2005 Annual Report - Amerada Hess

Home

Financial Highlights

Letter to Stockholders

Exploration and Production

Marketing and Refining

Corporate and Social Responsibility

Board of Directors and Corporate Officers

Downloadable PDFs
Exploration and Production Letter to Our Stockholders PAGE Marketing and Refining

Tension-leg platform for Okume Complex under construction in Samsung, Korea Production
The first quarter of 2005 saw the start-up of three field developments: Block A-18 (AHC 50%) in the Joint Development Area between Malaysia and Thailand, the Clair Field (AHC 9%) in the United Kingdom, and ACG Phase I (AHC 3%) in Azerbaijan. In addition, the BTC pipeline (AHC 2%), which will move crude oil from Azerbaijan to the Mediterranean port of Ceyhan in Turkey, commenced line-fill in the second quarter of 2005 and is expected to reach completion in the second quarter of 2006.

In 2005, we acquired a controlling interest in the Samara-Nafta joint venture in the Volga-Urals region of Russia and added additional assets and licenses to the venture during the year. As of the end of the year, we had invested about $400 million in Russia and had recognized 87 million barrels of proved reserves. Net production from this region is expected to grow to between 12,000 and 15,000 barrels per day in 2006 from 6,000 barrels per day in 2005.

In North Dakota, Amerada Hess is the leading oil and gas producer in the State. In 2005, the Corporation acquired an additional 64,000 acres in the Williston Basin, making us one of the largest acreage holders in the North Dakota Bakken Shale resource play. Last year we participated in 12 wells in this play with encouraging results and will continue to evaluate this area in 2006.

In 2005, Amerada Hess produced 335,000 barrels of oil equivalent per day, compared to 342,000 barrels per day in 2004. This decline in production resulted primarily from the impact of Hurricanes Katrina and Rita, which reduced full-year production by an average of 7,000 barrels of oil equivalent per day. Although our deepwater production facilities were largely undamaged, we were affected by outages in downstream transportation and processing infrastructure. Also impacting 2005 production was temporary downtime at some non-operated fields in the United Kingdom, which reduced 2005 production by an average of 5,000 barrels of oil equivalent per day. The vast majority of the production impacted by these events was restored by the end of the year.

Operations in Libya In 2006, we forecast worldwide oil and gas production to average between 360,000 and 380,000 barrels of oil equivalent per day. The increase in production in 2006 is anticipated from the addition of oil production from the Waha concessions (AHC 8%) in Libya, the start-up of the Atlantic (AHC 25%) and Cromarty (AHC 90%) Fields in the United Kingdom sector of the North Sea, and a full year of production from the Malaysia/Thailand JDA.

Development
In Equatorial Guinea, the Okume Complex development (AHC 85%) is on track to commence production in early 2007, with peak net production estimated at 40,000 barrels of oil per day. We are pleased to report that we have been able to keep this project on budget and on schedule in an environment of rapidly increasing costs for materials and services.

The fabrication of the Ujung Pangkah (AHC 75%) gas platform and onshore processing facility began in 2005. The project is on schedule to commence natural gas production by early 2007 at a rate of about 75 million cubic feet per day net to our Corporation. In addition, discussions are underway with Indonesian authorities regarding expanding the project to include development of the oil resources on the block.

In 2005, we signed a gas sales agreement with Thai authorities and reached agreement with our partners to proceed with the development of the Phu Horm gas project (AHC 35%) in Thailand. Production is expected to commence around the end of 2006 and plateau at a net rate of about 35 million cubic feet per day. Approval of the plan of development for the Shenzi discovery (AHC 28%) in the deepwater Gulf of Mexico is expected in 2006 at which time the Corporation will recognize initial reserves.

The Corporation acquired a 55% working interest in the deepwater section of the West Mediterranean Block 1 Concession, in the Arab Republic of Egypt, for $413 million. The deepwater portion of the block has four existing gas discoveries which will be developed as well as exploration opportunities.

Joint Development Area, Malaysia/Thailand Exploration
Our deepwater Gulf of Mexico portfolio is strong and will be the focus of near-term exploration drilling. In 2006, in the deepwater Gulf of Mexico, we intend to participate in approximately seven high-impact wells. Appraisal of the Tubular Bells discovery (AHC 20%) in Mississippi Canyon Block 725 is also expected in 2006. This portfolio of prospects has the potential to add significant reserves and create substantial value for the Corporation.

Our international exploration portfolio is growing. In 2005, we enhanced our prospect portfolio, adding offshore acreage in Libya, Egypt and Brazil. In 2006 we will focus on acquiring, processing and interpreting seismic data in these areas with wildcat drilling occurring in future years. The focus of our appraisal and exploitation drilling program in 2006 will be in Southeast Asia at the Malaysia/Thailand JDA and the delineation of the Belud discovery (AHC 40%) offshore the Malaysian state of Sabah. In addition, we will study the commerciality of a recent discovery on Block 64 in Peru (AHC 25%).

View Global Operations Map