Hess Corporation (HES) — 2022Q4 FY2022 Earnings Call Analysis

Guyana Ran Hot, Guidance Aims Cold

Q4 Guyana delivered 116,000 bopd with essentially zero downtime. Full-year 2023 guide is 100,000. Payara adds 220,000 gross nameplate by year-end.

Thesis: Q4 production beat guidance at 376,000 boepd, Guyana ran 116,000 bopd against a 78,000 full-year 2022 guide, and costs through the third Guyana development are locked in. Guidance for 2023 embeds downtime that Q4 data says may not materialize. The FPSO pipeline is a multi-year volume build with fixed cost bases, funded by operations with debt under 1x EBITDAX. That is asymmetry: conservative guide, expanding cash flow, 75% FCF return commitment.

Verdict: LONG — Conviction: MEDIUM

Catalyst: Payara first oil by end-2023 adds roughly 220,000 bopd gross nameplate; Wahoo government approval expected by end of Q1 2023; Liza Phase 2 de-bottlenecking in late 2023 adds roughly 10% uplift on 220,000 bopd.

Key Risk: Q1 2023 guide of 345,000 to 355,000 boepd already sits below the full-year range of 355,000 to 365,000, and Bakken wells decline into less quality acreage while Wahoo's $12.7B estimate stays unfinalized under market inflation.

The Tell: CFO Reilly volunteered, unprompted, that the board will give strong consideration to increasing the dividend during this current quarter. That is a commitment beyond published guidance, made on the back of $1.25B quarterly operating cash flow and $5.73B liquidity.

Detected Patterns

Beat and Raise Machine: Q4 came in at 376,000 boepd vs 370,000 guidance and Guyana at 116,000 bopd vs a 78,000 full-year 2022 figure, delivered despite losing 10 planned Bakken well completions to December weather.
Backlog Fortress: Six Guyana developments in the pipeline: Payara 93% complete, Yellowtail 40%, Wahoo submitted, Whiptail sanctioned early 2024. Non-cancellable FPSO projects with committed capital, first three developments cost-locked through Yellowtail.
Capital Conviction: $3.7B 2023 E&P capex, $650M of 2022 buybacks at roughly $120 average, $405M returned in Q4, 75% of FCF committed to shareholders, debt under 1x EBITDAX, $5.73B liquidity.
Clean Answers: CFO walked each post-2023 capex segment on request and quantified hedge drag at $120M premium amortization for 2023 rather than hiding it.
Say/Do Gap: FY2023 production guide of 355,000 to 365,000 boepd versus Q1 guide of 345,000 to 355,000, opened below the full-year range while Bakken Q4 missed guidance by 10,000 boepd and gets waved off as weather.
Unsustainable Trend Confidence: Management projects a smooth ramp to 200,000 boepd average in 2025 while admitting wells are moving into less quality acreage, calling the shortfall weather aberrations.
Capacity Ceiling: Each FPSO has finite capacity; de-bottlenecking uplift is 10%-ish, unengineered, in early stages, and Guyana 2023 guide of 100,000 bopd sits below Q4's 116,000.

Friction Level: MODERATE_FRICTION — Both sides accept production beat, clean balance sheet, and locked-in costs through Yellowtail. Disagreement is whether Q4's zero-downtime Guyana run rate makes 2023 guidance conservative or whether 100,000 bopd bakes in a real ceiling from maintenance and FPSO capacity limits.

Report not found

The report data is no longer available. Please return to the archive.

Guyana Ran Hot, Guidance Aims Cold | Silicon Signal