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C
2014 ANNUAL REPORT

Table of contents

  • Page 1
    2014 ANNUAL REPORT C

  • Page 2
    ... 4 Exploration and Production 9 Corporate and Social Responsibility 12 Board of Directors and Corporate Officers OUR COMPANY Hess Corporation is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas. We are committed to meeting the...

  • Page 3
    ... Total Natural gas (thousands of mcf per day) United States International Total Barrels of oil equivalent (thousands of barrels per day) (a) Excludes sales and operating revenues related to discontinued operations. (b) Total debt as a percentage of the sum of total debt and total equity. 2014 2013...

  • Page 4
    ... on budget. Net production is expected to average between 30,000 and 35,000 barrels of oil equivalent per day in 2015. The Stampede project that Hess operates in the Deepwater Gulf of Mexico received full co-owner sanction for development in October 2014. Total recoverable resources for Stampede are...

  • Page 5
    ... by the Bakken, Tubular Bells and the Utica Shale play. Longer term growth will benefit from the North Malay Basin project in Malaysia and from Stampede, both of which are currently under development. Safety and Social Responsibility We believe sound sustainability practices create value and enhance...

  • Page 6
    ...Production In 2014, net production averaged 329,000 barrels of oil equivalent per day, compared with 336,000 barrels of oil equivalent per day in 2013. The effect of asset sales, civil unrest in Libya and natural declines were partially offset by production growth in the Bakken and Utica shale plays...

  • Page 7
    ... pilot tests, the Company announced in November that 13 wells per 1,280 acre Drilling Spacing Unit (DSU) has become its standard basis for development in the Bakken, increasing the number of total drilling locations by approximately 33% to more than 4,000. In the Utica Shale Play in eastern Ohio...

  • Page 8
    ...the Stampede development (25% working interest, operator) was sanctioned by all project co-owners in October of 2014. Drilling is expected to commence in late 2015 with first oil targeted for 2018. In Asia, the Malaysia/Thailand Joint Development Area (50% working interest) achieved first production...

  • Page 9
    ... design (FEED) for the project and engage with LNG buyers. Exploration In 2014, the Company successfully completed the drilling of three appraisal wells and acquired 3D seismic in the deepwater Tano/Cape Three Points Block offshore Ghana. Hess holds a 44% paying interest and is the operator. Ghana...

  • Page 10
    Hess SUCCEED 2020 Educational Program, North Dakota 8

  • Page 11
    ... testing at U.S. onshore and offshore locations for employees and contractors. As part of our diversification strategy, over 25% of our business is now concentrated in lower risk, high return unconventional resources. The potential effects of shale energy operations on the environment, public health...

  • Page 12
    ... on the Board of the US UNGC Network which shares best practices in sustainable business conduct across the private sector. Hess was also added to the United Nations Global Compact 100 index. We recognize the important role stakeholders play in our access to resources and our license to operate. We...

  • Page 13
    ... in North America are poised to launch the platforms in early 2015 and two global assets planned by year end. Our flagship social investment programs continued to make good progress in 2014. The second phase of our education initiative, the Program for Education Development of Equatorial Guinea...

  • Page 14
    ... Chief Executive Officer, The Robert Wood Johnson Foundation Harvey Golub (2) (4) Former Chairman and Chief Executive Officer, American Express John H. Mullin III (4) Chairman, Ridgeway Farm LLC; Former Managing Director, Dillon, Read & Co., Inc. Corporate Officers John B. Hess Chief Executive...

  • Page 15
    ... closing market price on June 30, 2014, the last business day of the Registrant's most recently completed second fiscal quarter. At December 31, 2014, there were 285,834,964 shares of Common Stock outstanding. Part III is incorporated by reference from the Proxy Statement for the 2015 annual meeting...

  • Page 16
    ... with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...

  • Page 17
    ... to as the Corporation or Hess) is a global Exploration and Production (E&P) company that develops, produces, purchases, transports and sells crude oil, natural gas liquids, and natural gas with its production operations located primarily in the United States (U.S.), Denmark, Equatorial Guinea, the...

  • Page 18
    ...selling prices in the table beginning on page 9. (c) Proved reserves in Norway, which represented 20% of the Corporation's total reserves at both December 31, 2014 and 2013, were as follows: Crude Oil, Condensate & Natural Gas Liquids 2014 2013 (Millions of barrels) Developed ...Undeveloped ...Total...

