Elliott Management to Nominate Five Highly Experienced Executives to the
Board of Hess Corporation
$21.5 Billion Private Investment Firm Urges Strategic and Operational Review
to Drive Shareholder Value
NEW YORK -- January 29, 2013
Elliott Management Corporation (“Elliott”) today sent a letter to shareholders
of Hess Corporation (NYSE: HES) urging them to elect at the Company’s 2013
Annual Meeting the following slate of five independent directors to the Board:
*Rodney F. Chase - Former Deputy Chief Executive, BP plc
*Harvey Golub - Former Chief Executive Officer, American Express Company
*Karl F. Kurz - Former Chief Operating Officer, Anadarko Petroleum
*David McManus - Former Executive Vice President, Pioneer Natural Resources
*Marshall D. Smith - Chief Financial Officer, Ultra Petroleum Corporation
Alternate board nominees are:
*William Berry - Former Executive Vice President, ConocoPhillips Company
*Jonathan R. Macey - Sam Harris Professor of Corporate Law, Corporate
Finance, and Securities Law, Yale Law School
Elliott strongly advocates for Hess to conduct a full strategic and
operational review to consider all pathways to maximize shareholder value
which could include implementing a substantial divestment program with a
potential spinoff of the Bakken asset to refocus its portfolio; improving
operations and accountability; and bringing greater discipline to capital
Elliott, affiliates of which beneficially own 4% of the common stock of Hess
Corporation, is a multi-strategy investment firm with deep experience
investing in public and private companies. Please visit www.reassesshess.com
for more information. Full text of the letter follows:
January 29, 2013
Dear Fellow Shareholder:
We are writing to you on behalf of Elliott Associates, L.P. and Elliott
International, L.P. (together, “Elliott” or “we”), collectively the beneficial
owners of 4% of the common stock^1 of Hess Corporation (“Hess” or the
“Company”). After extensive study and analysis, we are convinced that
tremendous value is trapped inside the Company as a result of poor oversight
by a board of directors lacking both the experience and independence to set a
clear, shareholder-focused, value-creating strategy. As a result, we have
identified and are submitting for election at the Company’s 2013 Annual
Meeting a slate of five independent, highly qualified nominees to join Hess’s
board. The Nominees each bring substantial expertise and deep experience and
were selected specifically for their ability to foster the boardroom dynamics
that are required to unlock the Company’s enormous potential. We believe that
unlocking this trapped value could result in a share price of greater than
$126 per share^2, amounting to upside of over 150%^3, or $26 billion of
enterprise value creation.
Our investment in Hess Corporation is Elliott’s largest initial equity
investment in its more than 35 year history. The size of the position reflects
our conviction that, with proper oversight and guidance from the Shareholder
Nominees, tremendous value can be unlocked. In this letter, we lay out our
thoughts on how the board can reclaim shareholder value by refocusing the
Company. However, our overarching point is this: all of the billions wasted,
all of the operational failures, and all of the opacity stems from one central
problem: the board’s failure to oversee management and hold it accountable for
over a decade of failures.
We note that upon receipt of notification of Elliott’s intention to nominate
directors Hess announced an exit from its refining and terminal business (one
of its numerous distractions, but a financially insignificant step). However,
the problems at the Company go much deeper. By seeking to restructure a minor
business rather than address the larger problem, Hess is highlighting its
inability, on its own, to fix a 17 year history of unrelenting
underperformance. As John Hess himself acknowledges, “you can’t judge [Hess]
on a one-year basis. You have to do it over the long term.” Hess’s dreadful
long term performance speaks for itself. Past words have translated into
inaction or irrelevant actions—which is why new directors are needed for real
Across any time frame and against any reasonable set of comparable companies,
the stock of Hess Corporation has dramatically underperformed. This track
record of woeful shareholder returns relative to peers extends back to the
date on which the current CEO assumed control more than 17 years ago.
