10-Q 1 hes-20220331.htm 10-Q hes-20220331
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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 March 31, 2022
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, 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 classTrading SymbolName of exchange on which registered
Common StockHESNew 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 March 31, 2022, there were 311,262,547 shares of Common Stock outstanding.




HESS CORPORATION
Form 10-Q
TABLE OF CONTENTS
 
Item
No.
 Page
Number
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
  
 
 
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)
March 31,
2022
December 31,
2021
(In millions,
except share amounts)
Assets  
Current Assets:  
Cash and cash equivalents$1,370 $2,713 
Accounts receivable:
From contracts with customers1,388 1,062 
Joint venture and other136 149 
Inventories243 223 
Other current assets129 199 
Total current assets3,266 4,346 
Property, plant and equipment:
Total — at cost31,782 31,178 
Less: Reserves for depreciation, depletion, amortization and lease impairment17,293 16,996 
Property, plant and equipment — net14,489 14,182 
Operating lease right-of-use assets — net343 352 
Finance lease right-of-use assets — net140 144 
Goodwill360 360 
Deferred income taxes65 71 
Post-retirement benefit assets412 409 
Other assets723 651 
Total Assets$19,798 $20,515 
Liabilities
Current Liabilities:
Accounts payable$312 $220 
Accrued liabilities1,749 1,710 
Taxes payable129 528 
Current portion of long-term debt22 517 
Current portion of operating and finance lease obligations91 89 
Total current liabilities2,303 3,064 
Long-term debt7,934 7,941 
Long-term operating lease obligations381 394 
Long-term finance lease obligations195 200 
Deferred income taxes416 383 
Asset retirement obligations1,036 1,005 
Other liabilities and deferred credits485 502 
Total Liabilities12,750 13,489 
Equity
Hess Corporation stockholders’ equity:
Common stock, par value $1.00; Authorized — 600,000,000 shares
Issued 311,262,547 shares (2021: 309,744,953)
311 310 
Capital in excess of par value6,083 6,017 
Retained earnings680 379 
Accumulated other comprehensive income (loss)(766)(406)
Total Hess Corporation stockholders’ equity6,308 6,300 
Noncontrolling interests740 726 
Total Equity7,048 7,026 
Total Liabilities and Equity$19,798 $20,515 
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
March 31,
 20222021
 (In millions, except per share amounts)
Revenues and Non-Operating Income  
Sales and other operating revenues$2,313 $1,898 
Gains on asset sales, net22  
Other, net36 21 
Total revenues and non-operating income2,371 1,919 
Costs and Expenses
Marketing, including purchased oil and gas682 518 
Operating costs and expenses313 265 
Production and severance taxes61 37 
Exploration expenses, including dry holes and lease impairment43 33 
General and administrative expenses110 94 
Interest expense123 117 
Depreciation, depletion and amortization337 396 
Total costs and expenses1,669 1,460 
Income (Loss) Before Income Taxes702 459 
Provision (benefit) for income taxes197 123 
Net Income (Loss)505 336 
Less: Net income (loss) attributable to noncontrolling interests88 84 
Net Income (Loss) Attributable to Hess Corporation$417 $252 
Net Income (Loss) Attributable to Hess Corporation Per Common Share:
Basic$1.35 $0.82 
Diluted$1.34 $0.82 
Weighted Average Number of Common Shares Outstanding:
Basic308.9 305.8 
Diluted310.4 307.8 
Common Stock Dividends Per Share$0.375 $0.250 
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
March 31,
 20222021
 (In millions)
Net Income (Loss)$505 $336 
Other Comprehensive Income (Loss):
Derivatives designated as cash flow hedges
Effect of hedge (gains) losses reclassified to income92 51 
Income taxes on effect of hedge (gains) losses reclassified to income  
Net effect of hedge (gains) losses reclassified to income92 51 
Change in fair value of cash flow hedges(455)(102)
Income taxes on change in fair value of cash flow hedges  
Net change in fair value of cash flow hedges(455)(102)
Change in derivatives designated as cash flow hedges, after taxes(363)(51)
Pension and other postretirement plans
(Increase) reduction in unrecognized actuarial losses 14 
Income taxes on actuarial changes in plan liabilities  
(Increase) reduction in unrecognized actuarial losses, net 14 
Amortization of net actuarial losses3 16 
Income taxes on amortization of net actuarial losses  
Net effect of amortization of net actuarial losses3 16 
Change in pension and other postretirement plans, after taxes3 30 
Other Comprehensive Income (Loss)(360)(21)
Comprehensive Income (Loss)145 315 
Less: Comprehensive income (loss) attributable to noncontrolling interests88 84 
Comprehensive Income (Loss) Attributable to Hess Corporation$57 $231 
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)
Three Months Ended
March 31,
 20222021
 (In millions)
Cash Flows From Operating Activities  
Net income (loss)$505 $336 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Gains) on asset sales, net(22) 
Depreciation, depletion and amortization337 396 
Exploration lease and other impairment6 4 
Pension settlement loss 1 
Stock compensation expense33 25 
Noncash (gains) losses on commodity derivatives, net55 24 
Provision (benefit) for deferred income taxes and other tax accruals38 29 
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable(642)(329)
(Increase) decrease in inventories(20)159 
Increase (decrease) in accounts payable and accrued liabilities81 (127)
Increase (decrease) in taxes payable(399)87 
Changes in other operating assets and liabilities(128)(14)
Net cash provided by (used in) operating activities(156)591 
Cash Flows From Investing Activities
Additions to property, plant and equipment - E&P(491)(358)
Additions to property, plant and equipment - Midstream(55)(27)
Proceeds from asset sales, net of cash sold24  
Net cash provided by (used in) investing activities(522)(385)
Cash Flows From Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less1 (10)
Debt with maturities of greater than 90 days:
Borrowings  
Repayments(505)(3)
Proceeds from sale of Class A shares of Hess Midstream LP 70 
Payments on finance lease obligations(2)(2)
Cash dividends paid(119)(80)
Employee stock options exercised33 12 
Noncontrolling interests, net(74)(67)
Other, net1 1 
Net cash provided by (used in) financing activities(665)(79)
Net Increase (Decrease) in Cash and Cash Equivalents(1,343)127 
Cash and Cash Equivalents at Beginning of Year2,713 1,739 
Cash and Cash Equivalents at End of Period$1,370 $1,866 
See accompanying Notes to Consolidated Financial Statements.

