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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported):
July 27, 2005
AMERADA HESS CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE No. 1-1204 No. 13-4921002
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
1185 Avenue of the Americas
New York, New York 10036
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (212) 997-8500
--------------
N/A
(Former Name or Former Address, if Changed Since Last Report)
1
Item 2.02. Results of Operations and Financial Condition.
On July 27, 2005, Amerada Hess Corporation issued a news release reporting
its results for the second quarter of 2005. A copy of this news release is
attached hereto as Exhibit 99(1) and is hereby incorporated by reference.
Item 7.01. Regulation FD Disclosure.
Furnished hereunder are the prepared remarks of John B. Hess, Chairman of
the Board of Directors and Chief Executive Officer of Amerada Hess Corporation,
and John J. O'Connor, Executive Vice President and President, Worldwide
Exploration and Production at a public conference call held on July 27, 2005.
Copies of these remarks are attached, respectively, as Exhibit 99(2) and as
Exhibit 99(3) and are incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99(1) News release dated July 27, 2005 reporting results for the second
quarter of 2005.
99(2) Prepared remarks of John B. Hess, Chairman of the Board of
Directors and Chief Executive Officer.
99(3) Prepared remarks of John J. O'Connor, Executive Vice President and
President, Worldwide Exploration and Production.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 27, 2005
AMERADA HESS CORPORATION
By: /s/ John P. Rielly
------------------------------
Name: John P. Rielly
Title: Senior Vice President and
Chief Financial Officer
3
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99(1) News release dated July 27, 2005 reporting results for the
second quarter of 2005.
99(2) Prepared remarks of John B. Hess, Chairman of the Board of
Directors and Chief Executive Officer.
99(3) Prepared remarks of John J. O'Connor, Executive Vice President
and President, Worldwide Exploration and Production.
4
Exhibit 99.1
Amerada Hess Reports Estimated Results for the Second Quarter of 2005
NEW YORK--(BUSINESS WIRE)--July 27, 2005--Amerada Hess Corporation
(NYSE:AHC) reported net income of $299 million for the second quarter
of 2005 compared with income of $288 million for the second quarter of
2004. See the following page for a table of items affecting the
comparability of earnings between periods. The after-tax results by
major operating activity in 2005 and 2004 were as follows:
Three months ended Six months ended
June 30 (unaudited) June 30 (unaudited)
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
(In millions, except per share amounts)
Exploration and production $ 263 $ 182 $ 526 $ 389
Refining and marketing 98 160 161 272
Corporate (28) (24) (97) (26)
Interest expense (34) (37) (72) (73)
--------- --------- --------- ---------
Net income from continuing
operations $ 299 $ 281 $ 518 $ 562
Discontinued operations - 7 - 7
--------- --------- --------- ---------
Net income $ 299 $ 288 $ 518 $ 569
========= ========= ========= =========
Net income per share (diluted) $ 2.89 $ 2.84 $ 5.01 $ 5.61
========= ========= ========= =========
Weighted average number of
shares (diluted) 103.7 101.4 103.5 101.5
========= ========= ========= =========
Exploration and production earnings were $263 million in the
second quarter of 2005 compared with $182 million in the second
quarter of 2004. The Corporation's oil and gas production, on a
barrel-of-oil equivalent basis, was 355,000 barrels per day in the
second quarter of 2005 compared with 351,000 barrels per day in the
second quarter of 2004. In the second quarter of 2005, the
Corporation's average worldwide crude oil selling price, including the
effect of hedging, was $32.47 per barrel, an increase of $6.71 per
barrel from the second quarter of 2004. The Corporation's average
United States natural gas selling price was $6.47 per Mcf in the
second quarter of 2005, an increase of $1.24 per Mcf from the second
quarter of 2004.
Refining and marketing earnings were $98 million in the second
quarter of 2005 compared with $160 million in the second quarter of
2004. The decrease in refining and marketing earnings was primarily
due to lower refining results and reduced income from trading
activities.
