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Hess to Gain $275M From Hess Midstream's Structural Changes

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Hess Corporation HES is expected to gain around $275 million from a proposed change in the organizational structure of Hess Midstream Partners LP HESM. Moreover, Hess will receive 115 million newly issued units in the midstream partnership.

The proposed structural change will enable Hess Midstream to acquire Hess Infrastructure Partners LP and convert itself from a master limited partnership to an Umbrella Partnership. Hess is expected to own around 134 million units or 47% of Hess Midstream, following the closure of the transaction in fourth-quarter 2019.

Hess intends to use the cash proceeds from the transaction in funding Guyana and Bakken Shale development opportunities. Notably, the company made world-class oil discoveries offshore Guyana. It estimates gross resources of more than 6 billion barrels of oil equivalent from 14 promising discoveries in the Stabroek Block, which has the potential to accommodate nearly five floating production, storage and offloading vessels that will be capable of yielding around 750,000 barrels of oil per day by 2025.

Allocation of the cash proceeds for Bakken properties from the proposed structural change makes sense as Hess is among the leading producers of crude in the Bakken oil shale play in North Dakota.  The upstream energy firm, which holds interests in the best areas of the play, expects its daily production from Bakken to increase to 200 thousand barrels of oil equivalent by 2021. The rising output from the shale play can lead to overall 2019 net production of 275,000-280,000 Boe/d, indicating a significant increase from 117,000 Boe/d in 2018.

Price Performance

Hess has gained 58.9% year to date against the 23.2% fall of its industry.

Zacks Rank and Stocks to Consider

Currently, Hess has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Shell Midstream Partners, L.P. SHLX and NuStar Energy L.P. NS. While Shell Midstream sports a Zacks Rank #1 (Strong Buy), NuStar Energy has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shell Midstream’s 2019 earnings per share estimates have increased from $1.52 to $1.59 in the past 60-day period.

NuStar Energy’s third-quarter 2019 earnings per share are expected to gain more than 107% year over year.

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Shell Midstream Partners, L.P. (SHLX) : Free Stock Analysis Report
 
NuStar Energy L.P. (NS) : Free Stock Analysis Report
 
Hess Corporation (HES) : Free Stock Analysis Report
 
Hess Midstream Partners LP (HESM) : Free Stock Analysis Report
 
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