Hess Corporation - The Start Of A Turnaround?

Sherif Ahmad, Kapitall  Hess Corporation (HES) announced a handful of proposals on March 4 to boost the firm’s share price and to satisfy the demands of Elliot Management, the activist hedge fund that has recently attempted to use its sway to usher in a change of course for the struggling oil company. Investors are closely watching the ordeal for any signs of a true turnaround, which could provide significant value to shareholders. [More analysis: Carrizo Oil & Gas – A Smart Small-Cap Energy Buy?]

Elliot Management & Monday’s Announcements

Back in January, the activist hedge fund Elliot Management purchased a 4% stake in Hess Corporation. Paul Singer, founder of Elliot Management, immediately voiced his displeasure in the company’s performance and attempted to leverage the fund’s large position to convince Hess to restructure. Hess Corporation finally reacted yesterday with its announcement to name six new board members, divest its energy trading business and sell off its 1,300+ gas stations by 2015. Hess hopes to focus strictly on oil and gas exploration and production in mostly the US, Norway, Malaysia and Ghana. Additionally, the firm also announced its plan to buy back $4bn of shares and double its dividend payout.

Elliot Management, however, was not satisfied with the announcement. In its original proposal to Hess, the hedge fund suggested splitting the firm into onshore and offshore operations in order to deliver more value. John Hess, the CEO of Hess, quickly dismissed the validity of such a proposal and argued that Singer and his team failed to acknowledge the risk in such a move.

Recent Performance & Outlook