John B. Hess
In 2010, our company delivered improved financial results, increased reserves and production and made significant progress in strategically positioning our business for long-term profitable growth.

For the year, our company achieved earnings of $2.1 billion, or $6.47 per share, reflecting higher crude oil selling prices and increased retail and energy marketing earnings, which more than offset the impact of weaker refining results.

Exploration and Production earned $2.7 billion including net nonrecurring after-tax income of $732 million, primarily gains from asset sales. We produced 418,000 barrels of oil equivalent per day, a 2.5 percent improvement over the previous year, and replaced 176 percent of production at a finding, development and acquisition cost of about $23 per barrel of oil equivalent. At year end, our proved reserves rose to 1.54 billion barrels of oil equivalent and our reserve life increased to 9.9 years.

Marketing and Refining lost $231 million including an aftertax charge of $289 million to reduce the carrying value of our interest in the HOVENSA joint venture refinery in St. Croix in the U.S. Virgin Islands; the write-down reflects our outlook for continued weakness in refining margins. Energy Marketing generated stronger earnings primarily as a result of improved margins in our natural gas and electricity businesses. Retail Marketing convenience store sales were up more than 4 percent while average fuel volumes per station were lower by about 1 percent.

Our financial position remains strong. Our debt to capitalization ratio at year end was 24.9 percent, essentially unchanged from 2009. In August 2010 we issued $1.25 billion of 30-year notes, with proceeds used to acquire an additional 8 percent stake in the Valhall Field in Norway and for the acquisition of acreage from TRZ Energy in the Bakken shale oil play in North Dakota. In December, we issued 8.6 million shares of stock to complete the acquisition of American Oil & Gas, which was also positioned in the Bakken.

We are committed to maintaining a strong balance sheet so that we are able to fund our portfolio of attractive investment opportunities. Our company's capital and exploratory expenditures budget for 2011 is $5.6 billion. Substantially all of our spending will be targeted to Exploration and Production, with $3.1 billion for production, $1.6 billion for developments and $900 million for exploration. We plan to invest approximately $1.8 billion in the Bakken, up from about $800 million last year excluding acquisitions.

EXPLORATION AND PRODUCTION
Our company made significant progress in 2010 in increasing our reserves and production and building our position in unconventional resources. In addition to the American Oil & Gas and TRZ Energy acquisitions in the Bakken, we acquired about 90,000 net acres in the Eagle Ford in South Texas, formed a partnership with Toreador Resources to explore the Paris Basin in France and signed joint study agreements with PetroChina and Sinopec in China. During the year, we also increased our interest in the Valhall Field in Norway to 64 percent from 28 percent and doubled our working interest in the Tubular Bells Field in the Gulf of Mexico to 40 percent and became operator.

Production growth in 2010 was underpinned by the Bakken, where we exited the year at our targeted rate of 20,000 barrels of oil equivalent per day, the deepwater Gulf of Mexico and strong operating performance across the portfolio. We made great progress throughout the year advancing key developments, including the expansion of our Tioga gas plant in North Dakota, the continuing redevelopment of the Valhall Field, front-end engineering and design plans for the Pony and Tubular Bells Fields in the Gulf of Mexico, and the appraisal of Block WA-390-P offshore Australia. In exploration, we drilled three wells in the Eagle Ford shale and began drilling in the North Red Sea in Egypt.

MARKETING AND REFINING
Refining results were weaker than the previous year for both HOVENSA and our Port Reading, New Jersey facility. Both facilities completed major turnarounds of their FCC units during the year. In addition, HOVENSA was negatively impacted by a weak margin environment, higher fuel costs and unplanned downtime. It announced plans in January 2011 to reduce crude oil distillation capacity to 350,000 barrels per day from 500,000 barrels per day by shutting down older, less efficient units. This action should increase the percentage of higher margin products, improve efficiency and reliability and reduce operating costs.

Energy Marketing, which provides natural gas, electricity and fuel oil to more than 21,000 commercial and industrial customers in the eastern United States, introduced Hess Small Business Services and Hess Energy Solutions to expand both our customer base and service offerings. We also began construction in New Jersey of our joint venture Bayonne Energy Center, a 512-megawatt, natural gas fueled power plant that will provide electricity to New York City.

Retail Marketing, which has 1,362 gasoline and convenience stores along the East Coast of the United States, increased convenience store sales partly through the continued addition of Dunkin' Donuts, now offered in more than a third of our locations.

SAFETY AND SOCIAL RESPONSIBILITY
In 2010, we improved our safety performance for the sixth consecutive year. Our progress is the result of the commitment of our entire work force and the success of our management systems in building a culture of safety, an achievement that was recently recognized by the U.S. National Safety Council.

Our company is committed to making a long-lasting positive impact on the communities where we operate. In Equatorial Guinea, we completed the fourth year of a successful partnership with the government to help transform primary education through teacher training, the development of model schools and improving the education infrastructure. In 2010, nearly 1,000 primary school teachers graduated from a two-year certification course and 1,400 first grade teachers, trainers and school inspectors completed an intensive training course in active learning methodology. The company supported community development initiatives in more than 20 countries, including vocational skills training in Indonesia and youth development in Egypt and Norway. Hess has also made a major gift to the New York Public Library to support community and research libraries and upgrade information technology.

Our company received recognition for our efforts to build a sustainable enterprise. Our Corporate Sustainability Report earned an A+ under the Global Reporting Initiative. We were ranked first in the Carbon Disclosure Project's Global 500 Energy Sector and 10th among top corporate citizens by Corporate Responsibility Officer magazine. We were also ranked in the Dow Jones Sustainability Index for North America and included in NASDAQ CRD Analytics Global Sustainability Index.

We deeply appreciate the hard work and dedication of our employees to build a company to sustain profitable growth. We are grateful, as always, for the outstanding advice and guidance of our Board of Directors. We especially want to thank you, our stockholders, for your continued interest and support.

John B. Hess

John B. Hess
Chairman of the Board and Chief Executive Officer
March 2, 2011