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2015 ANNUAL REPORT2015 ANNUAL REPORT

Table of contents

  • Page 1
    2015 ANNUAL REPORT

  • Page 2

  • Page 3
    ...Total assets Cash and cash equivalents Total debt Total equity Debt to capitalization ratio Common stock price (b) 2015 $ 34,195 $ 2,716 $ 6,630 $ 20,401 24.5% $ 48.48 $ 2014 $ 38,407 $ $ 2,444 5,987 21.2% 73.82 $ 22,320 Operating - for the year Production - net Crude oil and natural gas liquids...

  • Page 4
    ... on the sale of a 50 percent interest in our Bakken midstream assets and formed a joint venture with Global Infrastructure Partners, which resulted in total cash proceeds to Hess of $3 billion. Our financial results in 2015 were severely impacted by lower crude oil and natural gas selling prices and...

  • Page 5
    ... risk workshops, value assurance reviews and asset business plans. In 2015, we continued to advance our social investment programs, including our PRODEGE education initiative in Equatorial Guinea and our SUCCEED 2020 program in North Dakota. OUR COMMITMENT TO SHAREHOLDERS In 2016, our company...

  • Page 6
    GLOBAL OPERATIONS North Malay Basin

  • Page 7
    Drilling Operations, North Dakota

  • Page 8
    ... sale of a 50% interest in its Bakken midstream assets to Global Infrastructure Partners that resulted in total cash proceeds to Hess of $3 billion. The agreement created a new midstream joint venture with Hess retaining operational control. In the Utica shale play in eastern Ohio, where the company...

  • Page 9
    ...being drilled. In West Africa, 2015 net production of 43,000 barrels of oil equivalent per day from Block G in Equatorial Guinea (85% working interest, operator) was held flat compared to 2014. Two new production wells were completed and brought online that offset natural field declines. Drilling at...

  • Page 10
    ... Danish North Sea, net production from the South Arne Field (62% working interest, operator) was held flat at 13,000 barrels of oil equivalent per day in 2015 compared to 2014. Four new production wells were completed and brought online that offset natural field declines. The Malaysia/Thailand Joint...

  • Page 11
    ... company participated in a significant oil discovery in Guyana, at the Stabroek Block, where the Liza-1 well encountered 295 feet of high quality oil bearing reservoir. The block, in which Hess holds a 30% working interest, is operated by Esso Exploration and Production Guyana Limited, a subsidiary...

  • Page 12
    CORPORATE AND SOCIAL RESPONSIBILITY LEAP Program, Edison Middle School, Houston, Texas

  • Page 13
    ... operate as intended. The occupational health and wellness program at Hess includes industrial hygiene, risk assessment and planning, workplace exposure control, fitness for work assessment and medical emergency management. The company's Environment, Health and Safety and Human Resources teams work...

  • Page 14
    ...assets. In 2015 we completed a review of our social investment strategy. The results will guide the company's corporate social responsibility activities for the next several years. Management of social risk has been further integrated into the company's value assurance system through the development...

  • Page 15
    ... Corporations list in 2015 as well as being included in the Dow Jones Sustainability Index North America for the sixth consecutive year. More detailed discussion of our environment, social and governance programs, progress and performance data can be found in our annual sustainability report. Hess...

  • Page 16
    ... Chief Executive Officer, The Robert Wood Johnson Foundation * Harvey Golub (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. * Retiring May 2016 Corporate Officers John B. Hess...

  • Page 17
    ANNUAL REPORT FORM 10-K

  • Page 18

  • Page 19
    ... shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ï,¨ No  The aggregate market value of voting stock held by non-affiliates of the Registrant amounted to $16,710,000,000, computed using the outstanding common shares and closing market price on June 30, 2015, the last business day...

  • Page 20
    ... 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 ...Certain Relationships...

  • Page 21
    ... business, including its terminal, retail, energy marketing and energy trading operations, as well as the permanent shutdown of refining operations at its Port Reading, NJ facility. HOVENSA L.L.C. (HOVENSA), a 50/50 joint venture between the Corporation's subsidiary, Hess Oil Virgin Islands Corp...

