HESS CORP [HES] Filings

10-Q 1 hes-20240630.htm 10-Q hes-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒

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

For the quarter ended June 30, 2024


☐						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, NY

(Address of Principal Executive Offices)

10036

(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	HES	New York Stock Exchange

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ý No ¨

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

At June 30, 2024, there were 308,114,909 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 3 0 , 2024, and December 31, 2023	2
	Statement of Consolidated Income for the Three and Six Months Ended June 3 0 , 2024, and 2023	3
	Statement of Consolidated Comprehensive Income for the Three and Six Months Ended June 3 0 , 2024, and 2023	4
	Statement of Consolidated Cash Flows for the Six Months Ended June 3 0 , 2024, and 2023	5
	Statement of Consolidated Equity for the Three and Six Months Ended June 3 0 , 2024, and 2023	6
	Notes to Consolidated Financial Statements (Unaudited)	7
	Note 1 - Basis of Presentation	7
	Note 2 - Inventories	7
	Note 3 - Property, Plant and Equipment	8
	Note 4 - Hess Midstream LP	8
	Note 5 - Accrued Liabilities	9
	Note 6 - Debt	9
	Note 7 - Revenue	10
	Note 8 - Impairment and Other	11
	Note 9 - Retirement Plans	11
	Note 10 - Weighted Average Common Shares	11
	Note 11 - Guarantees and Contingencies	12
	Note 1 2 - Segment Information	14
	Note 1 3 - Financial Risk Management Activities	15


2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
3.	Quantitative and Qualitative Disclosures about Market Risk	30
4.	Controls and Procedures	30

	PART II - OTHER INFORMATION
1.	Legal Proceedings	31
1A.	Risk Factors	31
2.	Share Repurchase Activities	32
5.	Other Information	32
6.	Exhibits	33
	Signatures	34

Unless the context indicates otherwise, references to “Hess”, the “Corporation”, “Registrant”, “we”, “us”, “our” and “its” refer to the consolidated business operations of Hess Corporation and its subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)


	June 30, 2024		December 31, 2023

	(In millions, except share amounts)
Assets
Current Assets:
Cash and cash equivalents	$	2,025	$	1,688
Accounts receivable:
From contracts with customers	1,117		1,180
Joint venture and other	198		150
Inventories	382		304
Other current assets	111		108
Total current assets	3,833		3,430
Property, plant and equipment:
Total — at cost	38,861		36,771
Less: Reserves for depreciation, depletion, amortization and lease impairment	20,432		19,339
Property, plant and equipment — net	18,429		17,432
Operating lease right-of-use assets — net	772		720
Finance lease right-of-use assets — net	100		108
Goodwill	360		360
Deferred income taxes	499		320
Post-retirement benefit assets	689		685
Other assets	1,128		952
Total Assets	$	25,810	$	24,007
Liabilities
Current Liabilities:
Accounts payable	$	434	$	402
Accrued liabilities	1,807		2,102
Taxes payable	109		85
Current portion of long-term debt	317		311
Current portion of operating and finance lease obligations	354		370
Total current liabilities	3,021		3,270
Long-term debt	8,548		8,302
Long-term operating lease obligations	520		459
Long-term finance lease obligations	145		156
Deferred income taxes	689		608
Asset retirement obligations	1,252		1,186
Other liabilities and deferred credits	434		424
Total Liabilities	14,609		14,405
Equity
Hess Corporation stockholders’ equity:
Common stock, par value $1.00; Authorized — 600,000,000 shares
Issued 308,114,909 shares (2023: 307,158,272)	308		307
Capital in excess of par value	6,566		6,495
Retained earnings	3,771		2,318
Accumulated other comprehensive income (loss)	(158)		(134)
Total Hess Corporation stockholders’ equity	10,487		8,986
Noncontrolling interests	714		616
Total Equity	11,201		9,602
Total Liabilities and Equity	$	25,810	$	24,007

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In millions, except per share amounts)
Revenues and Non-Operating Income
Sales and other operating revenues	$	3,202	$	2,289	$	6,511	$	4,700

Other, net	53		31		85		73
Total revenues and non-operating income	3,255		2,320		6,596		4,773
Costs and Expenses
Marketing, including purchased oil and gas	632		547		1,254		1,150
Operating costs and expenses	490		454		902		836
Production and severance taxes	64		46		120		94
Exploration expenses, including dry holes and lease impairment	101		99		143		165
General and administrative expenses	115		108		239		244
Interest expense	106		122		219		245
Depreciation, depletion and amortization	600		497		1,157		988
Impairment and other	—		82		—		82
Total costs and expenses	2,108		1,955		4,034		3,804
Income Before Income Taxes	1,147		365		2,562		969
Provision for income taxes	296		160		644		336
Net Income	851		205		1,918		633
Less: Net income attributable to noncontrolling interests	94		86		189		168
Net Income Attributable to Hess Corporation	$	757	$	119	$	1,729	$	465

