Jay Wilson - VP-IR John Hess - Chairman & CEO John Rielly - SVP & CFO John O'Connor - President Worldwide E&P

Robert Kessler - Simmons & Company Doug Leggate - Citigroup Arjun Murti - Goldman Sachs Paul Sankey - Deutsche Bank John Herrlin - Merrill Lynch Nickie Decker - Bear, Stearns & Co. Mark Gilman - The Benchmark Company Dan Barcelo - Banc of America Securities Ron Oster - A.G. Edwards Paul Cheng - Lehman Brothers

Good day, ladies and gentlemen, and welcome to the Hess Corporation 2007 second-quarter earnings conference call. My name is Letitia (ph) and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. At this time, I will turn the presentation over to Jay Wilson, Vice President of Investor Relations. Jay Wilson - Hess Corporation: Thank you, Letitia. Good morning, everyone, and thank you for participating in our second-quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hess.com. Today's conference call contains projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied in such statements. With me today are John Hess, Chairman of the Board and Chief Executive Officer, John O'Connor, President Worldwide Exploration and Production, John Rielly, Senior Vice President and Chief Financial Officer. I will now turn the call over to John Hess.

Thank you, Jay. Welcome to our second-quarter conference call. I will make a few brief comments, after which John Rielly will review our financial results. Our company delivered its strong operating and financial performance in the second quarter of 2007. Exploration & Production achieved solid financial results that were above the year-ago quarter, resulting from higher crude oil selling prices and sales volumes, a lower effective tax rate, partially offset by higher production costs. Second quarter 2007 crude oil and natural gas production averaged 378,000 barrels of oil equivalent per day, which was 7% above the year-ago period. Higher-than-forecast production volumes in the second quarter were result of earlier-than-anticipated payout of a carried interest at the ACG field in Azerbaijan, strong field performance at Okume Complex in Equatorial Guinea, and higher-than-anticipated nominations at the Malaysia-Thailand JDA, as well as deferral into the third quarter of planned maintenance at the Beryl Field in the United Kingdom. Our full-year 2007 production forecast remains 370,000 to 380,000 barrels of oil equivalent per day. With regard to our field developments we continue to make good progress. The Okume Complex, where we operate with an 85% working interest, has been experiencing strong reservoir performance and well deliverability and high facilities up time. The fields are currently producing net 30,000 barrels per day and are expected to reach net 40,000 barrels per day by year end. Combined with strong production performance from the Ceiba Field, Hess is currently operating on a gross basis nearly 80,000 barrels per day in Equatorial Guinea and we expect gross production to exceed 100,000 barrels per day by year end. In April, production commenced from the Pangkah Field in Indonesia, where Hess operates with a 75% working interest. The field is currently producing net 40 million cubic feet per day from two wells. In late June, an electrical fire occurred in a storage area on the Tender Assisted Drilling Rig barge at Pangkah that required it to go into the yards for repair. We expect to resume drilling in late August and net gas production is expected to reach 60 million cubic feet per day before the end of the year. In the Deepwater Gulf of Mexico, first production from Genghis Khan, which is the western extension of Shenzi Field, is anticipated in the fourth quarter. Development of the main portion of the Shenzi Field is progressing well and production is expected to commence in mid-2009. Hess owns a 28% working interest in the Shenzi Field. During the second quarter, we acquired an additional 100,000 acres in the Bakken Play in North Dakota. This acquisition brought our net acreage position to 325,000 acres. We currently have four rigs operating in the Bakken and will add two additional rigs in the fourth quarter. With regard to exploration, as previously announced, drilling at our Pony No. 2 well in the Deepwater Gulf of Mexico has been temporarily suspended while the Ocean Baroness drilling rig completes a statutory Coast Guard ABS inspection. The well has been drilled and cased to 23,000 feet and has a TD of 32,500 feet. We expect to resume drilling in late September. Hess owns a 100% working interest in the Pony discovery. At the Tubular Bells discovery in Mississippi Canyon, in which has as a 20% interest, a second appraisal well is expected to spud toward the end of the third quarter. We recently acquired interest in two Gulf of Mexico exploration prospects. The first is a Chevron operated prospect called Bob North, in which Hess has acquired a 30% interest. It is a five-block unit in the Mississippi Canyon area, located to the southeast of Tubular Bells. Bob North is a Lower Miocene prospect with a TD of 30,000 feet and a water depth of 5600 feet. The well recently spud and is expected to take four to five months to drill. The second prospect is a BP operated deep shelf test called Will K located on High Island Block A119. The well is a Wilcox/Paleogene test and will be drilled to a total depth of 20,000 -- 27,000 feet. The well is expected to spud in September and take approximately 10 months to drill. Hess will participate with a 10% working interest. Later this year, we will acquire 3-D seismic data on our WA-390-P Block in the Carnarvon Basin offshore Western Australia and will commence drilling four initial wells beginning late in the fourth quarter. Average water depths here are about 3700 feet and well depths are between 11,000 and 15,000 feet. Hess has a 100% interest in the block. Marketing & Refining financial results for the second quarter 2007 were strong, matching the year-ago quarter. During the second quarter, HOVENSA completed its first turnaround of its delayed coking unit. This turnaround was completed in 30 days, an outstanding performance. HOVENSA's margins were up compared to the same period last year, however our results were negatively impacted by the expensing of turnaround costs in the quarter. In Marketing, while our financial results were breakeven, our retail and energy marketing businesses benefited from higher sales volumes versus the year-ago period. Also, our trading results were substantially above the same period last year. Capital and exploratory expenditures in the first half of 2007 were just under $2.2 billion, of which about $2.1 billion was related to Exploration and Production activities. For 2007, our capital and exploratory expenditures are forecast to be approximately $4.2 billion, up $200 million dollars from our guidance in January. The increase reflects the acquisition of the Bakken acreage in the Williston Basin, the Australia seismic and drilling programs, and the addition of the Bob North and Will K exploration wells in the Gulf of Mexico. I will now turn the call over to John Rielly.

