Hess's Net Income Drops in 2nd Qtr from $566 Million to $557 Million



Hess Corporation (NYSE: HES) reported net income of $557 million for the second quarter of 2007 compared with net income of $566 million for the second quarter of 2006.

Exploration and Production earnings were $505 million in the second quarter of 2007 compared with $501 million in the second quarter of 2006. The Corporation's oil and gas production, on a barrel-of-oil equivalent basis, was 378,000 barrels per day in the second quarter of 2007, a 7% increase from the second quarter of 2006. In the second quarter of 2007, the Corporation's average worldwide crude oil selling price, including the effect of hedging, was $60.05 per barrel, an increase of $1.05 per barrel from the second quarter of 2006. The Corporation's average worldwide natural gas selling price was $4.88 per Mcf in the second quarter of 2007, compared to $5.06 per Mcf in the second quarter of 2006.

Marketing and Refining earnings were $122 million in the second quarter of both 2007 and 2006. Refining earnings were $87 million in the second quarter of 2007 compared with $107 million in the second quarter of 2006. During the second quarter of 2007, the coker unit at HOVENSA was shutdown for approximately 30 days for a scheduled turnaround. The expensing of the turnaround costs reduced refining earnings by approximately $24 million for the quarter. Marketing results were breakeven in the second quarter of 2007, a decrease of $16 million compared with the second quarter of 2006. Earnings from trading operations were $35 million in the second quarter of 2007 compared with a loss of $1 million in the second quarter of 2006.

The following items, on an after-tax basis, are included in net income (in millions):

                                Three months ended   Six months ended
                                     June 30             June 30
                                ------------------  ------------------
                                  2007      2006      2007      2006
                                --------- --------  --------- --------
Exploration and Production
--------------------------------
   Gains from asset sales       $      15 $    50   $      15 $   236
   Accrued office closing costs         -     (18)          -     (18)
                                --------- --------  --------- --------

                                $      15 $    32   $      15 $   218
                                ========= ========  ========= ========

Second quarter 2007 results included a gain related to the sale of the Corporation's interests in the Scott and Telford fields located in the United Kingdom.

Net cash provided by operating activities was $1,199 million in the second quarter of 2007 compared with $686 million in the second quarter of 2006. Capital and exploratory expenditures for the second quarter of 2007 amounted to $993 million, of which $959 million related to Exploration and Production operations. Capital and exploratory expenditures for the second quarter of 2006 amounted to $808 million, of which $766 million related to Exploration and Production operations.

At June 30, 2007, cash and cash equivalents totaled $482 million compared with $383 million at December 31, 2006. Total debt was $3,991 million at June 30, 2007 and $3,772 million at December 31, 2006. The Corporation's debt to capitalization ratio at June 30, 2007 was 30.5% compared with 31.6% at the end of 2006.

The after-tax results by major operating activity were as follows:


                            Three months ended     Six months ended
                            June 30 (unaudited)   June 30 (unaudited)
                           --------------------- ---------------------
                              2007       2006       2007       2006
                           ---------- ---------- ---------- ----------
                             (In millions, except per share amounts)

Exploration and Production $     505  $     501  $     845  $   1,207
Marketing and Refining           122        122        223        175
Corporate                        (32)       (29)       (63)       (52)
Interest expense                 (38)       (28)       (78)       (65)
                           ---------- ---------- ---------- ----------

Net income                 $     557  $     566  $     927  $   1,265
                           ========== ========== ========== ==========

Net income per share
 (diluted)                 $    1.75  $    1.79  $    2.92  $    4.01
                           ========== ========== ========== ==========

Weighted average number of
 shares (diluted)              318.6      315.5      317.9      315.2
                           ========== ========== ========== ==========

Note: See the following page for a table of items affecting the
 comparability of earnings between periods.

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