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2013 ANNUAL REPORT

Table of contents

  • Page 1
    2013 ANNUAL REPORT

  • Page 2
    Table of Contents 1 2 5 9 Financial Highlights Letter to Shareholders Exploration and Production Corporate and Social Responsibility 12 Board of Directors and Corporate Officers Cover: Production Operations, North Dakota

  • Page 3
    ....3 Financial - at year end Total assets Total debt Total equity Debt to capitalization ratio Common stock price (b) 2013 $ 42,754 $ 5,798 $ 24,784 19.0% $ 83.00 $ 2012 $ 43,441 $ 8,111 27.7 % 52.96 $ 21,203 Operating - for the year Production - net Crude oil and natural gas liquids (thousands of...

  • Page 4
    ... JDA asset are long life, low risk, natural gas assets with oil linked pricing and exploratory upside that will be significant cash generators for the next two decades; and • The Utica Shale play in Ohio, where we recently sold the Continuing Momentum in 2014 We have entered this year with...

  • Page 5
    ... safety training and Stop Work Authority, contributed to the positive results. We remain committed to engaging with our stakeholders and making a positive impact on the communities where we operate. In 2013 the Company continued its proactive involvement with a number of global initiatives designed...

  • Page 6
    Tubular Bells SPAR Sailaway, Gulf of Mexico 4

  • Page 7
    ... quarter of 2014. The expanded Tioga Gas Plant will allow processing of up to 250 million cubic feet of natural gas per day, resulting in a significant reduction in flaring and an increase in the production of natural gas liquids. In the Utica Shale play in eastern Ohio, the Company drilled 29 wells...

  • Page 8
    Utica Shale Drilling Operations, Ohio Utica Shale Drilling Operations, Ohio operator). First oil was achieved in November 2013 and development drilling will continue throughout 2014. In Asia, the Malaysia/Thailand Joint Development Area (50% working interest) achieved first production at wellhead ...

  • Page 9
    ... in the second quarter of 2014, which will include three wells and one production test. In addition, we have begun predevelopment studies on the Block. Hess holds a 90 percent working interest and is the operator. Ghana National Petroleum Corporation is a 10 percent equity interest partner and is...

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

  • Page 11
    ... in the Bakken oil shale in North Dakota, but through the promotion of our on-boarding safety orientations, Stop Work Authority, and contractor management programs, we look to advance our contractor safety initiatives for 2014 and capitalize on the positive gains achieved in 2013. Process Safety (PS...

  • Page 12
    ... and Corporate Enterprise Risk processes. We furthered our work in stakeholder engagement by developing a good neighbor pilot program that we intend to replicate across our assets. We continue to invest in high-impact education, health and livelihood programs in our host communities. In North Dakota...

  • Page 13
    11 Hess Scholars Program, Ghana

  • Page 14
    ..., CBS Corporation David McManus (3) Former Executive Vice President, Pioneer Natural Resources Former Deputy Group Chief Executive, BP William G. Schrader (2) Harvey Golub (2) (4) Former Chief Operating Officer, TNK-BP Russia Former Chairman and Chief Executive Officer, American Express Dr...

  • Page 15
    Annual Report Form 10-K 1

  • Page 16
    1

  • Page 17
    ... closing market price on June 28, 2013, the last business day of the Registrant's most recently completed second fiscal quarter. At December 31, 2013, there were 325,314,177 shares of Common Stock outstanding. Part III is incorporated by reference from the Proxy Statement for the 2014 annual meeting...

  • Page 18

  • Page 19
    ...Controls and Procedures ...9B. Other Information ...10. 11. 12. 13. 14. 15. PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related...

  • Page 20
    ... to as the Corporation or Hess) is a global Exploration and Production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas. Prior to 2013, the Corporation also operated a Marketing and Refining (M&R) segment, which it began to divest during the year. The...

  • Page 21
    ... and natural gas production was as follows: 2013 2012 2011 Crude oil (thousands of barrels per day) United States Bakken ...Other Onshore ...Total Onshore ...Offshore ...Total United States ...Europe Russia ...United Kingdom ...Norway (a) ...Denmark ...Africa Equatorial Guinea ...Libya ...Algeria...

