10-Q 1 hes-10q_20150331.htm 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2015

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-1204

 

HESS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE

(State or Other Jurisdiction of Incorporation or Organization)

13-4921002

(I.R.S. Employer Identification Number)

1185 AVENUE OF THE AMERICAS, NEW YORK, N.Y.

(Address of Principal Executive Offices)

10036

(Zip Code)

(Registrant’s Telephone Number, Including Area Code is (212) 997-8500)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer 

 x

Accelerated Filer 

¨

Non-Accelerated Filer 

 ¨ 

Smaller Reporting Company 

¨

                                     (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

At March 31, 2015, there were 287,382,013 shares of Common Stock outstanding.

 

 

 

 

 

 


 

HESS CORPORATION

Form 10-Q

TABLE OF CONTENTS

 

Item No.

 

 

  

Page

Number

 

 

PART I FINANCIAL INFORMATION

  

 

1.

 

Financial Statements (Unaudited)

  

 

 

 

Consolidated Balance Sheet at March 31, 2015 and December 31, 2014

  

2

 

 

Statement of Consolidated Income for the three months ended March 31, 2015 and 2014

  

3

 

 

Statement of Consolidated Comprehensive Income for the three months ended March 31, 2015 and 2014

  

4

 

 

Statement of Consolidated Cash Flows for the three months ended March 31, 2015 and 2014

  

5

 

 

Statement of Consolidated Equity for the periods ended March 31, 2015 and 2014

  

6

 

 

Notes to Consolidated Financial Statements

  

7

2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

16

3.

 

Quantitative and Qualitative Disclosures about Market Risk

  

27

4.

 

Controls and Procedures

  

27

 

 

PART II OTHER INFORMATION

  

 

1.

 

Legal Proceedings

  

28

2.

 

Share Repurchase Activities

  

28

6.

 

Exhibits and Reports on Form 8-K

  

29

 

 

Signatures

  

30

 

 

Certifications

  

 

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)

 

 

March 31,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions,

 

 

 

except share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,506

 

 

$

2,444

 

Accounts receivable

 

 

 

 

 

 

 

 

Trade

 

 

1,405

 

 

 

1,642

 

Other

 

 

306

 

 

 

431

 

Inventories

 

 

546

 

 

 

527

 

Other current assets

 

 

560

 

 

 

1,643

 

Total current assets

 

 

4,323

 

 

 

6,687

 

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

 

 

 

Total — at cost

 

 

46,958

 

 

 

46,522

 

Less: Reserves for depreciation, depletion, amortization and lease impairment

 

 

19,750

 

 

 

19,005

 

Property, plant and equipment — net

 

 

27,208

 

 

 

27,517

 

GOODWILL

 

 

1,858

 

 

 

1,858

 

DEFERRED INCOME TAXES

 

 

2,356

 

 

 

2,169

 

OTHER ASSETS

 

 

356

 

 

 

347

 

TOTAL ASSETS

 

$

36,101

 

 

$

38,578

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

681

 

 

$

708

 

Accrued liabilities

 

 

2,427

 

 

 

3,781

 

Taxes payable

 

 

290

 

 

 

294

 

Short-term debt and current maturities of long-term debt

 

 

69

 

 

 

68

 

Total current liabilities

 

 

3,467

 

 

 

4,851

 

LONG-TERM DEBT

 

 

5,911

 

 

 

5,919

 

DEFERRED INCOME TAXES

 

 

1,794

 

 

 

2,009

 

ASSET RETIREMENT OBLIGATIONS

 

 

2,086

 

 

 

2,281

 

OTHER LIABILITIES AND DEFERRED CREDITS

 

 

1,176

 

 

 

1,198

 

Total liabilities

 

 

14,434

 

 

 

16,258

 

EQUITY

 

 

 

 

 

 

 

 

Hess Corporation stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, par value $1.00

 

 

 

 

 

 

 

 

Authorized — 600,000,000 shares

 

 

 

 

 

 

 

 

Issued — 287,382,013 shares at March 31, 2015; 285,834,964 shares at

   December 31, 2014

 

 

287

 

 

 

286

 

Capital in excess of par value

 

 

3,306

 

 

 

3,277

 

Retained earnings

 

 

19,578

 

 

 

20,052

 

Accumulated other comprehensive income (loss)

