Hess Corp: Performance, Holdings, and Analysts’ Views

On Friday, Hess Corp (HES) fell 3.8%, while crude oil prices fell 1.4%. Trade deal-related concerns could be behind oil prices’ decline. In Q3 2019, it operated with a production mix of approximately 70% in oil price-linked commodities. Oil price-linked commodities include crude oil and NGLs (natural gas liquids). 

Hess Corp: Performance, Holdings, and Analysts’ Views

2019 performance

In 2019 so far, Hess Corp has risen by 58.9%. The gain was enormous compared to a 4.3% rise in the Energy Select Sector SPDR ETF (XLE).

XLE tracks the US energy sector. On a year-to-date basis, XLE was an underperformer among sector-specific SPDR ETFs, such as Financial Select Sector SPDR ETF, the Consumer Staples Select Sector SPDR ETF, and all others.

Hess Corp’s strategy to identify assets with low cost but high returns might have boosted investors’ confidence. For instance, the company assets in Guyana will be the key contributor to production growth between 2020 and 2025.

Notably, oil produced in this region is benchmarked to Brent crude oil prices. Usually, Brent crude oil prices are higher than West Texas Intermediate (WTI) crude oil prices.

In fact, by 2025, a majority of the company’s oil production will be benchmarked to Brent. In the next six years, the company’s production mix in liquids will rise to 80%. Liquids include crude oil and NGLs.

Analysts’ views on Hess

Out of the 24 analysts tracking HES, around 38% recommended a “buy” or a “strong-buy.” Based on Reuters data, 54% recommended a “hold.” Only two analysts recommended a “sell.” Analysts’ mean price target suggests an upside of 12.3%.

On November 13, Scotiabank downgraded the rating on Hess Corp from “sector-outperform” to “sector-underperform.” Early in this month, MKM Partners reduced the target price by $2 to $80. However, lately in October month, Credit Suisse increased the price target on the company by $7 to $65.

Institutional holdings

Fidelity is the largest institutional investor in Hess Corp. In the third quarter of 2019, it added 2.9 million shares of HES. Dodge & Cox, the fifth-largest institutional investor in the company, raised its stake by around 5.1 million shares. Dodge & Cox was the largest institutional buyer of HES shares in the third quarter.

However, in the third quarter of 2019, Paul Singer’s Elliot Management sold around 9.6 million shares, the largest sell by any institutional holder. It reduced holdings in Hess by 58%. In the third quarter, the company constituted around 3.4% of Elliot’s total portfolio of publicly traded securities.

Hess Corp’s moving averages

On Friday, HES closed 0.7% and 3.5% above its 50- and 100- DMAs (day moving averages), respectively. However, it was 5.8% below the 20-DMA. This might suggest a short-term weakness in the stock. Also, after Scotiabank’s downgraded rating, HES moved below the 20-DMA. In early December, “OPEC+” might take important decisions regarding the production cut. It might be important for HES.

Yesterday, Hess Corp’s implied was at 34.1%. Based on this figure, HES could close between $61.80 and $66.94 till November 29. The upper limit of our price forecast is $1.4 below the 20-DMA. If oil rebounds, HES might move to a $67 level next week. To know more about upstream stocks, read Chesapeake Energy: What’s the Latest Outlook?