Thanks, John. Hello, everyone. In my remarks today, I will compare second-quarter 2007 results to the first quarter. Net income for the second quarter of 2007 was $557 million, compared with $370 million in the first quarter. Turning to Exploration and Production, income from Exploration and Production operations in the second quarter of 2007 was $505 million, including a gain of $15 million from the sale of our remaining interest in the Scott and Telford Fields, compared with $340 million in the first quarter. Excluding the gain on sale, the after-tax components of the increase in earnings are as follows, higher selling prices increased earnings by $138 million; higher sales volumes increased earnings by $64 million; total E&P costs and expenses decreased income by $44 million. All other items net to a decrease in earnings of $8 million for an overall increase in second-quarter adjusted income of $150 million. The Exploration & Production effective income tax rate for the first half of 2007 was 49%, below our earlier estimates. The lower effective rate reflects the mix of earnings, including increased income in Equatorial Guinea and Azerbaijan, which is taxed at a lower rate than the overall E&P average. The E&P effective income tax rate for the full year of 2007 is expected to be in a range of 50 to 54%. Turning to Marketing & Refining, Marketing & Refining earnings were $122 million in the second quarter of 2007, compared with $101 million in the first quarter. Refining earnings were $87 million in the second quarter of 2007, compared with $54 million in the first quarter. The Corporation's share of HOVENSA's income after income taxes was $49 million in the second quarter, compared with $35 million in the first quarter, primarily due to higher refining margins, offset by lower throughput. In the second quarter, the coker at HOVENSA was down for approximately 30 days for its first turnaround since commencement of operations in 2002. Certain related processing units were also included in the turnaround. The expensing of the turnaround costs reduced Marketing & Refining net income by approximately $24 million. In addition, we estimate that the opportunity cost related to the turnaround was $26 million. During the second quarter, the Corporation received a distribution from HOVENSA of $75 million. Port Reading earnings increased to $35 million in the second quarter of 2007, compared with $17 million in the first quarter. Marketing results were breakeven in the second quarter of 2007, compared with $43 million in the first quarter, principally reflecting lower energy marketing margins and sales volumes. After-tax trading income amounted to $35 million in the second quarter 2007, compared with $4 million in the first quarter. Turning to corporate, net corporate expenses amounted to $32 million in the second quarter of 2007, compared with $31 million in the first quarter. Net corporate expenses for the year 2007 are expected to be in the range of $115 million to $125 million. After-tax interest expense was $38 million in the second quarter, compared with $40 million in the first quarter. After-tax interest in 2007 is expected to be in the range of $160 million to $170 million. Turning to cash flow, net cash provided by operating activities in the second quarter, including an increase of $274 million from changes in working capital, was $1.199 billion. Proceeds from the sale of the Scott and Telford Fields were $93 million. The principal use of cash was capital expenditures of $932 million. Repayments of debt amounted to $150 million. All other items amounted to an increase in cash flow of $23 million, resulting in a net increase in cash and cash equivalents in the second quarter of $233 million. At June 30, 2007, we had $482 million of cash and cash equivalents. Our available revolving credit capacity was $2.537 billion at quarter end. Total debt was $3.991 billion at June 30, 2007 and $3.772 billion at December 31, 2006. The Corporation has long-term debt maturities of $1 million during the remainder of 2007 and $28 million in 2008. The Corporation's debt to capitalization ratio at June 30, 2007 was 30.5%, compared with 31.6% at the end of 2006. This concludes my remarks. We will be happy to answer any questions. I will now turn the call over to the operator.

