Learning to Win in Unconventionals

Who we are

• Integrated energy company – Exploration, production, refining,

retail, trading, energy marketing, LNG

• No. 261 on the Global Fortune 500 in 2011

• ~$34 billion in revenue in 2010

• 14,000 employees worldwide

• E&P activity in 22 countries

• 2010 average production in excess of 420,000 Boe/d

• End-2010 proved reserves in excess of 1.5 billion Boe

• Marketing - Strong position selling petroleum products worldwide, gas and electricity on US East Coast

• Refineries - Port Reading in New Jersey and, in a joint venture with the Venezuelan state company PDVSA, at St Croix in the US Virgin Islands

Our History of Independence

Shenzi first oil

Bakken sanction

4

Global Production Portfolio

Bakken

Seminole

Okume / Ceiba

Waha GEA

Schiehallion Valhall

Beryl

Samara-Nafta

ACG

Sinphuhorm

JDA Natuna A

Conger

South Arne

Pangkah 2010 Production, Mboe/d

US Europe Africa Asia/Other Total

Liquids 89 91 113 14 307

Gas 18 22 - 71 112

Total 107 113 113 85 418

Pailin

Shenzi

Llano

5

250

300

350

400

450

2005 2006 2007 2008 2009 2010

800

1000

1200

1400

1600

2005 2006 2007 2008 2009 2010

Strong Track Record of Growth

Proved Reserves MMBOE

+7% CAGR

Production MBOED

+5% CAGR

Important Part of US Oil Supply

SOURCE : Hess estimates

Bakken (US)

Other tight oil & shale gas liquids

11%

US Unconventional Liquids Production Million barrels per day

40%

Share of onshore US liquids production

7

Growing Unconventional Portfolio

Eagle Ford Shale • >100,000 net acres • 3 rig program

Paris Basin • ~340,000 net acres • Plan 6 wells in 2012

Utica Shale • ~185,000 net acres • Plan 3 rig program in 2012

China • Two JSA’s with Sinopec • 1.7 MM acre study area

Beetaloo Basin • >6.2 MM gross acres • Seismic underway

Bakken Shale • ~900,000 net acres •16 rig program

8

North Dakota Bakken Shale

•Hess ~67% W.I., operator •~900,000 net acres •16 rig program •Expanding advantaged

infrastructure •Lean manufacturing •Attractive economics

MBOED

0

20

40

60

80

100

120

140

2010 2011 2012 2013 2014 2015

+50% CAGR

Capa

Beaver Lodge

Tioga

Hawkeye

Blue Buttes

Antelope

Red Sky

Impact

Passport

Stampede

East Nesson

Canada

Avalanche

Tioga Gas Plant

z Nesson Anticline

Russian Creek

Little Knife

Murphy Creek

30 Miles

West Nesson

Goliath Stony Creek

Buffalo Wallow

9

Unconventionals Require Different KPIs…

• Relatively few wells

• Complex geology and reservoir with variation across the field

• High volume production per well with relatively flat production curves

Unconventional Resource Conventional Resource

• Higher number of wells

• Less geological and reservoir complexity/ variation

• Lower volumes per well with peak IPs quickly tapering to steady state production

Keys to Success in Unconventionals

• Speed of execution

• Parallel processes

• Standardization

• Continuous improvement

• Balanced workflow and pull

• Replication of manufacturing approach across plays

© 2011 Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

A New Operating “model”…

10

Organization

• Functional structure is not well aligned to unconventional development and execution processes

• Often, lack of defined roles and responsibilities

Process and Planning

• Requires creation of standard processes

• Adopt formal mechanisms to share institutional knowledge and learnings

• Shift focus from capital planning to continuous process

• Focus on learning / improvement objectives

Performance Management

• Requires re-alignment of performance contracts and metrics with KPIs for new processes and planning

• New metrics require buy-in across the organization on their definition and review process

Operational

• Embrace a factory concept of repeatable, predictable processes -- to ensure efficient execution

• Drive accountability and compliance for consistency, efficiency and effectiveness

© 2011 Cambridge Energy Research Associates, Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

11

2011 Unconventionals Roadmap

OptimiseOptimise

• Operations Effectiveness • Manage NOJV • Infill Strategy • Frac Stages • Orientation • Re-fracs • Duals

• Multi-well Pads • Fully Automated • Remote monitoring • Optimised Spacing

• Single Lateral • Simple, Low Mechanical Risk • Drill best wells • Simple Surface Kit • Some Trucked Production • Build Infrastructure • Manage NOJV

Bakken Strategy Adjustments Support Growth…

12

“Play the Thick” • Leased 100k acres in East Nesson • Mimic Elm Coulee single stage frac’s • Success in good rock; but not tighter rock

“Chase the Play East” • Acquired 200k acres Red Sky; Stampede; Avalanche • Implemented 10 stage frac’s • Refine IP/EUR models

