John B. Hess
Chief Executive Officer at Hess
Thank you, Jay. Welcome, everyone, to our first quarter conference call. Today, I will review our continuing progress to execute our strategy. Greg Hill will then discuss our operations, and John Rielly will cover our financial results. With Russia's invasion of Ukraine, the spotlight has been put on energy security and the critical importance of oil and gas to the global economy. Energy security is essential for an orderly energy transition. Oil markets were tight even before the Russia-Ukraine conflict. We have now had seven consecutive quarters of global oil inventory draws. And at the end of March, global oil inventories were estimated to be more than 400 million barrels less than pre-COVID levels.
The world is facing a structural oil supply deficit, and the only way to address it is through more industry investment, and that will take time to have an impact. According to the International Energy Agency, a reasonable estimate for global oil and gas investment is at least $450 billion each year over the next 10 years to meet demand. In 2020, that number was $300 billion, and last year's investment was $340 billion. So to ensure an affordable, just and secure energy transition, we need to invest significantly more in oil and gas, and we also must have government policies that encourage investment rather than discourage it. In a world that will need reliable low-cost oil and gas resources now and for decades to come, Hess is in a very strong position, offering a differentiated value proposition.
Our strategy is to deliver high-return resource growth, deliver a low cost of supply and deliver industry-leading cash flow growth, while at the same time, maintain our industry leadership in environmental, social and governance performance and disclosure. Our successful execution of this strategy has uniquely positioned our company to deliver long-term value to our shareholders by both growing intrinsic value and growing cash returns. In terms of resource growth, we have built a balanced portfolio focused on the Bakken, deepwater Gulf of Mexico, Southeast Asia and Guyana. With multiple phases of low-cost oil developments coming online in Guyana and our robust inventory of high-return drilling locations in the Bakken, we can deliver highly profitable production growth of more than 10% annually over the next five years.
Our expanding high-quality resource base positions us to steadily move down the cost curve. Our four sanctioned oil developments in Guyana have a breakeven Brent oil price of between $25 and $35 per barrel. And by 2026, our company portfolio breakeven is forecast to decrease to a Brent oil price of approximately $45 per barrel. In terms of cash flow growth, we have an industry-leading rate of change and durability story. Based upon a flat Brent oil price of $65 per barrel, our cash flow is forecast to increase by approximately 25% annually between 2021 and 2026, more than twice as fast as our top line growth. Our balance sheet will also continue to strengthen in the coming years with debt to EBITDAX expected to decline from less than two times in 2022 to under one times in 2024.
Our financial priorities are, first, to have a disciplined capital allocation process so that we invest only in high-return, low-cost opportunities; second, to maintain our investment-grade credit rating and have a strong cash position and balance sheet to ensure that we can fund our world-class investment opportunities in Guyana; and third, to return up to 75% of our annual free cash flow to shareholders. With the successful start-up in February of the Liza Phase two oil development offshore Guyana, which, at capacity, will add $1 billion of net operating cash flow annually at a $65 Brent oil price. In late February, we repaid the remaining $500 million of our $1 billion term loan scheduled to mature in March 2023. And on March 1, we increased our regular quarterly dividend by 50%.
In April, Hess received total net proceeds of $346 million from the secondary offering of Hess-owned Class A shares of Hess Midstream and the sale of Hess-owned Class B units to Hess Midstream. Post these transactions, Hess owns approximately 41% of Hess Midstream. To manage oil price volatility, we have hedged 150,000 barrels per day of oil production for 2022, 90,000 barrels of oil per day with $60 per barrel WTI put options and 60,000 barrels of oil per day with $65 per barrel Brent put options. Given the significant increase in volatility and liquidity risk in the oil markets following Russia's invasion of Ukraine, in March, we removed $100 WTI and $105 Brent call options that we previously had in place. Hess is now positioned to fully benefit on the upside while remaining protected on the downside.
