing and for license acquisitions.