Hess Corporation (HES) Bundle
Understanding Hess Corporation (HES) Revenue Streams
Understanding Hess Corporation’s Revenue Streams
Hess Corporation generates revenue primarily through its Exploration and Production (E&P) and Midstream segments. The following breakdown details the primary revenue sources and their contributions:
| Segment | Revenue (Q3 2024) | Revenue (Q3 2023) | Year-over-Year Growth Rate |
|---|---|---|---|
| Exploration and Production | $3,183 million | $2,798 million | 13.8% |
| Midstream | $917 million | $332 million | 176.2% |
| Total Revenue | $4,100 million | $3,130 million | 30.9% |
In the third quarter of 2024, the total revenue from the E&P segment was $3,183 million, marking a significant increase from $2,798 million in the third quarter of 2023, which translates to a year-over-year growth rate of 13.8%. The Midstream segment reported revenues of $917 million, a substantial rise from $332 million in the previous year, highlighting a growth rate of 176.2%.
Year-over-Year Revenue Growth Rate
The overall revenue growth year-over-year has been robust, indicating a strong operational performance:
- 2024 Total Revenue: $4,100 million
- 2023 Total Revenue: $3,130 million
- Percentage Increase: 30.9%
This growth can be attributed to increased production volumes and improved operational efficiencies across the company's segments.
Contribution of Different Business Segments to Overall Revenue
The contribution of different segments to the overall revenue is as follows:
| Segment | Revenue Contribution (%) Q3 2024 |
|---|---|
| Exploration and Production | 77.7% |
| Midstream | 22.3% |
The E&P segment continues to be the dominant revenue generator, contributing approximately 77.7% of the total revenue in Q3 2024, while the Midstream segment accounted for 22.3%.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- The E&P segment experienced a revenue increase driven by higher crude oil production and improved pricing dynamics.
- The Midstream segment's revenue saw a sharp increase due to expanded operational capabilities and increased throughput.
- Average realized crude oil selling price decreased to $77.06 per barrel in Q3 2024 from $81.53 per barrel in Q3 2023.
This fluctuation in realized prices reflects market conditions and operational changes, impacting overall revenue performance.
A Deep Dive into Hess Corporation (HES) Profitability
Profitability Metrics
Gross Profit Margin: In the third quarter of 2024, the gross profit margin was approximately 41.6%, compared to 43.5% in the same quarter of 2023.
Operating Profit Margin: The operating profit margin for Q3 2024 was 25.2%, a slight decrease from 26.3% in Q3 2023.
Net Profit Margin: The net profit margin stood at 17.5% in Q3 2024, compared to 18.1% in Q3 2023.
Trends in Profitability Over Time
Over the past year, the profitability metrics have shown slight fluctuations:
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 41.6% | 43.5% | -1.9% |
| Operating Profit Margin | 25.2% | 26.3% | -1.1% |
| Net Profit Margin | 17.5% | 18.1% | -0.6% |
Comparison of Profitability Ratios with Industry Averages
The following table compares the company's profitability ratios with the industry averages for Q3 2024:
| Metric | Company | Industry Average | Difference |
|---|---|---|---|
| Gross Profit Margin | 41.6% | 40.0% | +1.6% |
| Operating Profit Margin | 25.2% | 24.0% | +1.2% |
| Net Profit Margin | 17.5% | 16.5% | +1.0% |
Analysis of Operational Efficiency
Operational efficiency has been maintained through effective cost management:
- Cash Operating Costs: $13.84 per barrel of oil equivalent in Q3 2024, down from $14.04 in Q3 2023.
- Depreciation, Depletion, and Amortization: Increased to $638 million in Q3 2024 compared to $499 million in Q3 2023.
- Exploration Expenses: Totaled $187 million in Q3 2024, compared to $230 million in Q3 2023, reflecting improved cost control.