Net Income Attributable to Hess Corporation Per Common Share:
Basic	$	2.47	$	0.39	$	5.64	$	1.52
Diluted	$	2.46	$	0.39	$	5.61	$	1.51
Weighted Average Number of Common Shares Outstanding:
Basic	306.9		306.0		306.6		305.7
Diluted	308.3		307.5		308.1		307.4
Common Stock Dividends Per Share	$	0.4375	$	0.4375	$	0.8750	$	0.8750

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In millions)
Net Income	$	851	$	205	$	1,918	$	633
Other Comprehensive Income (Loss):
Derivatives designated as cash flow hedges
Effect of hedge (gains) losses reclassified to income	—		52		—		86
Income taxes on effect of hedge (gains) losses reclassified to income	—		—		—		—
Net effect of hedge (gains) losses reclassified to income	—		52		—		86
Change in fair value of cash flow hedges	—		(73)		—		(90)
Income taxes on change in fair value of cash flow hedges	—		—		—		—
Net change in fair value of cash flow hedges	—		(73)		—		(90)
Change in derivatives designated as cash flow hedges, after taxes	—		(21)		—		(4)
Pension and other postretirement plans
(Increase) reduction in unrecognized actuarial losses	(25)		(13)		(25)		(13)
Income taxes on actuarial changes in plan liabilities	—		—		—		—
(Increase) reduction in unrecognized actuarial losses, net	(25)		(13)		(25)		(13)
Amortization of net actuarial losses	1		1		1		1
Income taxes on amortization of net actuarial losses	—		—		—		—
Net effect of amortization of net actuarial losses	1		1		1		1
Change in pension and other postretirement plans, after taxes	(24)		(12)		(24)		(12)
Other Comprehensive Income (Loss)	(24)		(33)		(24)		(16)
Comprehensive Income	827		172		1,894		617
Less: Comprehensive income attributable to noncontrolling interests	94		86		189		168
Comprehensive Income Attributable to Hess Corporation	$	733	$	86	$	1,705	$	449

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
	2024		2023

	(In millions)
Cash Flows From Operating Activities
Net income	$	1,918	$	633
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation, depletion and amortization	1,157		988
Impairment and other	—		82
Exploratory dry hole costs	63		93
Exploration lease impairment	10		13

Stock compensation expense	59		53
Noncash (gains) losses on commodity derivatives, net	—		52
Provision for deferred income taxes and other tax accruals	114		92
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	15		(14)
(Increase) decrease in inventories	(78)		(61)
Increase (decrease) in accounts payable and accrued liabilities	(194)		(119)
Increase (decrease) in taxes payable	24		22
Changes in other operating assets and liabilities	(310)		(222)
Net cash provided by (used in) operating activities	2,778		1,612
Cash Flows From Investing Activities
Additions to property, plant and equipment - E&P	(1,989)		(1,551)
Additions to property, plant and equipment - Midstream	(119)		(107)

Other, net	(2)		(4)
Net cash provided by (used in) investing activities	(2,110)		(1,662)
Cash Flows From Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less	(340)		180
Debt with maturities of greater than 90 days:
Borrowings	600		—
Repayments	(5)		—
Cash dividends paid	(271)		(271)
Common stock acquired and retired	—		(20)
Proceeds from sale of Class A shares of Hess Midstream LP	—		167
Noncontrolling interests, net	(305)		(263)
Employee stock options exercised	13		4
Payments on finance lease obligations	(5)		(4)
Other, net	(18)		(3)
Net cash provided by (used in) financing activities	(331)		(210)
Net Increase (Decrease) in Cash and Cash Equivalents	337		(260)
Cash and Cash Equivalents at Beginning of Year	1,688		2,486
Cash and Cash Equivalents at End of Period	$	2,025	$	2,226

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED EQUITY (UNAUDITED)


	Common Stock		Capital in Excess of Par		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Hess Stockholders’ Equity		Noncontrolling Interests		Total Equity


For the Three Months Ended June 30, 2024
Balance at April 1, 2024	$	308	$	6,545	$	3,149	$	(134)	$	9,868	$	663	$	10,531
Net income	—		—		757		—		757		94		851
Other comprehensive income (loss)	—		—		—		(24)		(24)		—		(24)
Share-based compensation	—		21		—		—		21		—		21
Dividends on common stock	—		—		(135)		—		(135)		—		(135)
Sale of Class A shares of Hess Midstream LP	—		—		—		—		—		100		100
Repurchase of Class B units of Hess Midstream Operations LP	—		—		—		—		—		(52)		(52)
Noncontrolling interests, net	—		—		—		—		—		(91)		(91)
Balance at June 30, 2024	$	308	$	6,566	$	3,771	$	(158)	$	10,487	$	714	$	11,201
For the Three Months Ended June 30, 2023
Balance at April 1, 2023	$	307	$	6,254	$	1,686	$	(114)	$	8,133	$	588	$	8,721
Net income	—		—		119		—		119		86		205
Other comprehensive income (loss)	—		—		—		(33)		(33)		—		(33)
Share-based compensation	—		19		—		—		19		—		19
Dividends on common stock	—		—		(135)		—		(135)		—		(135)
Sale of Class A shares of Hess Midstream LP	—		158		—		—		158		93		251
Repurchase of Class B units of Hess Midstream Operations LP	—		11		—		—		11		(55)		(44)

