Hess Corp. said on Jan. 31 it would spend $2.1 billion this year mostly in North Dakota and Guyana, keeping its budget unchanged from 2017 amid a battle over corporate strategy with activist investor Elliott Management Corp.
Executives across the U.S. oil industry have been feeling pressure to focus on profitability and shareholder returns, a departure from their long-established practice of boosting production regardless of the cost.
Hess said it expects it can be “cash generative” after 2020 with oil prices of $50 per barrel. The company has not made a profit since 2014.
“We are extremely well positioned to fund and execute on our strategy,” CEO John Hess said in a statement.
The bulk of the spending is earmarked for North Dakota, where Hess is the third-largest oil producer behind Whiting Petroleum Corp. and Continental Resources Inc.
Hess also plans to fund development costs in an offshore Guyana oil project operated by Exxon Mobil Corp that is expected to start pumping oil by 2020.
Hess earlier this month cut more than 10% of its workforce just weeks after Elliott, a major U.S. hedge fund, launched an activist campaign and said it was frustrated by the company’s “continuing underperformance.”
Elliott also floated the idea of pushing to remove John Hess as CEO.
An Elliott representative was not immediately available to comment on the 2018 budget.
Parts of the budget that focus on less-profitable projects outside North Dakota and Guyana are likely to irk Elliott.
Hess plans to frack wells in Ohio that have been dormant since they were drilled; fund some operations in war-torn Libya; invest in U.S. Gulf of Mexico wells, which have been plagued by fires and other operational setbacks; and spend on Demark projects, which the company is actively trying to sell.
The $900 million Bakken spend, a 29% increase from last year, will fuel two new rigs, bringing Hess’s total in the state to six by the end of 2018. The company also expects to drill 120 wells and bring 95 of them online.
In Malaysia, Hess plans to spend roughly $175 million, or 36 percent less than last year, on a natural gas project co-owned with Petronas Carigali.
Hess reports quarterly results Feb. 5.
Shares of the New York-based company fell about 1.5% to $49.77 in early Jan. 31 trading as oil prices dipped slightly.