  • Page 19
    ... oil, natural gas liquids and natural gas production was as follows: 2014 2013 2012 Crude oil (thousands of barrels per day) United States Bakken ...Other Onshore ...Total Onshore ...Offshore ...Total United States ...Europe Norway ...Denmark ...Russia ...United Kingdom ...Africa Equatorial Guinea...

  • Page 20
    ... to drill 170 wells and bring 210 wells on production while reducing capital expenditures to $1.8 billion in 2015 from $2.2 billion in 2014. Bakken production is forecast to average between 95,000 boepd and 105,000 boepd in 2015. In North Dakota, the Corporation owns and operates the Tioga Gas Plant...

  • Page 21
    ... Holdings LLC (owner of a 328,000 barrel propane storage cavern with a rail and truck transloading facility). The Corporation also owned a 50% undivided working interest in approximately 45,000 net acres in the wet gas area of the Utica Basin of Ohio. During 2014, a total of 38 wells were drilled...

  • Page 22
    ... were located in Africa (Equatorial Guinea 3.5%, Libya 11% and Algeria 0.5%). During 2014, 22% of the Corporation's crude oil and natural gas liquids production were from its African operations. Equatorial Guinea: The Corporation is operator and owns an interest in Block G (Hess 85% paying interest...

  • Page 23
    ... under a sales contract with the national oil companies of Malaysia and Thailand expiring in 2027. At the North Malay Basin development project, the Corporation has a commitment to deliver a minimum of 24 billion cubic feet of natural gas per year from full field development start-up, which...

  • Page 24
    ... selling prices and average production costs 2014 2013 2012 Average selling prices (a) Crude oil - per barrel (including hedging) United States Onshore ...$ Offshore ...Total United States ...Europe (b) ...Africa ...Asia ...Worldwide ...Crude oil - per barrel (excluding hedging) United States...

  • Page 25
    ...incurred to operate and maintain the Corporation's producing oil and gas wells, related equipment and facilities, transportation costs and production and severance taxes. The average production costs per barrel of oil equivalent reflect the crude oil equivalent of natural gas production converted on...

  • Page 26
    ...refinery in St. Croix, U.S. Virgin Islands. In January 2012, HOVENSA shut down its refinery and continued operating solely as an oil storage terminal through the first quarter of 2015. HOVENSA and the Government of the Virgin Islands agreed to a plan to pursue a sale of HOVENSA and the sales process...

  • Page 27
    ... of CGA and MSRC, as well as the Board of Directors of OSRL. The Corporation continues to participate in a number of industry-wide task forces that are studying better ways to assess the risk of and prevent onshore and offshore incidents, access and control blowouts in subsea environments, and...

  • Page 28
    ... in this report. Copies of the Corporation's Code of Business Conduct and Ethics, its Corporate Governance Guidelines and the charters of the Audit Committee, the Compensation and Management Development Committee and the Corporate Governance and Nominating Committee of the Board of Directors are...

  • Page 29
    ... in 2015 revenues, and earnings from 2014 levels. We cannot predict how long these lower price levels will continue to prevail. The commodities trading markets as well as other supply and demand factors may also influence the selling prices of crude oil, natural gas liquids and natural gas. To...

  • Page 30
    ..., limitations on access to exploration and development opportunities, anti-bribery or anti-corruption laws, as well as other political developments may affect our operations. We transport some of our crude oil production, particularly from the Bakken shale oil play, by rail. Recent rail accidents...

  • Page 31
    ... business and operations. Computers and telecommunication systems are used to conduct our exploration, development and production activities and have become an integral part of our business. We use these systems to analyze and store financial and operating data and to communicate within our company...

  • Page 32
    ... and other companies that operated industrial facilities on the south shore of St. Croix asserting that the defendants are liable under CERCLA and territorial statutory and common law for damages to natural resources. In 2014 HOVIC, HOVENSA and the government of the U.S. Virgin Islands entered into...

  • Page 33
    ...the remaining sites, the EPA's claims have been settled, or a proposed settlement is under consideration, in all cases for amounts that are not material. The ultimate impact of these proceedings, and of any related proceedings by private parties, on the business or accounts of the Corporation cannot...

  • Page 34
    ... 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 (ticker symbol: HES). High and low sales prices were as follows: 2014 Quarter Ended High Low High 2013 Low...

