Hess 2008 Annual Report Download

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2008 Annual Report

Table of contents

  • Page 1
    2008 Annual Report

  • Page 2
    ... on the communities in which we do business. TABLE OF CONTENTS 1 2 4 8 Financial Highlights Letter to Stockholders Exploration and Production Marketing and Refining 10 Corporate and Social Responsibility 12 Board of Directors and Corporate Officers Cover: Shenzi Development, Gulf of Mexico

  • Page 3
    ... debt Stockholders' equity Debt to capitalization ratio(a) Common stock price $ 28,589 $ 3,955 $ 12,307 24.3% $ 53.64 $ 26,131 $ 3,980 $ 9,774 28.9% $ 100.86 OPERATING - FOR THE YEAR Production - net Crude oil and natural gas liquids (thousands of barrels per day) United States International...

  • Page 4
    ... • Retail Marketing experienced higher average margins, which more than offset lower sales for gasoline and convenience stores on a per site basis. We continue to build a global franchise in Exploration JOHN B. HESS Chairman of the Board and Chief Executive Officer and Production with...

  • Page 5
    ...largely in sales of natural gas and electricity. Energy Marketing also introduced a slate of green products and services, such as Demand Response and Carbon Neutral programs. In Retail Marketing, which has 1,366 gasoline and convenience stores along the East Coast of the U.S., higher average margins...

  • Page 6
    ... in the North Sea. In the Malaysia/Thailand JDA, Phase 2 natural gas sales commenced at Block A-18 (Hess 50%) in In Equatorial Guinea, continued development drilling and strong performance from subsurface production facilities enabled net production from the company-operated Okume Complex (Hess 85...

  • Page 7
    ... and tested. Pre-startup production wells have been drilled and we expect first oil to commence in the second quarter of 2009. At the Pony project (Hess 100%) in the Gulf of Mexico, In the United States, we continued to build our position in the North Dakota Bakken shale play. In 2008 we increased...

  • Page 8
    Exploration drilling in Australia

  • Page 9
    2008 was a very active year for exploration drilling with successful wells in Australia, Libya and Egypt. Onshore in the United States, the company continued to advance the Hess-operated development of the Residual Oil Zone at the Seminole-San Andres Unit (Hess 34%) in West Texas, with the ...

  • Page 10
    ...It is jointly owned by the company and Petroleos de Venezuela S.A. The facility is strategically positioned and enjoys strong economies of scale. Our Port Reading, New Jersey FCC facility located near New York Harbor produces gasoline and fuel oil primarily for markets in the Northeast. The facility...

  • Page 11
    ...Hess locations. The company also opened 11 new HESS EXPRESS locations and added convenience stores to three existing locations. natural gas, fuel oil and electricity to commercial, industrial and utility customers in the 17 state market area in which it operates in the Eastern U.S. In 2008, natural...

  • Page 12
    ... reduced the rate of safety incidents by more than two thirds. emissions. The implementation of an energy efficiency program in 2008 enabled the Hess retail network to reduce electricity consumption at company-owned stores by 35 million kilowatt hours. This energy savings is equal to taking 4,300...

  • Page 13
    ...school census was conducted and education officials are using the data to guide governmental planning. The company also provided support to a range of community programs from Thailand to North Dakota. The company actively participates in voluntary initiatives supporting human rights, environmental...

  • Page 14
    HESS CORPORATION BOARD OF DIRECTORS John B. Hess (1) Chairman of the Board and Chief Executive Officer Thomas H. Kean (1) (3) (4) President, THK Consulting, LLC; Former President, Drew University; Former Governor, State of New Jersey Ernst H. von Metzsch (3) Managing Member, Cambrian Capital, ...

  • Page 15
    ... File Number 1-1204 to Hess Corporation (Exact name of Registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 13-4921002 (I.R.S. Employer Identification Number) 1185 AVENUE OF THE AMERICAS, NEW YORK, N.Y. (Address of principal executive...

  • Page 16

  • Page 17
    ..., Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accounting Fees and Services ...PART IV...

  • Page 18
    ... and sells crude oil and natural gas. These exploration and production activities take place principally in Algeria, Australia, Azerbaijan, Brazil, Denmark, Egypt, Equatorial Guinea, Gabon, Ghana, Indonesia, Libya, Malaysia, Norway, Peru, Russia, Thailand, the United Kingdom and the United States...