Noncontrolling interests, net	—		—		—		—		—		(82)		(82)
Balance at June 30, 2023	$	307	$	6,442	$	1,670	$	(147)	$	8,272	$	630	$	8,902
For the Six Months Ended June 30, 2024
Balance at January 1, 2024	$	307	$	6,495	$	2,318	$	(134)	$	8,986	$	616	$	9,602
Net income	—		—		1,729		—		1,729		189		1,918
Other comprehensive income (loss)	—		—		—		(24)		(24)		—		(24)
Share-based compensation	1		71		(6)		—		66		—		66
Dividends on common stock	—		—		(270)		—		(270)		—		(270)
Sale of Class A shares of Hess Midstream LP	—		—		—		—		—		194		194
Repurchase of Class B units of Hess Midstream Operations LP	—		—		—		—		—		(105)		(105)
Noncontrolling interests, net	—		—		—		—		—		(180)		(180)
Balance at June 30, 2024	$	308	$	6,566	$	3,771	$	(158)	$	10,487	$	714	$	11,201
For the Six Months Ended June 30, 2023
Balance at January 1, 2023	$	306	$	6,206	$	1,474	$	(131)	$	7,855	$	641	$	8,496
Net income	—		—		465		—		465		168		633
Other comprehensive income (loss)	—		—		—		(16)		(16)		—		(16)
Share-based compensation	1		59		—		—		60		—		60
Dividends on common stock	—		—		(269)		—		(269)		—		(269)
Sale of Class A shares of Hess Midstream LP	—		158		—		—		158		93		251
Repurchase of Class B units of Hess Midstream Operations LP	—		19		—		—		19		(109)		(90)

Noncontrolling interests, net	—		—		—		—		—		(163)		(163)
Balance at June 30, 2023	$	307	$	6,442	$	1,670	$	(147)	$	8,272	$	630	$	8,902

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

The financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at June 30, 2024 and December 31, 2023, the consolidated results of operations for the three and six months ended June 30, 2024 and 2023, and consolidated cash flows for the six months ended June 30, 2024 and 2023. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.

The financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by generally accepted accounting principles (GAAP) in the United States have been condensed or omitted from these interim financial statements. These statements, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023.

On October 22, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Chevron Corporation (Chevron) and Yankee Merger Sub Inc. (Merger Subsidiary), a direct, wholly-owned subsidiary of Chevron. The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, Merger Subsidiary will be merged with and into Hess, and Hess will be the surviving corporation in the Merger as a direct, wholly-owned subsidiary of Chevron (such transaction, the Merger). Under the terms of the Merger Agreement, if the Merger is completed, our stockholders will receive at the effective time of the Merger consideration consisting of 1.025 shares of Chevron common stock for each share of our common stock. On May 28, 2024, a majority of Hess stockholders voted to approve the Merger. Chevron and Hess are working to complete the Merger and anticipate all requisite regulatory reviews concluding in the third quarter of 2024. Hess Guyana Exploration Limited (HGEL), a wholly-owned subsidiary of Hess, is currently in arbitration relating to the applicability of a right of first refusal (the Stabroek ROFR) contained in the operating agreement (the Stabroek JOA) among HGEL and affiliates of Exxon Mobil Corporation (Exxon Mobil) and China National Offshore Oil Corporation (CNOOC). The arbitration merits hearing about the applicability of the Stabroek ROFR to the Merger has been scheduled for May 2025, with a decision expected in the following three months. Neither Chevron nor Hess can predict the actual date on which the transaction will be completed because it is subject to conditions beyond each company’s control, including the outcome of the arbitration.

New Accounting Pronouncements:

In November 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-07, Improvements to Reportable Segments Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU does not change how an entity identifies its operating segments. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently assessing the impact of adopting the ASU on our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which enhances the disclosure requirements within ASC Topic 740. The ASU requires, among other disclosures, greater disaggregation of information and the use of certain categories in the rate reconciliation, and the disaggregation of income taxes paid by jurisdiction. The ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently assessing the impact of adopting this ASU on our consolidated financial statements.

