Hess Parts With Indonesian Assets For $1.3 Billion

Purchased assets offshore Indonesia producing 15,000 BOE/d net in the first three quarters of 2013.

Hess Corp. (NYSE: HES) continued its blistering 2013 sales, parting with assets located off the shore of Indonesia for total after-tax proceeds of $1.3 billion, the company said Dec. 2.

For months Hess has been running a de facto asset mart, and as of November had closed $6.5 billion in asset sales -- not including the Indonesia sale. Other assets remain, including its Thailand holdings that Tudor, Pickering, Holt and Co. value at about $600 million.

In the latest deal, Hess entered into separate agreements to sell its interests in the Pangkah and Natuna A assets to a joint venture between PT Pertamina and PTT Exploration and Production Co. Ltd.

Hess’ two assets produced an average of 15,000 barrels of oil equivalent per day (BOE/d) net to Hess in the first three quarters of 2013.

Hess will use the proceeds from the sale to continue repurchasing shares under its existing $4 billion authorization.

Hess has an additional 16-17 MBOE/d of assets remaining on the market in Southeast Asia. Total proceeds could exceed Global Hunter Securities’ estimate of $2 billion, said Sameer Uplenchwar, a senior analyst.

Hess’ history in Pangkah traces back to 1996, when the company also began exploration and production of oil and gas fields in the Gulf of Mexico and North Sea. Hess had a 75% working interested in the Pangkah PSC, located off the northeast cost of Java. It is operated by Hess under the Pangkah Production Sharing Contract with the Indonesian government. Pangkah began producing gas in 2007, supplying power-generation needs in the region.

Also sold was the Natuna Sea Project gas field in West Natuna Sea near the Malaysian/Indonesian border. It has production of 220 MMcf/d of gas and 2,350 barrels of oil per day.

PTTEP expects to close the Natuna Sea A Project purchase within the year and the Pangkah Project in the first quarter of 2014.

The Pangkah Project in the East Java Sea produces 7,000 barrels of liquids per day, 33 million cubic feet per day (MMcf/d) of gas and has proved and probable reserves of 110 MMBOE.

“We see this as a positive in the near term as the proceeds will be used toward buybacks, which should create a floor on the stock price,” Uplenchwar said. “With HES in the last innings of the asset sale program, we see the stock as more defensive than offensive at current levels.

Hess finalized its last major deal in November, completing the sale of its energy marketing business to Direct Energy for total consideration of $1.2 billion. The energy marketing business supplies natural gas and electricity to 23,000 commercial, industrial and small-business customers in the eastern half of the United States.

For the company to perform better in the eyes of analysts, though, Hess needs to deliver on its production growth targets in 2014 and beyond in the Bakken, Utica and Gulf of Mexico, Uplenchwar said.

“Considering the company's choppy operating history, we are taking a wait-and-watch approach,” he said.