Hess 2005 Annual Report Download - page 4

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In 2005, we made significant progress in executing our
strategy to grow shareholder value over the long term.
That strategy is to grow reserves and production in
a sustainable and financially disciplined manner and
to deliver consistent financial performance from our
Marketing and Refining assets for more immediate
returns and free cash flow.
Our Corporation delivered another year of strong
operating and financial results. Earnings rose to a
record $1.2 billion as the effect of higher crude oil
and natural gas prices more than offset the negative
impact on production from Hurricanes Katrina and
Rita. Our capital and exploratory expenditures in 2005
totaled $2.5 billion, of which approximately $2.4 billion
was invested in Exploration and Production and about
$100 million in Marketing and Refining. Our Exploration
and Production expenditures included more than
$1 billion for field developments.
In Exploration and Production, we made substantial
progress in advancing our field developments, building
a high-impact exploration program and capturing
long-term growth opportunities through several new
country entries. Our proved reserves increased to
1.1 billion barrels of oil equivalent at year-end, and
we replaced approximately 140% of our production at
a finding, development and acquisition cost of about
$13.60 per barrel. Our reserve life improved to 8.8
years, marking the third consecutive year in which
we have lengthened our reserve life. We arebuilding
asustainable and profitable business with excellent
visibility of growth in reserves and production.
In Marketing and Refining, we continued to grow our
retail and energy marketing businesses and delivered
strong operating performance at our refineries. Our
tightly focused regional business model and well
known brand allow us to be very competitive and
generate strong financial performance.
EXPLORATION AND PRODUCTION
In 2005, significant progress was made in our major
field developments, including three new field start-ups –
Block A-18 in the Joint Development Area between
Malaysia and Thailand (JDA), the Clair Field in the
United Kingdom, and ACG Phase I in Azerbaijan. In
addition, the Phu Horm gas development in Thailand
was sanctioned in 2005. Approvals of the Shenzi
development in the deepwater Gulf of Mexico and the
Ujung Pangkah oil development in Indonesia areexpected
during 2006. Over the next several years, we will bring
on production from major new field developments in
the deepwater Gulf of Mexico, the North Sea, West Africa
and Southeast Asia. All of our operated development
projects continue to be on schedule and on budget.
JOHN B. HESS
Chairman of the Board and
Chief Executive Officer
To Our Stockholders: