Hess Corporation (NYSE:HES) Q4 2014 Earnings Conference Call - Final Transcript

Jan 28, 2015 • 10:00 am ET


Hess Corporation (NYSE:HES) Q4 2014 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, and welcome to the fourth quarter 2014 Hess Corporation Conference Call. My name is Lisa, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)


As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Jay Wilson, Vice President of Investor Relations. Please proceed.

Jay Wilson

Thank you, Lisa. Good morning everyone and thank you for participating in our fourth quarter earnings conference call. Our earnings release was issued this morning that appears on our website www.hess.com.

(Forward-Looking Cautionary Statements)

With me today are John Hess, Chief Executive Officer; Greg Hill, President and Chief Operating Officer; and John Rielly, Senior Vice President and Chief Financial Officer.

I will now turn the call over to John Hess.

John Hess

Thank you, Jay. Welcome to our fourth quarter conference call. I will provide some key highlights from 2014 and guidance for 2015. Greg Hill will then discuss our operating performance and John Riley will review our financial results. Before covering the quarter in the year, I would like to provide some thoughts on the dramatic change in the oil market with the price of Brent dropping from $115 per barrel in June to approximately $49 per barrel today. While this price drop poses serious challenges for the entire industry. Hess continues to maintain a strong financial position with $2.4 billion of cash on our balance sheet at year-end and a debt to capitalization ratio of 21%.

The current market weakness is driven by strong supply growth from US unconventionals and weaker than expected global demand. In the past during periods of oversupply, Saudi Arabia and a few other OPEC members would have reduced production to stabilize prices. This time they decided to leave it to the market to rebalance and consequently oil prices have plummeted. The near-term impact is that many companies including ours are announcing significant reductions to their global investment programs, which will begin to decrease unconventional and conventional production growth in the law

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latter half of 2015 and even more so in 2016. All of the steps we have taken in the last several years have positioned us well to manage in this environment.

In addition to our strong balance sheet and liquidity position our transformation to an E&P company has created a resilient portfolio of world-class assets that is balanced between unconventionals which offer a lower risk growth in a high price environment with the flexibility to moderate investment in a lower price environment and our offshore assets which generate significant cash flows and also provide future growth opportunities.

Our financial strategy, which we reviewed during our Investor Day last November is first to investor returns, second to manage our business to be cash generative over the long term. Third to use our balance sheet in a given year like 2015 to fund the shortfall in operating cash flow, and finally