(Operator Instructions) And your first question comes from the line of Robert Kessler representing Simmons & Co. Please proceed. Robert Kessler - Simmons & Company: Good morning. I am curious with the upcoming lease sale in the Western Gulf next month whether or not you'll be adding to your acreage covering the Paleogene. John O’Connor: Robert, good morning. We look upon the Gulf of Mexico as a core exploration area. We've worked these lease sales very diligently and quite aggressively. Whether or not we'll actually acquire any prospects, of course, is subject to market forces, but we will be prepared. Robert Kessler - Simmons & Company: I also recognize, of course, Jack Hays is a tight hole and you probably do not want to release any more information, at least until beyond that least sale, but any thoughts as to when we might get another datapoint on the Paleogene prospects for Hess? John O’Connor: Not realistically. I think what we need to do is get ourselves through the Western Gulf lease sale and see where we stand after that. Robert Kessler - Simmons & Company: Fair enough, thank you. John O’Connor: Okay. Thank you.

From the line of Citigroup with the next question we have Doug Leggate. Please proceed. Doug Leggate - Citigroup: Thank you. Good morning, guys. A couple things from me. Actually, first one for John Rielly. John, I was not aware there was any major maturities due this year. Can explain the decision to pay down debt and should we expect that to continue going forward?

Doug, there isn't any maturities. What we have is a revolving credit facility and it is just a matter of our cash position and whether we're paying down the revolving credit facility. So it is just liquidity management and managing our revolving facility. So I would always look at it as more from a net debt type standpoint, our cash and our debt figure. So there is not any plans for major debt to be paid down during the year. Doug Leggate - Citigroup: The share count continues to kind of nudge up a little bit over time. Is there any plans to perhaps try to keep the stock down, maybe canceling out some of the options?

Doug, as you know, our first, second, and third priority is to use our free cash flow to grow our reserves in a sustainable and financially-disciplined manner. That continues to be the priority. Watching the balance sheet, keeping our flexibility is also important, as John just mentioned. Right now, those two purposes, the first one being talked about, being the growth in reserves, is a priority for the Company, so while current returns to the shareholders, both in terms of stock repurchases and then dividend increases, are important. Right now, the priority for the cash is to grow reserves. Doug Leggate - Citigroup: Great, thanks. Just one final one. It is actually on the production numbers, maybe one for John O'Connor. I guess the Africa numbers, I think, is explained by Okume, but can you explain a little about what is going on in Asia, maybe go into a little bit more detail on the ACG issue that you mentioned in your remarks? John O’Connor: I think actually John covered it in the remarks, Doug, but basically ACG, as you know, is contained within the Asia Row and there are two things going on there. ACG continues to ramp up in production, so that second quarter versus year ago is up by 4000 barrels a day. And in addition, as I think John mentioned, the carry of Devon payout occurred at the end of the first quarter and so we see the net impact of that in the second. Doug Leggate - Citigroup: Okay, great. Thanks, John. John O’Connor: Sure.

And representing Goldman Sachs the next question comes from Arjun Murti. Please proceed. Arjun Murti - Goldman Sachs: Two, probably easy ones. Can you remind me what the production from the Genghis Khan, the two wells, are when that comes on in the fourth quarter? What is the Shenzi full-field production looking like? John O’Connor: Tricky. First of all, let me address Genghis Khan. We've had some delays actually in the drilling program there, because of a loss to downhole and the need to sidetrack the well. Then the rig has to leave the field because of MMS constraints during hurricane season. So my guess is that there probably will only be one well completed by year-end, Arjun. And I think the net rate to us we're looking at is gross 5000 barrels a day average for the fourth quarter, net to us 1000 barrels a day. Arjun Murti - Goldman Sachs: Will there be a second well there, John? John O’Connor: Yes, there will be. The development of the western flank of, if you will, Greater Shenzi, which Genghis Khan previously was, causes some confusion. The development plan for that area comprises six producing wells, Arjun. They will be drilled over time. As to Shenzi itself, the good news there is the fabrication is going ahead full steam. Matter-of-fact, there will be a lot of activity in the field in the June/July period next year, as a lot of installations are contracted for that period. Things are looking very positive as far production start up in Q2 '09. I think we will wait and see what experience we gain from the Genghis Khan production before we updated our production forecast for Shenzi as a whole. Arjun Murti - Goldman Sachs: Okay, and then just a last one on the JDA. I think you mentioned higher nominations in 2Q. Was that stronger demand or any other specific reason? How should we think about that going forward? John O’Connor: Yes, good question. The answer is…

We have some downtime in 3Q, I think, if I am remembering correctly. John O’Connor: Let me address the whole thing on the JDA. Certainly, I think that the market in Malaysia as you know, the first phase of 390 million cubic feet a day DCQ is committed to the Malaysian market. For a variety of reasons, in the second quarter I think alternate suppliers did not meet the call for gas, and they asked the JDA to meet that gap. So were as the DCQ was 390, much of the time we were running at about 440 million. I have to say that the facilities responded magnificently and were able to meet the call from the market, but it is market driven. The second thing that is going on and impacts, frankly, on the fact that Q2 production volumes were higher, in a way, than we had forecast earlier is that the shutdown has been moved out of late second quarter into the back end of August and will now be down for 50 days, the JDA, while both brownfield and greenfield tie-ins are made to the facilities there. So we will see an impact in third quarter, as we anticipated, but it'll also spread over a little later than that. Arjun Murti - Goldman Sachs: John, I apologize, one more. Can we think of the 440 as an over-lift versus the 390 million, or is it truly sort of a benefits, one-time or not, but that you get to keep, quote un-quote. John O’Connor: Well, actually, I think the best way to look at it is the market is taking the underlift from prior periods, so there was an underlift and as a point of fact, there was take or pay. So they paid, now they are taking I think is the best way to describe it. Arjun Murti - Goldman Sachs: That’s really helpful. Thank you very much. John O’Connor: Sure.

