Hess To Drop To One Rig In The Bakken -- March 17, 2020

Hess press release, March 17, 2020:

Hess today announced a revised $2.2 billion capital and exploratory budget for 2020, an $800 million reduction from the previous budget of $3.0 billion. The company also announced a new $1.0 billion three year term loan agreement. These actions further strengthen the company's cash position and financial liquidity in response to the sharp decline in oil prices.

"With 80% of our oil production hedged in 2020, our significantly reduced capital and exploratory budget and our new three year loan agreement, our company is well positioned for this low price environment," CEO John Hess said. "Our focus is on preserving cash and protecting our world class investment opportunity in Guyana."

The reductions to the company's 2020 capital budget will be primarily achieved by shifting from a six rig program to one rig in the Bakken, which is expected to be completed by the end of May. Most discretionary exploration and offshore drilling activities, excluding Guyana, will also be deferred.

On March 16, 2020, the company entered into a $1.0 billion three year term loan agreement with JPMorgan Chase Bank, N.A. The term loan contains provisions that require the company to reduce JPMorgan's initial funded amount, which the company intends to do by syndicating the loan to other banks.

In 2020, approximately 80% of the company's oil production is hedged by put options, with 130,000 barrels a day at $55 per barrel West Texas Intermediate put options and 20,000 barrels a day at $60 per barrel Brent put options. In addition, the company entered 2020 with more than $1.5 billion in cash and cash equivalents on its balance sheet and has a $3.5 billion undrawn revolving credit facility and no material debt maturities until 2027.

Net production for 2020 is now forecast to average between 325,000 and 330,000 barrels of oil equivalent per day, excluding Libya, versus previous guidance of between 330,000 and 335,000 barrels of oil equivalent per day. The company's Bakken net production is forecast to average approximately 175,000 barrels of oil equivalent per day in 2020, versus previous guidance of approximately 180,000 barrels of oil equivalent per day. 

This is an incredibly interesting story on so many levels.

This is very, very scary: "Our focus is on preserving cash and protecting our world class investment opportunity in Guyana."

Wouldn't a lot of folks love to get their hands on Guyana?

Anyway, back to the Bakken. This is all about managing their resources. Even with one rig in the Bakken, Hess can still produce a fair amount of oil ... look at that last paragraph ....

The company's Bakken net production is forecast to average approximately 175,000 barrels of oil equivalent per day in 2020, versus previous guidance of approximately 180,000 barrels of oil equivalent per day.

With six rigs in the Bakken, their previous guidance was 180,000 boepd. With one rig in the Bakken, their new guidance is 175,000 boepd.

Operators are allowed two years to complete a well. From the time they are drilled to depth, until they are completed and producing, they are referred to as shut-in/not completed (SI/NC) or drilled to depth/not fracked, or drilled/uncompleted (DUCs). All the same thing.

The six rigs drilling Hess wells today:

• Nabors B20
• Nabors X28 
• Nabors B26
• Nabors X27
• Nabors B23
• Nabors X24