Bloomberg News

Paul Singer’s Target Hess Reports $566 Million Profit

January 30, 2013

Hess Corp. (HES:US), the oil company that’s exiting refining and has been urged by an investor to split its production units, reported fourth-quarter net income of $566 million as output increased.

Net income was $1.66 a share, compared with a loss of $131 million or 39 cents a year earlier, when Hess recorded one-time costs of $525 million to close Hovensa LLC, its refinery partnership on St. Croix with Petroleos de Venezuela SA, according to a statement. Excluding one-time items, profit at the New York-based company was one cent less than the $1.21 estimate (HES:US) of 21 analysts compiled by Bloomberg.

Hess announced Jan. 28 it will close its last refinery and sell its oil terminals after disclosing billionaire Paul Singer’s Elliott Associates LP planned to buy an $800 million stake and seek board seats. Elliott yesterday called on Hess to spin off its U.S. production operations and divest all businesses except its best international exploration and production interests.

Production rose 7.9 percent from a year earlier to the equivalent of 396,000 barrels of oil a day during the quarter, mostly on increases from North Dakota’s Bakken deposit, according to the statement. Profit from production declined 1.9 percent to $517 million as it sold oil and natural gas liquids at lower prices.

Shares, Bonds

Hess declined (HES:US) 0.8 percent to $67.60 at 9:49 a.m. in New York.

Hess Corp.’s $1.25 billion of 5.6 percent notes due February 2041 rose 1.28 cents to 106.29 cents on the dollar to yield 5.17 percent at 8 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The debt dropped yesterday by the most since it was sold in August 2010, falling to the lowest level since May, Trace data show. The bonds are down from this month’s high of 118.6 cents on Jan. 23.

Net income included a $172 million gain on the sale of the company’s interest in the Bittern Field in the U.K. North Sea, a gain of $104 million on liquidation of fuel inventories and costs of $86 million on a tax dispute and $33 million to write down assets in the refining and marketing division.

Sales fell 2.3 percent to $9.5 billion.

Hess said this week it will close its last refinery and put up for sale 19 fuel terminals. New York-based Elliott called the moves “financially insignificant,” adding that Hess should spin off its Bakken and other onshore U.S. production and sell off all other operations except “crown jewel” offshore fields.

The activist investor also has proposed a slate of five board members to oppose incumbent Hess directors whose terms expire this year.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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Companies Mentioned

  • HES
    (Hess Corp)
    • $74.5 USD
    • 3.95
    • 5.3%
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