  • Page 35
    ...) in 2012. Share Repurchase Activities Hess's share repurchase activities for the year ended December 31, 2014, were as follows: Maximum Approximate Dollar Value of Shares that Total Number of May Yet be Shares Purchased as Purchased Under the Plans or Programs Part of Publicly Announced Plans or...

  • Page 36
    ... compensation plan. (b) The Corporation has a Stock Award Program pursuant to which each non-employee director annually receives approximately $175,000 in value of the Corporation's common stock. These awards are made from shares purchased by the Corporation in the open market. See Note 11, Share...

  • Page 37
    ... of Financial Condition and Results of Operations included elsewhere in this Annual Report: 2014 2013 2012 2011 2010 (In millions, except per share amounts) Sales and other operating revenues Crude oil and natural gas liquids ...$ Natural gas ...Other operating revenues ...Total ...$ Income from...

  • Page 38
    ... Hess Corporation is a global Exploration and Production (E&P) company that develops, produces, purchases, transports and sells crude oil, natural gas liquids, and natural gas with production operations primarily in the United States (U.S.), Denmark, Equatorial Guinea, the joint development area...

  • Page 39
    ... project in 2013, ongoing drilling of production wells and higher facilities uptime. At Block A-18 of the Joint Development Area of Malaysia/Thailand (JDA), the operator, Carigali Hess Operating Company, continued drilling production wells and successfully installed a new wellhead platform in 2014...

  • Page 40
    ... operations were as follows: 2014 2013 (In millions) 2012 United States Bakken ...Other Onshore ...Total Onshore ...Offshore ...Total United States ...Europe ...Africa ...Asia and other ...Total* ...Exploration expenses charged to income included above: United States ...International ...Total...

  • Page 41
    ...of Operations The after-tax income (loss) by major operating activity is summarized below: 2014 2013 (In millions, except per share amounts) 2012 Exploration and Production ...$ Corporate, Interest and Other ...Net income from continuing operations attributable to Hess Corporation...Net income from...

  • Page 42
    ... prices, production and sales volumes, cost of products sold, cash operating costs, depreciation, depletion and amortization, exploration expenses and income taxes, as discussed below. Selling Prices: Average crude oil realized selling prices were $92.17 per boe in 2014, or 6% lower compared to 2013...

  • Page 43
    ... operating revenues by $688 million ($431 million after income taxes) in 2012. Production Volumes: The Corporation's crude oil, natural gas liquids and natural gas production was 329,000 boepd in 2014, 336,000 boepd in 2013 and 406,000 boepd in 2012. Production volumes associated with assets sold...

  • Page 44
    ...average selling prices on page 28. United States: Crude oil, natural gas liquids and natural gas production was higher in 2014 compared with 2013, a result of continued development of the Bakken oil shale play, higher production resulting from an active drilling program in the Utica Shale and a new...

  • Page 45
    ... of Indonesia and Thailand assets in early 2014 and the Corporation's interests in Russia in April 2013, as well as lower employee costs. The decrease in 2013 was due to lower production taxes following the sale of the Corporation's Russian operations, and reductions in transportation costs, lease...

  • Page 46
    ... proved reserves at December 31, 2013. During 2014, the Corporation sold approximately 77,000 net acres, including related wells and facilities, in the dry gas area of the Utica shale play, for total cash proceeds of approximately $1,075 million, which resulted in a pre-tax gain of $62 million ($35...

  • Page 47
    ... of assets in the Eagle Ford Shale in Texas and $208 million ($116 million after income taxes) related to non-producing properties in the UK North Sea. In 2012, the Corporation decided to cease further development and appraisal activities in Peru. As a result, the Corporation recorded exploration...

  • Page 48
    ... of leased office space in 2013. Discontinued Operations Discontinued operations attributable to Hess Corporation had income of $625 million in 2014, $1,192 million in 2013, and $235 million in 2012 which comprised the Corporation's retail, energy marketing, terminal, energy trading and refining...

  • Page 49
    ... 44% equity interest in WilcoHess to fair value. The assets and liabilities acquired from WilcoHess were included in the sale of the retail business in September 2014. 2013: In December 2013, the Corporation sold its U.S. East Coast terminal network, St. Lucia terminal and related businesses for...

  • Page 50
    ... million in 2014 compared with $4,870 million in 2013, reflecting the impact of changes in working capital, lower operating earnings primarily as a result of asset sales and the decline in benchmark crude oil prices. Operating cash flow decreased to $4,870 million in 2013 from $5,660 million in 2012...