2. Inventories

Inventories consisted of the following:


	June 30, 2024		December 31, 2023

	(In millions)
Crude oil and natural gas liquids	$	94	$	72
Materials and supplies	288		232
Total Inventories	$	382	$	304

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. Property, Plant and Equipment

Capitalized Exploratory Well Costs:

The following table discloses the net changes in capitalized exploratory well costs pending determination of proved reserves during the six months ended June 30, 2024 (in millions):


Balance at January 1, 2024	$	952
Additions to capitalized exploratory well costs pending the determination of proved reserves	102
Reclassifications to wells, facilities and equipment based on the determination of proved reserves	(117)
Capitalized exploratory well costs charged to expense	(48)
Balance at June 30, 2024	$	889

In the first six months, additions to capitalized exploratory well costs pending determination of proved reserves primarily related to wells drilled on the Stabroek Block (Hess 30%), offshore Guyana. Reclassifications to wells, facilities and equipment based on the determination of proved reserves resulted from the sanction of the Whiptail development project, the sixth sanctioned project on the Stabroek Block. At June 30, 2024, 33 exploration and appraisal wells on the Stabroek Block, with a total cost of $804 million, were capitalized pending determination of proved reserves. Capitalized exploratory well costs charged to expense in the first six months primarily relate to three exploration wells in the Malaysia/Thailand Joint Development Area (JDA) (Hess 50%) in the Gulf of Thailand. In the second quarter of 2024, the regulator provided notification that the current production sharing contract (PSC) for JDA Block A-18 will not be re-awarded to the existing PSC contractors upon its expiration in 2029. There is no plan to develop these discoveries prior to the expiration of the existing PSC. The preceding table excludes well costs of $15 million that were incurred and expensed during the first six months of 2024.

At June 30, 2024, exploratory well costs capitalized for greater than one year following completion of drilling of $702 million was comprised of the following:

Guyana: 92% of the capitalized well costs in excess of one year relate to successful exploration and appraisal wells where hydrocarbons were encountered on the Stabroek Block. The operator also plans further appraisal drilling on the block and is conducting pre-development planning for additional phases of development.

Suriname: 6% of the capitalized well costs in excess of one year relate to the Zanderij-1 well on Block 42 (Hess 33%). Exploration and appraisal activities are ongoing.

Malaysia: 2% of the capitalized well costs in excess of one year relate to the North Malay Basin (Hess 50%), offshore Peninsular Malaysia, where hydrocarbons were encountered in two successful exploration wells. Pre-development studies are ongoing.

4. Hess Midstream LP

At June 30, 2024, Hess Midstream LP, a variable interest entity that is fully consolidated by Hess Corporation, had liabilities totaling $3,606 million (December 31, 2023: $3,385 million) that are on a non-recourse basis to Hess Corporation, while Hess Midstream LP assets available to settle the obligations of Hess Midstream LP included cash and cash equivalents totaling $100 million (December 31, 2023: $5 million), property, plant and equipment with a carrying value of $3,237 million (December 31, 2023: $3,229 million) and an equity-method investment in the Little Missouri 4 (LM4) gas processing plant of $89 million (December 31, 2023: $90 million). At June 30, 2024, we have an approximate 38% consolidated ownership interest in Hess Midstream LP on an as-exchanged basis, primarily through our ownership of Class B units in Hess Midstream Operations LP (HESM Opco), the operating subsidiary of Hess Midstream LP, which are exchangeable into Class A shares of Hess Midstream LP on a one-for-one basis.

LM4 is a 200 million standard cubic feet per day gas processing plant located south of the Missouri River in McKenzie County, North Dakota, that was constructed as part of a 50/50 joint venture between Hess Midstream LP and Targa Resources Corp. Hess Midstream LP has a natural gas processing agreement with LM4 under which it pays a processing fee and reimburses LM4 for its proportionate share of electricity costs. The processing fees included in Operating costs and expenses in the Statement of Consolidated Income for the three and six months ended June 30, 2024 were $8 million and $15 million, respectively, compared with $6 million and $11 million for the three and six months ended June 30, 2023, respectively.

During the first six months of 2024, Hess Midstream LP completed two underwritten public equity offerings of an aggregate of 23.0 million Hess Midstream LP Class A shares held by an affiliate of Global Infrastructure Partners (GIP). Hess Corporation did not receive any proceeds from these public equity offerings. As these transactions did not result in a change in Hess Corporation's ownership interest in Hess Midstream LP on a consolidated basis, there was no adjustment to Noncontrolling interests resulting from changes to ownership interests. However, these transactions, in aggregate, resulted in an increase in Noncontrolling interests and

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

deferred tax assets of $194 million resulting from step-ups in the tax basis of Hess Midstream LP’s investment in HESM Opco.

During the first six months of 2024, HESM Opco repurchased an aggregate of approximately 5.5 million HESM Opco Class B units held by affiliates of Hess Corporation and GIP for total proceeds of $200 million. The repurchases were financed using borrowings under HESM Opco's revolving credit facility and cash on hand. As Hess Corporation participated in these repurchases only to the extent necessary to maintain its current ownership interest in Hess Midstream LP on a consolidated basis, there was no adjustment to Noncontrolling interests resulting from changes to ownership interests. However, the repurchases, in aggregate, resulted in an increase in deferred tax assets and Noncontrolling interests of $19 million due to adjustments in the carrying value of Hess Midstream LP’s investment in HESM Opco without corresponding adjustments in the tax basis. The aggregate proceeds paid to GIP of $124 million reduced Noncontrolling interests.

