hes-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2023


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-1204

HESS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE

(State or Other Jurisdiction of Incorporation or Organization)

13-4921002

(I.R.S. Employer Identification Number)

1185 AVENUE OF THE AMERICAS, NEW YORK, NY

(Address of Principal Executive Offices)

10036

(Zip Code)

(Registrant’s Telephone Number, Including Area Code is (212) 997-8500)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	HES	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

At June 30, 2023, there were 307,061,031 shares of Common Stock outstanding.

HESS CORPORATION

Form 10-Q

TABLE OF CONTENTS


Item No.		Page Number
	PART I - FINANCIAL INFORMATION
1.	Financial Statements (Unaudited)
	Consolidated Balance Sheet at June 3 0 , 2023, and December 31, 2022	2
	Statement of Consolidated Income for the Three and Six Months Ended June 3 0 , 2023, and 2022	3
	Statement of Consolidated Comprehensive Income for the Three and Six Months Ended June 3 0 , 2023, and 2022	4
	Statement of Consolidated Cash Flows for the Six Months Ended June 3 0 , 2023, and 2022	5
	Statement of Consolidated Equity for the T hree and Six Months Ended June 3 0 , 2023, and 2022	6
	Notes to Consolidated Financial Statements (Unaudited)	7
	Note 1 - Basis of Presentation	7
	Note 2 - Inventories	7
	Note 3 - Property, Plant and Equipment	7
	Note 4 - Hess Midstream LP	8
	Note 5 - Accrued Liabilities	9
	Note 6 - Revenue	10
	Note 7 - Impairment and Other	11
	Note 8 - Retirement Plans	11
	Note 9 - Weighted Average Common Shares	11
	Note 10 - Guarantees and Contingencies	12
	Note 1 1 - Segment Information	14
	Note 1 2 - Financial Risk Management Activities	15

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
3.	Quantitative and Qualitative Disclosures about Market Risk	31
4.	Controls and Procedures	31

	PART II - OTHER INFORMATION
1.	Legal Proceedings	32
2.	Share Repurchase Activities	32
5 .	Other Information	32
6.	Exhibits	33
	Signatures	34

Unless the context indicates otherwise, references to “Hess”, the “Corporation”, “Registrant”, “we”, “us”, “our” and “its” refer to the consolidated business operations of Hess Corporation and its subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)


	June 30, 2023		December 31, 2022

	(In millions, except share amounts)
Assets
Current Assets:
Cash and cash equivalents	$	2,226	$	2,486
Accounts receivable:
From contracts with customers	868		1,041
Joint venture and other	151		121
Inventories	278		217
Other current assets	181		66
Total current assets	3,704		3,931
Property, plant and equipment:
Total — at cost	34,073		32,592
Less: Reserves for depreciation, depletion, amortization and lease impairment	18,332		17,494
Property, plant and equipment — net	15,741		15,098
Operating lease right-of-use assets — net	515		570
Finance lease right-of-use assets — net	117		126
Goodwill	360		360
Deferred income taxes	214		133
Post-retirement benefit assets	664		648
Other assets	915		829
Total Assets	$	22,230	$	21,695
Liabilities
Current Liabilities:
Accounts payable	$	350	$	285
Accrued liabilities	1,754		1,840
Taxes payable	69		47
Current portion of long-term debt	8		3
Current portion of operating and finance lease obligations	222		221
Total current liabilities	2,403		2,396
Long-term debt	8,459		8,278
Long-term operating lease obligations	407		469
Long-term finance lease obligations	168		179
Deferred income taxes	497		418
Asset retirement obligations	960		1,034
Other liabilities and deferred credits	434		425
Total Liabilities	13,328		13,199
Equity
Hess Corporation stockholders’ equity:
Common stock, par value $1.00; Authorized — 600,000,000 shares
Issued 307,061,031 shares (2022: 306,176,864)	307		306
Capital in excess of par value	6,442		6,206
Retained earnings	1,670		1,474
Accumulated other comprehensive income (loss)	(147)		(131)
Total Hess Corporation stockholders’ equity	8,272		7,855
Noncontrolling interests	630		641
Total Equity	8,902		8,496
Total Liabilities and Equity	$	22,230	$	21,695

