Aggressive · Stocks to Consider and Updates

Hess’ Quarterly Loss Less than Expected; Slashes Budget

HES Hess Corp. (NYSE: HES – $36.82) lost less money than expected in the fourth quarter as it managed to cut costs to weather the low-price storm that has battered the entire energy industry. The company, which produces oil in North Dakota’s Bakken Shale and the U.S. Gulf of Mexico, slashed its budget and curtailed production plans, saying it could no longer justify boosting output in the wake of a more-than 70 percent drop in oil prices during the past 18 months. Excluding one-time items, Hess posted a net loss of $1.40 per share in the fourth quarter compared with a profit equal to $0.18 in the year-ago period. By that measure, analysts expected a loss of $1.48 per share. Hess stressed that for 2016 it has enough cash to fund both its capital budget and dividend, which will cost about $2.5 billion, less than the company’s $2.7 billion in cash reserves. Oil and gas production inched up to 368,000 barrels of oil equivalent per day in the quarter, from 362,000 a year earlier. In North Dakota’s Bakken Shale, Hess plans to cut the number of drilling rigs it operates to two. By contrast, the company ran 14 Bakken drilling rigs as recently as 2014.

          These shares have experienced considerable volatility over the past several months, attributed partly to uncertainty surrounding the timing of a sustained, meaningful recovery in crude oil pricing. As a result, the shares remain largely out of favor. Nevertheless, bounce back potential seems appealing at the recent quotation and the dividend, yielding 2.9%, looks maintainable at the moment (given the solid balance sheet), sweetening the pot for ultimate recovery in aggressive accounts.


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