  • Page 22
    ...U.S. and 28% were in Norway at December 31, 2015 (2014: 82% and 18%, respectively). Natural gas liquids do not sell at prices equivalent to crude oil. See the average selling prices in the table on page 8. (b) Reflects natural gas reserves converted on the basis of relative energy content of six mcf...

  • Page 23
    ...: 2015 2014 2013 Crude oil (thousands of barrels per day) United States Bakken ...Other Onshore ...Total Onshore ...Offshore ...Total United States...Europe Norway ...Denmark ...Russia ...Africa Equatorial Guinea ...Libya ...Algeria ...Asia Azerbaijan ...Indonesia ...Joint Development Area of...

  • Page 24
    ...average selling prices in the table on page 8. E&P Operations A description of our significant E&P operations is as follows: United States Our production in the U.S. was from onshore properties, principally in the Bakken oil shale play in the Williston Basin of North Dakota, the Utica Basin of Ohio...

  • Page 25
    ... sanctioned eleven well multi-year program in the first quarter of 2016. Africa Equatorial Guinea: At the Hess operated offshore Block G (Hess 85% paying interest, national oil company of Equatorial Guinea 5% carried interest), we have production from the Okume and Ceiba Fields. In 2015, we deferred...

  • Page 26
    ... we can execute a gas sales agreement and sanction development of the project. At our adjacent WA-474-P Block (Hess 100%), which could become part of the Equus project, we plan to drill a commitment well in 2016. See Capitalized Exploratory Well Costs in Note 5, Property, Plant and Equipment in the...

  • Page 27
    ...) costs in Norway were $25.94 per barrel of oil equivalent in 2015 (2014: $33.76; 2013: $44.69). (c) Production (lifting) costs consist of amounts incurred to operate and maintain our producing oil and gas wells, related equipment and facilities, transportation costs (including Bakken Midstream...

  • Page 28
    ... net productive oil wells in Norway were 49 and 31, respectively. Exploratory and Development Wells Net exploratory and net development wells completed during the years ended December 31 were: Net Exploratory Wells 2015 2014 2013 Net Development Wells 2015 2014 2013 Productive wells United States...

  • Page 29
    ... Corporation and third party crude oil and natural gas producers as a publicly traded master limited partnership upon the future completion of an initial public offering of limited partnership units. Hess Midstream Partners LP filed its most recent registration statement on Form S-1 in December 2015...

  • Page 30
    ... gasoline stations, most of which had convenience stores, and two joint venture investments in natural gas fueled electric generating projects in Newark and Bayonne, New Jersey. ï,· 2013: We sold our energy marketing and terminal network businesses; which marketed refined petroleum products, natural...

  • Page 31
    ...to external well control and oil spill response support, we have contracts with wildlife, environmental, meteorology, incident management, medical and security resources. If we were to engage these organizations to obtain additional critical response support services, we would fund such services and...

  • Page 32
    ...Compensation and Management Development Committee, and Corporate Governance and Nominating Committee of the Board of Directors are available on our website and are also available free of charge upon request to Investor Relations at our principal executive office. We also file with the New York Stock...

  • Page 33
    ... in 2016 revenues and operating results from 2015 levels. We cannot predict how long these lower price levels will continue to prevail. The sentiment of commodities trading markets as well as other supply and demand factors may also influence the selling prices of crude oil, natural gas liquids...

  • Page 34
    ...all. The exploration, development and production of crude oil and natural gas involves substantial costs, which may not be fully funded from operations. For example, in 2015, we had a net loss attributable to Hess Corporation of $3,056 million, and if commodity prices remain low through 2016, we are...

  • Page 35
    ... acquiring rights to explore for crude oil and natural gas. Many competitors, including national oil companies, are larger and have substantially greater resources. We are also in competition with producers of other forms of energy. Increased competition for worldwide oil and gas assets could...

