oil industry

DealBook: Hess to Sell Gas Stations as Part of a Shift in Strategy

Ángel Franco/The New York TimesA Hess gas station in Brooklyn. The company said Monday it would sell all its gas stations, but a big investor wanted more changes.

8:55 p.m. | Updated The Hess truck may be going in a yard sale.

Known for its white-and-green gas stations, the Hess Corporation announced on Monday a plan to sell off its retail and refining operations and focus primarily on oil production.

The streamlining comes as it seeks to fight off an activist investor, the hedge fund Elliott Management, although Hess presented the new strategy as the culmination of a multiyear campaign.

Despite the changes announced by Hess, including six new directors, Elliott said significant problems remained.

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Document: Hess letter to investors

The statements on Monday signal a possibly prolonged battle between Hess and Elliott, the latest in a flurry of campaigns by activist investors. The hedge fund, led by Paul Singer, disclosed last month that it owned a 4 percent stake in Hess and nominated five candidates for the company’s board in what it said was an attempt to impose discipline on a wayward oil producer that lagged its peers.

Elliott was later joined by Relational Investors, another activist investor with deep roots in the oil industry.

Hess described its plans, which will further center the company on finding and developing new sources of oil, as a natural evolution of a turnaround begun years ago. Other companies, including ConocoPhillips, have made similar moves in the last three years.

“It’s the logical endpoint of our five-year plan,” John B. Hess, the company’s chief executive and the son of its founder, said in an interview by phone on Monday.

Mr. Hess explicitly rejected any notion that Monday’s plan was spurred by outside pressure — “Elliott got on the train after it left the station,” he said. But the moves further narrow the company’s focus, as the hedge fund has demanded.

The retail operation, which includes more than 1,350 gas stations primarily in the Northeast, the Carolinas and Florida, accounts for just 4 percent of the company’s revenue. (While the fate of the toy Hess trucks remains in question, the company expects the 2013 models to be ready in time for Christmas, batteries included.)

In addition, Hess will sell holdings in Indonesia and Thailand.

At the same time, the company sought to demonstrate its responsiveness to shareholders, announcing a big jump in its dividend payments, to $1 from 40 cents a share, and a stock buyback of up to $4 billion.

And perhaps most prominent, Hess named six new directors to its board, most of whom are former oil industry executives. They include John Krenicki Jr., a former head of GE Energy; William Schrader, a former chief operating officer of TNK-BP; and James H. Quigley, a former chief executive of Deloitte.

In naming its director candidates last month, Elliott criticized the board’s ties to the Hess family. Mr. Hess defended the departing directors as having helped shape the current strategy, but acknowledged that the board needed some new blood.

The directors who are leaving include Thomas Kean, a former governor of New Jersey; Samuel A. Nunn, a former United States senator from Georgia; and Gregory P. Hill, Hess’s president of worldwide exploration and production.

“With the new company that we’re becoming, we feel that we have the right people for the board,” Mr. Hess said.

But Hess explicitly rejected Elliott’s biggest recommendation: dividing the company into a domestic driller with a big presence in the Bakken shale formation and an international oil producer.

For its part, Elliott said it was unswayed by the plans, noting that Hess had announced several end points in its turnaround campaign since 2010. The hedge fund also said that the company had understated its poor stock performance in the months before Elliott announced its intentions, and that Hess had minimized years of mismanagement.

“Hess’s announcement is incomplete and it lacks accountability,” Elliott said in its statement. “Substantial change needs to be delivered rather than partial change promised.”

Investors appeared to respond favorably to the new strategy. Shares of the company rose 3.5 percent on Monday, to $68.84. They have risen over 10 percent since Elliott formally began its proxy fight.

And analysts praised the moves as well.

“We applaud the changes,” analysts at Wells Fargo wrote in a research note on Monday. They added that it was clear “management clearly is accelerating the changes rather than digging in its heels and fighting with its newest shareholders.”

