In 2009, net production averaged 408,000 barrels of oil equivalent per day, up from 381,000 barrels of oil equivalent per day in 2008. This increase resulted from the start-up of the Shenzi Field in the deepwater Gulf of Mexico, higher production at the Malaysia/Thailand Joint Development Area (JDA) and strong operating performance across the portfolio.

In the United States, the Shenzi Field (Hess 28%) achieved first production in March and ended the year strongly with net production of nearly 40,000 barrels of oil equivalent per day. The Conger Field, which is also in the deepwater Gulf of Mexico, recovered from 2008 hurricane damage and with the addition of two wells ended 2009 producing 16,000 net barrels of oil equivalent per day. During the year, we continued to build our position in the North Dakota Bakken shale play. We increased our land holdings, drilled 33 wells and raised our net production to more than 11,000 barrels of oil equivalent per day at year end.

In the Malaysia/Thailand JDA, a full year of Phase 2 natural gas sales was achieved at Block A-18 (Hess 50%). Net natural gas sales from the block reached 319 million cubic feet per day in December. In Russia, continued development drilling in conjunction with strong reservoir performance enabled production to achieve peak rates of 40,000 barrels of oil equivalent per day at year end.

In December, the company announced a strategic asset trade with Shell through which Hess will assume Shell’s 28 percent interest in the Valhall Field and 25 percent interest in the satellite Hod Field in Norway. In return, Shell will assume Hess’ 9 percent interest in the Clair Field in the United Kingdom and all of Hess’ interests in Gabon.

In North America, the company continued the development of the Residual Oil Zone at the Seminole San Andres Unit (Hess 34%) in the Permian Basin in West Texas with the expansion of the Seminole gas plant and the development of the West Bravo Dome CO₂ Field. The company also completed front end engineering and design (FEED) for the Tioga gas plant expansion associated with the Bakken oil shale development in the Williston Basin in North Dakota.

At the Hess operated Pony Field (Hess 100%), in the deepwater Gulf of Mexico, we completed FEED for the topsides, hull and subsea equipment and continued discussions on a joint operating agreement with the Knotty Head partnership in the adjacent block to the south. In 2010, the company plans to drill an additional appraisal well on Green Canyon Block 469 to test the eastern extent of the Pony structure.

In Indonesia, the company commissioned the Ujung Pangkah liquefied petroleum gas processing facility (Hess 75%) during the first quarter while progressing the offshore development via a second wellhead platform and production and utility platforms.

In the Norwegian North Sea, the company approved the Valhall Flank Gas Lift project (Hess 28%) that is advancing in parallel with the ongoing Valhall Redevelopment. The redevelopment project achieved major milestones in 2009 with installation of the new jacket and ongoing fabrication of the main deck and personnel accommodations.

In 2009, Hess acquired new acreage in the United States, Indonesia, Australia and Norway which builds upon existing positions and adds significant exploration opportunities to the portfolio. Of particular note were the acquisition of more than 80,000 net acres in the Marcellus unconventional shale gas play in northeastern Pennsylvania and the awarding of the South Sesulu Block in Indonesia.

2009 was another active year for exploration and appraisal drilling and resulted in successful wells in Australia, Malaysia, Libya, the United Kingdom and Peru. In Australia, the second phase of drilling on the 100 percent owned WA-390-P Block commenced with seven wells being drilled, six of which resulted in natural gas discoveries. In total, 11 exploration wells have now been drilled on the license, nine of which have discovered gas accumulations. Exploration drilling also commenced on the nearby WA-404-P Block (Hess 50%) with a gas discovery on the Martell prospect. Exploration drilling will continue in 2010 on both Australia licenses in parallel with analysis of commercialization options.

In Libya the A1-54/01 discovery on the Arous Al-Bahar prospect in 2,800 feet of water was re-entered and successfully tested utilizing the newly built Stena Forth drillship, which is under long term contract to Hess. The rig then drilled and successfully tested the down-dip appraisal well A2-54/01.

In Brazil two wells were drilled on the BM-S-22 License (Hess 40%) in 7,000 feet of water; the Azulao well resulted in the filing of a notice of discovery and the Guarani well was expensed. A third well on the license is planned in 2010.

In addition, exploitation drilling continued in 2010 with successful activity in the United Kingdom, Russia and onshore Libya.