5


PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED EQUITY (UNAUDITED)
 Common StockCapital in Excess of ParRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Hess Stockholders' EquityNoncontrolling InterestsTotal Equity
 
For the Three Months Ended March 31, 2022       
Balance at January 1, 2022$310 $6,017 $379 $(406)$6,300 $726 $7,026 
Net income (loss)— — 417 — 417 88 505 
Other comprehensive income (loss)— — — (360)(360)— (360)
Share-based compensation1 66 — — 67 — 67 
Dividends on common stock— — (116)— (116)— (116)
Noncontrolling interests, net— — — — — (74)(74)
Balance at March 31, 2022$311 $6,083 $680 $(766)$6,308 $740 $7,048 
For the Three Months Ended March 31, 2021
Balance at January 1, 2021$307 $5,684 $130 $(755)5,366 $969 $6,335 
Net income (loss)— — 252 — 252 84 336 
Other comprehensive income (loss)— — — (21)(21)— (21)
Share-based compensation1 39 — — 40 — 40 
Dividends on common stock— — (77)— (77)— (77)
Sale of Class A shares of Hess Midstream LP— 56 — — 56 41 97 
Noncontrolling interests, net— — — — — (67)(67)
Balance at March 31, 2021$308 $5,779 $305 $(776)$5,616 $1,027 $6,643 
See accompanying Notes to Consolidated Financial Statements.