 

 

(1,504

)

 

 

(1,410

)

Total Hess Corporation stockholders’ equity

 

 

21,667

 

 

 

22,205

 

Noncontrolling interests

 

 

 

 

 

115

 

Total equity

 

 

21,667

 

 

 

22,320

 

TOTAL LIABILITIES AND EQUITY

 

$

36,101

 

 

$

38,578

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

2


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED INCOME (UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions,

 

 

 

except per share amounts)

 

REVENUES AND NON-OPERATING INCOME

 

 

 

 

 

 

 

 

Sales (excluding excise taxes) and other operating revenues

 

$

1,538

 

 

$

2,673

 

Other, net

 

 

12

 

 

 

(81

)

Total revenues and non-operating income

 

 

1,550

 

 

 

2,592

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

Cost of products sold (excluding items shown separately below)

 

 

306

 

 

 

393

 

Operating costs and expenses

 

 

478

 

 

 

466

 

Production and severance taxes

 

 

36

 

 

 

62

 

Exploration expenses, including dry holes and lease impairment

 

 

269

 

 

 

119

 

General and administrative expenses

 

 

147

 

 

 

142

 

Interest expense

 

 

85

 

 

 

81

 

Depreciation, depletion and amortization

 

 

956

 

 

 

726

 

Total costs and expenses

 

 

2,277

 

 

 

1,989

 

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME

   TAXES

 

 

(727

)

 

 

603

 

Provision (benefit) for income taxes

 

 

(351

)

 

 

239

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

(376

)

 

 

364

 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME

   TAXES

 

 

(13

)

 

 

57

 

NET INCOME (LOSS)

 

 

(389

)

 

 

421

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

 

 

 

35

 

NET INCOME (LOSS) ATTRIBUTABLE TO HESS CORPORATION

 

$

(389

)

 

$

386

 

NET INCOME (LOSS) ATTRIBUTABLE TO HESS CORPORATION PER SHARE

 

 

 

 

 

 

 

 

BASIC:

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.32

)

 

$

1.14

 

Discontinued operations

 

 

(0.05

)

 

 

0.07

 

NET INCOME (LOSS) PER SHARE

 

$

(1.37

)

 

$

1.21

 

DILUTED:

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.32

)

 

$

1.13

 

Discontinued operations

 

 

(0.05

)

 

 

0.07

 

NET INCOME (LOSS) PER SHARE

 

$

(1.37

)

 

$

1.20

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES

   OUTSTANDING (DILUTED)

 

 

283.5

 

 

 

322.6

 

COMMON STOCK DIVIDENDS PER SHARE

 

$

0.25

 

 

$

0.25

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

3


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(389

)

 

$

421

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as cash flow hedges

 

 

 

 

 

 

 

 

Effect of hedge (gains) losses reclassified to income

 

 

 

 

 

(5

)

Income taxes on effect of hedge (gains) losses reclassified to income

 

 

 

 

 

2

 

Net effect of hedge (gains) losses reclassified to income

 

 

 

 

 

(3

)

Change in fair value of cash flow hedges

 

 

20

 

 

 

14

 

Income taxes on change in fair value of cash flow hedges

 

 

(7

)

 

 

(5

)

Net change in fair value of cash flow hedges

 

 

13

 

 

 

9

 

Change in derivatives designated as cash flow hedges, after taxes

 

 

13

 

 

 

6

 

 

 

 

 

 

 

 

 

 

Pension and other postretirement plans

 

 

 

 

 

 

 

 

Amortization of net actuarial losses

 

 

19

 

 

 

8

 

Income taxes on amortization of net actuarial losses

 

 

(6

)

 

 

(3

)

Net effect of amortization of net actuarial losses

 

 

13

 

 

 

5

 

Change in pension and other postretirement plans, after taxes

 

 

13

 

 

 

5

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(120

)

 

 

51

 

Change in foreign currency translation adjustment

 

 

(120

)

 

 

51

 

 

 

 

 

 

 

 

 

 

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)

 

 

(94

)

 

 

62

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

 

(483

)

 

 

483

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

 

 

 

35

 

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO HESS CORPORATION

 

$

(483

)

 

$

448

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

4


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(389

)

 

$

421

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

 

 

 

 

 

 

(Gains) losses on asset sales, net

 

