CEO John Hess predicts a slow recovery in oil prices, driven by lower capital investment and a resulting decline in production.
“Nothing cures a low price like a low price,” Hess said on CNBC’s Squawk Box. “The seeds have been planted for a slow recovery in oil price. Global investment in exploration/production has gone from $700 billion last year to $550 billion this year. And with the recent lag down in prices to $45 (per barrel), investment will go down even further next year.”
Hess also discussed the need for a long-term business strategy during a time when energy companies are experiencing reduced revenues. “I think the important thing during the downturn is our company is going to be guided, and I think the industry, by three principles,” he said.
“Preserve your balance sheet to have the staying power for low price. Preserve your operating capabilities. Where innovation in America has driven well costs, in our company's case in the Bakken, (from) $13 million to $5 million, we've got to keep that capability.
“Most of all, preserve your growth options.” Hess said. “We're in a long-term business and everybody is thinking short term.”