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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

 

 

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

 

For the quarter ended March 31, 2020

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock

HES

New York Stock Exchange

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

At March 31, 2020, there were 307,158,340 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, 2020, and December 31, 2019

2

 

Statement of Consolidated Income for the Three Months Ended March 31, 2020, and 2019

3

 

Statement of Consolidated Comprehensive Income for the Three Months Ended March 31, 2020, and 2019

4

 

Statement of Consolidated Cash Flows for the Three Months Ended March 31, 2020, and 2019

5

 

Statement of Consolidated Equity for the Three Months Ended March 31, 2020, and 2019

6

 

Notes to Consolidated Financial Statements (Unaudited)

7

 

Note 1 - Basis of Presentation

7

 

Note 2 - Impairment

7

 

Note 3 - Inventories

7

 

Note 4 – Property Plant and Equipment

8

 

Note 5 - Hess Midstream LP

8

 

Note 6 - Debt

8

 

Note 7 - Retirement Plans

9

 

Note 8 - Revenue

9

 

Note 9 - Weighted Average Common Shares

10

 

Note 10 - Guarantees and Contingencies

10

 

Note 11 - Segment Information

12

 

Note 12 - Financial Risk Management Activities

12

 

 

 

2.

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

14

3.

Quantitative and Qualitative Disclosures about Market Risk

30

4.

Controls and Procedures

30

 

 

 

 

PART II - OTHER INFORMATION

 

1.

Legal Proceedings

31

1A.

Risk Factors

31

2.

Share Repurchase Activities

32

5.

Other Information

32

6.

Exhibits

33

 

Signatures

34

 

 

Unless the context indicates otherwise, references to “Hess”, the “Corporation”, “Registrant”, “we”, “us”, “our” and “its” refer to the consolidated business operations of Hess Corporation and its subsidiaries.

 


PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In millions,

 

 

 

except share amounts)

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,080

 

 

$

1,545

 

Accounts receivable:

 

 

 

 

 

 

 

 

From contracts with customers

 

 

600

 

 

 

940

 

Joint venture and other

 

 

194

 

 

 

230

 

Crude oil derivative contracts

 

 

1,098

 

 

 

125

 

Inventories

 

 

230

 

 

 

261

 

Other current assets

 

 

68

 

 

 

55

 

Total current assets

 

 

4,270

 

 

 

3,156

 

Property, plant and equipment:

 

 

 

 

 

 

 

 

Total — at cost

 

 

31,704

 

 

 

35,820

 

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

 

 

16,893

 

 

 

19,006

 

Property, plant and equipment — net

 

 

14,811

 

 

 

16,814

 

Operating lease right-of-use assets — net

 

 

386

 

 

 

447

 

Finance lease right-of-use assets — net

 

 

187

 

 

 

299

 

Goodwill

 

 

360

 

 

 

360

 

Deferred income taxes

 

 

77

 

 

 

80

 

Other assets

 

 

626

 

 

 

626

 

Total Assets

 

$

20,717

 

 

$

21,782

 

Liabilities

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

431

 

 

$

411

 

Accrued liabilities

 

 

1,334

 

 

 

1,803

 

Taxes payable

 

 

33

 

 

 

97

 

Current maturities of long-term debt

 

 

3

 

 

 

 

Current portion of operating and finance lease obligations

 

 

146

 

 

 

199

 

Total current liabilities

 

 

1,947

 

 

 

2,510

 

Long-term debt

 

 

8,191

 

 

 

7,142

 

Long-term operating lease obligations

 

 

357

 

 

 

353

 

Long-term finance lease obligations

 

 

233

 

 

 

238

 

Deferred income taxes

 

 

328

 

 

 

415

 

Asset retirement obligations

 

 

929

 

 

 

897

 

Other liabilities and deferred credits

 

 

554

 

 

 

521

 

Total Liabilities

 

 

12,539

 

 

 

12,076

 

Equity

 

 

 

 

 

 

 

 

Hess Corporation stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, par value $1.00; Authorized — 600,000,000 shares

 

 

 

 

 

 

 

 

