Hess Market Cap Plunges $1.5 Billion as Major Project Halted
Hess Market Cap Plunges $1.5 Billion as Major Project Halted
(Bloomberg) -- Hess Corp. tumbled the most in almost three years, wiping out $1.5 billion in market valuation, after work at the oil explorer’s most promising international investment was halted by a Venezuelan blockade.
The intervention threatened to derail development of a 5 billion-barrel discovery off Guyana’s coastline that is so important to Hess’s future growth plans that it receives top billing in the New York-based driller’s investor presentations. Although significant for partners Exxon Mobil Corp. and CNOOC Ltd., Hess is particularly dependent on the Guyanese project to generate production growth and cash flow into the next decade.
Venezuela, which has long disputed neighboring Guyana’s offshore claims, “aggressively” interrupted the Exxon-led effort to map the sea floor on Dec. 22, U.S. State Department Deputy Spokesman Robert Palladino said on Sunday. By early Monday, the Venezuelan vessels had withdrawn, according to Bard Stenberg, a spokesman for vessel owner Petroleum Geo-Services ASA.
Meanwhile, the crew of the Ramform Tethys seismic boat remained aboard, Stenberg said in an interview. Seismic work, which involves bouncing sound waves off subsea rock formations, had yet to resume, Exxon spokeswoman Suann Guthrie said in an email.
Hess tumbled 12 percent to $36.43 in New York trading for its biggest daily drop since February 2016. The company’s media office didn’t respond to a telephone message left on Monday.
Expanding Reserves
Exxon shares fell 3.8 percent to $65.51, setting the oil titan on course for its worst annual performance since 1981. CNOOC’s American depositary receipts fell 2.1 percent. An after-hours email to CNOOC’s Hong Kong-based spokeswoman also wasn’t immediately returned.
Exxon has upped its estimate for the field’s size three times this year, most recently earlier this month when the company pegged the bonanza at 5 billion barrels. At current international crude prices, a treasure trove that large would be valued at about $265 billion, according to Bloomberg calculations.
Resolving the dispute may be complicated by the no-confidence vote in Guyana’s National Assembly that toppled the coalition government late on Dec. 21. At the same time, U.S. President Donald Trump’s administration is expected to decide within weeks whether to designate Venezuela a sponsor of terrorism, a move that would further isolate Nicolas Maduro’s regime.
“We underscore that Guyana has the sovereign right to explore and exploit resources in its Exclusive Economic Zone,” the U.S. state department’s Palladino wrote. “We call on Venezuela to respect international law and the rights of its neighbors.”
To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Carlos Caminada
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