Hess Corp. agreed to sell Russian subsidiary Samara-Nafta to OAO Lukoil for $2.05 billion in the biggest divestiture ever by the New York-based oil explorer.
Hess expects proceeds of $1.8 billion for its 90 percent stake in Samara-Nafta, the company said in a statement today. The transaction brings the combined after-tax value of assets Hess has agreed to sell this year to $3.4 billion.
Hess has been selling oil fields, storage terminals and other assets from Texas to the North Sea as Chairman and Chief Executive Officer John Hess narrows the company’s focus to crude exploration and production. The actions by the son of founder Leon Hess come as the company faces pressure from activist shareholder Elliott Management Corp. to spin off or sell assets and replace board members.
The sale “is another positive step in their restructuring,” Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis, said in a phone interview today. “The company is focused on becoming smaller and more nimble. It was too far-flung around the world.”
Hess rose 2.7 percent to $73.54 at the close in New York. The shares have increased 39 percent this year.
Hess acquired its stake in Samara-Nafta when it bought a 65 percent interest in Trabant Holdings International for $25 million in 2005. The sale announced today is the largest ever for Hess, according to data compiled by Bloomberg.
The company, which has been criticized by Paul Singer’s Elliott Management for “unrelenting underperformance,” has also announced plans to sell its gasoline stations and terminals business and exit energy trading. Elliot Sloane, an Elliott Management spokesman who works for Sloane & Co., had no comment on the announcement.
Simon Kukes, holder of the other 10 percent of Samara-Nafta, has also agreed to sell to Lukoil, Jon Pepper, a spokesman for Hess, said in an e-mail.
Lukoil fell 1.3 percent to 1,976.60 rubles at the close of trading in Moscow. The company is seeking to expand and increase production after halting oil output declines last year. It won a state auction to tap Siberia’s Imilor field and is developing assets in Russia’s Caspian Sea.
Samara-Nafta produces the equivalent of about 50,000 barrels of crude a day, according to a statement from Moscow-based Lukoil. The purchase price amounts to $3.40 a barrel of reserves, based on Russian parameters, and the deal requires approval from the nation’s anti-monopoly agency, Lukoil said.
“We have acquired a quality asset with long-term growth potential in a region that has some of the most highly developed infrastructure in the country,” Vagit Alekperov, CEO of Lukoil and its largest shareholder, said in the statement.
“The price seems a bit high and reflects Lukoil’s desperate search for new assets,” Ildar Davletshin, a Moscow-based oil and gas analyst at Renaissance Capital Ltd., said in a phone interview. A large number of the company’s fields have tax breaks as they are depleted and high viscosity, he said.