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 ~~September 30, 2022~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, there were ~~308,308,466~~307,051,889 shares of Common Stock outstanding.

HESS CORPORATION

Form 10-Q

TABLE OF CONTENTS


Item No.	Item No.		Page Number	Item No.		Page Number
		PART I - FINANCIAL INFORMATION			PART I - FINANCIAL INFORMATION
1.	1.	Financial Statements (Unaudited)		1.	Financial Statements (Unaudited)
		Consolidated Balance Sheet at September 30, 2022, and December 31, 2021	2
		Statement of Consolidated Income for the Three and Nine Months Ended September 30, 2022, and 2021	3
		Statement of Consolidated Comprehensive Income for the Three and Nine Months Ended September 30, 2022, and 2021	4		Consolidated Balance Sheet at March 3 1 , 202 3 , and December 31, 202 2	2
		Statement of Consolidated Cash Flows for the Nine Months Ended September 30, 2022, and 2021	5		Statement of Consolidated Income for the Three Months Ended March 3 1 , 202 3 , and 202 2	3
		Statement of Consolidated Equity for the Three and Nine Months Ended September 30, 2022, and 2021	6		Statement of Consolidated Comprehensive Income for the Three Months Ended March 3 1 , 202 3 , and 202 2	4
		Notes to Consolidated Financial Statements (Unaudited)	7		Statement of Consolidated Cash Flows for the Three Months Ended March 3 1 , 202 3 , and 202 2	5
		Note 1 - Basis of Presentation	7		Statement of Consolidated Equity for the Three Months Ended March 3 1 , 202 3 , and 202 2	6
		Note 2 - Inventories	7		Notes to Consolidated Financial Statements (Unaudited)	7
		Note 3 - Property, Plant and Equipment	7		Note 1 - Basis of Presentation	7
		Note 4 - Hess Midstream LP	8		Note 2 - Inventories	7
		Note 5 - Accrued Liabilities	9		Note 3 - Property, Plant and Equipment	7
		Note 6 - Debt	9		Note 4 - Hess Midstream LP	8
		Note 7 - Revenue	10		Note 5 - Accrued Liabilities	8
		Note 8 - Impairment and Other	11		Note 6 - Revenue	9
		Note 9 - Retirement Plans	11		Note 7 - Retirement Plans	9
		Note 10 - Weighted Average Common Shares	12		Note 8 - Weighted Average Common Shares	10
		Note 11 - Guarantees and Contingencies	12		Note 9 - Guarantees and Contingencies	10
		Note 12 - Segment Information	15		Note 1 0 - Segment Information	12
		Note 13 - Financial Risk Management Activities	16		Note 1 1 - Financial Risk Management Activities	13

2.	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
3.	3.	Quantitative and Qualitative Disclosures about Market Risk	33	3.	Quantitative and Qualitative Disclosures about Market Risk	28
4.	4.	Controls and Procedures	33	4.	Controls and Procedures	28

		PART II - OTHER INFORMATION			PART II - OTHER INFORMATION
1.	1.	Legal Proceedings	34	1.	Legal Proceedings	29
2.	2.	Share Repurchase Activities	34	2.	Share Repurchase Activities	29
6.	6.	Exhibits	35	6.	Exhibits	30
		Signatures	36		Signatures	31

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)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(In millions, except share amounts)					(In millions, except share amounts)
Assets	Assets					Assets
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,384	$	2,713	Cash and cash equivalents	$	2,100	$	2,486
Accounts receivable:	Accounts receivable:					Accounts receivable:
From contracts with customers	From contracts with customers	1,241		1,062		From contracts with customers	1,064		1,041
Joint venture and other	Joint venture and other	134		149		Joint venture and other	143		121
Inventories	Inventories	278		223		Inventories	229		217
Other current assets	Other current assets	86		199		Other current assets	263		66
Total current assets	Total current assets	4,123		4,346		Total current assets	3,799		3,931
Property, plant and equipment:	Property, plant and equipment:					Property, plant and equipment:
Total — at cost	Total — at cost	32,356		31,178		Total — at cost	33,276		32,592
Less: Reserves for depreciation, depletion, amortization and lease impairment	Less: Reserves for depreciation, depletion, amortization and lease impairment	17,264		16,996		Less: Reserves for depreciation, depletion, amortization and lease impairment	17,864		17,494
Property, plant and equipment — net	Property, plant and equipment — net	15,092		14,182		Property, plant and equipment — net	15,412		15,098
Operating lease right-of-use assets — net	Operating lease right-of-use assets — net	461		352		Operating lease right-of-use assets — net	542		570
Finance lease right-of-use assets — net	Finance lease right-of-use assets — net	131		144		Finance lease right-of-use assets — net	121		126
Goodwill	Goodwill	360		360		Goodwill	360		360
Deferred income taxes	Deferred income taxes	139		71		Deferred income taxes	131		133
Post-retirement benefit assets	Post-retirement benefit assets	617		409		Post-retirement benefit assets	663		648
Other assets	Other assets	720		651		Other assets	910		829
Total Assets	Total Assets	$	21,643	$	20,515	Total Assets	$	21,938	$	21,695
Liabilities	Liabilities					Liabilities
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts payable	Accounts payable	$	321	$	220	Accounts payable	$	344	$	285
Accrued liabilities	Accrued liabilities	1,703		1,710		Accrued liabilities	1,663		1,840
Taxes payable	Taxes payable	167		528		Taxes payable	59		47
Current portion of long-term debt	Current portion of long-term debt	—		517		Current portion of long-term debt	5		3
Current portion of operating and finance lease obligations	Current portion of operating and finance lease obligations	121		89		Current portion of operating and finance lease obligations	237		221
Total current liabilities	Total current liabilities	2,312		3,064		Total current liabilities	2,308		2,396
Long-term debt	Long-term debt	8,303		7,941		Long-term debt	8,382		8,278
Long-term operating lease obligations	Long-term operating lease obligations	461		394		Long-term operating lease obligations	422		469
Long-term finance lease obligations	Long-term finance lease obligations	185		200		Long-term finance lease obligations	174		179
Deferred income taxes	Deferred income taxes	604		383		Deferred income taxes	454		418
Asset retirement obligations	Asset retirement obligations	1,062		1,005		Asset retirement obligations	1,050		1,034
Other liabilities and deferred credits	Other liabilities and deferred credits	522		502		Other liabilities and deferred credits	427		425
Total Liabilities	Total Liabilities	13,449		13,489		Total Liabilities	13,217		13,199
Equity	Equity					Equity
Hess Corporation stockholders’ equity:	Hess Corporation stockholders’ equity:					Hess Corporation stockholders’ equity:
Common stock, par value $1.00; Authorized — 600,000,000 shares	Common stock, par value $1.00; Authorized — 600,000,000 shares					Common stock, par value $1.00; Authorized — 600,000,000 shares
Issued 308,308,466 shares (2021: 309,744,953)		308		310
Issued 307,051,889 shares (2022: 306,176,864)						Issued 307,051,889 shares (2022: 306,176,864)	307		306
Capital in excess of par value	Capital in excess of par value	6,227		6,017		Capital in excess of par value	6,254		6,206
Retained earnings	Retained earnings	1,354		379		Retained earnings	1,686		1,474
Accumulated other comprehensive loss		(330)		(406)
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	(114)		(131)
Total Hess Corporation stockholders’ equity	Total Hess Corporation stockholders’ equity	7,559		6,300		Total Hess Corporation stockholders’ equity	8,133		7,855
Noncontrolling interests	Noncontrolling interests	635		726		Noncontrolling interests	588		641
Total Equity	Total Equity	8,194		7,026		Total Equity	8,721		8,496
Total Liabilities and Equity	Total Liabilities and Equity	$	21,643	$	20,515	Total Liabilities and Equity	$	21,938	$	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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions, except per share amounts)									(In millions, except per share amounts)
Revenues and Non-Operating Income	Revenues and Non-Operating Income									Revenues and Non-Operating Income
Sales and other operating revenues	Sales and other operating revenues	$	3,122	$	1,759	$	8,390	$	5,236	Sales and other operating revenues	$	2,411	$	2,313
Gains on asset sales, net	Gains on asset sales, net	—		29		25		29		Gains on asset sales, net	—		22
Other, net	Other, net	35		23		101		63		Other, net	42		36
Total revenues and non-operating income	Total revenues and non-operating income	3,157		1,811		8,516		5,328		Total revenues and non-operating income	2,453		2,371
Costs and Expenses	Costs and Expenses									Costs and Expenses
Marketing, including purchased oil and gas	Marketing, including purchased oil and gas	982		522		2,507		1,362		Marketing, including purchased oil and gas	603		682
Operating costs and expenses	Operating costs and expenses	398		333		1,067		913		Operating costs and expenses	382		313
Production and severance taxes	Production and severance taxes	72		42		200		123		Production and severance taxes	48		61
Exploration expenses, including dry holes and lease impairment	Exploration expenses, including dry holes and lease impairment	58		36		134		117		Exploration expenses, including dry holes and lease impairment	66		43
General and administrative expenses	General and administrative expenses	109		76		314		254		General and administrative expenses	136		110
Interest expense	Interest expense	125		125		369		360		Interest expense	123		123
Depreciation, depletion and amortization	Depreciation, depletion and amortization	471		349		1,199		1,130		Depreciation, depletion and amortization	491		337
Impairment and other		54		—		54		147

Total costs and expenses	Total costs and expenses	2,269		1,483		5,844		4,406		Total costs and expenses	1,849		1,669
Income Before Income Taxes	Income Before Income Taxes	888		328		2,672		922		Income Before Income Taxes	604		702
Provision for income taxes	Provision for income taxes	282		143		807		388		Provision for income taxes	176		197
Net Income	Net Income	606		185		1,865		534		Net Income	428		505
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	91		70		266		240		Less: Net income attributable to noncontrolling interests	82		88
Net Income Attributable to Hess Corporation	Net Income Attributable to Hess Corporation	$	515	$	115	$	1,599	$	294	Net Income Attributable to Hess Corporation	$	346	$	417

Net Income Attributable to Hess Corporation Per Common Share:	Net Income Attributable to Hess Corporation Per Common Share:									Net Income Attributable to Hess Corporation Per Common Share:
Basic	Basic	$	1.67	$	0.37	$	5.18	$	0.96	Basic	$	1.13	$	1.35
Diluted	Diluted	$	1.67	$	0.37	$	5.16	$	0.95	Diluted	$	1.13	$	1.34
Weighted Average Number of Common Shares Outstanding:	Weighted Average Number of Common Shares Outstanding:									Weighted Average Number of Common Shares Outstanding:
Basic	Basic	307.6		308.1		308.7		307.1		Basic	305.4		308.9
Diluted	Diluted	308.9		309.9		310.1		309.1		Diluted	307.3		310.4
Common Stock Dividends Per Share	Common Stock Dividends Per Share	$	0.375	$	0.250	$	1.125	$	0.750	Common Stock Dividends Per Share	$	0.4375	$	0.3750

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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Net Income	Net Income	$	606	$	185	$	1,865	$	534	Net Income	$	428	$	505
Other Comprehensive Income (Loss):	Other Comprehensive Income (Loss):									Other Comprehensive Income (Loss):
Derivatives designated as cash flow hedges	Derivatives designated as cash flow hedges									Derivatives designated as cash flow hedges
Effect of hedge (gains) losses reclassified to income	Effect of hedge (gains) losses reclassified to income	165		64		420		179		Effect of hedge (gains) losses reclassified to income	34		92
Income taxes on effect of hedge (gains) losses reclassified to income	Income taxes on effect of hedge (gains) losses reclassified to income	—		—		—		—		Income taxes on effect of hedge (gains) losses reclassified to income	—		—
Net effect of hedge (gains) losses reclassified to income	Net effect of hedge (gains) losses reclassified to income	165		64		420		179		Net effect of hedge (gains) losses reclassified to income	34		92
Change in fair value of cash flow hedges	Change in fair value of cash flow hedges	(12)		(40)		(506)		(271)		Change in fair value of cash flow hedges	(17)		(455)
Income taxes on change in fair value of cash flow hedges	Income taxes on change in fair value of cash flow hedges	—		—		—		—		Income taxes on change in fair value of cash flow hedges	—		—
Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(12)		(40)		(506)		(271)		Net change in fair value of cash flow hedges	(17)		(455)
Change in derivatives designated as cash flow hedges, after taxes	Change in derivatives designated as cash flow hedges, after taxes	153		24		(86)		(92)		Change in derivatives designated as cash flow hedges, after taxes	17		(363)
Pension and other postretirement plans	Pension and other postretirement plans									Pension and other postretirement plans
(Increase) reduction in unrecognized actuarial losses	(Increase) reduction in unrecognized actuarial losses	—		—		152		3		(Increase) reduction in unrecognized actuarial losses	—		—
Income taxes on actuarial changes in plan liabilities	Income taxes on actuarial changes in plan liabilities	—		—		—		—		Income taxes on actuarial changes in plan liabilities	—		—
(Increase) reduction in unrecognized actuarial losses, net	(Increase) reduction in unrecognized actuarial losses, net	—		—		152		3		(Increase) reduction in unrecognized actuarial losses, net	—		—
Amortization of net actuarial losses	Amortization of net actuarial losses	2		16		10		48		Amortization of net actuarial losses	—		3
Income taxes on amortization of net actuarial losses	Income taxes on amortization of net actuarial losses	—		—		—		—		Income taxes on amortization of net actuarial losses	—		—
Net effect of amortization of net actuarial losses	Net effect of amortization of net actuarial losses	2		16		10		48		Net effect of amortization of net actuarial losses	—		3
Change in pension and other postretirement plans, after taxes	Change in pension and other postretirement plans, after taxes	2		16		162		51		Change in pension and other postretirement plans, after taxes	—		3
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)	155		40		76		(41)		Other Comprehensive Income (Loss)	17		(360)
Comprehensive Income	Comprehensive Income	761		225		1,941		493		Comprehensive Income	445		145
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests	91		70		266		240		Less: Comprehensive income attributable to noncontrolling interests	82		88
Comprehensive Income Attributable to Hess Corporation	Comprehensive Income Attributable to Hess Corporation	$	670	$	155	$	1,675	$	253	Comprehensive Income Attributable to Hess Corporation	$	363	$	57

See accompanying Notes to Consolidated Financial Statements.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022

		(In millions)					(In millions)
Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net income	Net income	$	1,865	$	534	Net income	$	428	$	505
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
(Gains) losses on asset sales, net	(Gains) losses on asset sales, net	(25)		(29)		(Gains) losses on asset sales, net	—		(22)
Depreciation, depletion and amortization	Depreciation, depletion and amortization	1,199		1,130		Depreciation, depletion and amortization	491		337
Impairment and other		54		147

Exploratory dry hole costs	Exploratory dry hole costs	19		11		Exploratory dry hole costs	31		—
Exploration lease impairment	Exploration lease impairment	14		15		Exploration lease impairment	5		6
Pension settlement loss		2		5

Stock compensation expense	Stock compensation expense	66		61		Stock compensation expense	35		33
Noncash (gains) losses on commodity derivatives, net	Noncash (gains) losses on commodity derivatives, net	383		152		Noncash (gains) losses on commodity derivatives, net	—		55
Provision for deferred income taxes and other tax accruals	Provision for deferred income taxes and other tax accruals	243		79		Provision for deferred income taxes and other tax accruals	42		38
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(Increase) decrease in accounts receivable	(500)		(533)		(Increase) decrease in accounts receivable	(202)		(642)
(Increase) decrease in inventories	(Increase) decrease in inventories	(55)		97		(Increase) decrease in inventories	(12)		(20)
Increase (decrease) in accounts payable and accrued liabilities	Increase (decrease) in accounts payable and accrued liabilities	37		169		Increase (decrease) in accounts payable and accrued liabilities	(23)		81
Increase (decrease) in taxes payable	Increase (decrease) in taxes payable	(361)		278		Increase (decrease) in taxes payable	12		(399)
Changes in other operating assets and liabilities	Changes in other operating assets and liabilities	(249)		(125)		Changes in other operating assets and liabilities	(169)		(128)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	2,692		1,991		Net cash provided by (used in) operating activities	638		(156)
Cash Flows From Investing Activities	Cash Flows From Investing Activities					Cash Flows From Investing Activities
Additions to property, plant and equipment - E&P	Additions to property, plant and equipment - E&P	(1,755)		(1,118)		Additions to property, plant and equipment - E&P	(773)		(491)
Additions to property, plant and equipment - Midstream	Additions to property, plant and equipment - Midstream	(177)		(120)		Additions to property, plant and equipment - Midstream	(64)		(55)
Proceeds from asset sales, net of cash sold	Proceeds from asset sales, net of cash sold	28		427		Proceeds from asset sales, net of cash sold	—		24
Other, net	Other, net	(4)		(4)		Other, net	(4)		—
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(1,908)		(815)		Net cash provided by (used in) investing activities	(841)		(522)
Cash Flows From Financing Activities	Cash Flows From Financing Activities					Cash Flows From Financing Activities
Net borrowings (repayments) of debt with maturities of 90 days or less	Net borrowings (repayments) of debt with maturities of 90 days or less	(61)		(32)		Net borrowings (repayments) of debt with maturities of 90 days or less	103		1
Debt with maturities of greater than 90 days:	Debt with maturities of greater than 90 days:					Debt with maturities of greater than 90 days:
Borrowings	Borrowings	420		750		Borrowings	—		—
Repayments	Repayments	(510)		(508)		Repayments	—		(505)
Cash dividends paid	Cash dividends paid	(350)		(234)		Cash dividends paid	(137)		(119)
Common stock acquired and retired	Common stock acquired and retired	(340)		—		Common stock acquired and retired	(20)		—
Proceeds from sale of Class A shares of Hess Midstream LP		146		70

