(Reuters) - Oil producer Hess Corp (HES.N) reported a smaller-than-expected quarterly loss on Wednesday as rising crude prices and cost cuts helped the company offset a drop in production.
The results reflect an increasing optimism pervading the U.S. shale oil industry that crude prices are on the rise and technology improvements, among other factors, should help companies pump more for less.
“We are poised to benefit from an increase in oil prices,” Chief Executive John Hess said on a Wednesday conference call with investors.
The company’s after-tax cash flow increases by $70 million for every $1 per barrel increase in oil prices, he said.
Shares of the New York-based company rose 4.4 percent to $50.78 in morning trading.
Excluding output from Libya, Hess produced 307,000 barrels of oil equivalent per day (boepd) in the first quarter ended March 31, lower than 350,000 boepd a year ago. The drop was due to investments cuts last year that curtailed output, a decision it is now reversing.
Hess is boosting spending this year, planning to have six drilling rigs in North Dakota’s Bakken shale by the end of the year, helping to boost output well into 2018. The company also plans to bring online this year its Stampede oil project in the U.S. Gulf of Mexico.
A more than 41 percent rise in Hess’s average realized crude oil selling price in the quarter, including the effect of hedging, helped the company make up for the fall in production.
Oil prices began to rise late last year after a two-year slump and have now stabilized at above $50 per barrel, as an OPEC-led production cut and rebounding demand slowly erode a global glut.
U.S. crude prices CLc1 averaged $51.78 per barrel in the first three months of the year, up 54 percent from a year earlier.
Hess said total revenue and non-operating income rose 28.4 percent to $1.28 billion in the quarter, while total costs and expenses fell 13.3 percent to $1.58 billion.
Lower oilfield costs have helped U.S. oil producers keep a lid on spending and enabled them to keep drilling during the downturn.
Net loss attributable to Hess narrowed to $324 million, or $1.07 per share, in the quarter, from $509 million, or $1.72 per share, a year earlier.
Reporting by Ernest Scheyder in Houston and Swetha Gopinath and Arathy S Nair in Bengaluru; Editing by Arun Koyyur and Chizu Nomiyama