January of 2009 could be a HUGE month for HES's "wildcat" 40% interest in ultra deep water block BM-S-22 in the "Sugarloaf" Santos Basin off the coast of Brazil. HES also has many other E & P projects that we should be hearing positive things about in the next 12 Months. The following excerpts from Credit Suisse’s highly regarded oil analyst Mark Flannery, July 30, 2008 HES Neutral rating report indicates a more cautious view of HES even though he has a 12 month HES target price of $130.00, and he also believes, " HES remains an intriguing stock as we believe it has by far the largest potential for value creation from exploration within the integrated oils."
HES - Exploration upside for ‘free’ – Credit Suisse - Neutral - TP $130.00 "HES remains an intriguing stock .... as we believe it has by far the largest potential for value creation from exploration within the integrated oils."
Several important wells should spud in 2H08, though important results are more likely in 1Q09. In August, the third exploration well (Nimblefoot) should spud on Australia's WA-390-P block. The fourth well is also expected to spud sometime in 2H08.
In Brazil , HES expects the first well on XOM-operated Block BM-S-22 will spud at the end of September. The West Polaris drillship will soon head to Mauritius , where it will change crews and go on to Brazil . Block 54 in Libya and Cape Three Points in Ghana are also both expected to spud in 2H08. Management expects Block 54 will start in early 4Q08, while Cape Three Points will begin sometime in November.
Pony and Tubular Bells - HES mentioned on the call that it still believes that the Pony discovery can be developed as a stand-alone project, even at the newly reduced indicative reserve size of 200 million barrels. However, we feel that this may be a stretch. HES also said that it will take most of the next 12 months to settle on a development plan, effectively setting this project back a little in our minds.
Additionally, continued discussions between operator BP and HES over the Tubular Bells discovery also highlight for us how recent cost increases and equipment availability issues are dogging the economics and timing of small to medium sized discoveries in the Gulf of Mexico
Bakken Shale - HES has expanded its Bakken Shale acreage to 500,000 acres, an industry leading position, and something which will doubtless reignite discussions of "Bakken Math" heard earlier this year. We expect more concrete details to emerge in 2009, along with a likely step-up in the drilling program.
This play, however, is not likely to be of the same transformational quality as HES’s more traditional exploration prospects .( End of Excerpts) for more excerpts from Credit Suisse, oil analyst's July 30, 2008 2Q08 conference call report see
http://www.investorvillage.com/smbd.asp?mb=4307&mn=130&am...
Good Luck and Good Investing. HLW333 (a/ka HLW3333) 8/21/08
$105.98 (08/21/08)
