Yeah, good morning and welcome to day two of J.P. Morgan's 7th annual energy conference. Really appreciate the strong buy-side turnout this year, where we had great attendance. Heard a lot of great commentary and feedback from our corporates. Delighted to have Hess to kick off day two, and again, delighted to have John B. Hess to lead us in a fireside chat today. For those generalists in the audience, Hess is one of the leading E&P companies, has a great portfolio with a position in one of the biggest growth areas within oil. It's one of the low-cost resources that we see in Guyana with the overall project breakevens, which range between $25 per barrel to $35. They have two projects which could be up to 10 projects or more just given the amount of resource that Hess and Exxon have found. With that, John, I thought I'd turn it over to you to give some just brief introductory comments around the company, and then we can dive into our fireside chat. Sure. Well, you know, what I might do is, just, you know, on the company, we offer a unique value proposition. You know, growing intrinsic value matters as well as, growing cash returns. Because we're growing our resource and still going, down to provide a low cost of supply, which has a $45 Brent breakeven by 2026, we can grow cash flow, stronger than any of our competitors. At $65 Brent, our cash flow will grow at an industry-leading rate of about 25% a year each year, every year for the next 5 years. In fact, we think it's longer than that. That really distinguishes us. Our production will grow, which is an output, not an input, 10% a year, and our cash flow grows 25% a year. Any business that can grow their cash flow at twice the rate of their top line is a business you wanna own. Arun talked before about having a low cost to supply because of the investments we're making and the portfolio we have. Our cash operating unit cost is gonna go down 25% in the next 5 years to $9 per BOE, and as I said before, our breakeven is $45 Brent. Oil's gonna continue to be volatile. Obviously, the world is paying for lack of investment the last 5 years. We think we're uniquely positioned. We have a rate of change story that's industry-leading and a durability story. Rate of change, our cash flow will grow this year from having 2.5 cargoes from Guyana in the first quarter. Each cargo's 1 million barrels. Multiply that by $100, it's $250 million. By the fourth quarter, we're gonna have 8 cargoes that we sell from Guyana. That's $800 million. We have a rate of change story of cash flow accelerating this year and then that 25% a year for the next five years. That allows us to invest in the business, but it allows us also to grow our cash returns. Our cash returns, we just increased our dividend by 50% in March. We paid down the $500 million of our debt that was from our term loan, billion-dollar term loan. We did that in February. Now as we go forward, we'll continue as our cash flow compounds and free cash flow compounds to increase the dividend and a growing proportion of our free cash will go back to buy our stock, which obviously at these levels we think is a unique opportunity to get into the company. I'd say that's the lead in on the company. Great. John, I know you spend a lot of your time thinking about the oil and gas macro. Couple questions here is clearly there's tightness. We've seen some good discipline from public E&Ps in the U.S. as well as in OPEC. Yeah. You obviously have Russian sanctions, which are in play today. Yeah. We have, call it, tightness in the physical markets, but some demand potential headwinds on the recession side of the story. I was wondering if you could talk about how you see things playing out in terms of the oil and gas market. Oh, sure. Recession fears now I think are overwhelming the financial markets and the oil markets as well. An example is if you just do month to date, S&P I think is down about 10%, WTI's down 10%, but the XOP's down 20%. I think what you're seeing is the recessionary fears that are hitting the equity market are also hitting oil equities. To your point, Arun, the physical market in oil is still very constructive, still very tight. I'll give you an example. If you wanna buy a Brent cargo, you have to buy on a dated Brent basis. You have to pay $5 a barrel premium to be able to buy that cargo. That's a sign that the physical market actually is tight. You know, to your point, you know, where are we? We're in unprecedented times, both for the financial markets and the oil markets. We've had a demand shock from COVID and then a supply shock from COVID, and the world really shut down, when COVID hit in 2020, and it's really taken two years for the world to get back on its feet. And in terms of, the oil market itself, basically, demand has been in a V-shaped recovery. We're now at a level of pre-COVID demand globally of about 100 million barrels a day, the financial stimulus programs as well as the loose monetary policy has really turbocharged oil demand. And then on the supply side, it's been more sticky. It's more a U-shape recovery where, you know, we are in an investment business. Investment was shut down, and supply has been struggling to keep up, to your point, with demand basically for 7 quarters. Inventories globally for the world have on oil inventories gone down 7 quarters in a row. So much so that global oil inventories right now are 400 million barrels less than pre-COVID levels. That's where we are now. The market is tight. When you look to the second half of the year, you just heard in the last 24 hours, President Xi give a speech that he's gonna use stronger