  • Page 22
    ... oil shale play in the Williston Basin of North Dakota as well as in the Permian Basin of Texas and the Utica Basin of Ohio. Onshore: In North Dakota, the Corporation holds approximately 645,000 net acres in the Bakken at December 31, 2013. During 2013, the Corporation operated 14 rigs, drilled...

  • Page 23
    ... to commence in the first quarter of 2014. Other North Dakota infrastructure includes the Tioga rail terminal, nine unit trains each with 104 cars, the Ramberg truck terminal, gas compression stations and related gathering lines. In the Utica shale play, the Corporation owns a 100% interest in...

  • Page 24
    ...total proved reserves were located in Africa (Equatorial Guinea 3.5%, Libya 12% and Algeria 0.5%). During 2013, 26% 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...

  • Page 25
    ...Field, located off the coast of Indonesia and in January 2014, its Pangkah asset, also located off the coast of Indonesia. In the first quarter of 2013, the Corporation sold its interests in Azerbaijan in the Caspian Sea and announced its intent to divest its interests in Thailand. Joint Development...

  • Page 26
    ... and probable reserves. Average selling prices and average production costs 2013 2012 2011 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...

  • Page 27
    ... the end of 2012, and $31.09 per barrel of oil equivalent produced in 2011. (c) Production (lifting) costs consist of amounts 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...

  • Page 28
    ...in process of drilling in Norway were 4 and 3, respectively. 184 5 16 23 228 81 3 2 6 92 Marketing and Refining The Corporation is in the process of exiting all downstream businesses to become a pure play E&P company. At December 31, 2013, the Corporation had 1,350 HESS® retail gasoline stations...

  • Page 29
    ...-megawatt natural gas fueled electric generating station in Bayonne, New Jersey, which provides power to New York City. In the fourth quarter of 2013, the Corporation sold its energy marketing and terminal network businesses which marketed refined petroleum products, natural gas and electricity on...

  • Page 30
    ... methods. The task forces are working closely with the oil and gas industry and international government agencies to implement improvements and increase the effectiveness of oil spill prevention, preparedness, response and recovery processes. Insurance Coverage and Indemnification The Corporation...

  • Page 31
    ... offices. The Corporation has also filed with the New York Stock Exchange (NYSE) its annual certification that the Corporation's Chief Executive Officer is unaware of any violation of the NYSE's corporate governance standards. Item 1A. Risk Factors Related to Our Business and Operations Our business...

  • Page 32
    ... we have operations concerning the safety and environmental impact of the drilling and development of shale oil and gas resources, particularly hydraulic fracturing, water usage, flaring of associated natural gas and air emissions. While we believe that these operations can be conducted safely and...

  • Page 33
    ... used by the oil and gas industry may materially impact our 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...

  • Page 34
    ... responsible for damages to natural resources arising from releases of hazardous substances from the HOVENSA refinery, which had been operated by HOVIC until October 1998. An action was filed on May 5, 2005 in the District Court of the Virgin Islands against HOVENSA, HOVIC and other companies...

  • Page 35
    ...Registrant's Common 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: 2013 Quarter Ended High...

  • Page 36
    ... per quarter) for both 2012 and 2011. Share Repurchase Activities Hess's share repurchase activities for the year ended December 31, 2013, were as follows: Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (b) (In millions) 2013 Total Number of Shares...

  • Page 37
    ...'s equity 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...

  • Page 38
    ... Annual Report: 2013 2012 2011 2010 (In millions, except per share amounts) 2009 Sales and other operating revenues Crude oil and natural gas liquids ...$ Natural gas (including sales of purchased gas) ...Refined petroleum products ...Convenience store sales and other operating revenues ...Income...

  • Page 39
    ...Corporation (the Corporation or Hess) is a global Exploration and Production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas. Prior to 2013, the Corporation also operated a Marketing and Refining (M&R) segment, which it began to divest during the year...

  • Page 40
    ...Points Block, offshore Ghana that resulted in a total of seven successful exploration wells. The Corporation submitted appraisal plans to the Ghanaian government and four appraisal areas have been approved to date. A three well appraisal drilling program has been scheduled in the second half of 2014...

  • Page 41
    ...generated income of $116 million in 2013 and $160 million in 2012 and a loss of $59 million in 2011. The downstream businesses comprise the Corporation's retail, energy marketing, terminal, energy trading and refining operations, together with its interests in two power plant joint ventures. By year...

