U.S. energy major, Hess Corporation (HES), unfazed by hedge fund Elliott Management Corporation’s continued pressure, remains focused on continuing its transition from an integrated oil and gas company to a predominantly exploration and production (E&P) entity.
In contrast, Elliott Management recently acquired 4.5% stake in Hess and is seeking to elect five of its own directors to the Hess board. The Elliot game plan is in sharp contrast to Hess’s objective of shifting its growth approach from a high-impact exploration to lower-risk unconventionals and a smaller, more focused exploration portfolio.
The company is of the opinion that Elliott Management is moving ahead with its own game plan without even making the effort to learn about Hess. The firm added that the Elliott directors are being compensated directly by the hedge fund through an unusual contingent payment scheme that incentivizes them to support a short-term break-up plan that will effectively liquidate Hess.
In a letter sent to all shareholders in connection with its Annual Meeting of Shareholders, to be held on May 16, Hess urged shareholders to vote for the election of Hess' "highly qualified" independent nominees. The incumbent management of Hess also asked shareholders to not let the Elliott hedge fund pursue its self-serving short-term agenda and destroy the long-term value of their investment.
Elliott Management is proactive in playing its role of an activist investor. Recently the hedge fund, which oversees $21 billion in assets, was helping Stan Lee Media in its wrangle with The Walt Disney Company (DIS). The tussle was over the ownership rights over the Stan Lee-created superhero characters like Spider-Man, X-Men, The Incredible Hulk and The Fantastic Four.
Hess is an integrated energy company engaged in oil and gas E&P and refining as well as marketing. The company’s E&P activities are concentrated in Algeria, Australia, Azerbaijan, Brazil, Denmark, Egypt, Equatorial Guinea, Gabon, Ghana, Indonesia, Libya, Malaysia, Norway, Russia, Thailand, the United Kingdom and the United States. As of year-end 2012, Hess’ proved reserves tally stood at 1.55 billion oil-equivalent barrels, while the company replaced 141% of its production, resulting in a reserve life of 10.3 years.
Hess carries a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, the Zacks Ranked #1 stocks of Range Resources Corporation (RRC) and NGL Energy Partners LP (NGL) are expected to outperform the market over the next few months.
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