The Rising Influence of Rising Affluence

[DewDiligence]

HES +5% on formation of JV for Bakken-midstream assets:

http://finance.yahoo.com/news/hess-announces-bakken-midstream-joint-120000954.html

Hess Corporation announced today that it has agreed to sell a 50 percent interest in its Bakken midstream assets to Global Infrastructure Partners, a leading global infrastructure investor with an extensive midstream energy investment track record, for cash consideration of $2.675 billion. Hess and Global Infrastructure Partners will create a premier midstream joint venture – Hess Infrastructure Partners. Upon closing, the joint venture will incur $600 million of debt through a 5-year Term Loan A facility with proceeds distributed equally to both partners, resulting in total after-tax cash proceeds, net to Hess, of $3.0 billion.

HES has said for the past year or so that it planned to monetize its Bakken midstream assets, although there was no detailed guidance on the amount or form of the monetization. Hence, the $3B of net after-tax proceeds to HES is larger than most investors probably thought.

An IPO of Bakken Midstream Partners (the new JV) is planned soon after closing of the JV transaction, and the proceeds from the IPO will go to the JV rather than to HES. The JV will last 20 years; because HES has BoD control over the JV, HES will consolidate the balance sheet and income statement of the JV on its own financial statements. After the JV is formed, HES’ debt-to-capital ratio will fall to only 10%, one of the lowest ratios in the E&P industry.

The JV assets will consist of:

• Tioga NG plant
• Tioga rail terminal
• Nine unit trains for transporting Bakken oil east to distant refineries
• 550 railcars on order that meet the new US government guidelines for oil trains
• Three pipeline systems

CC slides:
http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUxOTU3MTR8Q2hpbGRJRD01ODM4Nzk
http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUxOTU3MTR8Q2hpbGRJRD01ODM5MDE