John Hess Tenure
17 Years 5-Year 4-Year 3-Year 2-Year 1-Year
Hess 234.7 % (26.1 )% (5.2 )% (12.0 )% (28.0 )% (12.5 )%
Proxy Peers 567.6 % 4.5 % 38.3 % 16.9 % 11.6 % 4.3 %
Over (332.9 ) (30.6 ) (43.5 ) (28.9 ) (39.6 ) (16.8 )
Revised 694.4 % 19.1 % 58.2 % 31.6 % 18.6 % 7.1 %
Over (459.7 ) (45.2 ) (63.4 ) (43.6 ) (46.6 ) (19.6 )
Bakken 236.8 % 979.1 % 171.9 % 42.0 % 3.1 %
Over NA (262.8 ) (984.3 ) (183.9 ) (70.0 ) (15.6 )
Select 5.1 % 51.5 % 30.9 % 16.5 % 7.5 %
Over NA (31.2 ) (56.7 ) (42.9 ) (44.5 ) (20.0 )
Oil & Gas
Exploration 13.0 % 75.4 % 40.0 % 11.0 % 2.4 %
Over NA (39.0 ) (80.6 ) (52.0 ) (38.9 ) (14.9 )
This underperformance is all the more dramatic when considering that: (1) Hess
Corporation’s asset portfolio, unlike its peers’, has minimal exposure to
North American natural gas, the price of which has collapsed over the past
four years; and (2) a legacy position from the 1950’s provided Hess with a
substantial entry into the Williston Basin (“Bakken”), one of the most
productive unconventional plays being drilled today. In light of these
advantages, even shareholder returns in line with peers (which Hess most
certainly did not achieve) would still have constituted inexcusably poor
Underperformance of this magnitude, that is calculated against any reasonable
set of peers, and that exists over any time frame—up to and including the
entire 17 years of John Hess’s term as CEO—demands change in the boardroom.
Who Represents the Interest of 90% of the Shareholders?
The Hess board has the lowest rate of independence, least oil & gas operating
experience, most management directors, and one of the longest tenures of any
of Hess’s peers. While the independent directors on the Hess board are
accomplished in their fields, none (as in zero) have operating experience in
the oil and gas industry. Further, the board is characterized by
extraordinarily long tenures, the average of which is 50% higher than the
average tenure of S&P 500 board members. Finally, many Hess board members have
personal and financial relationships with the Hess family. The confluence of
these dynamics calls into extreme question the ability of this board to
effectively oversee John Hess.
The Company slate that is up for election epitomizes these issues. Of the five
individuals expected to stand for election: no independent director has E&P
operating experience; three directors have served on the board for over 15
years (two for over 20 years); and two are joint executors of the Leon Hess
estate (notably, these two long serving family confidants are a member and
chair of the Hess board’s compensation committee).
Shareholders are frustrated with this lack of oversight and want to hold the
*Shareholders have consistently withheld votes from directors despite there
being no alternative: the last time current directors were up for election
39%, 39%, and 33% of votes^4 were withheld from Nicholas Brady, Thomas
Kean, and Frank Olson, respectively (and this was the 3^rd and 2^nd
consecutive election with greater than 20% of votes withheld against Brady
and Olson, respectively). For context, the average percentage of votes
withheld from directors in the S&P 500 is below 5%.
*Shareholders have also overwhelmingly expressed opposition to Hess’s
staggered board: in the past five years, 90% of non-insider shareholders
have voted for proposals to declassify the board on three separate
*Shareholders recognize that Hess’s compensation policy is structured to
reward mediocrity: support for Hess’s “Say on Pay” ranked 149^th out of
156 Energy Companies and 427^th out of the 450 S&P companies that had “Say
on Pay” votes.
By nominating five highly accomplished executives with substantial expertise
and deep experience, we hope to provide shareholders an alternative to the
poor performance and lack of accountability currently at Hess.
Shareholder Nominees Can Reassess and Refocus Hess
We believe that the Shareholder Nominees will deliver the high-quality,
experienced, and independent business judgment that is desperately needed in
the Company’s boardroom. As a shareholder, we are excited that professionals
of this caliber have stepped forward:
*Rodney Chase (Former Deputy Group Chief Executive, BP): senior executive
experience managing every major business at a global integrated energy
company. Retiring from BP in 2003, he served as CEO of BP America, CEO of
Marketing & Refining, and CEO of E&P.
