DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

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HESS CORPORATION

(Name of Registrant as Specified in Its Charter)

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DELIVERING SHAREHOLDER VALUE
APRIL  2013


Forward-Looking Statements and Other Information
2
This presentation contains projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These projections and statements reflect the Company’s current views with respect to
future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be
achieved, and actual results could differ materially from those projected as a result of certain risk factors. A discussion of these risk factors is
included in the Company’s periodic reports filed with the Securities and Exchange Commission.
We use certain terms in this presentation relating to reserves other than proved, such as unproved resources.  Investors are urged to consider
closely the disclosure relating to proved reserves in Hess’
Form 10-K, File No.1-1204, available from Hess Corporation, 1185 Avenue of the
Americas, New York, New York 10036 c/o Corporate Secretary and on our website at www.hess.com.  You can also obtain this form from the
SEC on the EDGAR system.
Important
Additional
Information
Hess Corporation, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from Hess
shareholders in connection with the matters to be considered at Hess’s 2013 Annual Meeting. Hess has filed a definitive proxy statement and
form of WHITE proxy card with the U.S. Securities and Exchange Commission in connection with the 2013 Annual Meeting. HESS
SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY STATEMENT AND ACCOMPANYING WHITE
PROXY
CARD
AS
THEY
CONTAIN
IMPORTANT
INFORMATION
Information
regarding
the
identity
of
potential
participants,
and
their
direct
or
indirect
interests,
by
security
holdings
or
otherwise,
is
set
forth
in
the
proxy
statement
and
other
materials
filed
with
the
SEC.
Shareholders
will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by Hess with the
SEC for no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at Hess’s website at www.hess.com, by
writing to Hess Corporation at 1185 Avenue of the Americas, New York, NY 10036, by calling Hess’s proxy solicitor, MacKenzie Partners, toll-
free at (800) 322-2885 or by email at hess@mackenziepartners.com.
This document contains quotes and excerpts from certain previously published material.  Consent of the author and publication has not been
obtained to use the material as proxy soliciting material.
.


THE HESS VALUE PROPOSITION
3


Culmination of Our Transformation:
A Focused Pure Play E&P Company
Pure Play E&P Company
Focused, higher growth, lower risk portfolio
Divest Indonesia and Thailand
Pursue monetization of Bakken midstream assets (2015)
Exit Downstream
Divest Retail
Divest Energy Marketing
Divest Energy Trading (Hetco)
Return Capital to Shareholders and Retain Financial Flexibility to Fund Growth
Increase annual dividend by 150% to $1.00 per share, effective in the third quarter of 2013
Authorize share repurchase program of up to $4.0 billion
Additional share repurchases from the monetization of Bakken midstream assets
The Right Board to Drive Shareholder Value
Six new world class independent Directors with the right mix of corporate leadership,
operational and financial expertise, and top level E&P experience
4
These actions are the culmination of our transformation
into a focused, higher growth, lower risk, pure play E&P company


Culmination of Strategic Transformation
5
Phase I
Phase II
Phase III
5-YEAR TRANSFORMATION
Jan 1, 2010
July 25, 2012
March 4, 2013
Announced three-prong strategy
Reduced spending
Additional asset sales
Indonesia
Thailand
Bakken midstream monetization
Additional reduction in capital
expenditures and exploration spend
Bakken (added 250,000 net acres)
Utica (added 185,000 net acres)
Swapped for and acquired additional
Valhall equity (Norway) for non-core Clair
(UK) & Gabon assets
Asset sales ($1.7 billion)
Closed HOVENSA joint venture refinery
in St. Croix, U.S. Virgin Islands
Exited refining with closure of Port
Reading refinery
Selling terminal network
Complete exit of downstream
Retail
Energy Marketing
Energy Trading (Hetco)
Management’s continued commitment to reshaping HES’s portfolio has driven an impressive turnaround.
Capital One, January 29, 2013
Integrated Oil
Company
Pure Play E&P
Company
5-Year 5-8% CAGR
on Production
(2012 Pro Forma -
2017)
Mid-Teens Aggregate
Production Growth
(2012 Pro Forma -
2014)
Jambi Merang
UK Gas Assets
Snorre
Cook and Maclure
Snohvit
Schiehallion
Bittern
Shale
Exploitation
Focused exploration
Beryl
Azerbaijan
Eagle Ford
Russia
Upstream capex down 17% in 2013
Exploration spending down 29% in 2013
Additional asset sales ($1.5 billion)
Sales in progress


