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Hess to Lower Debt, Buy Back $500M Worth of Shares by 2018

Zacks Equity Research

Hess Corporation HES recently provided a sneak peek into its business strategies, including a stock buyback plan and debt-reduction initiatives. 

At the Bank of America Merrill Lynch 2017 Global Energy Conference, the upstream energy player announced its intention to buy back up to $500 million shares within 2018. With this, the company will be able to return significant cash to its shareholders.

Hess is also planning to strengthen its balance sheet by lowering debts by $500 million. On top of that, the company will likely increase the rig count from four to six for the development of the Bakken play. In the play, Hess has prospective drilling areas that will boost the company’s production over the long haul.  

During 2018, Hess is expected to prefund lucrative crude projects at the Stabroek Block, located off the coast of Guyana. The company estimated the gross recoverable resources from the block at 2.25-2.75 billion barrels of oil equivalent.

Investors should know that the company is planning to utilize the proceeds from asset divestment programs for financing these developments. During 2017, Hess will likely gain as much as $3.4 billion from divesting mature, non-core and less profitable properties.

New York-based Hess is among the leading producers of crude in the Bakken oil shale play in North Dakota. The company has interests in the best areas of the plays. With crude prices trading above $50-a-barrel mark, we believe that the Bakken play will contribute to production growth in the long run.

However, Hess’ stock has underperformed the industry year to date. During the aforesaid period, the stock has lost 29.3%, underperforming the industry’s 10.3% decline.

Presently, Hess carries a Zacks Rank #3 (Hold), signifying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

A few better-ranked players in the energy space are ExxonMobil Corp. XOM, China Petroleum & Chemical Corp. SNP and Northern Oil and Gas, Inc. NOG. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Headquartered in Irving, TX, ExxonMobil is the largest publicly traded energy firm. The company managed to beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 8.81%.

Headquartered in Beijing, China Petroleum is a leading integrated energy player. The company will likely witness year-over-year earnings growth of 59.1% in 2017.

Based in Minnetonka, MN, Northern Oil is an upstream energy player. The company’s 2017 revenues are estimated to grow almost 44%.

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