  • Page 36
    ...company and with outside business partners. Cyber-attacks could compromise our computer and telecommunications systems and result in disruptions to our business operations or the loss of our data and proprietary information. In addition, computers control oil and gas production, processing equipment...

  • Page 37
    ... subsidiary, Hess Oil Virgin Islands Corp. ("HOVIC"), and a subsidiary of Petroleos de Venezuela S.A. (PDVSA), and other companies that operated industrial facilities on the south shore of St. Croix asserting that the defendants are liable under the Comprehensive Environmental Response, Compensation...

  • Page 38
    proceedings, and of any related proceedings by private parties, on our business or accounts cannot be predicted at this time due to the large number of other potentially responsible parties and the speculative nature of clean-up cost estimates, but is not expected to be material. We are from time to...

  • Page 39
    PART II Item 5. Market for the Registrant's Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Market Information Our common stock is traded principally on the New York Stock Exchange (ticker symbol: HES). High and low sales prices were as follows: 2015 Quarter...

  • Page 40
    ...: Maximum Approximate Dollar Value of Shares that May Total Number of Shares Purchased as Yet be Purchased Under the Plans Part of Publicly or Programs (c) Announced Plans or (In millions) Programs 2015 Total Number of Shares Purchased (a) (b) Average Price Paid per Share (a) January ...February...

  • Page 41
    ... Compensation Plans Following is information related to our equity compensation plans at December 31, 2015. Number of Securities Remaining Available for Future Issuance Under Equity Number of Securities Weighted Average Compensation Plans to be Issued Upon Exercise Price of (Excluding Securities...

  • Page 42
    ... of Financial Condition and Results of Operations included elsewhere in this Annual Report: 2015 2014 2013 2012 2011 (In millions, except per share amounts) Sales and other operating revenues Crude oil and natural gas liquids...Natural gas ...Other operating revenues ...Total ...Income (loss) from...

  • Page 43
    ... Condition and Results of Operations Overview Hess Corporation is a global Exploration and Production (E&P) company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas with production operations located primarily...

  • Page 44
    ... for 2015: Producing E&P assets: ï,· In North Dakota, net production from the Bakken oil shale play averaged 112,000 boepd (2014: 83,000 boepd), with the increase from prior-year primarily due to ongoing field development. During 2015, we operated an average of 8.5 rigs, drilled 182 wells, completed...

  • Page 45
    ... Block (Hess 30%), the operator, Esso Exploration and Production Guyana Limited, announced a significant oil discovery at the Liza-1 well in the second quarter of 2015. The operator plans to drill two appraisal wells, including one sidetrack with a production test, and two exploration wells in 2016...

  • Page 46
    ...106 million in 2014 and 2013, respectively, related to our discontinued operations, and includes corporate capital expenditures of $53 million and $58 million in 2014 and 2013, respectively. 2015 2014 2013 Bakken Midstream Capital Expenditures Bakken Midstream capital expenditures ...$ 296 $ 301...

  • Page 47
    ...-tax income (loss) by major operating activity is summarized below: 2015 2014 2013 (In millions, except per share amounts) Net income (loss) attributable to Hess Corporation: Exploration and Production ...Bakken Midstream ...Corporate, Interest and Other ...Income (loss) from continuing operations...

  • Page 48
    ... of Results Exploration and Production Following is a summarized income statement of our E&P operations: 2015 2014 (In millions) 2013 Revenues and Non-operating Income Sales and other operating revenues ...$ Gains on asset sales, net ...Other, net ...Total revenues and non-operating income ...Costs...

  • Page 49
    ...and natural gas declined by 66% and 31%, respectively, in 2015 compared to the prior year. In total, lower realized selling prices reduced 2015 financial results by approximately $2.5 billion after income taxes compared with 2014. Our average selling prices were as follows: 2015 2014 2013 Crude oil...

  • Page 50
    ...Llano, Conger and Shenzi Fields. 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 drilling in the Utica shale and a new production well combined with lower...

  • Page 51
    ... Sold: Cost of products sold is mainly comprised of costs relating to the purchases of crude oil, natural gas liquids and natural gas from our partners in Hess operated wells or other third-parties, as well as rail transportation fees from our Bakken Midstream operating segment starting in 2014...