The Market Recognizes That Our Plan is Working
6
Source: Bloomberg
Note: Share price performance from 24-Jul-2012 (business day prior to 25-Jul-2012 strategy articulation) through 25-Jan-2013 (business day prior to the announcement of the planned divestiture of terminal
network and Elliott's position).
Hess’
share price increased 34%, outperforming all proxy peers, from our July 25, 2012 strategy update
to the last trading day before the announcement of the planned sale of our terminal network
E&P Proxy Peers
E&P Proxy Peers Median: 12%
Integrated Proxy Peers Median: 9.5%
Integrated Proxy Peers
We believe the companywide transition that began in 2009 is creating a more predictable/profitable growth
model…The company is making solid progress in building a focused portfolio of long life, high return assets
by leveraging its global scale and capability.
Dahlman Rose, December 11, 2012


HESS:
A PURE PLAY E&P COMPANY
7


Hess:
A Pure Play E&P Company Driving Shareholder Value
Focused Portfolio
78% of reserves and 84% of production in five key areas
Higher Growth, Lower Risk
5-year
5-8%
CAGR
on
production
(2012
pro
forma
2017)
Mid-teens
aggregate
production
growth
(2012
pro
forma
2014)
Growth
driven
by
Bakken,
Valhall,
Tubular
Bells,
and
North
Malay
Basin
Levered to Oil Prices
Highest percentage (79%) of proved reserves that are liquids based among our peers
Estimated 85% of 2013 pro forma crude oil production is Brent linked
Technical Breadth, Cost Efficient, Globally Capable
Among the leaders in drilling and completion costs in the Bakken
Global operator, selected by leading oil & gas companies and host governments on major projects
Returning Capital to Shareholders, Retaining Financial Flexibility, and
Allocating Capital Efficiently
Increasing annual dividend
Share repurchase program funded by asset sales
Financial flexibility to fund lower risk reserve and production growth and drive shareholder value
The Right Board to Drive Shareholder Value
Hess’
management and Board of Directors have built the Company’s world class asset portfolio and led the strategic
transformation that has been delivering shareholder value
To
lead
the
transformed
Hess
forward
we
are
adding
six
new
world
class
independent
Directors
with
the
right
mix
of
corporate leadership, operational and financial expertise, and top level E&P experience
8
1
2
3
4
5
6


E&P Portfolio Focused on Five Key Areas
9
¹
Snohvit field, Schiehallion, Azerbaijan assets, Russia subsidiary (Samara Nafta), Eagle Ford, Bittern, Beryl area, Indonesia and Thailand assets assumed sold as of January 1, 2012. 
1
78% of Reserves / 84% of Production
Equatorial
Guinea
17% Prod.
5% Res.
Valhall /
South Arne
8% Prod.
28% Res.
JDA
17% Prod.
11% Res.
Deepwater
Gulf of Mexico
23% Prod.
11% Res.
Bakken
19% Prod.
23% Res.
Pro Forma Metrics¹
2012A Production (MBoe/d)
289
2012A Reserves (MMBoe)
1,310
2013E Production (MBoe/d)
290 –
305
Utica
Ghana
North Malay
Basin
Near Term Growth Areas
Longer Term Growth Areas
Tubular Bells


A Higher Growth, Lower Risk
Portfolio to Deliver Results
10
2
BAKKEN SHALE
A leading acreage position in the premier United States shale oil play
Estimated
production
of
64
70
MBoe/d
in
2013
(up
15
25%
from
2012)
Goal of net production ~120 MBoe/d by mid-decade
VALHALL FIELD
(NORWAY)
Hess
64%
W.I.
with
net
production
24
28
MBoe/d
in
2013
Goal of net production ~75 MBoe/d
Redevelopment
complete
in
Q1
2013
and
multi-year
drilling
program
to
commence
in
2013
TUBULAR BELLS
(GULF OF MEXICO)
Hess 57% W.I. and operator with first production targeted in 2014
Anticipated peak annual net production rate of ~25 MBoe/d
NORTH MALAY BASIN
Hess 50% W.I. and operator with first production of ~40 MMcf/d targeted in Q4 2013
Goal of net production ~125 MMcf/d
Gas production linked to fuel oil price in Singapore with PSC through 2033
UTICA SHALE
Attractive position in emerging unconventional play
Focus in 2013 on delineation of our acreage with ~30 wells planned
GHANA
Seven
discoveries
to
date,
including
Pecan
and
Pecan
North
announced
in
Q4
2012
and Q1 2013
Hess 90% W.I. and operator
Company
to
submit
an
appraisal
plan
to
the
Ghanaian
government
for
approval
on
or
before
June
2013.
In
parallel,
Hess
has
begun
pre-development
studies
on
the
block 
5-Year
5-8%
CAGR
on
Production
(2012
Pro
Forma
2017)
Pro Forma for Announced Asset Sales Cash Margin Expected to Increase by $5 per Boe


