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Hess Corporation Announces Additional Plans For Bakken

 

January 9, 2019 | View PDF



Hess Corporation, the energy company headquartered in New York City with major investments in the Bakken oilfield, has announced additional plans for the region. The Fortune 500 Corporation, which was founded in 1920 and today is worth tens of billions of dollars, has announced a sale of its Bakken water services business. However, the purchase won’t take the business far from home or away from Hess altogether.

Hess has entered a Memorandum of Understanding (MOU) with Hess Infrastructure Partners (HIP), which lays out a tentative agreement to sell their Bakken water investments for 225 million in cash. HIP is a midstream energy joint venture between Hess and Global Infrastructure Partners known as Hess Midstream, which operates primarily in the Bakken and Three Forks Shale plays in the Williston Basin. Hess Midstream, which will tentatively acquire Hess’ water assets, is a company formed to provide services to its sponsor company, Hess Corporation, and other third-party customers.

The transaction is expected to be complete at some point during the first quarter of 2019, assuming regulatory approvals are granted by governing agencies.

Regarding the MOU purchase agreement, John Gatling, the chief operating officer of Hess Infrastructure Partners, said that there would be lots of room for growing investment in infrastructure for the Bakken in coming years.

Gatling said, “Hess has been actively building the water infrastructure necessary to meet its accelerated Bakken growth profile in tandem with HIP’s oil and gas infrastructure build-out. The expected growth in produced water volumes over the next several years and underdeveloped basin infrastructure creates an attractive opportunity for continued investment to build additional infrastructure for Hess and third parties.”

Currently there are over 150 miles of Hess water gathering pipelines that capture about 24,000 barrels of water per day. Along with saltwater disposal, Hess water operations in the region are massive.

Jonathan Stein, the Chief Financial Officer for Hess Infrastructure Partners (HIP), says that the acquisition of Hess Corporation’s water business in the Bakken will help the HIP portfolio.

Stein reported, “Consistent with our commitment to deliver stable cash flows, the water services business is expected to be underpinned by a long-term contract.”

He continued, “This contract structure is expected to be complementary with the current contract structure of our existing assets, making the water services business a strong addition to the HIP portfolio.”

In the meantime, Hess Corporation’s production in the Bakken shows signs of continued growth, despite its sale of the water business to its subsidiary, Hess Midstream. A December press release forecasted between 135,000 and 145,000 barrels of oil per day in 2019.

John Hess, the chief executive officer of Hess Corporation, said, “Our capital and exploratory expenditure program is designed to deliver strong returns, production growth and significant future free cash flow. As we focus spending on our high return investment opportunities, we will continue to reduce our unit costs to drive margin expansion and improve profitability.”

Hess plans to operate a six-rig program in 2019 within the Bakken, which is up from an average of 4.8 rigs in 2018. They anticipate a 42 percent increase in production from 2018 for a total of 180 anticipated newly drilled wells over the course of the next year.

 

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