Noncontrolling interests, net	Noncontrolling interests, net	(430)		(589)		Noncontrolling interests, net	(131)		(74)
Employee stock options exercised	Employee stock options exercised	44		75		Employee stock options exercised	3		33
Payments on finance lease obligations	Payments on finance lease obligations	(5)		(7)		Payments on finance lease obligations	(2)		(2)
Other, net	Other, net	(27)		(21)		Other, net	1		1
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(1,113)		(496)		Net cash provided by (used in) financing activities	(183)		(665)
Net Increase (Decrease) in Cash and Cash Equivalents	Net Increase (Decrease) in Cash and Cash Equivalents	(329)		680		Net Increase (Decrease) in Cash and Cash Equivalents	(386)		(1,343)
Cash and Cash Equivalents at Beginning of Year	Cash and Cash Equivalents at Beginning of Year	2,713		1,739		Cash and Cash Equivalents at Beginning of Year	2,486		2,713
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	2,384	$	2,419	Cash and Cash Equivalents at End of Period	$	2,100	$	1,370

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			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 September 30, 2022
Balance at July 1, 2022		$	310	$	6,236	$	1,075	$	(485)	$	7,136	$	622	$	7,758
Net income		—		—		515		—		515		91		606
Other comprehensive income (loss)		—		—		—		155		155		—		155
Share-based compensation		—		20		—		—		20		—		20
Dividends on common stock		—		—		(117)		—		(117)		—		(117)

Common stock acquired and retired		(2)		(29)		(119)		—		(150)		—		(150)
Noncontrolling interests, net		—		—		—		—		—		(78)		(78)
Balance at September 30, 2022		$	308	$	6,227	$	1,354	$	(330)	$	7,559	$	635	$	8,194
For the Three Months Ended September 30, 2021
Balance at July 1, 2021		$	310	$	5,859	$	155	$	(836)	5,488		$	1,044	$	6,532
For the Three Months Ended March 31, 2023																For the Three Months Ended March 31, 2023
Balance at January 1, 2023																Balance at January 1, 2023	$	306	$	6,206	$	1,474	$	(131)	$	7,855	$	641	$	8,496
Net income	Net income	—		—		115		—		115		70		185		Net income	—		—		346		—		346		82		428
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		40		40		—		40		Other comprehensive income (loss)	—		—		—		17		17		—		17
Share-based compensation	Share-based compensation	—		16		—		—		16		—		16		Share-based compensation	1		40		—		—		41		—		41
Dividends on common stock	Dividends on common stock	—		—		(78)		—		(78)		—		(78)		Dividends on common stock	—		—		(134)		—		(134)		—		(134)
Repurchase of Class B units of Hess Midstream Operations LP	Repurchase of Class B units of Hess Midstream Operations LP	—		28		—		—		28		(390)		(362)		Repurchase of Class B units of Hess Midstream Operations LP	—		8		—		—		8		(54)		(46)
Noncontrolling interests, net	Noncontrolling interests, net	—		—		—		—		—		(77)		(77)		Noncontrolling interests, net	—		—		—		—		—		(81)		(81)
Balance at September 30, 2021		$	310	$	5,903	$	192	$	(796)	$	5,609	$	647	$	6,256
For the Nine Months Ended September 30, 2022
Balance at March 31, 2023																Balance at March 31, 2023	$	307	$	6,254	$	1,686	$	(114)	$	8,133	$	588	$	8,721
For the Three Months Ended March 31, 2022																For the Three Months Ended March 31, 2022
Balance at January 1, 2022	Balance at January 1, 2022	$	310	$	6,017	$	379	$	(406)	$	6,300	$	726	$	7,026	Balance at January 1, 2022	$	310	$	6,017	$	379	$	(406)	$	6,300	$	726	$	7,026
Net income	Net income	—		—		1,599		—		1,599		266		1,865		Net income	—		—		417		—		417		88		505
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		76		76		—		76		Other comprehensive income (loss)	—		—		—		(360)		(360)		—		(360)
Share-based compensation	Share-based compensation	2		110		—		—		112		—		112		Share-based compensation	1		66		—		—		67		—		67
Dividends on common stock	Dividends on common stock	—		—		(350)		—		(350)		—		(350)		Dividends on common stock	—		—		(116)		—		(116)		—		(116)
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		(4)		(62)		(274)		—		(340)		—		(340)
Noncontrolling interests, net	Noncontrolling interests, net	—		—		—		—		—		(230)		(230)		Noncontrolling interests, net	—		—		—		—		—		(74)		(74)
Balance at September 30, 2022		$	308	$	6,227	$	1,354	$	(330)	$	7,559	$	635	$	8,194
For the Nine Months Ended September 30, 2021
Balance at January 1, 2021		$	307	$	5,684	$	130	$	(755)	5,366		$	969	$	6,335
Net income		—		—		294		—		294		240		534
Other comprehensive income (loss)		—		—		—		(41)		(41)		—		(41)
Share-based compensation		3		135		—		—		138		—		138
Dividends on common stock		—		—		(232)		—		(232)		—		(232)
Sale of Class A shares of Hess Midstream LP		—		56		—		—		56		41		97
Repurchase of Class B units of Hess Midstream Operations LP		—		28		—		—		28		(390)		(362)
Noncontrolling interests, net		—		—		—		—		—		(213)		(213)
Balance at September 30, 2021		$	310	$	5,903	$	192	$	(796)	$	5,609	$	647	$	6,256
Balance at March 31, 2022																Balance at March 31, 2022	$	311	$	6,083	$	680	$	(766)	$	6,308	$	740	$	7,048

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the consolidated results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and consolidated cash flows for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~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, ~~2021.~~2022.

2. Inventories

Inventories consisted of the following:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(In millions)					(In millions)
Crude oil and natural gas liquids	Crude oil and natural gas liquids	$	96	$	52	Crude oil and natural gas liquids	$	67	$	63
Materials and supplies	Materials and supplies	182		171		Materials and supplies	162		154
Total Inventories	Total Inventories	$	278	$	223	Total Inventories	$	229	$	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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 (in millions):


Balance at January 1, ~~2022~~2023	$	~~681~~886
Additions to capitalized exploratory well costs pending the determination of proved reserves	~~267~~49
~~Reclassifications~~Capitalized exploratory well costs charged to ~~wells, facilities and equipment based on the determination of proved reserves~~expense	~~(93)~~(2)
Balance at ~~September 30, 2022~~March 31, 2023	$	~~855~~933

~~The preceding table excludes well costs of $19 million incurred and expensed during~~In the first ~~nine months of 2022. Additions~~quarter, additions to capitalized exploratory well costs pending ~~the~~ determination of proved reserves ~~are~~primarily related to wells drilled on the Stabroek Block (Hess 30%), offshore ~~Guyana,~~Guyana. At March 31, 2023, 38 exploration and appraisal wells on the ~~Huron-1 well (Hess 40%) in the Gulf~~Stabroek Block, with a total cost of ~~Mexico, and the Zanderij-1 well on Block 42 (Hess 33%), offshore Suriname. Reclassifications to wells, facilities and equipment based on the~~$776 million, were capitalized pending determination of proved ~~reserves resulted from~~reserves. The preceding table excludes well costs of $29 million that were incurred and expensed during the ~~sanction~~first three months of ~~the Yellowtail Field development project, the fourth sanctioned project on the Stabroek Block.~~2023.

At ~~September 30, 2022,~~March 31, 2023, exploratory well costs capitalized for greater than one year following completion of drilling of ~~$497~~$615 million was comprised of the following:

Guyana: Approximately ~~90%~~92% of the capitalized well costs in excess of one year relate to successful exploration wells where hydrocarbons were encountered on the Stabroek Block. In April 2023, the Government of Guyana and the partners sanctioned the development of the Uaru Field, the fifth sanctioned project on the block. Approximately $80 million of capitalized exploratory well costs at March 31, 2023 related to the Uaru Field will be reclassified to wells, facilities and equipment in the second quarter of 2023. The operator also plans further appraisal drilling on the ~~Block~~block and is conducting pre-development planning for additional phases of development.

Joint Development Area (JDA): Approximately 8%6% of the capitalized well costs in excess of one year ~~relates~~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 commercial negotiations for an extension of the existing gas sales contract to include development of the western part of the ~~Block.~~block.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Malaysia: Approximately 2% 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. ~~Subsurface evaluation and pre-development~~Pre-development studies are ongoing.

~~PART I - FINANCIAL INFORMATION (CONT’D.)~~

~~HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

4. Hess Midstream LP

At ~~September 30, 2022,~~March 31, 2023, Hess Midstream LP (Hess Midstream), a variable interest entity that is fully consolidated by Hess Corporation, had liabilities totaling ~~$3,053~~$3,119 million (December 31, ~~2021: $2,694~~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$4 million (December 31, ~~2021: $2~~2022: $3 million), property, plant and equipment with a carrying value of ~~$3,160~~$3,183 million (December 31, ~~2021: $3,125~~2022: $3,173 million) and an equity-method investment in the Little Missouri 4 (LM4) gas processing plant of ~~$98~~$93 million (December 31, ~~2021: $102~~2022: $94 million).

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 were $7$5 million ~~and $16 million, respectively, compared with $8 million and $22 million for the three and nine months ended September 30, 2021, respectively.~~(2022: $5 million).

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 Global Infrastructure Partners (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 amount and tax basis of Hess Midstream LP's investment inMarch 2023, Hess Midstream Operations LP (HESM Opco).

~~Concurrent with the April 2022 public offering, HESM Opco,~~, a consolidated subsidiary of Hess Midstream LP, repurchased approximately ~~13.6~~3.6 million HESM Opco Class B units held by a subsidiary of Hess Corporation and an affiliate of ~~GIP~~Global Infrastructure Partners (GIP) for ~~$400 million.~~$100 million, which was financed by 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~~Opco's revolving credit ~~facility used to finance the repurchase.~~facility. The transaction resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of ~~$32~~$8 million, and an increase in deferred tax assets and Noncontrolling interests of ~~$17~~$4 million resulting from a change in the difference between the carrying amount and tax basis of Hess Midstream LP's investment in HESM Opco. The ~~$200~~$50 million paid to GIP reduced Noncontrolling ~~Interests~~interests. ~~We owned~~After giving effect to this transaction, Hess Corporation continues to own an approximate 41% interest in Hess Midstream LP, on a consolidated basis, at ~~September 30, 2022.~~March 31, 2023.

~~In August 2021, HESM Opco repurchased 31.25 million HESM Opco Class B units held by a subsidiary~~

5. Accrued Liabilities

Accrued Liabilities consisted of Hess Corporation and an affiliate of GIP for $750 million. HESM Opco issued $750 million in aggregate principal amount of 4.250% fixed-rate senior unsecured notes due 2030 in a private offering to finance the ~~repurchase. The transaction resulted in an increase in~~ ~~Capital in Excess of Par~~ ~~and a decrease in~~ ~~Noncontrolling Interests~~ ~~of $28 million, and an increase in deferred tax assets and~~ ~~Noncontrolling Interests~~ ~~of $15 million resulting from a change in the difference between the carrying amount and tax basis of Hess Midstream LP's investment in HESM Opco. The $375 million paid to GIP reduced~~ ~~Noncontrolling Interests~~.following:

In March 2021, Hess Midstream LP completed an underwritten public equity offering of 6.9 million Hess Midstream LP Class A shares held by a subsidiary of Hess Corporation and an affiliate of GIP. We received net proceeds of $70 million from the public offering. The transaction resulted in an increase in ~~Capital in excess of par~~ ~~and~~ ~~Noncontrolling interests~~ ~~of $56 million and $41 million, respectively. The increase to~~ ~~Noncontrolling interests~~ of $41 million is comprised of $14 million resulting from the change in ownership interest and $27 million from an increase to deferred tax assets resulting from a change in the difference between the carrying amount and tax basis of Hess Midstream LP's investment in HESM Opco.


	March 31, 2023		December 31, 2022

	(In millions)
Accrued operating and marketing expenditures	$	545	$	522
Accrued capital expenditures	454		499
Accrued payments to royalty and working interest owners	190		201
Current portion of asset retirement obligations	176		207
Accrued interest on debt	111		143
Accrued compensation and benefits	67		132
Other accruals	120		136
Total Accrued Liabilities	$	1,663	$	1,840

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:~~

September 30,
2022 December 31,
2021
(In millions)
Accrued capital expenditures $ 518 $ 479
Accrued operating and marketing expenditures 490 462
Accrued payments to royalty and working interest owners 262 253
Current portion of asset retirement obligations 215 185
Accrued interest on debt 111 138
Accrued compensation and benefits 89 124
Other accruals 18 69
Total Accrued Liabilities $ 1,703 $ 1,710

6. ~~Debt~~

~~Debt – Hess Corporation:~~

~~Credit facility:~~ In July 2022, Hess Corporation replaced its $3.5 billion revolving credit facility expiring in May 2024 with a new $3.25 billion revolving credit facility maturing in July 2027. The new facility, which is fully undrawn, can be used for borrowings and letters of credit. Borrowings on the new facility will generally bear interest at 1.400% above the Secured Overnight Financing Rate (SOFR), though the interest rate is subject to adjustment based on the credit rating of the Corporation's senior, unsecured, non-credit enhanced long-term debt. The new credit agreement replaced the London Interbank Offered Rate (LIBOR) as the benchmark interest rate with SOFR and has substantially similar terms to the prior agreement, including covenants.

~~Term loan: In February 2022, we repaid the remaining $500 million outstanding under our $1.0 billion term loan previously scheduled to mature in March 2023. We repaid the first $500 million in July 2021.~~

~~Debt – Midstream:~~

~~Term loan and credit facility:~~ In July 2022, HESM Opco amended and restated its credit agreement for its $1.4 billion senior secured syndicated credit facilities, consisting of a $1.0 billion revolving credit facility and a $400 million term loan facility, resulting in an incremental $20 million outstanding on the term loan facility at closing. The amended and restated credit agreement, among other things, extended the maturity date from December 2024 to July 2027, increased the accordion feature to up to an additional $750 million, which does not represent a lending commitment from the lenders, and replaced LIBOR as the benchmark interest rate with SOFR. Borrowings under the new term loan facility will generally bear interest at SOFR plus an applicable margin ranging from 1.650% to 2.550%, while the applicable margin for the new syndicated revolving credit facility ranges from 1.375% to 2.050%. The amended and restated credit agreement has substantially similar terms to the prior agreement, including commitment amounts, guarantees, secured collateral and covenants.

~~Senior unsecured fixed-rate public notes:~~ In April 2022, 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 of approximately 13.6 million HESM Opco Class B units held by a subsidiary of Hess Corporation and an affiliate of GIP. The covenants of the 5.500% fixed-rate senior unsecured notes are substantially similar to the terms of the other existing HESM Opco fixed-rate senior unsecured notes.