  • Page 19
    2008 2007 2006 Africa Equatorial Guinea ...Algeria ...Gabon ...Libya...Asia and other Azerbaijan ...Other ...Total ...Natural gas liquids (thousands of barrels per day) United States Onshore ...Offshore ...Europe United Kingdom ...Norway ...Total ...Natural gas (thousands of mcf per day) United ...

  • Page 20
    ... located in the United States. During 2008, 16% of the Corporation's crude oil and natural gas liquids production and 11% of its natural gas production were from United States operations. The Corporation's production in the United States was principally from properties offshore in the Gulf of Mexico...

  • Page 21
    ... drilled a successful exploration well on the block, which encountered natural gas and crude oil. The Corporation is currently conducting engineering studies and further exploratory drilling is planned. Ghana: The Corporation holds a 100% interest in the Cape Three Points South Block located...

  • Page 22
    ... to those under its commitments and by leasing storage facilities. Outside of the United States, the Corporation generally sells its natural gas production under long-term sales contracts at prices that are periodically adjusted due to changes in commodity prices or other indices. In the United...

  • Page 23
    ... production costs 2008 2007 2006 Average selling prices* Crude oil (per barrel) United States ...Europe ...Africa ...Asia and other ...Worldwide ...Natural gas liquids (per barrel) United States ...Europe ...Worldwide ...Natural gas (per mcf) United States ...Europe ...Asia and other ...Worldwide...

  • Page 24
    Gross and net developed acreage and productive wells at December 31, 2008 Developed Acreage Applicable to Productive Wells Gross Net (In thousands) Productive Wells* Oil Gas Gross Net Gross Net United States ...Europe ...Africa ...Asia and other ... ... 529 1,362 9,919 2,185 455 758 958 624 2,795...

  • Page 25
    ...supply contracts and spot purchases. Refining The Corporation owns a 50% interest in HOVENSA L.L.C. (HOVENSA), a refining joint venture in the United States Virgin Islands with a subsidiary of Petroleos de Venezuela S.A. (PDVSA). In addition, it owns and operates a refining facility in Port Reading...

  • Page 26
    ... gasoline stations are in New York, New Jersey, Pennsylvania, Florida, Massachusetts, North Carolina and South Carolina. Refined product sales averaged 472,000 barrels per day in 2008 compared with 451,000 barrels per day in 2007 and 459,000 barrels in 2006. Total energy marketing natural gas sales...

  • Page 27
    ... matters has a significant impact on the oil markets. The commodities trading markets may also influence the selling prices of crude oil, natural gas and refined petroleum products. If crude oil and natural gas prices remain at year-end 2008 levels, our revenues, profitability and cash flow will...

  • Page 28
    ... to explore for crude oil and natural gas, and in purchasing and marketing of refined products and natural gas. Many competitors, including national oil companies, are larger and have substantially greater resources. We are also in competition with producers and marketers of other forms of energy...

  • Page 29
    ...The letter alleges that HOVIC and HOVENSA are potentially responsible for damages to natural resources arising from releases of hazardous substances from the "HOVENSA Oil Refinery." HOVENSA currently owns and operates a petroleum refinery on the south shore of St. Croix, United States Virgin Islands...

  • Page 30
    ... Registrant and other oil and gas companies that have operations or interests in Equatorial Guinea. Registrant has provided the documents and information requested. The Corporation is from time to time involved in other judicial and administrative proceedings, including proceedings relating to other...

  • Page 31
    ... of the Board, Chief Executive Officer and Director Executive Vice President and Director Executive Vice President and President of Worldwide Exploration and Production Executive Vice President and Director Executive Vice President and President of Marketing and Refining and Director Senior Vice...

  • Page 32
    ... senior positions in the liquefied natural gas industry. PART II Item 5. Market for the Registrant's Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Market Information The common stock of Hess Corporation is traded principally on the New York Stock Exchange...

  • Page 33
    ... the Registrant's equity compensation plan. ** Registrant has a Stock Award Program pursuant to which each non-employee director receives $150,000 in value of Registrant's common stock each year. These awards are made from shares purchased by the Corporation in the open market. Stockholders did not...