The following items, on an after-tax basis, are included in net
income in the second quarter and first half of 2005 and 2004 (in
millions):
Three months ended Six months ended
June 30 June 30
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Exploration and production
- --------------------------
Income tax adjustments $ 11 $ - $ 11 $ -
Gains from asset sales - 15 11 34
Legal settlement - - 11 -
Corporate
- ---------
Premiums on bond repurchases (7) - (7) -
Income tax adjustments - - (41) 13
--------- --------- --------- ---------
$ 4 $ 15 $ (15) $ 47
========= ========= ========= =========
The exploration and production income tax benefits in the second
quarter reflect the effect on deferred income taxes of a reduction in
the income tax rate in Denmark and a tax settlement in the United
Kingdom.
Capital and exploratory expenditures in the second quarter of 2005
amounted to $527 million compared with $398 million in the second
quarter of 2004. Of these amounts, $507 million and $383 million in
the second quarter of 2005 and 2004, respectively, related to
exploration and production activities.
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS)
Second Second First
Quarter Quarter Quarter
2005 2004 2005
--------- --------- ---------
Income Statement
- ----------------
Revenues and Non-operating Income
Sales and other operating revenues $ 4,963 $ 3,803 $ 4,957
Non-operating income
Equity in income of HOVENSA L.L.C. 108 97 50
Gain on asset sales -- 3 18
Other 11 33 45
--------- --------- ---------
Total revenues and
non-operating income 5,082 3,936 5,070
--------- --------- ---------
Costs and Expenses
Cost of products sold 3,621 2,618 3,628
Production expenses 242 197 225
Marketing expenses 205 174 197
Exploration expenses, including dry
holes and lease impairment 87 63 133
Other operating expenses 38 47 31
General and administrative expenses 86 96 85
Interest expense 54 60 61
Depreciation, depletion and
amortization 261 239 254
--------- --------- ---------
Total costs and expenses 4,594 3,494 4,614
--------- --------- ---------
Income from continuing operations
before income taxes 488 442 456
Provision for income taxes 189 161 237
--------- --------- ---------
Income from continuing operations 299 281 219
Discontinued operations -- 7 --
--------- --------- ---------
Net income $ 299 $ 288 $ 219
========= ========= =========
Preferred stock dividends 12 12 12
--------- --------- ---------
Net income applicable to common
stockholders $ 287 $ 276 $ 207
========= ========= =========
Supplemental Income Statement
Information
- -----------------------------
Foreign currency gains, after-tax $ 8 $ 11 $ 6
Capitalized interest 22 13 14
Cash Flow Information
- ---------------------
Net cash provided by operating
activities (a) $ 606 $ 438 $ 461
Capital and Exploratory Expenditures
- ------------------------------------
Exploration and Production
United States $ 93 $ 83 $ 91
International 414 300 364
--------- --------- ---------
Total Exploration and Production 507 383 455
Refining and Marketing 20 15 28
--------- --------- ---------
Total Capital and Exploratory
Expenditures $ 527 $ 398 $ 483
========= ========= =========
Exploration expenses charged to income
included above
United States $ 23 $ 13 $ 8
International 11 13 8
--------- --------- ---------
$ 34 $ 26 $ 16
========= ========= =========
(a) Includes changes in working capital
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS)
First Half
-------------------
2005 2004
--------- ---------
Income Statement
- ----------------
Revenues and Non-operating Income
Sales and other operating revenues $ 9,920 $ 8,291
Non-operating income
Equity in income of HOVENSA L.L.C. 158 148
Gain on asset sales 18 23
Other 56 36
--------- ---------
Total revenues and non-operating income 10,152 8,498
--------- ---------
Costs and Expenses
Cost of products sold 7,250 5,906
Production expenses 466 384
Marketing expenses 402 351
Exploration expenses, including dry holes and
lease impairment 220 141
Other operating expenses 69 95
General and administrative expenses 171 172
Interest expense 115 117
Depreciation, depletion and amortization 515 465
--------- ---------