~~PART I - FINANCIAL INFORMATION (CONT’D.)~~

~~HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

7. Revenue

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


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

Three Months Ended September 30, 2022
Sales of our net production volumes:
Crude oil revenue (b)		$	895	$	838	$	34	$	97	$	1,864	$	—	$	—	$	1,864
Natural gas liquids revenue		191		—		—		—		191		—		—		191
Natural gas revenue		145		—		150		6		301		—		—		301
Sales of purchased oil and gas		889		20		—		22		931		—		—		931
Intercompany revenue		—		—		—		—		—		335		(335)		—
Total sales		2,120		858		184		125		3,287		335		(335)		3,287
Other operating revenues (c)		(98)		(59)		—		(8)		(165)		—		—		(165)
Total sales and other operating revenues		$	2,022	$	799	$	184	$	117	$	3,122	$	335	$	(335)	$	3,122
Three Months Ended September 30, 2021
Sales of our net production volumes:
Three Months Ended March 31, 2023																		Three Months Ended March 31, 2023
Sales of net production volumes:																		Sales of net production volumes:
Crude oil revenue	Crude oil revenue	$	654	$	214	$	2	$	104	$	974	$	—	$	—	$	974	Crude oil revenue	$	669	$	825	$	29	$	—	$	1,523	$	—	$	—	$	1,523
Natural gas liquids revenue	Natural gas liquids revenue	143		—		—		—		143		—		—		143		Natural gas liquids revenue	141		—		—		—		141		—		—		141
Natural gas revenue	Natural gas revenue	77		—		143		2		222		—		—		222		Natural gas revenue	54		—		180		—		234		—		—		234
Sales of purchased oil and gas	Sales of purchased oil and gas	457		4		—		23		484		—		—		484		Sales of purchased oil and gas	527		17		—		—		544		—		—		544
Intercompany revenue	Intercompany revenue	—		—		—		—		—		304		(304)		—		Intercompany revenue	—		—		—		—		—		303		(303)		—
Total sales		1,331		218		145		129		1,823		304		(304)		1,823
Total sales (b)																		Total sales (b)	1,391		842		209		—		2,442		303		(303)		2,442
Other operating revenues (c)	Other operating revenues (c)	(51)		(9)		—		(4)		(64)		—		—		(64)		Other operating revenues (c)	(26)		(7)		—		—		(33)		2		—		(31)
Total sales and other operating revenues	Total sales and other operating revenues	$	1,280	$	209	$	145	$	125	$	1,759	$	304	$	(304)	$	1,759	Total sales and other operating revenues	$	1,365	$	835	$	209	$	—	$	2,409	$	305	$	(303)	$	2,411
Nine Months Ended September 30, 2022
Sales of our net production volumes:
Crude oil revenue (b)		$	2,626	$	1,745	$	102	$	413	$	4,886	$	—	$	—	$	4,886
Natural gas liquids revenue		545		—		—		—		545		—		—		545
Natural gas revenue		356		—		555		16		927		—		—		927
Sales of purchased oil and gas		2,310		42		—		93		2,445		—		—		2,445
Intercompany revenue		—		—		—		—		—		961		(961)		—
Total sales		5,837		1,787		657		522		8,803		961		(961)		8,803
Other operating revenues (c)		(251)		(126)		—		(36)		(413)		—		—		(413)
Total sales and other operating revenues		$	5,586	$	1,661	$	657	$	486	$	8,390	$	961	$	(961)	$	8,390
Nine Months Ended September 30, 2021
Sales of our net production volumes:
Three Months Ended March 31, 2022																		Three Months Ended March 31, 2022
Sales of net production volumes:																		Sales of net production volumes:
Crude oil revenue	Crude oil revenue	$	2,200	$	529	$	51	$	355	$	3,135	$	—	$	—	$	3,135	Crude oil revenue	$	836	$	226	$	31	$	146	$	1,239	$	—	$	—	$	1,239
Natural gas liquids revenue	Natural gas liquids revenue	406		—		—		—		406		—		—		406		Natural gas liquids revenue	181		—		—		—		181		—		—		181
Natural gas revenue	Natural gas revenue	251		—		484		6		741		—		—		741		Natural gas revenue	85		—		190		5		280		—		—		280
Sales of purchased oil and gas	Sales of purchased oil and gas	1,054		12		—		68		1,134		—		—		1,134		Sales of purchased oil and gas	660		4		—		35		699		—		—		699
Intercompany revenue	Intercompany revenue	—		—		—		—		—		887		(887)		—		Intercompany revenue	—		—		—		—		—		312		(312)		—
Total sales		3,911		541		535		429		5,416		887		(887)		5,416
Total sales (b)																		Total sales (b)	1,762		230		221		186		2,399		312		(312)		2,399
Other operating revenues (c)	Other operating revenues (c)	(145)		(19)		—		(16)		(180)		—		—		(180)		Other operating revenues (c)	(58)		(15)		—		(13)		(86)		—		—		(86)
Total sales and other operating revenues	Total sales and other operating revenues	$	3,766	$	522	$	535	$	413	$	5,236	$	887	$	(887)	$	5,236	Total sales and other operating revenues	$	1,704	$	215	$	221	$	173	$	2,313	$	312	$	(312)	$	2,313

(a)Other includes our interest in the Waha Concession in Libya, ~~and our interests in Denmark,~~ which ~~were~~was sold in ~~the third quarter of 2021.~~November 2022.

(b)Guyana crude oil revenue includes ~~$56~~$108 million of revenue from non-customers in ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2022. There was no revenue from non-customers in the third quarter and first nine months of 2021.~~2023 (2022: $0 million).

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

In Guyana, the joint venture partners (Contractors) to the Stabroek Block petroleum agreement are subject to the income tax laws of Guyana and remain primarily liable for income taxes due on the results of operations, resulting in recognition of income tax expense. Pursuant to the contractual arrangements of the petroleum agreement, a portion of gross production from the block, separate from the Contractors’ cost oil and profit oil, is used to satisfy the Contractors’ income tax liability. This portion of gross production, referred to as "tax barrels", is included in our reported production volumes and is recognized as sales revenue from non-customers.

~~PART I - FINANCIAL INFORMATION (CONT’D.)~~

~~HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

There have been no significant changes to contracts with customers or the composition thereof during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 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 ~~September 30, 2022,~~March 31, 2023, contract liabilities of $24 million (December 31, ~~2021:~~2022: $24 million) resulted from 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were no contract assets.

~~8. Impairment and Other~~

In the third quarter of 2022, we recorded a pre-tax charge of $28 million ($28 million after income taxes) that resulted from updates to our estimated abandonment liabilities for non-producing properties in the Gulf of Mexico and $26 million ($26 million after income taxes) to fully impair the net book value of our interests in the Penn State Field in the Gulf of Mexico due to a mechanical issue on the remaining production well in the field encountered during the third quarter of 2022.

In June 2021, the U.S. Bankruptcy Court approved the bankruptcy plan for Fieldwood Energy LLC (Fieldwood) which includes transferring abandonment obligations of Fieldwood to predecessors in title of certain of its assets, who are jointly and severally liable for the obligations. Results for the nine months ended September 30, 2021 included a charge of $147 million ($147 million after income taxes) in connection with estimated abandonment obligations in the West Delta 79/86 Field (West Delta Field), which we sold to a Fieldwood predecessor in 2004.

9.7. Retirement Plans

Components of net periodic benefit cost consisted of the following:


											Three Months Ended March 31,
		Three Months Ended September 30,				Nine Months Ended September 30,					2023		2022
		2022		2021		2022		2021
		(In millions)									(In millions)

Service cost	Service cost	$	11	$	13	$	36	$	40	Service cost	$	9	$	13
Interest cost (a)	Interest cost (a)	19		14		52		42		Interest cost (a)	25		16
Expected return on plan assets (a)	Expected return on plan assets (a)	(47)		(49)		(152)		(148)		Expected return on plan assets (a)	(39)		(53)
Amortization of unrecognized net actuarial losses (a)	Amortization of unrecognized net actuarial losses (a)	2		15		8		43		Amortization of unrecognized net actuarial losses (a)	—		3
Settlement loss (a)		—		1		2		5
Net periodic benefit cost (income) (a)	Net periodic benefit cost (income) (a)	$	(15)	$	(6)	$	(54)	$	(18)	Net periodic benefit cost (income) (a)	$	(5)	$	(21)

(a) Net non-service cost, which is included in Other, net in the Statement of Consolidated Income, ~~for the three and nine months ended September 30, 2022~~ was income of ~~$26 million and $90 million, respectively, compared with income of $19 million and $58~~$14 million for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~

~~In the second quarter~~March 31, 2023 (2022: $34 million of 2022, the Hess Corporation Employees’ Pension Plan purchased a single premium annuity contract at a cost of approximately $170 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 charge of $13 million to recognize unamortized actuarial losses. In connection with this settlement transaction, as required under U.S. accounting standards, we remeasured the funded status of the plan, which increased by $154 million primarily due to a change in the weighted average discount rate used to value the projected benefit obligation, and an update to the fair value of plan assets. The change in the funded status is reflected in ~~Post-retirement benefit assets~~ ~~in the~~ ~~Consolidated Balance Sheet~~income).

In the second quarter of 2022, the HOVENSA Legacy Employees' Pension Plan paid lump sums of approximately $20 million to certain participants, and purchased a single premium annuity contract at a cost of approximately $80 million, to settle the plan's projected benefit obligation. The settlement transactions resulted in a noncash gain of $11 million to recognize unamortized actuarial gains. In connection with these settlement transactions, as required under U.S. accounting standards,2023, we ~~remeasured the funded status of the plan, which increased by $6 million. The change in the funded status is reflected in~~ ~~Post-retirement benefit assets~~ ~~in the~~ ~~Consolidated Balance Sheet~~.

For the full year 2022, we forecast service cost for our pension and postretirement medical plans to be approximately $45 million and net non-service cost to be approximately $118 million of income, which is comprised of expected return on plan assets of approximately $200 million, interest cost of approximately $70 million, amortization of unrecognized net actuarial losses of approximately $10 million, and net settlement losses of $2 million. In 2022, we do not expect to contribute approximately $2 million to our funded pension plans.

119

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~10.~~8. 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Net income attributable to Hess Corporation:	Net income attributable to Hess Corporation:									Net income attributable to Hess Corporation:
Net income	Net income	$	606	$	185	$	1,865	$	534	Net income	$	428	$	505
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	91		70		266		240		Less: Net income attributable to noncontrolling interests	82		88
Net income attributable to Hess Corporation	Net income attributable to Hess Corporation	$	515	$	115	$	1,599	$	294	Net income attributable to Hess Corporation	$	346	$	417
Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:									Weighted average number of common shares outstanding:
Basic	Basic	307.6		308.1		308.7		307.1		Basic	305.4		308.9
Effect of dilutive securities	Effect of dilutive securities									Effect of dilutive securities
Restricted common stock	Restricted common stock	0.6		0.6		0.7		0.6		Restricted common stock	0.7		0.7
Stock options	Stock options	0.5		0.3		0.6		0.5		Stock options	0.7		0.6
Performance share units	Performance share units	0.2		0.9		0.1		0.9		Performance share units	0.5		0.2
Diluted	Diluted	308.9		309.9		310.1		309.1		Diluted	307.3		310.4

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


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2022	2021	2022	2021		2023	2022
Restricted common stock	Restricted common stock	623	47,215	240	78,889	Restricted common stock	121,189	97
Stock options	Stock options	269,748	705,557	204,970	790,155	Stock options	52,973	75,413
Performance share units	Performance share units	—	—	20,340	26,405	Performance share units	—	31,352

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we granted ~~586,287~~446,508 shares of restricted stock ~~(2021: 779,167)~~(2022: 562,530), ~~178,008~~130,272 performance share units ~~(2021: 205,155)~~(2022: 178,008) and ~~269,748~~189,479 stock options ~~(2021: 319,295)~~(2022: 269,748).

At December 31, 2021, the remaining amount under our $7.5 billion stock repurchase plan authorized by our Board of Directors (Board) was $650 million. During the nine months ended September 30, 2022, we repurchased approximately 3.1 million shares of our common stock for $340 million. No shares of common stock were repurchased during 2021.

~~11.~~ 9. 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

~~PART I - FINANCIAL INFORMATION (CONT’D.)~~

~~HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

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 September 2003, we received a directive from the New Jersey Department of Environmental Protection (NJDEP) to remediate contamination in the sediments of the Lower Passaic River. The NJDEP is also seeking natural resource damages. The directive, insofar as it affects us, relates to alleged releases from a petroleum bulk storage terminal in Newark, New Jersey we previously owned. We and over 70 companies entered into an Administrative Order on Consent with the Environmental Protection Agency (EPA) to study the same contamination; this work remains ongoing. We and other parties settled a cost recovery claim by the State of New Jersey and agreed with the EPA to fund remediation of a portion of the site. Since 2016, the EPA has issued a Record of Decision (ROD) selecting a dredge and cap remedy for both the lower eight miles and the upper nine miles of the Lower Passaic River at an estimated cost of approximately $1.82 billion. The ROD does not address the Newark Bay, which may require additional remedial action. In addition, the federal trustees for natural resources have begun a separate assessment of damages to natural resources in the Passaic River. Given that the EPA has not selected a final remedy for the Newark Bay, total remedial costs cannot be reliably estimated at this time. Based on currently known facts and circumstances, we do not believe that this matter will result in a significant liability to us because our former terminal did not store or use contaminants which are of concern in the river sediments and could not have contributed contamination along the river’s length. Further, there are numerous other parties who we expect will bear the cost of remediation and damages.

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 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 ~~also~~ 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. ~~has~~ 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. ~~While~~In February 2023, Hess, HONX, Inc., the ~~ultimate outcome~~Unsecured Creditors’ Committee, and ~~impact to us cannot be predicted with certainty, we believe that the~~counsel representing claimants, reached a mediated resolution of ~~these proceedings will not~~the matter, contingent upon final approvals of all parties and confirmation by the Bankruptcy Court. As of March 31, 2023, we have a ~~material adverse effect~~provision of $116 million for the amounts expected to be funded to the § 524G trust established for the settlement of claims, based on ~~our consolidated financial position, results of operations or cash flows.~~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,

~~PART I - FINANCIAL INFORMATION (CONT’D.)~~

~~HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

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.

1411

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~12.~~10. 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			Exploration and Production		Midstream		Corporate, Interest and Other		Eliminations		Total

		(In millions)											(In millions)
For the Three Months Ended September 30, 2022
Sales and Other Operating Revenues - Third parties		$	3,122	$	—	$	—	$	—	$	3,122
Intersegment Revenues		—		335		—		(335)		—
For the Three Months Ended March 31, 2023												For the Three Months Ended March 31, 2023
Sales and Other Operating Revenues	Sales and Other Operating Revenues	$	3,122	$	335	$	—	$	(335)	$	3,122	Sales and Other Operating Revenues	$	2,409	$	2	$	—	$	—	$	2,411

Net Income (Loss) attributable to Hess Corporation		$	572	$	68	$	(125)	$	—	$	515
Depreciation, Depletion and Amortization		425		46		—		—		471
Impairment and other		54		—		—		—		54
Provision for Income Taxes		275		7		—		—		282
Capital Expenditures		666		60		—		—		726
For the Three Months Ended September 30, 2021
Sales and Other Operating Revenues - Third parties		$	1,759	$	—	$	—	$	—	$	1,759
Intersegment Revenues	Intersegment Revenues	—		304		—		(304)		—		Intersegment Revenues	—		303		—		(303)		—
Sales and Other Operating Revenues	Sales and Other Operating Revenues	$	1,759	$	304	$	—	$	(304)	$	1,759	Sales and Other Operating Revenues	$	2,409	$	305	$	—	$	(303)	$	2,411

Net Income (Loss) attributable to Hess Corporation	Net Income (Loss) attributable to Hess Corporation	$	178	$	61	$	(124)	$	—	$	115	Net Income (Loss) attributable to Hess Corporation	$	405	$	61	$	(120)	$	—	$	346
Depreciation, Depletion and Amortization	Depreciation, Depletion and Amortization	308		41		—		—		349		Depreciation, Depletion and Amortization	443		47		1		—		491
Provision for Income Taxes	Provision for Income Taxes	140		3		—		—		143		Provision for Income Taxes	170		6		—		—		176
Capital Expenditures	Capital Expenditures	469		59		—		—		528		Capital Expenditures	735		57		—		—		792
For the Nine Months Ended September 30, 2022
Sales and Other Operating Revenues - Third parties		$	8,390	$	—	$	—	$	—	$	8,390
For the Three Months Ended March 31, 2022												For the Three Months Ended March 31, 2022
Sales and Other Operating Revenues												Sales and Other Operating Revenues	$	2,313	$	—	$	—	$	—	$	2,313
Intersegment Revenues	Intersegment Revenues	—		961		—		(961)		—		Intersegment Revenues	—		312		—		(312)		—
Sales and Other Operating Revenues	Sales and Other Operating Revenues	$	8,390	$	961	$	—	$	(961)	$	8,390	Sales and Other Operating Revenues	$	2,313	$	312	$	—	$	(312)	$	2,313

Net Income (Loss) attributable to Hess Corporation	Net Income (Loss) attributable to Hess Corporation	$	1,755	$	205	$	(361)	$	—	$	1,599	Net Income (Loss) attributable to Hess Corporation	$	460	$	72	$	(115)	$	—	$	417
Depreciation, Depletion and Amortization	Depreciation, Depletion and Amortization	1,062		135		2		—		1,199		Depreciation, Depletion and Amortization	292		45		—		—		337
Impairment and other		54		—		—		—		54
Provision for Income Taxes	Provision for Income Taxes	788		19		—		—		807		Provision for Income Taxes	192		5		—		—		197
Capital Expenditures	Capital Expenditures	1,802		169		—		—		1,971		Capital Expenditures	543		37		—		—		580
For the Nine Months Ended September 30, 2021
Sales and Other Operating Revenues - Third parties		$	5,236	$	—	$	—	$	—	$	5,236
Intersegment Revenues		—		887		—		(887)		—
Sales and Other Operating Revenues		$	5,236	$	887	$	—	$	(887)	$	5,236

Net Income (Loss) attributable to Hess Corporation		$	461	$	212	$	(379)	$	—	$	294
Depreciation, Depletion and Amortization		1,007		122		1		—		1,130
Impairment and other		147		—		—		—		147
Provision for Income Taxes		379		9		—		—		388
Capital Expenditures		1,145		129		—		—		1,274

Corporate, Interest and Other had interest income of $20 million in the first quarter of 2023 (2022 Q1: $0 million) which is included in Other, net in the Statement of Consolidated Income.