  • Page 52
    ... were not in place prior to 2014. In 2013, Bakken Midstream earned revenues at the Tioga gas plant by purchasing unprocessed natural gas from our E&P business and third-parties, processing those hydrocarbons and selling them back to our E&P business or third-party customers based on a percentage of...

  • Page 53
    ... Block in Kurdistan and our interest in a natural gas exploration project, offshore Sabah, Malaysia. Exit costs and other: We recorded pre-tax severance and other exit costs of $28 million ($11 million after income taxes) resulting from our transformation to a more focused pure play E&P company...

  • Page 54
    ... of use of certain leased office space and other exit costs, resulting from our planned divestitures and transformation into a more focused pure play E&P company. Income taxes: In December 2013, the country of Denmark enacted a new hydrocarbon income tax law that resulted in a combination of changes...

  • Page 55
    ... income taxes) for exit related costs, including costs for cessation of leased office space. Discontinued Operations Discontinued operations attributable to Hess Corporation were a net loss of $48 million in 2015 compared to net income of $625 million in 2014 and $1,192 million in 2013. Discontinued...

  • Page 56
    ... value of our original 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. In December 2013, we sold our U.S. East Coast terminal network, St. Lucia terminal and related businesses...

  • Page 57
    ... assets related to continuing operations amounted to $50 million in 2015 (2014: $2,978 million; 2013: $4,458 million). In 2014, we completed asset sales of our dry gas acreage in the Utica shale play, our assets in Thailand, the Pangkah Field, offshore Indonesia, and our interests in two power plant...

  • Page 58
    ... million). We received net proceeds from the exercise of stock options, including related income tax benefits of $12 million in 2015 (2014: $182 million; 2013: $128 million). Future Capital Requirements and Resources At December 31, 2015, we had $2.7 billion in cash and cash equivalents, including...

  • Page 59
    ... to the Consolidated Financial Statements. Foreign Operations We conduct exploration and production activities outside the U.S., principally in Europe (Norway and Denmark), Africa (Equatorial Guinea, Libya, and Ghana) and Asia and Other (Joint Development Area of Malaysia/Thailand, Malaysia, 40

  • Page 60
    ... and proved oil and gas leasehold acreage, including lease bonuses, brokers' fees and other related costs are capitalized. Annual lease rentals, exploration expenses and exploratory dry hole costs are expensed as incurred. Costs of drilling and equipping productive wells, including development dry...

  • Page 61
    ...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 62
    ...required if internal business forecasts adopt lower selling price assumptions or development plans. We do 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 Obligations...

  • Page 63
    ... to settlement result in adjustments to both the liability and related asset values. Retirement Plans: We have funded non-contributory defined benefit pension plans, an unfunded supplemental pension plan and an unfunded postretirement medical plan. We recognize the net change in the funded status of...

  • Page 64
    ... exposed to commodity price risks primarily related to crude oil, natural gas, refined petroleum products and electricity, as well as foreign currency values, from our 50% voting interest in a consolidated energy trading joint venture, HETCO, which was sold in the first quarter of 2015. Controls: We...

  • Page 65
    ...increase the fair value of debt by approximately $410 million or $480 million, respectively. Trading Activities In February 2015, we sold our interest in our energy trading joint venture, HETCO, which was subsequently renamed Hartree Partners, LP (Hartree). Pursuant to the terms of the sale, Hartree...

  • Page 66
    ... 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, 2015, and 2014...

  • Page 67
    ...public accounting firm, Ernst & Young LLP, has audited the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2015, as stated in their report, which is included herein. By John P. Rielly Senior Vice President and Chief Financial Officer February 25, 2016...

  • Page 68
    ... related statements of consolidated income, comprehensive income, cash flows and equity for each of the three years in the period ended December 31, 2015 of Hess Corporation and consolidated subsidiaries, and our report dated February 25, 2016 expressed an unqualified opinion thereon. New York, New...