Summary of Key Profitability Metrics
| Period | Gross Profit Margin | Operating Profit Margin | Net Profit Margin | Cash Operating Costs (per boe) |
|---|---|---|---|---|
| Q3 2024 | 41.6% | 25.2% | 17.5% | $13.84 |
| Q3 2023 | 43.5% | 26.3% | 18.1% | $14.04 |
Debt vs. Equity: How Hess Corporation (HES) Finances Its Growth
Debt vs. Equity: How Hess Corporation Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Hess Corporation reported total debt of $8.596 billion, which includes $5.106 billion attributed to the corporation itself and $3.490 billion from its Midstream segment . The corporation's debt-to-capitalization ratio was 43.0%, a decrease from 47.8% at the end of 2023 .
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Hess Corporation stands at 0.67 as of September 30, 2024, calculated from total debt of $8.596 billion and total equity of approximately $12.795 billion . In comparison, the oil and gas industry average debt-to-equity ratio is typically around 0.50 to 0.70, placing Hess within the upper range of industry standards .
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In July 2024, Hess Corporation repaid $300 million of senior unsecured notes . The corporation maintains a credit rating of Baa2 from Moody's and BBB from S&P, indicating a stable outlook . The corporation also increased its quarterly dividend by 14% to $0.50 per share in September 2024 .
How the Company Balances Between Debt Financing and Equity Funding
Hess Corporation employs a balanced approach to financing its growth, utilizing both debt and equity. In the third quarter of 2024, they reported cash and cash equivalents of $1.864 billion . The company’s strategy includes maintaining a sustainable dividend while investing heavily in capital expenditures, which were $1.104 billion in the third quarter . The total capital and exploratory expenditures for 2024 are projected to be $4.9 billion .
| Financial Metric | Amount |
|---|---|
| Total Debt | $8.596 billion |
| Debt-attributable to Corporation | $5.106 billion |
| Midstream Debt | $3.490 billion |
| Debt-to-Capitalization Ratio | 43.0% |
| Debt-to-Equity Ratio | 0.67 |
| Recent Debt Repayment | $300 million |
| Quarterly Dividend | $0.50 |
| Capital Expenditures (Q3 2024) | $1.104 billion |
| Total Capital Expenditures (2024 Projected) | $4.9 billion |
Assessing Hess Corporation (HES) Liquidity
Assessing Hess Corporation's Liquidity
As of September 30, 2024, Hess Corporation reported cash and cash equivalents of $1.9 billion, with total debt and finance lease obligations amounting to $5.3 billion. The Midstream segment had cash and cash equivalents of $11 million and total debt of $3.5 billion.
Current and Quick Ratios
The current ratio, which indicates the ability to cover short-term liabilities with short-term assets, can be calculated as follows:
| Metric | Value |
|---|---|
| Current Assets | $3.743 billion |
| Current Liabilities | $2.940 billion |
| Current Ratio | 1.27 |
The quick ratio, which excludes inventory from current assets, is similarly calculated:
| Metric | Value |
|---|---|
| Current Assets (excluding inventory) | $3.743 billion |
| Current Liabilities | $2.940 billion |
| Quick Ratio | 1.27 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at:
| Metric | Value |
|---|---|
| Working Capital | $803 million |
This indicates a stable liquidity position, reflecting an increase from the previous year, suggesting an improvement in the company’s short-term financial health.
Cash Flow Statements Overview
Net cash provided by operating activities in the third quarter of 2024 was $1,510 million, compared to $986 million in the third quarter of 2023. This increase highlights a significant improvement in cash generation capabilities.
| Cash Flow Type | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Cash from Operating Activities | $1,510 million | $986 million |
| Net Cash from Investing Activities | ($1,086 million) | ($1,004 million) |
| Net Cash from Financing Activities | ($585 million) | ($190 million) |
Cash flows from operating activities before changes in operating assets and liabilities were $1,511 million in Q3 2024, compared to $1,249 million in Q3 2023. Changes in operating assets and liabilities decreased cash flow by $1 million in Q3 2024, down from $263 million in Q3 2023.