Identifiable assets by operating segment were as follows:


	March 31, 2023		December 31, 2022

	(In millions)
Exploration and Production	$	15,497	$	15,022
Midstream	3,780		3,775
Corporate, Interest and Other	2,661		2,898
Total	$	21,938	$	21,695

1512

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Identifiable assets by operating segment were as follows:~~

September 30,
2022 December 31,
2021
(In millions)
Exploration and Production $ 15,172 $ 14,173
Midstream 3,780 3,671
Corporate, Interest and Other 2,691 2,671
Total $ 21,643 $ 20,515

~~13.~~11. Financial Risk Management Activities

In the normal course of our business, we are exposed to commodity risks related to changes in the prices of crude oil and natural gas, as well as changes in interest rates and foreign currency values. Financial risk management activities include transactions designed to reduce risk in the selling prices of crude oil or natural gas we produce or ~~by reducing~~reduce our exposure to foreign currency or interest rate movements. Generally, futures, swaps or option strategies may be used to fix the forward selling price, or establish a floor price or a range banded with a floor and ceiling price, for a portion of our crude oil or natural gas production. Forward contracts or swaps may also be used to purchase certain currencies in which we conduct business with the intent of reducing exposure to foreign currency fluctuations. At ~~September 30, 2022,~~March 31, 2023, these instruments relate to the British Pound and Malaysian Ringgit. Interest rate swaps may be used to convert interest payments on certain long-term debt from fixed to floating rates.

The notional amounts of outstanding financial risk management derivative contracts were as follows:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(In millions)					(In millions)
Commodity - crude oil hedge contracts (millions of barrels)	Commodity - crude oil hedge contracts (millions of barrels)	13.8		54.8		Commodity - crude oil hedge contracts (millions of barrels)	35.8		—

Foreign exchange forwards / swaps	Foreign exchange forwards / swaps	$	153	$	145	Foreign exchange forwards / swaps	$	184	$	177
Interest rate swaps	Interest rate swaps	$	100	$	100	Interest rate swaps	$	100	$	100

~~At December 31, 2021,~~In the first quarter of 2023, we ~~had~~have hedged ~~90,000~~80,000 barrels of oil per day (bopd) with WTI ~~collars~~put options with an average monthly floor price of ~~$60~~$70 per barrel, and ~~an average monthly ceiling price of $100 per barrel and 60,000~~50,000 bopd with Brent ~~collars~~put options with an average monthly floor price of ~~$65 per barrel and an average monthly ceiling price of $105~~$75 per barrel for ~~calendar 2022. In~~ the ~~first quarter~~remainder of 2022, we purchased WTI and Brent call options to remove the ceiling price on our price collars for the period April 1, 2022 through December 31, 2022 for $325 million. The WTI $60 per barrel put options for 90,000 bopd and the Brent $65 per barrel put options for 60,000 bopd in our price collars remain outstanding through December 31, 2022.

~~PART I - FINANCIAL INFORMATION (CONT’D.)~~

~~HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

2023.

The table below reflects the fair values of risk management derivative instruments.


		Assets		Liabilities			Assets		Liabilities

		(In millions)					(In millions)
September 30, 2022
March 31, 2023						March 31, 2023
Derivative Contracts Designated as Hedging Instruments:	Derivative Contracts Designated as Hedging Instruments:					Derivative Contracts Designated as Hedging Instruments:
Crude oil put options	Crude oil put options	$	11	$	—	Crude oil put options	$	173	$	—
Interest rate swaps	Interest rate swaps	—		(4)		Interest rate swaps	—		(3)
Total derivative contracts designated as hedging instruments	Total derivative contracts designated as hedging instruments	11		(4)		Total derivative contracts designated as hedging instruments	173		(3)
Derivative Contracts Not Designated as Hedging Instruments:	Derivative Contracts Not Designated as Hedging Instruments:					Derivative Contracts Not Designated as Hedging Instruments:
Foreign exchange forwards and swaps	Foreign exchange forwards and swaps	8		—		Foreign exchange forwards and swaps	—		(2)
Total derivative contracts not designated as hedging instruments	Total derivative contracts not designated as hedging instruments	8		—		Total derivative contracts not designated as hedging instruments	—		(2)
Gross fair value of derivative contracts	Gross fair value of derivative contracts	19		(4)		Gross fair value of derivative contracts	173		(5)
Gross amounts offset in the Consolidated Balance Sheet	Gross amounts offset in the Consolidated Balance Sheet	—		—		Gross amounts offset in the Consolidated Balance Sheet	—		—
Net Amounts Presented in the Consolidated Balance Sheet	Net Amounts Presented in the Consolidated Balance Sheet	$	19	$	(4)	Net Amounts Presented in the Consolidated Balance Sheet	$	173	$	(5)
December 31, 2021
December 31, 2022						December 31, 2022
Derivative Contracts Designated as Hedging Instruments:	Derivative Contracts Designated as Hedging Instruments:					Derivative Contracts Designated as Hedging Instruments:
Crude oil collars		$	155	$	—
Interest rate swaps	Interest rate swaps	2		—		Interest rate swaps	$	—	$	(4)
Total derivative contracts designated as hedging instruments	Total derivative contracts designated as hedging instruments	157		—		Total derivative contracts designated as hedging instruments	—		(4)
Derivative Contracts Not Designated as Hedging Instruments:	Derivative Contracts Not Designated as Hedging Instruments:					Derivative Contracts Not Designated as Hedging Instruments:
Foreign exchange forwards and swaps	Foreign exchange forwards and swaps	—		(1)		Foreign exchange forwards and swaps	—		(2)
Total derivative contracts not designated as hedging instruments	Total derivative contracts not designated as hedging instruments	—		(1)		Total derivative contracts not designated as hedging instruments	—		(2)
Gross fair value of derivative contracts	Gross fair value of derivative contracts	157		(1)		Gross fair value of derivative contracts	—		(6)
Gross amounts offset in the Consolidated Balance Sheet	Gross amounts offset in the Consolidated Balance Sheet	—		—		Gross amounts offset in the Consolidated Balance Sheet	—		—
Net Amounts Presented in the Consolidated Balance Sheet	Net Amounts Presented in the Consolidated Balance Sheet	$	157	$	(1)	Net Amounts Presented in the Consolidated Balance Sheet	$	—	$	(6)

~~At September 30, 2022 and December 31, 2021, the~~The fair value of our crude oil hedge contracts is presented within Other current assets~~in our~~ ~~Consolidated Balance Sheet. The fair value of our foreign exchange forwards and swaps is presented within~~ ~~Other current assets~~ ~~at September 30, 2022 and within~~ ~~Accrued liabilities~~ ~~at December 31, 2021~~ in our Consolidated Balance Sheet. The fair value of our interest rate swaps is presented within Other liabilities and deferred credits ~~at September 30, 2022~~in our Consolidated Balance Sheet. The fair value of our foreign exchange forwards and swaps is presented within~~Other assets~~ ~~at December 31, 2021~~Accrued liabilities in our Consolidated Balance Sheet. All fair values in the table above are based on Level 2 inputs.

Derivative contracts designated as hedging instruments:

Crude oil derivatives designated as cash flow hedges: Crude oil hedging contracts decreased Sales and other operating revenues by ~~$165 million and $420~~$34 million in the three ~~and nine~~ months ended ~~September 30, 2022, respectively. In the three and nine months ended September 30, 2021, crude oil hedging contracts decreased~~ ~~Sales and other operating revenues~~March 31, 2023 (2022 Q1: decrease by ~~$64 million and $179 million, respectively.~~$92 million). At ~~September 30, 2022,~~March 31, 2023, pre-tax deferred ~~losses~~gains in Accumulated other comprehensive ~~loss~~income (loss) related to outstanding crude oil hedging contracts were ~~$155~~$17 million ($~~155~~17 million after income taxes), all of which will be reclassified into earnings during the remainder of ~~2022~~2023 as the hedged crude oil

PART I - FINANCIAL INFORMATION (CONT’D.)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

sales are recognized in earnings.

~~Interest rate swaps designated as fair value hedges:~~ We had interest rate swaps with gross notional amounts totaling $100 million at September 30, 2022 and December 31, 2021, that convert interest payments from fixed to floating rates. Changes in the fair value of interest rate swaps and the hedged fixed-rate debt are recorded in ~~Interest expense~~ ~~in the~~ ~~Statement of Consolidated Income~~. In the three and nine months ended September 30, 2022, the change in fair value of interest rate swaps was a decrease of $1 million and $6 million, respectively, compared with a decrease of nil and $1 million in the three and nine months ended September 30, 2021, respectively, with a corresponding adjustment in the carrying value of the hedged fixed-rate debt.

Derivative contracts not designated as hedging instruments:

Foreign exchange: Foreign exchange gains and losses, which are reported in Other, net in Revenues and non-operating income in the Statement of Consolidated Income, were ~~losses~~gains of ~~$2 million and $5 million in the three and nine months ended September 30, 2022, respectively, compared with losses of nil and~~ $2 million in the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2023 (2022 Q1: nil). A component of foreign exchange gains and losses is the result of foreign exchange derivative contracts that are not designated as hedges, which amounted to net ~~gains~~losses of ~~$12 million and $26~~$2 million in the three ~~and nine~~ months ended ~~September 30, 2022, respectively, compared with~~March 31, 2023 (2022 Q1: net gains of ~~$1 million in both the three and nine months ended September 30, 2021.~~$4 million).

~~PART I - FINANCIAL INFORMATION (CONT’D.)~~

~~HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Fair Value Measurement:

At ~~September 30, 2022,~~March 31, 2023, our total long-term debt, which was substantially comprised of fixed-rate debt instruments, had a carrying value of ~~$8,303~~$8,387 million and a fair value of ~~$7,841~~$8,460 million based on Level 2 inputs in the fair value measurement hierarchy. We also have short-term financial instruments, primarily cash equivalents, accounts receivable and accounts payable, for which the carrying value approximated fair value at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

1814

PART I - FINANCIAL INFORMATION (CONT'D.)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with the unaudited consolidated financial statements and accompanying footnotes for the quarter ended ~~September 30, 2022~~March 31, 2023 included under Item 1. Financial Statements of this Form 10-Q and the audited consolidated financial statements and related notes included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Overview

Hess Corporation is a global E&P company engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas with production operations located in the United States, Guyana, the Malaysia/Thailand Joint Development Area (JDA)~~, Malaysia,~~ and ~~Libya.~~Malaysia. We conduct exploration activities primarily offshore Guyana, in the U.S. Gulf of Mexico, and offshore Suriname and Canada. At the Stabroek Block (Hess 30%), offshore Guyana, we and our partners have discovered a significant resource base and are executing a multi-phased development of the Block. The Liza Phase 1 development reached its new production capacity of more than 140,000 gross bopd in June 2022 following the completion of production optimization work. The Liza Phase 2 development achieved first production in February 2022 and reached its nameplate production capacity of approximately 220,000 gross bopd in July. A third development, Payara, was sanctioned in the third quarter of 2020 and is expected to achieve first production at the end of 2023 with production capacity of approximately 220,000 gross bopd. A fourth development, Yellowtail, was sanctioned in April 2022 and is expected to achieve first production in 2025, with production capacity of approximately 250,000 gross bopd.block. We currently plan to have six ~~floating production, storage and offloading vessels (FPSO)~~FPSOs with an aggregate expected production capacity of more than 11.2 million gross bopd on the Stabroek Block inby the end of 2027, and the potential for up to ten FPSOs to develop the current discovered recoverable resource base.

Our Midstream operating segment, which is comprised of Hess Corporation’s approximate 41% consolidated ownership interest in Hess Midstream LP at March 31, 2023, provides fee-based services, including gathering, compressing and processing natural gas and fractionating natural gas liquids (NGL); gathering, terminaling, loading and transporting crude oil and NGL; storing and terminaling propane, and water handling services primarily in the Bakken shale play in the Williston Basin area of North Dakota.

In April 2022, Hess Midstream completed a public 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. Concurrent with the public offering, HESM Opco repurchased approximately 13.6 million HESM Opco Class B units from a subsidiary of Hess Corporation and an affiliate of GIP for $400 million, of which we received net proceeds of $200 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. After giving effect to these transactions, we own an approximate 41% interest in Hess Midstream LP, on a consolidated basis.

~~2022 Highlights and~~2023 Outlook

Following the startup of the Liza Phase 2 project in February 2022, we repaid the remaining $500 million outstanding under our $1.0 billion term loan, and in March 2022, we announced a 50% increase to our quarterly dividend on common stock. In the first nine months of 2022, we repurchased approximately 3.1 million shares of common stock for $340 million, and we intend to acquire the remaining Board authorized amount of $310 million in the fourth quarter.

Oil and gas net production, excluding Libya, is forecast to be approximately 370,000 barrels of oil equivalent per day (boepd) in the fourth quarter and approximately 325,000 boepd for the full year 2022. Our E&P capital and exploratory expenditures are forecast to be approximately ~~$800 million~~$3.7 billion for 2023. Oil and gas net production in 2023 is forecast to be in the ~~fourth quarter~~range of 365,000 boepd to 375,000 boepd. For the remainder of 2023, we have WTI put options for 80,000 bopd with an average monthly floor price of $70 per barrel and ~~approximately $2.7 billion~~Brent put options for ~~the full year 2022.~~50,000 bopd with an average monthly floor price of $75 per barrel.

~~Third~~First Quarter Results

In the ~~third~~first quarter of ~~2022,~~2023, net income was ~~$515~~$346 million, compared with ~~$115~~$417 million in the ~~third~~first quarter of ~~2021.~~2022. Excluding items affecting comparability of earnings between periods detailed on ~~pages~~page 26 ~~and~~ 2823, adjusted net income was ~~$583~~$404 million in the ~~third~~first quarter of ~~2022, compared with $86 million in the third quarter of 2021.~~2022. The ~~improvement~~decrease in adjusted after-tax earnings in the ~~third~~first quarter of ~~2022~~2023 compared with the prior-year quarter was primarily due to ~~higher~~lower realized selling prices ~~and sales~~partially offset by the net impact of higher production volumes in the ~~third~~first quarter of ~~2022.~~2023.

~~PART I - FINANCIAL INFORMATION (CONT'D.)~~

Exploration and Production Results

In the ~~third~~first quarter of ~~2022,~~2023, E&P had net income of ~~$572~~$405 million compared with ~~$178~~$460 million in the ~~third~~first quarter of ~~2021. Excluding items affecting comparability of earnings between periods, adjusted net income was $626 million in the third quarter of 2022, compared with $149 million in the third quarter of 2021.~~2022. Total net production ~~excluding Libya,~~ averaged ~~351,000~~374,000 boepd in the ~~third~~first quarter ~~2022,~~2023, compared with ~~265,000~~276,000 boepd, proforma for asset sold, in the ~~third~~first quarter of ~~2021.~~2022. The average realized crude oil selling price, including hedging, was ~~$85.32~~$74.23 per barrel in the ~~third~~first quarter of ~~2022,~~2023, compared with ~~$63.17~~$86.75 per barrel in the ~~third~~first quarter of ~~2021.~~2022. The average realized NGL selling price in the ~~third~~first quarter of ~~2022~~2023 was ~~$35.44~~$24.25 per barrel, compared with ~~$32.88~~$39.79 per barrel in the prior-year quarter, while the average realized natural gas selling price was ~~$5.85~~$4.39 per thousand cubic feet (mcf) in the ~~third~~first quarter of ~~2022,~~2023, compared with ~~$4.71~~$5.28 per mcf in the ~~third~~first quarter of ~~2021.~~2022.