During the first six months of 2023, Hess Midstream LP completed an underwritten public equity offering of approximately 12.8 million Hess Midstream LP Class A shares held by affiliates of Hess Corporation and GIP. Hess Corporation received net proceeds of $167 million from the public offering. The transaction resulted in an increase in Capital in excess of par and Noncontrolling interests of $158 million and $93 million, respectively. The increase to Noncontrolling interests of $93 million is comprised of $9 million resulting from changes to ownership interests and $84 million from an increase to deferred tax assets resulting from a step-up in the tax basis of Hess Midstream LP’s investment in HESM Opco.

During the first six months of 2023, HESM Opco repurchased an aggregate of approximately 7.0 million HESM Opco Class B units held by affiliates of Hess Corporation and GIP for total proceeds of $200 million. The repurchases were financed using borrowings under HESM Opco's revolving credit facility. The repurchases, in aggregate, resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of $19 million due to changes in ownership interests, and an increase in deferred tax assets and Noncontrolling interests of $10 million due to adjustments in the carrying value of Hess Midstream LP’s investment in HESM Opco without corresponding adjustments in the tax basis. The aggregate proceeds paid to GIP of $100 million reduced Noncontrolling interests.

5. Accrued Liabilities

Accrued Liabilities consisted of the following:


	June 30, 2024		December 31, 2023

	(In millions)
Accrued capital expenditures	$	678	$	670
Accrued operating and marketing expenditures	558		593
Accrued payments to royalty and working interest owners	204		178
Accrued interest on debt	149		144
Current portion of asset retirement obligations	100		160
Accrued compensation and benefits	74		193
Other accruals	44		164
Total Accrued Liabilities	$	1,807	$	2,102

6. Debt

In May 2024, HESM Opco issued $600 million in aggregate principal amount of 6.500% fixed-rate senior unsecured notes due in 2029 in a private offering. At the time of issuance, the proceeds were primarily used to reduce indebtedness outstanding under HESM Opco's revolving credit facility. The indenture for the 6.500% fixed-rate senior unsecured notes contains covenants that are substantially similar to the covenants contained in the indentures for the other existing HESM Opco fixed-rate senior unsecured notes.

In July 2024, we repaid the outstanding $300 million principal amount of our 3.500% fixed-rate senior unsecured notes, which matured on July 15, 2024. The principal amount of $300 million is classified as Current portion of long-term debt, in the Consolidated Balance Sheet at June 30, 2024.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7. Revenue

Revenue from contracts with customers on a disaggregated basis was as follows (in millions):


	Exploration and Production								Midstream		Eliminations		Total
	United States		Guyana		Malaysia and JDA		E&P Total

Three Months Ended June 30, 2024
Sales of net production volumes:
Crude oil revenue	$	820	$	1,370	$	29	$	2,219	$	—	$	—	$	2,219
Natural gas liquids revenue	140		—		—		140		—		—		140
Natural gas revenue	28		—		229		257		—		—		257
Sales of purchased oil and gas	548		27		—		575		—		—		575
Third-party services	—		—		—		—		6		—		6
Intercompany revenue	—		—		—		—		358		(358)		—
Total sales (a)	1,536		1,397		258		3,191		364		(358)		3,197
Other operating revenues (b)	4		—		—		4		1		—		5
Total sales and other operating revenues	$	1,540	$	1,397	$	258	$	3,195	$	365	$	(358)	$	3,202
Three Months Ended June 30, 2023
Sales of net production volumes:
Crude oil revenue	$	710	$	787	$	24	$	1,521	$	—	$	—	$	1,521
Natural gas liquids revenue	112		—		—		112		—		—		112
Natural gas revenue	38		—		182		220		—		—		220
Sales of purchased oil and gas	469		15		—		484		—		—		484
Intercompany revenue	—		—		—		—		322		(322)		—
Total sales (a)	1,329		802		206		2,337		322		(322)		2,337
Other operating revenues (b)	(30)		(20)		—		(50)		2		—		(48)
Total sales and other operating revenues	$	1,299	$	782	$	206	$	2,287	$	324	$	(322)	$	2,289
Six Months Ended June 30, 2024
Sales of net production volumes:
Crude oil revenue	$	1,609	$	2,880	$	58	$	4,547	$	—	$	—	$	4,547
Natural gas liquids revenue	293		—		—		293		—		—		293
Natural gas revenue	76		—		440		516		—		—		516
Sales of purchased oil and gas	1,081		57		—		1,138		—		—		1,138
Third-party services	—		—		—		—		11		—		11
Intercompany revenue	—		—		—		—		708		(708)		—
Total sales (a)	3,059		2,937		498		6,494		719		(708)		6,505
Other operating revenues (b)	4		—		—		4		2		—		6
Total sales and other operating revenues	$	3,063	$	2,937	$	498	$	6,498	$	721	$	(708)	$	6,511
Six Months Ended June 30, 2023
Sales of net production volumes:
Crude oil revenue	$	1,379	$	1,612	$	53	$	3,044	$	—	$	—	$	3,044
Natural gas liquids revenue	253		—		—		253		—		—		253
Natural gas revenue	92		—		362		454		—		—		454
Sales of purchased oil and gas	996		32		—		1,028		—		—		1,028
Intercompany revenue	—		—		—		—		625		(625)		—
Total sales (a)	2,720		1,644		415		4,779		625		(625)		4,779
Other operating revenues (b)	(56)		(27)		—		(83)		4		—		(79)
Total sales and other operating revenues	$	2,664	$	1,617	$	415	$	4,696	$	629	$	(625)	$	4,700

(a)Guyana crude oil revenue includes $214 million and $466 million of revenue from non-customers for the three and six months ended June 30, 2024, compared to $88 million and $196 million for the three and six months ended June 30, 2023.