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In millions, except per share amounts)
Revenues and Non-Operating Income
Sales and other operating revenues	$	2,289	$	2,955	$	4,700	$	5,268
Gains on asset sales, net	—		3		—		25
Other, net	31		30		73		66
Total revenues and non-operating income	2,320		2,988		4,773		5,359
Costs and Expenses
Marketing, including purchased oil and gas	547		843		1,150		1,525
Operating costs and expenses	454		356		836		669
Production and severance taxes	46		67		94		128
Exploration expenses, including dry holes and lease impairment	99		33		165		76
General and administrative expenses	108		95		244		205
Interest expense	122		121		245		244
Depreciation, depletion and amortization	497		391		988		728
Impairment and other	82		—		82		—
Total costs and expenses	1,955		1,906		3,804		3,575
Income Before Income Taxes	365		1,082		969		1,784
Provision for income taxes	160		328		336		525
Net Income	205		754		633		1,259
Less: Net income attributable to noncontrolling interests	86		87		168		175
Net Income Attributable to Hess Corporation	$	119	$	667	$	465	$	1,084

Net Income Attributable to Hess Corporation Per Common Share:
Basic	$	0.39	$	2.15	$	1.52	$	3.50
Diluted	$	0.39	$	2.15	$	1.51	$	3.49
Weighted Average Number of Common Shares Outstanding:
Basic	306.0		309.7		305.7		309.3
Diluted	307.5		310.9		307.4		310.6
Common Stock Dividends Per Share	$	0.4375	$	0.3750	$	0.8750	$	0.7500

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In millions)
Net Income	$	205	$	754	$	633	$	1,259
Other Comprehensive Income (Loss):
Derivatives designated as cash flow hedges
Effect of hedge (gains) losses reclassified to income	52		163		86		255
Income taxes on effect of hedge (gains) losses reclassified to income	—		—		—		—
Net effect of hedge (gains) losses reclassified to income	52		163		86		255
Change in fair value of cash flow hedges	(73)		(39)		(90)		(494)
Income taxes on change in fair value of cash flow hedges	—		—		—		—
Net change in fair value of cash flow hedges	(73)		(39)		(90)		(494)
Change in derivatives designated as cash flow hedges, after taxes	(21)		124		(4)		(239)
Pension and other postretirement plans
(Increase) reduction in unrecognized actuarial losses	(13)		152		(13)		152
Income taxes on actuarial changes in plan liabilities	—		—		—		—
(Increase) reduction in unrecognized actuarial losses, net	(13)		152		(13)		152
Amortization of net actuarial losses	1		5		1		8
Income taxes on amortization of net actuarial losses	—		—		—		—
Net effect of amortization of net actuarial losses	1		5		1		8
Change in pension and other postretirement plans, after taxes	(12)		157		(12)		160
Other Comprehensive Income (Loss)	(33)		281		(16)		(79)
Comprehensive Income	172		1,035		617		1,180
Less: Comprehensive income attributable to noncontrolling interests	86		87		168		175
Comprehensive Income Attributable to Hess Corporation	$	86	$	948	$	449	$	1,005

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
	2023		2022

	(In millions)
Cash Flows From Operating Activities
Net income	$	633	$	1,259
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
(Gains) losses on asset sales, net	—		(25)
Depreciation, depletion and amortization	988		728
Impairment and other	82		—
Exploratory dry hole costs	93		—
Exploration lease impairment	13		10
Pension settlement loss	—		2
Stock compensation expense	53		49
Noncash (gains) losses on commodity derivatives, net	52		218
Provision for deferred income taxes and other tax accruals	92		174
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(14)		(529)
(Increase) decrease in inventories	(61)		(94)
Increase (decrease) in accounts payable and accrued liabilities	(119)		100
Increase (decrease) in taxes payable	22		(387)
Changes in other operating assets and liabilities	(222)		(152)
Net cash provided by (used in) operating activities	1,612		1,353
Cash Flows From Investing Activities
Additions to property, plant and equipment - E&P	(1,551)		(1,098)
Additions to property, plant and equipment - Midstream	(107)		(111)
Proceeds from asset sales, net of cash sold	—		28
Other, net	(4)		—
Net cash provided by (used in) investing activities	(1,662)		(1,181)
Cash Flows From Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less	180		(13)
Debt with maturities of greater than 90 days:
Borrowings	—		400
Repayments	—		(510)
Cash dividends paid	(271)		(235)
Common stock acquired and retired	(20)		(190)
Proceeds from sale of Class A shares of Hess Midstream LP	167		146
Noncontrolling interests, net	(263)		(351)
Employee stock options exercised	4		40
Payments on finance lease obligations	(4)		(4)
Other, net	(3)		(9)
Net cash provided by (used in) financing activities	(210)		(726)
Net Increase (Decrease) in Cash and Cash Equivalents	(260)		(554)
Cash and Cash Equivalents at Beginning of Year	2,486		2,713
Cash and Cash Equivalents at End of Period	$	2,226	$	2,159