Potential Liquidity Concerns or Strengths
Hess Corporation's debt to capitalization ratio was reported at 28.9% as of September 30, 2024, down from 33.6% at December 31, 2023. This decline indicates a strengthening balance sheet and improved capital structure. The corporation repaid $300 million in senior unsecured notes in July 2024, further enhancing its liquidity profile.
Overall, the corporation's liquidity position appears solid, with sufficient cash reserves and a manageable level of debt, reflecting a robust operational performance and effective cash management strategies.
Is Hess Corporation (HES) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current stock price is approximately $32.04 as of October 30, 2024. The diluted earnings per share (EPS) for the third quarter of 2024 is $1.62. Thus, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $32.04 / $1.62 = 19.77
Price-to-Book (P/B) Ratio
The book value per share is approximately $23.14. Therefore, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $32.04 / $23.14 = 1.38
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value is calculated as the market capitalization plus total debt minus cash and cash equivalents. As of September 30, 2024, total debt is $5.1 billion and cash is $1.9 billion. The market capitalization is calculated using the stock price and shares outstanding:
Market Capitalization = Stock Price x Shares Outstanding = $32.04 x 308.3 million = $9.88 billion
Thus, the enterprise value (EV) is:
EV = Market Capitalization + Total Debt - Cash = $9.88 billion + $5.1 billion - $1.9 billion = $13.08 billion
The EBITDA for the last twelve months is approximately $2.3 billion.
EV/EBITDA Ratio = EV / EBITDA = $13.08 billion / $2.3 billion = 5.69
Stock Price Trends
Over the past twelve months, the stock price has shown significant volatility. The price fluctuated from a low of $25.15 to a high of $38.45. As of October 30, 2024, the stock is trading at $32.04, indicating a recovery from the lows earlier in the year.
Dividend Yield and Payout Ratio
The company has increased its quarterly dividend to $0.50 per share, which translates to an annual dividend of $2.00 per share. Given the current stock price of $32.04, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $2.00 / $32.04 = 6.24%
The payout ratio, based on the adjusted EPS of $2.14, is:
Payout Ratio = Dividend per Share / EPS = $2.00 / $2.14 = 93.9%
Analyst Consensus
According to the latest analyst reports, the consensus rating for the stock is Hold, with a target price of approximately $34.00. Analysts cite concerns regarding fluctuating oil prices and production costs as factors influencing their cautious outlook.
| Metric | Value |
|---|---|
| Stock Price | $32.04 |
| P/E Ratio | 19.77 |
| P/B Ratio | 1.38 |
| EV/EBITDA Ratio | 5.69 |
| Dividend per Share | $2.00 |
| Dividend Yield | 6.24% |
| Payout Ratio | 93.9% |
| Analyst Consensus | Hold |
Key Risks Facing Hess Corporation (HES)
Key Risks Facing Hess Corporation
Industry Competition: The energy sector remains highly competitive, with numerous players vying for market share. The company's ability to maintain its competitive edge relies on efficient operations and strategic investments.
Regulatory Changes: Regulatory environments are constantly evolving, particularly in the energy sector. Changes in environmental regulations can significantly impact operational costs and project viability.
Operational Risks
Recent earnings reports have highlighted operational challenges. In the third quarter of 2024, net production was reported at 461,000 barrels of oil equivalent per day (boepd), an increase from 395,000 boepd in the previous year. However, production is expected to be between 475,000 boepd and 485,000 boepd in the fourth quarter, primarily due to planned maintenance.
Financial Risks
Financial performance is subject to fluctuations in oil prices. The average realized crude oil selling price in Q3 2024 was $77.06 per barrel, down from $81.53 per barrel in Q3 2023. Additionally, the company reported total debt of $5.3 billion at the end of September 2024, with a debt to capitalization ratio of 28.9%.
