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Hess's bigger 2017 E&P budget misses Street estimates
January 12, 2017 / 2:49 PM / 9 months ago

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

(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.

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

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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