  • Page 51
    ... sale of assets related to continuing operations amounted to approximately $3.0 billion in 2014, $4.5 billion in 2013 and $0.8 billion in 2012. In 2014, the Corporation completed asset sales of its dry gas acreage in the Utica shale play, its assets in Thailand, the Pangkah Field, offshore Indonesia...

  • Page 52
    ... in 2014. Based on current strip crude oil prices, the Corporation forecasts in 2015 a significant net loss and net cash flow deficit after funding planned capital expenditures, dismantlement obligations, pension contributions, dividends and any share repurchases under its Board authorized plan. The...

  • Page 53
    ... December 31, 2014, including pension plan liabilities and estimates for uncertain income tax positions. The Corporation and certain of its subsidiaries, lease drilling rigs, tankers, office space and other assets for varying periods under leases accounted for as operating leases. The Corporation is...

  • Page 54
    ... for Exploration and Development Costs: E&P activities are accounted for using the successful efforts method. Costs of acquiring unproved and proved oil and gas leasehold acreage, including lease bonuses, brokers' fees and other related costs are capitalized. Annual lease rentals, exploration...

  • Page 55
    ...known development projects and an estimated market premium to reflect the market price an acquirer would pay for potential synergies including cost savings, access to new business opportunities, enterprise control and increased market share. The determination of the fair value of each reporting unit...

  • Page 56
    ... and selling prices that are consistent with the Corporation's internal business forecasts. The Corporation does not provide for deferred U.S. income taxes for that portion of undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. Asset Retirement...

  • Page 57
    ... of asset retirement obligations and any impairment of long-lived assets, equity method investments or goodwill. The Corporation determines fair value in accordance with the fair value measurements accounting standard which established a hierarchy for the inputs used to measure fair value based...

  • Page 58
    ... Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk, include references to the Corporation's future results of operations and financial position, liquidity and capital resources, capital expenditures, asset sales, oil and gas production, tax...

  • Page 59
    ... products and electricity, as well as foreign currency values, from its 50% voting interest in a consolidated energy trading joint venture, HETCO, which was sold in the first quarter of 2015. In conjunction with the Corporation's sale of its energy marketing business in the fourth quarter of 2013...

  • Page 60
    ... various strategies primarily using energy related commodities, securities and derivatives. Following is the value at risk for the Corporation's trading activities: 2014 (In millions) 2013 At December 31 ...Average ...High ...Low ... $ 3 $ 5 6 3 4 4 5 3 The information that follows represents...

  • Page 61
    ... sources of net asset (liability) fair values of financial instruments and derivative commodity contracts by year of maturity used in the Corporation's trading activities at December 31, 2014: 2018 and Beyond Total 2015 2016 (In millions) 2017 Sources of fair value Level 1 ...$ Level 2 ...Level...

  • Page 62
    ... Data 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, 2014 and 2013...

  • Page 63
    ...public accounting firm, Ernst & Young LLP, has audited the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2014, as stated in their report, which is included herein. By John P. Rielly Senior Vice President and Chief Financial Officer February 26, 2015...

  • Page 64
    ... Registered Public Accounting Firm The Board of Directors and Stockholders Hess Corporation We have audited Hess Corporation and consolidated subsidiaries' (the "Corporation") internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control...

  • Page 65
    ... a whole, presents fairly in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hess Corporation's internal control over financial reporting as of December 31, 2014, based...

  • Page 66
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2014 2013 (In millions, except share amounts) ASSETS CURRENT ASSETS Cash and cash equivalents ...Accounts receivable Trade ...Other ...Inventories...Other current assets ...Total current assets ...PROPERTY, PLANT...

  • Page 67
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED INCOME Years Ended December 31, 2014 2013 2012 (In millions, except per share amounts) REVENUES AND NON-OPERATING INCOME Sales (excluding excise taxes) and other operating revenues ...Gains on asset sales, net ...Other, net......

  • Page 68
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME Years Ended December 31, 2014 2013 2012 NET INCOME ...OTHER COMPREHENSIVE INCOME (LOSS): Derivatives designated as cash flow hedges Effect of hedge (gains) losses reclassified to income ...Income taxes on ...

  • Page 69
    ... equity affiliates ...Asset impairments ...Exploratory dry hole costs ...Exploration lease impairment ...Stock compensation expense ...Provision (benefit) for deferred income taxes ...Income from discontinued operations...Changes in operating assets and liabilities: (Increase) decrease in accounts...

  • Page 70
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED EQUITY Capital in Excess of Par Accumulated Other Total Hess Comprehensive Stockholders' Income (Loss) Equity (In millions) Common Stock Retained Earnings Noncontrolling Interests Total Equity Balance at January 1, 2012...

  • Page 71
    ... Corporation or Hess) is a global Exploration and Production (E&P) company that develops, produces, purchases, transports and sells crude oil, natural gas liquids and natural gas with production operations primarily in the United States (U.S.), Denmark, Equatorial Guinea, the Joint Development Area...

  • Page 72
    ... with governments, operators and contractors, firm plans for additional drilling and other factors. Depreciation, Depletion and Amortization: The Corporation records depletion expense for acquisition costs of proved properties using the units of production method over proved oil and gas reserves...

  • Page 73
    ... classified as held-for-sale at December 31, 2014, trades energy-related commodities and derivatives including futures, forwards, options and swaps based on expectations of future market conditions. All derivative instruments are recorded at fair value in the Corporation's Consolidated Balance Sheet...

  • Page 74
    ...are expensed as incurred. Capital improvements are recorded as additions in Property, plant and equipment. Environmental Expenditures: The Corporation accrues and expenses the undiscounted environmental costs necessary to remediate existing conditions related to past operations when the future costs...

  • Page 75
    ... the Corporation's divested retail, energy marketing and terminal operations, the Port Reading refining facility which ceased operations in 2013, and the energy trading joint venture, HETCO, which was classified as held for sale at December 31, 2014, have been reported as discontinued operations in...

  • Page 76
    ... ($343 million after income taxes), after deducting the net book value of assets including allocated goodwill of $39 million. 2012: In January, the Corporation completed the sale of its interest in the Snohvit Field (Hess 3%), a liquefied natural gas project, offshore Norway, for cash proceeds...

  • Page 77
    ...of use of certain leased office space, contract terminations and professional fees associated with the divestitures as well as costs associated with the shutdown of Port Reading refining operations. For the accrued employee severance at December 31, 2014 totaling $77 million, the Corporation expects...

  • Page 78
    ... 31, 2013, Corporate, Interest and Other included $1,021 million of property, plant and equipment, net related to the divested Retail Marketing operations. Assets Held for Sale: At December 31, 2014, assets totaling $1,035 million, which consisted of accounts receivable and other long-lived assets...

  • Page 79
    ... the Corporation can execute a gas sales agreement and sanction development of the project. Approximately 30% relates to offshore Ghana where the Corporation has drilled seven successful exploration wells. Appraisal plans for the seven wells on the block were submitted to the Ghanaian government in...

  • Page 80
    ... held under operating leases. The Corporation repaid $136 million of other debt in 2013. The Corporation recorded a non-cash net increase in debt of $68 million in 2014 and $116 million in 2013 related to progress on construction of a floating production system for the Tubular Bells Field, which...

  • Page 81
    ... 35 21 5 61 Includes pre-tax share-based compensation expense included in Income from continuing operations of approximately $87 million, $60 million and $83 million for 2014, 2013 and 2012, respectively. The Corporation reversed share-based compensation expenses totaling $33 million ($25 million...

  • Page 82
    ... at December 31, 2013. The change in 2014 related to the Corporation's Norwegian operations and reflects translation impacts of the strengthening U.S. dollar versus the Norwegian Krone. 13. Retirement Plans The Corporation has funded noncontributory defined benefit pension plans for a significant...

  • Page 83
    ... for all retirement plans is December 31. The following table summarizes the Corporation's benefit obligations and the fair value of plan assets and shows the funded status of the pension and postretirement medical plans: Funded Pension Plans 2014 2013 Unfunded Pension Plan 2014 2013 (In millions...

  • Page 84
    ... and foreign equities, fixed income, and other investments, including hedge funds, real estate and private equity. Investment managers are prohibited from investing in securities issued by the Corporation unless indirectly held as part of an index strategy. The majority of plan assets are highly...

  • Page 85
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables provide the fair value of the financial assets of the funded pension plans as of December 31, 2014 and 2013 in accordance with the fair value measurement hierarchy described ...

  • Page 86
    ... at fair value based on Level 3 inputs that are held by institutional funds classified as: Fixed Income* Hedge Funds Private Equity Funds (In millions) Real Estate Funds Total Balance at January 1, 2013...$ Actual return on plan assets ...Purchases, sales or other settlements...Net transfers...

  • Page 87
    ...) 14. Income Taxes The provision (benefit) for income taxes from continuing operations consisted of: 2014 2013 (In millions) 2012 United States Federal Current ...$ Deferred ...State ...Foreign Current ...Deferred ...Total ...Adjustment of deferred taxes for foreign income tax law changes* ...Total...

  • Page 88
    ... the Corporation's effective income tax rate from continuing operations and the U.S. statutory rate is reconciled below: 2014 2013 2012 U.S. statutory rate...Effect of foreign operations* ...State income taxes, net of Federal income tax ...Change in enacted tax laws ...Gains on asset sales, net...

  • Page 89
    ... presents the calculation of basic and diluted earnings per share: 2014 2013 (In millions) 2012 Income from continuing operations, net of income taxes ...$ Less: Net income attributable to noncontrolling interests ...Net income from continuing operations attributable to Hess Corporation ...Income...

  • Page 90
    ... used to drill development wells and successful exploration wells are capitalized. At December 31, 2014, 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 (in millions): 2015...

  • Page 91
    ... trial judge and the Corporation paid the settlement amount in December 2014. In June 2014, the Commonwealth of Pennsylvania and the State of Vermont each filed independent lawsuits alleging that the Corporation and all major oil companies with operations in each respective state, have damaged the...

  • Page 92
    ... play E&P company. The results of operations for its retail, energy marketing, terminal and refining businesses as well as the energy trading joint venture, HETCO, have been classified as discontinued operations. The Corporation currently has one operating segment, Exploration and Production, and...

  • Page 93
    ... 2014 Operating revenues ...$ Net income (loss) from continuing operations attributable to Hess Corporation ...Depreciation, depletion and amortization ...Provision (benefit) for income taxes ...Identifiable assets ...Property, plant and equipment (net) (a) ...Capital expenditures ...2013 Operating...

  • Page 94
    ...officer must approve the trading of new instruments and commodities. Risk limits are monitored and reported on a daily basis to business units and senior management. The Corporation's financial risk management department also performs independent price verifications (IPV's) of sources of fair values...

  • Page 95
    ... pre-tax gains (losses) on derivative contracts used in Corporate Risk Management activities and not designated as hedges amounted to the following: 2014 2013 (In millions) 2012 Commodity ...$ Foreign exchange ...Total ...$ - 117 117 $ $ - $ (39) (39) $ 1 43 44 Trading Activities: The energy...

  • Page 96
    ... in 2013 include amounts relating to the divested energy marketing business. The net assets and liabilities that were offset in the Consolidated Balance Sheet as reflected in column (iv) of the table above were primarily included in Accounts receivable-Trade and Accounts payable, respectively...

  • Page 97
    ... values of the risk management and trading derivative instruments and, at December 31, 2013 also includes energy marketing risk management derivative instruments: Accounts Accounts Receivable Payable (In millions) December 31, 2014 Derivative contracts designated as hedging instruments Commodity...

  • Page 98
    ...$ $ $ 168 - $ $ (1,004) (6,641) (a) Long-term debt, including current maturities, had a carrying value of $5,987 million and $5,798 million at December 31, 2014 and 2013, respectively. (b) Assets and liabilities in 2013 include amounts relating to the divested energy marketing business. 83 83

  • Page 99
    ... and financial assets and (liabilities) primarily related to commodities that are measured at fair value based on Level 3 inputs: 2013 2014 (In millions) Balance at January 1 ...$ Unrealized pre-tax gains (losses) Included in earnings (a) ...Purchases (b) ...Sales (b)...Settlements (c)...Transfers...

  • Page 100
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Unit of Measurement Range / Weighted Average December 31, 2014 Assets Commodity contracts with a fair value of $114 million Contract prices Crude oil and refined petroleum products ...Electricity...

  • Page 101
    ... for the downstream businesses, were concentrated as follows: Integrated Oil Companies - 45%, Refiners - 18%, Financial Institutions - 14% Government Entities - 8%, and Trading Companies - 7%. The Corporation reduces its risk related to certain counterparties by using master netting arrangements...

  • Page 102
    ..., 2013 and 2012, respectively, related to the accruals and revisions for asset retirement obligations. (c) Costs incurred in oil and gas producing activities in Norway, were as follows for the years ended December 31: 2014 Property Acquisitions ...$ Exploration ...Production and development capital...

  • Page 103
    ... of operations before income taxes ...Provision (benefit) for income taxes ...Results of operations ...$ 2013 Sales and other operating revenues ...$ Costs and expenses Operating costs and expenses ...Production and severance taxes...Exploration expenses, including dry holes and lease impairment...

  • Page 104
    ... project, either senior management or the Board of Directors must commit to fund the development. The Corporation's proved reserves are subject to certain risks and uncertainties, which are discussed in Item 1A, Risk Factors Related to Our Business and Operations of this Form 10-K. Internal Controls...

  • Page 105
    ..., 2012 and 10 million barrels as of January 1, 2012 of crude oil reserves related to a noncontrolling interest. The joint venture including the noncontrolling interest was sold in April 2013. (c) Excludes approximately 235 million mcf of carbon dioxide gas for sale or use in company operations. 90...

  • Page 106
    ... shale play in North Dakota, Utica shale in Ohio and the Gulf of Mexico. New wells completed in 2014 added proved reserves of 16 million barrels of crude oil, 5 million barrels of natural gas liquids and 58 million mcf of natural gas. Other additions and revisions to proved reserves primarily relate...

  • Page 107
    ... in North Dakota and the Gulf of Mexico in the U.S., Norway, Malaysia and Equatorial Guinea. Asset sales reduced proved undeveloped reserves by 63 million boe. In the United States, 2013 proved undeveloped reserve additions of 160 million barrels of crude oil, 29 million barrels of natural gas...

  • Page 108
    ... 143,000 mcf of natural gas per day. The operator is currently executing a multi-year development drilling program. x Production Sharing Contracts The Corporation's proved reserves include crude oil and natural gas reserves relating to long-term agreements with governments or authorities in which...

  • Page 109
    ... oil and gas reserves. Commencing with 2013, the Corporation changed its computation of future income tax expenses to include excess tax carryforward deductions relating to proved oil and gas reserves in conjunction with the Corporation's transition to a pure play Exploration and Production company...

  • Page 110
    ... on the operator's well life study completed in 2014 and the impact of changes in foreign exchange rates associated with the strengthening of the U.S. dollar versus the Norwegian Krone. (b) Future income taxes for 2012 have been restated as described above. Future income taxes for 2013 have been...

  • Page 111
    ... revenues, less Cost of products sold, Operating costs and expenses, Production and severance taxes, Depreciation, depletion and amortization and Asset impairments. (b) Includes after-tax charge of $52 million to reduce carrying value of its investments in Bayonne Energy Center asset sales to fair...

  • Page 112
    ... 2015 annual meeting of stockholders. The Corporation has adopted a Code of Business Conduct and Ethics applicable to the Corporation's directors, officers (including the Corporation's principal executive officer and principal financial officer) and employees. The Code of Business Conduct and Ethics...

  • Page 113
    ... human resource positions in the energy industry, including 15 years with BHP Billiton. 1983 2009 2009 2002 2014 2014 2014 2009 * All officers referred to herein hold office in accordance with the By-laws until the first meeting of the Directors following the annual meeting of stockholders...

  • Page 114
    ...-Ownership of Voting Securities by Certain Beneficial Owners" and "Election of Directors-Ownership of Equity Securities by Management" from the Registrant's definitive proxy statement for the 2015 annual meeting of stockholders. See Equity Compensation Plans in Item 5 for information pertaining to...

  • Page 115
    ... to Exhibit 3(1) of Form 8-K of Registrant filed on May 13, 2014. By-laws of Registrant incorporated by reference to Exhibit 3(1) of Form 8-K of Registrant filed on August 13, 2013. Five-Year Credit Agreement, dated as of January 21, 2015, among Registrant, certain subsidiaries of Registrant...

  • Page 116
    ...'s definitive proxy statement filed on March 23, 2012. Compensation program description for non-employee directors, incorporated by reference to Item 1.01 of Form 8-K of Registrant filed on January 4, 2007. Form of Amended and Restated Change of Control Termination Benefits Agreement, dated as...

  • Page 117
    ...Registrant, Elliott Associates, L.P. and Elliott International, L.P. , incorporated by reference to Exhibit 99(1) of Form 8-K of Registrant filed on May 22, 2013. Subsidiaries of Registrant. Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm, dated February 26, 2015. Consent...

  • Page 118
    ... duly authorized, on the 26th day of February 2015. HESS CORPORATION (Registrant) By /S/ JOHN P. RIELLY (John P. Rielly) Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 119
    ... II HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2014, 2013 and 2012 Additions Charged to Charged to Other Costs and Accounts Expenses (In millions) Description 2014 Losses on receivables ...Deferred income tax valuation ...2013...

  • Page 120
    ... to Item 5.02 of Form 8-K of Registrant filed on March 10, 2014. Financial Counseling Program description incorporated by reference to Exhibit 10(6) of Form 10-K of Registrant for the fiscal year ended December 31, 2004. Hess Corporation Savings and Stock Bonus Plan incorporated by reference to...

  • Page 121
    ...'s definitive proxy statement filed on March 23, 2012. Compensation program description for non-employee directors, incorporated by reference to Item 1.01 of Form 8-K of Registrant filed on January 4, 2007. Form of Amended and Restated Change of Control Termination Benefits Agreement, dated as...

  • Page 122
    ... 63 of Title 18 of the United States Code (18 U.S.C. 1350). Letter report of DeGolyer and MacNaughton, Independent Petroleum Engineering Consulting Firm, dated February 4, 2015, on proved reserves audit as of December 31, 2014 of certain properties attributable to Registrant. 32(2) 99(1) 101(INS...

  • Page 123
    ... Capital Services L.L.C. Hess Energy Exploration Limited Hess Equatorial Guinea Inc. Hess Exploration & Production Holdings Limited Hess (Ghana) Limited Hess Gulf of Mexico Ventures L.L.C. Hess International Holdings Corporation Hess (Netherlands) Oil & Gas Holdings C.V. Hess Norge AS Hess Norway...

  • Page 124
    ... consolidated financial statements and schedule of Hess Corporation and the effectiveness of internal control over financial reporting of Hess Corporation, included in this Annual Report (Form 10-K) of Hess Corporation for the year ended December 31, 2014. New York, New

  • Page 125
    ... petroleum engineering consulting firm, to references to our third party letter report dated February 4, 2015, containing our opinion on the proved reserves attributable to certain properties owned by Hess Corporation, as of December 31, 2014, (our "Report"), under the heading "Oil and Gas Reserves...

  • Page 126
    ..., process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By John B. Hess Chief Executive Officer Date: February 26, 2015...

  • Page 127
    ...in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 128
    ... of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. By John B. Hess Chief Executive Officer Date: February 26...

  • Page 129
    ...(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. By John P. Rielly Senior Vice President and Chief Financial Officer Date: February...

  • Page 130
    ...Texas 75244 February 4, 2015 Board of Directors Hess Corporation 1185 Avenue of the Americas New York, New York 10036 Ladies and Gentlemen: Pursuant to your request, we have conducted a reserves audit of the net proved crude oil, condensate, natural gas liquids (NGL), and natural gas reserves, as of...

  • Page 131
    ... 31, 2014 Natural Gas Oil Oil and Natural Gas Equivalent Liquids Condensate (MMbbl) (MMbbl) (Bcf) (MMboe) United States Norway Denmark Africa Asia Total 385 230 35 168 6 824 61 26 0 0 0 87 252 180 40 146 825 1,443 488 286 41 192 144 1,151 Note: Gas is converted to oil equivalent using an energy...

  • Page 132
    ...using conventional production methods and equipment. Reserves were estimated only to the limit of economic production rates under existing economic and operating conditions using prices and costs consistent with the effective date of this report, including consideration of changes in existing prices...

  • Page 133
    ... from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. (i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless...

  • Page 134
    ... used in estimating future costs required to operate the properties. Future costs are typically based on existing costs and where appropriate adjusted to reflect planned changes in operating conditions. These costs were not escalated for inflation. Possible Effects of Regulations Hess' oil and gas...

  • Page 135
    ... of the Board and Chief Executive Officer of DeGolyer and MacNaughton, which company did prepare the letter report dated February 4, 2015, on the proved reserves audit of certain properties attributable to Hess Corporation, and that I, as Chairman of the Board and Chief Executive Officer, was...

  • Page 136
    ...'s Code of Business Conduct and Ethics, its Corporate Governance Guidelines, and charters of the Audit Committee, Compensation and Management Development Committee and Corporate Governance and Nominating Committee of the Board of Directors, are available, without charge, on our Web site listed below...

  • Page 137
    www.hess.com 122