Hess(HES) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The company presents its unaudited consolidated financial statements for the quarter ended March 31, 2024 - The financial statements are unaudited and prepared in accordance with SEC interim reporting requirements, with certain GAAP notes condensed or omitted[20][21] - Hess Corporation entered into a Merger Agreement with Chevron Corporation on October 22, 2023, where Hess will become a wholly-owned subsidiary of Chevron, with stockholders receiving 1.025 shares of Chevron common stock for each Hess share[22][69] - The merger is anticipated to close by mid-2024, but an arbitration regarding a right of first refusal (Stabroek ROFR) may delay or prevent completion[22][69] Consolidated Balance Sheet Consolidated Balance Sheet Highlights (March 31, 2024 vs. December 31, 2023) | Metric | March 31, 2024 (Millions $) | December 31, 2023 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :-------------------------- | :--------------------------- | :---------- | :--------- | | Total Assets | 24,719 | 24,007 | 712 | 2.97% | | Total Liabilities | 14,188 | 14,405 | (217) | -1.51% | | Total Equity | 10,531 | 9,602 | 929 | 9.67% | | Cash and cash equivalents | 1,438 | 1,688 | (250) | -14.81% | | Property, plant and equipment — net | 17,827 | 17,432 | 395 | 2.27% | | Total current assets | 3,624 | 3,430 | 194 | 5.66% | | Total current liabilities | 2,951 | 3,270 | (319) | -9.75% | Statement of Consolidated Income Consolidated Income Statement Highlights (Three Months Ended March 31, 2024 vs. 2023) | Metric | 3 Months Ended Mar 31, 2024 (Millions $) | 3 Months Ended Mar 31, 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :---------- | :--------- | | Sales and other operating revenues | 3,309 | 2,411 | 898 | 37.25% | | Total revenues and non-operating income | 3,341 | 2,453 | 888 | 36.20% | | Total costs and expenses | 1,926 | 1,849 | 77 | 4.16% | | Income Before Income Taxes | 1,415 | 604 | 811 | 134.27% | | Provision for income taxes | 348 | 176 | 172 | 97.73% | | Net Income | 1,067 | 428 | 639 | 149.30% | | Net Income Attributable to Hess Corporation | 972 | 346 | 626 | 180.92% | | Basic EPS | 3.17 | 1.13 | 2.04 | 180.53% | | Diluted EPS | 3.16 | 1.13 | 2.03 | 179.65% | | Common Stock Dividends Per Share | 0.4375 | 0.4375 | 0 | 0.00% | Statement of Consolidated Comprehensive Income Consolidated Comprehensive Income Highlights (Three Months Ended March 31, 2024 vs. 2023) | Metric | 3 Months Ended Mar 31, 2024 (Millions $) | 3 Months Ended Mar 31, 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | :---------- | :--------- | | Net Income | 1,067 | 42 | 1,025 | 2440.48% | | Other Comprehensive Income (Loss) | — | 1 | (1) | -100.00% | | Comprehensive Income | 1,067 | 44 | 1,023 | 2325.00% | | Comprehensive Income Attributable to Hess Corporation | 972 | 36 | 936 | 2600.00% | Statement of Consolidated Cash Flows Consolidated Cash Flow Statement Highlights (Three Months Ended March 31, 2024 vs. 2023) | Metric | 3 Months Ended Mar 31, 2024 (Millions $) | 3 Months Ended Mar 31, 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | :---------- | :--------- | | Net cash provided by (used in) operating activities | 885 | 638 | 247 | 38.71% | | Net cash provided by (used in) investing activities | (958) | (841) | (117) | 13.91% | | Net cash provided by (used in) financing activities | (177) | (183) | 6 | -3.28% | | Net Increase (Decrease) in Cash and Cash Equivalents | (250) | (386) | 136 | -35.23% | | Cash and Cash Equivalents at End of Period | 1,438 | 2,100 | (662) | -31.52% | Statement of Consolidated Equity Consolidated Equity Statement Highlights (Three Months Ended March 31, 2024 vs. 2023) | Metric | Balance at Jan 1, 2024 (Millions $) | Balance at Mar 31, 2024 (Millions $) | Balance at Jan 1, 2023 (Millions $) | Balance at Mar 31, 2023 (Millions $) | | :------------------------------------ | :---------------------------------- | :---------------------------------- | :---------------------------------- | :---------------------------------- | | Total Hess Stockholders' Equity | 8,986 | 9,868 | 7,855 | 8,133 | | Noncontrolling Interests | 616 | 663 | 641 | 588 | | Total Equity | 9,602 | 10,531 | 8,496 | 8,721 | Notes to Consolidated Financial Statements (Unaudited) Note 1 - Basis of Presentation - The financial statements are unaudited and reflect normal recurring adjustments necessary for fair presentation, prepared in accordance with SEC interim reporting rules, condensing or omitting certain GAAP information[20][21] - Hess Corporation entered into a Merger Agreement with Chevron Corporation on October 22, 2023, where Hess will be merged into a wholly-owned subsidiary of Chevron, with Hess stockholders receiving 1.025 shares of Chevron common stock per Hess share[22] - The merger is expected to close by mid-2024, but an arbitration filing regarding a right of first refusal (Stabroek ROFR) may cause delays or prevent completion[22] - New accounting pronouncements, ASU No 2023-07 and ASU No 2023-09, are effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively, with their impact currently under assessment[23][24] Note 2 - Inventories Inventories (March 31, 2024 vs. December 31, 2023) | Inventory Type | March 31, 2024 (Millions $) | December 31, 2023 (Millions $) | Change ($M) | Change (%) | | :-------------------------- | :-------------------------- | :--------------------------- | :---------- | :--------- | | Crude oil and natural gas liquids | 100 | 72 | 28 | 38.89% | | Materials and supplies | 282 | 232 | 50 | 21.55% | | Total Inventories | 382 | 304 | 78 | 25.66% | Note 3 - Property, Plant and Equipment - At March 31, 2024, $904 million of capitalized exploratory well costs related to 37 wells on the Stabroek Block were pending determination of proved reserves[27] - 88% of exploratory well costs capitalized for over one year relate to successful wells on the Stabroek Block in Guyana, including $115 million for the Whiptail project[28] - Other significant capitalized well costs over one year include 5% for the Zanderij-1 well in Suriname, 5% for the JDA in the Gulf of Thailand, and 2% for the North Malay Basin in Malaysia[29][30][31] Capitalized Exploratory Well Costs (Three Months Ended March 31, 2024) | Metric | Amount (Millions $) | | :---------------------------------------------------------------- | :------------------ | | Balance at January 1, 2024 | 952 | | Additions to capitalized exploratory well costs pending proved reserves | 65 | | Balance at March 31, 2024 | 1,017 | Note 4 - Hess Midstream LP - Hess Midstream LP, a fully consolidated entity, had $3,460 million in nonrecourse liabilities to Hess Corporation at March 31, 2024[32] - Hess Corporation holds an approximate 38% consolidated ownership interest in Hess Midstream LP[32] - In February 2024, a public equity offering of 11.5 million Class A shares by a GIP affiliate increased Noncontrolling interests and deferred tax assets by $94 million[34] - In March 2024, HESM Opco repurchased 2.8 million Class B units for $100 million, with Hess Corporation receiving $38 million in proceeds[35][78] Note 5 - Accrued Liabilities Accrued Liabilities (March 31, 2024 vs. December 31, 2023) | Accrued Liability Type | March 31, 2024 (Millions $) | December 31, 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------ | :-------------------------- | :--------------------------- | :---------- | :--------- | | Accrued capital expenditures | 636 | 670 | (34) | -5.07% | | Accrued operating and marketing expenditures | 579 | 593 | (14) | -2.36% | | Accrued payments to royalty and working interest owners | 189 | 178 | 11 | 6.18% | | Current portion of asset retirement obligations | 163 | 160 | 3 | 1.88% | | Accrued interest on debt | 111 | 144 | (33) | -22.92% | | Accrued compensation and benefits | 73 | 193 | (120) | -62.18% | | Other accruals | 23 | 164 | (141) | -85.98% | | Total Accrued Liabilities | 1,774 | 2,102 | (328) | -15.60% | Note 6 - Revenue - Guyana crude oil revenue from non-customers increased significantly to $252 million in Q1 2024 from $108 million in Q1 2023[40] - Other operating revenues in Q1 2023 included $34 million in losses from commodity derivatives, while Q1 2024 had no such gains or losses[41] Revenue from Contracts with Customers (Three Months Ended March 31, 2024 vs. 2023) | Revenue Type (E&P Segment) | 3 Months Ended Mar 31, 2024 (Millions $) | 3 Months Ended Mar 31, 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | :---------- | :--------- | | Crude oil revenue | 2,328 | 1,523 | 805 | 52.86% | | Natural gas liquids revenue | 153 | 141 | 12 | 8.51% | | Natural gas revenue | 259 | 234 | 25 | 10.68% | | Sales of purchased oil and gas | 563 | 544 | 19 | 3.49% | | Third-party services | 5 | — | 5 | N/A | | Intercompany revenue (Midstream) | 350 | 303 | 47 | 15.51% | | Total sales (a) | 3,308 | 2,442 | 866 | 35.46% | | Other operating revenues (b) | 1 | (31) | 32 | -103.23% | | Total sales and other operating revenues | 3,309 | 2,411 | 898 | 37.25% | Note 7 - Retirement Plans - The U.K pension plan is evaluating alternatives to settle its projected benefit obligation, which could result in a material noncash settlement loss[45] - At March 31, 2024, pre-tax unrecognized net actuarial losses related to the U.K pension plan were $179 million[45] Net Periodic Benefit Cost (Three Months Ended March 31, 2024 vs. 2023) | Component | 3 Months Ended Mar 31, 2024 (Millions $) | 3 Months Ended Mar 31, 2023 (Millions $) | | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Service cost | 10 | 9 | | Interest cost | 23 | 25 | | Expected return on plan assets | (38) | (39) | | Amortization of unrecognized net actuarial losses | — | — | | Net periodic benefit cost (income) | (5) | (5) | Note 8 - Weighted Average Common Shares - During Q1 2024, 732,691 shares of restricted stock were granted, compared to 446,508 in Q1 2023[47] Net Income and Weighted Average Common Shares (Three Months Ended March 31, 2024 vs. 2023) | Metric | 3 Months Ended Mar 31, 2024 (Millions) | 3 Months Ended Mar 31, 2023 (Millions) | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | | Net income attributable to Hess Corporation | 972 | 346 | | Basic weighted average common shares | 306.4 | 305.4 | | Diluted weighted average common shares | 307.9 | 307.3 | Note 9 - Guarantees and Contingencies - Hess is involved in ongoing lawsuits related to the use of MTBE in gasoline, with two active cases remaining[49] - The company is subject to an EPA Administrative Order for the Gowanus Canal Superfund Site but does not expect a significant liability[50] - Hess is a defendant in climate change lawsuits and claims regarding post-production deductions, with an unpredictable ultimate impact[51][53][54] - Management believes current legal proceedings are not expected to have a material adverse effect on the company's financial condition or operations[56] Note 10 - Segment Information - Hess Corporation operates in two segments: Exploration and Production (E&P) and Midstream[57] Segment Financial Data (Three Months Ended March 31, 2024 vs. 2023) | Metric (Millions $) | E&P 2024 | Midstream 2024 | Corp, Int & Other 2024 | Total 2024 | E&P 2023 | Midstream 2023 | Corp, Int & Other 2023 | Total 2023 | | :------------------------------------ | :------- | :------------- | :--------------------- | :--------- | :------- | :------------- | :--------------------- | :--------- | | Total sales and other operating revenues | 3,303 | 356 | — | 3,309 | 2,409 | 305 | — | 2,411 | | Net income (loss) attributable to Hess Corporation | 997 | 67 | (92) | 972 | 405 | 61 | (120) | 346 | | Depreciation, depletion and amortization | 507 | 50 | — | 557 | 443 | 47 | 1 | 491 | | Provision for income taxes | 334 | 14 | — | 348 | 170 | 6 | — | 176 | | Capital expenditures | 888 | 35 | — | 923 | 735 | 57 | — | 792 | Identifiable Assets by Operating