Total costs and expenses 9,208 7,631
--------- ---------
Income from continuing operations before
income taxes 944 867
Provision for income taxes 426 305
--------- ---------
Income from continuing operations 518 562
Discontinued operations -- 7
--------- ---------
Net income $ 518 $ 569
========= =========
Preferred stock dividends 24 24
--------- ---------
Net income applicable to common stockholders $ 494 $ 545
========= =========
Supplemental Income Statement Information
- -----------------------------------------
Foreign currency gains, after-tax $ 14 $ 4
Capitalized interest 36 29
Cash Flow Information
- ---------------------
Net cash provided by operating activities (a) $ 1,067 $ 832
Capital and Exploratory Expenditures
- ------------------------------------
Exploration and Production
United States $ 183 $ 222
International 778 543
--------- ---------
Total Exploration and Production 961 765
Refining and Marketing 48 27
--------- ---------
Total Capital and Exploratory Expenditures $ 1,009 $ 792
========= =========
Exploration expenses charged to income included
above
United States $ 31 $ 26
International 19 30
--------- ---------
$ 50 $ 56
========= =========
(a) Includes changes in working capital
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
(IN MILLIONS)
June 30 December 31
2005 2004
------------ ------------
Balance Sheet Information (unaudited)
- -------------------------
Cash and short-term investments $ 916 $ 877
Other current assets 3,574 3,458
Investments 1,305 1,254
Property, plant and equipment - net 8,780 8,505
Other assets 2,884 2,218
------------ ------------
Total assets $ 17,459 $ 16,312
============ ============
Current portion of long-term debt $ 25 $ 50
Other current liabilities 6,078 4,647
Long-term debt 3,761 3,785
Deferred liabilities and credits 2,328 2,233
Stockholders' equity excluding other
comprehensive income (loss) 7,134 6,621
Accumulated other comprehensive income
(loss) (1,867) (1,024)
------------ ------------
Total liabilities and stockholders'
equity $ 17,459 $ 16,312
============ ============
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS)
Second Quarter 2005
----------------------------------
United
States International Total
--------- -------------- ---------
Sales and other operating revenues $ 269 $ 769 $ 1,038
Non-operating income (expenses) (3) 2 (1)
--------- -------------- ---------
Total revenues 266 771 1,037
--------- -------------- ---------
Costs and expenses
Production expenses, including
related taxes 58 184 242
Exploration expenses, including
dry holes and lease impairment 51 36 87
General, administrative and other
expenses 18 17 35
Depreciation, depletion and
amortization 42 205 247
--------- -------------- ---------
Total costs and
expenses 169 442 611
--------- -------------- ---------
Results of operations before
income taxes 97 329 426
Provision for income taxes 34 129 163
--------- -------------- ---------
Results of operations $ 63 $ 200 $ 263
========= ============== =========
Second Quarter 2004
----------------------------------
United
States International Total
--------- -------------- ---------
Sales and other operating revenues $ 201 $ 631 $ 832
Non-operating income (expenses) (8) 27 19
--------- -------------- ---------
Total revenues 193 658 851
--------- -------------- ---------
Costs and expenses
Production expenses, including
related taxes 49 148 197
Exploration expenses, including
dry holes and lease impairment 24 39 63
General, administrative and other
expenses 19 27 46
Depreciation, depletion and
amortization 35 191 226
--------- -------------- ---------
Total costs and
expenses 127 405 532
--------- -------------- ---------
Results of operations before
income taxes 66 253 319
Provision for income taxes 25 112 137
--------- -------------- ---------
Results of operations $ 41 $ 141 $ 182
======== ======== ========
First Quarter 2005
----------------------------------
United
States International Total
--------- -------------- ---------
Sales and other operating revenues $ 279 $ 751 $ 1,030
Non-operating income (expenses) (2) 49 47
--------- -------------- ---------
Total revenues 277 800 1,077
--------- -------------- ---------