With Deutsche Bank you have a question from the lien of Paul Sankey. Please proceed. Paul Sankey - Deutsche Bank: It is a question for John O'Connor, I think, but also related to the comments John Hess made about the aim of increasing reserves over time. You seem to be able to find opportunities somewhat unusually against your competition. Could you talk a little bit about the planning assumption that you're using in terms of oil price assumptions and so on in order to find these opportunities? John O’Connor: Well, I think there is more than just simply the oil price involved in reserves projection and reserves recognition, Paul, but it would not be far adrift to say that you're call on crude prices, as recently updated, is roughly in line with the way we looked the crude price market, i.e. a $60 TI nominal. To an extent, that probably guides forward strategy in terms of capture resources. For investment decisions, however, we test everything down to $40 and it has to -- projects have to make better than cost of capital at the $40 hurdle. So strategically, we're looking at a world that reflects your sort world, where want to capture opportunities and we think that $60 is good for that. Primarily, as you know, when you're capturing expiration acreage, this is really option value in any event. So we think it is working for us and it has worked for us. Paul Sankey - Deutsche Bank: Would you test on the upside as well? John O’Connor: Not really. If we're looking at cash flow management, we will probably look at the strip on a short-term basis, but we do not use an upside for projects or for acquisitions. Paul Sankey - Deutsche Bank: Great. Thanks, John. And a follow-up, if I could ask a personal question, could you talk a bit about your own intention of staying at Hess, for how long you could see yourself working for the company? John O’Connor: I am having a ball and as far as the eye can see is the answer, Paul. Paul Sankey - Deutsche Bank: How is your eyesight? John O’Connor: Time I had checked, I suppose. Paul Sankey - Deutsche Bank: Okay, thanks.

And your next question comes from the line of John Herrlin representing Merrill Lynch. Please proceed. John Herrlin - Merrill Lynch: John, could you characterize the size or potential gross targets for the new prospects in the Gulf of Mexico? John O’Connor: I would be glad to do that, John. Thanks for asking. The Bob North I would characterize as probably one of the last great undrilled middle to lower Miocene prospects in the Gulf of Mexico. It is a five-block unit and I do not think we would ever managed to put something like that together again in today's environment. The prospect size range bear is very similar to Pony, in point of fact, although I would say the bottom end of the range is probably more like 200 million barrels and the upper end, 600 million. So that would be our take on it. No doubt you'll have an opportunity to ask the operator what their range is, too, and hopefully we will be conservative versus their range. But we look at it as a 200 million to 600 million barrel prospects. The Will K, I think, is part of about a 30-block trend play, if you will, with a number of prospects. But the prospects being drilled is, I would suggest, plus or minus two to 2.5 Tcf. John Herrlin - Merrill Lynch: Okay, next one, keeping it Exploration bent, is the Bakken. You have drilled some wells now. What kind of results are you seeing? John O’Connor: I would say what we're seeing, John, is on the upside of expectations. Current production rate from the Bakken is about 4500 barrels a day of light sweet crude and that production is coming from about 22 wells. So the wells tend to complete, the better ones, post frac, in the 500 to 700 barrels a day type range, fall off relatively rapidly, but seem to stabilize, as I said, on average around about plus or minus 200 barrels a day. John Herrlin - Merrill Lynch: Are you doing verticals then, John, or horizontals? John O’Connor: Actually, at this stage, and it is probably not unimportant to recognize that we are trying a variety of different techniques, John, to try to optimize the program, keep the costs down, and find the best productivity, the best bang for the buck. Right now we are doing multilaterals and we are farcing them and we seem to be getting increasingly good results from that. John Herrlin - Merrill Lynch: Okay, two more from me. UK natural gas prices have been kind of week. Sales always trail off seasonally in the second quarter. Are you seeing any increases in demand, especially given the Cat's line out? John O’Connor: What we are seeing is that compared to our on the summer pricing earlier in the year, the prices are actually surprisingly better. We have looked at them as being about £0.15 a therm at the point in time when we decided to conserve Atlantic Cromarty. Currently prices are £0.32, £0.33 a therm, with the strip showing us GBP0.48 in December. I think that is probably a fair recognition. I do not see a big pickup in demand, although there are commentaries that the market in the UK may be a little bit tight, but it is not affecting us individually at our individual production facilities. John Herrlin - Merrill Lynch: Okay, thanks, John. Last one for me is on gasoline sales. It looked like you always get a seasonal rise in the second quarter, but it looked higher than normal. Any particular reason?

