Hess Sells Indonesian Assets for $1.3 Billion, Divestures Near $8 Billion in 2013

Andrew Klips |

As part of its transition away from refining and toward exploration and production, Hess Corporation (HES) said on Monday morning that it has agreed to sell its interests in both the Pangkah and Natuna A assets located of the coast of Indonesia.  The deal comes by way of two separate agreements with a joint venture between PT Pertamina and PTT Exploration and Production Company Ltd. for a total of $1.3 billion.  The transaction is expected to be closed by the end of March.

Combined, the two assets produced an average of 15,000 barrels of oil equivalent per day net to Hess in the first nine months of the year.

Hess, headquartered in New York City with offices in 20 countries around the world, said that it will use the proceeds from the sale to continue repurchasing shares as part of its recently announced $4 billion share repurchase plan.  During the third quarter, Hess bought-back $500 million of its common stock at an average price of $76.60 per share.

Hess has been on a selling spree this year as it exited the refining business and transformed from an integrated oil and gas company into one primarily focused on exploration and production.  One month ago, Hess completed the sale of its energy marketing business, selling those assets to Centrica plc subsidiary Direct Energy for $1.2 billion.  Hess’s energy marketing business supplied natural gas and electricity to more than 20,000 customers in the eastern United States.

Prior to that, the company sold its U.S. East Coast and St. Lucia terminal network to Buckeye Partners for $850 million.  Amongst other things, the Hess sold its subsidiary in Russian and its interests in the Beryl area fields in the United Kingdome North Sea, the Azeri-Chirag-Guneshli fields offshore Azerbaijan and its Eagle Ford shale assets in Texas.  Through September 30, the company had generated proceeds from completed asset sales, including the release of working capital, of $6.3 billion.

As part of its expansion initiatives, Hess is more than doubling capacity at its Tioga Gas Plant in North Dakota to be able to process up to 250 million cubic feet of natural gas per day by the end of 2014.  The plant is currently maxed-out at 110 million cubic feet.

Investors apparently like the shift in business model at Hess.  Shares have been trekking ahead all year since closing 2012 around $52 each, including rising to a nearly three-year high of $85.15 in October.  Subsequently, shares have pulled back to sit on the 50 day moving average, trading lower by one penny at $81.12 in early Monday action.

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Companies

Symbol Name Price Change % Volume
HES Hess Corporation 62.76 1.09 1.77 4,400,237
DIALF Dialight Plc Ord 10.25 0.20 1.99 900

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