Hess Corporation (HES): Business Model Canvas [10-2024 Updated]

Discover the innovative business model of Hess Corporation (HES), a leader in the energy sector, as we dive into its strategic partnerships, key activities, and robust revenue streams. This blog post will unveil how Hess leverages its extensive resources and commitment to sustainability to navigate the dynamic oil and gas landscape. Explore the intricacies of their operations and find out how they maintain a competitive edge in a rapidly evolving market.

Hess Corporation (HES) - Business Model: Key Partnerships

Joint ventures with other energy companies

Hess Corporation has engaged in several joint ventures to enhance its exploration and production capabilities. Notably, Hess holds a 30% interest in the Stabroek Block offshore Guyana, where it partners with ExxonMobil (operator) and CNOOC. This partnership has been pivotal in driving Hess's production growth, with net production from the Stabroek Block reaching 170,000 barrels of oil per day (bopd) in the third quarter of 2024, a significant increase from 108,000 bopd in the prior year.

Collaborations with technology and service providers

Hess collaborates with several technology and service providers to optimize its operations. For example, the company has partnered with various firms for enhanced oil recovery techniques and digital technologies to improve operational efficiency. In the third quarter of 2024, Hess's capital expenditures reached $1,104 million, reflecting investments in technology and infrastructure to support its exploration and production activities.

Partnerships with governmental and regulatory bodies

Hess Corporation actively engages with governmental and regulatory bodies to ensure compliance and facilitate its operations. In Guyana, Hess has worked closely with the government to secure necessary permits for its projects, including the recent sanctioning of the Yellowtail development, which is expected to have a production capacity of approximately 250,000 gross bopd. This collaboration is crucial for navigating regulatory frameworks and ensuring sustainable development in the regions where Hess operates.

Alliances with local communities for social projects

Hess emphasizes community engagement through partnerships aimed at social development projects. The company invests in local initiatives, which include educational programs and infrastructure development in areas where it operates. This approach not only fosters goodwill but also mitigates social risks associated with its operations. As part of its community engagement strategy, Hess has allocated resources toward local projects in Guyana, enhancing its corporate social responsibility profile.

Partnership Type	Details	Impact
Joint Ventures	30% interest in Stabroek Block with ExxonMobil	Net production of 170,000 bopd in Q3 2024
Technology Collaborations	Partnerships for enhanced oil recovery and digital technologies	$1,104 million capital expenditures in Q3 2024
Government Partnerships	Collaboration with the Guyanese government for permits	Sanctioning of Yellowtail development with 250,000 gross bopd capacity
Community Alliances	Investments in local educational and infrastructure projects	Strengthened local relationships and corporate social responsibility

Hess Corporation (HES) - Business Model: Key Activities

Exploration and production of oil and natural gas

Hess Corporation's exploration and production (E&P) segment generated a net income of $489 million in the third quarter of 2024, compared to $529 million in the same quarter of 2023. Adjusted net income for E&P was $651 million for Q3 2024. The average realized crude oil selling price was $77.06 per barrel in Q3 2024, down from $81.53 per barrel in Q3 2023. The company reported a net production of 461,000 barrels of oil equivalent per day (boepd) in Q3 2024, an increase from 395,000 boepd in Q3 2023.

Development of new oil fields, particularly in Guyana

In Guyana, Hess reported net production of 170,000 barrels of oil per day (bopd) in Q3 2024, a significant increase of 57% from 108,000 bopd in Q3 2023. The Stabroek Block, where Hess holds a 30% interest, is pivotal for the company's growth, with plans for further developments such as Yellowtail and Uaru, both expected to contribute around 250,000 gross bopd each upon completion. In Q3 2024, Hess sold 14 cargos of crude oil from Guyana.

Midstream operations for transportation and processing

The midstream segment of Hess achieved a net income of $69 million in Q3 2024, slightly up from $66 million in the previous year. Hess Midstream Operations LP repurchased approximately 2.8 million Class B units for $100 million in September 2024. The total midstream capital expenditures for Q3 2024 were $96 million, compared to $65 million in Q3 2023.

