Hess Breakup Maps Path to Shale Riches (Update 2)

Updated to reflect comments from Elliott Associates.

NEW YORK (TheStreet) -- Hess(HESS) plans to split off its oil and gas refining and marketing businesses, in a move that will help the New York-based oil conglomerate refocus on drilling its shale energy assets, while making a big payout to shareholders after years of underperformance.

Such action represents a 'win-win' for shareholders, even if Hess is yet to fully map out the financial impact of its divestiture plan, according to Bank of America Merrill Lynch analysts.

Still, Elliott Associates, a hedge fund pushing for change at Hess, called the company's plan "incomplete" and lacking in accountability in a late Monday letter.

The company said earlier it would fully divest its downstream businesses, including retail gas stations, energy marketing and trading, adding to a deconsolidation plan the company mapped out in January.

Hess also said in a press release that it would divest oil and gas assets in Indonesia and Thailand and exit midstream businesses in the North Dakota Bakken shale by 2015.

Bank of America energy analyst Doug Leggate forecasts Hess may eventually put its Bakken assets into a master limited partnership (MLP) that can be spun off to investors.

Hess's breakup plan follows similar moves made by Conoco Phillips(COP) and Marathon Petroleum(HESS) to split exploration businesses from refining and marketing and deliver value to investors.

With proceeds from asset sales and a reduction in overall expense, Hess appears to be ready for a more aggressive drilling program that could increase the company's oil and gas production growth rate in coming years.

The company now targets a five-year production growth rate of 5% to 8%, and forecasts 'mid-teens' production growth between 2012 and 2014.

Shareholders also will see an immediate payout as Hess executes the multi-year plan to focus exclusively on oil exploration and production.