The Leading Oil-Linked Asset Base
11
Source:  SEC filings, company annual reports, and company press releases
Note:
Percentage
of
reserves
that
are
liquids
based
for
peers
calculated
as
per
2012
year-end
SEC
filings.
TLM
is
calculated
as
per
its
2011
annual
report,
pro
forma
for
the
sale
in
2012
of
a
49%
stake
in
its
UK
North
Sea
business.
3


Hess: Driving Performance in the Bakken
12
Reducing Bakken Well Costs…
Source: NDIC Database at 1/24/13
…While Increasing Bakken Production
Hess Completed 10 of the Top 25 Wells in the Bakken in 2012
4
45
36
34
33
31
32
29
28
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
$ 5
$ 5
$ 6
$ 6
$ 6
$ 6
$ 6
$ 5
$ 5
$ 5
$ 5
$ 5
$ 8
$ 8
$ 7
$ 6
$ 5
$ 5
$ 4
$ 5
$ 4
$ 4
$ 4
$ 4
$ 13
$ 13
$
$ 12
$ 11
$ 11
$ 10
$ 10
$ 9
$ 9
$ 9
$ 9
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2012 Drilling & Completion Costs ($mm)
Drilling Costs
Completion Costs
13
0
200
400
600
800
1000
1200
1400
1600
Hess Wells
Peer Wells
5
6
7
9
9
10
11
12
12
14
16
18
25
25
32
38
42
55
62
64
Net Daily Production (Mboe/d)
Drilling Performance: Spud-to-Spud Days
30-Day Initial Production Rate


Hess Has Reduced Well Costs by 30% in 2012
13
Source:
Bakken
drilling
and
completion
cost
data
for
Hess
represents
actual
Q4
2012
drilling
and
completion
costs
per
well.
Peer
costs
represent
peer
estimated
Q4
2012
pre-drill
costs
provided
to
Hess
for
wells
where
Hess
has
an
ownership
interest
but
is
not
an
operator.
Peer
groups
based
on
a
weighted
average
of
well
costs
based
on
total
number
of
wells
balloted.
Proxy
Peers
include
XOM/XTO,
STL/BEXP,
COP,
OXY,
and
EOG.
Bakken
Pure
Play
Peers
include
CLR,
OAS,
and
KOG.
4
2012 Q4 Bakken Drilling & Completion Costs ($mm / well)
…Hess is increasingly demonstrating it can deliver results that are competitive with other leading Bakken
companies.
Goldman Sachs, January 30, 2013
$ 10.0
$ 9.4
$ 9.0
Proxy Peers
Bakken
Pure Play Peers
Hess
2012 Q4


Technical Breadth, Cost Efficient,
and Globally Capable
Chosen by leading international oil companies, national
oil companies, and host governments to operate major
new oil & gas developments
Chevron endorsed Hess as operator of the $2.3 billion
Tubular Bells offshore deep water Gulf of Mexico development
PETRONAS selected Hess as operator of the $2.9 billion
North Malay Basin offshore development
Realizing synergies from the transfer of technical skills
and operating capabilities globally
Bakken
hydraulic
fracturing
expertise
utilized
in
Malaysia/Thailand
Joint Development Area
Managed pressure drilling and geo-steering experience in
South Arne (Denmark) utilized in Utica shale play
Gulf
of
Mexico
deep
water
expertise
has
driven
Hess’
recent
drilling success in Ghana and Equatorial Guinea
High pressure and high temperature experience in Gulf of Mexico
is being deployed in the North Malay Basin and other international
assets
14
4


