hes-20240331

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, 2024


☐						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, NY

(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 ý 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 ý 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 ý

At March 31, 2024, there were 308,111,879 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 3 1 , 202 4 , and December 31, 202 3	2
	Statement of Consolidated Income for the Three Months Ended March 3 1 , 202 4 , and 202 3	3
	Statement of Consolidated Comprehensive Income for the Three Mo nths Ended M a rch 3 1 , 202 4 , and 202 3	4
	Statement of Consolidated Cash Flows for the Three Months Ended March 3 1 , 202 4 , and 202 3	5
	Statement of Consolidated Equity for the Three Months Ended March 3 1 , 202 4 , and 202 3	6
	Notes to Consolidated Financial Statements (Unaudited)	7
	Note 1 - Basis of Presentation	7
	Note 2 - Inventories	7
	Note 3 - Property, Plant and Equipment	8
	Note 4 - Hess Midstream LP	8
	Note 5 - Accrued Liabilities	9
	Note 6 - Revenue	9
	Note 7 - Retirement Plans	10
	Note 8 - Weighted Average Common Shares	10
	Note 9 - Guarantees and Contingencies	11
	Note 1 0 - Segment Information	12
	Note 1 1 - Financial Risk Management Activities	13


2.	Management ’s Discussion and Analysis of Financial Condition and Results of Operations	14
3.	Quantitative and Qualitative Disclosures about Market Risk	28
4.	Controls and Procedures	28

	PART II - OTHER INFORMATION
1.	Legal Proceedings	29
1A.	Risk Factors	29
2.	Share Repurchase Activities	30
5.	Other Information	30
6.	Exhibits	31
	Signatures	32

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, 2024		December 31, 2023

	(In millions, except share amounts)
Assets
Current Assets:
Cash and cash equivalents	$	1,438	$	1,688
Accounts receivable:
From contracts with customers	1,524		1,180
Joint venture and other	165		150
Inventories	382		304
Other current assets	115		108
Total current assets	3,624		3,430
Property, plant and equipment:
Total — at cost	37,706		36,771
Less: Reserves for depreciation, depletion, amortization and lease impairment	19,879		19,339
Property, plant and equipment — net	17,827		17,432
Operating lease right-of-use assets — net	658		720
Finance lease right-of-use assets — net	104		108
Goodwill	360		360
Deferred income taxes	408		320
Post-retirement benefit assets	695		685
Other assets	1,043		952
Total Assets	$	24,719	$	24,007
Liabilities
Current Liabilities:
Accounts payable	$	403	$	402
Accrued liabilities	1,774		2,102
Taxes payable	95		85
Current portion of long-term debt	314		311
Current portion of operating and finance lease obligations	365		370
Total current liabilities	2,951		3,270
Long-term debt	8,415		8,302
Long-term operating lease obligations	398		459
Long-term finance lease obligations	151		156
Deferred income taxes	657		608
Asset retirement obligations	1,192		1,186
Other liabilities and deferred credits	424		424
Total Liabilities	14,188		14,405
Equity
Hess Corporation stockholders’ equity:
Common stock, par value $1.00; Authorized — 600,000,000 shares
Issued 308,111,879 shares (2023: 307,158,272)	308		307
Capital in excess of par value	6,545		6,495
Retained earnings	3,149		2,318
Accumulated other comprehensive income (loss)	(134)		(134)
Total Hess Corporation stockholders’ equity	9,868		8,986
Noncontrolling interests	663		616
Total Equity	10,531		9,602
Total Liabilities and Equity	$	24,719	$	24,007

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED INCOME (UNAUDITED)


	Three Months Ended March 31,
	2024		2023

	(In millions, except per share amounts)
Revenues and Non-Operating Income
Sales and other operating revenues	$	3,309	$	2,411

Other, net	32		42
Total revenues and non-operating income	3,341		2,453
Costs and Expenses
Marketing, including purchased oil and gas	622		603
Operating costs and expenses	412		382
Production and severance taxes	56		48
Exploration expenses, including dry holes and lease impairment	42		66
General and administrative expenses	124		136
Interest expense	113		123
Depreciation, depletion and amortization	557		491