Issued — 307,158,340 shares (2019: 304,955,472)

 

 

307

 

 

 

305

 

Capital in excess of par value

 

 

5,633

 

 

 

5,591

 

Retained earnings

 

 

1,021

 

 

 

3,535

 

Accumulated other comprehensive income (loss)

 

 

239

 

 

 

(699

)

Total Hess Corporation stockholders’ equity

 

 

7,200

 

 

 

8,732

 

Noncontrolling interests

 

 

978

 

 

 

974

 

Total equity

 

 

8,178

 

 

 

9,706

 

Total Liabilities and Equity

 

$

20,717

 

 

$

21,782

 

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,

 

 

 

2020

 

 

2019

 

 

 

(In millions, except per share amounts)

 

Revenues and Non-Operating Income

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

1,354

 

 

$

1,572

 

Other, net

 

 

15

 

 

 

27

 

Total revenues and non-operating income

 

 

1,369

 

 

 

1,599

 

 

 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

Marketing, including purchased oil and gas

 

 

378

 

 

 

408

 

Operating costs and expenses

 

 

303

 

 

 

266

 

Production and severance taxes

 

 

42

 

 

 

39

 

Exploration expenses, including dry holes and lease impairment

 

 

189

 

 

 

34

 

General and administrative expenses

 

 

102

 

 

 

87

 

Interest expense

 

 

113

 

 

 

98

 

Depreciation, depletion and amortization

 

 

561

 

 

 

498

 

Impairment

 

 

2,126

 

 

 

 

Total costs and expenses

 

 

3,814

 

 

 

1,430

 

Income (Loss) Before Income Taxes

 

 

(2,445

)

 

 

169

 

Provision (benefit) for income taxes

 

 

(79

)

 

 

94

 

Net Income (Loss)

 

 

(2,366

)

 

 

75

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

67

 

 

 

43

 

Net Income (Loss) Attributable to Hess Corporation

 

 

(2,433

)

 

 

32

 

Less: Preferred stock dividends

 

 

 

 

 

4

 

Net Income (Loss) Attributable to Hess Corporation Common Stockholders

 

$

(2,433

)

 

$

28

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) Attributable to Hess Corporation Per Common Share:

 

 

 

 

 

 

 

 

Basic

 

$

(8.00

)

 

$

0.09

 

Diluted

 

$

(8.00

)

 

$

0.09

 

Weighted Average Number of Common Shares Outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

304.0

 

 

 

297.4

 

Diluted

 

 

304.0

 

 

 

299.7

 

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,

 

 

 

2020

 

 

2019

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

(2,366

)

 

$

75

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as cash flow hedges

 

 

 

 

 

 

 

 

Effect of hedge (gains) losses reclassified to income

 

 

(64

)

 

 

(15

)

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

 

 

 

 

 

 

Net effect of hedge (gains) losses reclassified to income

 

 

(64

)

 

 

(15

)

Change in fair value of cash flow hedges

 

 

990

 

 

 

(346

)

Income taxes on change in fair value of cash flow hedges

 

 

 

 

 

 

Net change in fair value of cash flow hedges

 

 

990

 

 

 

(346

)

Change in derivatives designated as cash flow hedges, after taxes

 

 

926

 

 

 

(361

)

 

 

 

 

 

 

 

 

 

Pension and other postretirement plans

 

 

 

 

 

 

 

 

(Increase) reduction in unrecognized actuarial losses

 

 

 

 

 

6

 

Income taxes on actuarial changes in plan liabilities

 

 

 

 

 

 

(Increase) reduction in unrecognized actuarial losses, net

 

 

 

 

 

6

 

Amortization of net actuarial losses

 

 

12

 

 

 

11

 

Income taxes on amortization of net actuarial losses

 

 

 

 

 

 

Net effect of amortization of net actuarial losses

 

 

12

 

 

 

11

 

Change in pension and other postretirement plans, after taxes

 

 

12

 

 

 

17

 

Other Comprehensive Income (Loss)

 

 

938

 

 

 

(344

)

 

 

 

 

 

 

 

 

 

Comprehensive Income (Loss)

 

 

(1,428

)