*Harvey Golub (Former Chairman & Chief Executive Officer, American
Express): substantial experience in finance, operations, and strategic
turnarounds. His refocusing of American Express in the 1990s has been
called “one of the most impressive turnarounds of a large public
corporation in history.”
*Karl Kurz (Former Chief Operating Officer, Anadarko): helped to lead a
major transformation of a large independent E&P. He was instrumental in
building a top-tier exploration capability, instilling capital discipline,
and improving operational focus.
*David McManus (Former Executive Vice President, Pioneer Natural
Resources): substantial experience overseeing international E&P assets,
also served as EVP at BG Group and President of Arco Europe. He oversaw a
widely-hailed value accreting divestiture program of Pioneer’s
international portfolio that has been called “a text book repositioning of
*Mark Smith (Current Senior Vice President & Chief Financial Officer, Ultra
Petroleum): manages lowest cost operator in resource play environment.
Ultra is widely recognized for delivering industry-leading operating
performance and prioritizing profitable growth through cycles. He has
direct experience monetizing infrastructure assets in a tax efficient
manner while maintaining strategic control.
Leaders of this caliber would be a welcome addition to the board of any
company. To Hess, they bring substantial, relevant experience in areas where
the Company sorely lacks counsel and oversight.
What is Hess Corporation and What Are the Problems and Solutions?
What is Hess?
Hess is an incredibly scattered organization. As described in its own 10-K:
“Hess Corporation is a global integrated energy company that operates in two
segments, Exploration and Production (E&P) and Marketing and Refining (M&R).
The E&P segment explores for, develops, produces, purchases, transports and
sells crude oil and natural gas. These exploration and production activities
take place principally in Algeria, Australia, Azerbaijan, Brazil, Brunei,
China, Denmark, Egypt, Equatorial Guinea, France, Ghana, Indonesia, the
Kurdistan region of Iraq, Libya, Malaysia, Norway, Peru, Russia, Thailand, the
United Kingdom and the United States (U.S.). The M&R segment manufactures
refined petroleum products and purchases, markets and trades refined petroleum
products, natural gas and electricity. The Corporation owns 50% of HOVENSA
L.L.C. (HOVENSA), a joint venture in the U.S. Virgin Islands. In January 2012,
HOVENSA announced a decision to shut down its refinery and operate the complex
as an oil storage terminal. The Corporation also operates a refining facility,
terminals, and retail gasoline stations, most of which include convenience
stores that are located on the East Coast of the United States.”
Even this rambling description fails to mention that Hess operates a hedge
fund using shareholder capital, owns an electric generating station, and funds
the development of fuel cell technology.
In our view, the breadth of the Company’s operations makes it difficult to
manage, creates an environment where distracted management make poor
decisions, renders meaningless any attempt to articulate a clear strategy, and
hinders any attempt the board hypothetically might make to hold management
accountable for executing on a strategy, to the extent one existed. From the
outside, it makes the Company challenging to analyze.
Yet, buried within the Company are highly valuable, high-potential assets.
Premier Position in the Bakken
Hess owns one of the most valuable acreage positions in the Bakken, a premier
U.S. resource play. In addition to an extensive review of the substantial well
performance data that are available, Elliott retained W.D. Von Gonten & Co.,
an industry-leading petroleum engineering and geological services firm that is
the recognized expert in unconventional resource play evaluations, to help
analyze the relative value of Hess’s Bakken position to peers such as
Continental and Oasis.
Von Gonten found that Hess’s Bakken asset has a higher per acre value than
Continental and Oasis and that the total value of Hess’s acreage is comparable
to the total value of Continental’s Bakken acreage. This view of the quality
of the Company’s acreage position was supported by anecdotal commentary from
other Bakken-focused operators. In addition to its extraordinarily valuable,
highly coveted Bakken play, the Company has potentially valuable positions in
both the Utica and the Eagle Ford.