  • Page 34
    ...of selected financial data follows: 2008 2007 2006 2005 2004 (Millions of dollars, except per share amounts) Sales and other operating revenues Crude oil and natural gas liquids ...Natural gas (including sales of purchased gas) ...Refined petroleum products ...Electricity ...Convenience store sales...

  • Page 35
    ... 2008. The operator is evaluating development options for Tubular Bells. • The Corporation completed drilling its initial four exploration wells of a 16 well commitment on the WA-Block-390-P offshore Western Australia (Hess 100%). Three of the four wells discovered natural gas and the Corporation...

  • Page 36
    ..., which encountered natural gas and crude oil. The Corporation is currently conducting engineering studies and further exploratory drilling is planned. • The operator commenced drilling of an exploration well on the BM-S-22 Block (Hess 40%) in the Santos Basin offshore Brazil and filed a Notice of...

  • Page 37
    ... which $3.1 billion relates to E&P operations. Consolidated Results of Operations The after-tax results by major operating activity are summarized below: 2008 2007 2006 (Millions of dollars, except per share data) Exploration and Production ...Marketing and Refining...Corporate ...Interest expense...

  • Page 38
    .... Selling prices: Higher average selling prices increased Exploration and Production revenues by approximately $2,100 million in 2008 compared with 2007. At December 31, 2008, the selling prices of crude oil and natural gas had decreased significantly from the average 2008 selling prices indicated...

  • Page 39
    ... Corporation's average selling prices were as follows: 2008 2007 2006 Crude oil-per barrel (including hedging) United States ...Europe ...Africa ...Asia and other ...Worldwide ...Crude oil-per barrel (excluding hedging) United States ...Europe ...Africa ...Asia and other ...Worldwide ...Natural gas...

  • Page 40
    ...Crude oil production in the United States was higher in 2008 compared with 2007, principally due to production from new wells in North Dakota and the deepwater Gulf of Mexico. This increased production was partially offset by the impact of hurricanes in the Gulf of Mexico. Natural gas production was...

  • Page 41
    ... related costs in 2008 and vacated leased office space in 2006 that are discussed below). The increases in 2008 and 2007 were primarily due to higher production volumes, increased production taxes (due to higher realized selling prices), increased costs of services and materials and higher employee...

  • Page 42
    ... the sale of certain United States oil and gas producing properties located in the Permian Basin in Texas and New Mexico and onshore Gulf Coast. The accrued office closing cost relates to vacated leased office space in the United Kingdom. The related expenses are reflected principally in general and...

  • Page 43
    ...sales, including sales of retail gasoline operations. Refined product margins were lower in 2007 compared with 2006. Total refined product sales volumes were 472,000 barrels per day in 2008, 451,000 barrels per day in 2007 and 459,000 barrels per day in 2006. Total energy marketing natural gas sales...

  • Page 44
    ...reflects higher selling prices and sales volumes of crude oil, higher refined product selling prices and increased sales volumes of electricity. The change in cost of goods sold in each year principally reflects the change in sales volumes and prices of refined products and purchased natural gas and...

  • Page 45
    ...States of $600 million and $210 million for the acquisition of the remaining 22.5% interest in the Corporation's Gabonese subsidiary. In 2008, the Corporation also selectively expanded its energy marketing business by acquiring fuel oil, natural gas, and electricity customer accounts, and a terminal...

  • Page 46
    ... billion from 2008, primarily as a result of lower crude oil selling prices. The Corporation also has maturities of long-term debt of $143 million in 2009. The Corporation anticipates that it can fund its 2009 operations, including planned capital expenditures, dividends, pension contributions and...

  • Page 47
    ... prices for additional gasoline necessary to supply the Corporation's retail marketing system and feedstocks for the Port Reading refining facility. In addition, the Corporation has commitments to purchase refined products, natural gas and electricity to supply contracted customers in its energy...

  • Page 48
    ... exploration and production activities principally in Algeria, Australia, Azerbaijan, Brazil, Denmark, Egypt, Equatorial Guinea, Gabon, Ghana, Indonesia, Libya, Malaysia, Norway, Peru, Russia, Thailand, the United Kingdom and the United States. Therefore, the Corporation is subject to the risks...

