Hess Corp. (NYSE:HES) engaged the services of Goldman Sachs Group Inc (NYSE:GS) to supervise the sale of its gas station chain as part of its restructuring efforts to concentrate its business operation in oil exploration and production, according to a report from Ryan Dezember of Wall Street Journal citing sources familiar with the issue.
According to the report, Hess Corp. (NYSE:HES) is trying to exit from its downstream businesses including refining, retail and transporting oil. The energy company plans to concentrate its business operations in exploring and extracting oil and natural gas from the ground.
Over the previous years, Hess Corp. (NYSE:HES) has been moving towards that direction. Elliot Associates, one of the largest shareholders of the company pushed the energy company to implement strategies to unlock shareholders value by improving its operations and accountability, as well as divesting its assets to refocus its portfolio.
Hess Settled Its Proxy Fight With Elliot Associates
Hess Corp. (NYSE:HES) settled its proxy fight with Elliot Associates last May, and accepted the three nominees of the hedge fund to become part of the board of directors of the company.
A person knowledgeable about the plans of Hess Corp. (NYSE:HES) said it is targeting a single-digit billion price for its gas stations. The energy company has 1,361 gas stations located in several states on the East Coast. A majority (90 percent) of the gas stations are company operated with convenience stores, which help increase its profits due to high margins on certain products sold such as beer, cigarettes and soda.
A previous report from analysts at Credit Suisse Group AG (NYSE:CS) such as $3.4 billion.
“Our retail analyst believes there could be a strong interest and value in HESS retail assets. While there will be give and take on how much EBITDA is ascribed to high multiple terminals and how much to retail, we have increased our downstream value by $3/share…We also await results of the mid-July auction for HESS Thailand and Indonesia assets. $9.5 billion of incremental cash receipts from disposals leaves room for HESS to buy back stock and create a robust balance sheet,” according to Credit Suisse Group AG (NYSE:CS) analysts.
On the other hand, Stephen Simko, analyst at Morningstar estimated that the gas stations of Hess Corp. (NYSE:HES) are worth $1.2 billion.
Hess Might Decide To Spin Off Its Assets Despite Hiring Goldman
According to sources, there is a possibility that Hess Corp. (NYSE:HES) might decide to spin off its assets despite hiring Goldman Sachs Group Inc (NYSE:GS) to find buyers for its gas stations. Last month, the energy company agreed to acquire that stake of its partner in a joint venture, which includes 400 gas stations and travel plazas in the Southeast. The company purchases 56 percent of WilcoHess LLC from A.T. Williams Oil. Co.