In accordance with international best practices for Production Sharing Agreements (PSAs), the operator is given some tax breaks for imports; but, it is still required to pay its income taxes to the government of the host country for its operations.
Hess Corporation Executives were recently quizzed on how the payment of these taxes would affect its bottom-line of massive profits to be had from the Stabroek Block which holds over six billion barrels of oil equivalent resources.
It was here that the abnormal nature of Guyana’s PSA came to the fore.
During the company’s third-quarter earnings call, the Chief Financial Officer (CFO), John Rielly alluded to the fact that investors or shareholders have nothing to worry about. The official explained, “…So the way that contract works, after the cost recovery, the profit oil, they split for the government and the working interest owners. And the government, out of its profit oil, pays for the taxes of the working interest owners. So what that requires us to do is record a tax…”
Rielly added, “…Whatever taxes show up there do not affect the bottom line cash flow from our Guyana production.”
During its third-quarter earnings call, this news agency would have also reported that Hess Corporation Executives bragged about the company becoming a free cash flow engine for shareholders by 2022 thanks to its 30 percent stake in Guyana’s Stabroek Block.
Specifically, the company’s Chief Executive Officer (CEO), John Hess was keen to note that the Stabroek Block’s Liza field offers high financial returns and more rapid cash paybacks since it carries the lowest development costs of all the major global offshore projects.
Hess had said,”…In 2022 and beyond, obviously, we will be a significant free cash flow generator. We see that free cash flow compounding over time and the first call will be continuing to invest in our high-return projects…”
“Once we start to generate free cash flow on a recurring basis, our top priority will be starting to return capital to our shareholders on a consistent basis and the first priority there will be increasing the dividend.”
In the meantime, the CEO said that the company will continue to focus on rapidly developing its exploration and appraisal programme. At the top of the list, he said is getting an understanding of the Tripletail discovery, the fourteenth to be made on the Stabroek Block.
