Hess Corporation (HES)

[gixxer11]

Hess Increases Quarterly Dividend by 150 Percent

The Board of Directors of Hess Corporation (NYSE: HES) today authorized the previously announced 150 percent increase to its quarterly dividend, declaring a dividend of 25 cents per share payable on the Common Stock of the Corporation on September 30, 2013 to holders of record at the close of business on September 16, 2013.

John B. Hess, Chief Executive Officer, said, “Our transformation into a pure play exploration and production company allows us to increase cash returns to shareholders. In addition to being able to repurchase shares under our existing $4 billion authorization, we are also substantially increasing our quarterly dividend. We remain committed to ensuring that our reshaped portfolio of focused, lower risk upstream assets is optimally positioned to drive production growth, enhance profitability, and generate superior returns.”

Hess Corporation is a leading global independent energy company primarily engaged in the exploration and production of crude oil and natural gas. More information on Hess Corporation is available at http://www.hess.com.

[DewDiligence]

HES director makes small ($55K) open-market purchase: #msg-91217060.

[Timothy Smith]

$HES currently possesses a market cap of $25.08 billion, a P/E ratio of 9.50, a forward P/E ratio of 12.58, and a forward yield of 0.54% ($0.40), settled at $73.94.

Based on end of July pricing, shares of Hess Corporation are trading 9.01% above their 20-day simple moving average, 8.36% above their 50-day simple moving average, and 18.48% above their 200-day simple moving average.

These numbers indicate short-term, mid-term, and long-term uptrends for the stock, which generally translates into a buying mode for most traders.

[Timothy Smith]

@RICK - Dividends help make this proposition. Since June 12, 2008, Hess Corporation has maintained its quarterly dividend distribution of $0.10/share.

Although a quarterly payout of $0.10/share is relatively mundane, especially when shares are trading above $73/share, my interest has recently piqued given the fact Hess has hinted at the fact a portion of the $7B it intends on generating through asset sales could go toward stock buybacks.

As an income-driven investor, my hope is that the company's dividend gets a boost as well.

From an income perspective, the company's forward yield of 0.54% ($0.40) coupled with its payout ratio of 5.00% make this particular stock a very viable income option for long-term investors in search of an ultra-conservative yield in the oil & gas sector.

[DewDiligence]

HES “declassifies” BoD, which makes hostile takeovers easier: #msg-90975647.

[Rick026]

I rather invest in a company that actually gives me money fast....And i HATE THIS COMPANY!

[ECole]

Q2 Results

Net production in the second quarter averaged 341,000 barrels of oil equivalent per day compared to 429,000 barrels of oil equivalent per day in last year's second quarter
http://www.earningsimpact.com/Transcript/82517/HES/Hess-Corporation---Q2-2013-Earnings-Call

[DewDiligence]

HES reports 2Q13 results: #msg-90510474.

[DewDiligence]

HES sells electricity-marketing business to Centrica for $1B in cash:

#msg-90485050

This is a business that I would bet few investors realized HES was involved in. Still on tap are the planned divestitures of: i) HES’ US retail service stations and convenience stores; and ii) E&P assets in Indonesia and Thailand.

[DewDiligence]

HES, PetroChina ink China shale-oil deal: #msg-90290185.

[Jcrou73]

There are days like this when I ask myself; Why oh why did I sell some of those $41's!!!!!!

Lol. What's that saying by Cramer... Bears make $, Bulls Make $ Pigs get slaughtered!!!!

[DewDiligence]

HES director bought $630K of stock on 6/21/13 @$63/sh:

http://www.sec.gov/Archives/edgar/data/4447/000120919113033328/xslF345X03/doc4.xml

p.s. I added HES today.

[Jcrou73]

Adding for a nice bounce!

[DewDiligence]

HES, Elliot settle proxy fight at 11th hour: #msg-88002724.

[DewDiligence]

HES +3% on solid 1Q13 earnings: #msg-87217984.

[DewDiligence]

I’m requesting your opinion on the proxy fight: #msg-86317388.

[DewDiligence]

HES bags $2.05B ($1.8B after taxes) on sale of Russian assets: #msg-86312576.

