Items 1 and 2. Business and Properties

Hess Corporation (the Registrant) is a Delaware corporation, incorporated in 1920. The Registrant and its subsidiaries (collectively referred to as the Corporation or Hess) operate in two segments, Exploration and Production (E&P) and Marketing and Refining (M&R). The E&P segment explores for, develops, produces, purchases, transports and sells crude oil and natural gas. The M&R segment purchases, markets and trades refined petroleum products, natural gas and electricity. The Corporation also operates terminals and retail gasoline stations, most of which include convenience stores, that are located on the East Coast of the United States. Through February 2013, the Corporation also manufactured refined petroleum products. In January 2013, the Corporation announced its decision to cease refining operations at its Port Reading facility in February and pursue the sale of its terminal network. In January 2012, HOVENSA L.L.C. (HOVENSA), a 50% owned joint venture in the U.S. Virgin Islands, shut down its refinery. The Corporation and its joint venture partner plan to pursue the sale of HOVENSA, while the complex is operated as an oil storage terminal.

The Corporation has for more than two years been engaged in transforming itself into an essentially E&P business focused on the Corporation’s most promising properties and operations and intends to continue to pursue this strategy.

See also the Overview in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Exploration and Production

The Corporation’s total proved developed and undeveloped reserves at December 31 were as follows:

	Crude Oil,Condensate &Natural GasLiquids (a)				Natural Gas				Total Barrels ofOil Equivalent(BOE) (b)
	2012		2011		2012		2011		2012		2011
	(Millions of barrels)				(Millions of mcf)				(Millions of barrels)

Developed
United States		280		190		232		199		318		223
Europe (c)		181		212		190		273		213		258
Africa		188		194		122		63		208		204
Asia		27		25		676		677		140		138

		676		621		1,220		1,212		879		823


Undeveloped
United States		193		183		168		161		222		210
Europe (c)		235		282		167		290		263		331
Africa		46		56		20		8		49		57
Asia		21		27		720		752		140		152

		495		548		1,075		1,211		674		750


Total
United States		473		373		400		360		540		433
Europe (c)		416		494		357		563		476		589
Africa		234		250		142		71		257		261
Asia		48		52		1,396		1,429		280		290

		1,171		1,169		2,295		2,423		1,553		1,573

(a) Total natural gas liquids reserves were 136 million barrels (76 million barrels developed and 60 million barrels undeveloped) at December 31, 2012 and 113 million barrels (56 million barrels developed and 57 million barrels undeveloped) at December 31, 2011.

Natural gas liquids reserves in the United States were 78% and 70% at December 31, 2012 and 2011, respectively. Natural gas liquids reserves in Norway were 17% and 22% at December 31, 2012 and 2011, respectively.

(b) Reflects natural gas reserves converted on the basis of relative energy content of six mcf equals one barrel of oil equivalent (one mcf represents one thousand cubic feet). Barrel of oil equivalence does not necessarily result in price equivalence as the equivalent price of natural gas on a barrel of oil equivalent basis has been substantially lower than the corresponding price for crude oil over the recent past. See the average selling prices in the table on page 8.

(c) Proved reserves in Norway, which represented 21% and 23% of the Corporation’s total reserves at December 31, 2012 and 2011, respectively, were as follows:

Crude Oil, Condensate &Natural Gas Liquids

Natural Gas

Total Barrels of OilEquivalent (BOE)

2012

2011

2012

2011

2012

2011

(Millions of barrels)

(Millions of mcf)

(Millions of barrels)

Developed

102

108

73

137

114

131

Undeveloped

182

185

146

251

207

227

Total

284

293

219

388

321

358

On a barrel of oil equivalent (boe) basis, 43% of the Corporation’s worldwide proved reserves were undeveloped at December 31, 2012 compared with 48% at December 31, 2011. Proved reserves held under production sharing contracts at December 31, 2012 totaled 10% of crude oil and natural gas liquids reserves and 52% of natural gas reserves, compared with 12% of crude oil and natural gas liquids reserves and 51% of natural gas reserves at December 31, 2011. See the Supplementary Oil and Gas Data on pages 80 through 88 in the accompanying financial statements for additional information on the Corporation’s oil and gas reserves.