As our portfolio becomes increasingly free cash flow positive in the coming years, we commit to return up to 75% of our annual free cash flow to shareholders with the remainder going to strengthen the balance sheet by increasing our cash position or further reducing our debt. We plan to continue increasing our regular dividend to a level that is attractive to income-oriented investors but sustainable in a low oil price environment. As our free cash flow generation steadily increases, share repurchases will represent a growing proportion of our return of capital. Key to our strategy is Guyana, the industry's largest oil province discovered in the last decade. According to a study by Wood Mackenzie, Guyana is one of the highest-margin, lowest carbon intensity oil developments globally.
As discussed earlier, the world will need these low-cost oil resources for decades to come to meet future energy demand. On the Stabroek Block in Guyana, where Hess has a 30% interest and ExxonMobil is the operator, a number of important milestones were recently achieved. Current production at the Liza Phase one development is 130,000 barrels of oil per day, ahead of its original gross nameplate capacity and following production optimization work on the Liza Destiny FPSO is expected to increase to more than 140,000 barrels of oil per day over the course of this quarter. The Liza Phase two development, which achieved first oil in February, is ramping up ahead of schedule and expected to reach its gross production capacity of approximately 220,000 barrels of oil per day by the third quarter.
Our third development on the Stabroek Block at the Payara Field with a gross capacity of approximately 220,000 barrels of oil per day is also ahead of schedule and is now expected to start up in late 2023. In early April, we announced the sanction of the Yellowtail development after receiving government and regulatory approvals. The Yellowtail development has world-class economics and will be the largest to date on the Stabroek Block. The project will develop an estimated resource base of approximately 925 million barrels of oil and have a gross production capacity of approximately 250,000 barrels of oil per day with first oil expected in 2025. Front-end engineering and design work for our fifth development at Uaru-Mako is underway, and we anticipate that ExxonMobil will be in a position to submit a plan of development to the government by the year-end. We want to thank and congratulate ExxonMobil for their outstanding work as operator in delivering exceptional project management and execution.
According to a Wood Mackenzie study, the production growth ramp for the Stabroek Block is the best in the industry compared with other major deepwater developments which will benefit the people of Guyana and our shareholders. We continue to see the potential for at least six floating production storage and offloading vessels, or FPSOs, on the block in 2027 with a production capacity of more than one million gross barrels of oil per day and up to 10 FPSOs to develop the discovered resources on the block. In terms of exploration and appraisal in Guyana, we continue to invest in an active exploration program with approximately 12 wells planned for the Stabroek Block in 2022. In January, we announced two more significant discoveries on the block at the Fangtooth and Lau Lau wells, which further underpin our queue of future low-cost development opportunities. Yesterday, we announced three additional discoveries at Barreleye, Lukanani and Patwa, which further strengthens the development potential of the block.
With these discoveries, the gross discovered recoverable resource estimate for the block has been increased to approximately 11 billion barrels of oil equivalent, up from the previous estimate of more than 10 billion barrels of oil equivalent, and we continue to see multibillion barrels of future exploration potential remaining. Now turning to the Bakken, where we have an industry-leading position with approximately 460,000 net acres in the core of the play. We are currently operating a three-rig program. Given the strength of the oil market and the world's need for more oil supply, we will give serious consideration to adding a fourth rig later this year which would accelerate our production ramp-up to approximately 200,000 net barrels of oil equivalent per day, a level which will maximize free cash flow generation, lower our unit cash costs and optimize our infrastructure.
As we continue to execute our strategy, our commitment to sustainability remain a top priority. We are honored to have been recognized as an industry leader in diversity, equity and inclusion in January with a top score of 100% on the Human Rights Campaign's Corporate Equality Index for 2022, as well as earning a place on the Bloomberg Gender-Equality Index for the third consecutive year. In summary, our differentiated portfolio is uniquely positioned to deliver industry-leading cash flow growth and financial returns in the coming years. As our portfolio becomes increasingly free cash flow positive, we commit to prioritizing the return of capital to our shareholders through further dividend increases and share repurchases.
I will now turn the call over to Greg for an operational update.
