Reassessing Guyana: PO to $200
In our view, the transformational impact of Guyana on Hess' investment is becoming increasingly understood by a market that has lifted the share price close to a new all-time high. But we continue to see skepticism on whether it is undervalued given an elevated c/flow multiple vs US E&P peers and the sticker shock of a capital program that supports the scale of a resource whose ultimate capacity is still being established. For this reason, in an operationally solid quarter, we revisit several aspects of Hess’Guyana position that we summarize in three points: we see the current value of Guyana at about $136 net to Hess increasing to a peak of about $170/sh within five years as a function of the PSC: there is still little value in the current share price for the balance of the portfolio. The impact on Hess cashflow would be substantial, doubling from 2022 levels within five years and 3x by the end of the decade. This would drive Hess’ EV / DACF multiple from 8x 2023E to a sector average by 2026E and under 4x by 2030E. Along with a moderately lower cost of capital, noting ExxonMobil as operator, our PO at $80 Brent moves to $200. BofA Global Research