6

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 March 31, 2022 and December 31, 2021, the consolidated results of operations for the three months ended March 31, 2022 and 2021, and consolidated cash flows for the three months ended March 31, 2022 and 2021.  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, 2021.
 2.  Inventories
Inventories consisted of the following:
March 31,
2022
December 31,
2021
 (In millions)
Crude oil and natural gas liquids$83 $52 
Materials and supplies160 171 
Total Inventories$243 $223 
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 three months ended March 31, 2022 (in millions):

Balance at January 1, 2022$681 
Additions to capitalized exploratory well costs pending the determination of proved reserves120 
Balance at March 31, 2022$801 
In the first quarter, additions to capitalized exploratory well costs pending determination of proved reserves related to wells drilled on the Stabroek Block (Hess 30%), offshore Guyana and drilling at the Huron prospect (Hess 40%) in the Gulf of Mexico.
At March 31, 2022, exploratory well costs capitalized for greater than one year following completion of drilling of $467 million was comprised of the following:
Guyana: Approximately 90% of the capitalized well costs in excess of one year relate to successful exploration wells where hydrocarbons were encountered on the Stabroek Block.  In April 2022, the government of Guyana and the partners sanctioned the development of the Yellowtail Field, the fourth sanctioned project on the block. Approximately $90 million of capitalized exploratory well costs at March 31, 2022 related to the Yellowtail Field will be reclassified to wells, facilities and equipment in the second quarter of 2022. The operator plans further appraisal drilling on the Block and is conducting pre-development planning for additional phases of development.
Joint Development Area (JDA):  Approximately 8% of the capitalized well costs in excess of one year relates to the JDA (Hess 50%) in the Gulf of Thailand, where hydrocarbons were encountered in three successful exploration wells drilled in the western part of Block A-18. The operator has submitted a development plan concept to the regulator to facilitate ongoing commercial negotiations for an extension of the existing gas sales contract to include development of the western part of the Block.
Malaysia:  Approximately 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 one successful exploration well.  Subsurface evaluation and pre-development studies are ongoing.
7

PART I - FINANCIAL INFORMATION (CONT’D.)
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4.  Hess Midstream LP
At March 31, 2022, Hess Midstream LP (Hess Midstream), a variable interest entity that is fully consolidated by Hess Corporation, had liabilities totaling $2,668 million (December 31, 2021: $2,694 million) that are on a nonrecourse basis to Hess Corporation, while Hess Midstream assets available to settle the obligations of Hess Midstream included cash and cash equivalents totaling $3 million (December 31, 2021: $2 million), property, plant and equipment with a carrying value of $3,118 million (December 31, 2021: $3,125 million) and an equity-method investment in the Little Missouri 4 (LM4) gas processing plant of $97 million (December 31, 2021: $102 million).
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 and Targa Resources Corp. Hess Midstream 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 months ended March 31, 2022 were $5 million (2021: $7 million).
In March 2021, Hess Midstream completed an underwritten public equity offering of 6.9 million Class A shares held by Hess and Global Infrastructure Partners (GIP). These Class A shares of Hess Midstream were obtained by Hess and GIP through the exchange of 6.9 million of their Class B units of Hess Midstream Operations LP (HESM Opco), a consolidated subsidiary of Hess Midstream. As a result of this transaction, Hess received net proceeds of $70 million and recorded an increase in additional paid-in capital and noncontrolling interests of $56 million and $41 million, respectively. The increase of $41 million in noncontrolling interests is comprised of $14 million resulting from the change in ownership and $27 million due to the recognition of a deferred tax asset as a result of an increase in the tax basis of Hess Midstream's investment in HESM Opco.
5.  Accrued Liabilities
Accrued Liabilities consisted of the following:
March 31,
2022
December 31,
2021
(In millions)
Accrued operating and marketing expenditures$589 $462 
Accrued capital expenditures513 479 
Accrued payments to royalty and working interest owners255 253 
Current portion of asset retirement obligations204 185 
Accrued interest on debt100 138 
Accrued compensation and benefits70 124 
Other accruals18 69 
Total Accrued Liabilities$1,749 $1,710 
6.  Debt
In February 2022, we repaid the remaining $500 million outstanding under our $1 billion term loan previously scheduled to mature in March 2023.
8