Segment (March 31, 2024 vs. December 31, 2023) | Segment | March 31, 2024 (Millions $) | December 31, 2023 (Millions $) | Change ($M) | Change (%) | | :-------------------------- | :-------------------------- | :--------------------------- | :---------- | :--------- | | Exploration and Production | 18,826 | 17,931 | 895 | 4.99% | | Midstream | 4,055 | 3,984 | 71 | 1.78% | | Corporate, Interest and Other | 1,838 | 2,092 | (254) | -12.14% | | Total | 24,719 | 24,007 | 712 | 2.97% | Note 11 - Financial Risk Management Activities - Hess uses financial instruments to reduce exposure to commodity price, interest rate, and foreign currency fluctuations, subject to Merger Agreement limitations[59] - There were no open crude oil hedging contracts at March 31, 2024, compared to a net loss of $34 million from hedging in Q1 2023[61] - Foreign exchange derivative contracts resulted in net gains of $5 million in Q1 2024, compared to net losses of $2 million in Q1 2023[63] Notional Amounts of Outstanding Financial Risk Management Derivative Contracts (March 31, 2024 vs. December 31, 2023) | Contract Type | March 31, 2024 (Millions $) | December 31, 2023 (Millions $) | | :------------------------------------ | :-------------------------- | :--------------------------- | | Foreign exchange forwards / swaps | 259 | 226 | | Interest rate swaps | 100 | 100 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2024 financial performance, liquidity, and capital resources, highlighting operational developments and the proposed Chevron merger - Hess Corporation is a global E&P company with key production operations in the U.S., Guyana, Malaysia/Thailand JDA, and Malaysia[67] - The Midstream segment provides fee-based services primarily in the Bakken shale play of North Dakota[68] - The proposed merger with Chevron is expected to close by mid-2024, but an arbitration regarding the Stabroek ROFR may cause delays or failure to complete the transaction[69] Overview - Hess is a global E&P company with production in the U.S., Guyana, Malaysia/Thailand JDA, and Malaysia[67] - The company is developing the Stabroek Block offshore Guyana, targeting 1.3 million gross barrels of oil per day capacity by the end of 2027[67] - The Midstream segment provides fee-based services primarily in the Bakken shale play of North Dakota[68] First Quarter Results - The significant increase in after-tax earnings in Q1 2024 was primarily driven by higher production volumes[70] First Quarter Net Income (2024 vs. 2023) | Metric | Q1 2024 (Millions $) | Q1 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :---------- | :--------- | | Net Income Attributable to Hess Corporation | 972 | 346 | 626 | 180.92% | Exploration and Production Operations Update - North Dakota net production averaged 190,000 boepd in Q1 2024, driven by increased drilling and completion activity[72] - Guyana net production reached 190,000 bopd in Q1 2024, primarily due to the Payara development reaching its initial production capacity of 220,000 gross bopd[75][77] - The successful Bluefin-1 exploration well in Guyana encountered approximately 197 feet of high-quality hydrocarbon bearing sandstone reservoirs[76] E&P Net Income and Production (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | Change (%) | | :------------------------------------ | :------ | :------ | :----- | :--------- | | Net Income (Millions $) | 997 | 405 | 592 | 146.17% | | Total Net Production (boepd) | 476,000 | 374,000 | 102,000 | 27.27% | Average Realized Selling Prices (Q1 2024 vs. Q1 2023) | Commodity | Q1 2024 | Q1 2023 | Change | Change (%) | | :------------------------------------ | :------ | :------ | :----- | :--------- | | Crude Oil (per barrel, incl. hedging) | $80.06 | $74.23 | $5.83 | 7.85% | | NGL (per barrel) | $22.97 | $24.25 | -$1.28 | -5.28% | | Natural Gas (per mcf) | $4.62 | $4.39 | $0.23 | 5.24% | Midstream Operations Update - In February 2024, Hess Midstream LP completed a public equity