  • Page 49
    ... the case of oil and gas fields, the present value of future net cash flows is based on management's best estimate of future prices, which is determined with reference to recent historical prices and published forward prices, applied to projected production volumes and discounted at a risk-adjusted...

  • Page 50
    ..., access to new business opportunities, enterprise control, improved processes and increased market share. The Corporation also considers the relative market valuation of similar Exploration and Production companies. The determination of the fair value of the Exploration and Production operating...

  • Page 51
    ..., in its energy marketing business, the Corporation sells natural gas and electricity to customers and offsets the price exposure by purchasing forward contracts. The fair value of these sales and purchases may be based on specific prices at less liquid delivered locations, which are classified...

  • Page 52
    ... of foreign subsidiaries that are indefinitely reinvested in foreign operations. Retirement Plans: The Corporation has funded non-contributory defined benefit pension plans and an unfunded supplemental pension plan. In accordance with FAS 158, Employer's Accounting For Defined Benefit Pension and...

  • Page 53
    ... of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk, including references to the Corporation's future results of operations and financial position, liquidity and capital resources, capital expenditures, oil and gas production, tax rates...

  • Page 54
    ...Controls include volumetric, term and value-at-risk limits. In addition, the chief risk officer must approve the use of new instruments or commodities. Risk limits are monitored daily and exceptions are reported to business units and to senior management. The Corporation's risk management department...

  • Page 55
    ...price of $86.95 each year. The after-tax deferred losses related to closed crude oil contracts will be recorded in earnings as the contracts mature. There were no hedges of WTI crude oil or natural gas production at December 31, 2008. The Corporation also markets energy commodities including refined...

  • Page 56
    ... summarizes the sources of fair values of derivatives used in the Corporation's trading activities at December 31, 2008: Total 2009 2010 2011 (Millions of dollars) 2012 and Beyond Source of fair value Level 1 ...$ 35 Level 2 ...885 Level 3 ...(56) Total ...$864 $ (22) 564 (42) $500 $ 63 180 (12...

  • Page 57
    ...HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Page Number Management's Report on Internal Control over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheet at December 31, 2008 and 2007 ...Statement...

  • Page 58
    ... accounting firm, Ernst & Young LLP, has audited the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2008, as stated in their report, which is included herein. By /s/ John P. Rielly John P. Rielly Senior Vice President and Chief Financial Officer...

  • Page 59
    ... Company Accounting Oversight Board (United States), the consolidated balance sheet of Hess Corporation and consolidated subsidiaries as of December 31, 2008 and 2007, and the related statements of consolidated income, cash flows, stockholders' equity and comprehensive income of Hess Corporation...

  • Page 60
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Hess Corporation We have audited the accompanying consolidated balance sheet of Hess Corporation and consolidated subsidiaries as of December 31, 2008 and 2007, and the related statements of consolidated ...

  • Page 61
    ... ...Accounts receivable Trade ...Other ...Inventories ...Other current assets ...Total current assets ...INVESTMENTS IN AFFILIATES HOVENSA L.L.C...Other ...Total investments in affiliates ...PROPERTY, PLANT AND EQUIPMENT Exploration and Production ...Marketing, Refining and Corporate ...Total...

  • Page 62
    ... sales ...Other, net ...Total revenues and non-operating income...COSTS AND EXPENSES Cost of products sold (excluding items shown separately below) ...Production expenses ...Marketing expenses ...Exploration expenses, including dry holes and lease impairment ...Other operating expenses ...General...

  • Page 63
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS Years Ended December 31, 2008 2007 2006 (Millions of dollars) CASH FLOWS FROM OPERATING ACTIVITIES Net income ...Adjustments to reconcile net income to net cash provided by operating activities Depreciation, ...

  • Page 64
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY 2008 Shares 2007 2006 Amount Shares Amount Shares Amount (Millions of dollars; thousands of shares) PREFERRED STOCK Balance at January 1 ...Conversion of preferred stock to common stock ...Balance at ...

  • Page 65
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME Years Ended December 31, 2008 2007 2006 (Millions ...in income ...Net change in fair value of cash flow hedges ...Effect of adoption of FAS 157 ...Change in retirement plan liabilities, after tax ...Change in...