No, I would say the best way to look at it are same site sales this year quarter versus last year quarter, up about 2%, not much higher than that, and the merchandise sales in the 2% to 3% same site comparison. So, it’s sort of steady-as-she-goes, where we're staying competitive and getting our fair share of the business. John Herrlin - Merrill Lynch: Great, thanks very much.

From the line of Bear Stearns with the next question we have Nickie Decker. Please proceed. Nickie Decker - Bear, Stearns & Co.: Good morning, everybody. Just a couple follow-up questions. First in the Bakken shale, could you just talk about timing and what kind of volumes you're envisioning there over the next one or two years? John O’Connor: I think, as I explained to John, we are intent, basically, on extensive data gathering phase probably for the next twelve months. So while we will have individual wells contributing to the aggregate total, I do not see a significant ramp up in the next 12 to 18 months. At this stage, our strategy would be somewhere in the third quarter of next year to have a position that says the optimum way of developing our 300,000 plus acres is the following. And at that point, we will commit to stepping up and project what we think ultimately is available. But as you probably are aware, this is an extensive resource. We have extensive position in it. We have a lot to learn and we are unlocking a lot of the keys to a very cost-effective, longer-term development, which will be with us for 40 plus years. I think that is probably the best way to characterize our view of the Bakken at this stage. Nickie Decker - Bear, Stearns & Co.: Okay, thank you. Just moving over to Will K, you said that the well would take about ten months to drill. That sounds like a long time. Is there something in particular about that prospect that would require such a long drilling time? John O’Connor: I think that as a deep shelf play, first of all, we are influenced by the operator's call on what the AFP calls for. Secondly, I suspect that they have been influenced by outside operators who have taken more than ten months to drill to similar depth, so hopefully we will be able to do better than that, but I think for planning purposes there is nothing unusual about it, by the way, at all. Nickie Decker - Bear, Stearns & Co.: No, I understand that now. I didn't realize it was a deep shelf. Fine. Anything new on your decision to shutting Cromarty for the third quarter? John O’Connor: Nothing new. At current prices, it would obviously be attractive to bring it back on stream for the winter market. So we keep an eye on the gas prices. But right now, as I mentioned earlier, prices look attractive and, therefore, we can assume we would pick it up again in the winter market. Nickie Decker - Bear, Stearns & Co.: Okay, but we should not assume anything in the third quarter? John O’Connor: No. Nickie Decker - Bear, Stearns & Co.: Finally just moving over to Pony, maybe you could just update the timetable on completion of that well that was suspended and how you see drilling evolving. John O’Connor: The well has cased to 23,000 feet and we have a couple of significant events to move through before we get into the top of the objectives section. We should have the rig back on location by the end of September, so I would definitely look for a complete result three months after that. So roundabout the turn of the year. Nickie Decker - Bear, Stearns & Co.: I know that there were some sort of operating issues prior to the shut-in and ,in fact, it looks like little drilling progress had been made in the final two months there. Is that something that will persist once you resume drilling? John O’Connor: That was a very good question, Nickie. From the point in view of footage reported, you're right in saying there was no progress. In terms of the technologies we deployed to overcome what we saw in the subsurface, I would say significant progress has been made. And indeed, the obstacles that were thwarting our progress were overcome and they are now safely behind casing. So I do not anticipate anything other than a normal drilling curve through the rest of the hole. I hope I am right. Nickie Decker - Bear, Stearns & Co.: Very good, thank you.

And your next question comes from the line of Mark Gilman representing The Benchmark Company. Please proceed. Mark Gilman - The Benchmark Company: Gentlemen, good morning. I had a couple things. I was hoping you might be able to clarify just once more, because I am having trouble following, the carried interest situation on ACG. I was not aware there was a carry involved. I assume that you were carried and, therefore, this bump in second-quarter production reflects the end of the payout on that carry. Is that correct? John O’Connor: That is correct, Mark. There was a piece of it as we were acquiring our interest in the ACG field, a portion of the interest had a carry and we were carried, just like you said. We were forecasting it to end somewhere around the second quarter. It turns out higher commodity prices, timing and capital expenditures, that the carry ended. So we now have our full entitlement in the second quarter and going forward. Mark Gilman - The Benchmark Company: Okay, so it will stabilize at the higher level. John O’Connor: Correct. Mark Gilman - The Benchmark Company: Just staying with ACG for a sec, you refer, John, I believe to the lower tax rate. What is the statutory tax rate there? John O’Connor: 25%. Mark Gilman - The Benchmark Company: So comparable to EG?