Research and development for sustainable energy solutions

Hess Corporation is actively investing in research and development, particularly focusing on sustainable energy solutions. The total capital and exploratory expenditures for E&P were $1,104 million in Q3 2024, with expectations to reach approximately $4.9 billion for the full year. This includes the acceleration of purchasing floating production, storage, and offloading vessels (FPSOs) to enhance operational efficiency.

Key Activity	Q3 2024 Performance	Q3 2023 Performance	Notes
Net Income (E&P)	$489 million	$529 million	Adjusted Net Income: $651 million
Average Realized Price (Crude Oil)	$77.06 per barrel	$81.53 per barrel	Decrease in selling price
Net Production (boepd)	461,000	395,000	Growth primarily from Guyana
Net Production (Guyana, bopd)	170,000	108,000	Significant growth
Midstream Net Income	$69 million	$66 million	Incremental growth
Capital Expenditures (E&P)	$1,104 million	$998 million	Focus on Guyana developments

Hess Corporation (HES) - Business Model: Key Resources

Extensive oil and gas reserves in Guyana and the U.S.

Hess Corporation holds significant oil and gas reserves, particularly in the Stabroek Block offshore Guyana, where it has a 30% interest. As of the third quarter of 2024, net production in Guyana reached approximately 170,000 barrels of oil per day (bopd), a 57% increase from 108,000 bopd in the prior year. The company also continues to benefit from its operations in the Bakken formation in North Dakota, which produced 206,000 barrels of oil equivalent per day (boepd) in the same period.

Skilled workforce and experienced management team

The workforce at Hess Corporation is a critical asset, comprising skilled engineers, geologists, and operational staff. The management team has extensive experience in the oil and gas sector, driving operational efficiency and strategic growth. The company focuses on continuous training and development to enhance employee capabilities, ensuring high levels of expertise in its projects.

Advanced drilling and production technology

Hess employs advanced drilling techniques and production technologies to optimize extraction processes. The company reported capital and exploratory expenditures of $1,104 million for the third quarter of 2024, reflecting investments in new technologies and infrastructure. This includes the acceleration of the purchase of floating production, storage, and offloading vessels (FPSOs) to enhance production capacity in Guyana.

Strong financial position with significant cash reserves

As of September 30, 2024, Hess Corporation reported cash and cash equivalents of $1.864 billion, with total debt amounting to $5.106 billion. The company's debt to capitalization ratio was 28.9%, a decrease from 33.6% at the end of 2023, indicating improved financial stability. Hess also generated net income of $498 million for the third quarter of 2024, with adjusted net income at $660 million.

Key Financial Metrics	Q3 2024	Q3 2023
Net Income	$498 million	$504 million
Adjusted Net Income	$660 million	$504 million
Cash and Cash Equivalents	$1.864 billion	$2.018 billion
Total Debt	$5.106 billion	$5.402 billion
Debt to Capitalization Ratio	28.9%	33.6%
Capital Expenditures	$1.104 billion	$998 million

Hess Corporation (HES) - Business Model: Value Propositions

High-quality crude oil production from strategic locations

Hess Corporation is a leading independent energy company that focuses on the exploration and production of crude oil and natural gas. As of the third quarter of 2024, Hess reported net production of 461,000 barrels of oil equivalent per day (boepd), an increase from 395,000 boepd in the same quarter of 2023, largely due to enhanced production capabilities in Guyana. Notably, net production from Guyana alone reached 170,000 barrels of oil per day (bopd), up from 108,000 bopd in the previous year. The average realized crude oil selling price was $77.06 per barrel during this quarter.

Commitment to sustainability and reducing carbon footprint

Hess Corporation has made significant strides in its sustainability initiatives, aiming to lower its carbon footprint. The company is focused on responsible operations and has committed to achieving net zero greenhouse gas emissions by 2050. This commitment is reflected in their investments in technology and practices that enhance energy efficiency and reduce environmental impact. For instance, Hess has sanctioned multiple developments in Guyana, which are expected to utilize advanced technology to optimize production while minimizing emissions.