(b)Other operating revenues are not a component of revenues from contracts with customers. Included within other operating revenues are gains (losses) on commodity derivatives of nil for the three and six months ended June 30, 2024, compared to losses of $(52) million and $(86) million for the three and six months ended June 30, 2023.

There have been no significant changes to contracts with customers or the composition thereof during the six months ended June 30, 2024. Generally, we receive payments from customers on a monthly basis, shortly after the physical delivery of the crude oil, natural gas liquids, or natural gas. At June 30, 2024 and December 31, 2023, there were no contract assets or liabilities.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

8. Impairment and Other

In the second quarter of 2023, we recognized a pre-tax charge of $82 million ($82 million after income taxes) that resulted from revisions to estimated costs to abandon certain wells, pipelines and production facilities in the West Delta Field in the Gulf of Mexico. These abandonment obligations were assigned to us as a former owner after they were discharged from Fieldwood Energy LLC as part of its approved bankruptcy plan in 2021.

9. Retirement Plans

Components of net periodic benefit cost consisted of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In millions)

Service cost	$	11	$	10	$	21	$	19
Interest cost (a)	23		25		46		50
Expected return on plan assets (a)	(38)		(40)		(76)		(79)
Amortization of unrecognized net actuarial losses (a)	1		1		1		1

Net periodic benefit cost (income)	$	(3)	$	(4)	$	(8)	$	(9)

(a) Net non-service cost, which is included in Other, net in the Statement of Consolidated Income, was income of $14 million and $29 million for the three and six months ended June 30, 2024, compared with income of $14 million and $28 million for the three and six months ended June 30, 2023.

The board of trustees for our U.K. pension plan is evaluating various alternatives to settle all or a portion of the plan’s projected benefit obligation. A decision to proceed will occur only after the board of trustees receives and evaluates proposals and determines that the transaction is in the best interest of plan participants. Should a settlement be completed, a material noncash settlement loss may be recorded reflecting any difference between the settlement value and projected benefit obligation, and the acceleration of the recognition of unrecognized actuarial losses. At June 30, 2024, pre-tax unrecognized net actuarial losses related to the U.K. pension plan were $178 million.

10. Weighted Average Common Shares

The Net income and weighted average number of common shares used in the basic and diluted earnings per share computations were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In millions)
Net income attributable to Hess Corporation:
Net income	$	851	$	205	$	1,918	$	633
Less: Net income attributable to noncontrolling interests	94		86		189		168
Net income attributable to Hess Corporation	$	757	$	119	$	1,729	$	465
Weighted average number of common shares outstanding:
Basic	306.9		306.0		306.6		305.7
Effect of dilutive securities
Restricted common stock	0.4		0.3		0.4		0.5
Stock options	0.6		0.7		0.6		0.7
Performance share units	0.4		0.5		0.5		0.5
Diluted	308.3		307.5		308.1		307.4

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the number of antidilutive shares excluded from the computation of diluted shares:


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Restricted common stock	1,474	1,789	824	61,489
Stock options	188,298	189,479	188,779	121,226
Performance share units	—	—	—	—

During the six months ended June 30, 2024, we granted 737,371 shares of restricted stock (2023: 451,226), no performance share units (2023: 130,272) and no stock options (2023: 189,479).

11. Guarantees and Contingencies

We are subject to loss contingencies with respect to various claims, lawsuits and other proceedings. A liability is recognized in our consolidated financial statements when it is probable that a loss has been incurred and the amount can be reasonably estimated. If the risk of loss is probable, but the amount cannot be reasonably estimated or the risk of loss is only reasonably possible, a liability is not accrued; however, we disclose the nature of those contingencies. We cannot predict with certainty if, how or when existing claims, lawsuits and proceedings will be resolved or what the eventual relief, if any, may be, particularly for proceedings that are in their early stages of development or where plaintiffs seek indeterminate damages.

