New York-based independent energy company Hess Corp. (HES) Monday said it plans to fully exit its downstream businesses, including retail, energy marketing, and energy trading and to become a pure play exploration and production or E&P firm. It plans to increase its annual dividend and repurchase shares of up to $4 billion. The stock is up about 5 percent in pre-market trading.
Announcing its multi-year strategic transformation, the company said it will further focus on its E&P portfolio by divesting Indonesia and Thailand. Hess intends to return capital directly to shareholders through an increase in annual dividend to $1.00 per share commencing third quarter of 2013. In addition, it plans share repurchases in relation to its asset sales.
On completion of transformation, Hess will have a focused portfolio of higher growth and lower risk E&P assets, it said. The company anticipates achieving a five year compound average annual production growth rate of 5 to 8 percent, based off of pro forma 2012 production, with aggregate mid-teens production growth between pro forma 2012 and 2014.
John Hess, chairman and CEO stated, "Our Board and management team have been pursuing a multi-year strategy to transform Hess into a focused E&P company. The initiatives announced today represent the culmination of this process. By 2014, Hess will be a pure play E&P company with a tremendous portfolio comprised of higher growth, lower risk assets."
Hess believes that it will have financial flexibility to pursue this growth.
The company also said it has nominated five independent directors for election at its Annual Meeting, and appointed an additional independent director who will stand for election at the 2014 Annual Meeting. Accordingly, the company has named John Krenicki Jr., former vice chairman of GE, Kevin Meyers, former SVP of E&P for the Americas, ConocoPhillips, and James Quigley, former CEO of Deloitte for 2014 election.
The other nominees are Fredric Reynolds, former EVP and CFO, CBS Corp., William Schrader, who has been serving as chief operating officer, TNK-BP Russia, and Mark Williams, former executive committee member, Royal Dutch Shell.
Hess sad it has issued a letter to its shareholders in connection with the change. According to the firm, its new share holder Elliott Management Corp., a hedge fund run by Paul Singer made a recommendation that would effectively dismantle Hess and began pressing for asset sales and changes to the company's board.
Separately, the board declared a regular quarterly dividend of $0.10 per share, to shareholders of record on March 15, 2013, payable on March 29.
HES closed Friday's regular trading at $66.54 on the NYSE. In the pre-market activity, the shares are up 4.82 percent.
by RTT Staff Writer
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