Correct, and that is exactly the reason. The mix of EG and Azerbaijan in the quarter reduced our overall effective rate. Mark Gilman - The Benchmark Company: Okay. Can we talk at all about the terms under which you entered both Bob North and Will K? Is it a farm-in and were you promoted? How did that work? John O’Connor: It's somewhat complicated, Mark, but indeed we acquired the equity in Bob North straight up, and the carry is assigned to the Will K. That is a simple way of looking at it. Mark Gilman - The Benchmark Company: I'm sorry, John, repeat what you said about Will K. John O’Connor: The total carry and promote rather, the promote is associated with Will K. The access to Bob North is on a heads-up, straightforward participation of 30% equity in the prospect. Mark Gilman - The Benchmark Company: Can you disclose what you paid for it?

Yes, Mark, we're not going to give, per se, the exact promote, but there was a promote, as John O'Connor said, and our total exposure for both wells we are estimating around $100 million. Mark Gilman - The Benchmark Company: That does not include well costs, does it, John?

Yes, that includes the well costs. Again, 10% in Will K, 30% on Bob North. With the promote, our exposure, we are estimating, is around $100 million. Mark Gilman - The Benchmark Company: Okay, John O'Connor, is my recollection accurate that Chevron drilled the Bob well previously? I was interested in what relationship Bob North has to that. John O’Connor: You've got a good memory, Mark. You probably went to visit them to have a look at the prospect at the time, but yes, it was in fact, I think that this is designated as Mississippi Canyon however they number it, three. So there have actually been two prior attempts. One stopped with surface, basically shallow water flows, I believe, I don't quite recall. The other one penetrated the salt and did not penetrate the objective section. This is a major drilling challenge, no doubt about it, but there is a very substantial drilling unit on location, the Discover Seven Seas, and I think a lot of learning in the industry in drilling this type of prospect with these types of challenges is now behind us. But there is no question, this is a challenging drilling task. Mark Gilman - The Benchmark Company: So John, it is the same structure as Bob? John O’Connor: Yes, it is, absolutely. Mark Gilman - The Benchmark Company: Okay, just one or two more, if I could. Acquisition costs on the additional Williston acreage -- the Bakken acreage, I'm sorry.

No, we're not going to provide that information. We do not give individual acquisition numbers on that for lease sales. Mark Gilman - The Benchmark Company: Okay, just one final one. The listing situation versus production in the quarter, John Rielly, was there a significant overlift in either Libya or other areas?

No, what we ended up with a small net underlift position for the quarter that really did not have an effect on our income. Mark Gilman - The Benchmark Company: Okay, thanks.

With Banc of America, with the next question we have Dan Barcelo. Please proceed. Dan Barcelo - Banc of America Securities: Good morning. A question regarding trading. Trading really drove a good result year on year, or quarter on quarter for your R&M business. I did not know if you could expand a little more on the basis for that. Are you thinking of putting even more capital to work their? And just touch again on, maybe, risk controls there. Then I would just follow up on that in terms of total R&M, as your growth continues, it is being dwarfed and dwarfed by the upstream. Maybe in the context of R&M and trading, how you think of that business as it relates to Hess overall?

Sure, Dan. First, let me just address your question on the trading for the quarter. There was no change in operations there or capital assigned to the trading group. Again, there is varied strategies that go over a very different type of commodities and just various spreads. So the limits were the same. The value at risk was the same. They just had a good operational quarter and we're not looking to change any capital structure or limits for the trading. For the downstream, I will turn that over to John Hess.

We're very happy with our downstream business, our Marketing/Refining model. It is 25% of our capital employed, as you know. We look for it to generate current returns and cash flow. We are on track this year for our target to generate approximately $400 million to $500 million this year. We are about halfway there through the year-to-date and it is where we are competitively positioned to sustain financial performance. So we're very happy with the returns there and the performance of the business and definitely want to keep it. Dan Barcelo - Banc of America Securities: If I could come a just one more. Just touching on rig positioning, maybe if you could just update us on what your rig position is both on exploratory front or for future looking and expiration and also for your developments currently? John O'Connor - Hess Corporation: Dan, in fact, we have had a review of that just last month and the program as we see it for the next 24 months is pretty much covered completely, either with our own units or through swaps with other operators. So in the Gulf of Mexico, we have got two units. We have secured a unit for the Carnarvon wildcatting program at the end of this year. We have also secured units from other operators who participate with us in a couple of tests west of Shetlands, which are programs for next year. Indeed we also has slots for wildcats, with or not they make the program, in West Africa and South America in 2008, and also, of course, for our Libya wildcat. So pretty much covered across the board. Dan Barcelo - Banc of America Securities: Perfect, thanks very much.

And your next question comes from the line of Ron Oster with A.G. Edwards. Please proceed.

Good morning. I was wondering if you could give us a quick update on your upstream per unit costs in terms of your cash operating costs and DD&A. It looks like there is a jump up in the U.S. for the cash costs and I was just wondering if the guidance still remain there. Also DD&A appears to be running below your guidance and I was wondering if we should anticipate a ramp up in the second half to make up for that.