offering of 11.5 million Class A shares held by a GIP affiliate; Hess Corporation received no proceeds[78] - In March 2024, HESM Opco repurchased 2.8 million Class B units for $100 million, with Hess Corporation receiving proceeds of $38 million[78] Consolidated Results of Operations Analysis - Net cash provided by operating activities before changes in operating assets and liabilities increased to $1,729 million in Q1 2024 from $1,032 million in Q1 2023, primarily due to higher production volumes[81][117] Exploration and Production Segment Analysis - Higher realized selling prices in Q1 2024 increased after-tax earnings by approximately $105 million compared to Q1 2023[88] - Higher sales volumes in Q1 2024 increased after-tax earnings by approximately $600 million compared to Q1 2023[96] - Cash operating costs increased due to Guyana's Payara start-up and maintenance in North Dakota, but decreased on a per-unit basis due to higher production volumes[98] - Midstream tariffs expense increased in Q1 2024 due to higher throughput volumes[99] - DD&A expense was higher due to increased production but decreased on a per-unit basis due to year-end 2023 reserve revisions and additions[100] - E&P income tax expense increased to $334 million in Q1 2024 from $170 million in Q1 2023, primarily due to higher pre-tax income in Guyana[104] E&P Summarized Income Statement (Three Months Ended March 31, 2024 vs. 2023) | Metric (Millions $) | Q1 2024 | Q1 2023 | Change ($M) | Change (%) | | :------------------------------------ | :------ | :------ | :---------- | :--------- | | Sales and other operating revenues | 3,303 | 2,409 | 894 | 37.11% | | Total revenues and non-operating income | 3,314 | 2,423 | 891 | 36.77% | | Total costs and expenses | 1,983 | 1,848 | 135 | 7.30% | | Net Income Attributable to Hess Corporation | 997 | 405 | 592 | 146.17% | Worldwide Average Selling Prices (Q1 2024 vs. Q1 2023) | Commodity | Q1 2024 | Q1 2023 | Change | Change (%) | | :------------------------------------ | :------ | :------ | :----- | :--------- | | Crude Oil (incl. hedging) | $80.06 | $74.23 | $5.83 | 7.85% | | Crude Oil (excl. hedging) | $80.06 | $76.02 | $4.04 | 5.31% | | Natural Gas Liquids | $22.97 | $24.25 | -$1.28 | -5.28% | | Natural Gas | $4.62 | $4.39 | $0.23 | 5.24% | Worldwide Net Production Volumes (Q1 2024 vs. Q1 2023) | Commodity | Q1 2024 (Thousands) | Q1 2023 (Thousands) | Change | Change (%) | | :------------------------------------ | :------------------ | :------------------ | :----- | :--------- | | Crude Oil – Barrels | 305 | 216 | 89 | 41.20% | | Natural Gas Liquids – Barrels | 71 | 62 | 9 | 14.52% | | Natural Gas – Mcf | 599 | 574 | 25 | 4.36% | | Barrels of Oil Equivalent (boepd) | 476 | 374 | 102 | 27.27% | E&P Unit Costs (Q1 2024 vs. Q1 2023) | Unit Cost (per boe) | Q1 2024 | Q1 2023 | Change | Change (%) | | :------------------------------------ | :------ | :------ | :----- | :--------- | | Cash operating costs | $10.79 | $12.96 | -$2.17 | -16.74% | | DD&A | $11.71 | $13.16 | -$1.45 | -11.02% | | Total Production Unit Costs | $22.50 | $26.12 | -$3.62 | -13.86% | Midstream Segment Analysis - Midstream sales and other operating revenues increased primarily due to higher throughput volumes[107] - Operating costs and expenses increased due to higher maintenance costs, while interest expense rose from higher rates and increased borrowings[107] - Provision for income taxes increased due to increased ownership of HESM Opco by Hess Midstream LP[107] Midstream Summarized Income Statement (Three Months Ended March 31, 2024 vs. 2023) | Metric (Millions $) | Q1 2024 | Q1 2023 | Change ($M) | Change (%) | | :------------------------------------ | :------ | :------ | :---------- | :--------- | | Sales and other operating revenues | 356 | 305 | 51 | 16.72% | | Total revenues and non-operating income | 359 | 307 | 52 | 16.94% | | Total costs and expenses | 183 | 158 | 25 | 15.82% | | Net Income Attributable to Hess