  • Page 69
    ... Public Accounting Firm The Board of Directors and Stockholders Hess Corporation We have audited the accompanying consolidated balance sheets of Hess Corporation and consolidated subsidiaries (the "Corporation") as of December 31, 2015 and 2014, and the related statements of consolidated income...

  • Page 70
    ... income taxes ...Asset retirement obligations...Other liabilities and deferred credits ...Total liabilities ...EQUITY Hess Corporation stockholders' equity Common stock, par value $1.00 Authorized - 600,000,000 shares Issued - 286,045,586 shares at December 31, 2015 (2014: 285,834,964) ...Capital...

  • Page 71
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED INCOME Years Ended December 31, 2015 2014 2013 (In millions, except per share amounts) Revenues and Non-Operating Income Sales and other operating revenues ...$ Gains on asset sales, net ...Other, net ...Total revenues and ...

  • Page 72
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME Years Ended December 31, 2014 2013 (In millions) 2015 Net Income (Loss) $ Other Comprehensive Income (Loss): Derivatives designated as cash flow hedges: Effect of hedge (gains) losses reclassified to ...

  • Page 73
    ... by (used in) operating activities (Gains) losses on asset sales, net ...Depreciation, depletion and amortization ...Impairment...Loss from equity affiliates ...Exploratory dry hole costs ...Exploration lease impairment ...Stock compensation expense ...Provision (benefit) for deferred income taxes...

  • Page 74
    ...Total Equity (In millions) Balance at January 1, 2013...Net income (loss) ...Other comprehensive income (loss) ...Activity related to restricted common stock awards, net ...Employee stock options, including income tax benefits ...Performance share units ...Common stock acquired and retired ...Cash...

  • Page 75
    ... Corporation is a global Exploration and Production (E&P) company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas with production operations located primarily in the United States (U.S.), Denmark, Equatorial Guinea...

  • Page 76
    ... and proved oil and gas leasehold acreage, including lease bonuses, brokers' fees and other related costs are capitalized. Annual lease rentals, exploration expenses and exploratory dry hole costs are expensed as incurred. Costs of drilling and equipping productive wells, including development dry...

  • Page 77
    ..., and capitalize the associated asset retirement costs as part of the carrying amount of the long-lived assets. In subsequent periods, the liability is accreted, and the asset is depreciated over the useful life of the related asset. Fair value is determined by applying a credit adjusted risk-free...

  • Page 78
    ...restricted stock based on the market value of the underlying shares at the date of grant. Foreign Currency Translation: The U.S. Dollar is the functional currency (primary currency in which business is conducted) for most foreign operations. Adjustments resulting from remeasuring monetary assets and...

  • Page 79
    ... of natural gas and the fractionation of natural gas liquids, terminaling and loading crude oil and natural gas liquids, transportation of crude oil by rail car and the storage and terminaling of propane, primarily located in the Bakken shale play of North Dakota. The Bakken Midstream operating...

  • Page 80
    ...($72 million after income taxes) related to the termination of lease contracts and the purchase of 180 retail gasoline stations in preparation for the sale of the retail operations. In January, our retail business acquired our partners' 56% interest in WilcoHess, a retail gasoline joint venture, for...

  • Page 81
    ... Property, Plant and Equipment Property, plant and equipment at December 31 were as follows: 2015 (In millions) 2014 Exploration and Production Unproved properties ...Proved properties ...Wells, equipment and related facilities ...Bakken Midstream ...Corporate, Interest and Other ...Total - at cost...

  • Page 82
    ... we can execute a gas sales agreement and sanction development of the project. Approximately 25% of the capitalized well costs in excess of one year relates to offshore Ghana. Appraisal plans for the seven discoveries on the block were submitted to the Ghanaian government in May 2013 for approval...

  • Page 83
    ... of related primarily to abandonment activities conducted at the Valhall field offshore Norway and at formerly operated fields in the U.K. North Sea. The revisions in 2015 and 2014 primarily reflect changes in the expected scope of operations and updates to service and equipment costs. 8. Debt...