The following is an update of our ongoing E&P activities:

•In North Dakota, net production from the Bakken averaged ~~166,000~~163,000 boepd for the ~~third~~first quarter of ~~2022 (2021 Q3: 148,000~~2023 (2022 Q1: 152,000 boepd), primarily due to higher NGL volumes received under percentage of proceeds contracts and increased drilling and completion ~~activity and a curtailment of production in the third quarter of 2021 resulting from a planned maintenance turnaround at the Tioga Gas Plant.~~activity. We added ~~a third drilling rig in September 2021 and~~ a fourth drilling rig in July ~~2022. We~~2022 and drilled 2025 wells, completed 2026 wells, and brought 2224 new wells online during the ~~third~~first quarter of ~~2022. We forecast net production to be in the range of 165,000 boepd to 170,000 boepd for the fourth quarter, and approximately 155,000 boepd for the full year 2022.~~2023.

•In the Gulf of Mexico, net production for the ~~third~~first quarter of ~~2022~~2023 averaged 33,000 boepd (2022 Q1: 30,000 ~~boepd (2021 Q3: 32,000~~ boepd)~~. We forecast Gulf of Mexico net production~~ primarily due to ~~be approximately 30,000 boepd for~~an additional well brought online at the ~~fourth quarter and for the full year 2022.~~Llano Field.

•At the Stabroek Block (Hess 30%), offshore Guyana, net production from the Liza Destiny and Liza Unity FPSOs totaled ~~98,000~~112,000 bopd for the ~~third~~first quarter of ~~2022 (2021 Q3: 32,000~~2023 (2022 Q1: 30,000 bopd). Net production from Guyana in the first quarter of 2023 included 15,000 bopd of tax barrels (2022 Q1: 0 bopd). The Liza Unity FPSO, which commenced production in February 2022, reached its ~~nameplate~~ production capacity of approximately 220,000 gross bopd in July 2022. In the ~~third~~first quarter of 2023, we sold ~~eight~~nine cargos of crude oil from Guyana compared with ~~three~~two cargos in the ~~prior-year~~prior year quarter. ~~In the fourth quarter, we expect to sell nine cargos from Guyana.~~

In the third quarter of 2022, we used the remainder of our previously generated Guyana net operating loss carryforwards and started incurring a current income tax liability. Pursuant to the contractual arrangements of the petroleum agreement, a portion of gross production from the block, separate from the Contractors’ cost oil and profit oil, is used to satisfy the Contractors’ income tax liability. This portion of gross production, referred to as tax barrels, is recognized as Contractor production volumes and estimated proved reserves. Net production from Guyana in the third quarter of 2022 included 7,000 bopd of tax barrels. There were no tax barrels in the third quarter of 2021. We forecast net production to be approximately 110,000 bopd for the fourth quarter, which includes approximately 20,000 bopd of tax barrels. For the full year 2022, net production is forecast to be approximately 77,000 bopd, which includes approximately 7,000 bopd of tax barrels.

PART I - FINANCIAL INFORMATION (CONT'D.)

Overview (continued)

The third development, Payara, which will utilize the Prosperity FPSO with ~~an expected~~a production capacity of approximately 220,000 gross bopd, ~~with first production expected~~is targeted for startup early in the fourth quarter of 2023. The Prosperity FPSO arrived at the ~~end of 2023.~~Stabroek Block on April 11th and hook-up and commissioning activities have commenced. The fourth development, Yellowtail, was sanctioned in April 2022 and will utilize the ONE GUYANA FPSO with ~~an expected~~a production capacity of approximately 250,000 gross bopd, with first production expected in 2025.

In ~~October 2022,~~April, we announced ~~our eighth~~the final investment decision to proceed with the development of the Uaru Field, the fifth development on the Stabroek Block, after the development plan received approval from the Government of Guyana. Uaru will have a production capacity of approximately 250,000 gross bopd with production targeted to startup in 2026. Up to ten drill centers and ~~ninth discoveries of this year~~44 production and injection wells are planned.

In April, we announced an oil discovery at ~~Yarrow-1 and Sailfin-1. The Yarrow-1~~the Lancetfish-1 well which encountered approximately 7592 feet of ~~high quality~~ oil bearing sandstone ~~reservoirs.~~reservoir. The well was drilled in ~~3,560~~5,843 feet of water by the Noble Don Taylor and is located approximately ~~nine~~4 miles southeast of the ~~Barreleye-1~~Fangtooth discovery. ~~The Sailfin-1 well encountered approximately 312 feet~~

In April, the operator completed drilling of ~~high quality hydrocarbon bearing sandstone reservoirs.~~the Kokwari-1 exploration well. The well ~~was drilled in 4,616 feet of water and is located approximately 15 miles southeast of the Turbot-1 discovery.~~

~~The Banjo-1 exploration well was drilled during the quarter and~~ did not encounter commercial quantities of hydrocarbons and well costs of $20 million incurred through March 31, 2023 were expensed. We estimate approximately $10 million of exploration expense will be recognized in the second quarter of 2023 for well costs incurred after March 31, 2023.

•In the Gulf of Thailand, net production from Block A-18 of the JDA averaged ~~34,000~~37,000 boepd for the ~~third~~first quarter of ~~2022 (2021 Q3: 30,000~~2023 (2022 Q1: 38,000 boepd), ~~while net~~including contribution from unitized acreage in Malaysia. Net production from North Malay Basin, offshore Peninsular Malaysia, averaged ~~23,000~~29,000 boepd for the ~~third~~first quarter of ~~2022 (2021 Q3: 20,000~~2023 (2022 Q1: 26,000 boepd). ~~Planned maintenance work was successfully completed at both the JDA~~

The following is an update of significant Midstream activities:

•In March 2023, HESM Opco, a consolidated subsidiary of Hess Midstream LP, repurchased approximately 3.6 million HESM Opco Class B units held by a subsidiary of Hess Corporation and ~~North Malay Basin during the third quarter. Combined~~an affiliate of GIP for $100 million, financed by HESM Opco's revolving credit facility, of which we received net ~~production from JDA and North Malay Basin is forecast~~proceeds of $50 million. After giving effect to bethis transaction, we continue to own an approximate 41% interest in ~~the range of 60,000 boepd to 65,000 boepd in the fourth quarter and for the full year 2022.~~Hess Midstream LP, on a consolidated basis.

2016

PART I - FINANCIAL INFORMATION (CONT'D.)

Consolidated Results of Operations

The after-tax income (loss) by major operating activity is summarized below:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions, except per share amounts)									(In millions, except per share amounts)
Net Income Attributable to Hess Corporation:	Net Income Attributable to Hess Corporation:									Net Income Attributable to Hess Corporation:
Exploration and Production	Exploration and Production	$	572	$	178	$	1,755	$	461	Exploration and Production	$	405	$	460
Midstream	Midstream	68		61		205		212		Midstream	61		72
Corporate, Interest and Other	Corporate, Interest and Other	(125)		(124)		(361)		(379)		Corporate, Interest and Other	(120)		(115)
Total	Total	$	515	$	115	$	1,599	$	294	Total	$	346	$	417
Net Income Attributable to Hess Corporation Per Common Share:	Net Income Attributable to Hess Corporation Per Common Share:									Net Income Attributable to Hess Corporation Per Common Share:
Basic	Basic	$	1.67	$	0.37	$	5.18	$	0.96	Basic	$	1.13	$	1.35
Diluted	Diluted	$	1.67	$	0.37	$	5.16	$	0.95	Diluted	$	1.13	$	1.34

Items Affecting Comparability of Earnings Between Periods

The following table summarizes, on an after-tax basis, items of income (expense) that are included in net income and affect comparability of earnings between periods:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Items Affecting Comparability of Earnings Between Periods, After-Tax:	Items Affecting Comparability of Earnings Between Periods, After-Tax:									Items Affecting Comparability of Earnings Between Periods, After-Tax:
Exploration and Production	Exploration and Production	$	(54)	$	29	$	(54)	$	(118)	Exploration and Production	$	—	$	—
Midstream	Midstream	—		—		—		—		Midstream	—		—
Corporate, Interest and Other	Corporate, Interest and Other	(14)		—		(1)		—		Corporate, Interest and Other	—		13
Total	Total	$	(68)	$	29	$	(55)	$	(118)	Total	$	—	$	13

The items in the table above are explained on ~~pages~~page 26 ~~and~~ 2823.

Reconciliations of GAAP and non-GAAP measures

The following table reconciles reported net income attributable to Hess Corporation and adjusted net income attributable to Hess Corporation:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Adjusted Net Income Attributable to Hess Corporation:	Adjusted Net Income Attributable to Hess Corporation:									Adjusted Net Income Attributable to Hess Corporation:
Net income attributable to Hess Corporation	Net income attributable to Hess Corporation	$	515	$	115	$	1,599	$	294	Net income attributable to Hess Corporation	$	346	$	417
Less: Total items affecting comparability of earnings between periods, after-tax	Less: Total items affecting comparability of earnings between periods, after-tax	(68)		29		(55)		(118)		Less: Total items affecting comparability of earnings between periods, after-tax	—		13
Adjusted Net Income Attributable to Hess Corporation	Adjusted Net Income Attributable to Hess Corporation	$	583	$	86	$	1,654	$	412	Adjusted Net Income Attributable to Hess Corporation	$	346	$	404

The following table reconciles reported net cash provided by (used in) operating activities and net cash provided by (used in) operating activities before changes in operating assets and liabilities:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022

		(In millions)					(In millions)
Net cash provided by (used in) operating activities before changes in operating assets and liabilities:	Net cash provided by (used in) operating activities before changes in operating assets and liabilities:					Net cash provided by (used in) operating activities before changes in operating assets and liabilities:
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	2,692	$	1,991	Net cash provided by (used in) operating activities	$	638	$	(156)
Changes in operating assets and liabilities	Changes in operating assets and liabilities	1,128		114		Changes in operating assets and liabilities	394		1,108
Net cash provided by (used in) operating activities before changes in operating assets and liabilities	Net cash provided by (used in) operating activities before changes in operating assets and liabilities	$	3,820	$	2,105	Net cash provided by (used in) operating activities before changes in operating assets and liabilities	$	1,032	$	952

2117

PART I - FINANCIAL INFORMATION (CONT'D.)

Consolidated Results of Operations (continued)

Adjusted net income attributable to Hess Corporation is a non-GAAP financial measure, which we define as reported net income attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods, which are summarized on ~~pages~~page 26 ~~and~~ 2823. Management uses adjusted net income to evaluate the Corporation’s operating performance and believes that investors’ understanding of our performance is enhanced by disclosing this measure, which excludes certain items that management believes are not directly related to ongoing operations and are not indicative of future business trends and operations.

Net cash provided by (used in) operating activities before changes in operating assets and liabilities presented in this report is a non-GAAP measure, which we define as reported net cash provided by (used in) operating activities excluding changes in operating assets and liabilities. Management uses net cash provided by (used in) operating activities before changes in operating assets and liabilities to evaluate the Corporation’s ability to internally fund capital expenditures, pay dividends and service debt and believes that investors’ understanding of our ability to generate cash to fund these items is enhanced by disclosing this measure, which excludes working capital and other movements that may distort assessment of our performance between periods.

These measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and net cash provided by (used in) operating activities.

In the following discussion and elsewhere in this report, the financial effects of certain transactions are disclosed on an after-tax basis. Management reviews segment earnings on an after-tax basis and uses after-tax amounts in its review of variances in segment earnings. Management believes that after-tax amounts are a preferable method of explaining variances in earnings, since they show the entire effect of a transaction rather than only the pre-tax amount. After-tax amounts are determined by applying the income tax rate in each tax jurisdiction to pre-tax amounts.

Comparison of Results

Exploration and Production

Following is a summarized income statement of our E&P operations:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Revenues and Non-Operating Income	Revenues and Non-Operating Income									Revenues and Non-Operating Income
Sales and other operating revenues	Sales and other operating revenues	$	3,122	$	1,759	$	8,390	$	5,236	Sales and other operating revenues	$	2,409	$	2,313
Gains on asset sales, net		—		29		—		29

Other, net	Other, net	22		19		81		49		Other, net	14		33
Total revenues and non-operating income	Total revenues and non-operating income	3,144		1,807		8,471		5,314		Total revenues and non-operating income	2,423		2,346
Costs and Expenses	Costs and Expenses									Costs and Expenses
Marketing, including purchased oil and gas	Marketing, including purchased oil and gas	999		542		2,560		1,427		Marketing, including purchased oil and gas	619		703
Operating costs and expenses	Operating costs and expenses	322		249		864		711		Operating costs and expenses	323		251
Production and severance taxes	Production and severance taxes	72		42		200		123		Production and severance taxes	48		61
Midstream tariffs	Midstream tariffs	313		270		896		802		Midstream tariffs	283		287
Exploration expenses, including dry holes and lease impairment	Exploration expenses, including dry holes and lease impairment	58		36		134		117		Exploration expenses, including dry holes and lease impairment	66		43
General and administrative expenses	General and administrative expenses	54		42		158		140		General and administrative expenses	66		57
Depreciation, depletion and amortization	Depreciation, depletion and amortization	425		308		1,062		1,007		Depreciation, depletion and amortization	443		292
Impairment and other		54		—		54		147

Total costs and expenses	Total costs and expenses	2,297		1,489		5,928		4,474		Total costs and expenses	1,848		1,694
Results of Operations Before Income Taxes	Results of Operations Before Income Taxes	847		318		2,543		840		Results of Operations Before Income Taxes	575		652
Provision for income taxes	Provision for income taxes	275		140		788		379		Provision for income taxes	170		192
Net Income Attributable to Hess Corporation	Net Income Attributable to Hess Corporation	$	572	$	178	$	1,755	$	461	Net Income Attributable to Hess Corporation	$	405	$	460

The changes in E&P results are primarily attributable to changes in selling prices, production and sales volumes, marketing expenses, cash operating costs, Midstream tariffs, depreciation, depletion and amortization, exploration expenses and income taxes, as discussed below.

2218

PART I - FINANCIAL INFORMATION (CONT'D.)