Crown Jewel Long-life Oil or Oil-Linked Offshore Assets
Offshore, the Company owns substantial interests in several “crown jewel”
assets, including in the Gulf of Mexico, the North Sea, West Africa, and
Southeast Asia. The substantial majority of these are very long-life assets,
and nearly all are oil or oil-linked. In addition to analyzing publicly
available production data, Elliott used Wood MacKenzie and Rystad data to
build out our valuation of every material asset in Hess’s portfolio. Further
diligence included discussing the assets with publicly traded partners in the
relevant concessions and singling out certain material assets for a further
review by an independent consultant.
We Estimate that the Intrinsic Value of Hess Could Be Up to $126 per share
If managed appropriately, we believe the equity value of Hess could be up to
$126 per share – a massive premium to where the shares currently trade in the
market. But reclaiming this shareholder value requires substantial strategic
Lack of Focus
There are real problems at Hess, and we believe they stem from a lack of focus
and strategy. While over 90% of Hess’s value derives from its E&P operations,
the Company maintains a laundry list of downstream (and out of any stream)
distractions. Simply put: What is an E&P business in 2013 doing in the hedge
fund business? Why does the Company fund fuel cell technology? What is the
strategic purpose of owning an electric generating station?
This lack of focus pervades Hess’s upstream portfolio as well. Hess is in over
20 countries. As John Hess has said: “We have the portfolio of a major, we
have the technical challenges of a major…” But Hess is less than 1/11^th the
size of the majors it lists as its proxy peers. It is 1/23^rd the size of
Exxon and 1/12^th the size of Chevron. By definition, if Hess spreads itself
as broad as a major with a fraction of the resources, it simply does not have
the wherewithal to compete.
Lack of focus leads to poor capital allocation decisions and poor execution.
Hess abounds with examples of both.
Despite Brent oil prices quadrupling over the past decade, Hess has neither
grown its dividend nor repurchased a share of stock. Where has the capital
gone? Wood Mackenzie estimates that in the last five years, Hess destroyed $4
billion of capital through its failed exploration program—more than 20% of the
entire market capitalization of the Company.
Over the last decade Hess described itself as a “high-impact explorer.” The
Company regularly drilled rank exploration wells at 80% to 100% working
interest—counter to the widely followed industry practice of farming out
prospects. Farm-outs accomplish two goals: (1) given the highly speculative
nature of exploration activities, spreading one’s risk is prudent (which would
have been particularly useful for Hess, given the relatively few such bets a
company of its size can place); and (2) perhaps more importantly, explorers
are able to validate their investment thesis in the marketplace. Ignoring
exploration best practices, Hess disregarded the opportunity to learn that the
rest of the industry might not have thought too highly of the holes into which
the Company was pouring billions of dollars of shareholder capital.
Hess’s mismanagement of the Bakken has been striking.
In 2009, contrary to every other operator in the play, the Company embarked on
and persisted with a program of drilling dual lateral wells (a technology
ill-suited to the Bakken). The subsequent well performance was substantially
below industry average.^5 We spoke with several industry executives who
believe this was the result of attempting to bring high-tech, complex drilling
techniques that characterizes deep water exploration into a play that required
a low-cost lean manufacturing approach.