 

 

 

 

(10

)

Depreciation, depletion and amortization

 

 

956

 

 

 

726

 

Loss from equity affiliates

 

 

 

 

 

93

 

Exploratory dry hole costs

 

 

169

 

 

 

9

 

Exploration lease impairment

 

 

54

 

 

 

32

 

Stock compensation expense

 

 

26

 

 

 

22

 

Provision (benefit) for deferred income taxes

 

 

(347

)

 

 

112

 

(Income) loss from discontinued operations, net of income taxes

 

 

13

 

 

 

(57

)

Changes in operating assets and liabilities

 

 

(109

)

 

 

(231

)

Cash provided by (used in) operating activities - continuing operations

 

 

373

 

 

 

1,117

 

Cash provided by (used in) operating activities - discontinued operations

 

 

(11

)

 

 

41

 

Net cash provided by (used in) operating activities

 

 

362

 

 

 

1,158

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,237

)

 

 

(1,146

)

Proceeds from asset sales

 

 

 

 

 

1,237

 

Other, net

 

 

(10

)

 

 

(57

)

Cash provided by (used in) investing activities - continuing operations

 

 

(1,247

)

 

 

34

 

Cash provided by (used in) investing activities - discontinued operations

 

 

95

 

 

 

(296

)

Net cash provided by (used in) investing activities

 

 

(1,152

)

 

 

(262

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Debt with maturities of greater than 90 days

 

 

 

 

 

 

 

 

Repayments

 

 

(17

)

 

 

(333

)

Common stock acquired and retired

 

 

(67

)

 

 

(1,043

)

Cash dividends paid

 

 

(72

)

 

 

(79

)

Employee stock options exercised, including income tax benefits

 

 

8

 

 

 

33

 

Cash provided by (used in) financing activities - continuing operations

 

 

(148

)

 

 

(1,422

)

Cash provided by (used in) financing activities - discontinued operations

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

 

(148

)

 

 

(1,422

)

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(938

)

 

 

(526

)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 

 

2,444

 

 

 

1,814

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

1,506

 

 

$

1,288

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 


5


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED EQUITY (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

Total Hess

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Excess of

 

 

Retained

 

 

Comprehensive

 

 

Stockholders’

 

 

Noncontrolling

 

 

Total

 

 

 

Stock

 

 

Par

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

 

Interests

 

 

Equity

 

 

 

(In millions)

 

BALANCE AT JANUARY 1, 2015

 

$

286

 

 

$

3,277

 

 

$

20,052

 

 

$

(1,410

)

 

$

22,205

 

 

$

115

 

 

$

22,320

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

(389

)

 

 

 

 

 

 

(389

)

 

 

 

 

 

(389

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(94

)

 

 

(94

)

 

 

 

 

 

(94

)

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(483

)

 

 

 

 

 

(483

)

Activity related to restricted common stock awards, net

 

 

1

 

 

 

18

 

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

19

 

Employee stock options, including income tax benefits

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Performance share units

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Cash dividends declared

 

 

 

 

 

 

 

 

(72

)

 

 

 

 

 

(72

)

 

 

 

 

 

(72

)

Common stock acquired and retired

 

 

 

 

 

(3

)

 

 

(13

)

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Noncontrolling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115

)

 

 

(115

)

BALANCE AT MARCH 31, 2015

 

$

287

 

 

$

3,306

 

 

$

19,578

 

 

$

(1,504

)

 

$

21,667

 

 

$

 

 

$

21,667

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT JANUARY 1, 2014

 

$

325

 

 

$

3,498

 

 

$

21,235

 

 

$

(338

)

 

$

24,720

 

 

$

64

 

 

$

24,784

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

386

 

 

 

 

 

 

 

386

 

 

 

35

 

 

 

421

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62

 

 

 

62

 

 

 

 

 

 

62

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

448

 

 

 

35

 

 

 

483

 

Activity related to restricted common stock awards, net

 

 

1

 

 

 

14

 

 

 

 

 

 

 

 

 

15

 

 

 

 

 

 

15

 

Employee stock options, including income tax benefits

 

 

1

 

 

 

34

 

 

 

 

 

 

 

 

 

35

 

 

 

 

 

 

35

 

Performance share units

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Cash dividends declared

 

 

 

 

 

 

 