  • Page 66
    ... Accounting Policies Nature of Business: Hess Corporation and subsidiaries (the Corporation) engage in the exploration for and the development, production, purchase, transportation and sale of crude oil and natural gas. These activities are conducted principally in Algeria, Australia, Azerbaijan...

  • Page 67
    ... equipment and wells is calculated using the units of production method over proved developed oil and gas reserves. Depreciation of all other plant and equipment is determined on the straight-line method based on estimated useful lives. Retail gas stations and equipment related to a leased property...

  • Page 68
    ... projections and other externally reported information. Oil and gas prices used for determining asset impairments will generally differ from the year-end prices used in the standardized measure of discounted future net cash flows. Impairment of Equity Investees: The Corporation reviews equity method...

  • Page 69
    ... 1, 2008. FAS 157 establishes a hierarchy for the inputs used to measure fair value based on the source of the input, which generally range from quoted prices for identical instruments in a principal trading market (Level 1) to estimates determined using related market data (Level 3). Multiple...

  • Page 70
    ... of 2008, the Corporation acquired the remaining 22.5% interest in its Gabonese subsidiary for $285 million, of which $210 million was allocated to proved properties. The Corporation expanded its energy marketing business by acquiring fuel oil, natural gas, and electricity customer accounts, and...

  • Page 71
    ...) 4. Refining Joint Venture The Corporation has an investment in HOVENSA L.L.C., a 50% joint venture with Petroleos de Venezuela, S.A. (PDVSA), which is accounted for using the equity method. HOVENSA owns and operates a refinery in the U.S. Virgin Islands. Summarized financial information for...

  • Page 72
    ...2008 2007 (Millions of dollars) Exploration and Production Unproved properties ...Proved properties ...Wells, equipment and related facilities ...Marketing, Refining and Corporate ...Total - at cost ...Less: reserves for depreciation, depletion, amortization and lease impairment . . Property, plant...

  • Page 73
    ...80% of the costs relates to the Pony and Tubular Bells projects in the deepwater Gulf of Mexico where development options are being evaluated at December 31, 2008. The remainder of the costs relate to projects where further drilling is planned or development planning activities are ongoing. 6. Asset...

  • Page 74
    ...Share-Based Compensation The Corporation awards restricted common stock and stock options under its 2008 Long-Term Incentive Plan. Generally, stock options vest in one to three years from the date of grant, have a 10-year option life, and the exercise price equals or exceeds the market price on the...

  • Page 75
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Share-based compensation expense consists of the following: Before Taxes After Taxes 2008 2007 2008 2007 (Millions of dollars) Stock options ...Restricted stock ...Total ... $ 51 68 $119 $36 51 ...

  • Page 76
    .... The Corporation uses the Black-Scholes model to estimate the fair value of employee stock options. The following weighted average assumptions were utilized for stock options awarded: 2008 2007 2006 Risk free interest rate ...2.70% 4.70% 4.50% Stock price volatility ...294 .316 .321 Dividend yield...

  • Page 77
    ... Corporation's principal pension plans, were it not for limitations imposed by income tax regulations. The plans provide defined benefits based on years of service and final average salary. Additionally, the Corporation maintains an unfunded postretirement medical plan that provides health benefits...

  • Page 78
    ... of the benefit obligation or the market value of assets are amortized over the average remaining service period of active employees. The Corporation's 2009 pension and postretirement medical expense is estimated to be approximately $125 million, of which approximately $57 million relates to the...

  • Page 79
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The weighted-average actuarial assumptions used by the Corporation's funded and unfunded pension plans were as follows: 2008 2007 2006 Weighted-average assumptions used to determine benefit ...

  • Page 80
    ...Estimated future benefit payments for the funded and unfunded pension plans and the postretirement medical plan, which reflect expected future service, are as follows: (Millions of dollars) 2009 ...2010 ...2011 ...2012 ...2013 ...Years 2014 to 2018 ... ... $ 63 73 90 76 83 492 The Corporation also...

  • Page 81
    ...046 ** Foreign income includes the Corporation's Virgin Islands and other operations located outside of the United States. Deferred income taxes arise from temporary differences between the tax bases of assets and liabilities and their recorded amounts in the financial statements. A summary of the...