measures in China to get the economy back on its feet. There's been 1 million to 2 million barrels a day of Chinese oil demand that has been shut off because of the lockdowns. Well, that's gonna come back on the market in the next 6 months. That's number one. Number two, you just look at the TSA data. People are flying more, both business as well as on the personal side. People are driving during the summer. When you look at it, we see the potential for 1.5 million to 2 million barrels a day of more demand between now and at the end of the year for on the oil side. Now, the good news is shale is back on its feet. I think, you know, it's important for people in Washington to realize that. I think more and more that story's getting out. Shale's growing at a rate of about 1 million barrels a day year-over-year. The rig count's 740. That's helpful. OPEC's producing at about 29 million barrels a day. Maybe they have 500,000 to 1 million barrels a day of spare capacity. That's important. The market's tight. When you overlay the Russia-Ukraine war on top of that and the potential for 2 to 3 million barrels a day to be banned, to be sanctioned, the world can't afford that. Right now, what's happening is most of that oil is being redirected at big discounts to India and China. If that oil actually is sanctioned, it's gonna make the market, going into the winter, very vulnerable. At the end of the day, the market is tight, and if anything, I'd say there are more risks to the upside than the downside. The issue of recessionary fears, are we gonna have a soft landing? Are we gonna have a hard landing? On oil, we still see demand very strong. We're not seeing any shortfalls in demand. At the pump, maybe that's a little bit, but that's more than offset by the fact that people are traveling more this summer, both on the road and in the air. I think the key point is, while interest rates go up, that may start to tame inflation and tame demand, and we're not seeing it physically yet on the oil side. The problem is, remember what I said before, we're having a demand shock? I just talked about the demand shock. What about the supply shock? Well, the only way to deal with the supply shock is more investment. Actually, tightening the monetary markets at the same time will make the supply shock worse. That goes for the global economy. It goes for the oil markets. The key challenge for the industry, actually, to deal with the supply shock is to get more supply out there. It's investment. If you look at the World Energy Outlook by the IEA, that they come out every October, November, and they'll come out again, in any scenario that they talk about the energy transition, more investment is needed for the oil and gas industry. That number is probably about $500 billion a year, each year for the next 10 years. That number globally was $300 billion two years ago, $360 billion one year ago, and it's about $420 billion now. The biggest issue to deal with the supply shock and the need for more oil supply is investment, and the industry needs to do more. That means more investment in shale, it means more investment in the offshore, and it means more investment in OPEC. I think it's very important for both government leaders as well as investors and business leaders to understand that we need to be investing more now in oil to make sure that we have an energy transition that's affordable and that's secure. John, some of your peers are gonna be in Washington today, and we've heard some rhetoric from the administration chastising the oil and gas industry, some of the refiners for some of the high prices that the consumer is seeing at the pump. Do you see any risk to the macro picture if the administration were to curb exports, windfall profits? Give us your view on that. Yeah. Some of the things being talked about by the administration would make the situation that I just talked about worse, not better. Providing a political move of sort of a hiatus, a grace period on the federal gasoline tax that's about $0.18 a gallon, what that would do is stimulate demand at a time we're trying to curb demand. Remember, the key to getting oil prices under control is to grow inventory. You only do that by increasing supply and tempering demand. The gasoline tax holiday would actually increase demand at a time that inventories are already tight. Actually, in the short term, while consumers would have more money in their pocket, it would actually increase gasoline demand. The idea of having a ban on crude oil exports is ill thought out. I think that was run up the flagpole about three months ago by one member in the administration. I understand the other people in the administration shut it down. The reason that would be a bad idea, we export about 3 million barrels a day of crude oil right now. That actually is good for world energy security, and it's good for world oil prices. Remember, what did I say before about Russia? If you take 3 million barrels a day of Russia crude oil off the market, it's gonna make inventories tighter. If you make a ban on crude oil exports in the United States, it's gonna make global inventories tighter. It's gonna make the price of world gasoline go up. We import 1 million barrels a day of gasoline in our country, so that import is gonna be higher. That's gonna set a higher price for gasoline in the United States, not a lower. These two ideas that the government has, either to ban crude oil exports or to have a gasoline holiday actually are gonna make the market tighter, not, you know, more constructive for consumers. It's gonna drive prices up, not drive them down. Do you see