  • Page 42
    ... to changes in selling 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 13% higher in 2013 compared...

  • Page 43
    ... to hedge 25,000 bopd for calendar year 2014 at an average price of $109.12 per barrel. Production Volumes: The Corporation's crude oil and natural gas production was 336,000 boepd in 2013, 406,000 boepd in 2012 and 370,000 boepd in 2011. Approximately 72% in 2013, 75% in 2012 and 72% in 2011 of...

  • Page 44
    ...the Bakken oil shale play was partly offset by natural decline and maintenance in the other U.S. assets. Crude oil, natural gas liquids and natural gas production was higher in 2012 compared with 2011, primarily due to new wells in the Bakken oil shale play. In the second quarter of 2012, production...

  • Page 45
    ... do not sell at prices equivalent to crude oil. See the average selling prices on page 25. Cost of Products Sold: Cost of products sold is mainly comprised of costs relating to the purchases of crude oil, natural gas liquids and natural gas from the Corporation's partners in Hess operated wells or...

  • Page 46
    ...-in production in Libya from the third quarter of 2013. The increase in the effective income tax rate in 2012 compared with 2011 was predominantly due to the resumption of Libyan operations, which were shut-in for substantially all of 2011. The effective income tax rate for E&P operations in 2014...

  • Page 47
    ... quarter of 2012, the Corporation recorded an income tax charge of $86 million for a disputed application of an international tax treaty. 2011: The Corporation completed the sale of its interests in certain natural gas producing assets in the UK North Sea, the Snorre Field (Hess 1%), offshore Norway...

  • Page 48
    ... leased office space in 2013. Downstream Businesses Downstream businesses reported income of $1,189 million in 2013, income of $231 million in 2012 and a loss of $584 million in 2011. The downstream businesses comprise the Corporation's retail, energy marketing, terminal, energy trading and refining...

  • Page 49
    ... of $678 million ($414 million after income taxes) relating to the liquidation of last-in, first-out (LIFO) inventories as a result of ceasing refining operations and the sales of its energy marketing and terminals businesses. During the year, the Corporation incurred $131 million ($80 million after...

  • Page 50
    ...Bakken oil shale play as a result of more drilling rigs operated in the field, higher working interest wells and increased spending on field infrastructure projects. Capital expenditures in 2011 included acquisitions of approximately $800 million for 195,000 net acres in the Utica Shale play in Ohio...

  • Page 51
    ... ACG, Eagle Ford and Natuna A fields, its Russian subsidiary, Samara-Nafta, and proceeds of approximately $2.2 billion from the sale of the Corporation's energy marketing operations and its U.S. East Coast terminal network, St. Lucia terminal and related businesses. Financing Activities: During 2013...

  • Page 52
    ... of the gasoline necessary to supply the Corporation's retail marketing system. In addition, the Corporation has commitments to purchase refined petroleum products, natural gas and electricity on behalf of Direct Energy to supply contracted customers from its divested energy marketing business until...

  • Page 53
    ... Financial Statements. Foreign Operations The Corporation conducts exploration and production activities outside the U.S., principally in Europe (Norway, Denmark and France), Africa (Equatorial Guinea, Libya, Algeria and Ghana) and Asia and Other (Malaysia, Thailand, Australia, Brunei, the...

  • Page 54
    ...savings, access to new business opportunities, enterprise control and increased market share. The Corporation also considers the relative market valuation of similar onshore and offshore peer companies. The determination of the fair value of each reporting unit depends on estimates about oil and gas...

  • Page 55
    ... in the prices of crude oil, natural gas, refined petroleum products and electricity, as well as changes in interest and foreign currency exchange rates. In trading activities, the Corporation, principally through a consolidated partnership, trades energy-related commodities and derivatives...

  • Page 56
    ... 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 on the source of the inputs, which generally range from quoted prices...

  • Page 57
    ... related to the prices of crude oil, natural gas, refined petroleum products and electricity. The following describes how these risks are controlled and managed. In November 2013, the Corporation completed the sale of its energy marketing business to Direct Energy, a North American subsidiary...

  • Page 58
    ... include energy-related equity or debt securities issued by a company or government or related derivatives on these securities. Corporate Risk Management Activities Corporate risk management activities include transactions designed to reduce risk in the selling prices of crude oil or natural gas...