  • Page 84
    ...the sale of our interest in an exploration asset in the United Kingdom North Sea for $53 million, which resulted in a pre-tax gain of $33 million ($33 million after income taxes). 2013: In January, we completed the sale of our interests in the Beryl fields and the Scottish Area Gas Evacuation System...

  • Page 85
    ... accounting standards. As a result of declining commodity prices, in 2015 we also recognized an impairment charge of $133 million pre-tax ($83 million after income taxes) relating to our conventional legacy assets in North Dakota based projected discounted cash flows, using similar Level 3 inputs to...

  • Page 86
    ... not expected to vest as a result of our transformation to a pure play E&P company. Based on share-based compensation awards outstanding at December 31, 2015, unearned compensation expense, before income taxes, will be recognized in future years as follows (in millions): 2016-$73, 2017-$42 and 2018...

  • Page 87
    ... fair value of plan assets, and the funded status of our pension and postretirement medical plans: Funded Pension Plans 2015 2014 Unfunded Pension Plan 2015 2014 (In millions) Postretirement Medical Plan 2015 2014 Change in benefit obligation Balance at January 1 ...$ 2,450 $ 1,957 $ Service cost...

  • Page 88
    HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The net periodic benefit cost for funded and unfunded pension plans, and the postretirement medical plan, is as follows: 2015 Pension Plans 2014 Postretirement Medical Plan 2013 2015 2014 2013 (In ...

  • Page 89
    ...) ...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 funds ...Real estate funds ...Diversified commodities...

  • Page 90
    ... per fund share and are classified as Level 2 or 3. Private equity and real estate limited partnership values reflect information reported by the fund managers, which include inputs such as cost, operating results, discounted future cash flows, market based comparable data and independent appraisals...

  • Page 91
    ... hydrocarbon income tax law change to the Chapter 3A regime in December 2013 and $8 million for the effect of a change in Norway's hydrocarbon and base corporate income tax rates in December 2013. Income (loss) from continuing operations before income taxes consisted of the following: 2015 2014 (In...

  • Page 92
    ...: 2015 2014 2013 U.S. statutory rate ...Effect of foreign operations (a)(b) ...State income taxes, net of Federal income tax ...Change in enacted tax laws ...Gains on asset sales, net ...Goodwill impairment ...Valuation allowance against previously benefitted deferred tax assets (a) ...Benefit of...

  • Page 93
    ... the calculation of basic and diluted earnings per share: 2015 2014 (In millions) 2013 Income (loss) from continuing operations, net of income taxes ...$ Less: Net income (loss) attributable to noncontrolling interests ...Net income (loss) from continuing operations attributable to Hess Corporation...

  • Page 94
    ... Cash Flows: 2015 2014 (In millions) 2013 Cash Flows From Operating Activities Interest paid ...$ Income taxes paid, net of refunds Cash Flows From Investing Activities Capital expenditures incurred - E&P ...Increase (decrease) in related liabilities ...Additions to property, plant and equipment...

  • Page 95
    ... used to drill development wells and successful exploration wells are capitalized. At December 31, 2015, 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): 2016...

  • Page 96
    ...of claims related to environmental matters, which were released upon the establishment of the environmental response trust in connection with the Liquidation Plan. In February 2015, the Pension Benefit Guaranty Corporation (PBGC) issued a notice of determination to terminate the HOVENSA pension plan...

  • Page 97
    ... derives from our former ownership and operation of a fuel oil terminal adjacent to the Canal. We indicated to EPA that we would comply with the Administrative Order and are currently contributing funding for the Remedial Design based on an interim allocation of costs among the parties. At the same...

  • Page 98
    ...segment explores for, develops, produces, purchases 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 of Malaysia/Thailand (JDA), Malaysia, and Norway. The Bakken Midstream...

  • Page 99
    ... ... Provision (benefit) for income taxes ... Identifiable assets ... Property, plant and equipment (net) (a) ... Capital expenditures ... 2013 Operating revenues ... $ Net income (loss) from continuing operations attributable to Hess Corporation ...Depreciation, depletion...

