Yahoo Finance Why Is Hess (HES) Down 15.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Hess (HES). Shares have lost about 15.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Hess due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hess Beats on Q4 Earnings, Hikes Exploration Budget
Hess Corporation reported fourth-quarter 2022 earnings per share of $1.78, beating the Zacks Consensus Estimate of $1.72. The bottom line improved from the year-ago quarter’s 85 cents per share.
Total quarterly revenues increased to $3,054 million from $2,255 million a year ago. The top line also beat the Zacks Consensus Estimate of $2,709 million.
The strong quarterly results have been driven by higher oil and natural gas price realizations, and production.
Operational Update
Exploration and Production:
For the quarter under review, the Exploration and Production business has reported adjusted earnings of $591 million, improving from $309 million a year ago. The business was favored by higher realized commodity prices.
Quarterly hydrocarbon production was 386 thousand barrels of oil equivalent per day (MBoe/d), up from 316 MBoe/d in the year-ago period primarily due to higher production in Guyana.
Crude oil production increased from 158 thousand barrels per day (MBbls/d) in fourth-quarter 2021 to 228 MBbls/d in the quarter under review. Natural gas liquid production totaled 62 MBbls/d, up from 56 MBbls/d in the prior-year quarter. However, natural gas output was 576 thousand cubic feet per day (Mcf/d), down from 611 Mcf/d a year ago.
Worldwide crude oil realization per barrel of $83.50 (excluding the impacts of hedging) significantly improved from $75.22 in the year-ago period. Also, worldwide natural gas prices rose to $5.17 per Mcf from the year-ago figure of $4.77. Yet, the average worldwide natural gas liquids’ selling price declined to $26.93 per barrel from $36.47 a year ago.
Midstream:
From the midstream business, the company generated adjusted net earnings of $64 million, down from $74 million a year ago.
Operating Expenses
Operating expenses for the fourth quarter totaled $385 million versus the year-ago level of $316 million. Marketing costs increased to $821 million from $672 million a year ago. However, exploration expenses declined to $40 million from $45 million in the year-ago period.
Total costs and expenses increased to $2,045 million for the quarter from $1,687 million a year ago.
Financials
Net cash provided by operating activities was $1,252 million for the fourth quarter. Hess’ capital expenditure for exploration and production activities totaled $818 million.
As of Dec 31, 2022, the company had $2,486 million in cash and cash equivalents. Its long-term debt was $8,278 million at the fourth-quarter end.
Reserves
As of 2022 end, Hess’ proved reserves were 1.26 billion oil-equivalent barrels compared with 1.31 billion oil-equivalent barrels on Dec 31, 2021. The segment recorded an adjusted profit of $2,400 million in 2022. Total production in 2022 was 344 thousand barrels of oil equivalent per day.
Guidance
For 2023, Hess expects net production guidance (excluding Libya) of 355,000-365,000 barrels of oil equivalent per day (Boe/d). Net production at Bakken is expected to be 165,000-170,000 Boe/d and 100,000 Boe/d in Guyana.
For 2023, Hess revealed its capital and exploratory budget of $3.7 billion, of which more than 80% would be directed toward Guyana and North Dakota’s Bakken Shale field. The metric suggests an increase from $2.7 billion reported in 2022.
Of the total, $1.45 billion will be allocated for production, $1.7 billion for offshore Guyana developments, and $550 million for exploration and appraisal activities. Beside this, $1.21 billion will be allocated for developing the Payara, Yellowtail and Uaru projects in the Stabroek Block.
Hess added that $90 million was allocated to the Liza Phase 1 and Phase 2 developments on the Stabroek Block offshore Guyana, which are currently operating at a combined gross production capacity of more than 360,000 barrels of oil equivalent per day.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -9.46% due to these changes.
VGM Scores
At this time, Hess has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hess has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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