Hess Corp. (NYSE:HES)

The property, plant, and equipment (PP&E) profile exhibits a cyclical pattern characterized by an expansion phase peaking in 2019, a sharp contraction in 2020, and a gradual recovery through 2022.

Gross Asset Valuation

PP&E at cost reached a five-year peak of US$ 35,820 million in 2019 before declining to US$ 30,519 million in 2020. By the end of 2022, the gross value recovered to US$ 32,592 million, indicating a moderate rebound in capital investment following the 2020 downturn.

Segmental Performance Trends

A divergent trend is observed between Exploration and Production (E&P) and Midstream assets. E&P assets, driven largely by wells and related facilities, experienced volatility similar to the total PP&E, dropping from a high of US$ 31,876 million in 2019 to US$ 26,318 million in 2020, before climbing back to US$ 27,991 million in 2022. Conversely, Midstream assets demonstrated consistent year-over-year growth, increasing from US$ 3,492 million in 2018 to US$ 4,571 million in 2022, representing a steady expansion of infrastructure investments.

Property Reserves and Exploration

A sustained downward trend is evident in both unproved and proved properties. Unproved properties decreased significantly from US$ 394 million in 2018 to US$ 149 million in 2022. Similarly, proved properties declined from a peak of US$ 3,304 million in 2019 to US$ 2,660 million by 2022, suggesting a reduction in the acquisition of new acreage or a strategic shift in the asset portfolio.

Net Book Value and Accumulation of Depreciation

The net book value of PP&E mirrored the gross asset fluctuations, peaking at US$ 16,814 million in 2019 and hitting a low of US$ 14,115 million in 2020. The sharp reduction in reserves for depreciation, depletion, amortization, and lease impairment in 2020—from US$ -19,006 million to US$ -16,404 million—indicates substantial asset write-downs or disposals during that fiscal year. Net PP&E recovered to US$ 15,098 million by 2022, though it remained below the levels recorded in 2018 and 2019.

The average age ratio of property, plant, and equipment exhibited a period of gradual increase followed by a slight moderation toward the end of the observed period.

Growth Phase (2018–2021)

A consistent upward trajectory was observed from December 31, 2018, through December 31, 2021, with the ratio rising from 51.59% to a peak of 54.51%. This steady increase indicates that the asset base was aging relative to its estimated useful life, suggesting that depreciation outpaced the addition of new capital assets during this interval.

Correction Phase (2022)

The upward trend reversed in 2022, as the ratio declined to 53.68%. This reduction suggests a relative increase in the acquisition of new property, plant, and equipment or the deployment of new capital expenditures, which served to lower the average age of the overall asset portfolio.

Overall Stability

Despite the fluctuations, the ratio remained within a narrow range of approximately 2.92 percentage points over the five-year period. This relative stability indicates a controlled asset lifecycle management strategy without drastic shifts in the composition of the fixed asset base.

The analysis of property, plant, and equipment reveals a period of volatility in asset valuation coupled with a gradual aging of the overall asset base. A significant contraction in both gross asset cost and accumulated depreciation occurred in 2020, followed by a steady recovery in investment levels through 2022.

Property, Plant, and Equipment at Cost

Gross asset values exhibited a peak in 2019 at 35,820 million US$, followed by a sharp decline to 30,519 million US$ in 2020. This reduction suggests a significant disposal of assets or a substantial impairment charge. Subsequent years show a consistent upward trend, with values rising to 32,592 million US$ by December 31, 2022, indicating a resumption of capital investment.

Reserves for Depreciation, Depletion, Amortization, and Lease Impairment

Accumulated reserves followed a trajectory similar to the gross cost of assets, peaking in 2019 at 19,006 million US$ and dropping to 16,404 million US$ in 2020. The recovery of these reserves to 17,494 million US$ by 2022 reflects the ongoing systematic allocation of asset costs over their useful lives as the asset base expanded.

Average Age Ratio

The average age ratio demonstrates a steady upward trend from 51.59% in 2018 to a peak of 54.51% in 2021. This progression indicates that the asset base was, on average, moving further through its estimated useful life. A slight reversal is observed in 2022, where the ratio declined to 53.68%, suggesting that new capital expenditures in that year exceeded the rate of depreciation, thereby marginally lowering the average age of the total asset portfolio.