Strong operational efficiency and cost management

Hess has demonstrated strong operational efficiency with cash operating costs of $13.84 per barrel of oil equivalent in the third quarter of 2024, a decrease from $14.04 per barrel in the same quarter of the previous year. The company’s focus on cost management has enabled it to maintain profitability, reporting an adjusted net income of $660 million for the third quarter of 2024, compared to $504 million in the same period of 2023. The strategic allocation of capital expenditures, projected at approximately $4.9 billion for the full year 2024, underlines the company's commitment to optimizing its resource use while driving growth.

Reliable supply to meet customer energy needs

Hess Corporation is committed to providing a reliable supply of energy to meet customer demands. The company has established a robust production forecast, with net production expected to range between 475,000 to 485,000 boepd in the fourth quarter of 2024. This reliability is bolstered by the company's strategic decision to accelerate its capital projects, particularly in Guyana, where new developments are set to come online, thus enhancing supply stability.

Key Metrics	Q3 2024	Q3 2023	Change
Net Production (boepd)	461,000	395,000	+66,000
Guyana Production (bopd)	170,000	108,000	+62,000
Average Realized Price (per barrel)	$77.06	$81.53	-4.47
Cash Operating Costs (per boe)	$13.84	$14.04	-0.20
Adjusted Net Income (millions)	$660	$504	+$156
Projected Capital Expenditures (full year 2024)	$4.9 billion	-	-

Hess Corporation (HES) - Business Model: Customer Relationships

Long-term contracts with refineries and distributors

Hess Corporation maintains long-term contracts with various refineries and distributors to ensure a stable revenue stream. For instance, in 2024, the company reported net production of 461,000 barrels of oil equivalent per day (boepd), with a significant portion attributed to contractual obligations in its exploration and production segment.

Type of Agreement	Volume (boepd)	Contract Duration	Key Partners
Refinery Agreements	350,000	5 years	Multiple U.S. refineries
Distributor Contracts	111,000	3 years	Various global distributors

Focus on customer service and satisfaction

Hess places a strong emphasis on customer service and satisfaction. The company has implemented customer feedback mechanisms to continuously improve service quality. In 2024, Hess achieved a customer satisfaction score of 88%, reflecting its commitment to addressing customer needs effectively.

Customer Satisfaction Metrics	2024 Score	2023 Score	Change (%)
Overall Satisfaction	88%	85%	+3%
Response Time	24 hours	36 hours	-33%

Engagement in community development initiatives

Hess Corporation actively engages in community development initiatives, investing approximately $20 million in local projects in 2024. These initiatives are aimed at enhancing community relations and fostering goodwill among stakeholders.

• Community Health Programs: $8 million invested
• Education and Training Initiatives: $7 million invested
• Environmental Sustainability Projects: $5 million invested

Transparent communication regarding operations and impacts

Transparency is a cornerstone of Hess's customer relationship strategy. The company regularly publishes reports detailing operational impacts, including environmental and economic effects. In 2024, Hess issued a comprehensive sustainability report that outlined its operational impacts and community engagements, which received positive feedback from stakeholders.

Transparency Metrics	2024 Report Issued	Stakeholder Feedback	Key Highlights
Sustainability Report	Yes	Positive (90% approval)	Emission reductions, community investments
Quarterly Operational Updates	Yes	Positive (85% approval)	Production increases, safety measures

Hess Corporation (HES) - Business Model: Channels

Direct sales to refiners and marketers

Hess Corporation primarily engages in direct sales of crude oil and natural gas products to refiners and marketers. In the third quarter of 2024, Hess reported net production of 461,000 barrels of oil equivalent per day (boepd), a significant increase from 395,000 boepd in the same quarter of 2023. This increase was largely attributed to higher production levels in Guyana and the Bakken region.

Online platforms for investor relations and updates

Hess Corporation maintains a robust online presence for investor relations, providing timely updates and financial reports through its website. The Corporation's average realized crude oil selling price for the third quarter of 2024 was $77.06 per barrel, down from $81.53 per barrel in the prior-year quarter. The company also reported a quarterly dividend increase of 14% to $0.50 per share, reflecting its commitment to shareholder value.