We, along with many companies that have been or continue to be engaged in refining and marketing of gasoline, have been a party to lawsuits and claims related to the use of methyl tertiary butyl ether (MTBE) in gasoline. A series of similar lawsuits, many involving water utilities or governmental entities, were filed in jurisdictions across the United States against producers of MTBE and petroleum refiners who produced gasoline containing MTBE, including us. The principal allegation in all cases was that gasoline containing MTBE was a defective product and that these producers and refiners are strictly liable in proportion to their share of the gasoline market for damage to groundwater resources and are required to take remedial action to ameliorate the alleged effects on the environment of releases of MTBE. The majority of the cases asserted against us have been settled. There are two remaining active cases, filed by Pennsylvania and Maryland. In June 2014, the Commonwealth of Pennsylvania filed a lawsuit alleging that we and all major oil companies with operations in Pennsylvania, have damaged the groundwater by introducing thereto gasoline with MTBE. The Pennsylvania suit has been forwarded to the existing MTBE multidistrict litigation pending in the Southern District of New York. In December 2017, the State of Maryland filed a lawsuit alleging that we and other major oil companies damaged the groundwater in Maryland by introducing thereto gasoline with MTBE. The suit, filed in Maryland state court, was served on us in January 2018 and has been removed to federal court by the defendants.

In March 2014, we received an Administrative Order from the EPA requiring us and 26 other parties to undertake the Remedial Design for the remedy selected by the EPA for the Gowanus Canal Superfund Site in Brooklyn, New York. Our alleged liability derives from our former ownership and operation of a fuel oil terminal and connected shipbuilding and repair facility adjacent to the Canal. The remedy selected by the EPA includes dredging of surface sediments and the placement of a cap over the deeper sediments throughout the Canal and in-situ stabilization of certain contaminated sediments that will remain in place below the cap. The EPA’s original estimate was that this remedy would cost $506 million; however, the ultimate costs that will be incurred in connection with the design and implementation of the remedy remain uncertain. We have complied with the EPA’s March 2014 Administrative Order and contributed funding for the Remedial Design based on an allocation of costs among the parties determined by a third-party expert. In January 2020, we received an additional Administrative Order from the EPA requiring us and several other parties to begin Remedial Action along the uppermost portion of the Canal. We intend to comply with this Administrative Order. The remediation work began in the fourth quarter of 2020. Based on currently known facts and circumstances, we do not believe that this matter will result in a significant liability to us, and the costs will continue to be allocated amongst the parties, as they were for the Remedial Design.

From time to time, we are involved in other judicial and administrative proceedings relating to environmental matters. We periodically receive notices from the EPA that we are a “potential responsible party” under the Superfund legislation with respect to various waste disposal sites. Under this legislation, all potentially responsible parties may be jointly and severally liable. For any site for which we have received such a notice, the EPA’s claims or assertions of liability against us relating to these sites have not been fully developed, or the EPA’s claims have been settled or a settlement is under consideration, in all cases for amounts that are not material. Beginning in 2017, certain states, municipalities and private associations in California, Delaware, Maryland, Rhode Island and South Carolina separately filed lawsuits against oil, gas and coal producers, including us, for alleged damages purportedly caused by climate change. These proceedings include claims for monetary damages and injunctive relief. Beginning in 2013, various parishes in Louisiana filed suit against approximately 100 oil and gas companies, including us, alleging that the companies’ operations and activities in certain fields violated the State and Local Coastal Resource Management Act of 1978, as amended, and caused

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

contamination, subsidence and other environmental damages to land and water bodies located in the coastal zone of Louisiana. The plaintiffs seek, among other things, the payment of the costs necessary to clear, re-vegetate and otherwise restore the allegedly impacted areas. The ultimate impact of such climate and other aforementioned environmental proceedings, and of any related proceedings by private parties, on our business or accounts cannot be predicted at this time due to the large number of other potentially responsible parties and the speculative nature of clean-up cost estimates.

We are also involved in six claims in federal and state courts in North Dakota related to post-production deductions from royalty and working interest payments. The plaintiffs in these cases assert that we take unauthorized or excessive post-production deductions from royalty or working interest payments for various oil and gas processing and transportation related costs and expenses. These plaintiffs seek reimbursement for allegedly underpaid revenue. It is our position that these costs and expenses are actual, reasonable, necessary, and authorized by the respective leases and North Dakota law. We believe that based on the facts and circumstances of these claims and because we have viable defenses, loss is not probable and the ultimate impact of these claims on our business or accounts cannot be estimated at this time due to the early stages of the proceedings and the speculative and indeterminate damages.

We may also be exposed to future decommissioning liabilities for divested assets in the event the current or future owners of facilities previously owned by us are determined to be unable to perform such actions, whether due to bankruptcy or otherwise. We cannot predict with certainty if, how or when such proceedings will be resolved or what the eventual relief, if any, may be, particularly for proceedings that are in their early stages of development or where plaintiffs seek indeterminate damages. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters before a loss or range of loss can be reasonably estimated for any proceeding.