  • Page 59
    ... crude oil fixed price swap contracts to hedge 25,000 boepd for calendar year 2014 at an average price of $109.12 per barrel. The Corporation has outstanding foreign exchange contracts used to reduce its exposure to fluctuating foreign exchange rates for various currencies. The change in fair value...

  • Page 60
    ... the 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, 2013: Total 2014 2015 (In millions) 2016 2017 and Beyond Sources of fair value Level 1 ...Level 2 ...Level...

  • Page 61
    Item 8. Financial Statements and Supplementary 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 ...

  • Page 62
    ... audited the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2013, as stated in their report, which is included herein. By John P. Rielly Senior Vice President and Chief Financial Officer February 28, 2014 By John B. Hess Chief Executive Officer 44

  • Page 63
    ... 31, 2013 and 2012, and the related statements of consolidated income, comprehensive income, cash flows and equity for each of the three years in the period ended December 31, 2013 of Hess Corporation and consolidated subsidiaries, and our report dated February 28, 2014 expressed an unqualified...

  • Page 64
    ... balance sheet of Hess Corporation and consolidated subsidiaries (the "Corporation") as of December 31, 2013 and 2012, and the related statements of consolidated income, comprehensive income, cash flows and equity for each of the three years in the period ended December 31, 2013. Our audits also...

  • Page 65
    ... and lease impairment ...Property, plant and equipment - net ...GOODWILL ...DEFERRED INCOME TAXES ...OTHER ASSETS ...TOTAL ASSETS ...LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable ...Accrued liabilities ...Taxes payable ...Liabilities associated with assets held for sale ...Short...

  • Page 66
    ... on asset sales, net ...2,174 584 446 Other, net ...(37) 121 32 Total revenues and non-operating income ...COSTS AND EXPENSES Cost of products sold (excluding items shown separately below) ...Operating costs and expenses ...Production and severance taxes ...Marketing expenses ...Exploration expenses...

  • Page 67
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME Years Ended December 31, 2013 2012 2011 (In millions) NET INCOME ...OTHER COMPREHENSIVE INCOME (LOSS): Derivatives designated as cash flow hedges Effect of hedge (gains) losses reclassified to income ......

  • Page 68
    ... ...Stock compensation expense ...Provision (benefit) for deferred income taxes ...Income from discontinued operations ...Changes in operating assets and liabilities: (Increase) decrease in accounts receivable ...(Increase) decrease in inventories ...Increase (decrease) in accounts payable and...

  • Page 69
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED EQUITY Accumulated Capital in Other Total Hess Common Excess of Retained Comprehensive Stockholders' Noncontrolling Stock Par Earnings Income (Loss) Equity Interests (In millions) Total Equity Balance at January 1, 2011 ......

  • Page 70
    ... to as the Corporation or Hess) is a global Exploration and Production (E&P) company that develops, produces, purchases, transports and sells crude oil and natural gas. Prior to 2013, the Corporation also operated a Marketing and Refining (M&R) segment, which it began to divest during the year. The...

  • Page 71
    ... 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 72
    ... its exposure to fluctuations in prices of crude oil, natural gas, refined petroleum products and electricity, as well as changes in interest and foreign currency exchange rates. The Corporation, through a consolidated partnership, trades energy-related commodities and derivatives, including futures...

  • Page 73
    ... 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 on the source of the inputs, which generally range from quoted prices...

  • Page 74
    ..., the Corporation completed the sale of its interest in the Natuna A Field, offshore Indonesia for total cash proceeds of approximately $656 million. The transaction resulted in a pre-tax gain of $388 million ($343 million after income taxes), after deducting the net book value of assets including...

  • Page 75
    ... million after income taxes). 3. Discontinued Operations As a result of the Corporation's divestiture of its energy marketing business and terminals network and its cessation of refining at the Port Reading facility, the results of operations for these businesses have been reported as discontinued...

  • Page 76
    ... exit costs relate to the shutdown of Port Reading refining operations, charges associated with the cessation of use of certain leased office space, contract termination costs and professional fees associated with the divestitures. 5. Acquisitions In 2011, the Corporation entered into agreements...