[DewDiligence]

Large insider sale of HES was court-ordered pursuant to a divorce (see footnotes 2 and 3):

http://www.sec.gov/Archives/edgar/data/4447/000120919113018801/xslF345X03/doc4.xml

[DewDiligence]

HES sells Caspian Sea assets for $1B ($884M after taxes):

http://finance.yahoo.com/news/hess-closes-sale-interest-acg-190700915.html

This is consistent with HES’ divestiture plan outlined on the most recent CC.

[DewDiligence]

CVX, XOM, and (especially) STO may be interested in acquiring HES, says the WSJ:

#msg-86055803

[Jcrou73]

All Aboard....

Gravy train is departing!

HES looking better everyday :)

[DewDiligence]

HES’ letter to shareholders is essentially a text-only version of the slides from yesterday’s CC (#msg-85271829):

http://finance.yahoo.com/news/hess-corporation-issues-letter-shareholders-120500422.html

The purpose of addressing shareholders directly is to prevent them from voting for Elliott’s BoD nominees at the upcoming annual meeting.

[DewDiligence]

Addendum: Other components of HES’ counter-proposal to Elliott are: i) to increase the dividend to an annual rate of $1.00 (from $0.40 currently); and ii) to buy back up to $4B of stock, which represents 15-20% of the shares outstanding based on the current share price.

[DewDiligence]

Info/musings re HES’ response to Elliott:

#msg-85271829

All told, I like it.

[Timothy Smith]

The company's stock has appreciated 27% year-to-date.

As compared to MRO and OXY, it has a lower dividend yield of 0.59 and also a lower operating margin of 10.81%.

The stock is trading at P/E ratio of 10.35 and 1.09X to book value (62.83).

[Timothy Smith]

Hess has seen support from one high-level insider since mid-November, and shares of the are already up 26% since the start of 2013.

Much of this appreciation has been a result of Hess's massive Q4 earnings beat reported late last month.

Despite its recent gains, Hess's stock price still trades just a 6% premium to its book value per share, below the likes of Exxon Mobil (XOM), Chevron (CVX) and its own five-year average.

[10nisman]

The short answer is no—I do not agree. I think HES has plenty of room to run and I haven’t sold any shares.

I'm more inclined to buy more at current levels or on any dips than sell. HES sooner or later will be sold and I wouldn't be surprised if more activists jump on board to make something happen sooner. 30-50% potential upside with little downside as other activists will start accumulating shares should the price decline materially, IMO.

[DewDiligence]

HES mentioned in passing in NYT profile of Monterey shale: #msg-84179239.

[DewDiligence]

The short answer is no—I do not agree. I think HES has plenty of room to run and I haven’t sold any shares. Regards, Dew

[anesthesia doc]

Dew: Do you agree with Barron's suggestion to take some money off the table? I tend to disagree with them in this regard.

From Barrons:
http://online.barrons.com/article/SB50001424052748703892404578269974034623986.html


EXPLORATION AND PRODUCTION company Hess (HES) Wednesday reported $1.66 a share in earnings for the fourth quarter and a 10% sales rise to $9.7 billion. The results were a welcome improvement from a loss a year earlier, but they were about as expected.

More important, they probably didn't satisfy activist investor Elliott Management, which recently took a 4% stake in Hess and is agitating for sweeping changes to increase shareholder value, such as a break-up of its assets.

This column pointed out last May 21, when Hess' stock was at $44.60, that the New York-based E&P outfit was greatly undervalued. We noted then that Hess's biggest problems were self-inflicted but fixable: too much capital spending and not enough production from what are good assets, such as fields in the Bakken Shale in North Dakota.

Investors were unhappy with the continual production disruptions and with Hess's habit of missing analyst earnings expectations, and had pushed the shares down to near all-time lows. Last Friday, however, the stock closed at $68.21, 53% above its quote when our bullish item ran.

Elliott Management's beef appears to be similar. In a recent SEC filing, Elliott attributed the stock's underperformance over the years to an unfocused portfolio and poor management. It is proposing five new board members at the coming shareholders meeting to help bring about a substantial restructuring, including the spinoff of the Bakken properties, among other changes.

