Hess increases capital budget by 15% for 2017

Hess Corp. has set its 2017 capital expenditure budget at $2.25 billion, up from the $1.9 billion spent in 2016.

Hess forecasts its net production for the year to reach 300,000-310,000 boe/d, excluding Libya. Production is expected to increase 8-12% from the beginning of 2017 to yearend as a result of additional rigs in the Bakken, restart of drilling at Valhall, and startup of the North Malay basin in the third quarter. Bakken net production is forecast to reach 95,000-105,000 boe/d.

Of Hess’s total budget, $700 million will go toward unconventional shale resources, which includes lifting its Bakken rig count to six from two by yearend and bringing online 75 new wells in the play. Funds also are included for nonoperated wells and pad construction in preparation for drilling in 2018.

Hess will allocate $375 million for production activities in the deepwater Gulf of Mexico, including the drilling and completion of a production well at Penn State field, where Hess is operator with 50% interest; and for operations at Valhall field in Norway, where Hess has 64% interest and Aker BP is operator. Drilling from Valhall will restart in late first-quarter 2017.

Developments will receive $825 million, including $425 million to drill two wells and complete three wells, install the tension-leg platform, and progress development of Stampede field in the deepwater gulf, where Hess is operator with 25% interest, to start oil production in 2018.

Another $275 million in development spending will go toward completing initial full-field development of the North Malay basin in Malaysia, where Hess is operator with 50% interest, to reach production startup in this year’s third quarter; and $125 million will be directed toward development activities at Liza field in Guyana, where Hess holds 30% and Esso Exploration & Production Guyana Ltd. is operator (OGJ Online, Dec. 20, 2016).

Exploration and appraisal activities will get $350 million to drill wells on Stabroek block offshore Guyana that include appraising Liza field, the recent Payara discovery, and other exploration prospects. Additional funds are included for seismic acquisition and processing and for license acquisitions.

During fourth-quarter 2016, Hess elected to defer further development of its wholly owned Equus natural gas fields on Blocks WA-390-P and WA-474-P offshore Australia’s North West Shelf (OGJ Online, Apr. 20, 2016). As a result, fourth-quarter results will include an aftertax charge of $700 million to fully impair the carrying value of interests in Equus.

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