Hess (HES) Prepares for Success in 2019 and Beyond

In a recently released 2019 budget, Hess Corporation (HES) has revealed that the company is planning to significantly increase spending compared to 2018's levels. Making itself an outlier compared to its exploration and production peers, Hess reiterated that its increased investment will pay big dividends down the road.

Hess also revealed that it plans to invest $2.9 billion in capex during 2019, nearly 40% higher than the $2.1 billion it spent in both 2017 and 2018. Further, it plans to allocate nearly three-quarters of $2.9 billion in assets it calls "high-return growth" in the U.S.'s Bakken formation and in Guyana to boost production in the near term. 20% would be invested in longer-term offshore development projects, and the remaining 15% on exploration and appraisal activities.

According to Hess, a major chunk of the production-focused spending will be on the Bakken Shale, where it plans to invest $1.425 billion so that it can operate an average of six drilling rigs. In addition, Hess plans to invest $290 million in its Gulf of Mexico operations to continue developing its Stampede Field, along with $150 million in Malaysia and Thailand.

All of Hess's development money will go toward the first two phases of Exxon's (XOM) Liza discovery offshore Guyana, where it plans to spend $260 million on phase one. This should enable them to start producing next year, and they have set aside $310 million toward phase two, which Exxon expects to sanction in 2019.

Finally, Hess plans to invest $440 million in continuing its exploration activities offshore Guyana with Exxon, as well as further exploring the deep-water Gulf of Mexico and offshore Suriname.

Hess believes this increased spending could enhance its position to grow production and cash flow at a fast pace over the next few years.