hes-10q_20150630.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2015

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-1204

 

HESS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE

(State or Other Jurisdiction of Incorporation or Organization)

13-4921002

(I.R.S. Employer Identification Number)

1185 AVENUE OF THE AMERICAS, NEW YORK, N.Y.

(Address of Principal Executive Offices)

10036

(Zip Code)

(Registrant’s Telephone Number, Including Area Code is (212) 997-8500)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer 

 x

Accelerated Filer 

¨

Non-Accelerated Filer 

 ¨ 

Smaller Reporting Company 

¨

                                     (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

At June 30, 2015, there were 287,057,761 shares of Common Stock outstanding.

 

 

 

 

 

 


 

HESS CORPORATION

Form 10-Q

TABLE OF CONTENTS

 

Item No.

 

 

  

Page

Number

 

 

PART I FINANCIAL INFORMATION

  

 

1.

 

Financial Statements (Unaudited)

  

 

 

 

Consolidated Balance Sheet at June 30, 2015 and December 31, 2014

  

2

 

 

Statement of Consolidated Income for the three months and six months ended June 30, 2015 and 2014

  

3

 

 

Statement of Consolidated Comprehensive Income for the three months and six months ended June 30, 2015 and 2014

  

4

 

 

Statement of Consolidated Cash Flows for the six months ended June 30, 2015 and 2014

  

5

 

 

Statement of Consolidated Equity for the periods ended June 30, 2015 and 2014

  

6

 

 

Notes to Consolidated Financial Statements

  

7

2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

17

3.

 

Quantitative and Qualitative Disclosures about Market Risk

  

30

4.

 

Controls and Procedures

  

30

 

 

 

 

 

 

 

PART II OTHER INFORMATION

  

 

1.

 

Legal Proceedings

  

31

2.

 

Share Repurchase Activities

  

31

5.

 

Other Information

  

31

6.

 

Exhibits and Reports on Form 8-K

  

32

 

 

Signatures

  

33

 

 

Certifications

  

 

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(In millions,

 

 

 

except share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

931

 

 

$

2,444

 

Accounts receivable

 

 

 

 

 

 

 

 

Trade

 

 

1,492

 

 

 

1,642

 

Other

 

 

302

 

 

 

431

 

Inventories

 

 

569

 

 

 

527

 

Other current assets

 

 

632

 

 

 

1,643

 

Total current assets

 

 

3,926

 

 

 

6,687

 

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

 

 

 

Total — at cost

 

 

47,878

 

 

 

46,522

 

Less: Reserves for depreciation, depletion, amortization and lease impairment

 

 

20,580

 

 

 

19,005

 

Property, plant and equipment — net

 

 

27,298

 

 

 

27,517

 

GOODWILL

 

 

1,473

 

 

 

1,858

 

DEFERRED INCOME TAXES

 

 

2,504

 

 

 

2,169

 

OTHER ASSETS

 

 

357

 

 

 

347

 

TOTAL ASSETS

 

$

35,558

 

 

$

38,578

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

616

 

 

$

708

 

Accrued liabilities

 

 

2,495

 

 

 

3,781

 

Taxes payable

 

 

313

 

 

 

294

 

Current maturities of long-term debt

 

 

69

 

 

 

68

 

Total current liabilities

 

 

3,493

 

 

 

4,851

 

LONG-TERM DEBT

 

 

5,888

 

 

 

5,919

 

DEFERRED INCOME TAXES

 

 

1,825

 

 

 

2,009

 

ASSET RETIREMENT OBLIGATIONS

 

 

2,011

 

 

 

2,281

 

OTHER LIABILITIES AND DEFERRED CREDITS

 

 

1,238

 

 

 

1,198

 

Total liabilities

 

 

14,455

 

 

 

16,258

 

EQUITY

 

 

 

 

 

 

 

 

Hess Corporation stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, par value $1.00

 

 

 

 

 

 

 

 

Authorized — 600,000,000 shares

 

 

 

 

 

 

 

 

Issued — 287,057,761 shares at June 30, 2015; 285,834,964 shares at

   December 31, 2014

 

 

287

 

 

 

286

 

Capital in excess of par value

 

 

3,329

 

 

 

3,277

 

Retained earnings

 

 

18,923

 

 

 

20,052

 

Accumulated other comprehensive income (loss)

 

 

(1,436

)

 

 

(1,410

)

Total Hess Corporation stockholders’ equity

 

 

21,103

 

 

 

22,205

 

Noncontrolling interests

 

 

 

 

 

115

 

Total equity

 

 

21,103

 

 

 

22,320

 

TOTAL LIABILITIES AND EQUITY

 

$

35,558

 

 

$

38,578

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

2


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED INCOME (UNAUDITED)

 

.

