Hess Presents 2012 Capital Plan

Integrated oil company Hess Corporation (HES - Analyst Report) has unveiled its capital and exploration budget for 2012. The company intends to expend around $6.80 billion, of which nearly 98.5% will be targeted toward exploration and production. Marketing, refining and corporate spending for the year will be approximately $100 million.

Of the total budget, Hess plans to put in approximately $2.50 billion for unconventional resource development that revolves around exploration in the Bakken Shale in North Dakota, where the company expects to operate 16 rigs and move ahead with the expansion the Tioga Gas Plant. Hess also plans to continue its activities in the Eagle Ford Shale in Texas and the Utica Shale in Ohio.

Management has assigned almost $1.60 billion for production, which includes drilling wells at Shenzi and Llano fields in the Gulf of Mexico and at Block G in Equatorial Guinea.

Hess’ development spending budget is $1.80 billion, while approximately $800 million has been allocated for exploration purpose.

The company plans to utilize its development spending budget for the operations at the Tubular Bells Field in the Gulf region, projects at the Valhall Field in Norway, appraisal activities at WA-390-P, offshore Western Australia and expansion of Block A-18 in the Gulf of Thailand.

Regionally, Hess will invest about $3.35 billion in the United States, $1.30 billion in Europe and $1.40 billion in Asia and Other. Africa will witness a spending of about $650 million.

New York-based Hess will announce its fourth quarter and full year 2011 earnings results on January 25, 2012. As per the Zacks Consensus Estimate, Hess will report an earnings of $1.48 per share in the fourth quarter and earnings per share of $6.15 for the full year.

Over the long term, we expect the company to perform on par with the broader industry and maintain a Neutral recommendation. Hess, which faces competition from ConocoPhillips (COP - Analyst Report), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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