Costs and expenses
Production expenses, including
related taxes 49 176 225
Exploration expenses, including
dry holes and lease impairment 109 24 133
General, administrative and other
expenses 19 10 29
Depreciation, depletion and
amortization 44 197 241
--------- -------------- ---------
Total costs and
expenses 221 407 628
--------- -------------- ---------
Results of operations before
income taxes 56 393 449
Provision for income taxes 22 164 186
--------- -------------- ---------
Results of operations $ 34 $ 229 $ 263
========= ============== =========
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXPLORATION AND PRODUCTION EARNINGS (UNAUDITED)
(IN MILLIONS)
First Half 2005
----------------------------------
United
States International Total
--------- -------------- ---------
Sales and other operating revenues $ 548 $ 1,520 $ 2,068
Non-operating income (expenses) (4) 50 46
--------- -------------- ---------
Total revenues 544 1,570 2,114
--------- -------------- ---------
Costs and expenses
Production expenses, including
related taxes 107 359 466
Exploration expenses, including
dry holes and lease impairment 160 60 220
General, administrative and other
expenses 38 28 66
Depreciation, depletion and
amortization 86 402 488
--------- -------------- ---------
Total costs and expenses 391 849 1,240
--------- -------------- ---------
Results of operations before
income taxes 153 721 874
Provision for income taxes 57 291 348
--------- -------------- ---------
Results of operations $ 96 $ 430 $ 526
========= ============== =========
First Half 2004
----------------------------------
United
States International Total
--------- -------------- ---------
Sales and other operating revenues $ 411 $ 1,289 $ 1,700
Non-operating income (expenses) (4) 35 31
--------- -------------- ---------
Total revenues 407 1,324 1,731
--------- -------------- ---------
Costs and expenses
Production expenses, including
related taxes 89 295 384
Exploration expenses, including
dry holes and lease impairment 63 78 141
General, administrative and other
expenses 36 46 82
Depreciation, depletion and
amortization 64 375 439
--------- -------------- ---------
Total costs and expenses 252 794 1,046
--------- -------------- ---------
Results of operations before
income taxes 155 530 685
Provision for income taxes 57 239 296
--------- -------------- ---------
Results of operations $ 98 $ 291 $ 389
========= ============== =========
AMERADA HESS CORPORATION AND CONSILIDATED SUBSIDIARIES
SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT FOR AVERAGE SELLING PRICES)
Second Second First
Quarter Quarter Quarter
2005 2004 2005
-------- -------- --------
Operating Data
- --------------
Net Production Per Day
- ----------------------
Crude oil - barrels
United States 47 41 49
Europe 117 127 120
Africa, Asia and other 75 66 69
-------- -------- --------
Total 239 234 238
======== ======== ========
Natural gas liquids - barrels
United States 14 12 13
Europe 5 5 7
-------- -------- --------
Total 19 17 20
======== ======== ========
Natural gas - mcf
United States 148 160 165
Europe 289 358 336
Africa, Asia and other 138 83 103
-------- -------- --------
Total 575 601 604
======== ======== ========
Barrels of oil equivalent 355 351 358
======== ======== ========
Average Selling Price (including hedging)
- -----------------------------------------
Crude oil - per barrel
United States $ 32.44 $ 25.27 $ 32.18
Europe 33.22 25.39 31.21
Africa, Asia and other 31.10 27.47 30.92
Natural gas liquids - per barrel
United States $ 34.98 $ 26.33 $ 32.83
Europe 35.49 27.33 31.69
Natural gas - per mcf
United States $ 6.47 $ 5.23 $ 6.15
Europe 4.60 3.47 5.41
Africa, Asia and other 3.95 3.85 3.93
Average Selling Price (excluding hedging)
- -----------------------------------------
Crude oil - per barrel
United States $ 47.83 $ 35.54 $ 45.18
Europe 50.10 35.39 46.82
Africa, Asia and other 47.78 35.04 44.87
Natural gas liquids - per barrel
United States $ 34.98 $ 26.33 $ 32.83
Europe 35.49 27.33 31.69
Natural gas - per mcf
United States $ 6.47 $ 5.76 $ 6.15
Europe 4.60 3.47 5.41
Africa, Asia and other 3.95 3.85 3.93
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL OPERATING DATA
