Hess Earnings: Tax Barrels and POP Contracts Magnifying Modest Outperformance

We intend to incorporate Hess' first-quarter results into our model shortly, but after this first look our fair value is unchanged. The firm is ostensibly off to a terrific start to 2023, with both production and cash costs significantly beating quarterly guidance and putting the firm in a strong position to exceed its annual goals, as well. Firmwide production was 374 mboe/d, handily beating the target range of 345-355 mboe/d, and giving management the confidence to raise its annual goal from 355-365 mboe/d to 365-375 mboe/d (up 3% at the midpoint). Likewise, E&P cash costs were $12.96 per boe, below the low end of guidance for both the quarter and the full year. But digging into the results reveals the execution, while solid, was not as spectacular as the headline numbers suggest.