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED EQUITY (UNAUDITED)


	Common Stock		Capital in Excess of Par		Retained Earnings		Accumulated Other Comprehensive Loss		Total Hess Stockholders' Equity		Noncontrolling Interests		Total Equity


For the Three Months Ended June 30, 2023
Balance at April 1, 2023	$	307	$	6,254	$	1,686	$	(114)	$	8,133	$	588	$	8,721
Net income	—		—		119		—		119		86		205
Other comprehensive income (loss)	—		—		—		(33)		(33)		—		(33)
Share-based compensation	—		19		—		—		19		—		19
Dividends on common stock	—		—		(135)		—		(135)		—		(135)
Sale of Class A shares of Hess Midstream LP	—		158		—		—		158		93		251
Repurchase of Class B units of Hess Midstream Operations LP	—		11		—		—		11		(55)		(44)
Noncontrolling interests, net	—		—		—		—		—		(82)		(82)
Balance at June 30, 2023	$	307	$	6,442	$	1,670	$	(147)	$	8,272	$	630	$	8,902
For the Three Months Ended June 30, 2022
Balance at April 1, 2022	$	311	$	6,083	$	680	$	(766)	$	6,308	$	740	$	7,048
Net income	—		—		667		—		667		87		754
Other comprehensive income (loss)	—		—		—		281		281		—		281
Share-based compensation	1		24		—		—		25		—		25
Dividends on common stock	—		—		(117)		—		(117)		—		(117)
Sale of Class A shares of Hess Midstream LP	—		130		—		—		130		88		218
Repurchase of Class B units of Hess Midstream Operations LP	—		32		—		—		32		(215)		(183)
Common stock acquired and retired	(2)		(33)		(155)		—		(190)		—		(190)
Noncontrolling interests, net	—		—		—		—		—		(78)		(78)
Balance at June 30, 2022	$	310	$	6,236	$	1,075	$	(485)	$	7,136	$	622	$	7,758
For the Six Months Ended June 30, 2023
Balance at January 1, 2023	$	306	$	6,206	$	1,474	$	(131)	$	7,855	$	641	$	8,496
Net income	—		—		465		—		465		168		633
Other comprehensive income (loss)	—		—		—		(16)		(16)		—		(16)
Share-based compensation	1		59		—		—		60		—		60
Dividends on common stock	—		—		(269)		—		(269)		—		(269)
Sale of Class A shares of Hess Midstream LP	—		158		—		—		158		93		251
Repurchase of Class B units of Hess Midstream Operations LP	—		19		—		—		19		(109)		(90)
Noncontrolling interests, net	—		—		—		—		—		(163)		(163)
Balance at June 30, 2023	$	307	$	6,442	$	1,670	$	(147)	$	8,272	$	630	$	8,902
For the Six Months Ended June 30, 2022
Balance at January 1, 2022	$	310	$	6,017	$	379	$	(406)	$	6,300	$	726	$	7,026
Net income	—		—		1,084		—		1,084		175		1,259
Other comprehensive income (loss)	—		—		—		(79)		(79)		—		(79)
Share-based compensation	2		90		—		—		92		—		92
Dividends on common stock	—		—		(233)		—		(233)		—		(233)
Sale of Class A shares of Hess Midstream LP	—		130		—		—		130		88		218
Repurchase of Class B units of Hess Midstream Operations LP	—		32		—		—		32		(215)		(183)
Common stock acquired and retired	(2)		(33)		(155)				(190)		—		(190)
Noncontrolling interests, net	—		—		—		—		—		(152)		(152)
Balance at June 30, 2022	$	310	$	6,236	$	1,075	$	(485)	$	7,136	$	622	$	7,758

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

The financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at June 30, 2023 and December 31, 2022, the consolidated results of operations for the three and six months ended June 30, 2023 and 2022, and consolidated cash flows for the six months ended June 30, 2023 and 2022. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.

The financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by generally accepted accounting principles (GAAP) in the United States have been condensed or omitted from these interim financial statements. These statements, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022.