  • Page 77
    ... in the Utica Shale play in Ohio, for $59 million in cash at closing and the agreement to fund 50% of CONSOL's share of the drilling costs up to $534 million within a 5-year period. This transaction was accounted for as an asset acquisition. During the second quarter of 2013, the Corporation reached...

  • Page 78
    ... of Safety and Environmental Enforcement in the first quarter of 2014. Field development planning is progressing and the project is targeted for sanction in 2014. Approximately 16% relates to offshore Ghana where the Corporation has drilled seven successful exploration wells. Appraisal plans for...

  • Page 79
    ...the Virgin Islands agreed to a plan to pursue a sale of HOVENSA and the sales process commenced in the fourth quarter. If an agreement to sell the refinery cannot be reached, HOVENSA will likely not be able to continue operating as an oil storage terminal. In 2011 the Corporation recorded a total of...

  • Page 80
    ......Total fixed-rate public notes ...Leased floating production system ...Other fixed-rate notes, weighted average rate 12.9%, due through 2023 ...Project lease financing, weighted average rate 5.1%, due through 2014 ...Fair value adjustments - interest rate hedging ...Pollution control revenue bonds...

  • Page 81
    ... capital lease obligations totaling $98 million in conjunction with its commitment to acquire 50 existing Hess retail gasoline stations that were previously held under operating leases. The Corporation repaid $136 million of other debt in 2013. At December 31, 2013, the Corporation's fixed-rate...

  • Page 82
    ... Includes pre-tax share-based compensation expense (benefit) included in Income from discontinued operations of approximately $(6) million, $16 million and $18 million for 2013, 2012 and 2011, respectively. During 2013, the Corporation reversed share-based compensation expenses totaling $33 million...

  • Page 83
    ... operations. The after-tax foreign currency translation adjustments included in Accumulated other comprehensive income (loss) totaled $(1) million at December 31, 2013 and $169 million at December 31, 2012. 15. Retirement Plans The Corporation has funded noncontributory defined benefit pension plans...

  • Page 84
    ...Corporation's announced asset sales program. (b) Plan settlements amounts reported include a charge of $9 million ($5 million after income taxes) due to employee retirements in 2012. Amounts recognized in the Consolidated Balance Sheet at December 31 consisted of the following: Funded Pension Plans...

  • Page 85
    ... of plan assets in a variety of asset classes. Asset classes and target allocations are determined by the Corporation's investment committee and include domestic and foreign equities, fixed income, and other investments, including hedge funds, real estate and private equity. Investment managers are...

  • Page 86
    ... investment funds ...Equities: U.S. equities (domestic) ...International equities (non-U.S.) ...Global equities (domestic and non-U.S.) ...Fixed income: Treasury and government issued (a) ...Government related (b) ...Mortgage-backed securities (c) ...Corporate ...Other: Hedge funds ...Private equity...

  • Page 87
    ... measured 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, 2012 ...Actual return on plan assets held at December 31, 2012 ...Purchases, sales or other...

  • Page 88
    ... income includes the Corporation's Virgin Islands and other operations located outside of the U.S. The components of deferred tax liabilities and deferred tax assets at December 31 were as follows: 2012 2013 (In millions) Deferred tax liabilities Property, plant and equipment ...Other ...Total...

  • Page 89
    ... continuing operations and the U.S. statutory rate is reconciled below: 2013 2012 2011 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 ...Effect of equity loss and operations related to...

  • Page 90
    ...The Corporation and its subsidiaries file income tax returns in the U.S. and various foreign jurisdictions. The Corporation is no longer subject to examinations by income tax authorities in most jurisdictions for years prior to 2005. Income taxes paid (net of refunds) in 2013, 2012 and 2011 amounted...

  • Page 91
    ... common shares outstanding used in the earnings per share calculations for 2013 do not reflect the full amount of the stock repurchases, due to the timing of the purchases. 19. Leased Assets The Corporation and certain of its subsidiaries lease gasoline stations, drilling rigs, tankers, office space...

  • Page 92
    ... expected to have a material adverse effect on the financial condition, results of operations or cash flows of the Corporation. 21. Segment Information The Corporation is transitioning to a pure play E&P company. In the first quarter of 2013, the Corporation announced plans to divest its downstream...