Worldwide crude oil, natural gas liquids and natural gas production was as follows:

	2012		2011		2010
Crude oil (thousands of barrels per day)
United States
Bakken		47		26		12
Other Onshore		13		11		11

Total Onshore		60		37		23
Offshore		48		44		52

Total United States		108		81		75

Europe
Russia		49		45		42
United Kingdom		15		14		19
Norway*		11		20		16
Denmark		9		10		11

		84		89		88

Africa
Equatorial Guinea		48		54		69
Libya		20		4		23
Algeria		7		8		11
Gabon		—		—		10

		75		66		113

Asia
Azerbaijan		7		6		7
Indonesia		6		3		2
Other		4		4		4

		17		13		13

Total		284		249		289

	2012		2011		2010
Natural gas liquids (thousands of barrels per day)
United States
Bakken		5		2		2
Other Onshore		5		5		5

Total Onshore		10		7		7
Offshore		6		6		7

Total United States		16		13		14

Europe*		2		3		3
Asia		1		1		1

Total		19		17		18

Natural gas (thousands of mcf per day)
United States
Bakken		27		13		9
Other Onshore		27		26		29

Total Onshore		54		39		38
Offshore		65		61		70

Total United States		119		100		108

Europe
United Kingdom		25		41		93
Norway*		10		29		29
Denmark		8		11		12

		43		81		134

Asia and Other
Joint Development Area of Malaysia/Thailand (JDA)		252		267		282
Thailand		90		84		85
Indonesia		66		56		50
Malaysia		39		35		8
Other		7		—		2

		454		442		427

Total		616		623		669

Barrels of oil equivalent (per day)**		406		370		418

* Norway production for 2012 included 11 thousand barrels per day of crude oil, 0.5 thousand barrels per day of natural gas liquids and 8 thousand mcf per day of natural gas from the Valhall Field. Norway production for 2011 included 18 thousand barrels per day of crude oil, 1 thousand barrels per day of natural gas liquids and 15 thousand mcf per day of natural gas from the Valhall Field. Norway production for 2010 included 14 thousand barrels per day of crude oil, 1 thousand barrels per day of natural gas liquids and 13 thousand mcf per day of natural gas from the Valhall Field.

** Reflects natural gas production converted on the basis of relative energy content (six mcf equals one barrel). Barrel of oil equivalence does not necessarily result in price equivalence as the equivalent price of natural gas on a barrel of oil equivalent basis has been substantially lower than the corresponding price for crude oil over the recent past. See the average selling prices in the table on page 8.

A description of our significant E&P operations is as follows:

United States

At December 31, 2012, 35% of the Corporation’s total proved reserves were located in the United States. During 2012, 41% of the Corporation’s crude oil and natural gas liquids production and 19% of its natural gas production were from United States operations. The Corporation’s production in the United States was from offshore properties in the Gulf of Mexico, and onshore properties principally in the Williston Basin of North Dakota as well as in the Permian Basin of Texas.

Onshore: In North Dakota, the Corporation holds approximately 725,000 net acres in the Bakken oil shale play (Bakken). In 2012, the Corporation invested $3.1 billion in drilling and infrastructure projects in the Bakken and substantially completed its “held by production” drilling program undertaken during 2011 and 2012 to hold acreage from the acquisitions in 2010 of TRZ Energy, LLC and American Oil & Gas Inc. (American Oil & Gas). In the fourth quarter, the Corporation moved to pad drilling, which involves sequentially drilling a number of wells on a pad followed by sequential completion of the wells. This pad drilling is expected to lead to a temporary flattening of the production profile until mid-2013. Bakken production is expected to average between 64,000 barrels of oil equivalent per day (boepd) and 70,000 boepd for the full year of 2013, with most of the increase expected to occur in the second half of the year. Infrastructure investments in 2012 included completion of a crude oil rail loading and

storage facility, which was operational in the first quarter, and the continued expansion of the Tioga gas plant. In 2013, the Corporation anticipates operating 14 rigs and completing the Tioga gas plant expansion project in the fourth quarter.

In Texas, the Corporation operates and holds a 34% interest in the Seminole-San Andres Unit. The Corporation also holds approximately 45,000 net acres in the Cotulla area of the Eagle Ford Shale, where first production commenced in May 2011.

In Ohio’s Utica Shale, the Corporation owns a 100% interest in approximately 95,000 acres. The Corporation also owns a 50% undivided interest in CONSOL Energy Inc.’s (CONSOL) approximately 200,000 gross acres, which will be amended pursuant to the joint venture’s ongoing title verification procedure. CONSOL announced on January 31, 2013, that there are chain of title issues with respect to approximately 36,000 acres, most of which likely cannot be cured and that the value of the Corporation’s carry obligation associated with these acres will reduce by approximately $146 million. The reduction in carry and validation of title on other acreage is being separately analyzed by the Corporation and will not be finally determined until the title verification process is completed. In 2012, the Corporation participated in 12 wells, 10 of which were joint venture wells with CONSOL. The Corporation has also contracted to acquire seismic data. In 2013, the Corporation plans to drill five wells on its 100% owned acreage and 27 wells with CONSOL, as well as acquire the seismic data.

Offshore: The Corporation’s production offshore in the Gulf of Mexico was principally from the Shenzi (Hess 28%), Llano (Hess 50%), Conger (Hess 38%), Baldpate (Hess 50%), Hack Wilson (Hess 25%) and Penn State (Hess 50%) fields.

