Hess 2008 Annual Report Download - page 4

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In 2008, our company delivered another year of
strong fi nancial and operational performance as we
executed our strategy to invest in the sustainable
growth of reserves and production in Exploration and
Production and manage for near-term earnings and
free cash fl ow in Marketing and Refi ning.
For the year, our company achieved record earnings
of $2.36 billion, or $7.24 per share, on the strength
of high crude oil prices and growth in our worldwide
crude oil and natural gas production. By the end
of 2008, we had lowered our ratio of debt to
capitalization to 24.3 percent from 28.9 percent in
the prior year.
Exploration and Production, which earned $2.4 billion,
delivered outstanding operational performance:
• Proved reserves grew to 1.43 billion barrels of oil
equivalent, an increase of 8 percent.
• Reserve life increased to 10 years, marking the
sixth consecutive year of improvement.
• We replaced 171 percent of production at a fi nding,
development and acquisition cost of $19 per barrel
of oil equivalent.
• Worldwide crude oil and natural gas production
grew to an average of 381,000 barrels of oil
equivalent per day.
Marketing and Refi ning, which earned $277 million,
continued to contribute to our company:
• Refi ning was negatively impacted by signifi cant
declines in refi ning margins due to the challenging
economic environment.
• Energy Marketing results benefi ted from strong
margins and volume growth.
• 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
and Production with world class technical
expertise and a portfolio of assets that is balanced
geographically between the United States, Europe,
Africa and Asia. Our exploration program had a
successful year, which positions the company for
future growth in reserves and production.
As we manage our business through a severe
period of economic weakness, we are committed
to maintaining fi nancial strength while protecting
our long-term growth options. We have responded
to the reduction in global energy demand and the
precipitous drop in crude oil and natural gas prices by
sizing our 2009 capital and exploratory expenditure
program to $3.2 billion compared with $4.8 billion
in 2008. As in previous years, nearly all of our
2009 spending will be targeted to Exploration and
Production, with $1.4 billion budgeted for production
operations, $900 million for developments and $800
million for exploration.
EXPLORATION AND PRODUCTION
Crude oil and natural gas production in 2008 was
up one percent versus the prior year despite the
impact of devastating hurricanes in the Gulf of
Mexico, which reduced our full year production
by about 7,000 barrels of oil equivalent per day.
Production growth was underpinned by strong
performance at the Hess operated Okume Complex
in Equatorial Guinea and the commencement of
Phase 2 natural gas sales at the Malaysia/Thailand
Joint Development Area (JDA).
Throughout the year, we advanced several key
developments in our global portfolio, including
the JDA, the Shenzi Field in the deepwater Gulf
of Mexico, Ujung Pangkah crude oil and liquefied
petroleum gas in Indonesia and the Valhall Field
redevelopment in Norway.
TO OUR SHAREHOLDERS
2
JOHN B. HESS
Chairman of the Board
and Chief Executive Officer