  • Page 93
    ... Production Retail Marketing and Other Corporate (In millions) Total 2013 Operating revenues (a) ...Net income (loss) from continuing operations attributable to Hess Corporation ...Interest expense ...Depreciation, depletion and amortization ...Asset impairments ...Provision (benefit) for income...

  • Page 94
    ... to commodity price risks primarily related to the prices of crude oil, natural gas, refined petroleum products and electricity as well as foreign currency values. In March 2013, the Corporation announced plans to divest its downstream businesses, which included its energy marketing risk management...

  • Page 95
    .... The chief risk 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 risk management department also performs independent price verifications (IPV's) of sources of fair...

  • Page 96
    ... 2012 (In millions) 2011 Commodity ...Foreign exchange ...Total ... $ - (39) $ 1 43 $ 1 (15) $ (39) $ 44 $ (14) Energy Marketing Risk Management Activities: In November 2013, the Corporation completed the sale of its energy marketing business to Direct Energy, a North American subsidiary...

  • Page 97
    ... trading partnership and, for 2012, the Corporation's proprietary trading accounts. The gross volumes of derivative contracts outstanding related to trading activities at December 31, were as follows: 2013 2012 Commodity Crude oil and refined petroleum products (millions of barrels) ...Natural gas...

  • Page 98
    ...Accounts receivable - Trade and Accounts payable, respectively. Included in those amounts were the assets and liabilities related to the Corporation's discontinued operations of $612 million and $620 million as of December 31, 2013, respectively ($378 million and $376 million as of December 31, 2012...

  • Page 99
    ... net fair values of the corporate and energy marketing risk management and trading derivative instruments: Accounts Receivable Accounts Payable (In millions) December 31, 2013 Derivative contracts designated as hedging instruments Commodity ...$ Interest rate and other ...Total derivative contracts...

  • Page 100
    ... Long-term debt (c) ...$ December 31, 2012 Assets Derivative contracts Commodity ...$ Interest rate and other ...Collateral and counterparty netting ...Total derivative contracts ...Other assets measured at fair value on a recurring basis ...Total assets measured at fair value on a recurring basis...

  • Page 101
    ... in the Change in fair value of cash flow hedges in the Statement of Consolidated Comprehensive Income. (c) Purchases and sales primarily represent option premiums paid or received, respectively, during the reporting period and were reflected in Sales and other operating revenues and Income from...

  • Page 102
    ...31, 2013 Assets Commodity contracts with a fair value of $494 million Contract prices Crude oil and refined petroleum products ...Electricity ...Basis prices Natural gas ...Contract volatilities Crude oil and refined petroleum products ...Natural gas ...Electricity ...Liabilities Commodity contracts...

  • Page 103
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Unit of Measurement Range / Weighted Average December 31, 2012 Assets Commodity contracts with a fair value of $243 million Contract prices Crude oil and refined petroleum products ...Electricity...

  • Page 104
    ... dry gas position in the Utica Shale for $924 million. Approximately two-thirds of these proceeds are expected at the end of the first quarter of 2014, with the balance to be received in the third quarter of 2014. In January 2014, the Corporation's retail marketing business acquired its partner's 56...

  • Page 105
    ... United Kingdom), Africa (Equatorial Guinea, Libya and Algeria) and Asia and Other (Malaysia, Thailand, Azerbaijan and Indonesia). Exploration activities were also conducted, or are planned, in certain of these areas as well as additional countries. Costs Incurred in Oil and Gas Producing Activities...

  • Page 106
    ...) Asia and Other For the Years Ended December 31 Total Africa 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 ...General and administrative expenses...

  • Page 107
    ... Item 1A, Risk Factors Related to Our Business and Operations of this Form 10-K. Internal Controls The Corporation maintains internal controls over its oil and gas reserve estimation process which are administered by the Corporation's Vice President of E&P Technology and its Chief Financial Officer...

  • Page 108
    ... petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world for over 70 years. D&M's letter report on the Corporation's December 31, 2013 oil and gas reserves is included as an exhibit to this Form 10-K. While the D&M report should be read in...

  • Page 109
    ... oil reserves relating to a noncontrolling interest owner of a corporate joint venture. The corporate joint venture was sold in April 2013. (c) Excludes approximately 270 million mcf of carbon dioxide gas for sale or use in company operations. (d) Natural gas liquids net proved developed reserves...