any risk of a windfall profits tax? Yeah. Well, I mean, you know, the key vote in the Senate, and this would have to go to the Senate, is Manchin, and I don't think there's any appetite for him to do that. Again, what would that do? That would curb investment. That would curb more supply coming out. Again, it would make the market tighter. Short-term, politically, it may have benefits. Long-term, fundamentally, it would be very bad. Great. I'd say one thing. If the Biden administration were gonna be asked for advice, and they're not looking for advice. If you were asked for advice, and that's one of the problems I think Mike Wirth wrote a great note, which is, you know, it'd be good if business and government engage because, you know, there is a war going on in the world, and we are facing this unprecedented time of dealing with COVID, from the demand shock and the supply shock. I think there's three things the Biden administration could do. The first is to have a master plan on the energy transition, to say that it's all about, to say that we need more investment, to make permitting and regulations, I'd say, more pragmatic, not putting obstacles up always to curtail oil and gas production. The second is we need a price on carbon. If you're going to attract trillions of dollars for the energy transition and renewable energy, you have to have a price on carbon. There's no appetite in the administration for that, and yet they wanna be the climate presidency. The third is, they should have people that actually have knowledge of the energy business in the administration, and they should have people who are knowledgeable about business in the administration. Unfortunately, it's not there. You know, the key to a successful energy transition, especially where energy security is so key, is to have climate literacy, energy literacy, and economic literacy. People need to understand the energy transition's gonna take a long time, cost a lot of money, and need technologies that don't exist today. We need to have a much better working relationship where business and we all wanna help the administration be successful in getting the economy back on its feet and dealing with inflation. You know, business really needs to have a seat at the table and a working relationship with the administration. Hopeful that that will happen today, skeptical that it will have any results. I think this is much more political fanfare than it is about policy substance. Great. John, I wanted to shift gears and maybe talk a little bit about cost inflation and if you could give an update on what you're seeing in the field in North America plus in some of your long cycle projects, and how do you describe the state of the company's supply chain? Yeah. Look, the supply chain is tight. Remember I said supply shock? Well, supply shock went through the supply chain. One of the reasons we have supply shock is because the supply chain is tight. It creates a challenge. In the Bakken where we're one of the largest oil and gas operators in North Dakota, I'd say inflation has added about 7% to the cost to drill and complete a well. It used to be $5.8 million to drill and complete a well in the Bakken. Now it's about $6.2 million. That's probably lower than what you see in the Permian, which is closer to 15% to 20%. Part of that's because the Bakken's a regional market, and part of that is we have a world-class team up there that uses lean manufacturing techniques to eliminate waste every day in, day out. We're very proud of the fact that the number is only 7%. If you look at the offshore, you know, the biggest exposure we have in the offshore is in Guyana. We're spending about $1 billion there this year on the developments. There we haven't adjusted our cost or capital commitment at all. That's because Exxon has done a world-class job in project management, project execution, making long-term commitments, and really locking in the cost of that development. When you look at our CapEx for the year, we just mentioned that we'll give an update in July. Right now, John Rielly, who's here, our CFO, talked about it on our last quarterly call, our capital and exploratory expenditures were projected originally to be this year, about $2.6 billion. They're gonna be $2.8 billion. 100 of that increase is due to inflation. The other 100 is because we're adding an extra rig, a fourth rig to the Bakken that should come on stream in drilling operations in July. You know, that speaks volumes about what inflation is doing to our CapEx. Now, our CapEx overall has gone from $1.9 billion a year ago to $2.8 billion. That's up about 47%. That's because of investing in the business. About 80% of our CapEx. About half to Guyana, half to the Bakken. That's increase in activity levels to deal with this investment issue that the world is dealing with. Hess is certainly doing its share to spend more money to make sure that the world has the oil that it needs for the next five and 10 years. Our production, on the other hand, will follow that. If you look at the beginning of the year to the end of the year, our production should be up 25% to 30%. You know, we're doing our share to make sure more oil's out there. Okay. $2.8 billion of CapEx this year. John Rielly will give an update on the 2Q call. Any just, you know, early thoughts around 2023? You'll have the full rig in the Bakken. I think you'll have a little bit more spend in Guyana. Any just ballpark numbers around, as you think about next year? Yeah. It may be a little bit higher than the $2.8 billion. You know, obviously, we'll announce that in January, but, you know, there are