Hess Corp announces restructuring

Hess Corporation announced that it would take new measures to complete its transformation from an integrated company to a pure play E&P. The overall impact of Hess’ plan on credit quality is mixed, according to Fitch Ratings.

Announced measures included an exit from the downstream; the sale of additional upstream assets; strengthened corporate governance measures, including the nomination of a new slate of directors; additional de-leveraging, as well as shareholder friendly initiatives (150% increase in dividend and an up to $4.0 billion share repurchase program).

The measures follow a challenge by activist investor Elliott Management at the end of January, which announced it was seeking to unlock shareholder value through its own strategic initiatives, and included a proxy challenge for board seats at the company’s upcoming Annual Shareholder Meeting. In terms of asset sales, Hess will completely exit the downstream by divesting or exiting its East Coast retail marketing, energy marketing, and energy trading (HETCO) businesses. On the upstream side, Hess plans to divest mature international assets in Indonesia and Thailand. A spinoff or sale of midstream assets in the Bakken is contemplated for 2015.

These moves follow earlier restructurings by Hess including the closure of the HOVENSA jv refinery in January 2012; the sale of non-core upstream properties in the North Sea and Norway in 2012.