(IN THOUSANDS, EXCEPT FOR AVERAGE SELLING PRICES)
First Half
-------------------
2005 2004
-------- --------
Operating Data
- --------------
Net Production Per Day
----------------------
Crude oil - barrels
United States 48 40
Europe 118 127
Africa, Asia and other 73 64
-------- --------
Total 239 231
======== ========
Natural gas liquids - barrels
United States 13 12
Europe 6 6
-------- --------
Total 19 18
======== ========
Natural gas - mcf
United States 156 171
Europe 312 346
Africa, Asia and other 121 85
-------- --------
Total 589 602
======== ========
Barrels of oil equivalent 356 349
======== ========
Average Selling Price (including hedging)
-----------------------------------------
Crude oil - per barrel
United States $ 32.31 $ 25.38
Europe 32.30 26.31
Africa, Asia and other 31.00 27.23
Natural gas liquids - per barrel
United States $ 33.94 $ 26.06
Europe 33.69 24.05
Natural gas - per mcf
United States $ 6.30 $ 5.22
Europe 5.03 3.89
Africa, Asia and other 3.95 3.78
Average Selling Price (excluding hedging)
-----------------------------------------
Crude oil - per barrel
United States $ 46.49 $ 34.55
Europe 48.60 33.76
Africa, Asia and other 46.22 33.12
Natural gas liquids - per barrel
United States $ 33.94 $ 26.06
Europe 33.69 24.05
Natural gas - per mcf
United States $ 6.30 $ 5.45
Europe 5.03 3.89
Africa, Asia and other 3.95 3.78
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
HEDGED PRICES AND VOLUMES
WTI Brent
--------------------------- ---------------------------
Average Thousands Average Thousands
Selling of barrels Selling of barrels
Maturity Price per day Price per day
- -------------- ------------- ------------- ------------- -------------
2005
3rd Quarter $32.65 28 $30.82 118
4th Quarter 32.16 28 30.37 118
2006 - - 28.10 30
2007 - - 25.85 24
2008 - - 25.56 24
2009 - - 25.54 24
2010 - - 25.78 24
2011 - - 26.37 24
2012 - - 26.90 24
Note: In addition to the income statement effects of the open
hedge positions indicated above, the Corporation has after-tax
deferred realized losses of $93 million as of June 30 included in
accumulated other comprehensive income (loss). These after-tax losses
will reduce 2005 income as follows: third quarter - $48 million and
fourth quarter - $45 million. There were no natural gas hedges
outstanding at June 30.
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
REFINING AND MARKETING SUPPLEMENTAL FINANCIAL AND OPERATING DATA
Second Second First
Quarter Quarter Quarter
2005 2004 2005
-------- -------- --------
Financial Information
(in millions)
- ---------------------
Refining and Marketing
Earnings
----------------------
Income before income taxes $ 151 $ 215 $ 102
Provision for income taxes 53 55 39
-------- -------- --------
Refining and Marketing
Earnings $ 98 $ 160 $ 63
======== ======== ========
Summary of Refining and
Marketing Earnings
-----------------------
Refining $ 77 $ 123 $ 42
Marketing 14 19 13
Trading 7 18 8
-------- -------- --------
Total Refining and
Marketing Earnings $ 98 $ 160 $ 63
======== ======== ========
- ----------------------------------------------------------------------
Operating Data
(in thousands unless noted)
- ----------------------------
Refined Product Sales
(barrels per day)
---------------------
Gasoline 227 205 181
Distillates 104 113 166
Residuals 59 51 74
Other 45 35 41
-------- -------- --------
Total 435 404 462
======== ======== ========
Refinery Throughput
(barrels per day)
-------------------
HOVENSA - Crude runs 500 489 449
HOVENSA - AHC 50% share 250 245 225
Port Reading 58 55 35
Refinery
Refinery Utilization Capacity
-------------------- ----------
HOVENSA (thousands
of barrels
per day)
Crude 500 100.1% 97.7% 89.8%
FCC 150 93.3% 95.5% 57.2%(a)
Coker 58 100.9% 100.2% 92.9%
Port Reading 65 89.2% 89.2% 56.5%(a)
----------
Retail Marketing
----------------
Number of retail
stations (b) 1,352 1,242 1,250
Convenience store revenue
(in millions) (c) $ 254 $ 242 $ 218
Average gasoline volume
per station (gallons per
month) (c) 213 197 195
(a) The fluid catalytic cracking units at HOVENSA and Port Reading
were each shutdown for approximately 30 days for scheduled
maintenance in the first quarter of 2005.
