January 12, 2017 / 2:49 PM / in 6 months

Hess's bigger 2017 E&P budget misses Street estimates

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Eighteen oil pumpjacks are seen on a Hess well pad near Tioga, North Dakota April 30, 2016.Andrew Cullen/File Photo

(Reuters) - Hess Corp (HES.N) budgeted $2.25 billion for exploration and production this year, higher than the $1.9 billion it spent in 2016, in one of the first signs that shale producers will ramp up spending after years of cuts.

However, the capex target and production forecast missed Wall Street estimates, sending the company's shares down as much as 8 percent, their biggest intraday percentage loss in nearly a year.

Shares were also weighed down by Hess' disclosure that it would have to record charges of more than $4.6 billion in the fourth quarter of 2016.

The company said it expects net production to average 300,000-310,000 barrels of oil equivalent per day (boe/d) in 2017, excluding Libya, with Bakken output accounting for almost a third of total production.

Analysts were expecting production of about 320,000 boe/d and capital spending of about $2.4 billion.

"2017 guidance was lower than expected with Bakken ramp taking longer than we modeled," Cowen and Co analysts wrote in a note.

A recovery in oil prices is expected to prompt oil companies to set bigger budgets this year, with Barclays estimating a 7 percent rise in global exploration and production spending.

Hess said on Thursday it would deploy four more rigs in North Dakota's Bakken shale field this year, develop a field in Guyana and restart drilling at the Valhall Field in Norway.

These moves are expected to help Hess increase production by 8-12 percent this year.

Hess also said drilling results from an exploration well offshore Guyana had shown a new reservoir containing 100-150 million barrels of oil equivalent.

The company also said its Payara-1 well offshore Guyana encountered high-quality oil.

"Event-driven investors" would exit the stock on news of the discovery, Cowen analysts said.

The charges to be included in Hess' fourth-quarter results relate to valuation allowances and deferred development of two natural gas fields.

The company's shares recouped some of their losses and were down 5.6 percent at $58.36 in afternoon trading.

Reporting by Swetha Gopinath and Komal Khettry in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila

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