Consolidated Results of Operations (continued)

Selling Prices: ~~Higher~~Lower realized selling prices in the ~~third~~first quarter ~~and first nine months~~ of ~~2022, increased~~2023 reduced after-tax earnings by approximately ~~$385~~$410 million ~~and $1,490 million, respectively,~~ compared to the ~~corresponding periods~~same period in ~~2021.~~2022. Average selling prices were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

Average Selling Prices (a)	Average Selling Prices (a)									Average Selling Prices (a)
Crude Oil – Per Barrel (Including Hedging)	Crude Oil – Per Barrel (Including Hedging)									Crude Oil – Per Barrel (Including Hedging)
United States	United States									United States
North Dakota (b)		$	79.04	$	59.65	$	85.39	$	52.27
North Dakota										North Dakota	$	68.63	$	84.77
Offshore	Offshore	78.80		62.23		86.13		57.36		Offshore	68.12		85.17
Total United States	Total United States	79.00		60.14		85.56		53.46		Total United States	68.50		84.85
Guyana	Guyana	92.02		70.05		96.24		65.31		Guyana	79.15		90.90
Malaysia and JDA	Malaysia and JDA	85.23		69.87		93.16		64.94		Malaysia and JDA	72.91		89.27
Other (c)		87.90		68.36		95.49		62.93
Other (b)										Other (b)	—		90.91
Worldwide	Worldwide	85.32		63.17		90.30		56.62		Worldwide	74.23		86.75
Crude Oil – Per Barrel (Excluding Hedging)	Crude Oil – Per Barrel (Excluding Hedging)									Crude Oil – Per Barrel (Excluding Hedging)
United States	United States									United States
North Dakota (b)		$	89.80	$	65.11	$	95.33	$	56.37
North Dakota										North Dakota	$	71.78	$	91.55
Offshore	Offshore	89.47		67.88		95.96		61.91		Offshore	71.27		91.52
Total United States	Total United States	89.74		65.64		95.47		57.66		Total United States	71.65		91.54
Guyana	Guyana	98.91		73.12		103.94		67.72		Guyana	79.86		99.76
Malaysia and JDA	Malaysia and JDA	85.23		69.87		93.16		64.94		Malaysia and JDA	72.91		89.27
Other (c)		94.96		71.43		104.67		65.91
Other (b)										Other (b)	—		101.04
Worldwide	Worldwide	93.95		67.88		99.14		60.33		Worldwide	76.02		94.04
Natural Gas Liquids – Per Barrel	Natural Gas Liquids – Per Barrel									Natural Gas Liquids – Per Barrel
United States	United States									United States
North Dakota	North Dakota	$	35.41	$	32.94	$	38.51	$	28.59	North Dakota	$	24.25	$	39.88
Offshore	Offshore	36.30		32.00		37.86		24.08		Offshore	24.28		37.48
Worldwide	Worldwide	35.44		32.88		38.48		28.23		Worldwide	24.25		39.79
Natural Gas – Per Mcf	Natural Gas – Per Mcf									Natural Gas – Per Mcf
United States	United States									United States
North Dakota	North Dakota	$	6.67	$	3.75	$	5.97	$	3.96	North Dakota	$	2.54	$	4.32
Offshore	Offshore	8.12		3.76		6.71		2.91		Offshore	2.42		4.46
Total United States	Total United States	6.94		3.75		6.13		3.62		Total United States	2.51		4.35
Malaysia and JDA	Malaysia and JDA	5.07		5.45		5.72		5.22		Malaysia and JDA	5.44		5.81
Other (c)		7.03		3.62		5.65		3.05
Other (b)										Other (b)	—		4.79
Worldwide	Worldwide	5.85		4.71		5.86		4.54		Worldwide	4.39		5.28

(a)Selling prices in the United States and Guyana are adjusted for certain processing and distribution fees included in Marketing expenses. Excluding these fees worldwide selling prices for the ~~third~~first quarter of ~~2022~~2023 would be ~~$88.87 (Q3 2021: $66.79)~~$77.68 (2022 Q1: $91.18) per barrel for crude oil (including hedging), ~~$97.50 (Q3 2021: $71.50)~~$79.47 (2022 Q1: $98.47) per barrel for crude oil (excluding hedging), ~~$35.97 (Q3 2021: $33.05)~~$24.48 (2022 Q1: $39.98) per barrel for NGLs and $5.98 (Q3 2021: $4.81) per mcf for natural gas. Excluding these fees worldwide selling prices for the first nine months of 2022 would be $94.12 (2021: $61.18) per barrel for crude oil (including hedging), $102.96 (2021: $64.89) per barrel for crude oil (excluding hedging), $38.88 (2021: $28.44) per barrel for NGLs and $5.98 (2021: $4.65)$4.52 (2022 Q1: $5.39) per mcf for natural gas.

(b)~~Excluding the two very large crude carrier (VLCC) cargo sales totaling 4.2 million barrels~~Other includes our interest in the ~~first quarter of 2021, the North Dakota crude oil price for the first nine months of 2021 excluding hedging~~Waha Concession in Libya, which was ~~$59.99 per barrel and $55.29 per barrel including hedging.~~

~~(c)Other includes Libya and our former interests in Denmark, which were~~ sold in ~~the third quarter of 2021.~~November 2022.

Crude oil hedging activities were a net loss of ~~$165 million and $420~~$34 million before and after income taxes in the ~~third~~first quarter ~~and first nine months~~ of ~~2022, respectively,~~2023, and a net loss of ~~$64 million and $179~~$92 million before and after income taxes in the ~~third~~first quarter ~~and first nine months~~ of ~~2021, respectively.~~2022. For the remainder of ~~2022,~~2023, we have hedged ~~90,000~~80,000 bopd with WTI put options with an average monthly floor price of ~~$60~~$70 per barrel, and ~~60,000~~50,000 bopd with Brent put options with an average monthly floor price of ~~$65~~$75 per barrel. We expect noncash premium amortization, which will be reflected in realized selling prices, to reduce our ~~fourth quarter~~ results by approximately ~~$165 million.~~$50 million in the second quarter and by approximately $190 million for the full year 2023.

2319

PART I - FINANCIAL INFORMATION (CONT'D.)

Consolidated Results of Operations (continued)

Production Volumes: Our daily worldwide net production was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In thousands)									(In thousands)
Crude Oil – Barrels	Crude Oil – Barrels									Crude Oil – Barrels
United States	United States									United States
North Dakota	North Dakota	79		78		75		80		North Dakota	76		77
Offshore	Offshore	21		20		20		30		Offshore	24		22
Total United States	Total United States	100		98		95		110		Total United States	100		99
Guyana	Guyana	98		32		65		30		Guyana	112		30
Malaysia and JDA	Malaysia and JDA	4		3		4		4		Malaysia and JDA	4		3
Other (a)	Other (a)	15		20		17		22		Other (a)	—		19
Total	Total	217		153		181		166		Total	216		151
Natural Gas Liquids – Barrels	Natural Gas Liquids – Barrels									Natural Gas Liquids – Barrels
United States	United States									United States
North Dakota	North Dakota	58		44		51		48		North Dakota	61		49
Offshore	Offshore	2		3		2		4		Offshore	1		1
Total United States	Total United States	60		47		53		52		Total United States	62		50
Natural Gas – Mcf	Natural Gas – Mcf									Natural Gas – Mcf
United States	United States									United States
North Dakota	North Dakota	176		158		160		159		North Dakota	158		158
Offshore	Offshore	41		52		42		77		Offshore	47		43
Total United States	Total United States	217		210		202		236		Total United States	205		201
Malaysia and JDA	Malaysia and JDA	320		284		355		339		Malaysia and JDA	369		364
Other (a)	Other (a)	10		9		11		9		Other (a)	—		12
Total	Total	547		503		568		584		Total	574		577
Barrels of Oil Equivalent (b)	Barrels of Oil Equivalent (b)	368		284		329		315		Barrels of Oil Equivalent (b)	374		297

Crude oil and natural gas liquids as a share of total production	Crude oil and natural gas liquids as a share of total production	75	%	70	%	71	%	69	%	Crude oil and natural gas liquids as a share of total production	74	%	68	%

(a)Other includes our interest in the Waha Concession in Libya, ~~and our former interests in Denmark,~~ which ~~were~~was sold in ~~the third quarter of 2021.~~November 2022. Net production from Libya was ~~17,000 boepd and 19,000~~21,000 boepd in the ~~third~~first quarter ~~and first nine months~~ of 2022, respectively, compared with 19,000 boepd for both the third quarter and first nine months of 2021. Net production from Denmark was 3,000 boepd and 4,000 boepd in the third quarter and first nine months of 2021, respectively.2022.

(b)Reflects natural gas production converted based on relative energy content (six mcf equals one barrel). Barrel of oil equivalence does not necessarily result in price equivalence as the equivalent price of natural gas on a barrel of oil equivalent basis has been substantially lower than the corresponding price for crude oil over the recent past. In addition, NGLs do not sell at prices equivalent to crude oil. See the average selling prices in the table on page 2319.

We forecast net production ~~excluding Libya,~~ to be ~~approximately 370,000~~in the range of 355,000 boepd to 365,000 boped for the ~~fourth~~second quarter, and ~~approximately 325,000~~in the range of 365,000 boepd to 375,000 boepd for the full year ~~2022.~~2023.

United States: North Dakota net production was higher in the ~~third~~first quarter of ~~2022,~~2023, compared to the corresponding period in ~~2021,~~2022, primarily due to higher NGL volumes received under percentage of proceeds contracts and increased drilling and completion ~~activity and a curtailment of production in the third quarter of 2021 resulting from a planned maintenance turnaround at the Tioga Gas Plant.~~activity. Total offshore net production was ~~lower~~higher in the first ~~nine months~~quarter of ~~2022,~~2023, compared to the corresponding period in ~~2021,~~2022, primarily due to ~~field decline and unplanned downtime~~an additional well brought online at the ~~Penn State and~~ Llano ~~fields.~~Field.

International: Net production in Guyana was higher in the ~~third~~first quarter ~~and first nine months~~ of ~~2022,~~2023, compared to the corresponding ~~periods~~period in ~~2021,~~2022, primarily due to production ramp up from the Liza Unity FPSO, which commenced production in February 2022 and reached its ~~nameplate~~expected production capacity of approximately 220,000 gross bopd in July ~~2022, and due to Liza Destiny FPSO production optimization work completed in the second quarter of~~ 2022. Net production from Guyana included ~~7,000 bopd and 2,000~~15,000 bopd of tax barrels in the ~~third~~first quarter ~~and first nine months~~ of ~~2022, respectively. There were no tax barrels in the third quarter and first nine months of 2021 (See~~ 2023 (2022 Q1: 0 bopd).

~~Note 7 - Revenue~~ ~~in the~~ ~~Notes to Consolidated Financial Statements)~~.

2420

PART I - FINANCIAL INFORMATION (CONT'D.)

Consolidated Results of Operations (continued)

Sales Volumes: Higher sales volumes in the ~~third~~first quarter of ~~2022~~2023 increased after-tax earnings by approximately ~~$355~~$590 million compared to the corresponding period in ~~2021. Worldwide~~2022. Net worldwide sales volumes from Hess net production, which excludes sales volumes of crude oil, NGLs and natural gas purchased from third parties, were as follows:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2022	2021	2022	2021		2023	2022

		(In thousands)					(In thousands)
Crude oil – barrels ~~(a)~~	Crude oil – barrels ~~(a)~~	19,118	13,627	47,461	48,315	Crude oil – barrels ~~(a)~~	19,161	12,580
Natural gas liquids – barrels	Natural gas liquids – barrels	5,299	4,338	14,018	14,282	Natural gas liquids – barrels	5,761	4,539
Natural gas – mcf	Natural gas – mcf	50,343	46,317	155,052	159,387	Natural gas – mcf	51,692	51,898
Barrels of Oil Equivalent ~~(b)~~(a)	Barrels of Oil Equivalent ~~(b)~~(a)	32,807	25,685	87,321	89,162	Barrels of Oil Equivalent ~~(b)~~(a)	33,537	25,769
Crude oil – barrels per day	Crude oil – barrels per day	208	148	174	177	Crude oil – barrels per day	213	140
Natural gas liquids – barrels per day	Natural gas liquids – barrels per day	58	47	51	52	Natural gas liquids – barrels per day	64	50
Natural gas – mcf per day	Natural gas – mcf per day	547	503	568	584	Natural gas – mcf per day	574	577
Barrels of Oil Equivalent Per Day ~~(b)~~(a)	Barrels of Oil Equivalent Per Day ~~(b)~~(a)	357	279	320	326	Barrels of Oil Equivalent Per Day ~~(b)~~(a)	373	286

(a)~~Sales volumes for the first nine months of 2021 include 4.2 million barrels that were stored on VLCCs at December 31, 2020 and sold in the first quarter of 2021.~~

~~(b)~~Reflects natural gas production converted based on relative energy content (six mcf equals one barrel). Barrel of oil equivalence does not necessarily result in price equivalence as the equivalent price of natural gas on a barrel of oil equivalent basis has been substantially lower than the corresponding price for crude oil over the recent past. In addition, NGLs do not sell at prices equivalent to crude oil. See the average selling prices in the table on page 2319.

Marketing, including Purchased Oil and Gas: Marketing expense is mainly comprised of costs to purchase crude oil, NGL and natural gas from our partners in Hess operated wells or other third parties, primarily in the United States, and transportation and other distribution costs for U.S. and Guyana marketing activities. Marketing expense was ~~higher~~lower in the ~~third~~first quarter ~~and first nine months~~ of ~~2022,~~2023, compared with the corresponding ~~periods~~period in ~~2021,~~2022, primarily due to ~~higher~~lower third party crude oil volumes purchased and ~~higher~~ prices paid for purchased volumes. ~~First quarter 2021 marketing expense included $173 million related to the cost of 4.2 million barrels of crude oil produced and stored on two VLCCs in 2020 that were sold in the first quarter of 2021.~~

Cash Operating Costs: Cash operating costs consist of operating costs and expenses, production and severance taxes and E&P general and administrative expenses. Cash operating costs increased in the ~~third~~first quarter ~~and first nine months~~ of ~~2022~~2023 compared with the corresponding ~~periods~~period in ~~2021,~~2022, primarily due to the production ramp up in Guyana from the Liza Unity FPSO, which commenced production in February 2022, increased maintenance activity in North Dakota, and higher workover costs in the Gulf of Mexico partially offset by lower production and severance taxes associated with ~~higher~~lower crude oil ~~prices, and increased workover activity in the Gulf of Mexico.~~prices. On a per-unit basis, the decrease in cash operating costs in the ~~third~~first quarter ~~and first nine months~~ of 2023, compared with the corresponding period in 2022, ~~reflect the higher costs partially offset by~~primarily reflects the impact of the higher production ~~volumes, compared with the corresponding periods in 2021.~~volumes.

Midstream Tariffs Expense: Tariffs expense ~~increased~~ in the ~~third~~first quarter of ~~2022, compared~~2023 was comparable with the corresponding period in 2021, primarily due to higher throughput volumes. Tariffs expense increased in the first nine months of 2022, compared with the corresponding period in 2021, primarily due to higher throughput volumes and minimum volume commitments.2022. We estimate Midstream tariffs expense to be ~~approximately $310~~in the range of $305 million to $315 million in the ~~fourth~~second quarter of ~~2022,~~2023, and ~~approximately $1,205~~in the range of $1,230 million to $1,250 million for the full year ~~2022.~~2023.

Depreciation, Depletion and Amortization (DD&A): DD&A expense and per-unit rates were higher in the ~~third~~first quarter ~~and first nine months~~ of ~~2022,~~2023, compared with the corresponding ~~periods~~period in ~~2021,~~2022, primarily due to higher production from ~~Guyana.~~Guyana following the start-up of Liza Phase 2 in February 2022.

Unit Costs: Unit cost per boe information is based on total net production volumes. Actual and forecast unit costs per boe are as follows:


		Actual								Forecast range (a)											Actual				Forecast range
		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended December 31,					Twelve Months Ended December 31,						Three Months Ended March 31,				Three Months Ended June 30,					Twelve Months Ended December 31,
		2022		2021		2022		2021		2022					2022						2023		2022		2023					2023
Cash operating costs ~~(b)~~(a)	Cash operating costs ~~(b)~~(a)	$	13.19	$	12.76	$	13.60	$	11.34	$	13.00	—	$	13.50	$	13.50	—	$	14.00	Cash operating costs ~~(b)~~(a)	$	12.96	$	13.79	$	15.50	—	$	16.00	$	13.50	—	$	14.50
DD&A ~~(c)~~(b)	DD&A ~~(c)~~(b)	12.56		11.77		11.83		11.72		13.00		—	13.50		12.50		—	13.00		DD&A ~~(c)~~(b)	13.16		10.96		13.00		—	13.50		13.00		—	14.00
Total Production Unit Costs	Total Production Unit Costs	$	25.75	$	24.53	$	25.43	$	23.06	$	26.00	—	$	27.00	$	26.00	—	$	27.00	Total Production Unit Costs	$	26.12	$	24.75	$	28.50	—	$	29.50	$	26.50	—	$	28.50

(a)~~Forecast information excludes any contribution from Libya.~~

~~(b)~~Cash operating costs per boe, excluding Libya (sold in November of 2022), were ~~$13.64 and $14.20~~$14.54 in the ~~third~~first quarter ~~and first nine months~~ of ~~2022, respectively, compared with $13.45 and $11.86 in the third quarter and first nine months of 2021, respectively.~~2022.

~~(c)~~(b)DD&A per boe, excluding Libya (sold in November of 2022), was ~~$13.03 and $12.37~~$11.54 in the ~~third~~first quarter ~~and first nine months~~ of ~~2022, respectively, compared with $12.38 and $12.29 in the third quarter and first nine months of 2021, respectively.~~2022.

2521

PART I - FINANCIAL INFORMATION (CONT'D.)

Consolidated Results of Operations (continued)

Exploration Expenses: Exploration expenses were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Exploratory dry hole costs (a)	Exploratory dry hole costs (a)	$	19	$	2	$	19	$	11	Exploratory dry hole costs (a)	$	31	$	—
Exploration lease impairment	Exploration lease impairment	4		5		14		15		Exploration lease impairment	5		6
Geological and geophysical expense and exploration overhead	Geological and geophysical expense and exploration overhead	35		29		101		91		Geological and geophysical expense and exploration overhead	30		37
Total Exploration Expense	Total Exploration Expense	$	58	$	36	$	134	$	117	Total Exploration Expense	$	66	$	43

(a)~~The exploratory dry hole costs in the third quarter and first nine months of 2022 relate primarily to the Banjo-1 exploration well at the Stabroek Block, offshore Guyana. The exploratory~~Exploratory dry hole costs in the first ~~nine months~~quarter of ~~2021~~2023 relate primarily ~~relate~~ to the ~~Koebi-1~~Fish/Tarpon-1 and Kokwari-1 exploration ~~well,~~wells at the Stabroek Block, offshore Guyana.

