Hess Corporation (HES) reported adjusted fourth-quarter 2014 earnings – from continuing operation − of 18 cents per share, lagging the Zacks Consensus Estimate of 28 cents and deteriorating from the year-ago quarter earnings of 98 cents. The underperformance was mainly due to a drop in oil and gas prices.
Revenues decreased almost 19% year over year to $2,528 million in the quarter from $3,108 million. However, revenues surpassed the Zacks Consensus Estimate of $2,161 million. The beat can be mainly attributed to higher production.
Full-year 2014 earnings from continuing operation – excluding one-time items − came in at $3.98 per share, down about 24% from year-earlier earnings of $5.21. The earnings missed the Zacks Consensus Estimate of $4.31. Total revenue decreased 19% to $11,439 million from $14,028 million in 2013.
Fourth-Quarter Operational Performance
In the reported quarter, the Exploration and Production (E&P) business posted adjusted profits of $147 million, plummeting 66% from the year-earlier profit of $436 million.
Quarterly hydrocarbon production was 362 thousand barrels of oil equivalent per day (MBOE/d), up 18% year over year. The increase in production came primarily on the back of higher output from the Bakken shale play.
Crude oil production was 241 thousand barrels per day (up from 197 thousand barrels per day in the year-ago quarter), natural gas liquids production totaled 32 thousand barrels (up from 16 thousand barrels). However, natural gas output was 531 thousand cubic feet (Mcf) (down from 565 Mcf).
Worldwide crude oil realization per barrel of $74.97 (including the impact of hedging) decreased 24% year over year. Worldwide natural gas prices fell 25% year over year to $5.24 per Mcf.
Financials
Quarterly net cash flow from operations was $1,057 million at quarter end. Hess’ capital expenditures totaled $1.7 billion. In the reported quarter, the company returned roughly $1,124 million to shareholders through dividends and share repurchases.
As of Dec 31, 2014, the company had approximately $2,444 million in cash and $5,919 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was 20%.
2015 Capital Budget
On Jan 26, Hess announced that it expects 2015 capital expenditure of $4.7 billion, roughly 16% less than $5.6 billion spent in 2014.
Zacks Rank
Hess currently carries a Zacks Rank #4 (Sell), implying that the stock will underperform the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Cheniere Energy Partners LP (CQP), World Fuel Services Corp. (INT) and Transocean Partners LLC (RIGP). All these stocks sport a Zacks Rank #1 (Strong Buy).
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