Total costs and expenses	1,926		1,849
Income Before Income Taxes	1,415		604
Provision for income taxes	348		176
Net Income	1,067		428
Less: Net income attributable to noncontrolling interests	95		82
Net Income Attributable to Hess Corporation	$	972	$	346

Net Income Attributable to Hess Corporation Per Common Share:
Basic	$	3.17	$	1.13
Diluted	$	3.16	$	1.13
Weighted Average Number of Common Shares Outstanding:
Basic	306.4		305.4
Diluted	307.9		307.3
Common Stock Dividends Per Share	$	0.4375	$	0.4375

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended March 31,
	2024		2023

	(In millions)
Net Income	$	1,067	$	428
Other Comprehensive Income (Loss):
Derivatives designated as cash flow hedges
Effect of hedge (gains) losses reclassified to income	—		34
Income taxes on effect of hedge (gains) losses reclassified to income	—		—
Net effect of hedge (gains) losses reclassified to income	—		34
Change in fair value of cash flow hedges	—		(17)
Income taxes on change in fair value of cash flow hedges	—		—
Net change in fair value of cash flow hedges	—		(17)
Change in derivatives designated as cash flow hedges, after taxes	—		17
Pension and other postretirement plans
(Increase) reduction in unrecognized actuarial losses	—		—
Income taxes on actuarial changes in plan liabilities	—		—
(Increase) reduction in unrecognized actuarial losses, net	—		—
Amortization of net actuarial losses	—		—
Income taxes on amortization of net actuarial losses	—		—
Net effect of amortization of net actuarial losses	—		—
Change in pension and other postretirement plans, after taxes	—		—
Other Comprehensive Income (Loss)	—		17
Comprehensive Income	1,067		445
Less: Comprehensive income attributable to noncontrolling interests	95		82
Comprehensive Income Attributable to Hess Corporation	$	972	$	363

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)


	Three Months Ended March 31,
	2024		2023

	(In millions)
Cash Flows From Operating Activities
Net income	$	1,067	$	428
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation, depletion and amortization	557		491

Exploratory dry hole costs	—		31
Exploration lease impairment	3		5

Stock compensation expense	39		35

Provision for deferred income taxes and other tax accruals	63		42
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(359)		(202)
(Increase) decrease in inventories	(78)		(12)
Increase (decrease) in accounts payable and accrued liabilities	(294)		(23)
Increase (decrease) in taxes payable	10		12
Changes in other operating assets and liabilities	(123)		(169)
Net cash provided by (used in) operating activities	885		638
Cash Flows From Investing Activities
Additions to property, plant and equipment - E&P	(902)		(773)
Additions to property, plant and equipment - Midstream	(55)		(64)

Other, net	(1)		(4)
Net cash provided by (used in) investing activities	(958)		(841)
Cash Flows From Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less	115		103
Debt with maturities of greater than 90 days:
Borrowings	—		—
Repayments	(3)		—
Cash dividends paid	(137)		(137)
Common stock acquired and retired	—		(20)

Noncontrolling interests, net	(151)		(131)
Employee stock options exercised	11		3
Payments on finance lease obligations	(3)		(2)
Other, net	(9)		1
Net cash provided by (used in) financing activities	(177)		(183)
Net Increase (Decrease) in Cash and Cash Equivalents	(250)		(386)
Cash and Cash Equivalents at Beginning of Year	1,688		2,486
Cash and Cash Equivalents at End of Period	$	1,438	$	2,100

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED EQUITY (UNAUDITED)


	Common Stock		Capital in Excess of Par		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Hess Stockholders’ Equity		Noncontrolling Interests		Total Equity


For the Three Months Ended March 31, 2024
Balance at January 1, 2024	$	307	$	6,495	$	2,318	$	(134)	$	8,986	$	616	$	9,602
Net income	—		—		972		—		972		95		1,067
Other comprehensive income (loss)	—		—		—		—		—		—		—
Share-based compensation	1		50		(6)		—		45		—		45
Dividends on common stock	—		—		(135)		—		(135)		—		(135)
Sale of Class A shares of Hess Midstream LP	—		—		—		—		—		94		94
Repurchase of Class B units of Hess Midstream Operations LP	—		—		—		—		—		(53)		(53)
Noncontrolling interests, net	—		—		—		—		—		(89)		(89)
Balance at March 31, 2024	$	308	$	6,545	$	3,149	$	(134)	$	9,868	$	663	$	10,531
For the Three Months Ended March 31, 2023
Balance at January 1, 2023	$	306	$	6,206	$	1,474	$	(131)	$	7,855	$	641	$	8,496
Net income	—		—		346		—		346		82		428
Other comprehensive income (loss)	—		—		—		17		17		—		17
Share-based compensation	1		40		—		—		41		—		41
Dividends on common stock	—		—		(134)		—		(134)		—		(134)

