HOUSTON - Hess Corp. said Thursday it has agreed to sell its 15.67% interest in an offshore energy field off the Scottish Coast to Royal Dutch Shell PLC, part of the U.S. oil company's efforts to fund its capital program.
Houston-based Hess is selling its interest in the Schiehallion field, its associated floating, production, storage and offloading vesel, or FPSO, and the West of Shetland pipeline system. The oilfield is operated by BP PLC.
Financial terms of the deal, which is expected to close later this year, weren't disclosed. UBS, however, estimated the stake is worth about $515 million. Hess's production during 2013-2015 won't be impacted, as Schiehallion is scheduled to be off line for replacing the FPSO, UBS said. As result of the of the sale, Hess won't have to spend in the FPSO replacement, saving $640 million in capital expenditure over the next five years, the firm added.
Hess has been increasing spending in recent years in order to fund an ambitious exploration program and the development of shale-gas properties it acquired across the U.S. Hess also has been aiming to reduce its exposure to risky exploration programs following a string of dry holes.
The company's capital expenditure guidance for this year is $6.8 billion, but management said in late April its estimate is likely to raise and that its budget will be funded with cash flow from operations and asset sales.
Hess in April reported that its first-quarter earnings fell 41% without the benefit of a large year-earlier asset sale. However, the company reduced its production outlook for North Dakota's Bakken Shale this year and hinted it could increase its capital expenditure.
Hess's shares were recently 4.15% lower at $45.45. The stock is down nearly 40% in the past year.
Copyright (c) 2012 Dow Jones & Company, Inc.
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