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 ProductionMidstreamEliminationsTotal
 United StatesGuyanaMalaysia and JDAOther (a)E&P Total   
Three Months Ended March 31, 2022        
Sales of our net production volumes:        
Crude oil revenue$836 $226 $31 $146 $1,239 $ $— $1,239 
Natural gas liquids revenue181    181  — 181 
Natural gas revenue85  190 5 280  — 280 
Sales of purchased oil and gas660 4  35 699  — 699 
Intercompany revenue     312 (312)— 
Total revenues from contracts with customers1,762 230 221 186 2,399 312 (312)2,399 
Other operating revenues (b)(58)(15) (13)(86)  (86)
Total sales and other operating revenues$1,704 $215 $221 $173 $2,313 $312 $(312)$2,313 
Three Months Ended March 31, 2021        
Sales of our net production volumes:        
Crude oil revenue$885 $181 $22 $116 $1,204 $ $— $1,204 
Natural gas liquids revenue143    143  — 143 
Natural gas revenue113  163 3 279  — 279 
Sales of purchased oil and gas298 4  19 321  — 321 
Intercompany revenue     289 (289)— 
Total revenues from contracts with customers1,439 185 185 138 1,947 289 (289)1,947 
Other operating revenues (b)(41)(4) (4)(49)  (49)
Total sales and other operating revenues$1,398 $181 $185 $134 $1,898 $289 $(289)$1,898 
(a)Other includes Libya and our interests in Denmark, which were sold in the third quarter of 2021.
(b)Includes gains (losses) on commodity derivatives.
There have been no significant changes to contracts with customers or composition thereof during the three months ended March 31, 2022.  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 March 31, 2022, contract liabilities of $24 million (December 31, 2021: $24 million) resulted from a take-or-pay deficiency payment received in the fourth quarter of 2021 that is subject to a make-up period expiring in December 2023. At March 31, 2022 and December 31, 2021, there were no contract assets.
8. Retirement Plans
Components of net periodic benefit cost consisted of the following:
Three Months Ended
March 31,
 20222021
 (In millions)
Service cost$13 $14 
Interest cost (a)16 14 
Expected return on plan assets (a)(53)(50)
Amortization of unrecognized net actuarial losses (a)3 15 
Settlement loss (a) 1 
Net periodic benefit cost (income) (a)$(21)$(6)
(a)  Net non-service cost included in Other, net in the Statement of Consolidated Income for the three months ended March 31, 2022 was income of $34 million (2021: income of $20 million).
In 2022, we expect to contribute approximately $45 million to our funded pension plans.
9

PART I - FINANCIAL INFORMATION (CONT’D.)
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. Weighted Average Common Shares
The Net income (loss) and weighted average number of common shares used in the basic and diluted earnings per share computations were as follows:
Three Months Ended
March 31,
 20222021
 (In millions)
Net income (loss) attributable to Hess Corporation:  
Net income (loss)$505 $336 
Less: Net income (loss) attributable to noncontrolling interests88 84 
Net income (loss) attributable to Hess Corporation$417 $252 
Weighted average number of common shares outstanding:
Basic308.9 305.8 
Effect of dilutive securities
Restricted common stock0.7 0.8 
Stock options0.6 0.4 
Performance share units0.2 0.8 
Diluted310.4 307.8 
The following table summarizes the number of antidilutive shares excluded from the computation of diluted shares:
Three Months Ended
March 31,
 20222021
Restricted common stock97 189,000 
Stock options75,413 1,164,214 
Performance share units31,352 36,134 
During the three months ended March 31, 2022, we granted 562,530 shares of restricted stock (2021: 695,832), 178,008 performance share units (2021: 205,155) and 269,748 stock options (2021: 319,295).
10.  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 (U.S.) 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.
10

PART I - FINANCIAL INFORMATION (CONT’D.)
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In September 2003, we received a directive from the New Jersey Department of Environmental Protection (NJDEP) to remediate contamination in the sediments of the Lower Passaic River. The NJDEP is also seeking natural resource damages. The directive, insofar as it affects us, relates to alleged releases from a petroleum bulk storage terminal in Newark, New Jersey we previously owned. We and over 70 companies entered into an Administrative Order on Consent with the Environmental Protection Agency (EPA) to study the same contamination; this work remains ongoing. We and other parties settled a cost recovery claim by the State of New Jersey and agreed with the EPA to fund remediation of a portion of the site. Since 2016, the EPA has issued a Record of Decision (ROD) selecting a dredge and cap remedy for both the lower eight miles and the upper nine miles of the Lower Passaic River at an estimated cost of approximately $1.82 billion.  The ROD does not address the Newark Bay, which may require additional remedial action. In addition, the federal trustees for natural resources have begun a separate assessment of damages to natural resources in the Passaic River. Given that the EPA has not selected a final remedy for the Newark Bay, total remedial costs cannot be reliably estimated at this time. Based on currently known facts and circumstances, we do not believe that this matter will result in a significant liability to us because our former terminal did not store or use contaminants which are of concern in the river sediments and could not have contributed contamination along the river’s length. Further, there are numerous other parties who we expect will bear the cost of remediation and damages.
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 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.
Hess Corporation and its subsidiary HONX, Inc. have also been named as defendants in various personal injury claims alleging exposure to asbestos and/or other alleged toxic substances while working at a former refinery (owned and operated by subsidiaries or related entities) located in St. Croix, U.S. Virgin Islands. HONX, Inc. has initiated a Chapter 11 § 524G process to resolve these asbestos-related claims. While the ultimate outcome and impact to us cannot be predicted with certainty, we believe that the resolution of these proceedings will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
11

