While 2011 was a challenging year operationally, we continued to make significant progress in increasing our crude oil and natural gas reserves, acquiring strategic acreage and positioning our company for long term profitable growth.

For the year 2011, our company achieved earnings of $1.7 billion, or $5.01 per share, reflecting lower crude oil and natural gas sales volumes, weaker refining results and the impact of higher crude oil selling prices.

Exploration and Production earned nearly $2.7 billion, which was comparable to the previous year. Crude oil and natural gas production was 370,000 barrels of oil equivalent per day, an 11 percent decrease compared to the 418,000 barrels of oil equivalent per day we averaged the previous year. Most of the decline was due to several short term setbacks, including weather related delays in North Dakota, the temporary shut in of the Llano No.3 well in the deepwater Gulf of Mexico, a fire at the Valhall Field in Norway and civil unrest in Libya. We continue to make progress in restoring these lost production volumes. At year end in 2011, we had replaced 147 percent of production at a finding, development and acquisition cost of about $36 per barrel of oil equivalent. Our proved reserves stood at 1.573 billion barrels of oil equivalent and our reserve life was 11.4 years.

In Exploration and Production, we made important strategic acreage acquisitions during the year in the emerging Utica Shale play in Eastern Ohio and in the Kurdistan Region of Iraq. We gained a leadership position in the Utica by entering into an agreement with CONSOL Energy to acquire a 50 percent interest in nearly 200,000 acres and acquiring Marquette Exploration for another 85,000 acres. With these transactions, the company now has the critical mass in shale resources to make a significant contribution to our future production and reserve growth with lower risk than has been the case in the past. We also acquired an 80 percent interest in two highly prospective blocks covering more than 670 square miles in a major petroleum province in Kurdistan.

Marketing and Refining lost $584 million. This loss included an after tax charge of $525 million following the difficult decision to close the HOVENSA joint venture refinery in St. Croix, U.S. Virgin Islands and operate the complex as an oil storage terminal. HOVENSA examined every option to maximize value, but ultimately severe financial losses due to adverse market conditions left no other choice. The Retail and Energy Marketing businesses, which earned $185 million in 2011, will continue to be a strategic part of our portfolio with a well established brand that generates attractive financial returns and offers selective growth opportunities.

Our financial position remains strong. Our debt to capitalization ratio at year end was 25 percent, which was essentially unchanged from a year earlier. In 2012, our company's capital and exploratory expenditures are budgeted at $6.8 billion, with substantially all dedicated to Exploration and Production. We plan to invest $2.5 billion, or nearly 40 percent of our projected spend, in unconventionals. In addition, we have budgeted $1.6 billion for production, $1.8 billion for development and $800 million for exploration.

We expect to fund the majority of our 2012 capital program from internally generated cash flow and asset sales. To protect our cash flow, we have hedged 120,000 barrels per day, or approximately 45 percent of our forecasted oil production for the calendar year 2012, at an average Brent price of $107.70 per barrel.

In the Bakken oil shale play in North Dakota, we generated strong growth throughout the second half of the year and exited 2011 at a net rate of approximately 50,000 barrels of oil equivalent per day, compared to an exit rate of 20,000 barrels of oil equivalent in 2010. We continued to develop critical infrastructure projects, including our crude oil rail loading and storage facility, which becomes fully operational in the first quarter of 2012, and the Tioga gas plant expansion, which will be completed in 2013. We also plan to continue the appraisal of our acreage in the Eagle Ford Shale in Texas and the Utica Shale.

We continued investment in our conventional opportunities, sanctioning the Tubular Bells project in the deep-water Gulf of Mexico, in which Hess has a 57 percent interest and is the operator. We anticipate first production in 2014 and expect peak annual net production rate of about 25,000 barrels of oil equivalent per day. In Australia, we are pursuing commercial options for Block WA-390-P, where we have had 13 natural gas discoveries and our appraisal program is ongoing. In exploration, our company announced a discovery in the Paradise-1 well offshore Ghana, where we have a 90 percent interest. The well encountered an estimated 490 net feet of oil and gas condensate. Further exploration drilling is planned in 2012.

Refining results were lower than 2010, principally because of losses associated with our HOVENSA joint venture refinery, which has completed its shutdown. Retail Marketing, which has 1,360 gasoline stores along the East Coast of the United States, experienced a 2 percent decline in both convenience store sales and average gasoline volumes, reflecting the weak economic environment. Retail expanded its popular Dunkin' Donuts offering to 555 locations. Energy Marketing, which provides natural gas, electricity and fuel oil to more than 21,000 commercial and industrial customers in the Eastern United States, generated strong operating results with increased sales volumes of natural gas and electricity. The Bayonne Energy Center, a 512-megawatt, natural gas fueled power plant that will provide electricity to New York City, will begin operations in 2012.

Our employee safety performance improved for the seventh consecutive year in 2011 but our results deteriorated in terms of contractor safety. We have taken aggressive steps to ensure the continuous improvement in safety for our entire workforce.

Our company is committed to making a long-term positive impact on the communities where we do business. In North Dakota, we announced a five year $25 million partnership to enhance the transition from school to work for students across the state beginning in 2012. In Equatorial Guinea, we expect to begin in 2012 a second five-year phase expanding our successful partnership with the government to help transform primary and secondary education.

Our company also supported community development activities in more than 20 countries in the areas of youth and community development, education and health.

Hess was recognized for our efforts to communicate openly about sustainable business practices. We were cited by Bloomberg as first among 2,454 oil companies in the world for disclosure of environmental, social and corporate governance issues. Hess was also ranked No.1 among S&P 500 companies for "Clean Capitalism" by Corporate Knights, a Canadian magazine promoting responsible business practices. We were again 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.