2. Inventories

Inventories consisted of the following:


	June 30, 2023		December 31, 2022

	(In millions)
Crude oil and natural gas liquids	$	84	$	63
Materials and supplies	194		154
Total Inventories	$	278	$	217

3. Property, Plant and Equipment

Capitalized Exploratory Well Costs:

The following table discloses the net changes in capitalized exploratory well costs pending determination of proved reserves during the six months ended June 30, 2023 (in millions):


Balance at January 1, 2023	$	886
Additions to capitalized exploratory well costs pending the determination of proved reserves	128
Reclassifications to wells, facilities and equipment based on the determination of proved reserves	(78)
Capitalized exploratory well costs charged to expense	(6)
Balance at June 30, 2023	$	930

In the first six months, additions to capitalized exploratory well costs pending determination of proved reserves primarily related to wells drilled on the Stabroek Block (Hess 30%), offshore Guyana, and the Pickerel-1 exploration well (Hess 100%) in the Gulf of Mexico on Mississippi Canyon Block 727. Reclassifications to wells, facilities and equipment based on the determination of proved reserves resulted from the sanction of the Uaru Field development project, the fifth sanctioned project on the Stabroek Block. At June 30, 2023, 32 exploration and appraisal wells on the Stabroek Block, with a total cost of $738 million, were capitalized pending determination of proved reserves. The preceding table excludes well costs of $87 million that were incurred and expensed during the first six months of 2023.

At June 30, 2023, exploratory well costs capitalized for greater than one year following completion of drilling of $653 million was comprised of the following:

Guyana: Approximately 85% of the capitalized well costs in excess of one year relate to successful exploration wells where hydrocarbons were encountered on the Stabroek Block. The operator also plans further appraisal drilling on the block and is conducting pre-development planning for additional phases of development.

U.S.: Approximately 8% of the capitalized well costs in excess of one year relate to the Huron-1 exploration well (Hess 40%) located on Green Canyon Block 69 in the Gulf of Mexico, where oil bearing reservoirs were encountered. Well results are being evaluated and planning for appraisal activities is underway.

Joint Development Area (JDA): Approximately 6% of the capitalized well costs in excess of one year relate to the JDA (Hess 50%) in the Gulf of Thailand, where hydrocarbons were encountered in three successful exploration wells drilled in the western part of Block A-18. The operator has submitted a development plan concept to the regulator to facilitate ongoing

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

commercial negotiations for an extension of the existing gas sales contract to include development of the western part of the block.

Malaysia: Approximately 1% of the capitalized well costs in excess of one year relate to the North Malay Basin (Hess 50%), offshore Peninsular Malaysia, where hydrocarbons were encountered in one successful exploration well. Pre-development studies are ongoing.

4. Hess Midstream LP

At June 30, 2023, Hess Midstream LP (Hess Midstream), a variable interest entity that is fully consolidated by Hess Corporation, had liabilities totaling $3,201 million (December 31, 2022: $3,027 million) that are on a nonrecourse basis to Hess Corporation, while Hess Midstream assets available to settle the obligations of Hess Midstream included cash and cash equivalents totaling $3 million (December 31, 2022: $3 million), property, plant and equipment with a carrying value of $3,188 million (December 31, 2022: $3,173 million) and an equity-method investment in the Little Missouri 4 (LM4) gas processing plant of $93 million (December 31, 2022: $94 million). Hess Corporation owns an approximate 38% interest in Hess Midstream LP, on a consolidated basis, at June 30, 2023.

LM4 is a 200 million standard cubic feet per day gas processing plant located south of the Missouri River in McKenzie County, North Dakota, that was constructed as part of a 50/50 joint venture between Hess Midstream and Targa Resources Corp. Hess Midstream has a natural gas processing agreement with LM4 under which it pays a processing fee and reimburses LM4 for its proportionate share of electricity costs. The processing fees included in Operating costs and expenses in the Statement of Consolidated Income for the three and six months ended June 30, 2023 were $6 million and $11 million respectively, compared with $4 million and $9 million for the three and six months ended June 30, 2022, respectively.

In June 2023, Hess Midstream Operations LP (HESM Opco), a consolidated subsidiary of Hess Midstream LP, repurchased approximately 3.4 million HESM Opco Class B units held by a subsidiary of Hess Corporation and an affiliate of Global Infrastructure Partners (GIP) for $100 million, which was financed by HESM Opco's revolving credit facility. The transaction resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of $11 million, and an increase in deferred tax assets and Noncontrolling interests of $6 million resulting from a change in the difference between the carrying value and tax basis of Hess Midstream LP's investment in HESM Opco. The $50 million paid to GIP reduced Noncontrolling interests.

In May 2023, Hess Midstream LP completed an underwritten public equity offering of approximately 12.8 million Hess Midstream LP Class A shares held by a subsidiary of Hess Corporation and an affiliate of GIP. We received net proceeds of $167 million from the public offering. The transaction resulted in an increase in Capital in excess of par and Noncontrolling interests of $158 million and $93 million, respectively. The increase to Noncontrolling interests of $93 million is comprised of $9 million resulting from the change in ownership interest and $84 million from an increase to deferred tax assets resulting from a change in the difference between the carrying value and tax basis of Hess Midstream LP's investment in HESM Opco.

