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Hess Sells Stake in Samara-Nafta

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U.S. energy major Hess Corporation (HES) has inked an agreement with OAO Lukoil to divest its interest in its Russian subsidiary Samara-Nafta. The transaction value is estimated at $2.05 billion. 


Hess has a 90% interest in Samara-Nafta, based on which the total after-tax proceeds to the company will be around $1.8 billion. The Russian subsidiary’s current yield is 50,000 barrels of oil equivalent per day in the Volga-Urals region of the country. 


The remaining 10% is held by the chairman of Russia's Yukos Oil Co. Simon Kukes, who will also sell his 10% stake to Lukoil. Total after-tax proceeds for the entire company will be $2 billion.


The closure of the deal is subject to the customary approval process of the state anti-trust authorities. Hess intends to file its application for the approval by mid April.


Hess has been on a divestment spree since 2012 and has raised about $3.4 billion from the sale of its assets including the latest one. The assets sold so far consist of its interests in the Beryl field in the U.K. North Sea, the Eagle Ford play in Texas, as well as the Azeri, Chirag and Guneshli fields in Azerbaijan and the associated pipeline.


Hess has being selling assets to raise proceeds for reducing its debt and strengthening its balance sheet in view of its lackluster profits and a shareholder revolt.


Hess remains on track with its strategy of becoming a purely E&P company while boosting its shareholder value. In this respect, it may be mentioned that Hess plans to pursue the sale of 20 oil storage terminals in the U.S. and the Caribbean and exit its refining business. Further, the latest sale validates its growing presence as a focused, higher growth, lower risk pure play exploration and production company.


Hess holds a Zacks Rank #3 (short-term Hold rating). However, there are other stocks in the sector that appear rewarding. Among these, Stone Energy Corporation ( SGY), Range Resources Corporation ( RRC) and EPL Oil & Gas, Inc. ( EPL), are expected to perform impressively over the next few months and carry a Zacks Rank #1 (Strong Buy).

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