Off the southern coast of the US, in Gulf of Mexico waters more than 1400 metres deep, Hess’ Esox subsea installation quietly hums along producing thousands of barrels of high-quality oil from Miocene-aged reservoirs buried thousands of metres below the seafloor daily.

Hess announced the Esox oil discovery in October 2019 and brought it on stream the following February as a tie-back to the company’s Tubular Bells production facilities located 10 kilometres away.

“There’s an old adage that goes, ‘you find oil where you found oil', and Esox is a great example of that,” Brock Hajdik, vice president of Gulf of Mexico and Denmark for Hess, tells Upstream.

“Achieving first oil in four months from discovery is a great example of strategic pre-investment in hardware, flexibility in design, and cross-discipline collaboration... .a model we’re looking to replicate for other opportunities in the Gulf of Mexico,” he says.

Esox is one of seven assets in the US independent’s Gulf of Mexico portfolio.

Blending short-cycle and long-cycle projects across the globe, the company’s strategy is to capitalise on low cost-of-supply and sustainable cash-flow growth opportunities.

Its growth engine is found offshore Guyana, where Hess has 30% interest in the ExxonMobil-operated Stabroek block.

There have been 18 discoveries to date on the 6.6 million-acre block and potential for at least five floating production, storage and offloading vessels expected to produce a total 750,000 barrels per day of oil by 2026.

"Guyana becomes a significant cash engine as multiple phases of low-cost oil developments come online, which we believe will drive our company’s breakeven price to under $40 per barrel Brent and provide industry-leading cash flow growth over the course of the decade," chief executive John Hess told analysts in a recent earnings call.

The deep-water Gulf of Mexico is considered one of the company’s three cash engines, the Bakken shale and Southeast Asia being the other two.

Fourth-quarter 2020 production from its US Gulf operations averaged 32,000 barrels of oil equivalent per day, compared to 70,000 boepd a year ago.

The drop reflects downtime for hurricane-related maintenance and lower production from the Shenzi field, which was 3000 boepd net in the fourth quarter as compared to 12,000 boepd the previous year.

Hess sold its 28% working interest in the Shenzi field in November, generating proceeds of $482 million.

“We consider the Gulf of Mexico a high cash margin area. We operate three hubs — the legacy Baldpate platform, the Tubular Bells spar and the Stampede tension-leg platform,” says Hajdik.

Hess' Conger, Llano and Penn State fields are tied back to Shell’s Enchilada platform, Shell’s Auger TLP and the Baldpate platform, respectively.

“While we have been in a growth trajectory in the past, we’re now primarily focused on stabilising and generating cash. These fields are the backbone of our long-term sustainable cash flow opportunities,” he says.

“There are multiple opportunities near our infrastructure that fit our profile being cash-generative but also afford us the ability to do these quick, short-cycle, profitable tie-backs to those facilities.”

‘Tremendous capacity’

Strong returns have made this infrastructure-led exploration approach a dominant development strategy in the Gulf of Mexico for years, says Mfon Usoro, senior energy analyst for Wood Mackenzie.

“That’s the beauty of the Gulf of Mexico — the potential for a new play located where there’s a lot of infrastructure. It is a low-risk frontier,” she tells Upstream.

A 2019 assessment on capacity conducted by the Bureau of Safety and Environmental Enforcement found that 53 out of 68 deep-water Gulf of Mexico facilities are producing less than 50% of their daily nameplate capacity.

The assessment also determined that 48% of the US Gulf’s average daily oil production is coming from facilities with less than 10 years of permitted design life remaining.

By 2025, 32% of deep-water facilities, representing 24% of the US Gulf’s average daily oil production, are scheduled to reach the end of their permitted design life.

“We have plenty of unused capacity in our hubs,” Hajdik says.

“In the near term, the race will be to get good economic conditions to support your investment and some confidence on the long-term view of oil prices.

“These projects can certainly survive $40 barrel oil. However, once we start to see more of these tie-backs identified, sanctioned, and executed, that will be the green shoots of recovery we’ll see before more companies jump out and do larger greenfield developments,” he says.

“In the meantime, there is a tremendous amount of capacity available.”

Field Development

‘You find oil where you found oil’: Hess keeps development close with tie-backs