Hess exits storage, refining; fund may seek board seats

Mon Jan 28, 2013 7:07pm EST
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(Reuters) - Hess Corp (HES.N: Quote) on Monday announced plans to sell its oil storage terminal network and exit the oil refining business, after activist hedge fund Elliott Associates said it was considering nominating directors to the Hess board.

Hess' decision to become predominantly an exploration and production company is similar to the strategy employed by others such as ConocoPhillips (COP.N: Quote) and Marathon Oil (MRO.N: Quote), which spun off their refining operations in recent years.

"Hess is now facing some activist shareholder interest. In order to deflect or preempt pressure from Elliot, Hess announced it will be becoming a pure E&P company," said Pavel Molchanov, an oil analyst for Raymond James.

Molchanov said the move to simplify Hess' asset base should be appreciated by investors. Hess shares rose 6 percent in afternoon trading.

Hess has been shifting away from refining since early last year, when the HOVENSA refinery, a joint venture between Hess and Venezuela's PDVSA, was closed. Chief Executive John Hess has said the company's strategy is to focus on lower-risk, higher-return assets like its position in the Bakken oil shale in North Dakota.

Hess said in a statement on Monday that it received a letter from Elliott late last week saying the hedge fund might buy more than $800 million of Hess shares, or a roughly 4 percent stake.

Such a purchase would make Elliott one of the top three shareholders in Hess, according to Thomson Reuters data.

Elliott also said it was considering nominating candidates for election to the Hess board at the 2013 annual meeting.

Hess said it has not had any discussions with Elliott and does not know the hedge fund's intentions.   Continued...

Hess Corporation Port Reading refinery and terminal are pictured in this undated handout photo obtained by Reuters January 28, 2013. The oil and gas producer said January 28, 2013 its plans to sell 20 oil storage terminals and close its money-losing Port Reading refinery in New Jersey will free up $1 billion of capital. REUTERS/Hess Corporation/Handout