Hess to Exit Oil Refining and Storage Businesses

Hess, a U.S.-based oil company, has been in the business of crude oil exploration, production, refining, storage, and distribution for many decades now. It is also known, especially in the East Coast, as the operator of more than a thousand gas stations throughout the region.

It seems, however, that the company is reinventing itself, joining the bandwagon of oil firms that have left or are about to leave their downstream activities to make way for oil production as a core business activity.

Lately, the industry has seen Hess auctioning off its refinery facilities and other less profitable assets. The company also received firm offers from Elliot Associates of a bid for $800 million worth of Hess shares and seats on the company’s board of trustees.  Most recently, Hess shares moved up by at least $20 per share.  Reports say that Elliot Associates’ offer somehow helped propel Hess share prices.

The oil company has been in the oil refining business for many years now, so for those who have been doing business with Hess, it might take a while to start getting used to the idea that it will soon exit from the oil refining and storage business.  Conoco Phillips and Marathon Oil served as Hess’ model.  The two oil giants were ahead of Hess when they spun off refinery facilities and related assets and concentrated in oil exploration and production –ventures that are now considered by large oil firms as more promising, especially in the long term.

Assuming these oil giants are correct in their LT assumptions, they will be well positioned in the event crude oil prices increase further within the next 10 years or so.

Some market analysts believe in Marathon and Conoco’s forecasts, and investors are continually hunting for oil companies with the best plans and programs for increasing oil production and, eventually, those which can offer higher return on investments.