In March 2023, HESM Opco repurchased approximately 3.6 million HESM Opco Class B units held by a subsidiary of Hess Corporation and an affiliate of GIP for $100 million, which was financed by HESM Opco's revolving credit facility. The transaction resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of $8 million, and an increase in deferred tax assets and Noncontrolling interests of $4 million resulting from a change in the difference between the carrying value and tax basis of Hess Midstream LP's investment in HESM Opco. The $50 million paid to GIP reduced Noncontrolling interests.

In April 2022, Hess Midstream LP completed an underwritten public equity offering of approximately 10.2 million Hess Midstream LP Class A shares held by a subsidiary of Hess Corporation and an affiliate of GIP. We received net proceeds of $146 million from the public offering. The transaction resulted in an increase in Capital in excess of par and Noncontrolling interests of $130 million and $88 million, respectively. The increase to Noncontrolling interests of $88 million is comprised of $16 million resulting from the change in ownership interest and $72 million from an increase to deferred tax assets resulting from a change in the difference between the carrying value and tax basis of Hess Midstream LP's investment in HESM Opco.

Concurrent with the April 2022 public offering, HESM Opco repurchased approximately 13.6 million HESM Opco Class B units held by a subsidiary of Hess Corporation and an affiliate of GIP for $400 million. HESM Opco issued $400 million in aggregate principal amount of 5.500% fixed-rate senior unsecured notes due 2030 in a private offering to repay borrowings under its revolving credit facility used to finance the repurchase. The transaction resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of $32 million, and an increase in deferred tax assets and Noncontrolling interests of $17 million resulting from a change in the difference between the carrying value and tax basis of Hess Midstream LP's investment in HESM Opco. The $200 million paid to GIP reduced Noncontrolling interests.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. Accrued Liabilities

Accrued Liabilities consisted of the following:


	June 30, 2023		December 31, 2022

	(In millions)
Accrued capital expenditures	$	589	$	499
Accrued operating and marketing expenditures	400		522
Current portion of asset retirement obligations	241		207
Accrued payments to royalty and working interest owners	179		201
Accrued interest on debt	144		143
Accrued compensation and benefits	76		132
Other accruals	125		136
Total Accrued Liabilities	$	1,754	$	1,840

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6. Revenue

Revenue from contracts with customers on a disaggregated basis was as follows (in millions):


	Exploration and Production										Midstream		Eliminations		Total
	United States		Guyana		Malaysia and JDA		Other (a)		E&P Total

Three Months Ended June 30, 2023
Sales of net production volumes:
Crude oil revenue	$	710	$	787	$	24	$	—	$	1,521	$	—	$	—	$	1,521
Natural gas liquids revenue	112		—		—		—		112		—		—		112
Natural gas revenue	38		—		182		—		220		—		—		220
Sales of purchased oil and gas	469		15		—		—		484		—		—		484
Intercompany revenue	—		—		—		—		—		322		(322)		—
Total sales (b)	1,329		802		206		—		2,337		322		(322)		2,337
Other operating revenues (c)	(30)		(20)		—		—		(50)		2		—		(48)
Total sales and other operating revenues	$	1,299	$	782	$	206	$	—	$	2,287	$	324	$	(322)	$	2,289
Three Months Ended June 30, 2022
Sales of net production volumes:
Crude oil revenue	$	895	$	681	$	37	$	170	$	1,783	$	—	$	—	$	1,783
Natural gas liquids revenue	173		—		—		—		173		—		—		173
Natural gas revenue	126		—		215		5		346		—		—		346
Sales of purchased oil and gas	761		18		—		36		815		—		—		815
Intercompany revenue	—		—		—		—		—		314		(314)		—
Total sales (b)	1,955		699		252		211		3,117		314		(314)		3,117
Other operating revenues (c)	(95)		(52)		—		(15)		(162)		—		—		(162)
Total sales and other operating revenues	$	1,860	$	647	$	252	$	196	$	2,955	$	314	$	(314)	$	2,955
Six Months Ended June 30, 2023
Sales of net production volumes:
Crude oil revenue	$	1,379	$	1,612	$	53	$	—	$	3,044	$	—	$	—	$	3,044
Natural gas liquids revenue	253		—		—		—		253		—		—		253
Natural gas revenue	92		—		362		—		454		—		—		454
Sales of purchased oil and gas	996		32		—		—		1,028		—		—		1,028
Intercompany revenue	—		—		—		—		—		625		(625)		—
Total sales (b)	2,720		1,644		415		—		4,779		625		(625)		4,779
Other operating revenues (c)	(56)		(27)		—		—		(83)		4		—		(79)
Total sales and other operating revenues	$	2,664	$	1,617	$	415	$	—	$	4,696	$	629	$	(625)	$	4,700
Six Months Ended June 30, 2022
Sales of net production volumes:
Crude oil revenue	$	1,731	$	907	$	68	$	316	$	3,022	$	—	$	—	$	3,022
Natural gas liquids revenue	354		—		—		—		354		—		—		354
Natural gas revenue	211		—		405		10		626		—		—		626
Sales of purchased oil and gas	1,421		22		—		71		1,514		—		—		1,514
Intercompany revenue	—		—		—		—		—		626		(626)		—
Total sales (b)	3,717		929		473		397		5,516		626		(626)		5,516
Other operating revenues (c)	(153)		(67)		—		(28)		(248)		—		—		(248)
Total sales and other operating revenues	$	3,564	$	862	$	473	$	369	$	5,268	$	626	$	(626)	$	5,268

