Hess Q2 Adj. Profit Beats View; Plans Formation, IPO Of MLP

(RTTNews) - Energy company Hess Corp. (HES) on Wednesday reported a 35 percent decline in profit for the second quarter from last year, reflecting lower revenues and a decline in oil and gas production. Asset sales and extended shutdowns caused by the civil unrest in Libya reduced production.

However, adjusted earnings per share for the quarter beat analysts' expectations. Hess also said it plans to pursue the formation and initial public offering of a master limited partnership or MLP to be used as the primary midstream vehicle to support production growth in the Bakken oil shale play in North Dakota.

For the second quarter, net income attributable to the company declined to $931 million or $2.96 per share from $1.43 billion or $4.16 per share in the same period last year.

Adjusted earnings for the quarter were $432 million or $1.38 per share, compared to $520 million or $1.51 per share in the year-ago period.

On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $1.18 per share for the quarter. Analysts estimates typically exclude special items.

Total revenues and non-operating income declined 13 percent to $3.60 billion from $4.16 billion in the prior year. Analysts had a consensus revenue estimate of $2.63 billion for the quarter.

Oil and gas production was 319,000 barrels of oil equivalent per day or boepd, down 6.5 percent from 341,000 boepd in the year-ago quarter. The company noted that asset sales lowered production by 43,000 boepd, while extended shutdowns caused by civil unrest in Libya reduced production by around 24,000 boepd.

However, pro forma production in the quarter was 310,000 boepd, up 17 percent from 265,000 boepd in 2013.

The company's average worldwide crude oil selling price, including the effect of hedging, was $101.70 per barrel, up 4 percent from $97.89 per barrel in the same quarter a year ago. Meanwhile, average worldwide natural gas selling price decreased 1 percent to $6.35 per mcf from $6.44 per mcf in the same quarter a year ago.

For 2014, the company continues to expect pro forma production to average between 305,000 boepd and 315,000 boepd.

In a separate statement, Hess said it plans to pursue the formation and initial public offering of a master limited partnership or MLP. Hess stated that it plans to use the MLP as the primary midstream vehicle to support its Bakken production growth.

Hess said it will remain focused on value creation and the pursuit of its previously announced intention to monetize its midstream assets in the Bakken oil shale play in North Dakota.

The company expects initially to contribute to the MLP its natural gas processing plant, rail loading terminal and crude oil truck and pipeline terminal, all located in Tioga, North Dakota, in addition to its propane storage cavern as well as related rail and truck loading and storage terminal located in Mentor, Minnesota.

The company will own the general partner of the MLP, all of its incentive distribution rights, and a majority of its limited partner interests following completion of the initial public offering.

Hess expects the MLP to file a registration statement with the Securities and Exchange Commission in the fourth quarter of 2014. The company anticipates to make an IPO of common units representing limited partner interests in the MLP in the first quarter of 2015.

HES is currently trading at $102.03, up $2.61 or 2.62 percent on a volume of 1.67 million shares.