  • Page 100
    ... designated as hedging instruments: Commodity: In 2015, crude oil price hedging contracts increased E&P Sales and other operating revenues by $126 million, including losses of $48 million associated with changes in the time value of crude oil collars. In 2014 and 2013, crude oil price hedging...

  • Page 101
    ... pension plan upon the effective date of the Liquidation Plan. In 2015, we recorded a charge of $30 million primarily representing the estimated net difference between the HOVENSA pension plan obligation and fair value of the plan assets. Hess Common and Preferred Stock Issuance: In February 2016...

  • Page 102
    ... asset retirement obligations in 2015 (2014: $326 million; 2013: $615 million). (c) Costs incurred in oil and gas producing activities in Norway, were as follows for the years ended December 31: 2015 2014 2013 (In millions) Property Acquisitions Exploration ...- - Production and development capital...

  • Page 103
    ... before income taxes ...Provision (benefit) for income taxes ...Results of operations ...$ 2014 Sales and other operating revenues ...$ Costs and expenses Operating costs and expenses ...Production and severance taxes ...Bakken Midstream tariffs ...Exploration expenses, including dry holes and lease...

  • Page 104
    ... for oil and gas producing activities in Norway were as follows for the years ended December 31. 2015 2014 2013 (In millions) Sales and other operating revenues ...$ $ 1,102 $ 860 635 Cost and expenses Operating costs and expenses ...376 376 314 Production and severance taxes ...3 6 2 Exploration...

  • Page 105
    ... the impact of changes in selling prices on the reserve estimates for production sharing contracts with cost recovery provisions. Revisions included an increase to crude oil, condensate and natural gas liquids reserves of 5 million barrels (2014: 1 million barrels increase; 2013: 0.1 million barrels...

  • Page 106
    ...gas) of which 73 million boe resulted from new wells drilled in the Bakken shale play in North Dakota. Total net negative revisions of proved reserves in 2015, includes a reduction of 234 million boe driven by lower commodity prices, a reduction of 48 million boe from changes in our planned drilling...

  • Page 107
    ... Thailand. Extensions, discoveries and other additions ('Additions') 2015: In the United States, we recognized additions of 29 million boe in the Bakken shale play and 13 million boe related to the Tubular Bells and Penn State fields in the Gulf of Mexico based on drilling plans for new wells. 2014...

  • Page 108
    ... in excess of five years relate to the Valhall Field in Norway. 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 Corporation has the legal right to produce or has...

  • Page 109
    ... States Europe (a) (In millions) Africa Asia 2015 Future revenues ...$ Less: Future production costs ...Future development costs ...Future income tax expenses...Future net cash flows...Less: Discount at 10% annual rate ...Standardized measure of discounted future net cash flows . $ 2014 Future...

  • Page 110
    ... 2015 2014 (In millions) 2013 Standardized measure of discounted future net cash flows at January 1 ...Changes during the year Sales and transfers of oil and gas produced during the year, net of production costs ...Development costs incurred during year...Net changes in prices and production costs...

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    ... estimated liability resulting from HOVENSA LLC's bankruptcy settlement. (f) Includes after-tax charge of $52 million to reduce carrying value of its investments in Bayonne Energy Center asset sales to fair value and $48 million after-tax charge relating to severance and other exits costs partially...

  • Page 112
    ... 2016 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
    ... by the Registrant since 1977. He has over 37 years of experience in the oil and gas industry. Chief Operating Officer, Executive Vice President and President, Exploration and Production Mr. Hill has been Chief Operating Officer since 2014. Mr. Hill has been President of Registrant's worldwide...

  • Page 114
    ... of Equity Securities by Management" from the Registrant's definitive proxy statement for the 2016 annual meeting of stockholders. See Equity Compensation Plans in Item 5. Market for the Registrant's Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities for information...

  • Page 115
    ... 15. Exhibits, Financial Statement Schedules (a) 1. and 2. Financial statements and financial statement schedules The financial statements filed as part of this Annual Report on Form 10-K are listed in the accompanying index to financial statements and schedules in Item 8. Financial Statements and...

