Hess 2002 Annual Report Download - page 4

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Review of 2002
During 2002 we achieved a number of important successes:
•We met our goal of delivering results on exploration opportunities
in Equatorial Guinea obtained in the Triton acquisition. We discov-
ered the Ebano, Akom and Abang Fields, and made a potentially
significant discovery with the G-13 well, all of which will be further
appraised. We discovered the Elon Field, which will be developed.
•We were successful in the deep-water Gulf of Mexico where the
Shenzi Field was discovered and the Llano Field was successfully
appraised. Appraisal of the Shenzi discovery is planned for the
second quarter of 2003. Resources discovered in 2002 in the Gulf
of Mexico and Equatorial Guinea will begin to be added to our
proved reserve base when development plans are finalized.
•We submitted development plans for the Okume, Oveng and
Elon Fields to the Government of Equatorial Guinea and expect
approval in the second quarter of 2003. Development of the Llano
Field has begun.
•We continued to upgrade our portfolio of assets. We sold
exploration and production assets for $268 million, including our
United Kingdom energy marketing business for $165 million and
smaller properties in the United States, United Kingdom and
Azerbaijan. We also sold our U.S. flag vessels for $140 million.
•We agreed to exchange our equity interest in Premier Oil plc for a
23% interest in the Natuna A Field in Indonesia, adding low cost,
long life reserves.
•The HOVENSA refinery joint venture completed construction of
a 58,000 barrel per day coking unit, allowing the refinery to
process lower cost, heavy Venezuelan crude oil, thereby enhancing
profit margins.
•We reduced debt by $673 million, exceeding our $600 million debt
reduction target.
We also experienced some disappointments:
•Production averaged 451,000 barrels of oil equivalent per day, the
highest in the Corporation’s history, but below our target of 475,000.
This shortfall was caused primarily by natural declines from mature
fields in the United States and the United Kingdom and reduced
production from the Ceiba Field in Equatorial Guinea.
•We took a $530 million after-tax impairment charge on the Ceiba
Field reflecting an extended production profile and a reduction in
probable reserves and a $256 million after-tax impairment charge
to reduce the carrying value of several Gulf of Mexico fields,
reflecting reduced reserves.
•Total proved reserves on a barrel of oil equivalent basis declined
to 1.2 billion barrels from 1.4 billion barrels at year-end 2001.
The decline was caused by negative revisions, reductions in entitle-
ment reserves covered by production sharing contracts due to
high year-end commodity prices and asset sales.
•Refining and marketing earnings declined to $40 million in 2002
from $235 million in 2001, due to poor refining margins, a warm
winter and narrow retail gasoline margins.
Results of Operations
Amerada Hess reported a net loss of $218 million for 2002, including
after-tax charges of $769 million for special items. Operating income
was $551 million for 2002, versus $945 million in 2001. Details appear
under Management’s Discussion and Analysis of Results of Operations
and Financial Condition beginning on page 14.
Strategic Plan
Our long-term strategic plan is focused on reshaping our portfolio of
assets to enhance financial performance and provide long-term
profitable growth. Exploration and production will be the engine of future
income and growth, currently representing more than 72% of our capi-
tal employed and over 90% of our average annual capital expenditures.
John B. Hess
Chairman of the Board and Chief Executive Officer
TO OUR STOCKHOLDERS:
“Our long-term strategic plan is focused on reshaping our
portfolio of assets to enhance financial performance and
provide long-term profitable growth.”