At the Shenzi Field, development drilling continued during 2012 with the completion of two wells. During 2013, the operator plans to complete two production wells and drill one additional water injection well. At the outside operated Llano Field, a successful workover was completed on the Llano #3 well and drilling of the Llano #4 production well commenced in fourth quarter of 2012. At the operated Conger Field, the Corporation plans to acquire seismic data during 2013.

At the Tubular Bells Field (Hess 57%) in the Mississippi Canyon Area of the deepwater Gulf of Mexico, the field development was advanced with the ongoing construction of a floating production system, batch drilling of the top hole sections of the well program and drilling and completion of one well. Development drilling will continue throughout 2013 and first production is anticipated in 2014.

During the third quarter of 2012, the Corporation signed an exchange agreement with the partners of Green Canyon Block 512 that contains the Knotty Head discovery and is in the same reservoir as the Corporation’s Pony discovery on the adjacent Block 468. Under this agreement, the Corporation was appointed operator and has a 20% working interest in the blocks, now collectively referred to as Stampede. Field development planning is progressing and the project is targeted for sanction in 2014.

At December 31, 2012, the Corporation had interests in 252 blocks in the Gulf of Mexico, of which 223 were exploration blocks comprising approximately 855,000 net undeveloped acres, with an additional 66,000 net acres held for production and development operations. During 2012, 49 leases in which the Corporation held an interest either expired or were relinquished.

Europe

At December 31, 2012, 31% of the Corporation’s total proved reserves were located in Europe (Norway 21%, Denmark 4%, Russia 5% and United Kingdom 1%). During 2012, 28% of the Corporation’s crude oil and natural gas liquids production and 7% of its natural gas production were from European operations.

Norway: Substantially all of the 2012 Norwegian production was from the Corporation’s interest in the Valhall Field (Hess 64%). At December 31, 2012, the Corporation also held an interest in the Hod Field (Hess 63%).

At the Valhall Field, a multi-year redevelopment project was completed in early 2013. The project included the installation of a new production, utilities and accommodation platform and expansion of gross production capacity to 120,000 barrels of liquids per day and 143,000 mcf of natural gas per day. In July 2012, the field was shut-in to complete the installation and commissioning of the new facilities and production resumed in January 2013. The operator plans a multi-year development drilling program commencing in 2013.

In January 2012, the Corporation completed the sale of its interest in the Snohvit Field (Hess 3%), a liquefied natural gas development, offshore Norway.

United Kingdom: Production in the United Kingdom North Sea was from the Corporation’s outside-operated interests in the Beryl (Hess 22%), Nevis (Hess 27%), Schiehallion (Hess 16%) and Bittern (Hess 28%) fields. The Corporation also has interests in the Atlantic (Hess 25%), Cromarty (Hess 90%), Fife, Flora and Angus (Hess 85%), Fergus (Hess 65%), Ivanhoe and Rob Roy (Hess 77%), Renee (Hess 14%) and Rubie (Hess 19%) fields. These fields are no longer producing and decommissioning activities have commenced.

In September 2012, the Corporation completed the sale of its interests in the Schiehallion Field, its share of the associated floating production, storage and offloading vessel, and the West of Shetland pipeline system. In October 2012, the Corporation completed the sale of its interests in the Bittern Field and the associated Triton floating production, storage and offloading vessel. In October 2012, the Corporation also announced that it had reached an agreement to sell its interests in the Beryl and Nevis fields and its interest in the Scottish Area Gas Evacuation (SAGE) pipeline (Hess 11%). This transaction was completed in January 2013, see Note 21, Subsequent Events in the notes to the Consolidated Financial Statements.

Denmark: Production comes from the Corporation’s operated interest in the South Arne Field (Hess 62%), offshore Denmark. In 2012, the Corporation continued its phase three development program where two new wellhead platforms were successfully installed in the field. Hook-up and commissioning of the new platforms was ongoing at year-end and development drilling is expected to commence in the first half of 2013. First oil from the phase three development is anticipated in the second half of 2013.

Russia: The Corporation’s activities in Russia are conducted through its interest in Samara-Nafta, a subsidiary operating in the Volga-Urals region (Hess 90%). As of December 31, 2012, this subsidiary had exploration and production rights in 23 license areas. In November 2012, the Corporation announced that it will pursue the sale of Samara-Nafta.

France: The Corporation has a 100% interest in and is operator of approximately 630,000 acres in the Paris Basin. In July 2011, the French government implemented a law prohibiting the use of hydraulic fracturing. In 2013, the Corporation plans to drill three conventional vertical wells, which will be logged and cored to gain subsurface data.

Africa

At December 31, 2012, 16% of the Corporation’s total proved reserves were located in Africa (Equatorial Guinea 4%, Libya 11% and Algeria 1%). During 2012, 25% of the Corporation’s crude oil and natural gas liquids production was from its African operations.

