NEW YORK -- Hess Corp.--exiting the downstream refining, transportation and retail business--has enlisted Goldman Sachs Group Inc. to sell its gas station network as the oil company moves to reshape itself into a pure exploration-and-production (E&P) company, people familiar with the matter told The Wall Street Journal.
Hess had been moving down that path in recent years, and hedge fund Elliott Management Corp. earlier this year pressed for such exits in a contentious battle over the company's board.
Hess has approximately 1,360 stations spread among several East Coast states. More than 90% of the stores are company-operated and include convenience stores.
As reported in a Raymond James/CSP Daily News flash on Tuesday, the company is seeking a price in the low single-digit billions for its gas stations, one of the people told the Journal.
Analyst estimates of the chain's value vary widely, the report said. Credit Suisse Group analysts said in a recent report that they value the stores at $2.5 billion but that the chain has the potential to be worth as much as $3.4 billion. Meanwhile, Morningstar Inc. analyst Stephen Simko values the business at up to about $1.2 billion.
Hess said in February that it would divest its stations as part of a broad restructuring of its business, but did not specify whether it would do so by selling them or possibly by spinning them out into a separate business, as competitor Valero Energy Corp. did recently with its retail unit, now a separate publicly traded company called CST Brands Inc.
Despite hiring Goldman to look for a buyer for the gas stations, Hess may still choose to pursue a spinoff, the people familiar with the matter said.
In mid-June. Hess. Corp. agreed to acquire the 56% interest in Winston-Salem, N.C.-based convenience store and travel plaza operator WilcoHess LLC it did not already hold from A.T. Williams Oil Co. "We believe that the agreement will enable Hess to continue its divestiture of the downstream business in a way that maximizes value for shareholders," he told CSP Daily News. It tied up the Hess retail offering in a neater package, he said.
Meanwhile, the company had a July 2 deadline for interested parties to submit bids for its 19-East Coast terminal network (as well as two in the Caribbean). Hess is hoping to get about $1 billion for these assets, according to a Motley Fool report that cited Marathon Petroleum Corp. (MPC), Sunoco Logistics and Buckeye Partners as potential bidders.
Marathon does have a very large terminal and transportation business that includes 65 terminals in the Midwest and Southeast. Adding Hess' terminals would enable the company to expand its footprint to the East and to expand its Speedway retail brand. "However, the company does have a lot on its plate this year with several significant capital projects in the works," said Matt DiLallo. "Unless the price is right, Hess' terminals don't make a whole lot of sense here."
(Click here to read the full Motley Fool report.)
The Goldman Sachs Group is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 1869, the firm is based in New York.
Woodbridge, N.J.-based Hess is a leading global independent energy company primarily engaged in the exploration and production of crude oil and natural gas and the marketing of refined petroleum products, natural gas and electricity. Hess is a major independent gasoline-convenience store retailers on the East Coast with more than 1,350 retail outlets in 16 East Coast states.
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