Returning Capital to Shareholders, Retaining
Financial Flexibility, and Allocating Capital Efficiently
Returning capital to shareholders
Increased common stock dividend 150% to $1.00 per share annually, effective third quarter of
2013
Authorized share repurchase program of up to $4.0 billion
Actual amount and timing of share repurchases dependent upon proceeds from divestiture program
We expect to return additional capital to shareholders as a result of monetizing the Bakken
midstream assets, expected 2015
Retaining financial flexibility to fund future growth
Initial portion of the divestiture proceeds will be used to pay down short term debt, provide a
cash cushion of an additional $1.0 billion against future commodity price volatility, and fund the
development of our focused growth projects
Allocating capital efficiently
Capital investments focused on higher growth, lower risk assets
Substantial reductions in capital and exploration expenditures
Upstream capital expenditures down 17% in 2013
Exploration spending down 29% in 2013
Further decrease in capital expenditures planned in 2014
Additional cost reduction program underway
15
5


DR.
KEVIN
MEYERS
-
59
Former Senior Vice President of E&P for the Americas, ConocoPhillips
The Right Board to Drive Shareholder Value
We
have
identified
a
team
of
outstanding
and
experienced
leaders
with
substantial
E&P
and business experience to help execute the next phase of our value plan
JOHN
KRENICKI
JR.
-
50
Former Vice Chairman of GE; President and Chief Executive Officer of GE Energy
JAMES
H.
QUIGLEY
-
61
Former Chief Executive Officer, Deloitte
6
16
Mr. Krenicki recently joined private equity firm Clayton, Dubilier & Rice in 2013 after 29 years in senior leadership roles at GE, including as Vice Chairman.  While
leader of GE Energy, the unit doubled in size and profitability and became GE's largest business – with revenue increasing from $22 billion in 2005 to over $50
billion in 2012.  His responsibilities included oversight of GE’s Oil & Gas, Power & Water, and Energy management businesses, which employ more than 100,000
people in over 165 countries.  Mr. Krenicki is one of America's top corporate executives with a strong track record of success, experience, and leadership in
operations, oil and gas, and energy. His experience leading large scale initiatives and operations across a global energy portfolio will add important
perspective to the Hess Board as the Company completes its transformation to a pure play E&P company.
Mr. Quigley led Deloitte, one of the world's largest accounting and consulting firms.  During his 38 years at Deloitte, he was a trusted consultant on strategic
leadership and operating matters to senior management teams of multinational companies across industries.  As CEO, he was responsible for the consulting,
tax, audit, and financial advisory practices of Deloitte, and as an advisor and consultant, helped guide major strategic initiatives at many companies.  In 2012,
Mr. Quigley was named Trustee of the International Financial Reporting Standards (IFRS) Foundation, the oversight body of the International Accounting
Standards Board (IASB).  He will bring to the Hess Board significant global leadership experience and knowledge of financial, tax and regulatory
matters that are relevant to Hess operations.
Dr. Meyers ran Exploration and Production in the Americas for ConocoPhillips, where he oversaw 6,000 employees and a $6 billion annual capital program, and
was responsible for reorganizing and driving business value in the Americas E&P portfolio.  Dr. Meyers drove the reconfiguration of the company’s upstream
portfolio in North America, divesting $6 billion of low growth, low margin assets and focusing capital into emerging shale plays. He spearheaded the company's
development of the Eagle Ford, moving it from exploration to a twelve-rig development program in under a year, and increased investment in both the Permian
Basin and the Bakken.  Dr. Meyers has over 30 years of experience in exploration and production, both domestic and international.  Based on this experience,
Dr. Meyers will bring to the Hess Board decades of managing cost-efficient E&P operations in geographies directly relevant to Hess’ focused E&P
portfolio.