Corporation | 67 | 61 | 6 | 9.84% | Corporate, Interest and Other Segment Analysis - Corporate and other expenses were lower in Q1 2024 primarily due to reduced legal and professional fees[110] - Net interest expense decreased in Q1 2024, primarily due to capitalized interest that commenced upon the sanctioning of the Uaru development in Guyana[110] Corporate, Interest and Other Expenses (Three Months Ended March 31, 2024 vs. 2023) | Metric (Millions $) | Q1 2024 | Q1 2023 | Change ($M) | Change (%) | | :------------------------------------ | :------ | :------ | :---------- | :--------- | | Corporate and other expenses, net | 28 | 39 | (11) | -28.21% | | Interest expense, net | 64 | 81 | (17) | -20.99% | | Net Corporate, Interest and Other expenses after income taxes | 92 | 120 | (28) | -23.33% | Other Items Potentially Affecting Future Results - Future results may be impacted by factors such as volatility in commodity prices, reserve changes, asset sales, and exploration expenses[112] - A comprehensive description of risks is available in the 2023 Annual Report on Form 10-K and this Form 10-Q[112] Liquidity and Capital Resources - At March 31, 2024, Hess had $1.4 billion in cash (excluding Midstream) and total liquidity of approximately $4.8 billion[119] - E&P capital and exploratory expenditures are forecast to be approximately $4.2 billion for 2024[119] - Cash flow from operations and cash on hand are expected to be sufficient to fund debt maturities, capital investment, and capital return programs in 2024[119] Liquidity and Capital Resources (March 31, 2024 vs. December 31, 2023) | Metric | March 31, 2024 (Millions $) | December 31, 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------ | :-------------------------- | :--------------------------- | :---------- | :--------- | | Cash and cash equivalents | 1,438 | 1,688 | (250) | -14.81% | | Total debt | 8,729 | 8,613 | 116 | 1.35% | | Total equity | 10,531 | 9,602 | 929 | 9.67% | | Debt to capitalization ratio for debt covenants | 31.9% | 33.6% | -1.7% | -5.06% | Cash Flows - Net cash from operating activities increased to $885 million in Q1 2024, primarily due to higher production volumes[117] - Investing activities outflows increased by $117 million to $958 million in Q1 2024, due to increased drilling activity in the Gulf of Mexico[117][118] - Financing activities outflows were comparable, with common stock dividends paid remaining at $137 million[118] Summary of Cash Flows (Three Months Ended March 31, 2024 vs. 2023) | Cash Flow Activity | Q1 2024 (Millions $) | Q1 2023 (Millions $) | Change ($M) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :---------- | :--------- | | Operating activities | 885 | 638 | 247 | 38.71% | | Investing activities | (958) | (841) | (117) | 13.91% | | Financing activities | (177) | (183) | 6 | -3.28% | | Net Increase (Decrease) in Cash and Cash Equivalents | (250) | (386) | 136 | -35.23% | Future Capital Requirements and Resources - Hess Corporation had $1.4 billion in cash and cash equivalents (excluding Midstream) and total liquidity of approximately $4.8 billion at March 31, 2024[119] - E&P capital and exploratory expenditures are forecast to be approximately $4.2 billion for 2024[119] - The company expects current cash flow and cash equivalents to be sufficient to fund upcoming debt maturities, capital investment, and capital return programs in 2024[119] Credit Facilities and Ratings - Hess Corporation was in compliance with its financial covenants at March 31, 2024, including a debt to capitalization ratio limit of 65%[123] - Hess Corporation's senior unsecured debt has investment grade credit ratings from S&P (BBB-), Moody's (Baa3), and Fitch (BBB), all on review for positive action[126] - HESM Opco's senior unsecured debt is rated BB+ by S&P and Fitch, and Ba2 by Moody's[125][127] Credit Facilities Summary (March 31, 2024) | Facility | Capacity (Millions $) | Borrowings (Millions $) | Letters of Credit