Hess Corporation
HES
stock appears to be a solid bet now, based on strong fundamentals and compelling business prospects. The company’s shares have popped 35% over the past three months and there is more room for growth.
Headquartered in New York, Hess is primarily involved in the exploration and production of oil as well as natural gas around the globe. Moreover, it has profitable gathering, compressing and processing operations of natural gas as well as fractionating natural gas liquids (NGLs). Also, it provides water handling services, mainly in the Bakken and Three Forks Shale plays in North Dakota’s Williston Basin area.
The company currently sports a Zacks Rank #1 (Strong Buy), which implies that it is offering significant investment opportunities to investors. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Let’s see what makes Hess’ stock an attractive investment option at the moment.
Northbound Estimates
Earnings estimate revisions have the greatest impact on stock prices. Over the past month, the Zacks Consensus Estimate for Hess’ earnings for the current year has jumped from $1.47 per share to $1.73. During this time period, the stock has witnessed two upward revisions and no downward movement.
Moreover, the Zacks Consensus Estimate for revenues for the current year is pegged at $6.2 billion, signaling a 29.6% year-over-year rise.
Positive Earnings Surprise History
Hess outpaced the Zacks Consensus Estimate in three of the trailing four quarters and met the same once. It delivered a four-quarter average earnings surprise of 27.7%.
Hess Corporation Price and EPS Surprise
Hess Corporation price-eps-surprise
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Hess Corporation Quote
Major Positives
The company has made multiple world-class oil discoveries at the Stabroek Block, located off the coast of Guyana. With the latest oil discovery at the Longtail-3 well, the company has added to its previously estimated 9 billion barrels of oil equivalent of recoverable resource in the block. The discoveries made so far at the site, wherein
Exxon Mobil Corporation
XOM
is the operator, have the potential to add at least six floating, production, storage and offloading vessels that will likely be capable of yielding 800,000 barrels of oil per day (bpd) by 2025. Furthermore, production is expected to reach 1 million bpd by 2027. Hess anticipates multibillion barrels of exploration potential to be still left in Guyana.
It expects 2021 exploration and production capital and exploration expenditure to be $1.9 billion, the majority of which will likely be directed toward Guyana and Bakken. Markedly, the company is focusing on preserving cash and implementing a cost-reduction program, through which it will likely boost profitability and cash margins. From 2017 through 2021, Hess decreased cash unit production costs by 20%. This trend will provide a northbound thrust to the company’s bottom line.
Crude oil prices have significantly recovered from last year’s historic lows. West Texas Intermediate Crude price is currently trading above the $70 per barrel mark, which is positioning companies with exploration and production businesses for massive year-over-year growth in bottom line. The company expects 2021 net production (excluding Libya) in the band of 290-295 thousand barrels of oil equivalent per day, which is expected to bring massive profits.
Moreover, it has hedged 150 thousand barrels of oil per day for 2021 to safeguard itself from any unforeseen oil price decline. This will reduce the company’s upstream business risk level.
Hess’ midstream assets, which enable it to earn stable fee-based revenues, are a huge positive. From the midstream business, the company generated adjusted net earnings of $75 million in the first quarter, significantly up from $61 million a year ago, due to higher throughput volumes. Also, with the roll out of vaccines and easing of COVID-19 restrictions, it sees a quick and sustained demand recovery.
Other Stocks to Consider
Other top-ranked players in the energy space include
Earthstone Energy, Inc.
ESTE
and
PHX Minerals Inc.
PHX
, each having a Zacks Rank #2 (Buy).
Earthstone’s sales for 2021 are expected to jump 87.7% year over year.
PHX Minerals’ bottom line for 2021 is expected to surge 180% year over year.
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