Equatorial Guinea: The Corporation is operator and owns an interest in Block G (Hess 85% paying interest) which contains the Ceiba Field and the Okume Complex. The national oil company of Equatorial Guinea holds a 5% carried interest in Block G. During 2012, the Corporation completed three workovers and drilled three production wells in the Ceiba Field with a fourth well spud late in the fourth quarter. During 2013, the Corporation plans to complete this well and tie in the four wells. The Corporation also plans to drill two production wells at the Okume Complex beginning in the latter part of 2013.

Libya: The Corporation, in conjunction with its Oasis Group partners, has production operations in the Waha concessions in Libya (Hess 8%). The Corporation also owns a 100% interest in offshore exploration Area 54 in the Mediterranean Sea, where two wells discovered natural gas. In response to civil unrest in Libya and the resulting imposition of economic sanctions, production at the Waha fields was suspended in the first quarter of 2011. As a result, the Corporation delivered force majeure notices to the Libyan government covering its exploration and production interests. During the fourth quarter of 2011, the sanctions were lifted, force majeure was withdrawn at Waha and production resumed. The force majeure covering the Corporation’s offshore exploration interests was withdrawn in March 2012. The Corporation is pursuing commercial options for its exploration interests.

Algeria: The Corporation has a 49% interest in a venture with the Algerian national oil company that redeveloped three oil fields. The Corporation also has an interest in Bir El Msana (BMS) Block 401C (Hess 45%). The Corporation sanctioned a small development project at BMS in 2011 and advanced the construction of facilities and development drilling during 2012.

Ghana: The Corporation holds a 100% paying interest and is operator of the Deepwater Tano Cape Three Points license. The Ghana National Petroleum Corporation holds a 10% carried interest in the block. Through February 2013, the Corporation has drilled seven consecutive successful exploration wells, including four discoveries made in 2012 and two completed in early 2013. Based on the results of these wells, the Corporation plans to submit an appraisal plan to the Ghanaian government for approval on or before June 2, 2013 and has also begun pre-development studies on the block.

Asia

At December 31, 2012, 18% of the Corporation’s total proved reserves were located in the Asia region (JDA 8%, Indonesia 5%, Thailand 3%, Azerbaijan 1% and Malaysia 1%). During 2012, 6% of the Corporation’s crude oil and natural gas liquids production and 74% of its natural gas production were from its Asian operations.

Joint Development Area of Malaysia/Thailand (JDA): The Corporation owns an interest in Block A-18 of the JDA (Hess 50%) in the Gulf of Thailand. In 2012, the operator continued development drilling, constructed wellhead platforms and sanctioned a compression project. In 2013, the operator intends to progress the compression project and the installation of new wellhead platforms.

Malaysia: The Corporation’s production in Malaysia comes from its interest in Block PM301 (Hess 50%), which is adjacent to and is unitized with Block A-18 of the JDA where the natural gas is processed. The Corporation also owns a 50% interest and is the operator of Blocks PM302, PM325 and PM326B located in the North Malay Basin (NMB), offshore Peninsular Malaysia, where in 2012 it signed agreements with its partner to develop nine discovered natural gas fields as well as acquire seismic and drill exploration wells. First production from an early production system is forecast to commence in the second half of 2013 with a second phase of development targeted for first production in 2016. In addition, the Corporation owns an interest in Block SB302 (Hess 40%). Technical and commercial evaluations are underway to assess potential development alternatives for this block.

Indonesia: The Corporation’s production in Indonesia comes from its interests offshore in the operated Ujung Pangkah project (Hess 75%) and the outside-operated Natuna A Field (Hess 23%). At the Pangkah Field, the Corporation drilled and completed five production wells during 2012 and plans further drilling in 2013. At the Natuna Field, construction began on two new wellhead platforms in 2012 and facility construction and other infrastructure work will continue in 2013.

The Corporation also owns interests in the offshore South Sesulu Block (Hess 100%), Timor Sea Block 1 (Hess 100%), Semai V Block (Hess 100%) and Kofiau Block (Hess 43%) as well as the West Timor Block (Hess 49%) that includes onshore and offshore acreage.

Thailand: The Corporation’s production in Thailand comes from the offshore Pailin Field (Hess 15%) and the operated onshore Sinphuhorm Block (Hess 35%). During 2012, development drilling continued at Pailin. In 2013, there will be further development drilling at both Pailin and Sinphuhorm.

Azerbaijan: The Corporation has interests in the Azeri-Chirag-Guneshli (ACG) fields (Hess 3%) in the Caspian Sea and in the Baku-Tbilisi-Ceyhan (BTC) oil transportation pipeline company (Hess 2%). In September 2012, the Corporation reached an agreement to sell its interests in ACG and BTC. This transaction is expected to close in the first quarter of 2013.

