Hess Exiting Retail

Following pressure from its third largest shareholder, Hess to focus on oil and gas exploration.

Hess plans to exit its retail, energy marketing and energy trading businesses, Reuters reported.

The move follows pressure from Hess’ third-largest shareholder—activist investor Elliott Management—to break up the company.

Hedge fund Elliott Management in January asked the company, which is looking to become a predominantly exploration and production company, to consider a spinoff of its U.S. onshore assets and the sale of its retail operations. Paul Singer’s Elliott, which has a 4% percent stake in the company, also announced its plans to nominate five directors at the annual meeting in May.

Hess rejected Elliott’s proposed board members. The company said the investor’s recommendation to split the exploration and production business into U.S. onshore and offshore operations, and separate its midstream business ignored credit risk and tax consequences, according to Reuters.

Hess noted it would repurchase up to $4 billion of its stock and increase its annual dividend to $1 from 40 cents, beginning July.

Hess also said it would trim its Asian portfolio by divesting operations in Indonesia and Thailand to focus on the North Malay basin and a joint development area in Malaysia and Thailand.

The company is pursuing monetization of its oil and gas gathering and transportation assets in North Dakota’s Bakken shale field, expected in 2015. Hess plans to use proceeds from the asset sales to pay down its short-term debt, which totaled $787 million as of Dec. 31, according to Thomson Reuters data.

Hess’ marketing operations—consisting mainly of retail gasoline and energy marketing—brought in earnings of $209 million in 2012. Hess’ net income for the year totaled $2.25 billion.

 

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