Hess 2002 Annual Report Download - page 5

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We will continue to increase reserves outside the mature regions of the
United States and North Sea. We are confident that the significant increase
in new field developments, a more focused, higher impact exploration
program and sales of lower value, mature properties will lower our unit
costs of production and increase our reserves to production life,
strengthening future profitability.
In refining and marketing, we will maximize financial returns from the
HOVENSA refinery joint venture and our retail and energy marketing
operations on the East Coast of the United States. We will continue to
selectively expand our HESS EXPRESS convenience store network.
2003 Priorities
Our priorities in 2003 are:
• Financial Strength We will continue to reduce debt and strengthen
our financial position.
• Developments Our capital expenditures will focus on oil and
gas field developments. Over $900 million, more than 60% of our
estimated $1.475 billion of capital expenditures in 2003, is for
developments. This reflects a major shift from an average of about
37% during the past three years (excluding acquisitions). These
new, lower cost developments will improve profitability and provide
future cash flow.
• Exploration We will drill approximately 20 exploration wells in high
impact basins in the deepwater Gulf of Mexico, West Africa
and Southeast Asia. We are optimistic that the results of this
program will build upon our 2002 success.
• Upgrade Producing Portfolio We completed a swap of mature
Colombian oil and gas properties for an additional 25% interest in
long life natural gas reserves in the Joint Development Area (JDA)
of Malaysia and Thailand increasing our working interest to 50%.
The JDA meets our performance objectives of total unit costs
below $12 per barrel of oil equivalent and a reserve life of more
than 10 years. The JDA has the potential for significant further
additions to proved reserves and production once more natural gas
is contracted. Contracts for the construction of the pipeline and gas
plant are expected to be authorized in the second quarter of 2003.
Potential asset sales in 2003 for properties in the United States, the
United Kingdom and Indonesia will continue reshaping our portfolio.
• Refining and Marketing We will improve financial performance
from our refining and marketing business. Thus far in the first
quarter of 2003, our HOVENSA refinery joint venture and energy
marketing operations have been very profitable as a result of a
cold winter and historically low refined product inventories.
Corporate Governance
At Amerada Hess, we stress the importance of maintaining high ethical
standards. Our corporate governance structure already meets most of
the initiatives proposed by the SEC and the New York Stock Exchange.
We have established Board and internal committees to assure that we
maintain the highest standards of conduct.
As we move further into the international arena, we remain cognizant
of the importance of being a good corporate citizen, a reliable partner
and a socially responsible corporation. We remain committed to our
tradition of making positive contributions to the communities in which
we do business.
Recently, two new members were elected to our Board of Directors.
Craig Matthews has had extensive operating and financial experience
as Vice Chairman and Chief Operating Officer, as President and as Chief
Financial Officer of both KeySpan Corporation and its predecessor,
Brooklyn Union Corporation. Ernst von Metzsch served for many years
as Senior Vice President and a Partner of Wellington Management
Company and was Manager of the Vanguard Energy Fund and the
Vanguard Wellington Fund. He brings a depth of knowledge of the
worldwide energy industry and financial markets to the Board. We wel-
come both of them.
Three outstanding members of the Board of Directors, Roger B.
Oresman, Peter S. Hadley and Robert F. Wright have retired after a long
tenure as Directors. During his 34 years as a Director and 45 years
of association with Amerada Hess, Mr. Oresman contributed his
sophisticated legal knowledge of corporate and financial matters.
Mr. Hadley brought extensive financial expertise to the Board during his
12 years as a Director. In his 22 years as a Director and 40 years
of extraordinary service, including his role as President and
Chief Operating Officer, Mr. Wright provided exemplary leadership and
dedication. We will miss their advice and many invaluable contributions.
We are grateful to our employees for their commitment and
achievements. We thank our Directors for their advice and guidance.
We express our appreciation to our stockholders for their support.
John B. Hess
Chairman of the Board
and Chief Executive Officer
March 5, 2003