Sure, let me give you the update. In the second quarter, our overall unit costs were $22.50 per barrel. Cash costs were $12.70 and DD&A was $9.80. You are right about the U.S. On a global portfolio basis, our costs are in line with guidance. In the U.S. we did have some costs rising versus a year ago and even the first quarter. It is a result of increased staffing and activity levels in the Williston and Permian Basin. We also had happen to have -- it is just the timing of maintenance activity, as well as there's higher severance costs with the higher commodity prices. As far as DD&A, we did give a 10 to $11 guidance for the full year and we are running a little below that, but again, now, as we continue to ramp up Okume and Okume's production has been doing very well, as John has mentioned earlier, that does have some higher DD&A costs. Again remember that was part of and it does have some acquisition costs on it from the Triton acquisition. So as we see here, we do not think we need to change the guidance at this point.

Okay, and with that in mind, do you think with those current targets in place that you would be able to improve your competitive position relative to some of your peers if you were able to reach those goals or would you expect you guys remain relatively stagnant in terms of how you rank against your peers? John O'Connor: Our stated objective longer-term and going back sometime is to become a top quartile performer. That applies not just to reserve replacement or production growth, but also to costs. That is what we expect to see happen, so we're driving for that. We have come significantly from being a fourth quartile in terms of costs, where we now see that we are at the threshold between upper second and lower first quartile. So I think if you look at the track record in 2003 through 2006 actual, you'll see that we have made a lot of progress. I would expect that progress versus the peer group to continue.

Great, and then finally, I'm not sure if I missed, but was there anything, can you give us some guidance in terms of exploration for the second half of the year?

Sorry, with Exploration expenses, that's guidance we did not provide and it is really -- again, it is just the estimate of the success ratio that we're going to have, so again, we will talk about spend. John O'Connor mentioned we will start our Australia program. We have Bob North, which is spudded, Will K, which will spud towards the end of the third quarter. So those of the major parts of our exploration program at this point. And then Pony will start up again in mid-September.

Okay, and then final one for me. You mentioned the three items that drove production a little higher than expected. Can you quantify each of those and impact they had on the quarter?

I would say if you were looking at the, let's say, the JDA, you are talking about about 3000 to 5000. John O'Connor: You want me to supplement that, John?

Yes, sure. John O'Connor: ACG is about 6000 barrels a day in the second quarter above what we have projected and John Rielly explained the reason why earlier, with the payout of the carry. Okume is about 5000 barrels a day higher net to us because of the superior performance versus our projections of what the reservoir and the wells would do and also, I might add, the drilling performance. As you know, we have two wells working continuously at the Okume complex, so we are completing and adding wells efficiently.There was a timing change with respect to when the Beryl shutdown in the North Sea would occur. It was supposed to occur in the second quarter. It is now being deferred to the third quarter. As a consequence of that, Beryl contributed 3000 barrels a day more than it should or had been projected to do, but we will lose that, of course, in the third quarter. Then, finally, the JDA, as we talked about earlier with Arjun Murti, the call for gas there was significantly higher than we might have expected for a variety of reasons in the market, so that on a gross basis, we were some 30 to 40 million cubic feet a day more positive than we had planned. Those are the main components of the production variance.

Great, thanks. That's helpful.

With Lehman Brothers with the next question we have Paul Cheng. Please proceed. Paul Cheng - Lehman Brothers: Good morning guys.

Good morning. Paul Cheng - Lehman Brothers: John, can you tell us there was Libya production for the quarter in the sales?

I'm sorry, Paul, I didn't hear the question. Paul Cheng - Lehman Brothers: Can you tell us there was Libya production and sales in the quarter?

Sure, for Libya's production was 24,000 barrels a day and as far as the overlift/underlift, there was a small overlift in the quarter for Libya, just about 49,000 barrels. Paul Cheng - Lehman Brothers: This is for John Rielly. John, you had mentioned that your full-year effective tax rate for the E&P is targeted 50 to 54, which is slightly lower the last quarter, it was 52 to 56. In the first quarter, you have 51, second quarter 49, or slightly below 49. And you indicated that because it is the production mix, the higher production in EG and ACG, which has lowered your effective tax rate, that's why for the quarter you have lower-than-expected tax rate. Is there any reason why in the second half the tax rate is going to jump that much then, because ACG is not coming back down or EG, I mean, the production is going to rise further? Should we looking for a lower effective tax rate?

No and, again, you're absolutely right on what you said. Azerbaijan is going to stay higher in EG from Okume's production will stay higher, but again, in the second quarter, what we had was some mix issues. For example, in the EG, we actually had an overlift in the quarter versus our production of approximately 900,000 barrels. Offset by that was UK, where we had an underlift of over one million barrels. So you took out higher than 50% tax rates in the UK and replaced it with EG barrels a 25% rate. So again, from that standpoint it is just a mix issue in the quarter and then as we forecast out, we see the UK, obviously, underlift going away. So we will bring back in those higher 50% rate barrels into the effective tax rate. That is why the rate will increase in the third and fourth quarter. Paul Cheng - Lehman Brothers: That's great. John, I'm sorry, then what is the UK underlift?