 

(79

)

 

 

 

 

 

(79

)

 

 

 

 

 

(79

)

Common stock acquired and retired

 

 

(13

)

 

 

(136

)

 

 

(849

)

 

 

 

 

 

(998

)

 

 

 

 

 

(998

)

Noncontrolling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

BALANCE AT MARCH 31, 2014

 

$

314

 

 

$

3,413

 

 

$

20,693

 

 

$

(276

)

 

$

24,144

 

 

$

98

 

 

$

24,242

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

6


PART I - FINANCIAL INFORMATION (CONT’D)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  Basis of Presentation

The financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the Corporation’s consolidated financial position at March 31, 2015 and December 31, 2014 and the consolidated results of operations and cash flows for the three months ended March 31, 2015 and 2014. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.

The financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by U.S. generally accepted accounting principles (GAAP) have been condensed or omitted from these interim financial statements. These statements, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014.

The statements of consolidated income and consolidated cash flows for the three months ended March 31, 2014, have been recast to reflect the Corporation’s retail business which was sold in September 2014, and its energy trading joint venture, HETCO, which was sold in February 2015, as discontinued operations.  Certain other information in the financial statements and notes has been reclassified to conform to the current period presentation.

New Accounting Pronouncements:  In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The ASU amends the criteria for reporting discontinued operations to include only disposals representing a strategic shift in operations. The ASU also requires expanded disclosures regarding the assets, liabilities, income, and expenses of discontinued operations. This ASU became effective for the Corporation in the first quarter of 2015 and did not have a significant impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Accounting Standards Codification (ASC) Topic ASC 606. This ASU is effective for the Corporation beginning in the first quarter of 2018, with early adoption permitted from the first quarter of 2017. The Corporation is currently assessing the impact of the ASU on its consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which makes changes to both the variable interest model and the voting model, affecting all reporting entities involved with limited partnerships or similar entities. This ASU is effective for the Corporation beginning in the first quarter of 2016, with early adoption permitted. The Corporation is currently assessing the impact of the ASU on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability.  This ASU is effective for the Corporation beginning in the first quarter of 2016, with early adoption permitted. The Corporation is currently assessing the impact of the ASU on its consolidated financial statements.

 

 

7


PART I - FINANCIAL INFORMATION (CONT’D)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

2. Discontinued Operations

The results of operations for the Corporation’s divested retail business and energy trading joint venture, HETCO, have been reported as discontinued operations in the Statement of Consolidated Income for all periods presented.  The Corporation’s interest in HETCO was sold in February 2015 and the retail business was sold in September 2014.

Sales and other operating revenues and Income (loss) from discontinued operations were as follows:

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions)

 

Sales and other operating revenues

 

$

14

 

 

$

3,167

 

Income (loss) from discontinued operations before income taxes

 

$

(24

)

 

$

73

 

Current tax provision (benefit)

 

 

 

 

 

 

Deferred tax provision (benefit)

 

 

(11

)

 

 

16

 

Provision (benefit) for income taxes

 

 

(11

)

 

 

16

 

Income (loss) from discontinued operations, net of income taxes

 

$

(13

)

 

$

57

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

 

 

 

35

 

Income (loss) from discontinued operations attributable to Hess Corporation

 

$

(13

)

 

$

22

 

At December 31, 2014, HETCO assets totaling $1,035 million, which consisted of accounts receivable and other long‑lived assets, were reported in Other current assets, and liabilities totaling $797 million, which consisted primarily of accounts payable, were reported in Accrued liabilities in the Consolidated Balance Sheet.

 

3. Inventories

Inventories consisted of the following:

 

 

March 31,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions)

 

Crude oil and natural gas liquids

 

$

284

 

 

$

246

 

Materials and supplies

 

 

262

 

 

 

281

 

Total inventories

 

$

546

 

 

$

527

 

 

4. Capitalized Exploratory Well Costs

The following table discloses the net changes in capitalized exploratory well costs pending determination of proved reserves for the three months ended March 31, 2015 (in millions):

 

Balance at January 1

 

$

1,416

 

Additions to capitalized exploratory well costs pending the determination of proved reserves

 

 

160

 

Reclassifications to wells, facilities and equipment based on the determination of proved reserves

 

 

(70

)

Capitalized exploratory well costs charged to expense

 