Australia: The Corporation holds an interest in an exploration license covering approximately 780,000 acres in the Carnarvon basin offshore Western Australia (WA-390-P Block, also known as Equus) (Hess 100%). The Corporation has drilled all of the 16 commitment wells on the block, 13 of which were natural gas discoveries. Appraisal of the discoveries was completed in mid-2012. Development planning and commercial activities, including negotiations with potential liquefaction partners continued in 2012 and will continue in 2013. Successful negotiation with a third party liquefaction partner is necessary before the Corporation can negotiate a gas sales agreement and sanction development of the project.

The Corporation also has a participation agreement under which it has the option to earn a 63% working interest in more than 6.2 million acres in the Beetaloo Basin, onshore Northern Territory Australia (Hess 100% paying interest). In 2012, the Corporation completed its seismic data acquisition program. In addition, the Corporation acquired approximately 1.9 million net acres in the Canning Basin, Western Australia. An aeromagnetic survey of this acreage was completed in 2012.

Brunei: The Corporation has an interest in Block CA-1 (Hess 14%). In 2012, the operator drilled two wells, Jagus East and Julong East, which both encountered hydrocarbons. These wells are being evaluated and additional exploration and appraisal drilling is planned for 2014.

Kurdistan Region of Iraq: The Corporation is operator and has an 80% paying interest in the Dinarta and Shakrok exploration blocks, which have a combined area of more than 670 square miles. The terms of the production sharing contracts require the acquisition of 2D seismic and the drilling of at least one well on each of the blocks. During 2012, the Corporation commenced a seismic program on both of its blocks. The Corporation plans to complete this seismic program and commence drilling of its two commitment wells in 2013.

China: The Corporation has signed a joint study agreement with PetroChina to evaluate unconventional oil and gas resource opportunities covering approximately 200,000 gross acres in the Santanghu Basin.

Sales Commitments

In the E&P segment, the Corporation has contracts to sell fixed quantities of its natural gas and natural gas liquids (NGL) production. The natural gas contracts principally relate to producing fields in Asia. The most significant of these commitments relates to the JDA where the minimum contract quantity of natural gas is estimated at 107 million mcf per year based on current entitlements under a sales contract expiring in 2027. There are additional natural gas supply commitments on producing fields in Thailand and Indonesia which currently total approximately 46 million mcf per year under contracts expiring in years 2021 through 2029. The estimated total volume of production subject to sales commitments under all of these contracts is approximately 2.35 billion mcf of natural gas.

The Corporation also has NGL contracts relating to its Bakken production with delivery commitments beginning in November 2013. The minimum contract quantity under these contracts, which expire in 2023, is approximately 7 million barrels per year, or approximately 70 million barrels over the life of the contracts.

The Corporation has not experienced any significant constraints in satisfying the committed quantities required by its sales commitments and it anticipates being able to meet future requirements from available proved and probable reserves.

Natural gas is marketed by the M&R segment on a spot basis and under contracts for varying periods of time to local distribution companies, and commercial, industrial and other purchasers. These natural gas marketing activities are primarily conducted in the eastern portion of the United States, where the principal source of supply is purchased natural gas, not the Corporation’s production from the E&P segment. The Corporation has not experienced any significant constraints in obtaining the required supply of purchased natural gas.

Average selling prices and average production costs


	2012		2011		2010
Average selling prices (a)
Crude oil (per barrel)
United States	$	92.32	$	98.56	$	75.02
Europe (b)		74.14		80.18		58.11
Africa		89.02		88.46		65.02
Asia		107.45		111.71		79.23
Worldwide		86.94		89.99		66.20

Natural gas liquids (per barrel)
United States	$	40.75	$	58.59	$	47.92
Europe (b)		78.43		75.49		59.23
Asia		77.92		72.29		63.50
Worldwide		47.81		62.72		50.49

Natural gas (per mcf)
United States	$	2.09	$	3.39	$	3.70
Europe (b)		9.50		8.79		6.23
Asia and other		6.90		6.02		5.93
Worldwide		6.16		5.96		5.63

Average production (lifting) costs per barrel of oil equivalent produced (c)
United States	$	18.25	$	16.30	$	12.61
Europe (b)		29.56		25.13		17.55
Africa		14.45		15.95		11.00
Asia and other		11.13		10.62		8.16
Worldwide		18.52		17.40		12.61

(a) Includes inter-company transfers valued at approximate market prices and the effect of the Corporation’s hedging activities.

