) is all set to transform itself into an oil and gas exploration
and production (E&P) entity from an integrated oil and gas
firm. In this regard, Hess plans to pursue the sale of 20 oil
storage terminals in the U.S. and the Caribbean and exit its
The terminal network up for sale comprises 19 facilities located
along the East Coast with a total of 28 million barrels of
storage capacity. These terminals served as the major channel for
Hess' share of production in the past from its former HOVENSA
joint venture refinery and 12 of these have deep water contact.
Additionally, the other St. Lucia oil storage terminal in the
Caribbean has a capacity of 10 million barrels.
Hess announced plans to wrap up its 70,000 barrels per day Port
Reading, New Jersey refinery by the end of February that would
mark its complete exit from the refining business. This refinery
unit remains engaged in making gasoline and components utilized
to blend heating oil and includes a fluid catalytic cracking
unit. It incurred losses twice in the last three years and the
closure will release around $1 billion of working capital.
It is believed that the recent environmental policies,
accompanied with a weak anticipation for gasoline refining
profitability, have compelled the New York-based company to take
the divestiture decision. Hess remains on track with its strategy
of becoming purely an E&P company while boosting its
shareholders value, much like
Marathon Oil Corporation
These companies spun off their refining units in recent times.
ConocoPhillips' midstream business now operates as
) and Marathon's as
Marathon Petroleum Corporation
CONOCOPHILLIPS (COP): Free Stock Analysis
HESS CORP (HES): Free Stock Analysis Report
MARATHON PETROL (MPC): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
PHILLIPS 66 (PSX): Free Stock Analysis Report
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Hess' endeavor to simplify its operations is appreciated by
investors as the news pulled Hess shares up around 6% on Monday
on the New York Stock Exchange. This makes the company one of the
major gainers in the market.
We appreciate the company's new strategy of concentrating on
high-impact exploration areas compared to low risk areas in more
stable regions. Consequently, this has led to increased spending
on Bakken as well as North Malay Basin, Valhall and Tubular
Bells. The closure of the Hovensa refinery venture in Virgin
Islands last year amidst weak demand for refined petroleum
products is a positive as it will help reduce losses.
In view of the global economic slowdown and new refining capacity
entering the world market, these aforesaid decisions of Hess will
help boost shareholders' value.
Meanwhile, Hess also disclosed that Elliott Associates notified
last Friday that it intends to file a Hart-Scott-Rodino
regulatory report to seek permission to acquire Hess shares.
Billionaire Paul Singer is the founder and president of Elliott
Management Corp., which manages two funds, namely, Elliott
Associates and Elliott International LP.
This hedge fund is expected to take over more than $800 million
of Hess shares, or a roughly 4% stake. Elliott Associates also
seeks to nominate candidates for election to Hess' board. Such a
move might make Elliott one of the top three shareholders in
Hess. However, the investment group did not discuss anything with
Hess before stating its intention.
Hess retains a Zacks Rank #3, implying that it is expected to
perform in line with the broader U.S. equity market over the next
one to three months.