Integrated energy company, Hess Corporation (HES), announced two separate agreements with a joint venture between state-owned Indonesian oil and natural gas company, PT Pertamina and Thai oil and gas company, PTT Exploration and Production Company Limited.
Per the agreements, Hess would sell its interests in both the Pangkah and Natuna A assets located off the coast of Indonesia for a total after-tax consideration of $1.3 billion. Together, the two assets produced an average of 15,000 barrels of oil equivalent per day net to Hess in the first three quarters of 2013.
Hess plans to use the proceeds from the asset sales on buying back shares under its existing $4 billion share repurchase program. The agreements are expected to close before the end of the first quarter of 2014.
New York-based Hess Corp. is an integrated energy company engaged in oil and gas exploration, production and refining as well as marketing.
Hess, however, remains on track with its transition to a pure play E&P company while boosting shareholder value. The company has already divested its U.S. East Coast bunkering business, subsidiary in Russia as well as interests in the Beryl area fields in the United Kingdom North Sea, the Azeri-Chirag-Guneshli fields offshore Azerbaijan and the Eagle Ford assets in Texas.
In an attempt to better manage its portfolio with respect to resource availability, project development and its intricacy, Hess intends to arrive at a 50:50 ratio between unconventional and conventional assets. Currently, the ratio of the company’s undrilled inventory is 40:60 between unconventional and conventional. The recent lease in the Bakken and augmentation of Utica acreage are in sync with its new strategy.
Going forward, we believe that the company’s strong exploration upside in Ghana and continued improvement in Bakken productivity hold a lot of promise. This would help the company to consistently deliver 5–8% annualized production growth in the near future.
Hess currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider other stocks in the energy sector that are expected to outperform in the near term. These include Zacks Ranked #1 (Strong Buy) stocks of SM Energy Company (SM), Matador Resources Co. (MTDR) and Abraxas Petroleum Corp. (AXAS).
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