Hess's Suriname Gamble: Can Frontier Oil Deliver a Stabroek-Style Payday?

The oil industry's next frontier is playing out in the waters off Suriname, where Hess Corporation now holds sole control of Block 59—a deepwater lease that could rival Guyana's Stabroek Basin in scale, or become a cautionary tale of frontier risk. With ExxonMobil and Equinor having abandoned the project earlier this year, Hess faces a July 2025 deadline to secure a partner or lose its stake entirely. The clock is ticking on what could be one of the decade's most consequential exploration bets.

The Geological Allure of Block 59

Block 59's proximity to Guyana's Stabroek Basin, which has already yielded over 10 billion barrels of recoverable oil, is no accident. Both regions are part of the Guyana-Suriname Basin, a geological superprovince that has become the envy of global oil majors. The Stabroek's Liza, Payara, and Turbot fields—operated by Exxon and Hess—have transformed Guyana into a top-tier oil producer.

Block 59's 4,400-square-kilometer expanse, lying in water depths up to 3,600 meters, shares the basin's structural traits. “The seismic data shows similar subsurface geology to Stabroek's prolific plays,” said one exploration executive who has reviewed the data. “This isn't a shot in the dark—it's a strategic extension of a proven system.”

Yet Hess's path is fraught with challenges. Unlike Exxon, which invested $30 billion to develop Stabroek, Hess lacks the balance sheet to go it alone in Suriname. The block requires a partner to share the costs of deepwater drilling—a single well can cost $200 million—and navigate Suriname's complex fiscal terms.

The Partner Puzzle: A Race Against the Clock

Hess's July 2025 deadline is non-negotiable. Staatsolie, Suriname's state oil firm, has made it clear: no partner, no exploration. The search has already begun, with TotalEnergies, CNOOC, and even independent players like Apache Corp. (APA) being mentioned as potential candidates.

But finding a partner isn't just about capital—it's about appetite for risk. The block's unproven status, combined with Suriname's political and logistical hurdles, could deter all but the most aggressive E&P firms. “This is a high-risk, high-reward play,” said Rystad Energy analyst Espen Erlingsen. “A partner needs to believe in Hess's geology and be willing to bet on Suriname's governance stability.”

Risks: Geopolitics, Gas, and Geology

The risks are manifold. First, Suriname's political climate remains unpredictable. The country's 2020 election saw a coalition government take power with ties to Venezuela, raising concerns about nationalization fears or contract renegotiation. Staatsolie's demands for a “fair share” of profits—common in frontier deals—could also strain terms.

Then there's the gas problem. Stabroek's oil-rich reservoirs have made it a success, but Suriname's discoveries to date, like the Maka Central field, are gas-heavy. Processing and exporting natural gas requires costly infrastructure like floating LNG facilities—projects that Exxon once championed but later abandoned as too risky.

Environmental pushback is another wild card. Suriname's environmental groups, including ProBioS, have successfully lobbied to halt projects in the past, citing threats to the Amazon rainforest and coastal ecosystems. “Flaring methane from dry gas wells would be a disaster,” said Erlan Sleur of ProBioS. “Suriname can't afford to become another Nigeria.”

The Investment Case: High Stakes, Higher Rewards

If Hess secures a partner, the upside is massive. The U.S. Geological Survey estimates the Guyana-Suriname Basin holds 15 billion barrels of recoverable oil—and Block 59 sits squarely in its heart. A single discovery the size of Stabroek's Liza field (6 billion barrels) would turn Hess into a multibillion-dollar winner.

Investors should also note Hess's track record. The company's 33% stake in Suriname's Block 42—where Shell's 2023 well found oil—suggests its geologists know where to drill. CEO John Hess has staked his reputation on the region, calling it “the most exciting exploration story since the Gulf of Mexico.”

Playbook for Investors

• Buy HES if a partner is secured by Q3 2024: A deal by mid-2024 would give Hess time to design a drilling campaign, boosting confidence in its ability to meet Staatsolie's deadline. A 20% upside is possible if the stock's current P/E of 11 expands on a positive catalyst.
• Consider SM Energy (SM) or Matador Resources (MTDR): These U.S. shale firms, with Zacks #2 rankings, offer lower-risk exposure to oil exploration. Their proven Permian Basin assets could outperform if oil prices rise, while their financial flexibility might position them to pounce on a Block 59 partnership.
• Avoid pure-play LNG bets: Floating LNG projects in the region, like those proposed by Fulcrum, face execution risks. Wait for concrete partnerships before investing.

The Bottom Line

Hess's Suriname opportunity is the oil industry's next great test of frontier risk-taking. The parallels to Stabroek's success are undeniable, but so are the pitfalls of geopolitics, gas, and governance. For investors with a high-risk tolerance and a long view, a partner-secured Hess could be the next Exxon of the 2020s. Miss the July 2025 deadline, though, and this story ends in the footnotes of exploration history.

Investment thesis: Buy HES at $65/share if a partner is secured by September 2024, targeting $80–$100 by 2026. Proceed with caution until contractual certainty emerges.