Subject to the foregoing, in management’s opinion, based upon currently known facts and circumstances, the outcome of lawsuits, claims and proceedings, including the matters disclosed above, is not expected to have a material adverse effect on our financial condition, results of operations or cash flows. However, we could incur judgments, enter into settlements, or revise our opinion regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations in the period in which the amounts are accrued and our cash flows in the period in which the amounts are paid.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

12. Segment Information

We currently have two operating segments, Exploration and Production and Midstream. All unallocated costs are reflected under Corporate, Interest and Other. The following table presents operating segment financial data:


	Exploration and Production		Midstream		Corporate, Interest and Other		Eliminations		Total

	(In millions)
For the Three Months Ended June 30, 2024
Sales and other operating revenues	$	3,195	$	7	$	—	$	—	$	3,202
Intersegment revenues	—		358		—		(358)		—
Total sales and other operating revenues	$	3,195	$	365	$	—	$	(358)	$	3,202

Net income (loss) attributable to Hess Corporation	$	765	$	66	$	(74)	$	—	$	757
Depreciation, depletion and amortization	550		50		—		—		600

Provision for income taxes	280		16		—		—		296
Capital expenditures	1,120		73		—		—		1,193
For the Three Months Ended June 30, 2023
Sales and other operating revenues	$	2,287	$	2	$	—	$	—	$	2,289
Intersegment revenues	—		322		—		(322)		—
Total sales and other operating revenues	$	2,287	$	324	$	—	$	(322)	$	2,289

Net income (loss) attributable to Hess Corporation	$	155	$	62	$	(98)	$	—	$	119
Depreciation, depletion and amortization	450		47		—		—		497
Impairment and other	82		—		—		—		82
Provision for income taxes	152		8		—		—		160
Capital expenditures	904		52		—		—		956
For the Six Months Ended June 30, 2024
Sales and other operating revenues	$	6,498	$	13	$	—	$	—	$	6,511
Intersegment revenues	—		708		—		(708)		—
Total sales and other operating revenues	$	6,498	$	721	$	—	$	(708)	$	6,511

Net income (loss) attributable to Hess Corporation	$	1,762	$	133	$	(166)	$	—	$	1,729
Depreciation, depletion and amortization	1,057		100		—		—		1,157

Provision for income taxes	614		30		—		—		644
Capital expenditures	2,008		108		—		—		2,116
For the Six Months Ended June 30, 2023
Sales and other operating revenues	$	4,696	$	4	$	—	$	—	$	4,700
Intersegment revenues	—		625		—		(625)		—
Total sales and other operating revenues	$	4,696	$	629	$	—	$	(625)	$	4,700

Net income (loss) attributable to Hess Corporation	$	560	$	123	$	(218)	$	—	$	465
Depreciation, depletion and amortization	893		94		1		—		988
Impairment and other	82		—		—		—		82
Provision for income taxes	322		14		—		—		336
Capital expenditures	1,639		109		—		—		1,748

Corporate, Interest and Other had interest income of $18 million and $35 million for the three and six months ended June 30, 2024, respectively, compared to $21 million and $41 million for the three and six months ended June 30, 2023. Interest income is included in Other, net in the Statement of Consolidated Income.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Identifiable assets by operating segment were as follows:


	June 30, 2024		December 31, 2023

	(In millions)
Exploration and Production	$	19,203	$	17,931
Midstream	4,264		3,984
Corporate, Interest and Other	2,343		2,092
Total	$	25,810	$	24,007

13. Financial Risk Management Activities

In the normal course of our business, we are exposed to commodity risks related to changes in the prices of crude oil and natural gas, as well as changes in interest rates and foreign currency values. Financial risk management activities include transactions designed to reduce risk in the selling prices of crude oil or natural gas we produce or reduce our exposure to foreign currency or interest rate movements. Generally, futures, swaps or option strategies may be used to fix the forward selling price, or establish a floor price or a range banded with a floor and ceiling price, for a portion of our crude oil or natural gas production. Such strategies are subject to certain limitations under the Merger Agreement. Forward contracts or swaps may also be used to purchase certain currencies in which we conduct business with the intent of reducing exposure to foreign currency fluctuations. At June 30, 2024, these forward contracts and swaps relate to the British Pound and Malaysian Ringgit. Interest rate swaps may be used to convert interest payments on certain long-term debt from fixed to floating rates.

The notional amounts of outstanding financial risk management derivative contracts were as follows:


	June 30, 2024		December 31, 2023

	(In millions)


Foreign exchange forwards / swaps	$	232	$	226
Interest rate swaps	$	100	$	100

Derivative contracts designated as hedging instruments:

Crude oil derivatives designated as cash flow hedges: Crude oil hedging contracts decreased Sales and other operating revenues by $52 million and $86 million in the three and six months ended June 30, 2023, respectively. There were no open crude oil hedging contracts at June 30, 2024 or December 31, 2023, or during the three and six months ended June 30, 2024.

Interest rate swaps designated as fair value hedges: At June 30, 2024 and December 31, 2023, we had interest rate swaps with gross notional amounts totaling $100 million, which were designated as fair value hedges and relate to debt where we have converted interest payments from fixed to floating rates. Changes in the fair value of interest rate swaps and the hedged fixed-rate debt are recorded in Interest expense in the Statement of Consolidated Income. The fair value of our interest rate swaps was nil at June 30, 2024 and a liability of $2 million at December 31, 2023.

Derivative contracts not designated as hedging instruments:

Foreign exchange: Foreign exchange gains and losses, which are reported in Other, net in Revenues and non-operating income in the Statement of Consolidated Income, were gains of $