John Hess
Chief Executive Officer at Hess
Thank you, Jay. Welcome, everyone, to our second quarter conference call. Today, I will share some thoughts on the energy transition and then discuss our continued progress in executing our strategy. Then Greg Hill will cover our operations, and John Rielly will review our financial results.
First, in terms of the energy transition, it is important to realize that progress has been made towards the goal of the Paris Agreement. According to the International Energy Agency, or the IEA, the global median temperature increase prior to the Paris Agreement was 3.5 degrees Celsius. Today, according to the IEA's stated policy scenario, the world is on a trajectory to a median temperature increase of 2.5 degrees. However, much more progress is required, and we currently are not on a path to meeting the Paris Agreement's goal of 1.5 degrees.
There are three important gaps affecting the pace of progress. First, the world is facing a structural deficit in energy supply, and the key challenge is investment. To meet growing energy demand, the world needs to invest $4 trillion each year for the next 10 years in clean energies, significantly more than last year's investment of $1.4 trillion. The world also needs to invest $500 billion each year for the next 10 years in oil and gas, as compared with $300 billion to $400 billion invested annually in the last five years.
Second, developed countries have a gap between their current pledges and the investments they are making to reach their emission reduction commitments. For example, the United States has pledged a 50% reduction in emissions by 2030. And even with the incentives in the Inflation Reduction Act, our nation will likely fall far short of that pledge.
Finally, developing countries are also facing large gaps in their aspirations for emission reductions. I recently had the honor of speaking at the Energy Asia Conference in Kuala Lumpur. Asia represents 50% of the world's population, 50% of global energy use and 50% of global emissions and will, therefore, play a key role in the energy transition. The conference speakers, both government officials and business leaders, made it clear that Asia will need to find the right balance between energy affordability and emission reduction commitments.
At COP28 in December of this year, developing countries' voices must be heard to address their rights to economic prosperity and a higher standard of living. The reality is that the energy transition will take a long time, cost a lot of money and require many technologies that do not exist today. We must recognize that oil and gas will be needed for decades to come and are fundamental to an orderly, just and secure energy transition. Policymakers need to have climate literacy, energy literacy and economic literacy to enable a net zero future.
In a world that will require reliable, low-cost oil and gas resources for decades ahead, we believe that Hess offers a unique value proposition for investors. We continue to execute our strategy to deliver high-return resource growth, a low cost of supply and industry-leading cash flow growth and, at the same time, maintain our industry leadership in environmental, social and governance performance and disclosure.
In terms of resource growth, with multiple phases of Guyana developments coming online and our robust inventory of high-return drilling locations in the Bakken, we can deliver highly profitable production growth of more than 10% annually through 2027. In terms of low cost of supply, as our resource base continues to expand, particularly in Guyana, where our first five developments have break evens in the range of $25 to $35 per barrel Brent, we will steadily move down the cost curve. By 2027, we forecast that our cash unit costs will decline by 25% to approximately $10 per BOE.
In terms of cash flow growth, we have an industry-leading rate of chain story and an industry-leading duration story, providing a highly differentiated value proposition. Based upon a flat Brent oil price of $75 per barrel, our cash flow is forecast to increase by approximately 25% annually between 2022 and 2027, more than twice as fast as our top line growth. And our balance sheet will also continue to strengthen, with our most recent debt-to-EBITDAX ratio at approximately one times.
Successful execution of our strategy has uniquely positioned our company to deliver significant value to shareholders for years to come, both by growing intrinsic value and by growing cash returns. 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 in future years, share repurchases are expected to represent a growing proportion of our return of capital.
By investing only in high-return low-cost opportunities, we have built a differentiated and balanced portfolio focused on Guyana, the Bakken, Deepwater Gulf of Mexico and Southeast Asia. Key to our strategy is Guyana, the industry's largest oil province discovered in the last decade, where Hess has a 30% interest and ExxonMobil is the operator. Since 2015, we have had more than 30 discoveries on the Stabroek Block, underpinning a gross discovered recoverable resource estimate of more than 11 billion barrels of oil equivalent, with multibillion barrels of exploration potential remaining.
In June, we were honored to be named E&P Explorer of the Year in the 15th Annual Wood Mackenzie Exploration Industry Survey for the second consecutive year. In terms of Guyana developments, we currently have line of sight to six floating production, storage and offloading vessels, or FPSOs, in 2027, with a gross production capacity of more than 1.2 million barrels of oil per day and the potential for up to 10 FPSOs to develop the discovered resources on the Stabroek Block.
In the Bakken, we have a 15-year inventory of high-return drilling locations to enable us to steadily grow net production to approximately 200,000 barrels of oil equivalent per day in 2025. We plan to continue operating a four-rig program, which will enable us to fully optimize our infrastructure, lower our unit cash costs and generate significant levels of free cash flow.
Turning to our operated offshore assets. In the Gulf of Mexico, we had a successful oil discovery during the quarter at the Hess-operated Pickerel-1 well with approximately 90 feet of high-quality net pay, which we plan to tie back to our Tubular Bells production facility, with first oil expected in mid-2024.
In Southeast Asia, we have two important long-life natural gas assets, North Malay Basin and the joint development area, or JDA. Our major priorities going forward are to continue to maximize cash flow and production at North Malay Basin, and to work with the governments of Malaysia and Thailand to extend our PSC agreement at the JDA.
As we execute our company strategy, we will continue to be guided by our long-standing commitment to sustainability and are proud to be an industry leader in this area. Last week, we announced the publication of our 26th Annual Sustainability Report, which provides a comprehensive review of our strategy and performance on environmental, social and governance programs, including our net zero commitment and the significant progress we have made toward our 2025 emissions reduction targets.
In summary, we continue to successfully execute our strategy to deliver industry-leading cash flow growth and financial returns to our shareholders, while safely and responsibly producing oil and gas to help meet the world's growing energy needs. As a result, our company is uniquely positioned to deliver significant value to shareholders for years to come, both by growing intrinsic value and by growing cash returns.
As our portfolio becomes increasingly free cash flow positive, we will continue to prioritize the return of capital to our shareholders through further dividend increases and share repurchases.
I will now turn the call over to Greg Hill for an operational update.