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In millions, except per share amounts)

 

REVENUES AND NON-OPERATING INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other operating revenues

 

$

1,953

 

 

$

2,829

 

 

$

3,491

 

 

$

5,502

 

Gains on asset sales, net

 

 

 

 

 

779

 

 

 

 

 

 

789

 

Other, net

 

 

(18

)

 

 

(25

)

 

 

(6

)

 

 

(116

)

Total revenues and non-operating income

 

 

1,935

 

 

 

3,583

 

 

 

3,485

 

 

 

6,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold (excluding items shown separately below)

 

 

356

 

 

 

421

 

 

 

634

 

 

 

785

 

Operating costs and expenses

 

 

503

 

 

 

545

 

 

 

1,009

 

 

 

1,040

 

Production and severance taxes

 

 

45

 

 

 

78

 

 

 

81

 

 

 

140

 

Exploration expenses, including dry holes and lease impairment

 

 

90

 

 

 

460

 

 

 

359

 

 

 

579

 

General and administrative expenses

 

 

151

 

 

 

143

 

 

 

298

 

 

 

285

 

Interest expense

 

 

86

 

 

 

85

 

 

 

171

 

 

 

166

 

Depreciation, depletion and amortization

 

 

1,028

 

 

 

785

 

 

 

1,984

 

 

 

1,511

 

Impairment

 

 

385

 

 

 

 

 

 

385

 

 

 

 

Total costs and expenses

 

 

2,644

 

 

 

2,517

 

 

 

4,921

 

 

 

4,506

 

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE

INCOME TAXES

 

 

(709

)

 

 

1,066

 

 

 

(1,436

)

 

 

1,669

 

Provision (benefit) for income taxes

 

 

(156

)

 

 

92

 

 

 

(507

)

 

 

331

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

(553

)

 

 

974

 

 

 

(929

)

 

 

1,338

 

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF

INCOME TAXES

 

 

(14

)

 

 

(44

)

 

 

(27

)

 

 

13

 

NET INCOME (LOSS)

 

 

(567

)

 

 

930

 

 

 

(956

)

 

 

1,351

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

 

 

 

(1

)

 

 

 

 

 

34

 

NET INCOME (LOSS) ATTRIBUTABLE TO HESS CORPORATION

 

$

(567

)

 

$

931

 

 

$

(956

)

 

$

1,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO HESS CORPORATION

PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.94

)

 

$

3.15

 

 

$

(3.27

)

 

$

4.26

 

Discontinued operations

 

 

(0.05

)

 

 

(0.14

)

 

 

(0.10

)

 

 

(0.07

)

NET INCOME (LOSS) PER SHARE

 

$

(1.99

)

 

$

3.01

 

 

$

(3.37

)

 

$

4.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.94

)

 

$

3.10

 

 

$

(3.27

)

 

$

4.20

 

Discontinued operations

 

 

(0.05

)

 

 

(0.14

)

 

 

(0.10

)

 

 

(0.07

)

NET INCOME (LOSS) PER SHARE

 

$

(1.99

)

 

$

2.96

 

 

$

(3.37

)

 

$

4.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES

   OUTSTANDING (DILUTED)

 

 

284.3

 

 

 

314.1

 

 

 

283.9

 

 

 

318.7

 

COMMON STOCK DIVIDENDS PER SHARE

 

$

0.25

 

 

$

0.25

 

 

$

0.50

 

 

$

0.50

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

3


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(567

)

 

$

930

 

 

$

(956

)

 

$

1,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of hedge (gains) losses reclassified to income

 

 

 

 

 

(5

)

 

 

 

 

 

(10

)

Income taxes on effect of hedge (gains) losses reclassified to income

 

 

 

 

 

2

 

 

 

 

 

 

4

 

Net effect of hedge (gains) losses reclassified to income

 

 

 

 

 

(3

)

 

 

 

 

 

(6

)

Change in fair value of cash flow hedges

 

 

(18

)

 

 

(40

)

 

 

2

 

 

 

(26

)

Income taxes on change in fair value of cash flow hedges

 

 

6

 

 

 

15

 

 

 

(1

)

 

 

10

 

Net change in fair value of cash flow hedges

 

 

(12

)

 

 

(25

)

 

 

1

 

 

 

(16

)

Change in derivatives designated as cash flow hedges, after taxes

 

 

(12

)

 

 

(28

)

 

 

1

 

 

 

(22

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension and other postretirement plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) reduction in unrecognized actuarial losses

 

 

(15

)

 

 

(4

)

 

 

(15

)

 

 

(4

)

Income taxes on actuarial changes in plan liabilities

 

 

6

 

 

 

2

 

 

 

6

 

 

 

2

 

(Increase) reduction in unrecognized actuarial losses, net

 

 

(9

)

 

 

(2

)

 

 

(9

)

 

 

(2

)

Amortization of net actuarial losses

 

 

25

 

 

 

15

 

 

 

44

 

 

 

23

 

Income taxes on amortization of net actuarial losses

 

 

(8

)

 

 

(5

)

 

 

(14

)

 

 

(8

)

Net effect of amortization of net actuarial losses

 

 

17

 

 

 

10

 

 

 

30

 

 

 

15

 

Change in pension and other postretirement plans, after taxes

 

 

8

 

 

 

8

 

 

 