gonna be no surprises there, no real incremental expenditures for new plays or, you know, much more increase in activity. Yes, the impact of having another rig running in the Bakken is one thing. That's probably another $100 million. There may be some upward pressure, because we have a very big development investment activity going on in Guyana. It might be a couple of hundred million dollars more. Okay. Great. Let's talk a little bit about where the company's at. You know, this is an important year. You've reached that free cash flow inflection point. Talk to us about what that means. You obviously raised the dividend earlier this year. You paid off the term loan. As you get the second phase of this project up and running, we have obviously strong prices are constructive. How do you think about cash return to shareholders? Obviously, we're gonna continue to invest in our high return, low cost projects. That's gonna be the first funnel on cash. That's the $2.8 billion to potentially $3 billion, you know, that we're looking at potentially for next year. We'll get the final numbers when we get into January. After that, you know, as you know, the second ship in Guyana comes on. I know Neil Chapman was talking yesterday. It's a 220,000 barrel a day ship. It's running at about 200,000 barrels a day right now. Hess has 30% of that. That's one of the contributors to make the number of cargoes go up from 2.5 in the first quarter to 8 in the fourth quarter. With current prices and that increase in volume, obviously, our cash flow and free cash flow is compounding. First step, we paid off the debt once that ship came on production in February. We increased our dividend. What we said on the last conference call, you know, we're gonna give strong consideration to starting to buy our stock. We'll give an update on that in the July call. The first priority now for us, now that the dividend's been increased and our debt's in good shape, is we're gonna proportionately more start returning capital through buying our stock. We don't believe in variable dividends. We don't think there's any sustainability to that return. When we increase our dividend, it's gonna be increasing the fixed, so you can count on it. We'll stress test it. We want it attractive for income investors. Yet at the same time that we're gonna continue to grow the dividend, a growing proportion of that free cash flow will go to stock buybacks. Okay. The specific language on your buyback program is, or cash return is up to 75%. I get a lot of questions on, you know, how does that, how does Hess. I think it's actually at least 75%. You know, maybe, hopefully, we can do more. Okay. Okay. Got it. That's the clarity on that. Okay. Jay will- I'm looking back at John Rielly. Jay He looks nervous, but it's okay. Okay. Got it. Let's talk a little bit about the portfolio. Sure. Guyana, for the generalists in the audience, maybe you could paint the bigger picture of where we're at in terms of the phases and the longer-term opportunity set for Hess. Yeah. Guyana, so you all know, is one of the largest oil discoveries in the last 20 years in the world. We have a page in our investor pack that Wood Mackenzie did a study that it's some of the lowest cost, highest return oil in the world, and yet it's got some of the lowest carbon footprint. This oil, you know, oil and gas are gonna be needed for the next 20 years, 30 years to have an orderly and affordable energy transition. The Guyana barrels are gonna be very well suited for that. We get a Brent price for it, and right now we're getting a premium to Brent. I think that's important because when you think of shale producers, they get a WTI price that's less as well as a deduct for transportation to the wellhead. There's a price advantage along with the cost advantage that I talked about. Since 2015, when the first discovery happened, we've had overall 26 discoveries. 11 billion barrels of oil equivalent have been discovered. We have a 12-well program this year. About three rigs are running in theater for exploration and appraisal. Three rigs are running for development. Those prospects are both geographically dispersed as well as geologically dispersed at some deeper prospects that we have. My point here is there's still a lot of longevity, a lot of upside, a lot of running room, multi-billion barrels on top of the 11 billion barrels that we've discovered already. In terms of the development, Arun, you talked well about them having a break even between $25 and $35 Brent. Liza Phase One is on. Its nameplate is 120,000 barrels a day. Neil Chapman talked yesterday that it's running 20% higher than that. There's been debottlenecking. So you can assume about 140 a day. We have 30% of that. Liza Phase Two is running 200 a day of the 220 a day, and that's ramping up to that 220 a day, hopefully by the third quarter. Payara, which is the third development, we just gave an announcement at our last quarterly call, that instead of that 220,000 barrels a day coming on in 2024, it'll be the latter part of 2023. Yellowtail is the biggest development today, 250,000 barrels a day because it's developing more oil, and it's got excellent returns. It's got a break even of about $29 per barrel Brent. That should come on in 2025. What we're doing now is doing the engineering and planning for a fifth ship that hopefully will get a plan of development on by the end of the year. We're actually starting to do work on a sixth ship. We have visibility now to at least 6 ships, 1 million barrels a day of gross production in 2027. You know, this is an unbelievable investment opportunity, and it's got