“Take Multi-Year Approach” • ‘Mow-it-Down’ • Sanctioned 5 year; $5B project • Recognized need to continue growing acreage • Committed to build infrastructure; play mid-stream

“Make Strategic Acquisitions” • Acquire AOG and Tracker

Two Phase Strategy Developed • Hold by Production (HBP) • Re-set strategy to hold new acreage • Field test optimal well designs

2005 2006 2007 2008 2009 2010 2011 2012

Unconventional Basins Screening Methodology

• Organic Storage

• Inorganic Storage

• Fracability

• Fluid Mobility

• Reservoir Pressure

• Fluid Quality

• Structural Complexity

• Drilling Depth

Inorganic Matrix Storage

Inorganic Matrix Storage

Pore Throats 4 - 50 nm

(Oil molecules 0.5 - 3 nm) Pore Throats 4 - 7000 nm

Lower Maturity – fluid GOR 300-2900 cf/bbl

Higher Maturity – fluid GOR 800-8800 cf/bbl

High Maturity – gas condensate to dry gas

Organic Matrix Storage

Storage mechanisms

Classification of Unconventional Reservoirs

Producing in Williston Basin for 60 Years

• Conventional Production Gas and oil zones Primary and waterflood

• Bakken Unconventional

Project Since 2004, intense high

activity Applying best-in class

technology

• Well established infrastructure Gathering and trunk lines Trucking Facility

Resource Description: Middle Bakken

Item Bakken

Depth (ft) 10,000

Porosity (%) 6

Water saturation (%) 38

oil gravity 42

Permeability (mD) 0.05 – 0.001

Net Pay (ft) 50 ft

OIP/ 1280 acres (MMSTB) 10

Upper Bakken Shale

Facies 6

Facies 1-5

Lower Bakken Shale

Three Forks

Facies 7

Lodgepole

Middle Bakken

Resource Description : Middle Bakken

• MB-7：variable calcareous, variably silty dolomites (XRD>50% carbonate); abrupt transition from a siliciclastic – dominated system to a carbonate-dominated system indicates a significant sealevel turnaround (basin deepening or sealevel increase)

• MB-6：coarsest material (fossiliferous sandstones to sandy skeletal/peloidal/ooid grainstones composed of very fine – to medium-grained sand, and diverse skeletal grains and allochems), and marks a maximum sealevel lowstand

• MB-1 through MB-5: predominantly calcareous to fully dolomitic siltstones (XRD>50% detrital quartz silt, +feldspars), representing a prograding, shallowing upward siliciclastic system

Upper Bakken Shale

Lower Bakken Shale

Middle Bakken

Key Reservoir Data Reservoir & Fluid Properties

• Permeability: 0.0001 – 1 md • Initial Pressure: 5,000 – 8,000 psig (34.5-55.2MPa) • Bubble Point: 1,800 – 3,300 psig ( 12.22-22.4MPa) • Formation Volume Factor: 1.4 – 1.8 RB/STB • Solution GOR: 500 – 1400 scf/STB • 0.82 SG Oil (Viscosity = 0.15- 0.45 cP @ Reservoir Conditions) • Compressibility: 10 - 20 x 106 psi-1

1020

10225

10250

10275

10300

10325

10350

10375

10400

10425

10450

10475

10500

MD 0.00 900.00GR_EDTC 0.00 15.00YME_DYN_HORZ

0.00 15.00YME_DYN_VERT

0.00 0.50PR_DYN_VERT

0.00 0.50PR_DYN_HORZ

0.50 1.00TXSG_ANI2

Upper Bakken

iddle Bakken

ower Bakken

Three Forks

9975

10000

10025

10050

10075

10100

10125

10150

10175

10200

10225

10250

0275

MD 0.00 900.00GR_EDTC 0.00 15.00YME_DYN_HORZ

0.00 15.00YME_DYN_VERT

0.00 0.50PR_DYN_VERT

0.00 0.50PR_DYN_HORZ

0.50 1.00TXSG_ANI2

Upper Bakken

iddle Bakken

ower Bakken

Three Forks

1065

10675

10700

10725

10750

10775

10800

10825

10850

10875

10900

10925

10950

MD 0.00 900.00GR_EDTC 0.00 15.00YME_DYN_HORZ

0.00 15.00YME_DYN_VERT

0.00 0.50PR_DYN_VERT

0.00 0.50PR_DYN_HORZ

0.50 1.00TXSG_ANI2

Upper Bakken

iddle Bakken

ower Bakken

Three Forks

10775

10800

10825

10850

10875

10900

10925

10950

10975

11000

11025

(11050

)

MD 0.00 900.00GR_EDTC 0.00 15.00YME_DYN_HORZ

0.00 15.00YME_DYN_VERT

0.00 0.50PR_DYN_VERT

0.00 0.50PR_DYN_HORZ

0.50 1.00TXSG_ANI2

Upper Bakken

iddle Bakken

ower Bakken

Three Forks

Simulation Projects

Objectives • Confirm presence of

natural fractures, estimate fracture permeability

• Determine drainage areas of wells and interference effects

• Determine effective contributing well length

• Degradation of hydraulic fractures

• Infill-drilling strategy

• Uplift of increased frac stages

Microseismic

This seismic attribute is the dip on the reservoir. The well log shown for the northern well is an anisotropy log which may detect fractured zones. The maximum anisotropy coincides with the maximum dip. Squares are the locations of fracturing events during a hydraulic frac.

