Hess Corp profit tops estimate as tanker storage bet pays off

Oil and gas producer Hess Corp on Wednesday posted a quarterly profit, more than double the Wall Street estimates, as its strategy to store oil during last year's downturn paid off, while a harsh winter storm also aided a recovery in fuel prices.

Most crude oil operators, including Hess, were forced to cut production in 2020 as demand for fuel was decimated by coronavirus-related travel restrictions, sending US crude prices into a negative territory last April for the first time.

In May, Hess chartered three 'very large crude carriers' (VLCC) to store its Bakken crude oil, a hedge against selling at the extremely low market price.

The company sold 4.2 million barrels of oil from two of the VLCCs at improved prices in the first three months of this year, booking a $70 million profit in the first quarter.

US crude oil prices averaged around $58 per barrel in the first three months, erasing all pandemic losses, aided by the rollout of coronavirus vaccines that has helped revitalize economic activity.

Oil and natural gas prices were also lifted by a harsh winter storm that gripped parts of the United States in February.

Hess said its net production, excluding Libya, fell to 315,000 barrels of oil equivalent per day (boepd) in the first quarter, though the average realized selling price for crude oil, excluding hedges, surged to $52.52 per barrel from $39.45 in the fourth quarter.

Hess, the first major oil and gas producer to report corporate earnings this season, posted an adjusted profit of 82 cents per share, compared with analysts' average estimate of 34 cents.

The company, however, cut its full-year forecast for production excluding Libya, to between 290,000 boepd and 295,000 boepd, from prior estimate of about 310,000 boepd.

The decline is due to lower volumes received on some contracts, asset sales and the impact of frigid weather conditions in North Dakota, the oil producer said.