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Hess announces 2015 capital, exploratory budget

Hess Corp has announced a 2015 capital and exploratory budget of $4.7 billion, a 16% reduction from its 2014 actual spend of $5.6 billion.

Of this, $2.1 billion (45%) is budgeted for unconventional shale resources, $1.2 billion (26%) for production, $1.0 billion (21%) for developments and $0.4 billion (8%) for exploration.

“We are reducing our 2015 spending in the Bakken to $1.8 billion, compared with $2.2 billion in 2014,” Greg Hill, President and COO, said. “In 2015, we plan to operate an average of 9.5 rigs and bring approximately 210 new operated wells online, compared with 17 rigs and 238 operated wells brought online in 2014.”

Hess plans to spend $290 million in the Utica, compared with approximately $500 million last year, as it transitions to early development at a measured pace in the price environment and as infrastructure builds out. In 2015, its joint venture with CONSOL intends to execute a two-rig program, focused in the core of the wet gas window and bring 25-30 new wells online, compared with four rigs and 39 new wells in 2014.

“Our company is well positioned to manage through the current price environment, with a strong balance sheet and resilient portfolio,” CEO John Hess said. “Our 2015 budget reflects a disciplined approach to maintaining our financial strength and flexibility while preserving our longterm growth options.”

The 2015 budget also includes: continued offshore production drilling at the Tubular Bells and Shenzi fields in deepwater Gulf of Mexico (GOM); at the South Arne Field in Denmark; the Valhall Field in Norway; the Okume Complex in Equatorial Guinea and in the Joint Development Area of the Gulf of Thailand.

The budget will fund continued full field development of the North Malay Basin project in Malaysia and development of the Stampede field in deepwater GOM. The 2015 exploration drilling program includes wells in deepwater GOM, offshore Guyana and Kurdistan.

“Hess has some of the best acreage in the Bakken, and we will continue to drill in the core of the play which offers the most attractive returns,” Mr Hill said. “Substantially all our core acreage is held by production, which allows us to defer investment in the short term while maintaining the long-term value and optionality of this important asset. As oil prices recover, we will increase activity and production accordingly.”

Unconventionals – $2.1 billion:

  • $1.8 billion for the development of the Bakken Shale in North Dakota. Approximately $1.45 billion is dedicated to drilling and completion activities, pad-level facilities and low-pressure gathering lines; $350 million is planned for major infrastructure projects.
  • $290 million for drilling 20-25 wells in the core of the wet gas window of the Utica shale play in Ohio.

Production – $1.2 billion:

  • $300 million to drill four production wells and begin one water injection well at the South Arne field (Hess 62% and operator) in Denmark and to bring three production wells online and drill one new well at the Valhall Field in Norway (Hess 64%, BP as operator).
  • $250 million to complete drilling of one production well and one water injection well, and for continued facilities work at the Tubular Bells field (Hess 57.1% and operator) in the deepwater GOM.
  • $220 million to drill two production wells (Hess 85% and operator) in Equatorial Guinea.
  • $200 million to complete drilling of production, appraisal and water injection wells on the Shenzi field (Hess 28%, BHP Billiton as operator) and for small-scale well-related activity elsewhere in the deepwater GOM.
  • $175 million to drill 8-10 wells and progress the ongoing Booster Compression project in the Joint Development Area (Hess 50%) in the Gulf of Thailand.

Developments – $1.0 billion:

  • $600 million to install three wellhead platform jackets, progress fabrication and commence Phase 1 drilling for the North Malay Basinfull field development project (Hess 50% and operator) in Malaysia.
  • $300 million to progress hull and topsides fabrication and commence drilling at the Stampede field (Hess 25% and operator) in the deepwater GOM.

Exploration – $0.4 billion:

  • Drill the Sicily well (Hess 25%, Chevron as operator) in the deepwater GOM.
  • Drill the Liza well (Hess 30%, Esso Exploration and Production Guyana as operator) in offshore Guyana.
  • Complete drilling operations in the Dinarta block (Hess 80% and operator) in Kurdistan.

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