  • Page 82
    ... 31, 2008. If the earnings of foreign subsidiaries were not indefinitely reinvested, a deferred tax liability of approximately $2.5 billion would be required, excluding the potential use of foreign tax credits in the United States. The Corporation and its subsidiaries file income tax returns in the...

  • Page 83
    ... to purchase the related property at fixed prices. At December 31, 2008, future minimum rental payments applicable to non-cancelable operating leases with remaining terms of one year or more (other than oil and gas property leases) are as follows: (Millions of dollars) 2009 ...2010 ...2011 ...2012...

  • Page 84
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Operating lease expenses for drilling rigs used to drill development wells and successful exploration wells are capitalized. Rental expense was as follows: 2008 2007 2006 (Millions of dollars) ...

  • Page 85
    ... Accounting Policies"). FAS 157 establishes a hierarchy for the inputs used to measure fair value based on the source of the input, which generally range from quoted prices for identical instruments in a principal trading market (Level 1) to estimates determined using related market data (Level...

  • Page 86
    ..., in its energy marketing business, the Corporation sells natural gas and electricity to customers and offsets the price exposure by purchasing forward contracts. The fair value of these sales and purchases may be based on specific prices at less liquid delivered locations, which are classified...

  • Page 87
    ... 5, Accounting for Contingencies. The Corporation, along with many other companies engaged in refining and marketing of gasoline, has been a party to lawsuits and claims related to the use of methyl tertiary butyl ether (MTBE) in gasoline. A series of similar lawsuits, many involving water utilities...

  • Page 88
    ...and Production operations include the exploration for and the development, production, purchase, transportation and sale of crude oil and natural gas. Marketing and Refining operations include the manufacture, purchase, transportation, trading and marketing of refined petroleum products, natural gas...

  • Page 89
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Exploration and Production Marketing Corporate and Refining and Interest (Millions of dollars) Consolidated(a) 2007 Operating revenues Total operating revenues(b) ...Less: Transfers between ...

  • Page 90
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Financial information by major geographic area for each of the three years ended December 31, 2008: United States Asia and Europe Africa Other (Millions of dollars) Consolidated 2008 Operating ...

  • Page 91
    ... produces crude oil, natural gas liquids and/or natural gas principally in Algeria, Azerbaijan, Denmark, Equatorial Guinea, Gabon, Indonesia, Libya, Malaysia, Norway, Russia, Thailand, the United Kingdom and the United States. Exploration activities are also conducted, or are planned, in additional...

  • Page 92
    ... United States Europe Africa (Millions of dollars) Asia and Other 2008 Sales and other operating revenues Unaffiliated customers ...$9,569 Inter-company ...237 Total revenues ...Costs and expenses Production expenses, including related taxes(a) ...Exploration expenses, including dry holes and lease...

  • Page 93
    ... United States Europe Africa (Millions of dollars) Asia and Other 2007 Sales and other operating revenues Unaffiliated customers ...$7,297 Inter-company ...201 Total revenues ...Costs and expenses Production expenses, including related taxes ...Exploration expenses, including dry holes and lease...

  • Page 94
    .... The Corporation's and D&M's technical staffs met to review and discuss the information provided. Senior management and the Board of Directors reviewed the final reserve estimates issued by D&M. Crude Oil, Condensate and Natural Gas Liquids United States Asia and Europe Africa Other (Millions...

  • Page 95
    ... mcf of natural gas, relating to higher selling prices. In 2006 this amount was immaterial for both oil and natural gas (b) Includes 28% of crude oil reserves and 58% of natural gas reserves held under production sharing contracts. These reserves are located outside of the United States and are...

  • Page 96
    ... Total United States Europe Africa (Millions of dollars) Asia and Other 2007 Future revenues ...Less: Future production costs ...Future development costs ...Future income tax expenses ...Future net cash flows ...Less: discount at 10% annual rate ...Standardized measure of discounted future net...

  • Page 97
    ... in prices and production costs applicable to future production ...Net change in estimated future development costs ...Extensions and discoveries (including improved recovery) of oil and gas reserves, less related costs ...Revisions of previous oil and gas reserve estimates ...Net purchases (sales...

  • Page 98
    ...sales and other operating revenues, less cost of products sold, production expenses, marketing expenses, other operating expenses and depreciation, depletion and amortization. (b) Includes after-tax charges of $17 million related to asset impairments in the United States and United Kingdom North Sea...