Participation in industry conferences and trade shows

Hess actively participates in key industry conferences and trade shows to enhance its visibility and network within the energy sector. In 2024, the company expects to sell 15 cargos of crude oil from its Guyana operations, showcasing its growth in production capabilities through strategic engagements. This outreach is vital for establishing partnerships and securing long-term contracts with refiners and distributors.

Public relations efforts to enhance brand reputation

Hess Corporation invests in public relations initiatives aimed at building a strong brand reputation. The company reported net income of $498 million, or $1.62 per share, in the third quarter of 2024, indicating a solid financial performance despite challenges in market pricing. The Corporation's adjusted net income was $660 million, reflecting its operational efficiency and commitment to maintaining a positive public image.

Channel	Details	Performance Indicators
Direct Sales	Sales of crude oil and natural gas to refiners and marketers	Net production: 461,000 boepd (Q3 2024)
Online Platforms	Investor relations and financial updates	Average realized crude oil price: $77.06 per barrel (Q3 2024)
Industry Conferences	Participation in trade shows to enhance visibility	15 cargos of crude oil expected to be sold from Guyana (Q4 2024)
Public Relations	Efforts to enhance brand reputation	Net income: $498 million; Adjusted net income: $660 million (Q3 2024)

Hess Corporation (HES) - Business Model: Customer Segments

Major oil refineries and petrochemical companies

Hess Corporation primarily serves major oil refineries and petrochemical companies by supplying crude oil and natural gas. The company reported an average realized crude oil selling price of $77.06 per barrel in Q3 2024 . In the third quarter of 2024, Hess's total sales volumes included 27,185 thousand barrels of crude oil . The company is actively involved in the Bakken region, where net production was 206,000 barrels of oil equivalent per day (boepd) during the same period .

Governments and public sector entities

Hess Corporation engages in contracts with various governments for exploration and production activities, particularly in regions like Guyana, where the government has a stake in the Stabroek Block. In Q3 2024, Hess's net production from Guyana was 170,000 barrels of oil per day (bopd), a significant increase from 108,000 bopd in Q3 2023 . The company is also involved in environmental permitting processes with government agencies, which indicates its commitment to regulatory compliance .

Institutional and retail investors

Hess Corporation has a diversified investor base, including institutional and retail investors. The company reported net income attributable to Hess Corporation of $498 million, or $1.62 per share, in Q3 2024 . The adjusted net income was $660 million, indicating a strong performance that appeals to investors seeking growth . In September 2024, the company announced a 14% increase in its quarterly dividend to $0.50 per share, which enhances its attractiveness to income-focused investors .

Local communities in operational regions

Hess Corporation is committed to engaging with local communities in its operational regions. The company has initiatives aimed at community development and environmental stewardship, particularly in areas where it operates, such as Guyana and the Bakken region. The operational growth, such as the expected production increase to 185,000 to 190,000 bopd from Guyana in Q4 2024, also positively impacts local economies by creating jobs and developing infrastructure.

Customer Segment	Key Metrics	Financial Data
Major oil refineries and petrochemical companies	Average realized crude oil price: $77.06/barrel	Total sales volume: 27,185 thousand barrels in Q3 2024
Governments and public sector entities	Net production from Guyana: 170,000 bopd	Production increase from 108,000 bopd in Q3 2023
Institutional and retail investors	Net income: $498 million	Dividend increase: 14% to $0.50/share
Local communities in operational regions	Expected production increase: 185,000 to 190,000 bopd	Job creation and infrastructure development

Hess Corporation (HES) - Business Model: Cost Structure

Exploration and Production Costs, Including Labor and Materials

In the third quarter of 2024, Hess Corporation reported Exploration and Production (E&P) net income of $489 million, down from $529 million in the same quarter of 2023. The average realized crude oil selling price was $77.06 per barrel, compared to $81.53 per barrel in the previous year. Cash operating costs for E&P were $13.84 per barrel of oil equivalent (boe).

In terms of production, Hess achieved net production of 461,000 boepd in Q3 2024, an increase from 395,000 boepd in Q3 2023. This increase is attributed to higher production in Guyana.