Issued (Millions $) | Available Capacity (Millions $) | | :------------------------------------ | :-------------------- | :---------------------- | :---------------------------- | :------------------------------ | | Hess Corporation Revolving credit facility | 3,250 | — | — | 3,250 | | Hess Corporation Committed lines | 75 | — | 8 | 67 | | Hess Corporation Uncommitted lines | 84 | — | 84 | — | | Midstream Revolving credit facility | 1,000 | 455 | — | 545 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company details its exposure to commodity price, interest rate, and foreign currency market risks and its related risk management activities - Hess is exposed to commodity risks, interest rate changes, and foreign currency values, which are managed through financial risk management activities[130] - Outstanding foreign exchange contracts totaled $259 million at March 31, 2024; a 10% change in the U.S Dollar exchange rate would result in an estimated gain or loss of $25 million[131] - At March 31, 2024, long-term debt had a carrying value of $8,729 million and a fair value of $8,965 million; a 15% change in interest rates would impact fair value by $400-430 million[132] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls for the quarter - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of March 31, 2024[143] - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2024[144] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company details ongoing legal proceedings, including stockholder lawsuits and arbitration related to the Chevron merger - Information regarding legal proceedings is incorporated by reference from Note 9, Guarantees and Contingencies[147] Merger Stockholder Suits - Two lawsuits have been filed challenging the sufficiency of disclosures related to the Merger Agreement[148] - The lawsuits allege misrepresentations in proxy statements and seek injunctions against the merger; Hess believes these matters are without merit[148][149] Arbitration - Exxon Mobil, HGEL, and CNOOC affiliates commenced parallel arbitration proceedings in March 2024 regarding the Stabroek Right of First Refusal (ROFR)[150] - HGEL asserts the Stabroek ROFR does not apply to the merger, while Exxon Mobil and CNOOC affiliates assert it does[151] - Chevron and Hess believe the claims are without merit, and HGEL intends to vigorously defend its position, though the outcome is uncertain[151] Item 1A. Risk Factors This section highlights material risk factor changes arising from the proposed Chevron merger, including completion uncertainties and arbitration - Material changes to risk factors are due to the proposed Merger with Chevron[152] - The Merger is subject to conditions, including stockholder and regulatory approvals, making completion and timing uncertain[153] - Failure to resolve the Stabroek ROFR arbitration satisfactorily would constitute a failure of a closing condition, preventing the Merger from closing[153] - The Merger Agreement's end date has been extended and will automatically extend further if the Stabroek ROFR arbitration is ongoing, up to October 22, 2025[155] Item 2. Share Repurchase Activities The company reports on its share repurchase program, which was inactive in Q1 2024 due to merger restrictions - The Board of Directors approved a new $1 billion common stock repurchase authorization on March 1, 2023[156] - No shares of common stock were repurchased during Q1 2024 due to restrictions under the Merger Agreement[156] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024[157] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include certifications, a form of 2024 Restricted Stock Award Agreement, and various Inline XBRL taxonomy documents[160] Signatures The report is certified by the required signatures of the Chief Executive Officer and Chief Financial Officer - The report is signed by John B. Hess, Chief Executive Officer, and John P. Rielly, Chief Financial Officer, on May 7, 2024[163]