(b) The average selling prices in Norway for 2012 were $109.23 per barrel for crude oil, $58.48 per barrel for natural gas liquids and $12.21 per mcf for natural gas. The average selling prices in Norway for 2011 were $112.38 per barrel for crude oil, $62.07 per barrel for natural gas liquids and $9.77 per mcf for natural gas. The average selling prices in Norway for 2010 were $79.47 per barrel for crude oil, $52.26 per barrel for natural gas liquids and $7.32 per mcf for natural gas. The average production (lifting) costs in Norway in 2012 were $62.38 per barrel of oil equivalent produced, reflecting the shutdown of production from July 2012 through year-end. The average production (lifting) costs in Norway were $31.09 per barrel of oil equivalent produced in 2011 and $18.33 per barrel of oil equivalent produced in 2010.

(c) Production (lifting) costs consist of amounts incurred to operate and maintain the Corporation’s producing oil and gas wells, related equipment and facilities, transportation costs and production and severance taxes. The average production costs per barrel of oil equivalent reflect the crude oil equivalent of natural gas production converted on the basis of relative energy content (six mcf equals one barrel).

The table above does not include costs of finding and developing proved oil and gas reserves, or the costs of related general and administrative expenses, interest expense and income taxes.

Gross and net undeveloped acreage at December 31, 2012

	UndevelopedAcreage (a)
	Gross		Net
	(In thousands)
United States		2,310		1,594
Europe (b)		1,517		1,278
Africa		8,009		4,625
Asia and other		15,322		9,937

Total (c)		27,158		17,434

(a) Includes acreage held under production sharing contracts.

(b) Gross and net undeveloped acreage in Norway was 61 thousand and 9 thousand, respectively.

(c) Licenses covering approximately 35% of the Corporation’s net undeveloped acreage held at December 31, 2012 are scheduled to expire during the next three years pending the results of exploration activities. These scheduled expirations are largely in Africa, Asia and the United States.

Gross and net developed acreage and productive wells at December 31, 2012


	Developed Acreage Applicable to				Productive Wells (a)
	Productive Wells				Oil				Gas
	Gross		Net		Gross		Net		Gross		Net
	(In thousands)
United States		1,177		795		1,767		776		58		47
Europe (b)		1,053		885		292		216		12		2
Africa		9,832		933		811		125		—		—
Asia		2,246		638		86		15		456		100

Total		14,308		3,251		2,956		1,132		526		149

(a) Includes multiple completion wells (wells producing from different formations in the same bore hole) totaling 31 gross wells and 21 net wells.

(b) Gross and net developed acreage in Norway was 57 thousand and 36 thousand, respectively. Gross and net productive oil wells in Norway were 46 and 30, respectively.

Number of net exploratory and development wells drilled at December 31

	Net Exploratory Wells						Net Development Wells
	2012		2011		2010		2012		2011		2010
Productive wells
United States		3		20		—		184		98		83
Europe		3		6		1		23		25		18
Africa		3		1		1		1		1		11
Asia and other		3		4		6		20		18		7

		12		31		8		228		142		119


Dry holes
United States		1		—		5		—		—		—
Europe		3		2		—		—		—		—
Africa		—		1		2		—		—		1
Asia and other		2		1		2		—		—		—

		6		4		9		—		—		1

Total		18		35		17		228		142		120

Number of wells in process of drilling at December 31, 2012

	GrossWells		NetWells
United States		117		53
Europe*		17		15
Africa		6		2
Asia		28		9

Total		168		79

* Gross and net wells in process of drilling in Norway were 3 and 2, respectively.

Marketing and Refining

Marketing

The Corporation markets refined petroleum products, natural gas and electricity on the East Coast of the United States to the motoring public, wholesale distributors, industrial and commercial users, other petroleum companies, governmental agencies and public utilities.

The Corporation had 1,361 HESS^® gasoline stations at December 31, 2012, including stations owned by its WilcoHess joint venture (Hess 44%). Approximately 93% of the gasoline stations are operated by the Corporation or WilcoHess. Of the operated stations, 96% have convenience stores on the sites. Most of the Corporation’s gasoline stations are in New York, New Jersey, Pennsylvania, Florida, Massachusetts, North Carolina and South Carolina.

The table below summarizes marketing sales volumes:

	2012*		2011*		2010*
Refined petroleum product sales (thousands of barrels per day)
Gasoline		209		222		242
Distillates		113		123		120
Residuals		53		65		69
Other		14		20		40

Total refined petroleum product sales		389		430		471

Natural gas (thousands of mcf per day)		2,300		2,200		2,000
Electricity (megawatts round the clock)		4,500		4,400		4,100

* Of total refined petroleum products sold, a total of approximately 16%, 37% and 41% was obtained from HOVENSA and Port Reading in 2012, 2011 and 2010, respectively. In January 2012, HOVENSA shut down its refinery. In January 2013, the Corporation announced its decision to cease refining operations in February at its Port Reading facility.

The Corporation does not anticipate any disruption to product supply to its Marketing operations as a result of the shutdown of its Port Reading facility.

