Hess’s stock performance
Hess’s (HES) stock started rapidly declining in the second half of 2015. This was due to weaker crude oil prices in the third and fourth quarters. However, as crude oil prices started rallying in early February 2016, so did Hess stock.
Year-over-year, Hess stock has fallen ~21%. Crude oil prices have fallen ~22% in the same period.
Key highlights in 2015 and 2016 year-to-date
In 2015, Hess spun off its non-core midstream Bakken assets to form a joint venture with private equity group Global Infrastructure Partners. Hess owns 50% of the venture.
In February 2016, Hess announced an equity offering of 25 million shares. Many upstream companies have been turning to equity offerings to protect their cash flows. These include EQT (EQT), Oasis Petroleum (OAS), and Newfield Exploration (NFX). All these companies make up 7.5% of the iShares US Oil & Gas Exploration & Production ETF (IEO).
Key management comments
John Hess, CEO (chief executive officer) of Hess, commented on the company’s 4Q15 earnings conference, “Three principles are guiding us through this lower-for-longer oil price environment: preserve the strength of our balance sheet, preserve our operating capabilities, and preserve our long-term growth options.”
He also stressed that maintaining a strong balance sheet is top priority for the company. He said, “Our focus is on value, not volume, and we do not think it makes sense to accelerate production in the current price environment, particularly given the recent further deterioration in the oil markets.”
Next, let’s look at Wall Street analysts’ recommendations for Hess before its 1Q16 earnings.