The Right Board to Drive Shareholder Value
6
We
have
identified
a
team
of
outstanding
and
experienced
leaders
with
substantial
E&P
and business experience to help execute the next phase of our value plan
17
Former Executive Vice President and Chief Financial Officer, CBS
Corporation
Former Chief Operating Officer, TNK-BP Russia
Former Executive Committee Member, Royal Dutch Shell
Dr. Williams worked for over 30 years at Shell, including more than 17 years in Shell’s E&P and upstream business, serving most recently as a member
of the Executive Committee of Royal Dutch Shell, where he was of the top three operating executives collectively responsible for all strategic, capital,
and operational matters.  Most recently, as Downstream Director, Dr. Williams oversaw $400 billion in revenues and approximately 55,000 people,
generating $5.3 billion in profit annually, and redirected a $6 billion annual investment into the higher growth markets of China and Brazil, while
strengthening Shell’s position in key hubs in the U.S. Gulf Coast and Singapore.  His experience as part of an executive group with ultimate
strategic responsibilities for the overall direction of one of the world’s largest oil & gas companies will add invaluable insight to Hess’ Board.
FREDRIC
REYNOLDS
-
62
WILLIAM
SCHRADER
-
55
DR.
MARK
WILLIAMS
-
61
Mr. Reynolds was Executive Vice President and Chief Financial Officer of CBS Corporation and its predecessors from January 1994 until his retirement
in August 2009.  While at CBS, Mr. Reynolds managed the company's transformation, beginning with the acquisition by Westinghouse of CBS in 1995,
followed by the Viacom-CBS merger of 2000 and the subsequent spin-out of MTV Networks, since renamed Viacom.  During his tenure as CFO of CBS,
shareholders experienced substantial share appreciation and return of capital.  Mr. Reynolds is also the lead independent director at AOL Inc. 
Mr. Reynolds will bring to the Hess Board his substantial experience as a CFO with a successful track record of financial oversight, leading a
successful transformation, returning capital, and delivering long term returns.
Mr. Schrader was a senior leader of many of BP's most important E&P businesses, including serving as President of BP Azerbaijan – one of BP’s most
valued assets – and most recently served as COO of TNK-BP, which comprised 27% of BP’s reserves and 29% of BP’s production.  During his tenure
as President of BP Azerbaijan, production increased from 240,000 bpd to over 950,000 bpd while operating costs were reduced from $7/bbl to $4/bbl. 
He also was responsible for all of BP’s E&P business in Indonesia including the Tangguh LNG business.  Mr. Schrader is an outstanding E&P
executive responsible for transforming BP’s best and most valued E&P assets, and will bring to the Board his experience as a disciplined
E&P operator with expertise in production sharing structures, government relations, and delivering returns.


Hess Transformed:
A Pure Play E&P Company Driving Shareholder Value
Focused Portfolio
Higher Growth, Lower Risk
Levered to Oil Prices
Technical Breadth, Cost Efficient, and Globally Capable
Returning Capital to Shareholders, Retaining Financial Flexibility,
and Allocating Capital Efficiently
The Right Board to Drive Shareholder Value
18
1
2
3
4
5
6
Management is doing all the right things…the outlook has never been better.
Bank of America Merrill Lynch, January 31, 2013


Research Analysts Support Hess’
Transformation…
And Reject Elliott’s Plan
Hess Corporation’s much anticipated response to Elliott Management deals what we believe will provide a
knockout counter-proposal and provides the line of sight on the next leg of the recovery
Bank of America Merrill Lynch, March 5, 2013
We view the company’s proactive stance and exceptional clarity with its investor base as a major blow to activist
claims. . .
The
accelerated
plan
covers
essentially
all
facets
for
unlocking
value
for
shareholders…
with
the
only
exception being the onshore resource spin off, which remains highly controversial and, in our opinion, not likely
to double the valuation of HES’s Bakken acreage
Capital One, March 6, 2013
Critically, we believe the strategy outlined by management is a superior route to releasing value
Bank of America Merrill Lynch, March 5, 2013
We tend to agree with management’s assertion that a breakup into two E&P companies, one domestic and one
international, would not be the best way to create shareholder value
Oppenheimer, March 5, 2013
We
applaud
the
changes
HES
announced
today…
HES
will
become
a
pure-play
E&P
company
with
a
more
shareholder-friendly approach to returning capital via dividends and share repurchases
Wells Fargo, March 4, 2013
We expect the HES transformational plan to be viewed more favourably by shareholders than the suggestions
made by Elliott in late January
UBS, March 4, 2013
We believe the recovery set in place by management well before Elliott entered the fray is compelling. To derail
the process at this juncture would be counter-productive
Bank of America Merrill Lynch, March 5, 2013
19