(a)Other includes our interest in the Waha Concession in Libya, which was sold in November 2022.

(b)Guyana crude oil revenue includes $88 million and $196 million of revenue from non-customers for the three and six months ended June 30, 2023, respectively. There was no revenue from non-customers for the three and six months ended June 30, 2022.

(c)Other operating revenues are not a component of revenues from contracts with customers, and primarily includes gains (losses) on commodity derivatives.

There have been no significant changes to contracts with customers or the composition thereof during the six months ended June 30, 2023. Generally, we receive payments from customers on a monthly basis, shortly after the physical delivery of the crude oil, natural gas liquids, or natural gas. At June 30, 2023, contract liabilities of $27 million (December 31, 2022: $24 million) were primarily due to a take-or-pay deficiency payment received in the fourth quarter of 2021 that is subject to a make-up period expiring in December 2023. At June 30, 2023 and December 31, 2022, there were no contract assets.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7. Impairment and Other

In the second quarter of 2023, we recognized a pre-tax charge of $82 million ($82 million after income taxes) that resulted from revisions to estimated costs to abandon certain wells, pipelines and production facilities in the West Delta Field in the Gulf of Mexico. These abandonment obligations were assigned to us as a former owner after they were discharged from Fieldwood Energy LLC as part of its approved bankruptcy plan in 2021.

8. Retirement Plans

Components of net periodic benefit cost consisted of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In millions)

Service cost	$	10	$	12	$	19	$	25
Interest cost (a)	25		17		50		33
Expected return on plan assets (a)	(40)		(52)		(79)		(105)
Amortization of unrecognized net actuarial losses (a)	1		3		1		6
Settlement loss (a)	—		2		$	—	$	2
Net periodic benefit cost (income) (a)	$	(4)	$	(18)	$	(9)	$	(39)

(a) Net non-service cost, which is included in Other, net in the Statement of Consolidated Income, was income of $14 million and $28 million for the three and six months ended June 30, 2023, respectively, compared with income of $30 million and $64 million for the three and six months ended June 30, 2022.

In the second quarter of 2022, the Hess Corporation Employees’ Pension Plan purchased a single premium annuity contract at a cost of $166 million using assets of the plan to settle and transfer certain of its obligations to a third party. This partial settlement resulted in a noncash settlement loss of $13 million to recognize unamortized actuarial losses.

In the second quarter of 2022, the HOVENSA Legacy Employees' Pension Plan paid lump sums to certain participants totaling $20 million, and purchased a single premium annuity contract at a cost of $80 million, to settle the plan's projected benefit obligation in connection with terminating the plan. The settlement transactions resulted in a noncash settlement gain of $11 million to recognize unamortized actuarial gains. The assets remaining after settlement of the plan's projected benefit obligation of $15 million were transferred to the Hess Corporation Employees' Pension Plan in December 2022.

In 2023, we expect to contribute approximately $2 million to our funded pension plans.

9. Weighted Average Common Shares

The Net income and weighted average number of common shares used in the basic and diluted earnings per share computations were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(In millions)
Net income attributable to Hess Corporation:
Net income	$	205	$	754	$	633	$	1,259
Less: Net income attributable to noncontrolling interests	86		87		168		175
Net income attributable to Hess Corporation	$	119	$	667	$	465	$	1,084
Weighted average number of common shares outstanding:
Basic	306.0		309.7		305.7		309.3
Effect of dilutive securities
Restricted common stock	0.3		0.6		0.5		0.6
Stock options	0.7		0.6		0.7		0.6
Performance share units	0.5		—		0.5		0.1
Diluted	307.5		310.9		307.4		310.6

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the number of antidilutive shares excluded from the computation of diluted shares:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Restricted common stock	1,789	—	61,489	48
Stock options	189,479	269,748	121,226	172,581
Performance share units	—	29,668	—	30,510

During the six months ended June 30, 2023, we granted 451,226 shares of restricted stock (2022: 565,318), 130,272 performance share units (2022: 178,008) and 189,479 stock options (2022: 269,748).

