On Jun 3, 2014, shares of Hess Corporation (HES) scaled a new 52-week high of $92.39 and closed at the same price. About 3.1 million shares exchanged hands in the trading session. The momentum was driven by earnings strength, continued focus on enhancement of shareholders’ value and strong scores from rating agencies. The one-year return from the stock came in at 37.1%, which was ahead of the S&P’s return of 18.0%.
With respect to earnings performance, this Zacks Rank #2 (Buy) exploration and production (E&P) major delivered positive surprises in two of the last four quarters, with an average beat of 3.3%. In the first quarter of 2014, the company posted adjusted earnings of $1.38 per share, breezing past the Zacks Consensus Estimate of $1.01.
As of Mar 31, 2014, the company had approximately $1,288 million in cash and $5,576 million in long-term debt. The debt-to-capitalization ratio at the end of the first quarter was 18.7% versus 19.0% in the prior quarter.
Going forward, we believe New York-based Hess’ asset divestiture program along with its significant progress in multi-year transformation will reduce its financing needs.
Hess is undergoing a transition from an integrated oil and gas company to a predominantly E&P entity, thereby shifting its growth approach from high-impact exploration to lower-risk unconventionals and a smaller, more-focused exploration portfolio.
The company expects production to average 305–315 MBOE/d for full-year 2014. This would be driven by continued growth in Bakken, higher production from Valhall Field post completion, and the planned start-up of the Tubular Bells Field in the Gulf of Mexico in the third quarter of 2014.
Other Stocks to Consider
Other oil and gas sector stocks worth considering include Athlon Energy Inc. (ATHL), Ultra Petroleum Corp. (UPL) and Pembina Pipeline Corp. (PBA). All these carry a Zacks Rank #1 (Strong Buy).