Exploration expenses, excluding dry hole expense, are estimated to be ~~approximately~~in the range of $40 million to $45 million in the ~~fourth~~second quarter of ~~2022,~~2023 and ~~approximately $155~~in the range of $160 million to $170 million for the full year ~~2022.~~2023.

Income Taxes:

E&P income tax expense was ~~$275 million and $788~~$170 million in the ~~third~~first quarter of 2023 and ~~first nine months of 2022, respectively, compared with $140 million and $379~~$192 million in the ~~third~~first quarter ~~and first nine months~~ of ~~2021, respectively. The increase in income tax expense, compared with the corresponding periods in 2021, was primarily due to higher pre-tax income in Libya and Guyana.~~2022. Income tax expense from Libya operations, sold in November 2022, was ~~$104 million and $435~~$154 million in the ~~third~~first quarter ~~and~~of 2022. The decrease in Libya income tax expense in the first ~~nine months~~quarter of 2023 compared to the first quarter of 2022 ~~respectively, compared with $103 million and $279 million~~was partially offset by higher income tax expense in ~~the third quarter and first nine months~~Guyana as a result of ~~2021, respectively.~~higher pre-tax income. We are generally not recognizing deferred tax benefit or expense in certain countries, primarily the United States (non-Midstream), and Malaysia, while we maintain valuation allowances against net deferred tax assets in these jurisdictions in accordance with U.S. generally accepted accounting principles. There is a reasonable possibility that if anticipated future earnings come to fruition and no other unforeseen negative evidence materializes, sufficient positive evidence may become available to support the ~~requirements~~release of ~~U.S. accounting standards.~~all or a portion of the valuation allowance in these jurisdictions in the near term. This would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period in which the release is recorded. Excluding items affecting comparability of earnings between periods, ~~and Libyan operations,~~ E&P income tax expense is expected to be ~~approximately $210~~in the range of $170 million to $180 million for the ~~fourth~~second quarter of ~~2022~~2023 and ~~approximately $560~~in the range of $670 million to $680 million for the full year ~~2022.~~

On August 16, 2022 the United States enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which includes a 15% book-income alternative minimum tax on corporations with average adjusted financial statement income over $1 billion for any 3-year period ending with 2022 or later and a 1% excise tax on the fair market value of stock that is repurchased by publicly traded U.S. corporations. The alternative minimum tax and the excise tax are effective in taxable years beginning after December 31, 2022. The alternative minimum tax is designed to be a temporary acceleration of cash tax as amounts paid under such regime are creditable against the regular U.S. corporate income tax liability in following tax years. The Department of the Treasury is expected to publish regulations relevant to many aspects of the minimum tax on corporations, including the calculation of adjusted financial statement income. We are currently awaiting such guidance and continue to evaluate the effect of the new law to our future cash flows and financial results.

~~Items Affecting Comparability of Earnings Between Periods:~~2023.

InMidstream

Following is a summarized income statement for our Midstream operations:


	Three Months Ended March 31,
	2023		2022

	(In millions)
Revenues and Non-Operating Income
Sales and other operating revenues	$	305	$	312
Other, net	2		1
Total revenues and non-operating income	307		313
Costs and Expenses
Operating costs and expenses	63		66
General and administrative expenses	6		6
Interest expense	42		31
Depreciation, depletion and amortization	47		45
Total costs and expenses	158		148
Results of Operations Before Income Taxes	149		165
Provision for income taxes	6		5
Net Income	143		160
Less: Net income attributable to noncontrolling interests	82		88
Net Income Attributable to Hess Corporation	$	61	$	72

Sales and other operating revenues for the ~~third~~first quarter of ~~2022, we recorded impairment charges of $28 million ($28 million after income taxes) that resulted from updates~~2023 decreased, compared to ~~our estimated abandonment liabilities for non-producing properties~~the prior-year quarter, primarily due to lower minimum volume commitments in the ~~Gulf~~first quarter of ~~Mexico and $26 million ($26 million after income taxes) related~~2023. Interest expense for the first quarter of 2023 increased, compared to the ~~Penn State Field~~corresponding period in 2022, primarily due to the ~~Gulf~~$400 million of ~~Mexico. See~~ ~~Note 8, Impairment and Other~~5.500% fixed-rate senior unsecured notes issued in ~~the~~ ~~Notes to Consolidated Financial Statements~~.

In the second quarter of 2021, we recorded a charge of $147 million ($147 million after income taxes) in connection with estimated abandonment obligations 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 as part of Fieldwood's approved bankruptcy plan. See ~~Note 8, Impairment and Other~~ ~~in the~~ ~~Notes to Consolidated Financial Statements~~.

~~In the third quarter of 2021, we recognized a pre-tax gain of $29 million ($29 million after income taxes) associated with the sale of our interests in Denmark.~~April 2022.

2622

PART I - FINANCIAL INFORMATION (CONT'D.)

Consolidated Results of Operations (continued)

~~Midstream~~

~~Following is a summarized income statement for our Midstream operations:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(In millions)
Revenues and Non-Operating Income
Sales and other operating revenues $ 335 $ 304 $ 961 $ 887
Other, net 3 3 4 9
Total revenues and non-operating income 338 307 965 896
Costs and Expenses
Operating costs and expenses 81 98 215 222
General and administrative expenses 5 6 16 17
Interest expense 40 28 109 74
Depreciation, depletion and amortization 46 41 135 122
Total costs and expenses 172 173 475 435
Results of Operations Before Income Taxes 166 134 490 461
Provision for income taxes 7 3 19 9
Net Income 159 131 471 452
Less: Net income attributable to noncontrolling interests 91 70 266 240
Net Income Attributable to Hess Corporation $ 68 $ 61 $ 205 $ 212

Sales and other operating revenues for the third quarter of 2022 increased, compared to the corresponding period in 2021, primarily due to higher throughput volumes. Sales and other operating revenues in the first nine months of 2022 increased, compared to the corresponding period in 2021, primarily due to higher throughput volumes and minimum volume commitments.

Operating costs and expenses for the third quarter and first nine months of 2022 decreased, compared to the corresponding periods in 2021, primarily due to a planned maintenance turnaround at the Tioga Gas Plant, which was performed in the third quarter of 2021. DD&A expense for the third quarter and first nine months of 2022 increased, compared to the corresponding periods in 2021, primarily due to additional assets placed in service. Interest expense for the third quarter and first nine months of 2022 increased, compared to the corresponding periods in 2021, primarily due to the $400 million of 5.500% fixed-rate senior unsecured notes issued in April 2022 and the $750 million of 4.250% fixed-rate senior unsecured notes issued in August 2021.

Excluding items affecting comparability of earnings, net income attributable to Hess Corporation from the Midstream segment is estimated to be ~~approximately $65~~in the range of $55 million to $60 million in the ~~fourth~~second quarter of ~~2022,~~2023, and ~~approximately $270~~in the range of $255 million to $265 million for the full year ~~2022.~~2023.

Corporate, Interest and Other

The following table summarizes Corporate, Interest and Other expenses:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(In millions)									(In millions)
Corporate and other expenses		$	26	$	27	$	100	$	93
Corporate and other expenses (excluding items affecting comparability)										Corporate and other expenses (excluding items affecting comparability)	$	39	$	36
Interest expense	Interest expense	88		97		266		286		Interest expense	86		92
Less: Capitalized interest	Less: Capitalized interest	(3)		—		(6)		—		Less: Capitalized interest	(5)		—
Interest expense, net	Interest expense, net	85		97		260		286		Interest expense, net	81		92
Corporate, Interest and Other expenses before income taxes	Corporate, Interest and Other expenses before income taxes	111		124		360		379		Corporate, Interest and Other expenses before income taxes	120		128
Provision for income taxes	Provision for income taxes	—		—		—		—		Provision for income taxes	—		—
Net Corporate, Interest and Other expenses after income taxes	Net Corporate, Interest and Other expenses after income taxes	111		124		360		379		Net Corporate, Interest and Other expenses after income taxes	120		128
Items affecting comparability of earnings between periods, after-tax	Items affecting comparability of earnings between periods, after-tax	14		—		1		—		Items affecting comparability of earnings between periods, after-tax	—		(13)
Total Corporate, Interest and Other Expenses after income taxes	Total Corporate, Interest and Other Expenses after income taxes	$	125	$	124	$	361	$	379	Total Corporate, Interest and Other Expenses after income taxes	$	120	$	115

Corporate and other expenses, excluding items affecting comparability, were higher in the first ~~nine months~~quarter of ~~2022,~~2023 compared to the ~~corresponding period in 2021,~~prior-year quarter primarily due to higher legal and professional ~~fees.~~

~~PART I - FINANCIAL INFORMATION (CONT'D.)~~

~~Consolidated Results of Operations (continued)~~

fees partially offset by higher interest income. Interest expense, net was lower in the ~~third~~first quarter ~~and first nine months~~ of ~~2022,~~2023, compared to the ~~corresponding periods in 2021,~~prior-year quarter, due to the repayment of the remaining $500 million outstanding under the Corporation's $1.0 billion term loan in February 2022, and capitalized interest that commenced upon sanctioning of the Yellowtail development in Guyana in April 2022.

~~Fourth~~Second quarter ~~2022~~2023 corporate expenses are expected to be approximately ~~$35~~$30 million and ~~approximately $135~~in the range of $120 million to $130 million for the full year ~~2022.~~2023. Interest expense, net is expected to be ~~approximately~~in the range of $80 million to $85 million for the ~~fourth~~second quarter and ~~approximately $345~~in the range of $305 million to $315 million for the full year ~~2022.~~2023.

Items Affecting Comparability of Earnings Between Periods:

~~In the third quarter of 2022, results included a charge of $14 million ($14 million after income taxes) for legal costs related to our former downstream business.~~

In the first quarter of 2022, results included a pre-tax gain of $22 million ($22 million after income taxes) associated with the sale of real property and a charge of $9 million ($9 million after income taxes) for litigation related tocosts associated with our former downstream business.

Other Items Potentially Affecting Future Results

Our future results may be impacted by a variety of factors, including but not limited to, volatility in the selling prices of crude oil, NGLs and natural gas, reserve and production changes, asset sales, impairment charges and exploration expenses, industry cost inflation and/or deflation, changes in foreign exchange rates and income tax rates, changes in deferred tax asset valuation allowances, the effects of weather, crude oil storage capacity, political risk, environmental risk and catastrophic risk. For a more comprehensive description of the risks that may affect our business, see Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

PART I - FINANCIAL INFORMATION (CONT'D.)

Liquidity and Capital Resources

The following table sets forth certain relevant measures of our liquidity and capital resources:


		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022

		(In millions, except ratio)							(In millions, except ratio)
Cash and cash equivalents (a)	Cash and cash equivalents (a)	$	2,384		$	2,713		Cash and cash equivalents (a)	$	2,100		$	2,486
Current portion of long-term debt	Current portion of long-term debt	—			517			Current portion of long-term debt	5			3
Total debt (b)	Total debt (b)	8,303			8,458			Total debt (b)	8,387			8,281
Total equity	Total equity	8,194			7,026			Total equity	8,721			8,496
Debt to capitalization ratio for debt covenants (c)	Debt to capitalization ratio for debt covenants (c)	36.8		%	42.3		%	Debt to capitalization ratio for debt covenants (c)	35.4		%	36.1		%

(a)Includes $3$4 million of cash attributable to our Midstream segment at ~~September 30, 2022~~March 31, 2023 (December 31, ~~2021: $2~~2022: $4 million) of which $3$4 million is held by Hess Midstream LP at ~~September 30, 2022~~March 31, 2023 (December 31, ~~2021: $2~~2022: $3 million).

(b)At ~~September 30, 2022,~~March 31, 2023, includes ~~$2,909~~$2,990 million of debt outstanding from our Midstream segment (December 31, ~~2021: $2,564~~2022: $2,886 million) that is non-recourse to Hess Corporation.

(c)Total Consolidated Debt of Hess Corporation (including finance leases and excluding Midstream non-recourse debt) as a percentage of Total Capitalization of Hess Corporation as defined under Hess Corporation's revolving credit facility financial covenants. Total Capitalization excludes the impact of noncash impairment charges and non-controlling interests.

Cash Flows

The following table summarizes our cash flows:

Nine Months Ended
September 30,
2022 2021
(In millions)
Net cash provided by (used in):
Operating activities $ 2,692 $ 1,991
Investing activities (1,908) (815)
Financing activities (1,113) (496)
Net Increase (Decrease) in Cash and Cash Equivalents $ (329) $ 680

~~PART I - FINANCIAL INFORMATION (CONT'D.)~~

~~Liquidity and Capital Resources (continued)~~


	Three Months Ended March 31,
	2023		2022

	(In millions)
Net cash provided by (used in):
Operating activities	$	638	$	(156)
Investing activities	(841)		(522)
Financing activities	(183)		(665)
Net Increase (Decrease) in Cash and Cash Equivalents	$	(386)	$	(1,343)

Operating activities: Net cash provided by operating activities was ~~$2,692~~$638 million in the first ~~nine months~~quarter of ~~2022,~~2023, compared with ~~$1,991~~net cash used in operating activities of $156 million in the first ~~nine months~~quarter of ~~2021.~~2022. Net cash provided by operating activities before changes in operating assets and liabilities was ~~$3,820~~$1,032 million in the first ~~nine months~~quarter of ~~2022,~~2023, compared with ~~$2,105~~$952 million in the first ~~nine months~~quarter of ~~2021 primarily due to higher realized selling prices.~~2022. During the first ~~nine months~~quarter of ~~2022,~~2023, changes in operating assets and liabilities reduced ~~net~~ cash ~~provided by~~flow from operating activities by ~~$1,128~~$394 million ~~(2021: $114 million)~~primarily due to premiums paid for crude oil hedge contracts and payments for abandonment activities. Changes in operating assets and liabilities in the first quarter of 2022 reduced cash flow from operating activities by $1,108 million reflecting payments ~~made~~of approximately $470 million for ~~previously~~ accrued Libyan income tax and royalties ~~of approximately $470 million for the period~~at December ~~2020 through November~~31, 2021, premiums paid ~~of $325 million to remove the ceiling price on outstanding WTI and Brent~~for crude oil ~~price collars effective April 1, 2022,~~hedge contracts and an increase in accounts receivable due to higher crude oil prices.

Investing activities: Additions to property, plant and equipment of ~~$1,932~~$837 million in the first ~~nine months~~quarter of ~~2022~~2023 were up ~~$694~~$291 million compared with the corresponding period in ~~2021.~~2022. The increase is primarily due to higher drilling in the Bakken and development activities in ~~Guyana, the Bakken, Malaysia~~Guyana.

PART I - FINANCIAL INFORMATION (CONT'D.)

Liquidity and ~~JDA, and the Gulf of Mexico. Proceeds from asset sales in the first nine months of 2022 were $28 million and $427 million in the first nine months of 2021.~~Capital Resources (continued)

The following table reconciles capital expenditures incurred on an accrual basis to Additions to property, plant and equipment:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022

		(In millions)					(In millions)
Additions to property, plant and equipment - E&P:	Additions to property, plant and equipment - E&P:					Additions to property, plant and equipment - E&P:
Capital expenditures incurred - E&P	Capital expenditures incurred - E&P	$	(1,802)	$	(1,145)	Capital expenditures incurred - E&P	$	(735)	$	(543)
Increase (decrease) in related liabilities	Increase (decrease) in related liabilities	47		27		Increase (decrease) in related liabilities	(38)		52
Additions to property, plant and equipment - E&P	Additions to property, plant and equipment - E&P	$	(1,755)	$	(1,118)	Additions to property, plant and equipment - E&P	$	(773)	$	(491)
Additions to property, plant and equipment - Midstream:	Additions to property, plant and equipment - Midstream:					Additions to property, plant and equipment - Midstream:
Capital expenditures incurred - Midstream	Capital expenditures incurred - Midstream	$	(169)	$	(129)	Capital expenditures incurred - Midstream	$	(57)	$	(37)
Increase (decrease) in related liabilities	Increase (decrease) in related liabilities	(8)		9		Increase (decrease) in related liabilities	(7)		(18)
Additions to property, plant and equipment - Midstream	Additions to property, plant and equipment - Midstream	$	(177)	$	(120)	Additions to property, plant and equipment - Midstream	$	(64)	$	(55)

Financing activities:

~~In the first nine months of 2022, we repurchased $340 million of our common stock and paid common~~Common stock dividends ~~of $350~~paid were $137 million ~~(2021: $234 million). In July 2021, we repaid $500 million of our $1 billion term loan, and in February 2022, we repaid the remaining $500 million.~~

~~In the first nine months of 2022, we received net proceeds of $146 million from the public offering of approximately 5.1 million Hess-owned Class A shares in Hess Midstream LP, and~~ in the first ~~nine months~~quarter of ~~2021, we received net proceeds~~2023, compared to $119 million in the first quarter of $70 million from the public offering of approximately 3.5 million Hess-owned Class A shares in Hess Midstream LP. Borrowings resulted from the issuance in 2022 by HESM Opco of $400 million of 5.500% fixed-rate senior unsecured notes due 2030, and the issuance in 2021 by HESM Opco of $750 million of 4.250% fixed-rate senior unsecured notes due 2030.2022. Net cash outflows to noncontrolling interests were ~~$430~~$131 million in the first ~~nine months~~quarter of 2023 and $74 million in the first quarter of 2022. Net borrowings (repayments) of debt with maturities of 90 days or less related to the HESM Opco revolving credit facility, which was used to finance the repurchase of approximately 3.6 million HESM Opco Class B units for $100 million. In the first quarter of 2022, ~~(2021: $589 million).~~we repaid the remaining $500 million outstanding under our $1.0 billion term loan.