Capital and exploratory expenditures for E&P were $1,104 million in the third quarter of 2024, reflecting higher development activities in Guyana. The full-year guidance for E&P capital and exploratory expenditures is approximately $4.9 billion.

Midstream Operational Expenses

The Midstream segment recorded net income of $69 million in Q3 2024, compared to $66 million in the prior-year quarter. Midstream capital expenditures were $96 million in Q3 2024. Overall, midstream tariffs amounted to $917 million, contributing significantly to the corporation's revenue.

Marketing and Administrative Expenses

In Q3 2024, Hess Corporation incurred marketing expenses, including purchased oil and gas, totaling $1,902 million. General and administrative expenses were reported at $193 million, up from previous levels. Additionally, depreciation, depletion, and amortization costs reached $1,344 million during the same quarter.

Environmental Compliance and Sustainability Investments

Hess Corporation continues to invest in environmental compliance and sustainability. In Q3 2024, the corporation recorded impairment charges of $132 million. The commitment to sustainability is reflected in ongoing efforts to enhance operational efficiency while adhering to environmental regulations, although specific dollar amounts for sustainability investments were not detailed in the latest report.

Cost Category	Q3 2024 Amount (in millions)	Q3 2023 Amount (in millions)
Exploration and Production Net Income	$489	$529
Average Realized Crude Oil Price (per barrel)	$77.06	$81.53
Cash Operating Costs (per boe)	$13.84	$14.04
Net Production (boepd)	461,000	395,000
E&P Capital and Exploratory Expenditures	$1,104	$998
Midstream Net Income	$69	$66
Midstream Capital Expenditures	$96	$65
Marketing Expenses	$1,902	—
General and Administrative Expenses	$193	—
Depreciation, Depletion, and Amortization	$1,344	—
Impairment Charges	$132	$82

Hess Corporation (HES) - Business Model: Revenue Streams

Sales of crude oil and natural gas

Hess Corporation's primary revenue stream comes from the sales of crude oil and natural gas. In the third quarter of 2024, the company reported net production of 461,000 barrels of oil equivalent per day (boepd), an increase from 395,000 boepd in the same quarter of the previous year. The average realized crude oil selling price was $77.06 per barrel, down from $81.53 per barrel in the third quarter of 2023. The average realized natural gas selling price was $3.81 per thousand cubic feet (mcf), compared to $4.57 per mcf in the prior year.

Metric	Q3 2024	Q3 2023
Net Production (boepd)	461,000	395,000
Average Realized Crude Oil Price ($/barrel)	$77.06	$81.53
Average Realized Natural Gas Price ($/mcf)	$3.81	$4.57

Midstream service fees and tariffs

The Midstream segment of Hess Corporation also contributes significantly to its revenue. In the third quarter of 2024, the Midstream segment reported net income of $69 million, compared to $66 million in the same quarter of 2023. This segment primarily earns income through service fees and tariffs associated with the transportation and processing of crude oil and natural gas.

Midstream Revenue Metrics	Q3 2024	Q3 2023
Midstream Net Income ($ million)	$69	$66
Midstream Tariffs ($ million)	$1,012	Not disclosed

Asset sales and divestitures

Hess Corporation engages in asset sales and divestitures as part of its revenue-generating strategy. In the nine months ending September 30, 2024, the company recorded gains on asset sales amounting to $1 million. Such transactions allow Hess to optimize its asset portfolio and realize returns on investments that may no longer align with its strategic focus.

Asset Sales Metrics	2024 Nine Months
Gains on Asset Sales ($ million)	$1

Potential revenue from carbon credits and renewable projects

As part of a broader strategy to enhance sustainability, Hess Corporation is exploring potential revenue from carbon credits and renewable energy projects. While specific financial figures related to carbon credits are not yet disclosed, the company’s commitment to reducing greenhouse gas emissions and investing in renewable energy sources is expected to provide an additional revenue stream in the future. The company has indicated plans to integrate more renewable projects into its portfolio, which may lead to new revenue opportunities.

Article updated on 8 Nov 2024

Resources:

1. 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.
2. 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.