In 2012, the Company’s well costs in the Bakken spiraled out of control. For
the first half of the year, per well drilling and completion costs were $3
million higher per well than industry average (a 30% cost overrun that equates
to over $5.6 billion of value destruction if left unchecked). We have heard
anecdotal reports of firms that owned an interest in Hess acreage going
“non-consent”—that is, passing on the option to participate in Hess-drilled
wells (fairly remarkable given that the Bakken is one of the highest return
shale plays existing today). Senior executives of Bakken-focused players also
noted that they consistently attempt to swap out of Hess-operated wells, even
if into worse acreage, in order to avoid these return-destroying cost
overruns. While the Company may insist well costs are trending down, it is not
clear whether this represents improvement from a very low base or simply the
migration to a much lower cost completion technique (with Hess’s cost
remaining substantially above industry players using those lower cost
Poor execution not only decreases the value of existing assets, but also
squanders the potential of corporate opportunities. In April 2010, as
competitors were focused on assembling positions in the Eagle Ford shale (the
premier liquids resource play in the U.S.), Hess tied its own hands with an
ill-conceived joint venture with unknown ZaZa Energy that was predetermined to
fail. ZaZa was paid by Hess to acquire acreage regardless of cost or quality
and bore no risk for Hess’s capital losses. Two years later, after competitors
had secured extremely valuable Eagle Ford positions, Hess realized its mistake
and attempted to get out of the joint venture. The cumulative monetary loss
was $175 million in cash payments and the forfeiture of over 60,000 acres in
the Eagle Ford. Further, there is still ongoing litigation related to this
transaction, as Hess paid lease brokers for acreage that was never delivered
(bespeaking lack of capital controls). But much worse is the foregone
multi-billion dollar opportunity that Hess’s competitors were able to seize.
Lack of Focus is Recurring
The point is not whether the Company has modestly reduced its exploration
program, halted using dual lateral wells in the Bakken, or determined to avoid
future contracting failures such as the ZaZa JV. The point is that lack of
focus is a chronic issue at Hess that remains unchecked by the board.
In short: history will continue to repeat itself at Hess if action is not
In April 2003 Hess management told shareholders that the Hess exploration
program would focus on deepwater Gulf of Mexico, West Africa, and Southeast
Asia. Over the next decade, Hess poured capital and management time into
exploration in Australia, Brazil, China, Colombia, Egypt, France, Kurdistan,
Libya, and Peru with the value-destroying results detailed above by Wood
Again, in November 2012, Hess management apologized to shareholders for a
“strategy that didn’t work” and explained it had “shifted our exploration
strategy” to three primary focus areas: Gulf of Mexico, West Africa, and
Asia-Pacific—exactly what we were told a decade ago. This time Hess management
team went further and said they would no longer drill 80% to 100% working
interest wells and instead would act in accordance with the industry’s
widely-followed risk management practice of farming out prospects described
above. Only ten seconds later, Hess management was enthusiastically talking
about seeing “lots of hydrocarbons” in Kurdistan where it would drill 85%
working interest wells. Two months later, Hess management reached an agreement
to increase their exposure to Paris Basin exploration to an 85% working
What is occurring here? Neither France nor Kurdistan is in the “focus areas”
and both are being drilled at 85% working interest. Where is the
accountability for broken promises to shareholders?
When Hess learned of our intention to nominate directors, they responded with
yet more promises. Are we now to believe that a hastily announced exit from
its refining and terminal businesses is a credible commitment to refocusing
Hess’s Configuration of Assets Results in Market Penalties and Management
In all industries the market penalizes lack of focus and strategy and rewards
clear focus and execution—E&P is no different. Given the history of mishaps,
it is no wonder that analysts write about “investor skepticism” and “loss of
confidence” in Hess management execution.
But the discount the market applies to Hess goes deeper.
Bakken operators trade at substantially higher cash flow multiples than
large-cap internationals.^6 The average Bakken pure play trades at 8.4x versus
4.3x for large-cap internationals—nearly a 100% higher multiple.
Hess, a mix of both, trades at a shocking 3.0x. Why?
Bakken operators have high capital intensity and material free cash flow
gaps—two operating realities of resource plays in the early stages of their
development. Investors in Bakken pure plays are comfortable with capital
intensity and manageable cash flow gaps, because there is a high level of
transparency as to where the capital is going and its expected return.
Conversely, investors in large-cap internationals penalize capital intensity
and cash flow gaps as indicators of risk and lack of capital control.
Rather than receiving a blended multiple, Hess is penalized twice:
*Penalty #1: Hess is grouped with other large cap internationals and thus
does not get credit for its Bakken asset.
*Penalty #2: Hess gets a lower multiple than its large-cap international
peers due to its capital intensity and cash flow gap (which in part are
due to its Bakken operations). We believe the lack of confidence in
management further pressures Hess’s multiple.