The Corporation owns 19 terminals with an aggregate storage capacity of 28 million barrels in its East Coast marketing areas, including the storage capacity at Port Reading. The Corporation also owns a terminal in St. Lucia with a storage capacity of 10 million barrels, which is operated for third party storage. In January 2013, the Corporation announced that it will pursue the sale of its terminal network.

During 2012, operations commenced at the Bayonne Energy Center, LLC (Hess 50%), a joint venture established to build and operate a 512-megawatt natural gas fueled electric generating station in Bayonne, New Jersey, which provides power to New York City. During 2012, the Corporation also formed a joint venture (Hess 50%) to build a 655-megawatt natural gas fueled electric generating facility in Newark, New Jersey. In addition, a subsidiary of the Corporation is exploring the development of fuel cell and hydrogen reforming technologies.

Refining

HOVENSA: The Corporation owns a 50% interest in HOVENSA, a joint venture with a subsidiary of Petroleos de Venezuela S.A. (PDVSA). In January 2012, HOVENSA shut down its refinery in St. Croix, U.S. Virgin Islands. During 2012 and continuing into 2013, HOVENSA and the Government of the Virgin Islands engaged in discussions pertaining to HOVENSA’s plan to run the facility as an oil storage terminal while the

Corporation and its joint venture partner pursue a sale of HOVENSA. For further discussion of the refinery shutdown, see Note 5, HOVENSA L.L.C. Joint Venture, in the notes to the Consolidated Financial Statements.

Port Reading Facility: The Corporation owns a fluid catalytic cracking facility in Port Reading, New Jersey, with a capacity of 70,000 barrels per day. This facility, which processes residual fuel oil and vacuum gas oil, operated at a rate of 59,000 barrels per day in 2012, 63,000 barrels per day in 2011 and 55,000 barrels per day in 2010. Substantially all of Port Reading’s production was gasoline and heating oil. In January 2013, the Corporation announced its decision to cease refining operations in February at its Port Reading facility.

The Corporation has a 50% voting interest in a consolidated partnership that trades energy-related commodities, securities and derivatives. The Corporation also takes energy commodity and derivative trading positions for its own account.

For additional financial information by segment see Note 18, Segment Information in the notes to the Consolidated Financial Statements.

Competition and Market Conditions

See Item 1A. Risk Factors Related to Our Business and Operations, for a discussion of competition and market conditions.

Other Items

Gulf of Mexico Update

The Corporation currently holds interests in 223 exploration blocks in the Gulf of Mexico, in addition to 29 developed blocks. The Corporation received approval for its oil spill response plan for the Gulf of Mexico in May 2012 and is currently awaiting approval for an updated Gulf of Mexico Operator Oil Spill Contingency Plan in response to recent regulatory changes. The Corporation also fully implemented the Bureau of Safety and Environmental Enforcement required, Safety and Environmental Management System in 2012.

Emergency Preparedness and Response Plans and Procedures

The Corporation has in place a series of business and asset-specific emergency preparedness, response and business continuity plans that detail procedures for rapid and effective emergency response and environmental mitigation activities. These plans are risk appropriate and are maintained, reviewed and updated as necessary to ensure their accuracy and suitability. Where appropriate, they are also reviewed and approved by the relevant host government authorities.

Responder training and drills are routinely held worldwide to assess and continually improve the effectiveness of the Corporation’s plans. The Corporation’s contractors, service providers, representatives from government agencies and, where applicable, joint venture partners participate in the drills to ensure that emergency procedures are comprehensive and can be effectively implemented.

To complement internal capabilities and to ensure coverage for its global operations, the Corporation maintains membership contracts with a network of local, regional and global oil spill response and emergency response organizations. At the regional and global level, these organizations include Clean Gulf Associates (CGA), Marine Well Containment Company (MWCC), Wild Well Control (WWC), National Response Corporation (NRC) and Oil Spill Response (OSR). CGA is a regional spill response organization and MWCC provides the equipment and personnel to contain an underwater well control incident in the Gulf of Mexico. WWC provides firefighting, well control and engineering services globally. NRC and OSR are global response organizations and are available to assist the Corporation when needed anywhere in the world. In addition to owning response assets in their own right, these organizations maintain business relationships that provide immediate access to additional critical response support services if required. These owned response assets included nearly 300 recovery and storage vessels and barges, more than 250 skimmers, over 300,000 feet of boom, and significant quantities of dispersants and other ancillary equipment, including aircraft. If the Corporation were to engage these organizations to obtain additional critical response support services, it would fund such services and seek reimbursement under its insurance coverage described below. In certain circumstances, the Corporation pursues and enters into mutual aid agreements with other companies and government cooperatives to receive and provide oil spill response equipment and personnel support. The Corporation maintains close associations with emergency response organizations through its representation on the Executive Committee of CGA and the Board of Directors of OSR.