PART I - FINANCIAL INFORMATION (CONT’D.)
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
We are also involved in other judicial and administrative proceedings from time to time in addition to the matters described above, including claims related to post-production deductions from royalty and working interest payments. 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.
11.  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 ProductionMidstreamCorporate, Interest and OtherEliminationsTotal
 (In millions)
For the Three Months Ended March 31, 2022     
Sales and Other Operating Revenues - Third parties$2,313 $ $— $— $2,313 
Intersegment Revenues 312 — (312)— 
Sales and Other Operating Revenues$2,313 $312 $— $(312)$2,313 
Net Income (Loss) attributable to Hess Corporation$460 $72 $(115)$ $417 
Depreciation, Depletion and Amortization292 45   337 
Provision (Benefit) for Income Taxes192 5   197 
Capital Expenditures543 37   580 
For the Three Months Ended March 31, 2021     
Sales and Other Operating Revenues - Third parties$1,898 $ $— $— $1,898 
Intersegment Revenues 289 — (289)— 
Sales and Other Operating Revenues$1,898 $289 $— $(289)$1,898 
Net Income (Loss) attributable to Hess Corporation$308 $75 $(131)$ $252 
Depreciation, Depletion and Amortization355 40 1  396 
Provision (Benefit) for Income Taxes120 3   123 
Capital Expenditures280 23   303 
Identifiable assets by operating segment were as follows:
March 31,
2022
December 31,
2021
 (In millions)
Exploration and Production$14,403 $14,173 
Midstream3,651 3,671 
Corporate, Interest and Other1,744 2,671 
Total$19,798 $20,515 





12

PART I - FINANCIAL INFORMATION (CONT’D.)
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12.  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 by reducing 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. 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 March 31, 2022, these instruments 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:
 March 31,
2022
December 31,
2021
 (In millions)
Commodity - crude oil hedge contracts (millions of barrels)41.3 54.8 
Foreign exchange forwards$156 $145 
Interest rate swaps$100 $100 
At December 31, 2021, we had hedged 90,000 barrels of oil per day (bopd) with WTI collars with an average monthly floor price of $60 per barrel and an average monthly ceiling price of $100 per barrel and 60,000 bopd with Brent collars with an average monthly floor price of $65 per barrel and an average monthly ceiling price of $105 per barrel for calendar 2022. In the first quarter of 2022, we purchased WTI and Brent call options to remove the ceiling price on our price collars for the period April 1, 2022 through December 31, 2022 for $325 million. As a result, during this period, we are able to realize average monthly WTI and Brent selling prices above $100 per barrel and $105 per barrel, respectively, to the extent that market prices at the time exceed these thresholds. The WTI $60 per barrel put options and the Brent $65 per barrel put options that established the floor price in our collars remain outstanding for 90,000 bopd and 60,000 bopd, respectively, through December 31, 2022.