Repurchase of Class B units of Hess Midstream Operations LP	—		8		—		—		8		(54)		(46)

Noncontrolling interests, net	—		—		—		—		—		(81)		(81)
Balance at March 31, 2023	$	307	$	6,254	$	1,686	$	(114)	$	8,133	$	588	$	8,721

See accompanying Notes to Consolidated Financial Statements.

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 our consolidated financial position at March 31, 2024 and December 31, 2023, the consolidated results of operations for the three months ended March 31, 2024 and 2023, and consolidated cash flows for the three months ended March 31, 2024 and 2023. 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 generally accepted accounting principles (GAAP) in the United States 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, 2023.

On October 22, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Chevron Corporation (Chevron) and Yankee Merger Sub Inc. (Merger Subsidiary), a direct, wholly-owned subsidiary of Chevron. The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, Merger Subsidiary will be merged with and into Hess, and Hess will be the surviving corporation in the Merger as a direct, wholly-owned subsidiary of Chevron (such transaction, the Merger). Under the terms of the Merger Agreement, if the Merger is completed, our stockholders will receive at the effective time of the Merger consideration consisting of 1.025 shares of Chevron common stock for each share of our common stock. Chevron and Hess are working to complete the Merger as soon as practicable and continue to anticipate obtaining all requisite stockholder and regulatory approvals by the middle of 2024. The filing of the arbitration relating to a right of first refusal (the Stabroek ROFR) contained in the operating agreement (the Stabroek JOA) among Hess Guyana Exploration Limited (HGEL) and affiliates of Exxon Mobil Corporation (Exxon Mobil) and China National Offshore Oil Corporation (CNOOC), however, may cause the transaction to be completed at a later time or to fail to be completed. Hess is seeking to have the merits of the arbitration heard by the third quarter of 2024 and to complete the arbitration by the end of 2024. Neither Chevron nor Hess can predict the actual date on which the transaction will be completed because it is subject to conditions beyond each company’s control.

New Accounting Pronouncements:

In November 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-07, Improvements to Reportable Segments Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU does not change how an entity identifies its operating segments. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently assessing the impact of adopting the ASU on our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which enhances the disclosure requirements within ASC Topic 740. The ASU requires, among other disclosures, greater disaggregation of information and the use of certain categories in the rate reconciliation, and the disaggregation of income taxes paid by jurisdiction. The ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently assessing the impact of adopting this ASU on our consolidated financial statements.

2. Inventories

Inventories consisted of the following:


	March 31, 2024		December 31, 2023

	(In millions)
Crude oil and natural gas liquids	$	100	$	72
Materials and supplies	282		232
Total Inventories	$	382	$	304

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. Property, Plant and Equipment

Capitalized Exploratory Well Costs:

The following table discloses the net changes in capitalized exploratory well costs pending determination of proved reserves during the three months ended March 31, 2024 (in millions):


Balance at January 1, 2024	$	952
Additions to capitalized exploratory well costs pending the determination of proved reserves	65


Balance at March 31, 2024	$	1,017

In the first three months, additions to capitalized exploratory well costs pending determination of proved reserves primarily related to wells drilled on the Stabroek Block (Hess 30%), offshore Guyana. At March 31, 2024, 37 exploration and appraisal wells on the Stabroek Block, with a total cost of $904 million, were capitalized pending determination of proved reserves.

At March 31, 2024, exploratory well costs capitalized for greater than one year following completion of drilling of $812 million was comprised of the following:

Guyana: 88% of the capitalized well costs in excess of one year relate to successful exploration and appraisal wells where hydrocarbons were encountered on the Stabroek Block. In April 2024, the Government of Guyana and the partners sanctioned the development of the Whiptail project, the sixth sanctioned project on the block. Approximately $115 million of capitalized exploratory well costs at March 31, 2024 related to the Whiptail project will be reclassified to wells, facilities and equipment in the second quarter of 2024. The operator also plans further appraisal drilling on the block and is conducting pre-development planning for additional phases of development.