Elliott, which declined to comment beyond the filing, has said that the shares could be worth more than $126.

Investors who bought the stock last May are sitting on a fat gain and a nice decision: What do they do now?

Hess's public response has been polite, but suggests that management lacks ardor for the massive changes that Elliott is suggesting. No surprise there. In a conference call Wednesday, CEO John Hess broadly indicated that management opposes a radical breakup of Hess's operations. Through a spokesman, the company declined to comment, but it is preparing a response to Elliott's proposals.

In recent years, a number of energy-sector companies, including ConocoPhilips (COP), Marathon Petroleum (MPC), and Tesoro (X), have spun off assets. Post-spinoff stock performance has generally enhanced the overall value to shareholders.

Elliott's proposals would likely do the same for Hess, though its $126 valuation seems a stretch. The price would value Hess' current assets at 19 times analysts' consensus estimates of about $6.50 next year, double the firm's long-term P/E.

Moreover, a breakup could be a long and bruising way off. It remains uncertain, given management's present attitude and John Hess' 10% stake in the company.

Additionally, the executive team, which already has its hands full with improving operations, will be distracted as it battles Elliott. Since mid-July of 2012, when Hess announced a strategy change, the energy producer has been cutting costs, boosting production, and divesting assets. And that was before Elliott showed up.

Given the 50%-plus rise in the shares since our item was published, it's time to take some money off the table. A breakup of Hess would bring a price substantially higher than $68, perhaps $90 to $100, if perfectly executed. But there's significant risk that Elliott Management's activism will fail.

The conservative—and smart—course would be to sell a portion, say half, of one's Hess stake, and then play with house money. A big gain would be locked in, but an investor would still have a chance to participate in further advances if management continues to improve operations or if Elliott is ultimately successful.

[DewDiligence]

Transcript of 4Q12 CC with some comments by me: #msg-84015980.

[anesthesia doc]

Elliott Management's website for Hess:


http://www.reassesshess.com

[DewDiligence]

Elliott’s 48-page presentation for proxy fight at HES annual meeting:

http://www.sec.gov/Archives/edgar/data/4447/000110465913005512/a13-3887_2ex1.pdf

http://www.sec.gov/Archives/edgar/data/4447/000110465913005512/a13-3887_2ex1.htm

Wow.

[DewDiligence]

Tomorrow's 4Q12 CC ought to be interesting, although management will probably decline to answer the pointed questions vis-a-vis Elliott's demands.

[DewDiligence]

#msg-83940094 has excepts of Elliott's letter with some annotations by me at the end.

[DewDiligence]

If HES were sold what do you think it could receive on a per share basis? $85-90?

A bid for less than $100 would not be taken seriously, IMO. The Hess family still controls a lot of shares, directly and indirectly. Elliott’s $126/sh figure is on the high side, but it might be attainable in a competitive bidding scenario.

[10nisman]

HES is now up ~12%.

Dew --- If HES were sold what do you think it could receive on a per share basis? $85-90?

[anesthesia doc]

Singer Chases Icahn With Stake in Cheapest Oil Company Hess

http://www.bloomberg.com/news/2013-01-29/singer-chases-icahn-gain-with-stake-in-cheapest-oil-company-hess.html

[10nisman]

HES is up another 7% in PM trading.

[anesthesia doc]

Hess Should Consider Bakken Spinoff, Elliott Management Says


Hess Corp. (HES) should conduct a full strategic review, including potential spinoff of its Bakken shale assets, Paul Singer’s Elliott Management Corp. said.

The activist investor urged shareholders of the New York- based energy company to vote for five new board members it’s proposing in a letter today. Elliott Management owns 4 percent of Hess’s common stock, the largest initial investment in its 35-year history.

Elliott Management gave notice to the company on Jan. 25 that it would buy about $800 million in shares and seek new board members. Hess yesterday said it will close its last refinery and seek to sell a fuel storage network.