 

 

(269

)

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

67

 

 

 

43

 

Comprehensive Income (Loss) Attributable to Hess Corporation

 

$

(1,495

)

 

$

(312

)

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,

 

 

 

2020

 

 

2019

 

 

 

(In millions)

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(2,366

)

 

$

75

 

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

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

561

 

 

 

498

 

Impairment

 

 

2,126

 

 

 

 

Exploratory dry hole costs

 

 

135

 

 

 

 

Exploration lease and other impairment

 

 

32

 

 

 

7

 

Stock compensation expense

 

 

29

 

 

 

27

 

Noncash (gains) losses on commodity derivatives, net

 

 

70

 

 

 

29

 

Provision (benefit) for deferred income taxes and other tax accruals

 

 

(85

)

 

 

(1

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 

258

 

 

 

(117

)

(Increase) decrease in inventories

 

 

31

 

 

 

(29

)

Increase (decrease) in accounts payable and accrued liabilities

 

 

(263

)

 

 

(204

)

Increase (decrease) in taxes payable

 

 

(63

)

 

 

8

 

Changes in other operating assets and liabilities

 

 

(20

)

 

 

(55

)

Net cash provided by (used in) operating activities

 

 

445

 

 

 

238

 

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment - E&P

 

 

(740

)

 

 

(521

)

Additions to property, plant and equipment - Midstream

 

 

(78

)

 

 

(150

)

Payments for Midstream equity investments

 

 

 

 

 

(7

)

Other, net

 

 

 

 

 

(2

)

Net cash provided by (used in) investing activities

 

 

(818

)

 

 

(680

)

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Net borrowings (repayments) of debt with maturities of 90 days or less

 

 

60

 

 

 

199

 

Debt with maturities of greater than 90 days:

 

 

 

 

 

 

 

 

Borrowings

 

 

1,000

 

 

 

 

Repayments

 

 

 

 

 

(3

)

Payments on finance lease obligations

 

 

(1

)

 

 

(23

)

Common stock acquired and retired

 

 

 

 

 

(25

)

Cash dividends paid

 

 

(81

)

 

 

(88

)

Noncontrolling interests, net

 

 

(63

)

 

 

(13

)

Other, net

 

 

(7

)

 

 

1

 

Net cash provided by (used in) financing activities

 

 

908

 

 

 

48

 

 

 

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

535

 

 

 

(394

)

Cash and Cash Equivalents at Beginning of Year

 

 

1,545

 

 

 

2,694

 

Cash and Cash Equivalents at End of Period

 

$

2,080

 

 

$

2,300

 

See accompanying Notes to Consolidated Financial Statements.

5

 


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED EQUITY (UNAUDITED)

 

 

 

Mandatory Convertible Preferred Stock

 

 

Common Stock

 

 

Capital in Excess of Par

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Total Hess Stockholders' Equity

 

 

Noncontrolling Interests

 

 

Total Equity

 

 

 

(In millions)

 

For the Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

$

 

 

$

305

 

 

$

5,591

 

 

$

3,535

 

 

$

(699

)

 

$

8,732

 

 

$

974

 

 

$

9,706

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(2,433

)

 

 

 

 

 

(2,433

)

 

 

67

 

 

 

(2,366

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

938

 

 

 

938

 

 

 

 

 

 

938

 

Share-based compensation

 

 

 

 

 

2

 

 

 

42

 

 

 

(5

)

 

 

 

 

 

39

 

 

 

 

 

 

39

 

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

(76

)

 

 

 

 

 

(76

)

 

 

 

 

 

(76

)

Noncontrolling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(63

)

 

 

(63

)

Balance at March 31, 2020

 

$

 

 

$

307

 

 

$

5,633

 

 

$

1,021

 

 

$

239

 

 

$

7,200

 

 

$

978

 

 

$

8,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2019

 

$

1

 

 

$

291

 

 

$

5,386

 

 

$

4,257

 

 

$

(306

)

 

$

9,629

 

 

$

1,259

 

 

$

10,888

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

32

 

 

 

43

 

 

 

75

 

Other comprehensive income (loss)