Hess Corporation HES
Hess trades at a steep discount because its unfocused portfolio and poor execution mask premier Bakken acreage; spin the resource co., replace the board, and unlock ~150% upside to $126.
Thesis
Elliott argues Hess's intrinsic value exceeds $126 per share — roughly 150% above its ~$50 trading price — but the market applies a deep discount because of an unfocused global portfolio, a history of cost overruns in the Bakken, $4 billion of failed exploration, and a board with zero independent oil & gas operating experience and near-thirteen-year average tenure (three of whom are joint executors of the Hess family trust). Elliott proposes four actions: elect five new independent directors with relevant E&P experience, spin off the premier US resource plays (Bakken, Eagle Ford, Utica) as a standalone Hess Resource Co., monetize midstream via an MLP/REIT and divest downstream distractions (retail, power, refining), and streamline the remaining international portfolio to earn a peer multiple. Execution of all steps targets 94-153% share-price appreciation.
SCQA
Hess Corporation is a mid-cap integrated oil & gas company with premier Bakken acreage, global offshore positions and downstream/midstream businesses, but trades near $50 despite $126+ of intrinsic asset value.
An unfocused portfolio, chronic cost overruns in the Bakken, $4 billion of failed exploration and a 13-year-tenure board with zero independent oil & gas operating experience saddle the stock with a 50%+ discount to NAV.
Elect five independent shareholder-nominated directors with E&P experience, spin off Bakken/Eagle Ford/Utica as a US resource pure-play, monetize midstream via MLP/REIT, divest downstream and streamline the international portfolio.
Execution delivers $126+ per share versus $49.85 today — roughly 94% to 153% upside — driven by full market credit for Bakken acreage, midstream monetization and a peer multiple on a focused international portfolio.
The three reasons
- 1
Intrinsic value ~$126/share vs ~$50 today — 94-153% upside masked by unfocused portfolio
- 2
Zero independent directors have oil & gas operating experience; ~13-year average tenure
- 3
Hess destroyed $4bn on failed exploration — 20% of market cap — over five years
Primary demands
- Elect 5 independent shareholder-nominated directors with relevant E&P experience (Chase, Golub, Kurz, McManus, Smith)
- Spin off Bakken, Eagle Ford and Utica as a standalone US resource-play company (Hess Resource Co.)
- Monetize midstream assets via MLP or REIT structure
- Divest downstream distractions (retail stations, marketing, terminals, power, refining)
- Streamline international portfolio to focus on core competitive-advantage areas
- Reduce exploration budget and instill capital discipline
KPIs cited
Pattern membership
Precedents cited
- American Express refocusing under Harvey Golub (~750% share appreciation)
- Anadarko Petroleum transformation (Karl Kurz, former COO)
- Pioneer Natural Resources international divestiture (David McManus)
- Anadarko / Western Gas Partners MLP (midstream monetization model)
- Ultra Petroleum / CorEnergy REIT (midstream monetization model)
- Sunoco divestitures of chemical, refining, power, marketing and retail
- Marathon sale of retail and spin-off of downstream
Composition what's on the 48 slides
Slide gallery ·
Notes
Opening salvo of Elliott's Hess proxy fight; Rule 14a-12 materials filed 2013-01-29 per disclaimer. Campaign branded under www.ReassessHess.com with five shareholder nominees (Rodney Chase, Harvey Golub, Karl Kurz, David McManus, Mark Smith). Ownership stake not disclosed in this deck. Textbook activist SCQA structure with strong rhetorical devices: (1) CEO quote-contradiction pattern used repeatedly — John Hess's 'judge us on the long term' juxtaposed with 17-year underperformance table (pg 4); 'we want to live within our cash flow' quotes 2006-2012 vs historical FCF deficits (pg 40); 2003 'focus areas' vs drift into Kurdistan/Paris Basin by 2012 (pg 41). (2) Sum-of-parts waterfall on pg 8: $49.85 today → $126.24 pro forma is the money slide, repeated as a recurring motif on pg 23/25/27. (3) Board governance table on pg 11 names every director with tenure, O&G experience, and Hess-trust conflicts. (4) Deck co-opts Hess's green logo in every slide header — rhetorical reframing as if it were the company's own presentation. Cover says only 'January 2013'; exact date from the 14a-12 filing.