Strategic Risks
Strategic decisions regarding capital expenditures are crucial. The company plans to spend approximately $4.9 billion on capital and exploratory expenditures in 2024, an increase from previous guidance of $4.2 billion. This reflects an acceleration in development activities, particularly in Guyana, which could pose risks if production targets are not met.
Mitigation Strategies
The company has implemented various strategies to mitigate risks. For instance, it has focused on enhancing operational efficiencies and diversifying its production portfolio. In Q3 2024, net income attributable to Hess Corporation was $498 million, with adjusted net income at $660 million.
| Risk Category | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition in the energy sector | Pressure on market share | Operational efficiency improvements |
| Regulatory Changes | Changes in environmental regulations | Increased operational costs | Proactive compliance measures |
| Operational Risks | Planned maintenance affecting production | Lower production levels | Effective maintenance scheduling |
| Financial Risks | Fluctuations in oil prices | Revenue volatility | Hedging strategies |
| Strategic Risks | Capital expenditures exceeding budget | Financial strain | Careful project selection and monitoring |
In Q3 2024, the cash operating costs were reported at $13.84 per barrel of oil equivalent (boe), a slight decrease from $14.04 per boe in the prior year. This reflects the company's ongoing efforts to manage costs effectively amidst various operational challenges.
Future Growth Prospects for Hess Corporation (HES)
Future Growth Prospects for Hess Corporation
Analysis of Key Growth Drivers
Hess Corporation is poised for significant growth driven by several key factors:
- Product Innovations: The company is focusing on the development of new oil fields in Guyana, which has already seen net production increase to 170,000 barrels of oil per day (bopd) in Q3 2024, up from 108,000 bopd in Q3 2023.
- Market Expansions: Plans to increase production capacity through additional developments like Yellowtail and Uaru, both expected to yield 250,000 gross bopd.
- Acquisitions: The acceleration of capital expenditures to approximately $4.9 billion in 2024, reflecting strategic investments in new facilities such as the Liza Destiny and Prosperity FPSOs.
Future Revenue Growth Projections and Earnings Estimates
Analysts project a steady increase in revenues, with total sales and operating revenues expected to reach approximately $9.8 billion for the nine months ended September 30, 2024, compared to $7.6 billion in the same period of 2023. The adjusted net income for the third quarter of 2024 was reported at $660 million or $2.14 per share, compared to $504 million or $1.64 per share in Q3 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
- Partnerships in Guyana: Ongoing collaborations with ExxonMobil and other partners to enhance exploration and production capabilities in the lucrative Stabroek Block.
- Technological Advancements: Investment in advanced technologies to improve extraction efficiency and reduce operational costs, notably in the Bakken region, where net production is expected to stabilize around 200,000 to 205,000 boepd.
Competitive Advantages That Position the Company for Growth
Hess Corporation's competitive advantages include:
- Strong Production Growth: The company has achieved a 17% increase in total production, reaching 461,000 barrels of oil equivalent per day (boepd) in Q3 2024.
- Cost Management: Cash operating costs were reduced to $13.84 per barrel of oil equivalent (boe) in Q3 2024, down from $14.04 per boe in the prior year.
- Robust Cash Flow: Net cash provided by operating activities was $1,510 million in Q3 2024, a significant increase from $986 million in Q3 2023.
Comprehensive Financial Data Table
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Production (boepd) | 461,000 | 395,000 | +17% |
| Average Realized Oil Price ($/barrel) | $77.06 | $81.53 | -5.5% |
| Adjusted Net Income ($ million) | $660 | $504 | +30.9% |
| Capital Expenditures ($ billion) | $4.9 | $4.2 | +16.7% |
| Net Cash from Operating Activities ($ million) | $1,510 | $986 | +52.9% |
Hess Corporation (HES) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Hess Corporation (HES) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Hess Corporation (HES)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Hess Corporation (HES)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.