Liza-3 Well Could Mean Big Gains Ahead For Hess Corp Shares

Oct. 06, 2016 12:46 PM ETHess Corporation (HES)XOM13 Comments
NextGenAnalysis profile picture
NextGenAnalysis
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Summary

  • Hess Corporation is a US-domiciled Integrated Exploration and Production Oil Company.
  • Shared fields off the coast of Guyana have the potential to drive them to a prosperous future.
  • Hess is a 30% partner in the Liza field that could easily become one of the top 50 producing fields in the world.
  • Exxon Mobil recently doubled its reserves estimate for the Liza field in which Hess is a partner. Many believe these estimates can move up further.
  • An upcoming catalyst may make this field even more exciting for Hess Corp and investors.

Exxon Mobil (NYSE:XOM) quieted skeptics after reporting the Liza field 120 miles off the coast of Guyana was a "world-class discovery" that could hold as much as 1.4 billion barrels of crude equivalent. The region off the coast of Guyana known as the Stabroek block has been stingy with its treasures for explorers over the previous 20 years. Well holes were drilled by various companies over the years that produced nothing, other than the hole. The Liza field changed all this; the Liza-1 well proved there was a viable oil deposit at the location. The Liza-2 well upped the field's game significantly, making the oil field the largest discovery of 2015 (over half of all oil found in the world in 2015 could lie at the Liza discovery)(Source: FuelFix.com) with its estimated 800mm to 1.4 billion barrels of oil equivalents (Source: Hess.com). The Liza-3 well is being drilled currently, and although we will have to wait for more information from this well, some industry experts believe the estimated size of the field could rise by another 50 to 100%. This increase is the catalyst we are targeting in this article. Hess Corporation (NYSE:NYSE:HES) has a 30% interest in this field through its Hess Guyana Exploration Ltd 100% owned affiliate. So with Exxon Mobil leading the charge why might Hess Corp. benefit more than Exxon with its 45% share of this exciting discovery? With the inclusion of the Liza-2 findings Exxon Mobil's total resource base inched over 91 billion barrels of BOE (barrel of oil equivalent). So although this is a very exciting find, it only increases Exxon Mobil's reserves by about 70 basis points assuming the high-end of the well's oil estimate. Exxon Mobil's share of the oil would be worth 30 Billion USD at current oil prices, It's a fantastic find, fortunately, or unfortunately with Exxon's Market

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NextGenAnalysis profile picture
751 Followers
Traded and Analyzed long/short equities, generally with an Asian focus. Specialize in the Tech Space, Metals and Mining, Gaming and Special/Deep Value situations. 12 years of experience. What feel's like 12 years of getting lied to by various managements. 12 years at an Asian focused fund the basis of my skepticism. More bad investments than I care to remember but you need to remember the bad ones. It's the only way we learn. If I can help one person avoid a land mine than this is a worthwhile endeavor. Use both Fundamentals and Technicals. My idea's are my own and may not represent the views or positions of my firm.

Disclosure: I am/we are long HES. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long HES DEC 16 55 CALL Options

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