10. Guarantees and Contingencies

We are subject to loss contingencies with respect to various claims, lawsuits and other proceedings. A liability is recognized in our consolidated financial statements when it is probable that a loss has been incurred and the amount can be reasonably estimated. If the risk of loss is probable, but the amount cannot be reasonably estimated or the risk of loss is only reasonably possible, a liability is not accrued; however, we disclose the nature of those contingencies. We cannot predict with certainty if, how or when existing claims, lawsuits and proceedings will be resolved or what the eventual relief, if any, may be, particularly for proceedings that are in their early stages of development or where plaintiffs seek indeterminate damages.

We, along with many companies that have been or continue to be engaged in refining and marketing of gasoline, have been a party to lawsuits and claims related to the use of methyl tertiary butyl ether (MTBE) in gasoline. A series of similar lawsuits, many involving water utilities or governmental entities, were filed in jurisdictions across the United States against producers of MTBE and petroleum refiners who produced gasoline containing MTBE, including us. The principal allegation in all cases was that gasoline containing MTBE was a defective product and that these producers and refiners are strictly liable in proportion to their share of the gasoline market for damage to groundwater resources and are required to take remedial action to ameliorate the alleged effects on the environment of releases of MTBE. The majority of the cases asserted against us have been settled. There are two remaining active cases, filed by Pennsylvania and Maryland. In June 2014, the Commonwealth of Pennsylvania filed a lawsuit alleging that we and all major oil companies with operations in Pennsylvania, have damaged the groundwater by introducing thereto gasoline with MTBE. The Pennsylvania suit has been forwarded to the existing MTBE multidistrict litigation pending in the Southern District of New York. In December 2017, the State of Maryland filed a lawsuit alleging that we and other major oil companies damaged the groundwater in Maryland by introducing thereto gasoline with MTBE. The suit, filed in Maryland state court, was served on us in January 2018 and has been removed to federal court by the defendants.

In March 2014, we received an Administrative Order from the EPA requiring us and 26 other parties to undertake the Remedial Design for the remedy selected by the EPA for the Gowanus Canal Superfund Site in Brooklyn, New York. Our alleged liability derives from our former ownership and operation of a fuel oil terminal and connected shipbuilding and repair facility adjacent to the Canal. The remedy selected by the EPA includes dredging of surface sediments and the placement of a cap over the deeper sediments throughout the Canal and in-situ stabilization of certain contaminated sediments that will remain in place below the cap. The EPA’s original estimate was that this remedy would cost $506 million; however, the ultimate costs that will be incurred in connection with the design and implementation of the remedy remain uncertain. We have complied with the EPA’s March 2014 Administrative Order and contributed funding for the Remedial Design based on an allocation of costs among the parties determined by a third-party expert. In January 2020, we received an additional Administrative Order from the EPA requiring us and several other parties to begin Remedial Action along the uppermost portion of the Canal. We intend to comply with this Administrative Order. The remediation work began in the fourth quarter of 2020. Based on currently known facts and circumstances, we do not believe that this matter will result in a significant liability to us, and the costs will continue to be allocated amongst the parties, as they were for the Remedial Design.

From time to time, we are involved in other judicial and administrative proceedings relating to environmental matters. We periodically receive notices from the EPA that we are a “potential responsible party” under the Superfund legislation with respect to various waste disposal sites. Under this legislation, all potentially responsible parties may be jointly and severally liable. For any site for which we have received such a notice, the EPA’s claims or assertions of liability against us relating to these sites have not been fully developed, or the EPA’s claims have been settled or a settlement is under consideration, in all cases for amounts that are not material. Beginning in 2017, certain states, municipalities and private associations in California, Delaware, Maryland, Rhode Island and South Carolina separately filed lawsuits against oil, gas and coal producers, including us, for alleged damages purportedly caused by climate change. These proceedings include claims for monetary damages and injunctive relief. Beginning in 2013, various parishes in Louisiana filed suit against approximately 100 oil and gas companies, including us, alleging that the companies’ operations and activities in certain fields violated the State and Local Coastal Resource Management Act of 1978, as amended, and caused

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

contamination, subsidence and other environmental damages to land and water bodies located in the coastal zone of Louisiana. The plaintiffs seek, among other things, the payment of the costs necessary to clear, re-vegetate and otherwise restore the allegedly impacted areas. The ultimate impact of such climate and other aforementioned environmental proceedings, and of any related proceedings by private parties, on our business or accounts cannot be predicted at this time due to the large number of other potentially responsible parties and the speculative nature of clean-up cost estimates.