The double penalty is exacerbated by the fact that 20 out of the 22 Wall
Street analysts that cover Hess primarily cover large cap internationals. Only
two analysts also cover Bakken operators, and it is no coincidence that these
two analysts have a 40% higher average price target for Hess.
By separating Hess into Hess Resource Co. and Hess International, the Company
has a tremendous opportunity to receive multiple expansion on both portions of
Perception is not the only challenge presented by Hess’s combination of these
types of assets. Resource plays and conventional offshore assets also require
very different management capabilities to be successful. Successful resource
play operators have a maniacal focus on cost; a $100,000 cost overrun on a
well, repeated 1,000 times on each well across the entire play, can have a
substantial impact on overall returns. Conversely, the fact that offshore
basins require substantially fewer wells, combined with fiscal regimes that
often offer advantageous recoupment of capital outlays, make the economics of
deep water oil extraction surprisingly insensitive to cost overruns. The
conflicting management requirements of resource plays and deep water basins
makes managing both businesses in the same company quite challenging.
We believe Hess’s illogical, difficult to value configuration of assets is
evidence of a lack of focus that breeds poor execution, encourages appalling
capital allocation, and results in perpetual undervaluation by the market.
Hess requires a thorough restructuring that realigns its current multitude of
businesses and assets into manageable, focused enterprises. To that end, we
believe the Hess board should:
1. Spin off the Bakken along with the Eagle Ford and Utica acreage
2. Divest downstream assets and monetize resource play infrastructure
3. Streamline the remaining international portfolio
Spin off the Bakken—Creating Hess Resource Co.
Buried within Hess Corporation is one of the premier U.S. resource play
focused companies. Similar to Continental, Pioneer, Range, and Cabot, and
based solely on its existing asset base, Hess Resource Co. would have a
substantial position in a major U.S. resource play along with strong secondary
positions (in Hess’s case the Eagle Ford and Utica).
Instead of being anchored by the low multiple associated with large-cap
internationals, Hess Resource Co. would receive the high multiple that is a
product of NAV-based valuation that fully takes into account undeveloped
acreage—as the market is well informed on the value of the Bakken, Eagle Ford,
We estimate that a spin-off of Hess Resource Co. could create over $28 per
share of additional value for Hess Corporation shareholders—a nearly 60%
increase in the Company’s stock.
Divest Downstream Distractions and Monetize Midstream Assets
Hess Corporation capital is tied up in a multitude of businesses it should
exit: Hedge Funds, Electric Generation, Retail & Marketing, Distribution,
Refining, and others. In addition, Hess has poured over $1 billion of
shareholder capital into midstream assets around its Bakken acreage when there
are numerous lower cost of capital alternatives that would allow Hess to
maintain strategic control.
By divesting out of downstream and tax efficiently monetizing midstream assets
through MLP or REIT structures, Hess Corporation could release up to $5.5
billion of capital that could be returned to shareholders. We estimate that
carrying out such transactions would create over $11 per share of additional
value for shareholders—over a 20% impact on the stock price. In addition, we
believe the market would give Hess a higher overall multiple as confidence was
gained that management was credibly focusing on its most valuable assets and
Streamline Hess International
As a result of the spin-off of Hess Resource Co. and the divestment and
monetization of downstream and midstream, respectively, we believe Hess
International would emerge as a marquee collection of long-life oil (or
oil-linked) assets. We believe the reduced capital intensity and positive free
cash flow would result in the market assigning a substantially higher multiple
more akin to Hess’s New York and London listed peers, resulting in over $36
per share of additional value to Hess Corporation shareholders—over a 70%
increase in shareholder value.
We Believe that Refocusing Hess Could Create Over $76 per Share of Additional
Value = Over 150% Upside
Creating separate enterprises that can transparently execute against specific
strategies will reclaim decades of lost shareholder value. Focus, execution,
and accountability are powerful tenets of enterprise. They are needed at Hess.
