Integrated oil company
) partnership agreement with Houston-based energy firm
ZaZa Energy Corporation
) was terminated by the latter. The pact, formed in 2010, comprised
exploration and development of the Eagle Ford Shale formation in
Texas and the Paris basin in France.
Hess made a direct payment of $15 million to end the agreement
for Eagle Ford and is liable to shell out a further $70 million in
cash upon closure. The companies also plan to conclude their
partnership agreement in the Paris basin. The companies expect to
sign definitive agreements to this intent by June 29, with closure
scheduled before August 15.
Upon termination, ZaZa's core holdings in the proved, productive
regions of the oil-rich Eagle Ford would be augmented to reach
72,000 acres from its recent holding of 11,500 acres. But its
conventional producing assets in the Paris basin will remain at
about 24,260 acres.
ZaZa has hired
Jefferies & Co.
) to assist it in finding another joint venture partner for its
assets in the Eagle Ford and the emerging Woodbine region.
Jefferies is also responsible for assessing the strategic prospects
available to ZaZa.
The new transaction would include transfer of some oil, gas and
mineral interests, well bores and production in the Eagle Ford
Shale and Paris basin. Per the deal terms, Hess is entitled to
receive royalty payments.
We believe Hess has a competitive advantage over its peers based
on improving fundamentals, commodity price leverage and exposure to
areas with high resource potential (such as Brazil, Ghana, Libya
and offshore Australia). We continue to see an upstream momentum on
the back of the company's large inventory of exploration and
development projects. The termination of one agreement is unlikely
to affect its strong revenue base.
We are maintaining our long-term Neutral recommendation on the
stock. Hess, which faces competition from
), currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating.
HESS CORP (HES): Free Stock Analysis Report
JEFFERIES GP-NW (JEF): Free Stock Analysis
ZAZA ENERGY CP (ZAZA): Free Stock Analysis
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