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Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1 2 3 4 2

Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

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Page 1: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

Overview

Hess Global Overview

Bakken and Utica Asset Overview

Leveraging Lean: Practical Lean Principles

The Journey Continues: Waste Elimination

1

2

3

4

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Page 2: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

Unconventionals Strategy Using Lean to drive competitive advantage…

Maximize Bakken

Value Delivery

•  Execute ‘Lean’ manufacturing strategy

•  Deliver first quartile performance

•  Expand & infill acreage position

•  Exploit infrastructure advantage

Leverage Capability

•  Leverage Bakken capability to Utica and other plays

•  Strengthen technical advantage

•  Build relationships with preferred partners

Grow Portfolio

•  Capture new growth opportunities

•  Consolidate as opportunities arise

4 Continual improvement unlocks additional opportunities

Page 3: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

6

Hess in Ohio Material Position in the Utica Wet Gas Window

•  Encouraging 2014 appraisal, transitioning to early

development at measured pace

•  Material position in the wet gas window, acreage in play sweet

spot

•  Leveraging Bakken capability and experience to maximize efficiency and reduce costs

•  Encouraging 2014 appraisal, transitioning to early

development at measured pace

•  Material position in the wet gas window, acreage in play sweet

spot

•  Leveraging Bakken capability and experience to maximize efficiency and reduce costs

Program Highlights

•  45,000 net acres

•  Hess 50% WI, 95% gross NRI

•  2015 net prod. ~20 Mboe/d

•  2 rig program, reduced to 1 rig from June 2015

•  2015 capex $240 MM

•  Net production goal of ~40 mboepd 2020+

Core position in emerging Utica Shale play

Page 4: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

81 64

53 43 34 30 26

NAC 4H 20

Oxford 3H 8

Smithfield A 1H 27

Cadiz B 1H 14

Kirkwood 3H 33

Athens B 1H 5

Athens B 2H 5

45 36 33 32 29 27 25 24 22

Q1 2011 Q2 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014

$5.4 $5.6 $5.2 $5.0 $4.8 $4.6 $4.1

$8.0 $6.0

$4.1 $3.6 $2.9 $2.9 $3.1

$13.4

$11.6

$9.3 $8.6

$7.7 $7.5 $7.2

1Q 2012 2Q 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014

Bakken Well Delivery Drilling Performance: Spud-to-Spud Days

51% Improvement

Drilling and Completions Cost ($MM)

47% Improvement

Lean Delivering Significant Improvements The drive to first quartile performance…

Bakken Lean practices accelerate Utica learning curve

$605 $466 $421 $362

1H 2013 2H 2013 1H 2014 2H 2014

Utica Well Delivery Drilling Performance: Spud-to-Spud Days

68% Improvement

Drilling Cost ($M/foot)

40% Improvement

2012

2014

$240 $230 $193 $176

1H 2013 2H 2013 1H 2014 2H 2014

Completions Cost ($M/stage)

27% Improvement Completion Costs

Drilling Costs

9

Page 5: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

Lean Manufacturing Proven methodology to drive cost and efficiency improvements…

Lean Principles •  Eliminate waste

•  Customer-Supplier Relationships

•  Structured Problem Solving

•  Operating Rhythm with Visual Controls

•  Defect Elimination/CI through Standard work

Repeatable Scalable Standardized

Well Scoping

Well Planning

Site Construction Drilling

Hydraulic Fracturing Flowback

Handover to Operations

Leveraging Lean to drive improvement 8

Page 6: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

Structured Problem Solving Robust, shared problem solving method, aligned to business objectives…

• Disciplined approach ü Team-Based Contributions

ü  Incorporate Customers

ü Avoid “Solutions”

ü Follow Process

9

• Concise and accurate definition of the problem ü What is the current condition? Need data.

ü What problem are we trying to solve? Views vary.

• What is the Future State, Goal or Target?

• What are proposed Countermeasures? Who? When? ü  Is a root cause identified? Not to be confused with “solutioning.”

ü Serves as a record in the future and more efficient problem solving ü What problem are we trying to solve – Views vary widely

Page 7: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

Operating Rhythm with Visual Controls Scheduled meetings to drive and manage efficiency… • Open visual meeting space ü Recurring time dedicated to coordination

ü Expectations are clearly understood

ü Consistent visual “Scoreboard”

• Manage by exception ü Focus on Highlights and Hot Spots

ü Typically “Stand-Up” meetings facilitate focus

ü Do not cover activities that are on target

ü  Increases efficiency – Can cover a lot of ground in a short meeting

10

• Allocate resources quickly and enact countermeasures ü Action appropriately with accountability and deadlines

Page 8: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

$-

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

0

30

60

90

120

Q1 Q2 Q3 Q4 YTD 2015

Faci

litie

s C

ost/w

ell

Con

stru

ctio

n C

ycle

Tim

e

(Days) ($MM) à  30+% reduction in cycle time

0

10

20

30

Increased build rate from 10% to 15% enables higher EUR at 20% lower cost

Improved mud motor and MWD reliability has reduced lateral times by 20%

Implementing best practices has improved vertical section times by 15%

Best Practices Deliver Improvements

Refining standard processes, a Lean approach to deliver further improvement

Further Standardization Distinctive Lean manufacturing approach…

Image Source: Halliburton

2014 Drilling Cycle Time (Spud-to-Spud)

Improving Standards to Deliver Better Performance

P90 P50

P10

10

15

20

25

30

35

Facilities Delivered Faster at a Lower Cost Implementing a standard design and construction process

2014

12

(Days)

Rig Fleet

Page 9: Overview - Amazon S3...Overview Hess Global Overview Bakken and Utica Asset Overview Leveraging Lean: Practical Lean Principles The Journey Continues: Waste Elimination 1Unconventionals

Summary

•  Successfully leveraging skillset to other assets

•  Lean manufacturing key enabler

•  Positioned well for low price environment

• What is the possibility for North America?

17 “People Make the Difference at Hess”