The table below reflects the fair values of risk management derivative instruments.
 AssetsLiabilities
 (In millions)
March 31, 2022  
Derivative Contracts Designated as Hedging Instruments:  
Crude oil put options$64 $ 
Interest rate swaps  (2)
Total derivative contracts designated as hedging instruments64 (2)
Derivative Contracts Not Designated as Hedging Instruments:
Foreign exchange forwards and swaps
  
Total derivative contracts not designated as hedging instruments  
Gross fair value of derivative contracts64 (2)
Gross amounts offset in the Consolidated Balance Sheet  
Net Amounts Presented in the Consolidated Balance Sheet$64 $(2)
December 31, 2021
Derivative Contracts Designated as Hedging Instruments:
Crude oil collars$155 $ 
Interest rate swaps2  
Total derivative contracts designated as hedging instruments157  
Derivative Contracts Not Designated as Hedging Instruments:
Foreign exchange forwards and swaps
 (1)
Total derivative contracts not designated as hedging instruments (1)
Gross fair value of derivative contracts157 (1)
Gross amounts offset in the Consolidated Balance Sheet  
Net Amounts Presented in the Consolidated Balance Sheet$157 $(1)
At March 31, 2022 and December 31, 2021, the fair value of our crude oil hedge contracts is presented within Other current assets and the fair value of our foreign exchange forwards and swaps is presented within Accrued liabilities in our Consolidated
13

PART I - FINANCIAL INFORMATION (CONT’D.)
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheet. The fair value of our interest rate swaps is presented within Other liabilities and deferred credits at March 31, 2022 and within Other assets at December 31, 2021 in our Consolidated Balance Sheet. All fair values in the table above are based on Level 2 inputs.
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 $92 million in the three months ended March 31, 2022 (2021 Q1: decreased by $51 million). At March 31, 2022, pre-tax deferred losses in Accumulated other comprehensive income (loss) related to outstanding crude oil hedging contracts were $433 million ($433 million after income taxes), all of which will be reclassified into earnings during the remainder of 2022 as the hedged crude oil sales are recognized in earnings.
Interest rate swaps designated as fair value hedges:  We had interest rate swaps with gross notional amounts totaling $100 million at March 31, 2022 and December 31, 2021, that convert 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.  In the three months ended March 31, 2022, the change in fair value of interest rate swaps was a decrease of $4 million (2021 Q1: decrease of $1 million) with a corresponding adjustment in the carrying value of the hedged fixed-rate debt.
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 nil in the three months ended March 31, 2022 (2021 Q1: losses of $1 million).  A component of foreign exchange gains and losses is the result of foreign exchange derivative contracts that are not designated as hedges, which amounted to net gains of $4 million in the three months ended March 31, 2022 (2021 Q1: losses of $1 million).
Fair Value Measurement:  
At March 31, 2022, our total long-term debt, which was substantially comprised of fixed-rate debt instruments, had a carrying value of $7,956 million and a fair value of $8,801 million based on Level 2 inputs in the fair value measurement hierarchy. We also have short-term financial instruments, primarily cash equivalents, accounts receivable and accounts payable, for which the carrying value approximated fair value at March 31, 2022 and December 31, 2021.
13.  Subsequent Events
In April 2022, Hess Corporation received total proceeds of $346 million related to two Hess Midstream equity transactions. During the month, Hess Midstream completed a public offering of approximately 10.2 million Hess Midstream Class A shares held by Hess Corporation and GIP. We received net proceeds of $146 million from the public offering. Concurrent with the public offering, HESM Opco repurchased approximately 13.6 million HESM Opco Class B units from Hess Corporation and GIP for $400 million, of which we received net proceeds of $200 million. The purchase was financed by HESM Opco's issuance of $400 million of 5.500% senior unsecured notes due 2030. As a result of these transactions, our ownership in Hess Midstream, on a consolidated basis, decreased from approximately 43.5% at March 31, 2022 to approximately 41.0%.
14