Red Sky 3-D seismic Calibration

Anisotropy Map

Multi-Well Pads and Stacked Dual Laterals

Multi-well Pad Objectives

Drill and complete six dual lateral (3F/MB) wells on a single drilling pad

Execute safely with no incidents, injuries, or spills

Conduct simultaneous operations Frac and/or produce adjacent wells while drilling

Use Lean tools to develop multi-well procedures

Implement Lean Production Control to ensure safe, on-time execution

Understanding the Bakken Cost Structure

Though a very high-tech play, the Bakken also benefits from a “Manufacturing Mind-set”:

• Minimize upfront Capex costs:

Lean/Six Sigma - Transparent, efficient work-flows (Standardized Work flows, etc.)

Robust, simple designs of drilling, completion and production equipment (Standardized Designs, etc.)

Long-term, performance-based relationships with key suppliers

• Minimize Life of Project Operating costs:

Production Excellence - “Early Equipment Management” maximize reliability and minimize catastrophic failure

Exception Based Surveillance – “The Virtual Oilfield” Leverage manpower and minimize negative effects of distances

847739

693671

617607607

587582577575

556552

539526

492477

429424

390386

374314

185

Hess

Hess at best class in Drilling

Feet drilled per day (2009 average) Hess 2005 avg. Hess 2007 avg.

Source: North Dakota Industrial Commission, Oil & Gas Division

20

22

24

26

28

30

32

34

3Q08 4Q08 1Q09 2Q09

Hess Drilling Days (Spud to TD)

26

Evolution of Well Design

Cased hole Wireline set packers and perforating guns Sequentially set packers and perforate over

each interval

27

Horizontal Well Plug and Perf Completion

Multi-stage system was initiated in 2Q 2008 Frac pumped down 4.5" frac string 5k # 100 mesh sand & 150k # ISP or sand per stage Proppant concentration ramped up from 0.5 to 6 ppa Max. surface treating press. = 8,000 psi @ 30 to 40 bpm

Multistage Frac with Sliding Sleeves

Increasing the number of stages

NPV Analysis

14

15

16

17

18

19

20

21

22

0 20 40 60 80

No of Fracs

NPV

(MM$

)

NPV f

Number of Stages Improvements made Timeline

10Frac ball material. Openhole packer technology using hydraulic set and swell packer.

2008

18Expanable collapsible frac sleeve. 1/8 increment ball and seat with 8K differential rating.

2009

22 Double barrel ball seat. 2009

22+Wireless e-technology. Activating multi-sleeve with one-ball system

2010

Current Well Design

Current multi-lateral / stacked dual-lateral wellbore diagram

Shown as an 22-stage completion system

Moving to a 38-stage completion system

29

Bakken Lateral

Three Forks Lateral

Multi-Well Pad

Drill Site During Production

30

Groundwater protected by steel casing strings held in place with cement

Mechanical Configuration

31

In fracture stimulating the Middle Bakken a completion liner (4 1/2") with oil swellable casing external elements for stage isolation is utilized.

Preparing for Fracturing

Trucks loading water into frac tanks

~ 20,000 Barrels of Water Per Frac

32

Bakken Well Performance Improvement

Single Lateral Performance

Bakken Well Performance Improvement

Production Comparison - SOR

0

200

400

600

800

1000

1200

30 Day 60 Day 90 Day 180 Day 365 Day

BO

PD

18 Stage 10 Stage Scour Frac

How to succeed Unconventional project

Suitable Leading Technology + Manufacturing Mind-set

36

Successful Unconventional Project

•Hess ~67% W.I., operator •~900,000 net acres •16 rig program •Expanding advantaged

infrastructure •Lean manufacturing •Attractive economics

MBOED

0

20

40

60

80

100

120

140

2010 2011 2012 2013 2014 2015

+50% CAGR

Capa

Beaver Lodge

Tioga

Hawkeye

Blue Buttes

Antelope

Red Sky

Impact

Passport

Stampede

East Nesson

Canada

Avalanche

Tioga Gas Plant

z Nesson Anticline

Russian Creek

Little Knife

Murphy Creek

30 Miles

West Nesson

Goliath Stony Creek

Buffalo Wallow