The Corporation continues to participate in a number of industry-wide task forces that are studying better ways to assess the risk of and prevent onshore and offshore incidents, access and control blowouts in subsea environments, and improve containment and recovery methods. The task forces are working closely with the oil and gas industry and international government agencies to implement improvements and increase the effectiveness of oil spill prevention, preparedness, response and recovery processes.

Insurance Coverage and Indemnification

The Corporation maintains insurance coverage that includes coverage for physical damage to its property, third party liability, workers’ compensation and employers’ liability, general liability, sudden and accidental pollution and other coverage. This insurance coverage is subject to deductibles, exclusions and limitations and there is no assurance that such coverage will adequately protect the Corporation against liability from all potential consequences and damages.

The amount of insurance covering physical damage to the Corporation’s property and liability related to negative environmental effects resulting from a sudden and accidental pollution event, excluding Atlantic Named Windstorm coverage for which it is self-insured, varies by asset, based on the asset’s estimated replacement value or the estimated maximum loss. In the case of a catastrophic event, first party coverage consists of two tiers of insurance. The first $300 million of coverage is provided through an industry mutual insurance group. Above this $300 million threshold, insurance is carried which ranges in value up to $2.25 billion in total, depending on the asset coverage level, as described above. Additionally, the Corporation carries insurance which provides third party coverage for general liability, and sudden and accidental pollution, up to $1 billion.

Other insurance policies provide coverage for, among other things: charterer’s legal liability, in the amount of $500 million per occurrence and aircraft liability, in the amount of $300 million per occurrence.

The Corporation’s insurance policies renew at various dates each year. Future insurance coverage could increase in cost and may include higher deductibles or retentions, or additional exclusions or limitations. In addition, some forms of insurance may become unavailable in the future or unavailable on terms that are deemed economically acceptable.

Generally, the Corporation’s drilling contracts (and most of its other offshore services contracts) provide for a mutual hold harmless indemnity structure whereby each party to the contract (the Corporation and Contractor) indemnifies the other party for injuries or damages to their personnel and property (and, often, those of its contractors/subcontractors) regardless of fault. Variations may include indemnity exclusions to the extent a claim is attributable to the gross negligence and/or willful misconduct of a party. Third-party claims, on the other hand, are generally allocated on a fault basis.

The Corporation is customarily responsible for, and indemnifies the Contractor against all claims, including those from third-parties, to the extent attributable to pollution or contamination by substances originating from its reservoirs or other property (regardless of fault, including gross negligence and willful misconduct) and the Contractor is responsible for and indemnifies the Corporation for all claims attributable to pollution emanating from the Contractor’s property. Additionally, the Corporation is generally liable for all of its own losses and most third-party claims associated with catastrophic losses such as blowouts, cratering and loss of hole, regardless of cause, although exceptions for losses attributable to gross negligence and/or willful misconduct do exist. Lastly, many offshore services contracts include overall limitations of the Contractor’s liability equal to the value of the contract or a fixed amount.

Under a standard joint operating agreement (JOA), each party is liable for all claims arising under the JOA, not covered by or in excess of insurance carried by the JOA, to the extent of its participating interest (operator or non-operator). Variations include indemnity exclusions when the claim is based upon the gross negligence and/or willful misconduct of a party, in which case such party is solely liable. However, under some production sharing contracts between a governmental entity and commercial parties, liability of the commercial parties to the governmental entity is joint and several.

Environmental

Compliance with various existing environmental and pollution control regulations imposed by federal, state, local and foreign governments is not expected to have a material adverse effect on the Corporation’s financial condition or results of operations. The Corporation spent $19 million in 2012 for environmental remediation. The Corporation anticipates capital expenditures for facilities, primarily to comply with federal, state and local environmental standards, other than for the low sulfur requirements, of approximately $75 million in 2013 and approximately $60 million in 2014. For further discussion of environmental matters see the Environment, Health and Safety section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Number of Employees

The number of persons employed by the Corporation at year-end was approximately 14,775 in 2012 and 14,350 in 2011.

Other

The Corporation’s internet address is www.hess.com. On its website, the Corporation makes available free of charge its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Corporation electronically files with or furnishes such material to the Securities and Exchange Commission. The contents of the Corporation’s website are not incorporated by reference in this report. Copies of the Corporation’s Code of Business Conduct and Ethics, its Corporate Governance Guidelines and the charters of the Audit Committee, the Compensation and Management Development Committee and the Corporate Governance and Nominating Committee of the Board of Directors are available on the Corporation’s website and are also available free of charge upon request to the Secretary of the Corporation at its principal executive offices. The Corporation has also filed with the New York Stock Exchange (NYSE) its annual certification that the Corporation’s Chief Executive Officer is unaware of any violation of the NYSE’s corporate governance standards.

HES - Hess Corporation