PART I - FINANCIAL INFORMATION (CONT'D.)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with the unaudited consolidated financial statements and accompanying footnotes for the quarter ended March 31, 2022 included under Item 1. Financial Statements of this Form 10-Q and the audited consolidated financial statements and related notes included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021.
Overview
Hess Corporation is a global E&P company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas with production operations located primarily in the U.S., Guyana, the Malaysia/Thailand Joint Development Area (JDA), and Malaysia. We conduct exploration activities primarily offshore Guyana, in the U.S. Gulf of Mexico, and offshore Suriname and Canada. At the Stabroek Block (Hess 30%), offshore Guyana, we and our partners have discovered a significant resource base and are executing a multi-phased development of the Block. The Liza Phase 1 development, with production capacity of approximately 120,000 gross bopd, completed production optimization work in April that expanded its production capacity to more than 140,000 bopd. The Liza Phase 2 development achieved first production in February 2022 and is expected to reach its production capacity of approximately 220,000 gross bopd by the third quarter. A third development, Payara, was sanctioned in the third quarter of 2020 and is expected to achieve first production in late 2023 with production capacity of approximately 220,000 gross bopd. A fourth development, Yellowtail, was sanctioned in April 2022 and is expected to achieve first production in 2025, with production capacity of approximately 250,000 gross bopd. We currently plan to have six floating production, storage and offloading vessels (FPSO) with an aggregate expected production capacity of more than 1 million gross bopd on the Stabroek Block in 2027, and the potential for up to ten FPSOs to develop the current discovered recoverable resource base.
Our Midstream operating segment provides fee-based services, including gathering, compressing and processing natural gas and fractionating natural gas liquids (NGL); gathering, terminaling, loading and transporting crude oil and NGL; storing and terminaling propane, and water handling services primarily in the Bakken shale play in the Williston Basin area of North Dakota.
In April 2022, Hess Corporation received total proceeds of $346 million related to two Hess Midstream equity transactions. During the month, Hess Midstream completed a public offering of approximately 10.2 million Hess Midstream Class A shares held by Hess Corporation and GIP. We received net proceeds of $146 million from the public offering. Concurrent with the public offering, HESM Opco repurchased approximately 13.6 million HESM Opco Class B units from Hess Corporation and GIP for $400 million, of which we received net proceeds of $200 million. The purchase was financed by HESM Opco's issuance of $400 million of 5.500% senior unsecured notes due 2030. As a result of these transactions, our ownership in Hess Midstream, on a consolidated basis, decreased from approximately 43.5% at March 31, 2022, to approximately 41.0%.
First Quarter Highlights and 2022 Outlook
Following the startup of the Liza Phase 2 project in February 2022, we repaid the remaining $500 million outstanding under our $1 billion term loan, and in March 2022, we announced a 50% increase in our first quarter dividend on common stock. Excluding our Midstream segment, we ended the first quarter of 2022 with approximately $1.37 billion in cash and cash equivalents.
Oil and gas net production in 2022, excluding Libya, is forecast to be at the low end of the range of 325,000 barrels of oil equivalent per day (boepd) to 330,000 boepd reflecting our initial assessment of the impact from severe weather in North Dakota in April. For the remainder of 2022, we have WTI put options for 90,000 bopd with an average monthly floor price of $60 per barrel and Brent put options for 60,000 bopd with an average monthly floor price of $65 per barrel.
Our E&P capital and exploratory expenditures guidance for 2022 is approximately $2.6 billion. We are considering adding a fourth rig in the Bakken in the second half of this year which could add up to $100 million to our 2022 capital spend, and we also expect industry cost inflation to potentially increase capital spend by $80 million to $100 million for this year, including higher drilling and completion costs in the Bakken that we now expect to average approximately $6.2 million per well, or 7% above last year.
First Quarter Results
In the first quarter of 2022, net income was $417 million, compared with net income of $252 million in the first quarter of 2021. Excluding items affecting comparability of earnings between periods detailed on page 23, adjusted net income was $404 million in the first quarter of 2022.  The improvement in first quarter 2022 adjusted after-tax earnings compared to the prior-year quarter primarily reflects higher realized selling prices, partially offset by lower sales volumes.
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PART I - FINANCIAL INFORMATION (CONT'D.)
Exploration and Production Results
