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Raising Our FVE for Hess on Encouraging Yellowtail Data and Higher Gas Midcycle

Analyst Note

| Dave Meats, CFA |

After taking a second look at Hess' third-quarter financial and operating results, we are nudging our fair value estimate to $75 per share from $72. The increase is primarily the result of higher-than-expected capacity for the Yellowtail development in Guyana (the fourth development of a planned 10 on the firm's prolific Stabroek Block assets). The floating production, storage, and offloading vessel will have capacity of 250 mbo/d, slightly larger than the 220 mbo/d earmarked for the second and third developments (Liza 2 and Payara, respectively). The upside for volumes outweighs the potential impact of inflation on development costs for Yellowtail and subsequent projects. Our fair value also benefits from the recent increase in our U.S. natural gas midcycle forecast, which is $3.30/mcf (up from $2.80). However, because Hess' U.S. assets are heavily oil-weighted, the impact is fairly modest.

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Company Profile

Business Description

Hess is an independent oil and gas producer with key assets in the Bakken Shale, Guyana, the Gulf of Mexico, and Southeast Asia. At the end of 2020, the company reported net proved reserves of 1.2 billion barrels of oil equivalent. Net production averaged 323 thousand barrels of oil equivalent per day in 2020, at a ratio of 70% oil and natural gas liquids and 30% natural gas.

1185 Avenue of the Americas
New York, NY, 10036
T +1 212 997-8500
Sector Energy
Industry Oil & Gas E&P
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Distressed
Employees 1,621