  • Page 116
    ..., on the 25th day of February 2016. 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 117
    ... II HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2015, 2014 and 2013 Additions Charged to Charged to Other Costs and Accounts Expenses (In millions) Description 2015 Losses on receivables...Deferred income tax valuation ...2014...

  • Page 118
    ...2014. Certificate of Designations of the 8.00% Series A Mandatory Convertible Preferred Stock of Hess Corporation, including Form of Certificate for the 8.00% Series A Mandatory Convertible Preferred Stock incorporated by reference to Exhibit 3(1) of Form 8-K of Registrant filed on February 10, 2016...

  • Page 119
    ... to Item 5.02 of Form 8-K of Registrant filed on March 9, 2015. 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 120
    ...) were entered into between Registrant and other executive officers (including the named executive officers, other than Michael Turner and John B.Hess). Form of Change in Control Termination Benefits Agreement, dated as of August 3, 2015, between the Registrant and Michael R. Turner, incorporated...

  • Page 121
    ... Hess Norge AS Hess North Dakota Pipelines L.L.C Hess Norway LP Hess Ohio Developments, L.L.C Hess Ohio Sub-Holdings L.L.C Hess Oil and Gas Holdings Inc. Hess Oil Company Of Thailand (JDA) Limited Hess Shenzi L.L.C Hess Stampede L.L.C Hess Tioga Gas Plant L.L.C Hess Trading Corporation Hess Tubular...

  • Page 122
    ... to the 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, 2015. New York, New York February 25...

  • Page 123
    ... to certain properties owned by Hess Corporation, as of December 31, 2015, (our "Report"), under the heading "Oil and Gas Reserves-Reserves Audit," and to the inclusion of our Report as an exhibit in Hess Corporation's Annual Report on Form 10-K for the year ended December 31, 2015. We also...

  • Page 124
    ... 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 125
    ...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 126
    ... In connection with the Annual Report of Hess Corporation (the Corporation) on Form 10-K for the period ended December 31, 2015 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 127
    ... with the Annual Report of Hess Corporation (the Corporation) on Form 10-K for the period ended December 31, 2015 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 128
    ... 2015 IHS Global Inc. In the preparation of this report we have relied, without independent verification, upon such information furnished by Hess with respect to property interests, production from such properties, costs of operation and development, prices for production, agreements relating...

  • Page 129
    ... 31, 2015 Oil and Natural Gas Condensate Liquids Gas Oil Equivalent (MMbbl) (MMbbl) (Bcf) (MMboe) United States Norway Denmark Africa Asia Total 330 170 32 34 5 571 70 28 0 0 0 99 460 191 43 20 667 1,381 477 229 39 37 116 899 Note: Gas is converted to oil equivalent using an energy equivalent...

  • Page 130
    ...operating conditions using prices and costs consistent with the effective date of this report, including consideration of changes in existing prices provided only by contractual arrangements but not including escalations based upon future conditions. Gas quantities herein are expressed as marketable...

  • Page 131
    ...based upon future conditions. Developed oil and gas reserves - Developed oil and gas reserves are reserves of any category that can be expected to be recovered: (i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor...

  • Page 132
    ... 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...

  • Page 133
    ... I am a Senior Vice President of DeGolyer and MacNaughton, which company did prepare the letter report dated February 3, 2016, on the proved reserves audit of certain properties attributable to Hess Corporation, and that I, as Senior Vice President, was responsible for the preparation of this letter...

  • Page 134
    ...the Corporation's 2015 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and its annual proxy statement filed with the Securities and Exchange Commission (SEC), as well as the Corporation's Code of Business Conduct and Ethics, its Corporate Governance Guidelines...

  • Page 135
    Annual Meeting The Annual Meeting of Shareholders will be held on Wednesday, May 4, 2016. Dividend Reinvestment Plan Information concerning the Dividend Reinvestment Plan available to holders of Hess Corporation common stock may be obtained by writing to Computershare, Dividend Reinvestment ...

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