Hess Inks $600M Deal To Divest Stakes In Permian Holdings

Global exploration & production company Hess Corporation (NYSE:HES) recently inked a deal with Permian Basin’s largest operator, Occidental Petroleum Corporation (NYSE:OXY) to sell stakes in some enhanced oil recovery assets in West Texas and New Mexico.

Per the deal, Hess will be selling stakes in four different properties in the Permian Basin. It will divest a 34.2% interest in Seminole-San Andres unit, a 46.6% interest in the Seminole Gas Processing plant, a 9.9% interest the Bravo Dome unit and its entire stake in the West Bravo Dome CO2 field. These assets produced an average of 8,200 barrels of oil equivalent per day (Boe/d) in 2016.

Hess will receive $600 million from this divestment deal. The proceeds from the sale will be utilized to provide an impetus to growth both nationally and globally. The amount will also be used by Hess to fund the first phase of development in the Liza field off Guyana, which the company had sanctioned a few days back.

Subject to regulatory approvals and satisfactory closing conditions, the deal is scheduled for closure in August.

Notably, while Houston-based Occidental has acquired acreage from Hess in one part of the Permian Basin for $600 million, it has also unloaded around 13,000 non-core acres with the production capacity of 4,700 Boe/d in some other part of the Permian land to undisclosed buyers for the same consideration. Therefore these series of purchase and sale transaction will not require any spending by Occidental. At the same time, it will increase its output in the region by 3,500 barrels of oil equivalent per day. The strategic land swap deal is likely to enhance the cash flow and returns of the company.

Zacks Rank & Key picks

Hess is a leading global independent energy company engaged in the exploration and production of crude oil and natural gas.

Hess’ robust portfolio include Bakken shale play in North Dakota, two offshore developments — one in the Gulf of Thailand and one in the Gulf of Mexico — that are expected to contribute significant production and cash flow when they come online in 2017 and 2018 respectively.

The company, under Zacks categorized U.S.Oil and gas Integrated industry, carries a Zacks Rank# 3 (Hold).

Hess Corporation Price

Some better-ranked players in the energy space include Enbridge Energy, L.P. (NYSE:EEP) and Delek US Holdings, Inc. (NYSE:DK) . Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Energy reported a positive average earnings surprise of 38.22% in the trailing four quarters.

Delek US Holdings reported a positive average earnings surprise of 60.68% in the trailing four quarters.

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