(b) Includes company operated, branded/dealer and Wilco-Hess.
(c) Company operated only.
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
REFINING AND MARKETING SUPPLEMENTAL FINANCIAL AND OPERATING DATA
First Half
--------------------
2005 2004
-------- --------
Financial Information (in millions)
- -----------------------------------
Refining and Marketing Earnings
---------------------------------
Income before income taxes $ 253 $ 352
Provision for income taxes 92 80
-------- --------
Refining and Marketing
Earnings $ 161 $ 272
======== ========
Summary of Refining and Marketing
Earnings
---------------------------------
Refining $ 119 $ 198
Marketing 27 42
Trading 15 32
-------- --------
Total Refining and Marketing
Earnings $ 161 $ 272
======== ========
- ----------------------------------------------------------------------
Operating Data
(in thousands unless noted)
- ----------------------------
Refined Product Sales
(barrels per day)
---------------------
Gasoline 204 197
Distillates 135 146
Residuals 67 66
Other 42 35
-------- --------
Total 448 444
======== ========
Refinery Throughput
(barrels per day)
-------------------
HOVENSA - Crude runs 475 492
HOVENSA - AHC 50% share 238 246
Port Reading 47 56
Refinery
Refinery Utilization Capacity
-------------------- -----------
HOVENSA (thousands
of barrels
per day)
Crude 500 95.0% 98.3%
FCC 150 75.3%(a) 95.9%
Coker 58 96.9% 100.0%
Port Reading 65 72.8%(a) 90.2%
-----------
Retail Marketing
----------------
Number of retail stations (b) 1,352 1,242
Convenience store revenue (in
millions) (c) $ 472 $ 455
Average gasoline volume per
station (gallons per
month) (c) 204 190
(a) The fluid catalytic cracking units at HOVENSA and Port Reading
were each shutdown for approximately 30 days for scheduled
maintenance in the first quarter of 2005.
(b) Includes company operated, branded/dealer and Wilco-Hess.
(c) Company operated only.
CONTACT: Amerada Hess Corporation
J.R. Wilson, 212-536-8940
Exhibit 99.2
Amerada Hess - 2nd Quarter 2005 Conference Call
Comments by John Hess
Thank you Jay, and welcome to our second quarter conference call. I would like
to make a few brief comments after which John O'Connor will discuss our
exploration program for the balance of the year. John Rielly will then review
the financial results for the quarter.
Turning first to exploration and production, our second quarter production
averaged 355 thousand barrels of oil equivalent per day, up about 1% over the
year ago quarter. Strong operating performance from our existing assets and new
production from the JDA, Clair Field, and Russia all contributed to these
results.
At the end of March we announced the acquisition of a controlling interest in
Samara-Nafta, a company operating in the Volga-Urals region of Russia. Since
then, our Russian venture has acquired three additional licenses in the
Volga-Urals region, increasing our investment to approximately $200 million.
Production from Russia averaged seven thousand barrels per day in the second
quarter.