Future Capital Requirements and Resources

At ~~September 30, 2022,~~March 31, 2023, we had ~~$2.38~~$2.1 billion in cash and cash equivalents, excluding Midstream, and total liquidity, including available committed credit facilities, of approximately ~~$5.73~~$5.4 billion. ~~In the first nine months of 2022, we repurchased $340 million of our common stock.~~ We intend to acquire the remaining Board authorized amount of $310 million in the fourth quarter of 2022. In March 2022, we announced a 50% increase in our dividend on common stock. As we become increasingly free cash flow positive, we plan to return up to 75% of our annual adjusted free cash flow (defined as net cash provided by operating activities less capital expenditures and adjusted for debt repayments and net Midstream financing activities) to shareholders through ~~further~~ dividend increases ~~and/or~~and common stock repurchases. In March 2023, we announced a 17% increase in our first quarter dividend on common stock and our Board of Directors approved a new authorization for the repurchase of our common stock in an aggregate amount of up to $1 billion.

~~We are currently developing~~Net production in 2023 is forecast to be in the range of 365,000 boepd to 375,000 boepd, and we expect our 2023 budget and plan, which remains subject to board and management approval. In 2023, we expect increased development activity in Guyana and plan to have a four rig drilling program in the Bakken for the full year and the potential for three exploration wells in the Gulf of Mexico. As a result, we expect to increase our 2023 capital and exploratory budget by approximately $1 billion compared with forecastedE&P capital and exploratory expenditures ~~in 2022 of $2.7~~will be approximately $3.7 billion. In 2023, based on current forward strip crude oil prices, we expect cash flow from operating activities and cash and cash equivalents at ~~September 30, 2022~~March 31, 2023 will be sufficient to fund our capital investment and capital return programs. Depending on market conditions, we may take any of the following steps, or a combination thereof, to improve our liquidity and financial position: reduce the planned capital program and other cash outlays, including dividends, pursue asset sales, borrow against our committed revolving credit facility, or issue debt or equity securities.

~~PART I - FINANCIAL INFORMATION (CONT'D.)~~

~~Liquidity and Capital Resources (continued)~~

The table below summarizes the capacity, usage, and available capacity for borrowings and letters of credit under committed and uncommitted credit facilities at ~~September 30, 2022:~~March 31, 2023:


		Expiration Date	Capacity		Borrowings		Letters of Credit Issued		Total Used		Available Capacity			Expiration Date	Capacity		Borrowings		Letters of Credit Issued		Total Used		Available Capacity

			(In millions)												(In millions)
Hess Corporation	Hess Corporation												Hess Corporation
Revolving credit facility	Revolving credit facility	July 2027	$	3,250	$	—	$	—	$	—	$	3,250	Revolving credit facility	July 2027	$	3,250	$	—	$	—	$	—	$	3,250
Committed lines	Committed lines	Various (a)	100		—		2		2		98		Committed lines	Various (a)	100		—		—		—		100
Uncommitted lines	Uncommitted lines	Various (a)	119		—		119		119		—		Uncommitted lines	Various (a)	86		—		86		86		—
Total - Hess Corporation	Total - Hess Corporation		$	3,469	$	—	$	121	$	121	$	3,348	Total - Hess Corporation		$	3,436	$	—	$	86	$	86	$	3,350
Midstream	Midstream												Midstream
Revolving credit facility (b)	Revolving credit facility (b)	July 2027	$	1,000	$	43	$	—	$	43	$	957	Revolving credit facility (b)	July 2027	$	1,000	$	121	$	—	$	121	$	879
Total - Midstream	Total - Midstream		$	1,000	$	43	$	—	$	43	$	957	Total - Midstream		$	1,000	$	121	$	—	$	121	$	879

(a)Committed and uncommitted lines have expiration dates through ~~2022.~~2024.

(b)This credit facility may only be utilized by HESM Opco and is non-recourse to Hess Corporation.

PART I - FINANCIAL INFORMATION (CONT'D.)

Liquidity and Capital Resources (continued)

Hess Corporation:

~~In July 2022, we replaced our $3.5 billion~~The revolving credit facility ~~expiring in May 2024 with a new $3.25 billion revolving credit facility maturing in July 2027. The new facility, which is fully undrawn,~~ can be used for borrowings and letters of credit. Borrowings on the ~~new~~ facility will generally bear interest at 1.400% above SOFR, though the interest rate is subject to adjustment based on the credit rating of the Corporation's senior, unsecured, non-credit enhanced long-term debt. The revolving credit facility is subject to customary representations, warranties, customary events of default and covenants, including a financial covenant limiting the ratio of Total Consolidated Debt to Total Capitalization of the Corporation and its consolidated subsidiaries to 65%, and a financial covenant limiting the ratio of secured debt to Consolidated Net Tangible Assets of the Corporation and its consolidated subsidiaries to 15% (as these capitalized terms are defined in the credit agreement for the revolving credit facility). The indentures for the Corporation's fixed-rate senior unsecured notes limit the ratio of secured debt to Consolidated Net Tangible Assets (as that term is defined in the indentures) to 15%. As of ~~September 30, 2022,~~March 31, 2023, Hess Corporation was in compliance with these financial covenants. At March 31, 2023, Hess Corporation had no outstanding borrowings or letters of credit under its revolving credit facility.

All three major credit rating agencies that rate ~~our~~the senior unsecured debt of Hess Corporation have assigned an investment grade credit rating. In June 2022, Moody’s Investors Service upgraded ~~the~~our senior unsecured ratings ~~of Hess Corporation~~ from Ba1 to Baa3 with a stable outlook. In March ~~2022,~~2023, Standard and Poor’s Ratings Services affirmed our credit rating at BBB- with stable outlook. Fitch Ratings affirmed our BBB- credit rating with a positive outlook in August 2022.

We have a shelf registration under which we may issue additional debt securities, warrants, common stock or preferred stock.

Midstream:

~~In July 2022,~~At March 31, 2023, HESM Opco, a consolidated subsidiary of Hess Midstream LP, ~~amended and restated its credit agreement for its~~had $1.4 billion senior secured syndicated credit facilities, consisting of a $1.0 billion revolving credit facility and a $400 million term loan facility. The amended and restated credit agreement, among other things, extended the maturity date from December 2024 to July 2027, increased the accordion feature to up to an additional $750 million, which does not represent a lending commitment from the lenders, and replaced the London Interbank Offered Rate (LIBOR) as the benchmark interest rate with SOFR. Borrowings under the term loan facility will generally bear interest at SOFR plus an applicable margin ranging from 1.650% to 2.550%, while the applicable margin for the syndicated revolving credit facility ranges from 1.375% to 2.050%. Pricing levels for the facility fee and interest-rate margins are based on HESM Opco’s ratio of total debt to EBITDA (as defined in the credit facilities). If HESM Opco obtains an investment grade credit rating, the pricing levels will be based on HESM Opco’s credit ratings in effect from time to time. The credit facilities contain covenants that require HESM Opco to maintain a ratio of total debt to EBITDA (as defined in the credit facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to HESM Opco obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter. The credit facilities are secured by first-priority perfected liens on substantially all of the assets of HESM Opco and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions. At ~~September 30, 2022,~~March 31, 2023, borrowings of ~~$43~~$121 million were drawn under HESM Opco’s revolving credit facility, and borrowings of $400 million, excluding deferred issuance costs, were drawn under HESM Opco’s term loan facility. Borrowings under these credit facilities are non-recourse to Hess Corporation.

~~PART I - FINANCIAL INFORMATION (CONT'D.)~~

Market Risk Disclosures

We are exposed in the normal course of business to commodity risks related to changes in the prices of crude oil and natural gas, as well as changes in interest rates and foreign currency values. See Note ~~13,~~11, Financial Risk Management Activities, in the Notes to Consolidated Financial Statements.

We have outstanding foreign exchange contracts with notional amounts totaling ~~$153~~$184 million at ~~September 30, 2022~~March 31, 2023 that are used to reduce our exposure to fluctuating foreign exchange rates for various currencies. AThe change in fair value of foreign exchange contracts from a 10% strengthening or weakening in the U.S. Dollar exchange rate is estimated to be a gain or loss ~~respectively,~~ of approximately ~~$15~~$20 million, respectively, at ~~September 30, 2022.~~March 31, 2023.

At ~~September 30, 2022, consolidated~~March 31, 2023, our long-term debt, which was substantially comprised of fixed-rate instruments, had a carrying value of ~~$8,303~~$8,387 million and a fair value of ~~$7,841~~$8,460 million. A 15% increase or decrease in interest rates would decrease or increase the fair value of debt by approximately ~~$485~~$445 million or ~~$545~~$490 million, respectively. Any changes in interest rates do not impact our cash outflows associated with fixed-rate interest payments or settlement of debt principal, unless a debt instrument is repurchased prior to maturity.

At ~~September 30, 2022,~~March 31, 2023, we have WTI put options with an average monthly floor price of ~~$60~~$70 per barrel for ~~90,000~~80,000 bopd, and Brent put options with an average monthly floor price of ~~$65~~$75 per barrel for ~~60,000~~50,000 bopd. As of ~~September 30, 2022,~~March 31, 2023, an assumed 10% increase in the forward WTI and Brent crude oil prices used in determining the fair value of our put options would reduce the fair value of these derivative instruments by approximately $5$55 million, while an assumed 10% decrease in the same crude oil prices would increase the fair value of these derivative instruments by approximately ~~$10~~$105 million.

3126

PART I - FINANCIAL INFORMATION (CONT'D.)

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including information incorporated by reference herein, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; estimates of our crude oil and natural gas reserves and levels of production; benchmark prices of crude oil, natural gas liquids and natural gas and our associated realized price differentials; our projected budget and capital and exploratory expenditures; expected timing and completion of our development projects; information about sustainability goals and targets and planned social, safety and environmental policies, programs and initiatives; and future economic and market conditions in the oil and gas industry.

Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements:

•fluctuations in market prices of crude oil, natural gas liquids and natural gas and competition in the oil and gas exploration and production ~~industry, including as a result of COVID-19;~~industry;

•reduced demand for our products, including due to ~~COVID-19,~~ perceptions regarding the oil and gas industry, competing or alternative energy products and political conditions and events;

•potential failures or delays in increasing oil and gas reserves, including as a result of unsuccessful exploration activity, drilling risks and unforeseen reservoir conditions, and in achieving expected production levels;

•changes in tax, property, contract and other laws, regulations and governmental actions applicable to our business, including legislative and regulatory initiatives regarding environmental concerns, such as measures to limit greenhouse gas emissions and flaring, fracking bans as well as restrictions on oil and gas leases;

•operational changes and expenditures due to climate change and sustainability related initiatives;

•disruption or interruption of our operations due to catastrophic and other events, such as accidents, severe weather, geological events, shortages of skilled labor, cyber-attacks, public health measures, ~~related to COVID-19,~~ or climate change;

•the ability of our contractual counterparties to satisfy their obligations to us, including the operation of joint ventures under which we may not control and exposure to decommissioning liabilities for divested assets in the event the current or future owners are unable to perform;

•unexpected changes in technical requirements for constructing, modifying or operating exploration and production facilities and/or the inability to timely obtain or maintain necessary permits;

•availability and costs of employees and other personnel, drilling rigs, equipment, supplies and other required services;

•any limitations on our access to capital or increase in our cost of capital, including as a result of limitations on investment in oil and gas activities, rising interest rates or negative outcomes within commodity and financial markets;

•liability resulting from environmental obligations and litigation, including heightened risks associated with being a general partner of Hess Midstream LP; and

•other factors described in the section entitled “Risk Factors” in Item 1A—Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 as well as any additional risks described in our other filings with the SEC.

As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.

3227

PART I - FINANCIAL INFORMATION (CONT'D.)

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The information required by this item is presented under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Disclosures.”

Item 4. Controls and Procedures.

Based upon their evaluation of the Corporation’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~September 30, 2022,~~March 31, 2023, John B. Hess, Chief Executive Officer, and John P. Rielly, Chief Financial Officer, concluded that these disclosure controls and procedures were effective as of ~~September 30, 2022.~~March 31, 2023.

There was no change in internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 in the quarter ended ~~September 30, 2022~~March 31, 2023 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

3328

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Information regarding legal proceedings is contained in Note ~~11,~~9, Guarantees and Contingencies in the Notes to Consolidated Financial Statements and is incorporated herein by reference.

Item 2. Share Repurchase Activities.

~~Our~~On March 1, 2023, our Board of Directors approved a new authorization for the repurchase of our common stock in an aggregate amount of up to $1 billion. This new authorization replaced our previous repurchase ~~activities for~~authorization which was fully utilized at the end of 2022. There were no shares of our common stock repurchased during the first three months ~~ended September 30, 2022, were as follows:~~

Period Total Number of
Shares Purchased (a) Average
Price Paid
per Share (a) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (b) Maximum Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the Plans
or Programs (c)
(In millions)
July 576,892 $ 103.59 576,892 $ 400
August 413,956 110.51 413,956 354
September 382,238 116.50 382,238 310
Total 1,373,086 $ 109.27 1,373,086

~~(a)Repurchased in open-market transactions. The average price paid per share is inclusive~~ of ~~transaction fees.~~

~~(b)Since initiation of the buyback program in August 2013, total shares repurchased through September 30, 2022 amounted to 95 million at a total cost of $7.19 billion including transaction fees.~~

~~(c)~~In March 2013, we announced that our Board approved a stock repurchase program that authorized the purchase of common stock up to a value of $4.0 billion. In May 2014, the share repurchase program was increased to $6.5 billion and in March 2018, it was increased further to $7.5 billion.2023.

3429

PART II –- OTHER INFORMATION (CONT'D)

Item 6. Exhibits.


Exhibits
~~4(1)~~10(1)*			~~Credit~~Form of 2023 Performance Award Agreement ~~dated as of July 14, 2022, among Hess Corporation,~~under the subsidiary party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent incorporated by reference to Exhibit 10(1) of Form 8-K of the Registrant, filed on July 15, 2022.2017 Long-Term Incentive Plan.
31(1)			Certification required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).
31(2)			Certification required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).
~~32(1)~~32(1 )#			Certification required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
~~32(2)~~32(2 )#			Certification required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
101(INS)			Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101(SCH)			Inline XBRL Taxonomy Extension Schema Document.
101(CAL)			Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101(LAB)			Inline XBRL Taxonomy Extension Label Linkbase Document.
101(PRE)			Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101(DEF)			Inline XBRL Taxonomy Extension Definition Linkbase Document.
104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2022,~~March 31, 2023, has been formatted in Inline XBRL.

*The exhibit relates to executive compensation plans and arrangements.

#Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


HESS CORPORATION
(REGISTRANT)


By						/s/ John B. Hess
						JOHN B. HESS
						CHIEF EXECUTIVE OFFICER


By						/s/ John P. Rielly
						JOHN P. RIELLY
						EXECUTIVE VICE PRESIDENT AND
						CHIEF FINANCIAL OFFICER

Date: ~~November 3, 2022~~May 4, 2023

3631


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share (a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (c) (In millions)
July	576,892	$	103.59	576,892	$	400
August	413,956	110.51		413,956	354
September	382,238	116.50		382,238	310
Total	1,373,086	$	109.27	1,373,086