Elliott Looks Forward to Introducing the Shareholder Nominees to the Owners of
The ideas set out above are the result of substantial investigation and
analysis by Elliott and reflect our thoughts on the most promising path to
maximize shareholder value. Our belief in the potential of Hess is
demonstrated by the substantial investment we have made in the Company’s
While this letter presents Elliott’s perspectives, Shareholder Nominees will
form their own, independent views on the Company, its assets, and its
strategy. These five accomplished individuals bring deep knowledge and
experience in areas that are severely lacking in the existing board. We look
forward to introducing them to the shareholders in the weeks and months ahead.
John Pike Quentin Koffey
Elliott Associates, L.P. and Elliott International, L.P. (“Elliott”) intend to
make a filing with the Securities and Exchange Commission of a proxy statement
and an accompanying proxy card to be used to solicit proxies in connection
with the 2013 Annual Meeting of Stockholders (including any adjournments or
postponements thereof or any special meeting that may be called in lieu
thereof) (the “2013 Annual Meeting”) of Hess Corporation (the “Company”).
Information relating to the participants in such proxy solicitation has been
included in materials filed on January , 2013 by Elliott with the
Securities and Exchange Commission pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934, as amended. Stockholders are advised to read
the definitive proxy statement and other documents related to the solicitation
of stockholders of the Company for use at the 2013 Annual Meeting when they
become available because they will contain important information, including
additional information relating to the participants in such proxy
solicitation. When completed and available, Elliott's definitive proxy
statement and a form of proxy will be mailed to stockholders of the Company.
These materials and other materials filed by Elliott in connection with the
solicitation of proxies will be available at no charge at the Securities and
Exchange Commission's website at www.sec.gov. The definitive proxy statement
(when available) and other relevant documents filed by Elliott with the
Securities and Exchange Commission will also be available, without charge, by
directing a request to Elliott’s proxy solicitor, Okapi Partners, at its
toll-free number (877) 796-5274 or via email at email@example.com.
Cautionary Statement Regarding Forward-Looking Statements
The information herein contains “forward-looking statements.” Specific
forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts and include, without
limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,”
“plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could” or
the negative of such terms or other variations on such terms or comparable
terminology. Similarly, statements that describe our objectives, plans or
goals are forward-looking. Our forward-looking statements are based on our
current intent, belief, expectations, estimates and projections regarding the
Company and projections regarding the industry in which it operates. These
statements are not guarantees of future performance and involve risks,
uncertainties, assumptions and other factors that are difficult to predict and
that could cause actual results to differ materially. Accordingly, you should
not rely upon forward-looking statements as a prediction of actual results and
actual results may vary materially from what is expressed in or indicated by
the forward-looking statements.
About Elliott Associates
Elliott Associates, L.P. and its sister fund, Elliott International, L.P. have
more than $21 billion of capital under management. Founded in 1977, Elliott is
one of the oldest hedge funds under continuous management. The Elliott funds'
investors include large institutions, high-net-worth individuals and families,
and employees of the firm.
^1 Elliott beneficially owns 13.76 million shares. Ownership percentage based
on September 2012 10-Q share count of 341,547,049.
^2 Together with this letter we are today making available to Hess
shareholders a presentation that explains and supports in greater detail the
points we set out below, including the sources for our statements and
analysis. That presentation, and all materials that we distribute to Hess
shareholders, will be available at our website www.ReassessHess.com. We
encourage all shareholders to review these materials.
^3 All percentages of stock price are calculated as of November 28, 2012—the
date before which Elliott began to purchase a substantial amount of Hess
^4 Percentage of votes withheld; Hess estate is assumed to have voted for
nominees and is excluded from calculation.
^5 Elliott estimate based on public well data from North Dakota Industrial
^6 Bakken operators receive a higher EBITDA multiple because they are
generally valued on a NAV basis that takes into account their substantial
undeveloped acreage: analysts and investors model out a drilling plan based on
single well economics. The repeatability of the drilling process (in the right
play and with the right operator) lends itself to such a valuation technique.
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