On July 19, we announced that an agreement was signed for the sale of gas from
the Phu Horm Field, located onshore in Northeast Thailand. Amerada Hess is the
operator with a 35% interest. First gas is expected to be delivered by early
2007 at an initial gross rate of approximately 80 million cubic feet per day,
increasing gradually to a rate of approximately 100 million cubic feet per day.
We are steadily building a significant position in the Southeast Asia gas
market, and this development is a positive addition to our portfolio.
For 2005, our current production forecast is 350-360 thousand barrels of oil
equivalent per day, excluding any contribution from Libya. We continue to
believe that re-entry into our Oasis concessions will happen; however, the
timing of our return is difficult to predict.
With regard to refining and marketing, our operations performed well during the
quarter. The Hovensa joint venture refinery operated at full capacity and
benefited from a strong margin environment. While our retail marketing business
posted same store gasoline volumes which were 8% higher than last year, and
convenience store sales which were 3% higher, income was negatively impacted by
lower retail gasoline margins, resulting from the run up in wholesale prices
during the quarter.
Effective June 1, our WilcoHess joint venture acquired 102 retail outlets in
eastern North Carolina. The acquisition, which was financed solely by the joint
venture, has solidified our competitive position in North Carolina, where we now
have 233 sites, and has increased the total number of Hess branded retail
outlets to about 1,355.
Earlier this month, Hess LNG, a 50/50 joint venture between Amerada Hess and
Poten & Partners, received approval from the Federal Energy Regulatory
Commission to proceed with the Weaver's Cove LNG regasification terminal in Fall
River, Massachusetts. While additional federal, state and local permits are
required, the receipt of the FERC certificate is an important milestone. The
facility is designed for a base load send out capacity of 400 million cubic feet
per day.
Our current estimate of 2005 capital and exploratory expenditures is $2.4-2.6
billion. This level of spending is up from our previous forecast of $2.1 billion
and is opportunity driven. Our investment in Russia accounts for approximately
$200 million of the increase, with the balance coming from additional
opportunities in our portfolio.
I will now turn the call over to John O'Connor.
Exhibit 99.3
Amerada Hess - 2nd Quarter 2005 Conference Call
Comments by John O'Connor
We have an active exploration and appraisal drilling program planned for the
second half of the 2005. We are currently drilling a wildcat well offshore Gabon
and are participating in a well on Block 64 in Peru. Results of both of these
wells are expected before the end of the third quarter. In addition, we plan to
drill approximately eight appraisal wells at the Malaysia-Thailand Joint
Development Area (JDA) over the remainder of 2005, which are designed to prove
up reserves in support of both Phase II and Phase III developments.
In the Gulf of Mexico, we will participate in four exploration wells in the
second half of 2005, including a well at our Pony prospect on Green Canyon 468.
This block is to the north of and is contiguous with the Nexen operated Green
Canyon Block 512, on which they and their partners are currently drilling the
Knotty Head prospect. Reported results from that well appear encouraging and we
believe that the same structure extends onto our blocks, pending the drilling
outcome of Pony. We intend to drill our prospect with a 100% working interest.
In addition to Pony, we plan to participate in the drilling of two lower Miocene
prospects in the Green Canyon area - Ouachita (AHC: 67% interest) and Turtle
Lake (AHC: 25% interest), as well as a prospect named Barossa (AHC: 100%
interest), on Garden Banks 158, which will target natural gas reserves in the
Pliocene.
Rigs have been contracted for all of our drilling needs for the balance of 2005
as well as the majority of the 2006 program.
With regard to our Shenzi and Tubular Bells discoveries in the deepwater Gulf of
Mexico, the Shenzi discovery has now been appraised and we are working with our
partners to sanction the development before the end of 2005. With regard to
Tubular Bells, the operator has indicated that an appraisal well is planned for
the first quarter of 2006.
In 2005, exploration expense is forecast to range between $425-475 million,
versus $287 million in 2004. The increase reflects the carry-over effect of
expensing the Wembley and Diamondback wells in 2005, versus 2004, together with
an expanded drilling program at the JDA.
I will now turn the call over to John Rielly.