This post has been revised to reflect the following correction:

Correction: March 4, 2013

An earlier version of this article misspelled the name of a new Hess board member. He is William Schrader, not Scrader.

Article source: http://dealbook.nytimes.com/2013/03/04/hess-to-sell-refining-arm-and-revamp-its-board/?partner=rss&emc=rss

Algeria Attack Puts Focus on Worker Security

Security was a constant preoccupation, as it is with other fields in the many politically unstable parts of the world where foreign oil companies take big chances for big gain: Iraq, Nigeria and Libya, to name a few. The Algerian Army escorted the workers anytime they left the sprawling compound, to and from the airport or as they headed to distant wells where they sometimes saw nomads crossing the desert on camels.

Now energy companies’ use of these far-flung outposts staffed by expatriates is being scrutinized as never before. The bloody, four-day hostage siege at the In Amenas facility in eastern Algeria prompted at least one worker who escaped to question whether more could have been done to rebuff the attack. And analysts say the catastrophic failure could change the way the oil industry protects such compounds throughout the region, where Islamist militants who revile the West are active, just as the State Department has had to rethink security after the attack on the diplomatic compound in Benghazi, Libya.

The attack in Algeria has already led oil companies there to evacuate hundreds of workers temporarily and eventually could lead some companies to pull out of especially volatile countries. But analysts said the siege was not likely to fundamentally reshape the industry, which has a long history of making money in countries in the throes of upheaval and even war (including one in Algeria), and where workers with a taste for traveling the world — and the hazard pay they earn — have long put aside fears of kidnapping and death.

“This attack is highlighting in a ghastly way the security concerns around the global energy infrastructure on which the world depends,” the oil historian Daniel Yergin said. “Security has been a very big concern over the last two decades, and security is now an even bigger concern. But that doesn’t mean their work will stop.”

The attack in the desert has opened a rare window on a world few outside the oil industry know: the scores of oil and gas fields around the globe where foreign and local workers mix, sometimes uneasily, in vast compounds ringed by security fencing that are a strange mix of privilege and privation.

Many are in parts of the world where political problems outside the camp walls add to natural hazards: blinding sandstorms, winter cold severe enough to shatter metal and tropical diseases in areas where medical care is spotty at best. To keep their cloistered workers focused, companies often splurge on such amenities as swimming pools in the desert (In Amenas has one), steaks for lunch and air-conditioned gyms.

At some camps, the Japanese companies that specialize in plant construction had their own Japanese-style communal bath, and had their food flown in from Japan. In Amenas had no bath, but the Japanese workers there ate separately from both the locals and other foreigners, with a chef trained in Japanese cuisine catering to them.

“It’s a better way to live than in a hotel, but it’s not home and never will be,” said Pat Campbell, a longtime executive with Superior Energy Services, who has worked in North Africa and the Middle East since the 1960s and was a crucial technician in taming the burning Kuwaiti oil fields after the Persian Gulf war. “You cannot help but chuckle when you are sipping homemade bourbon by the pool, but there you are in the desert.”

The men (and some women) who sign up for assignments at the fields are generally adventurers, people able to put up with, or even thrive on, the lifestyle in the camps. The pay and the fast track to corporate success such postings can lead to does not hurt; industry insiders say that top managers can earn $250,000 or more a year. That can go a long way when food and lodging for half the year (they generally work 28 days on and 28 off) is paid for.

Clifford Krauss reported from Houston and Nederland, Tex., and Stanley Reed from London. Reporting was contributed by Nicholas Kulish and Henrik Pryser Libell from Bergen, Norway; Mihai Radu from Bucharest, Romania; Martin Fackler, Makiko Inoue and Hisako Ueno from Tokyo; Ravi Somaiya from New York; and John F. Burns from London.

Article source: http://www.nytimes.com/2013/01/23/world/africa/algerian-attack-puts-focus-on-worker-security.html?partner=rss&emc=rss

DealBook: Hess to Sell Gas Stations as Part of a Shift in Strategy

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Algeria Attack Puts Focus on Worker Security

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