a lot more running room. We still see multi-billion barrels to explore there, and we think that will add to our development queue. The phasing of the developments, and again, Exxon's done a world-class job on this, is about one ship or one FPSO a year. The time from investment decision, you know, when you talk long cycle, this is short cycle of the long cycle. From the time of investment decision for an FPSO, floating production storage and offloading facility, it's about 3 years. There's, you know, a conception out there that when you have long cycle, it's 7 years, it's 10 years. Well, in a virgin emerging area, that's probably true. If you're off the coast of South Africa or something like that, and you had your first well, you have to do appraisal, then you have to do development. It's probably 7-10 years from your first oil discovered. In our case, since all this oil's been discovered and also the supply chain and project management by Exxon is so great, it's really 3 years. You actually get your money back faster if you invest in Guyana than if you invest in shale. Let's talk about the next potential project. I think from previous comments it could be Uaru. Yeah, Uaru, Mako, and probably one other prospect tied into that. Is the potential for that plan of development to be submitted to the government this year? Yes. This calendar year? Yes. Okay. That's what we're working towards. Okay. I wanted to ask you about the deeper interval that you successfully tested at Fangtooth. Yes. Most of the developments thus far have been in the Upper Campanian. Yes. What's the potential in this deeper interval? Yeah. Well, you know, most of the oil's been found in the Upper Campanian. It's about 15,000-foot total depth, and there are these sand channels. Just think of the Colorado River, if you ever gone rafting on it or gone hiking by there. There are all these sand channels that go out, and these sand channels have had a petroleum system feeding it from below. So, you know, fortunately, they're, you know, high-quality reservoirs, very high porosity, high permeability, and they're oily. So that's really the Upper Campanian. That's what Liza is. That's what Liza Phase Two is. That's what Payara is. That's what Yellowtail is. Potentially, that's what Uaru is. What we have found is that there's a deeper horizon with similar sand channels about 3,000 feet deeper, so it's not much deeper. You don't have to solve problems or drilling challenges like you have in the deep water Gulf of Mexico. We found, we drilled this prospect in and of itself as opposed to drilling to 15,000 and going for what we call a tail 3,000 feet deeper. We optimally located this where we thought the reservoir size and potential prospect, you know, could be impactful. In Fangtooth, which is to the west of Liza, we found, you know, a substantial accumulation of oil. High-quality oil. Now that we've had this success and we have these other well ties to deeper horizons in other wells as well, we've remodeled our seismic, and we're starting to find other deep prospects. Part of our program this year and next year is gonna be testing and appraising these deeper prospects that could either be added to the shallower developments that we're doing, because in some cases are on top of each other, or could potentially provide a standalone development itself. Okay. There's a lot of optionality and upside here with these deeper horizons to complement the geographic width of the Upper Campanian. Okay. Are you gonna appraise Fangtooth this year? Is that the plan? Yeah. Hopefully by the end of this year. If not the end of this year, the beginning of next year. Okay. That's a high priority to do that. Got it. I think there are at least two wells that are being planned. Two wells. Okay, great. Great. Let me shift gears a little bit to the Bakken. Can you talk about, you know, the 2022 program? You obviously had some weather issues in Q1. How do you see the Bakken program looking for the year? Yeah. Weather was literally a headwind for us and for the industry in both March and April. You know, we had to take down our guidance and go to the lower end. We are coming out of that. We're adding the fourth rig as we go into the third quarter. We should be on track, even though we're starting at a lower point to meet our 175 to 180 a day guidance for the fourth quarter. It was a transitory problem. It was a real problem for the industry as well as ourselves. Now we're catching up, and we're starting to get ahead of it. Okay. You made the decision to add the fourth rig. Yes. which I think is gonna come in that September timeframe. What does that do for your longer term production profile? Yeah. What it does is, you know, we've always said that, you know, we were producing 200,000 barrels a day of oil equivalent before COVID. We'll be at 200,000 barrels a day. I think this year, you know, the guidance is 160-165, maybe at the lower end of that number, on average for the year, even though you got the higher number in the fourth quarter. What this should do is allow us to get to 200,000 barrels a day, you know, in 2024. Then we hold it on plateau. We're not gonna be adding a fifth rig in the Bakken. The fourth rig is the optimal number for returns, for optimizing inventory, for optimizing free cash flow. That 200,000 barrels a day will come sooner, and it should extend the plateau at 200,000 barrels a day, potentially to the end of the decade. Great. John, we're out of time. We really appreciate your support of the conference once again this year. Appreciate it. Thank you so much. Thank you. Thanks for the time. Yeah. Thank you.