Integrated energy company,
), has inked a deal with petroleum products pipeline operator,
Buckeye Partners, L.P.
), to sell its U.S. East Coast and St. Lucia storage terminals
for a cash consideration of $850 million. The sale would also
free working capital of about $900 million.
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The transaction includes a network of 20 terminals of which one
is in the Caribbean and the remaining ones are located in
metropolitan sites along the East Coast. The total storage
capacity is expected at approximately 39 million barrels.
The terminal network sale represents a strategic move, whereby
Hess plans to shift its focus from refining to exploration and
production (E&P). The transaction is expected to be settled
in the fourth quarter of 2013 post necessary approvals.
Hess' total divestiture for the year, to date, stands at $5.4
billion. The sale of the four upstream producing assets
previously and the impending sale of the Energy Marketing
business are other contributors to this amount, in addition to
the current deal.
The New York-based company plans to use the proceeds from the
asset sales to lower its debt burden and add value to its
financials. Also, the company has initiated its $4 billion share
buyback program. It plans to finance this venture from the
proceeds of the terminal network sale and the working capital
released by the move.
Hess is engaged in oil and gas exploration, production and
refining as well as marketing. The company now plans to work as a
pure play E&P and is working toward becoming a more focused,
higher growth and lower risk company.
Hess currently holds a Zacks Rank #3 (Hold), implying that it is
expected to perform in line with the broader U.S. equity market
over the next one to three months.
Meanwhile, one can consider other stocks in the energy sector
that are expected to outperform in the near term. These include
Zacks Ranked #1 (Strong Buy) stocks of
Stone Energy Corp.