  • Page 99
    ...'s definitive proxy statement for the annual meeting of stockholders to be held on May 6, 2009. Information regarding executive officers is included in Part I hereof. The Corporation has adopted a Code of Business Conduct and Ethics applicable to the Corporation's directors, officers (including...

  • Page 100
    .... Item 14. Principal Accounting Fees and Services Information relating to this item is incorporated by reference to "Ratification of Selection of Independent Auditors" from the Registrant's definitive proxy statement for the annual meeting of stockholders to be held on May 6, 2009. PART IV Item 15...

  • Page 101
    ... Registrant's definitive proxy statement filed on March 27, 2008. Forms of Awards under Registrant's 2008 Long Term Incentive Plan, incorporated by reference to Exhibit 10(2) of Form 10-Q of Registrant for three months ended June 30, 2008. Compensation program description for non-employee directors...

  • Page 102
    ...(other than the named executive officers referred to in Exhibit 10(15)). Letter Agreement dated March 18, 2002 between Registrant and John J. O'Connor relating to Mr. O'Connor's participation in the Hess Corporation Pension Restoration Plan incorporated by reference to Exhibit 10(15) of Form 10-K of...

  • Page 103
    ... authorized, on the 23rd day of February 2009. HESS CORPORATION (Registrant) By JOHN P. RIELLY (John P. Rielly) Senior Vice President and Chief Financial Officer /s/ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on...

  • Page 104
    ... financial statements and schedule of Hess Corporation and consolidated subsidiaries and with respect to the effectiveness of internal control over financial reporting of Hess Corporation, included in this Annual Report (Form 10-K) for the year ended December 31, 2008. New York, New York February...

  • Page 105
    ...II HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2008, 2007 and 2006 Additions Charged to Costs Charged Deductions and to Other from Expenses Accounts Reserves (In millions) Description Balance January 1 Balance December 31 2008...

  • Page 106
    .... Incorporated by reference to Exhibit 4.2 to Registrant's Form 8-K filed with the Securities and Exchange Commission on February 4, 2009. Extension and Amendment Agreement between the Government of the Virgin Islands and Hess Oil Virgin Islands Corp. incorporated by reference to Exhibit 10(4) of...

  • Page 107
    ... Registrant's definitive proxy statement filed on March 27, 2008. Forms of Awards under Registrant's 2008 Long Term Incentive Plan, incorporated by reference to Exhibit 10(2) of Form 10-Q of Registrant for three months ended June 30, 2008. Compensation program description for non-employee directors...

  • Page 108
    ... 18 of the United States Code (18 U.S.C. 1350). Certification required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). * These exhibits relate to executive compensation plans and...

  • Page 109
    ...SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT Name of Subsidiary Organized under the laws of Hess Energy Exploration Limited ...Hess Limited ...Hess Norge A/S ...Hess Receivables LLC ...Hess (GEA) Limited...Hess Oil Virgin Islands Corp...Hess (Indonesia Pangkah) Limited ...Hess Energy Trading Company...

  • Page 110
    ... 31(1) I, John B. Hess, certify that: 1. I have reviewed this annual report on Form 10-K of Hess Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 111
    ...31(2) I, John P. Rielly, certify that: 1. I have reviewed this annual report on Form 10-K of Hess Corporation; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 112
    ... with the Annual Report of Hess Corporation (the Corporation) on Form 10-K for the period ending December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John B. Hess, Chairman of the Board and Chief Executive Officer of the Corporation, certify...

  • Page 113
    ... with the Annual Report of Hess Corporation (the Corporation) on Form 10-K for the period ending December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John P. Rielly, Senior Vice President and Chief Financial Officer of the Corporation, certify...

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  • Page 115
    ... Production Hess Corporation One Allen Center 500 Dallas Street Houston, Texas 77002 Hess Limited The Adelphi Building 1-11 John Adam Street London WC2N 6AG England Marketing and Refining Hess Corporation 1 Hess Plaza Woodbridge, New Jersey 07095 Hess Web site www.hess.com ANNUAL MEETING The Annual...

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    1185 Avenue of the Americas New York, New York 10036 www.hess.com