“Lack of focus is a chronic issue at Hess that remains unchecked by the board,” Elliott said in the letter. “New directors are needed for real change.”

The investment firm said the shares could be worth as much as $126 each, more than twice Hess’s $62.48 closing price yesterday. The announcement was made before regular trading began on U.S. markets. Hess rose 2.7 percent to 64.21 at 8:10 a.m. in New York.

Four of Elliot’s proposed board members have senior executive experience at oil companies, according to the letter. The fifth is Harvey Golub, former chairman and chief executive officer of American Express Co. (AXP)

Singer is the founder and president of Elliott Management, which oversees two funds, Elliott Associates LP and Elliott International LP, that have $21.5 billion of assets under management. Elliott last year added two new board members to BMC Software Inc. (BMC) after pushing BMC to consider a sale.

To contact the reporters on this story: Tina Davis in New York at [e-mail]; Jim Polson in New York at [e-mail]


http://www.bloomberg.com/news/2013-01-29/hess-should-consider-bakken-spinoff-elliott-management-says-1-.html?cmpid=yhoo

[DewDiligence]

More color on HES' two big stories today: #msg-83899647.

[10nisman]

HES up 6+% pre-market on morning news.

[10nisman]

Hess Announces Receipt of Notices from Elliott

http://finance.yahoo.com/news/hess-announces-receipt-notices-elliott-134000800.html

NEW YORK--(BUSINESS WIRE)--
Hess Corporation (HES) announced today that Elliott Associates, L.P. and its associated entity Elliott International Limited notified Hess this past Friday in writing that they intend to file a Hart-Scott-Rodino Notification and Report Form seeking regulatory clearance to acquire additional Hess shares beyond those they may already own, if any. The correspondence suggests that Elliott may seek to acquire shares valued at more than $800 million. A law firm representing Elliott Associates, L.P. also informed the company that Elliott is considering nominating candidates for election to Hess’s Board of Directors at Hess’s upcoming 2013 annual meeting.

John Hess, Chairman and Chief Executive Officer, said, “Prior to the letters we received this past Friday, Elliott had not contacted us about their intentions, nor have we had any discussions with them. As we do with all shareholders who engage with us, if Elliott wishes to do so, we will meet to hear their ideas.”

Hess continued, “We have transformed Hess into a predominantly exploration and production company, which is part of a multi-year strategy to grow shareholder value. This strategy is focused on developing lower risk, higher return assets such as those related to our leadership position in the Bakken oil shale of North Dakota.

“We are pleased that the market has been recognizing the success of our strategic transformation as reflected by the fact that Hess shares have significantly outperformed our peers over the past six months. Since July 24, 2012, the last day of trading before we announced our updated strategy, Hess shares have increased approximately 34% versus 13% for our peer index. We are confident that continued execution of our strategy is delivering and will deliver superior and sustainable value to all Hess shareholders.
“Today we announced that we are completing our exit from refining with the closure of our Port Reading, New Jersey refinery and we are pursuing the sale of our U.S. oil storage terminal network. The terminals sale, when complete, should release approximately $1 billion of working capital in addition to the proceeds from the transaction. In the past several months, we have announced divestitures of $2.4 billion in non-strategic assets and committed to sell our oil and gas assets in Russia, as well as our Eagle Ford assets in Texas. Proceeds from our divestiture program will help fund our future growth opportunities.”

Hess Corporation is a leading global independent energy company primarily engaged in the exploration and production of crude oil and natural gas, and the marketing of refined petroleum products, natural gas and electricity. More information on Hess Corporation is available at http://www.hess.com.

[10nisman]

Hess to Pursue Sale of Terminal Network and Exit Refining Business

http://finance.yahoo.com/news/hess-pursue-sale-terminal-network-133000148.html

NEW YORK--(BUSINESS WIRE)--
Hess Corporation (HES) announced today that it will pursue the sale of its terminal network in the United States. Hess also announced that it will complete its exit from the refining business by closing its Port Reading, New Jersey refinery.