  • Page 110
    ... per day and 143,000 mcf of natural gas per day. The operator plans a multi-year development drilling program. • 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 the...

  • Page 111
    ... December 31, the standardized measure of discounted future net cash flows relating to proved reserves in Norway were as follows: 2013 Future revenues ...Less: Future production costs ...Future development costs ...Future income tax expenses ...2012 2011 (In millions) $29,668 $33,974 $34,495 11,538...

  • Page 112
    ...) of oil and gas reserves, less related costs ...Revisions of previous oil and gas reserve estimates ...Net purchases (sales) of minerals in place, before income taxes ...Accretion of discount ...Net change in income taxes ...Revision in rate or timing of future production and other changes ...Total...

  • Page 113
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES QUARTERLY FINANCIAL DATA (UNAUDITED) Following are quarterly results of operations: 2013 First Second Third Fourth Quarter Quarter Quarter Quarter (In millions, except per share amounts) Sales and other operating revenues ...Gross profit from ...

  • Page 114
    ..., refinery shutdown costs, and other charges. (e) Includes after-tax gains of $1,472 million related to asset sales and the liquidation of LIFO inventories, as well as a deferred tax benefit of $674 million which represents the effect of Denmark's enacted changes to the hydrocarbon income tax law...

  • Page 115
    ... financial reporting and the attestation report on the Corporation's internal controls over financial reporting are included in Item 8 of this annual report on Form 10-K. Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance Information relating to...

  • Page 116
    ...five years. Item 11. Executive Compensation Information relating to executive compensation is incorporated herein by reference to "Election of Directors - Executive Compensation and Other Information," from the Registrant's definitive proxy statement for the 2014 annual meeting of stockholders. Item...

  • Page 117
    ... and its subsidiaries upon request. Incentive Cash Bonus Plan description incorporated by reference to Item 5.02 of Form 8-K of Registrant filed on March 8, 2013. Financial Counseling Program description incorporated by reference to Exhibit 10(6) of Form 10-K of Registrant for fiscal year ended...

  • Page 118
    ... Registrant'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. Amended and Restated Change of Control Termination Benefits Agreement dated as of...

  • Page 119
    ...exhibits relate to executive compensation plans and arrangements. (b) Reports on Form 8-K During the three months ended December 31, 2013, Registrant filed or furnished the following report on Form 8-K: 1. Filing dated October 30, 2013 reporting under Items 2.02 and 9.01, and a news release dated...

  • Page 120
    ..., on the 28th day of February 2014. 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 on behalf...

  • Page 121
    ...II HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2013, 2012 and 2011 Additions Charged to Costs Charged Deductions and to Other from Expenses Accounts Reserves (In millions) Description Balance January 1 Balance December 31 2013...

  • Page 122
    ... opinion, the financial statements referred to above present fairly, in all material respects, the results of the Company's operations and its cash flows for the year ended December 31, 2011 in conformity with U.S. generally accepted accounting principles. February 27, 2012 New York, New York 104

  • Page 123
    ...31, 2013 2012 (Unaudited) (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents ...Accounts receivable: Members and affiliates ...Trade (less allowance in 2013 of $0 and 2012 of $6,859) ...Other ...Inventories ...Deposits and prepaid expenses ...Total current assets ...OTHER ASSETS ... $ 158...

  • Page 124
    ... Years Ended December 31, 2013 2012 2011 (Unaudited) (Unaudited) (Audited) SALES ...OPERATING EXPENSES Product costs ...Operating expenses ...Depreciation and amortization ...Asset impairments and shutdown related charges ...Total operating expenses ...OPERATING INCOME (LOSS) ...OTHER NON-OPERATING...

  • Page 125
    ......(Increase) decrease in other assets ...Decrease in accounts payable and accrued liabilities ...Increase (decrease) in interest and taxes payable ...Increase (decrease) in other liabilities ...Net cash used in operating activities ...CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ...Net...

  • Page 126
    ...Corporation ("Hess"), to own and operate the Company's refinery located in St. Croix, United States (U.S.) Virgin Islands. The Company's members are PDVSA V.I., Inc., a subsidiary of PDVSA, and Hess Oil Virgin Islands Corp. ("HOVIC"), a subsidiary of Hess. Through January 2012, the Company purchased...