21

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

72

 

 

 

(88

)

 

 

(48

)

 

 

(37

)

Change in foreign currency translation adjustment

 

 

72

 

 

 

(88

)

 

 

(48

)

 

 

(37

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)

 

 

68

 

 

 

(108

)

 

 

(26

)

 

 

(46

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

 

(499

)

 

 

822

 

 

 

(982

)

 

 

1,305

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

 

 

 

(1

)

 

 

 

 

 

34

 

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO HESS CORPORATION

 

$

(499

)

 

$

823

 

 

$

(982

)

 

$

1,271

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 

 

4


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

 

(In millions)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(956

)

 

$

1,351

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

 

 

 

 

 

 

(Gains) losses on asset sales, net

 

 

 

 

 

(789

)

Depreciation, depletion and amortization

 

 

1,984

 

 

 

1,511

 

Impairment

 

 

385

 

 

 

 

Loss from equity affiliates

 

 

 

 

 

84

 

Exploratory dry hole costs

 

 

176

 

 

 

286

 

Exploration lease impairment

 

 

78

 

 

 

161

 

Stock compensation expense

 

 

51

 

 

 

40

 

Provision (benefit) for deferred income taxes

 

 

(534

)

 

 

72

 

(Income) loss from discontinued operations, net of income taxes

 

 

27

 

 

 

(13

)

Changes in operating assets and liabilities

 

 

(114

)

 

 

(596

)

Cash provided by (used in) operating activities - continuing operations

 

 

1,097

 

 

 

2,107

 

Cash provided by (used in) operating activities - discontinued operations

 

 

(21

)

 

 

(46

)

Net cash provided by (used in) operating activities

 

 

1,076

 

 

 

2,061

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(2,423

)

 

 

(2,340

)

Proceeds from asset sales

 

 

 

 

 

2,847

 

Other, net

 

 

(13

)

 

 

(124

)

Cash provided by (used in) investing activities - continuing operations

 

 

(2,436

)

 

 

383

 

Cash provided by (used in) investing activities - discontinued operations

 

 

95

 

 

 

(405

)

Net cash provided by (used in) investing activities

 

 

(2,341

)

 

 

(22

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Debt with maturities of greater than 90 days

 

 

 

 

 

 

 

 

Borrowings

 

 

 

 

 

598

 

Repayments

 

 

(34

)

 

 

(500

)

Common stock acquired and retired

 

 

(78

)

 

 

(1,735

)

Cash dividends paid

 

 

(144

)

 

 

(156

)

Employee stock options exercised, including income tax benefits

 

 

10

 

 

 

148

 

Noncontrolling interests, net

 

 

 

 

 

(1

)

Other, net

 

 

(2

)

 

 

 

Cash provided by (used in) financing activities - continuing operations

 

 

(248

)

 

 

(1,646

)

Cash provided by (used in) financing activities - discontinued operations

 

 

 

 

 

(2

)

Net cash provided by (used in) financing activities

 

 

(248

)

 

 

(1,648

)

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(1,513

)

 

 

391

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

 

 

2,444

 

 

 

1,814

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

931

 

 

$

2,205

 

 

See accompanying Notes to Consolidated Financial Statements.

 


5


PART I - FINANCIAL INFORMATION (CONT’D.)

 

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED EQUITY (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

Total Hess

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Excess of

 

 

Retained

 

 

Comprehensive

 

 

Stockholders’

 

 

Noncontrolling

 

 

Total

 

 

 

Stock

 

 

Par

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

 

Interests

 

 

Equity

 

 

 

(In millions)

 

BALANCE AT JANUARY 1, 2015

 

$

286

 

 

$

3,277

 

 

$

20,052

 

 

$

(1,410

)

 

$

22,205

 

 

$

115

 

 

$

22,320

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

(956

)

 

 

 

 

 

 

(956

)

 

 

 

 

 

(956

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26

)

 

 

(26

)

 

 

 

 

 

(26

)

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(982

)

 

 

 

 

 

(982

)

Activity related to restricted common stock awards, net

 

 

2

 

 

 

34

 

 

 

 

 

 

 

 

 

36

 

 

 

 

 

 

36

 

Employee stock options, including income tax benefits

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Performance share units

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Cash dividends declared

 

 

 

 

 

 

 

 

(144

)

 

 

 

 

 

(144

)

 

 

 

 

 

(144

)

Common stock acquired and retired

 

 

(1

)

 

 

(6

)

 

 

(29

)

 

 

 

 

 

(36

)

 

 

 

 

 

(36

)

Noncontrolling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115

)

 

 

(115

)

BALANCE AT JUNE 30, 2015

 

$

287

 

 

$

3,329

 

 

$

18,923

 

 

$

(1,436

)

 

$

21,103

 

 

$

 

 

$

21,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT JANUARY 1, 2014

 

$

325

 

 

$

3,498

 

 

$

21,235

 

 

$

(338

)

 

$

24,720

 

 

$

64

 

 

$

24,784

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

1,317

 

 

 

 

 

 

 

1,317