The terminal network is located along the U.S. East Coast and has a total of 28 million barrels of storage capacity in 19 terminals, 12 of which have deep water access. The terminals previously served as the primary outlet for Hess’ share of production from its HOVENSA joint venture refinery, most of which was used to supply Hess’ Retail and Energy Marketing businesses. With the closure of the HOVENSA refinery in 2012 as well as Hess’ ability to access refined products from third parties to supply these marketing businesses, the terminal system is no longer core to the company’s operations. The company’s St. Lucia oil storage terminal in the Caribbean with 10 million barrels of capacity will also be included in the package for divestiture. In addition to the proceeds from the sale of the terminal network, the transaction should also release approximately $1 billion of working capital for redeployment to fund Hess’ future growth opportunities.
Hess will continue its long term commitment to the Retail and Energy Marketing businesses and take all the necessary steps to ensure supply security, competitive prices and high quality service for its customers.

The Port Reading refinery, which will be closed by the end of February, is comprised solely of a Fluid Catalytic Cracking unit and it primarily manufactures gasoline and components used for blending heating oil. The refinery incurred losses in two of the past three years. The financial outlook for the facility is expected to remain challenged due to the requirement for future expenditures to comply with environmental regulations for low sulfur heating oil and the weak forecast for gasoline refining margins.

“By closing the Port Reading refinery and selling our terminal network, Hess will complete its transformation from an integrated oil and gas company to one that is predominantly an exploration and production company and be able to redeploy substantial additional capital to fund its future growth opportunities,” said John Hess, Chairman and CEO.

Hess has retained Goldman, Sachs & Company as its financial advisor for the divestiture of the terminal network.
Hess Corporation is a leading global independent energy company primarily engaged in the exploration and production of crude oil and natural gas, and the marketing of refined petroleum products, natural gas and electricity. More information on Hess Corporation is available at http://www.hess.com.

Contact:
Hess Corporation
Investor:
Jay Wilson, 212-536-8940
or
Media:
Jon Pepper, 212-536-8550

[Timothy Smith]

@DD - I am in and have been in since summer. My comments are more geared toward someone starting a position here. I really meant that if it drops then it is a buying opportunity.

[DewDiligence]

I would hope for a pullback on earnings to get in.

What is your logic? A pullback on earnings would seem to be no better than a 50/50 proposition.

[Timothy Smith]

The company is trading 13% below its 52 week high and 14% below the analysts' consensus mean target price of $66.81 for the company. HES was trading Tuesday for $58.87, up over 2% for the day.

Fundamentally, HES has several positives. The stock is trading for slightly less than book value. The stock has a forward PE of 9.14. HES pays a dividend with a yield of .69%. EPS is up 87% quarter over quarter. The company's profit margins are improving. The current net profit margin is 4.14%.

HES has been in a well-defined uptrend since July of 2012. The stock recently fulfilled the coveted golden cross recently which is extremely bullish. The stock has been on a tear as of late and may be showing signs of being overbought currently with a RSI of 76.

HES is a buy, but I would wait for a pullback prior to starting a position. The company reports earnings on January 30th. I would hope for a pullback on earnings to get in.

Any thoughts?

[Timothy Smith]

Thanks for the feedback and links.

[DewDiligence]

The company could also unlock value by spinning off its refining, marketing and retail operations like ConocoPhillips (COP) and Marathon Oil (MRO) did last year.

That won’t happen, IMO. HES needs the cash flow from marketing and retail (including the convenience stores) to fund its cap-ex program (#msg-83355795). A refining sale is possible, however, insofar as HES has only one refining facility and it’s not a big money-maker.

[Timothy Smith]

$HES The company has significantly beat earnings estimates (better than 20% over consensus) each of the last two quarters and consensus earnings estimates for FY2013 have risen nicely over the last month.

The stock is selling near the bottom of its five year valuation range based on P/E, P/CF, P/B and P/S.

HES is cheap at under 9x forward earnings and just 91% of book value. The company could also unlock value by spinning off its refining, marketing and retail operations like ConocoPhillips (COP) and Marathon Oil (MRO) did last year.

HES has had some nice discoveries recently in Ghana. It also basically doubled oil production from the Bakken in 2012 to 62,000 BOE/D.