  • Page 127
    ... information develops or circumstances change. Income Taxes The Company is a limited liability company and, as a result, income taxes are the responsibility of the members. Accordingly, no effect of income tax has been recognized in the accompanying financial statements. Retirement Plans The Company...

  • Page 128
    ... estimated fair market value of property, plant and equipment at December 31, 2011. Estimated fair value was determined based on discounted future cash flows (a Level 3 fair value measure). In addition, the Company recorded other charges totaling $172,251 for obligations incurred in 2011 related to...

  • Page 129
    ... gasoline, distillate, residual fuel and other products at market prices. Purchases and sales under these agreements ceased on April 1, 2012 following the shutdown of refining operations. A summary of all material transactions between the Company, its members and affiliates follows: 2013 (Unaudited...

  • Page 130
    ..., results of operations and cash flows. 9. Retirement Plans The Company has a funded non-contributory, defined benefit pension plan for substantially all of its employees. The plan provides defined benefits based on years of service and final average salary. At December 31, 2013 and 2012, the...

  • Page 131
    ...) The following table reconciles the projected benefit obligation and fair value of plan assets and shows the funded status of the pension plan: 2013 2012 (Unaudited) (Unaudited) Reconciliation of projected benefit obligation: Benefit obligation at January 1 ...Service costs ...Interest costs...

  • Page 132
    ...per fund share. Equities consist of registered mutual fund investments whose diversified holdings primarily include common stock securities issued by U.S. and non-U.S. corporations, respectively. Mutual fund shares are valued daily, with the NAV per fund share published at the close of each business...

  • Page 133
    ...,160 as of December 31, 2013 and $11,325 as of December 31, 2012. The decrease in the projected benefit obligation includes a change in actuarial assumptions to reflect the transition of the refinery to an oil storage terminal. This plan remains in place, but terminated employees will no longer earn...

  • Page 134
    ... by reference to Item 5.02 of Form 8-K of Registrant filed on March 8, 2013. Financial Counseling Program description incorporated by reference to Exhibit 10(6) of Form 10-K of Registrant for fiscal year ended December 31, 2004. Hess Corporation Savings and Stock Bonus Plan incorporated by reference...

  • Page 135
    ... Registrant'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. Amended and Restated Change of Control Termination Benefits Agreement dated as of...

  • Page 136
    ...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 7, 2014, on proved reserves audit as of December 31, 2013 of certain properties attributable to Registrant. XBRL Instance Document XBRL...

  • Page 137
    ... Name of Company Hess Bakken Investments III L.L.C...Hess Bakken Investments IV L.L.C...Hess Capital Services Corporation ...Hess Capital Services L.L.C...Hess Energy Exploration Limited ...Hess Equatorial Guinea Inc...Hess Exploration & Production Holdings Limited ...Hess (Ghana) Limited ...Hess...

  • Page 138
    ... to the statements of operations, comprehensive income (loss) and (accumulated deficit) retained earnings, and cash flows of HOVENSA L.L.C., for the year ended December 31, 2011, included in this Annual Report (Form 10-K) for the year ended December 31, 2013. New York, New York February 28, 2014

  • Page 139
    ... petroleum engineering consulting firm, to references to our third party letter report dated February 7, 2014, containing our opinion on the proved reserves attributable to certain properties owned by Hess Corporation, as of December 31, 2013, (our "Report"), under the heading "Oil and Gas...

  • Page 140
    ... to record, 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...

  • Page 141
    ...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 142
    ... In connection with the Annual Report of Hess Corporation (the Corporation) on Form 10-K for the period ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John B. Hess, Chief Executive Officer of the Corporation, certify, pursuant to 18...

  • Page 143
    ... with the Annual Report of Hess Corporation (the Corporation) on Form 10-K for the period ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John P. Rielly, Senior Vice President and Chief Financial Officer of the Corporation, certify...

  • Page 144
    ...Form 10-Q, Current Reports on Form 8-K and its annual proxy statement filed with the Securities and Exchange Commission, as well as the Corporation's Code of Business Conduct and Ethics, its Corporate Governance Guidelines, and charters of the Audit Committee, Compensation and Management Development...

  • Page 145
    1185 Avenue of the Americas New York, New York 10036 www.hess.com