It 1.1 million barrels, actually, in the quarter. But again, for the portfolio standpoint, we had a small net underlift that really did not affect the quarter. It is just that mix. Paul Cheng - Lehman Brothers: Okay, I fully understand. I think this one will be for John O'Connor. John, on Pony, clearly, the drilling has been far longer before the recent drop that has been far longer than anyone expected. Is it more of a -- because I think it is a combination of issues, including maybe some of the equipment issues and some geological structure issues that may be more difficult to drill through. Can you characterize that? Which one is more important in terms of why it has been taking so long or with order delay? John O'Connor: Yes, I can. First of all, to characterize it, the equipment is working significantly better than it has in earlier times, so we would not assign any of the extended drilling time to the equipment. Secondly, probably through about 18,000 feet, this was probably the fastest well drilled in the basin. We did encounter significant geological issues in the subsurface, which have been encountered by others. There are a variety of solutions which have been attempted. We came up with a novel innovative solution, ultimately, which proved successful. We think that that gives us confidence that when, or if, we meet similar obstacles in the subsurface in the future, we will be able to address them. This was certainly a learning for us without too much precedent in the industry. Paul Cheng - Lehman Brothers: Right, and with that in mind, if we going to, say, go in to drill this same well today with all the learning, how much time that you may be able to cut down? John O'Connor: I really have no idea. The way we look at these things, Paul, is we put together the best drilling curves by different hole sizes that other offset operators have reported and we come up with a compass of curve of best in class and we attempt to design our program to do better than that, and we will continue to operate that way. Paul Cheng - Lehman Brothers: Then maybe let me ask you in another way. In terms of Okume, do you encounter or do expect to encounter a still pretty lengthy drilling or longer than expected drilling in the future in either the appraisal well or the development well? John O'Connor: That is a very good question because what we are thinking of is in the event that we were to be encountering that type of thing, how would we counter it? We do not necessarily expect to see that in development wells, but prudence makes sense that we have the capability to overcome this type of thing in the event we were to encounter it in developed wells. Paul Cheng - Lehman Brothers: So you do believe that you have the capability at this point or you found a solution already? John O'Connor: Correct, you're exactly right. That's the simplest and best way to put it, Paul. Paul Cheng - Lehman Brothers: Perfect, just one final one for John Rielly, or maybe John Hess. In the Marketing, you had a breakeven quarter. First quarter, you earned $43 million. I understand in terms of the energy marketing and all that, but it still come to me seems like the drop is to severe given severe given, sequentially. I thought the East Coast retail marketing margin is actually slightly up. Is there any somewhat unusual item included in the result?

No, the major driver of the drop first versus second quarter, you hit the nail on the head, is the energy marketing. Obviously, energy marketing is driven by weather. It was very, very cold in February and energy marketing benefited from that. Obviously the weather abates in the second quarter and is reflected in our sales volumes, so it does not drive margin nearly as much. So that is the major driver. In terms of retail, as you know, during the second quarter, the markets had a lot of upward pressure on gasoline. That helped refining and did not help retail as much, but the retail that we can control or at least have some influence over, the merchandise margin as well as controllable costs behaved well. So we feel good about the retail business, but obviously it was much more refining-driven quarter in the second quarter than it was a marketing one. Paul Cheng - Lehman Brothers: John, will you be able to share with us how much you earned in the energy marketing in the first quarter and a second quarter?

No. Paul Cheng - Lehman Brothers: Okay, very good. Thank you.

And you next question comes as follow up from the line of Mark Gilman, representing The Benchmark Company. Please proceed. Mark Gilman - The Benchmark Company: John Rielly, typically in these calls, you make a statement along the lines of principal and interest on the PDVSA note are current. Unless I missed it, I did not hear that. Could you just confirm that that is still true?

That is still true and got catch, Mark. PDVSA has, again, honored all its obligations. It has been a good partner for us. Yes, the interest in principle is current and we did receive our payment during the quarter. Mark Gilman - The Benchmark Company: Okay, John O'Connor, I do not recall the deep shelf as being an area of interest for you previously. Just curious as to what might have altered your thinking on participation in the Will K, which sounds to me like a deep shelf test. John O'Connor: You're absolutely right, Mark. Of course, what we were particularly attracted to was a continuation of the Miocene play in the heart of the play fairway, which Bob North represented. In a sequence of discussions with BP, it arose that this particular arrangement was the best arrangement for us to access Bob North. So, if you will, the Will K is a secondary consideration, but it was considered important in the transaction to allow us to enter Bob North. Mark Gilman - The Benchmark Company: Okay, thank you. John O'Connor: Thanks Mark.

Ladies and gentlemen, this now concludes the question-and-answer session. Thank you for your participation in the Hess Corporation 2007 second-quarter earnings conference call. This concludes the presentation. You may all disconnect and have a good day.