Hess sells interest in Gulf of Mexico to fund oil investment in Guyana

Hess Corporation, a 30 per cent stakeholder in the Stabroek Block, has entered into an agreement to sell its 28 per cent working interest in the Shenzi Field in the deep-water Gulf of Mexico to BHP Billiton, the field’s operator, for a total consideration of US$505 million.
The deal is subject to customary adjustments, with an effective date of July 1, 2020.
According to Hess, the field produced an average of 11,000 net barrels of oil equivalent per day in the first eight months of 2020.
“Proceeds will be used to fund our world-class investment opportunity in Guyana,” Chief Executive Officer (CEO) John Hess said in a brief statement on Monday.
“This sale is aligned with our strategy to preserve cash and preserve the long-term value of our assets in the current low oil price environment,” Hess said.
The transaction is expected to close before the end of 2020 and is subject to customary closing conditions.
Just recently, Hess Corp announced plans to invest approximately US$1.8 billion in the Payara Development Project, excluding pre-sanction costs and Floating Production, Storage, and Offloading (FPSO) vessels purchase cost.
The company said that it made a final investment decision to proceed with development of the Payara Field offshore Guyana after the development plan got the go-ahead from the Government of Guyana last Wednesday.
The Stabroek Block is 6.6 million acres. ExxonMobil affiliate Esso Exploration and Production Guyana Limited is the operator and holds a 45 per cent stake. CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds the remaining 25 per cent interest in the Stabroek Block.
“We are excited to sanction our third oil development on the Stabroek Block,” Hess said following the approval of the licences.
“We thank the Government of Guyana for their support and look forward to realising the full potential of this world-class resource,” he added.
Payara is the third Field Development Plan (FDP) in the Stabroek Block to gain approval. The first FDP that the Guyana Government approved was for Liza Phase One, while Liza Phase Two is expected to start up in 2022.
The Liza Phase One development, with a production capacity of 120,000 gross barrels of oil per day, achieved first oil in late 2019. Liza Phase Two remains on track to achieve first oil by early 2022. It will produce up to 220,000 gross barrels of oil per day at peak rates using the Liza Unity FPSO, which is under construction in Singapore.
According to Hess, Payara will utilise the Prosperity FPSO, which will have the capacity to produce up to 220,000 barrels of oil per day and will target an estimated resource base of about 600 million barrels of oil equivalent.
The company said 10 drill centres were planned with a total of 41 wells – 20 production wells and 21 injection wells. First oil is expected sometime in 2024.
Hess stated that its net share of development costs is forecast to be approximately US$250 million in 2021, US$450 million in 2022, US$500 million in 2023, US$300 million in 2024, and US$225 million in 2025.
Gross discovered recoverable resources for the Stabroek Block are estimated at more than eight billion barrels of oil equivalent as of January 2020.
The 18 discoveries on the Block to date have established the potential for at least five FPSOs producing more than 750,000 barrels of oil per day by 2026.
According to Hess, additional development opportunities in the Stabroek Block are being evaluated, including recent discoveries at Yellowtail, Redtail, Mako and Uaru.
The US$9 billion Payara development is considered to be the largest single investment ever made in Guyana.