In the first quarter of 2022, E&P had net income of $460 million compared with net income of $308 million in the first quarter of 2021. Total net production, excluding Libya, averaged 276,000 boepd in the first quarter 2022, compared with 315,000 boepd in the first quarter of 2021, or 304,000 boepd pro forma for assets sold. The average realized crude oil selling price, including hedging, was $86.75 per barrel in the first quarter of 2022, compared with $50.02 per barrel in the first quarter of 2021. The average realized NGL selling price in the first quarter of 2022 was $39.79 per barrel, compared with $29.49 per barrel in the prior-year quarter, while the average realized natural gas selling price was $5.28 per thousand cubic feet (mcf) in the first quarter of 2022, compared with $4.90 per mcf in the first quarter of 2021.
The following is an update of our ongoing E&P activities:
In North Dakota, net production from the Bakken averaged 152,000 boepd for the first quarter of 2022 (2021 Q1: 158,000 boepd). Our former Little Knife and Murphy Creek nonstrategic acreage interests that were sold in the second quarter 2021 contributed net production of approximately 5,000 boepd in the first quarter of 2021. We operated three rigs, drilled 19 wells, completed 16 wells, and brought 13 new wells online during the first quarter of 2022. We forecast net production to be in the range of 140,000 boepd and 145,000 boepd for the second quarter of 2022 and at the low end of the range of 160,000 boepd and 165,000 boepd for the full year 2022 reflecting our initial assessment of the impact from severe weather in April.
In the Gulf of Mexico, net production for the first quarter of 2022 averaged 30,000 boepd (2021 Q1: 56,000 boepd), primarily reflecting field decline and unplanned downtime at the Baldpate, Penn State, and Llano fields. In February, we spud an exploration well at the Huron prospect (Hess 40%) located at Green Canyon Block 69. Well results are anticipated in the second quarter.
At the Stabroek Block (Hess 30%), offshore Guyana, net production totaled 30,000 bopd for the first quarter of 2022 (2021 Q1: 31,000 bopd). In February 2022, production commenced from the Liza Unity FPSO and contributed 7,000 net bopd in the first quarter of 2022.
The Liza Destiny FPSO, recently completed production optimization work initiated in March 2022 that expanded its production capacity to more than 140,000 gross bopd, from 120,000 gross bopd previously. It is expected to reach its full capacity of more than 140,000 bopd in the second quarter. The Liza Unity FPSO is expected to reach its production capacity of approximately 220,000 gross bopd by the third quarter. In the first quarter we sold approximately 2.3 million barrels of oil from Guyana and expect to have 7 one-million barrel liftings in the second quarter and 8 one-million barrel liftings in both the third and fourth quarters.
The third development, Payara, will utilize the Prosperity FPSO with an expected capacity of 220,000 gross bopd. The project is progressing ahead of schedule with first production now expected in late 2023. In April 2022, we announced the final investment decision was made to proceed with development of the Yellowtail Field on the Stabroek Block after the development plan received approval from the government of Guyana. Yellowtail, the largest development thus far on the Block, will utilize the ONE GUYANA FPSO, which is expected to have a production capacity of up to 250,000 gross bopd with first production expected in 2025. Six drill centers are planned with up to 26 production wells and 25 injection wells.
In April, we announced discoveries at Barreleye, Lukanani, and Patwa. The Barreleye-1 well encountered approximately 230 feet of hydrocarbon bearing sandstone reservoirs of which approximately 52 feet is high quality oil bearing. The well was drilled in 3,840 feet of water and is located approximately 20 miles southeast of the Liza Field. The Lukanani-1 well encountered 115 feet of hydrocarbon bearing sandstone reservoirs of which approximately 76 feet is high quality oil bearing. The well was drilled in water depth of 4,068 feet and is located in the southeastern part of the Block, approximately 2 miles west of the Pluma discovery. The Patwa-1 well encountered 108 feet of hydrocarbon bearing sandstone reservoirs. The well was drilled in 6,315 feet of water and is located approximately 3 miles northwest of the Cataback-1 discovery.
In the Gulf of Thailand, net production from Block A-18 of the JDA averaged 38,000 boepd for the first quarter of 2022 (2021 Q1: 37,000 boepd), including contribution from unitized acreage in Malaysia, while net production from North Malay Basin, offshore Peninsular Malaysia, averaged 26,000 boepd for the first quarter of 2022 (2021 Q1: 27,000 boepd).



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PART I - FINANCIAL INFORMATION (CONT'D.)
Consolidated Results of Operations
The after-tax income (loss) by major operating activity is summarized below:
Three Months Ended
March 31,
 20222021
 (In millions, except per share amounts)
Net Income (Loss) Attributable to Hess Corporation:  
Exploration and Production$460 $308 
Midstream72 75 
Corporate, Interest and Other(115)(131)
Total$417 $252 
Net Income (Loss) Attributable to Hess Corporation Per Common Share:
Basic$1.35 $0.82 
Diluted$1.34 $0.82