Hess Corporation and its subsidiary HONX, Inc. have been named as defendants in various personal injury claims alleging exposure to asbestos and/or other alleged toxic substances while working at a former refinery (owned and operated by subsidiaries or related entities) located in St. Croix, U.S. Virgin Islands. On April 28, 2022, HONX, Inc. initiated a Chapter 11 § 524G process in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, to resolve these asbestos-related claims. In February 2023, Hess, HONX, Inc., the Unsecured Creditors’ Committee, and counsel representing claimants, reached a mediated resolution of the matter, contingent upon final approvals of all parties and confirmation by the Bankruptcy Court. As of June 30, 2023, we have a provision of $116 million for the amounts expected to be funded to the § 524G trust established for the settlement of claims, based on the mediated resolution.

We are also involved in other judicial and administrative proceedings from time to time in addition to the matters described above, including claims related to post-production deductions from royalty and working interest payments. We may also be exposed to future decommissioning liabilities for divested assets in the event the current or future owners of facilities previously owned by us are determined to be unable to perform such actions, whether due to bankruptcy or otherwise. We cannot predict with certainty if, how or when such proceedings will be resolved or what the eventual relief, if any, may be, particularly for proceedings that are in their early stages of development or where plaintiffs seek indeterminate damages. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters before a loss or range of loss can be reasonably estimated for any proceeding.

Subject to the foregoing, in management’s opinion, based upon currently known facts and circumstances, the outcome of lawsuits, claims and proceedings, including the matters disclosed above, is not expected to have a material adverse effect on our financial condition, results of operations or cash flows. However, we could incur judgments, enter into settlements, or revise our opinion regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations in the period in which the amounts are accrued and our cash flows in the period in which the amounts are paid.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

11. Segment Information

We currently have two operating segments, Exploration and Production and Midstream. All unallocated costs are reflected under Corporate, Interest and Other. The following table presents operating segment financial data:


	Exploration and Production		Midstream		Corporate, Interest and Other		Eliminations		Total

	(In millions)
For the Three Months Ended June 30, 2023
Sales and other operating revenues	$	2,287	$	2	$	—	$	—	$	2,289
Intersegment revenues	—		322		—		(322)		—
Total sales and other operating revenues	$	2,287	$	324	$	—	$	(322)	$	2,289

Net income (loss) attributable to Hess Corporation	$	155	$	62	$	(98)	$	—	$	119
Depreciation, depletion and amortization	450		47		—		—		497
Impairment and other	82		—		—		—		82
Provision for income taxes	152		8		—		—		160
Capital expenditures	904		52		—		—		956
For the Three Months Ended June 30, 2022
Sales and other operating revenues	$	2,955	$	—	$	—	$	—	$	2,955
Intersegment revenues	—		314		—		(314)		—
Total sales and other operating revenues	$	2,955	$	314	$	—	$	(314)	$	2,955

Net income (loss) attributable to Hess Corporation	$	723	$	65	$	(121)	$	—	$	667
Depreciation, depletion and amortization	345		44		2		—		391
Provision for income taxes	321		7		—		—		328
Capital expenditures	593		72		—		—		665
For the Six Months Ended June 30, 2023
Sales and other operating revenues	$	4,696	$	4	$	—	$	—	$	4,700
Intersegment revenues	—		625		—		(625)		—
Total sales and other operating revenues	$	4,696	$	629	$	—	$	(625)	$	4,700

Net income (loss) attributable to Hess Corporation	$	560	$	123	$	(218)	$	—	$	465
Depreciation, depletion and amortization	893		94		1		—		988
Impairment and other	82		—		—		—		82
Provision for income taxes	322		14		—		—		336
Capital expenditures	1,639		109		—		—		1,748
For the Six Months Ended June 30, 2022
Sales and other operating revenues	$	5,268	$	—	$	—	$	—	$	5,268
Intersegment revenues	—		626		—		(626)		—
Total sales and other operating revenues	$	5,268	$	626	$	—	$	(626)	$	5,268

Net income (loss) attributable to Hess Corporation	$	1,183	$	137	$	(236)	$	—	$	1,084
Depreciation, depletion and amortization	637		89		2		—		728
Provision for income taxes