 

(120

)

Balance at March 31, 2015

 

$

1,386

 

Capitalized exploratory well costs charged to expense in the preceding table excludes $49 million of exploratory well costs which were incurred and subsequently expensed in 2015.  First quarter 2015 results included an after-tax charge of $67 million ($159 million pre-tax) to write-off a previously capitalized exploration well and related leasehold costs associated with the Dinarta Block in the Kurdistan Region of Iraq following the decision of the Corporation and its partner in March 2015 to cease further drilling activity in the region. Capitalized exploratory well costs greater than one year old after completion of drilling were $1,217 million at March 31, 2015. Approximately 70% of the capitalized well costs in excess of one year relates to Block WA-390-P, offshore Western Australia, where development planning and commercial activities for the Corporation’s natural gas discoveries are ongoing. In December 2014, the Corporation executed a non-binding letter of intent with the North West Shelf (NWS), a third party joint venture with existing natural gas processing and liquefaction

8


PART I - FINANCIAL INFORMATION (CONT’D)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

facilities. Successful execution of binding agreements with NWS is necessary before the Corporation can execute a gas sales agreement and sanction development of the project. Approximately 30% of the capitalized well costs in excess of one year relates to offshore Ghana where the Corporation has drilled seven successful exploration wells. Appraisal plans for the seven wells on the block were submitted to the Ghanaian government in June 2013 for approval. Four of the plans were approved and discussions continue with the government on the three remaining appraisal plans. In the third quarter of 2014, the Corporation completed a three well appraisal program in Ghana. Well results continue to be evaluated and development planning is progressing.

5. Debt

In January 2015, the Corporation entered into a new $4 billion syndicated revolving credit facility that expires in January 2020. The new facility, which replaced a $4 billion facility that was scheduled to expire in April 2016, can be used for borrowings and letters of credit. Based on the Corporation’s credit rating as of March 31, 2015, borrowings on the facility will generally bear interest at 1.075% above the London Interbank Offered Rate with the facility fee amounting to 0.175% per annum. The interest rate and facility fee are subject to adjustment if the Corporation's credit rating changes. The restrictions on the amount of total borrowings and secured debt are substantially similar to the previous facility.  At March 31, 2015, there were no borrowings outstanding or letters of credit issued against the syndicated revolving credit facility.

6. Exit and Severance Costs

During the three months ended March 31, 2015 and 2014, the Corporation recorded exit related costs of $6 million and $20 million, respectively.  In addition, the Corporation incurred severance totaling $33 million in the first quarter of 2014, primarily related to the Corporation’s divestiture program announced in March 2013. During the first quarter of 2015, payments for accrued severance costs amounted to $28 million.

7.  Retirement Plans

 

Components of net periodic pension cost consisted of the following:

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions)

 

Service cost

 

$

17

 

 

$

12

 

Interest cost

 

 

26

 

 

 

25

 

Expected return on plan assets

 

 

(42

)

 

 

(40

)

Amortization of unrecognized net actuarial losses

 

 

19

 

 

 

8

 

Pension expense

 

$

20

 

 

$

5

 

In 2015, the Corporation expects to contribute approximately $55 million to its funded pension plans.  Through March 31, 2015, the Corporation contributed approximately $13 million of this amount.

 


9


PART I - FINANCIAL INFORMATION (CONT’D)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

8. Weighted Average Common Shares

The net income (loss) and weighted average number of common shares used in the basic and diluted earnings per share computations were as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions,

 

 

 

except per share amounts)

 

Net income (loss) from continuing operations attributable to Hess Corporation

 

$

(376

)

 

$

364

 

Income (loss) from discontinued operations, net of income taxes

 

 

(13

)

 

 

57

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

 

 

 

35

 

Net income (loss) from discontinued operations attributable to Hess Corporation

 

 

(13

)

 

 

22

 

Net income (loss) attributable to Hess Corporation

 

$

(389

)

 

$

386

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

283.5

 

 

 

318.1

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

Restricted common stock

 

 

 

 

 

1.5

 

Stock options

 

 

 

 

 

1.8

 

Performance share units

 

 

 

 

 

1.2

 

Diluted

 

 

283.5

 

 

 

322.6

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Hess Corporation per share:

 

 

 

 

 

 

 

 

Basic: