Hess 2014 Annual Report Download - page 134

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DeGolyer and MacNaughton
NGL Prices
Hess has represented that the NGL prices were based on a 12-month average price, calculated as the unweighted
arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the
reporting period, unless prices are defined by contractual arrangements. These prices were held constant over the lives of
the properties. The volume weighted average NGL price for the fields evaluated was $39.67 per barrel.
Natural Gas Prices
Hess has represented that the non-contracted natural gas prices were based on reference prices, calculated as the
unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the
end of the reporting period, unless prices are defined by contractual arrangements. The 12-month average reference price
for NYMEX was $4.30 per thousand cubic feet and the UK International Petroleum Exchange reference price was $8.655
per thousand cubic feet. The gas prices were adjusted for each property using differentials to NYMEX or the UK
International Petroleum Exchange furnished by Hess and held constant thereafter. A portion of the gas reserves evaluated
are in international properties where the gas is sold based on contracted prices. The contract was used to determine the gas
price but inflation was not taken into account in the calculation of the average price. The volume weighted average gas
price for the fields evaluated was $6.32 per thousand cubic feet.
Operating Expenses and Capital Costs
Operating expenses and capital costs, based on information provided by Hess, were 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 reserves have been estimated assuming the continuation of the current regulatory environment. Foreign oil
producing countries, including members of the Organization of Petroleum Exporting Countries (OPEC), may impose production
quotas which limit the supply of oil that can be produced. Generally, these production quotas affect the timing of production, rather
than the total volume of oil or gas reserves estimated.
Changes in the regulatory environment by host governments may impact the operating environment and oil and gas reserves
estimates of industry participants. Such regulatory changes could include increased mandatory government participation in producing
contracts, changes in royalty terms, cancellation or amendment of contract rights, or expropriation or nationalization of property.
While the oil and gas industry is subject to regulatory changes that could affect an industry participant’s ability to recover its oil and
gas reserves, neither we nor Hess are aware of any such governmental actions which restrict the recovery of the December 31, 2014,
estimated oil and gas reserves.
DeGolyer and MacNaughton is an independent petroleum engineering consulting firm that has been providing petroleum
consulting services throughout the world since 1936. DeGolyer and MacNaughton does not have any financial interest, including
stock ownership, in Hess. Our fees were not contingent on the results of our evaluation. This letter report has been prepared at the
request of Hess. DeGolyer and MacNaughton has used all data, procedures, assumptions and methods that it considers necessary to
prepare this report.
Submitted,
/s/ DeGolyer and MacNaughton
DeGOLYER and MacNAUGHTON
Texas Registered Engineering Firm F-716
/s/ James W. Hail, Jr.
James W. Hail, Jr., P.E.
[SEAL] Chairman of the Board and
Chief Executive Officer
DeGolyer and MacNaughton