Suriname: 5% of the capitalized well costs in excess of one year relate to the Zanderij-1 well on Block 42 (Hess 33%). Exploration and appraisal activities are ongoing.

Joint Development Area (JDA): 5% of the capitalized well costs in excess of one year relate to the JDA (Hess 50%) in the Gulf of Thailand, where hydrocarbons were encountered in three successful exploration wells drilled in the western part of Block A-18. The operator has submitted a development plan concept to the regulator to facilitate ongoing commercial negotiations for an extension of the existing gas sales contract to include development of the western part of the block.

Malaysia: 2% of the capitalized well costs in excess of one year relate to the North Malay Basin (Hess 50%), offshore Peninsular Malaysia, where hydrocarbons were encountered in two successful exploration wells. Pre-development studies are ongoing.

4. Hess Midstream LP

At March 31, 2024, Hess Midstream LP, a variable interest entity that is fully consolidated by Hess Corporation, had liabilities totaling $3,460 million (December 31, 2023: $3,385 million) that are on a nonrecourse basis to Hess Corporation, while Hess Midstream LP assets available to settle the obligations of Hess Midstream LP included cash and cash equivalents totaling $4 million (December 31, 2023: $5 million), property, plant and equipment with a carrying value of $3,215 million (December 31, 2023: $3,229 million) and an equity-method investment in the Little Missouri 4 (LM4) gas processing plant of $89 million (December 31, 2023: $90 million). At March 31, 2024, we have an approximate 38% consolidated ownership interest in Hess Midstream LP on an as-exchanged basis, primarily through our ownership of Class B units in Hess Midstream Operations LP (HESM Opco), the operating subsidiary of Hess Midstream LP, which are exchangeable into Class A shares of Hess Midstream LP on a one-for-one basis.

LM4 is a 200 million standard cubic feet per day gas processing plant located south of the Missouri River in McKenzie County, North Dakota, that was constructed as part of a 50/50 joint venture between Hess Midstream LP and Targa Resources Corp. Hess Midstream LP has a natural gas processing agreement with LM4 under which it pays a processing fee and reimburses LM4 for its proportionate share of electricity costs. The processing fees included in Operating costs and expenses in the Statement of Consolidated Income for the three months ended March 31, 2024 were $7 million (2023: $5 million).

In February 2024, Hess Midstream LP completed an underwritten public equity offering of 11.5 million Hess Midstream LP Class A shares held by an affiliate of Global Infrastructure Partners (GIP). Hess Corporation did not receive any proceeds from this public equity offering. The transaction resulted in an increase in Noncontrolling interests and deferred tax assets of $94 million resulting from a step-up in the tax basis of Hess Midstream LP’s investment in HESM Opco.

In March 2024, HESM Opco repurchased approximately 2.8 million HESM Opco Class B units held by affiliates of Hess Corporation and GIP for $100 million, which was financed by HESM Opco's revolving credit facility. The transaction resulted in an

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

increase in deferred tax assets and Noncontrolling interests of $9 million due to an adjustment in the carrying value of Hess Midstream LP’s investment in HESM Opco without a corresponding adjustment in the tax basis. The $62 million paid to GIP reduced Noncontrolling interests.

In March 2023, HESM Opco repurchased approximately 3.6 million HESM Opco Class B units held by affiliates of Hess Corporation and GIP for $100 million, which was financed by HESM Opco's revolving credit facility. The transaction resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of $8 million, and an increase in deferred tax assets and Noncontrolling interests of $4 million due to an adjustment in the carrying value of Hess Midstream LP’s investment in HESM Opco without a corresponding adjustment in the tax basis. The $50 million paid to GIP reduced Noncontrolling interests.

5. Accrued Liabilities

Accrued Liabilities consisted of the following:


	March 31, 2024		December 31, 2023

	(In millions)
Accrued capital expenditures	$	636	$	670
Accrued operating and marketing expenditures	579		593
Accrued payments to royalty and working interest owners	189		178
Current portion of asset retirement obligations