Replies to post #650 on The Rising Influence of Rising Affluence

[DewDiligence]

Excellent article. The Bakken Shale seems to be a singular case* insofar as it contains oil but the technology to exploit it is derived from the drilling techniques used for shale gas.

HES, one of my favorite oil plays, has a substantial position in the Bakken (see the first bullet in #msg-44527891).

…to vault the state [ND] past Oklahoma and Louisiana to become the country's fourth-biggest oil producer, after Texas, Alaska and California.

That’s a great trivia question—one where investors are probably more likely to know the answer than some people who work in the industry :- )

*If anyone knows of another similar formulation, please post.

[DewDiligence]

On HES’ 2Q10 CC, almost half of the long Q&A session pertained to activity in the Bakken. That really surprised me insofar as the CC took place a week after the Deepwater Horizon accident. By the large, the analysts on the call were much more interested in the Bakken than the GoM, despite the fact that HES is a significant player in the GoM.

[DewDiligence]

HES seeks permit for Bakken rail terminal:

http://finance.yahoo.com/news/Hess-Corp-plans-to-ship-ND-apf-2625593888.html?x=0&.v=1

[DewDiligence]

HES Acquires AEZ for $450M in Stock

[AEZ owns 85K net acres in the Bakken shale, where HES was already a significant player (#msg-44527891, #msg-50759891). The acquisition will increase HES’ share count by approximately 3%.]

http://finance.yahoo.com/news/Hess-Corporation-to-Acquire-bw-2640898989.html?x=0&.v=1

›Tuesday July 27, 2010, 10:04 pm EDT

NEW YORK & DENVER--(BUSINESS WIRE)--Hess Corporation (NYSE: HES) and American Oil & Gas Inc. (NYSE-AMEX: AEZ) jointly announced today that Hess has agreed to acquire American Oil & Gas pursuant to a merger agreement approved by the Boards of Directors of both companies in an all-stock transaction. The acquisition will increase Hess’ strategic acreage position in the Bakken oil play in North Dakota by approximately 85,000 net acres.

Under terms of the agreement, Hess has agreed to issue 0.1373 shares of its common stock in exchange for each outstanding share of American Oil & Gas’ common stock. This represents a 9.4 percent premium to American Oil & Gas stockholders based on the closing stock prices of Hess’ and American Oil & Gas’ shares on July 27, 2010. It is expected that Hess would issue approximately 8.6 million shares for all outstanding American Oil & Gas shares and options on a net settlement basis. The merger agreement provides for a possible cash dividend to American Oil & Gas’ stockholders to the extent of American Oil & Gas’ positive working capital as of the closing date (subject to certain adjustments that are described in the merger agreement) and subject to available cash. Hess has committed (subject to the terms and conditions of a customary commitment letter) to provide American Oil & Gas with a $30 million working capital credit facility to help finance American Oil & Gas’ planned exploration and production activities and other working capital needs prior to the closing of the transaction.

“This acquisition builds upon our strong land position in the Bakken, leverages our nearby infrastructure and offers operational synergies,” said Greg Hill, President of Worldwide Exploration and Production at Hess.

“We believe this transaction captures the value that we have been able to create since our initial entry in the North Dakota Bakken play four years ago,” said Pat O’Brien, CEO of American Oil & Gas. “We are excited about the leverage our stockholders will gain not only to Hess’ compelling Bakken position and developmental activities, but also to Hess’ large and diverse global project portfolio.”

The transaction is subject to customary closing conditions, including approval of American Oil & Gas’ shareholders. Holders of approximately 20.5 percent of American Oil & Gas common stock have agreed to vote their shares in favor of the merger. Completion of the transaction is expected in the fourth quarter of 2010. In connection with the transaction, Goldman, Sachs & Co. is acting as financial advisor to Hess, and Tudor, Pickering, Holt & Co. Securities Inc. is acting as financial advisor and provided a Fairness Opinion to American Oil & Gas. Legal counsel is being provided by White & Case LLP for Hess, and Patton Boggs LLP for American Oil & Gas.

About Hess Corporation

Hess, with headquarters in New York, is a global integrated energy company engaged in the exploration, production, purchase, transportation and sale of crude oil and natural gas, as well as the production and sale of refined petroleum products. More information on Hess is available at www.hess.com.

About American Oil & Gas Inc.

American Oil & Gas is an independent oil and natural gas company engaged in exploration, development and production of hydrocarbon reserves primarily in the Rocky Mountain region. Additional information about American Oil & Gas is available via the Company's website at www.americanog.com.‹