Hess Corporation HES
Hess underperformed peers by 460% over 17 years of restructurings; splitting the conglomerate into a Bakken pure-play and an international E&P unlocks $128/share.
Thesis
Elliott Management argues Hess Corporation has underperformed its revised proxy peers by 460% over CEO John Hess's 17-year tenure — a product of perpetual restructurings, a $4 billion exploration loss program, and mismanagement of the company's premier Bakken position, where well costs run 17-38% above Whiting. The opaque conglomerate trades at a steep discount to a $39-50 billion sum-of-parts that breaks into a Hess Resource Co. (Bakken, Eagle Ford, Utica plus a midstream MLP dropdown) and a Hess International vehicle for long-life conventional assets. Elliott demands shareholders elect five independent nominees — Rodney Chase, Harvey Golub, Karl Kurz, David McManus, and Mark Smith — to replace rubber-stamp directors, including lead 'independent' John Mullin III, joint-executor of the Hess family estate. Substantive change delivers $96-$128 per share versus the mid-$50s reference price.
SCQA
Hess Corporation is a 17-year Wall Street underperformer: a vertically integrated conglomerate under second-generation CEO John Hess, spanning conventional E&P, a premier Bakken unconventional position, midstream infrastructure, and a downstream retail/marketing footprint.
Sixteen years of 'perpetual restructuring' delivered 460% underperformance, $4 billion of exploration losses, 17-38% above-peer Bakken well costs, and a staggered board of rubber-stamp directors — including a lead 'independent' who co-executes the Hess family estate.
Elect Elliott's five truly independent nominees (Chase, Golub, Kurz, McManus, Smith); tax-free spin Hess Resource Co. from Hess International, drop midstream assets into an MLP, and divest the downstream retail and marketing business.
A focused Bakken/Utica resource pure-play plus a long-life conventional vehicle is worth $39–50 billion, or $96–$128 per share — materially above the mid-$50s price before Elliott's involvement became public.
The three reasons
- 1
Hess underperformed revised peers by 460% over John Hess's 17-year CEO tenure
- 2
Breakup into Bakken pure-play plus Hess International is worth $39–50bn ($96–$128/share)
- 3
Board is captured — lead 'independent' director is joint-executor of the Hess family estate
Primary demands
- Elect Elliott's five truly independent nominees (Rodney Chase, Harvey Golub, Karl Kurz, David McManus, Mark Smith) at the 2013 Annual Meeting
- Create Hess Resource Co. via tax-free spinoff — Bakken, Eagle Ford, Utica plus midstream MLP dropdown
- Create Hess International for long-life, oil-weighted conventional assets; divest non-core pieces
- Monetize Bakken midstream (Tioga gas plant, rail terminal) through an MLP
- Divest downstream retail, marketing, terminals, and gas-fired power
- De-stagger the board and restore credible pay-for-performance
KPIs cited
Pattern membership
Precedents cited
- Anadarko transformation under Karl Kurz (top-tier exploration, capital discipline)
- American Express turnaround under Harvey Golub (750% share appreciation)
- Pioneer Natural Resources international divestiture under David McManus
- Ultra Petroleum midstream monetization via REIT deal (Mark Smith)
- BP integrated-major operating experience (Rodney Chase)
- Continental Resources as Bakken pure-play valuation comparable
Composition what's on the 71 slides
Slide gallery ·
Notes
Textbook activist proxy-fight deck filed ahead of the 2013 Hess annual meeting. Rhetorical signature: Elliott appropriates Hess's own green HESS logo and brand palette on every page header — visual judo dressing the attack in the target's own livery, with companion site www.ReassessHess.com. Two-act SCQA: Part I exec summary plus $128 valuation; Part II prosecutorial catalogue of accountability failures. Heavy use of CEO-quote contradictions across a seven-panel 'Unending Restructurings' timeline (p.7) showing overlapping plans from 1996–2014 framed by Goldman's 'Will perpetual restructuring mode ever end?' headline. Peer-gap delivered as a stark red-number matrix (p.5) next to the John Hess quote 'You can't judge us on a one-year basis.' Sum-of-parts shown twice — asset inventory (p.13) then before/after breakup reveal (p.14). Page 8 'False Excuses' idea/excuse/reality three-column is a rebuttal-slide template. Stake percentage is NOT disclosed in this document. No named human author on cover — attributed to 'Elliott Management' as firm.