Research Analysts Support Hess’
Transformation…
And Reject Elliott’s Plan
None of the Hess directors are tethered to Elliott’s unusual
compensation scheme or flawed agenda
All- Star Board. HES will add six new independent directors, all former business executives, each with decades of
distinguished careers, including three with extensive oil industry experience. The new board should help guide
HES with executing its transformation strategy into a pure E&P play
Oppenheimer, March 5, 2013
HES
announced
the
expected
departure
of
six
members
of
its
Board
of
Directors
while
also
putting
forth
six
new
independent
nominees.
In
our
view
. . .this
addresses
Elliott
Associates’
prior
concern
over
the
lack
of
independence
at HES’s Board
J.P. Morgan, March 4, 2013
Hess
has
put
forward
an
equally
attractive
slate
of
candidates
that
in
our
view
will
address
any
and
all
concerns
raised
over
the independence of the board
Bank of America Merrill Lynch, March 5, 2013
HES
has
nominated
six
new
members
to
join
its
board
of
directors.
Four
of
these
members
possess
extensive
energy
experience and three of them have direct experience in oil and gas production
Wells Fargo, March 4, 2013
20


HESS’
ASSESSMENT OF
ELLIOTT’S “RECOMMENDATIONS”
21


Elliott Management’s “Recommendations”
Are Flawed and Irrelevant
22
We think Elliott's entry into HES is a bit late as HES is already well underway in executing a successful
transformation strategy.
Capital One, January 30, 2013
Elliott’s Central Thesis
Facts
Immediately break the
Company in two
Deeply
flawed
idea
that
undermines
the
prospect
of
future
value
by
breaking
the
Company
into
two
pieces
with
inadequate capital structures to support future growth
Ignores tax considerations and includes flawed valuation assumptions
Hess
and
a
number
of
sell-side
analysts
believe
that
Elliott’s
central
thesis
will
destroy
real
shareholder
value
Elliott’s Other
“Recommendations”
Facts
Focus portfolio
Irrelevant
in
light
of
Hess’
strategic
transformation,
including
recent
announcements,
to
focus
its
portfolio
on
higher growth, lower risk assets
Multi-billion dollar non-core E&P asset divestiture program well underway and realizing value, with additional assets
to be sold
Hess completely exiting downstream businesses
Instill capital and
operational discipline
Irrelevant
and ignores facts related to cost leadership in Bakken and reductions to capital and exploration spending
Total capital spending has already been reduced
by 17% in 2013 and is continuing to be reduced
Exploration
spending
has
already
been
reduced
by
29%
in
2013
Drilling
and
completion
costs
in
the
Bakken
have
been
reduced
in
excess
of
30%
and
are
continuing
to
be
reduced
We are one of the most efficient operators in the Bakken
Hess
Bakken
wells
had
an
average
85%
participation
rate
in
2012
Elect 5 dissident nominees
to the Hess Board
Hess’
management
and
Board
of
Directors
were
responsible
for
building
the
Company’s
world
class
asset
portfolio
that
is now delivering value to shareholders
Hess has proposed six new independent Directors with the right mix of corporate leadership, operational and financial
expertise, and top level E&P experience –
a best-in-class slate of Directors
None of our Directors are tethered to Singer’s unusual compensation scheme and flawed agenda


Elliott’s Central Thesis Ignores Key Issues and is
Based on Flawed Assumptions
23
IGNORES
FINANCING
IMPLICATIONS
Paul
Singer
plans
to
immediately
break
Hess
into
two
pieces,
the
U.S.
unconventional
resource
spin
entity,
“ResourceCo,”
and
the
remaining
Hess
assets,
“InternationalCo,”
both
of
which
we
believe would have higher financing costs and limited financial flexibility
Due to the 3-4 year cash flow deficit that Singer’s ResourceCo would incur, the spun out entity
would
not
be
able
to
assume
any
of
Hess’
existing
debt.
Even
without
any
initial
debt,
Singer’s
ResourceCo
would
likely
be
a
sub-investment
grade
credit
with
limited
stand-alone
debt
capacity. 
As a result, ResourceCo’s ability to fund growth in the Bakken and hence realize future value for
Hess shareholders would be harmed
If Singer’s ResourceCo were to be spun debt free, Singer’s InternationalCo would be forced to
assume all of Hess’
existing debt and therefore restrict InternationalCo’s financial flexibility, future
growth rate, and ability to return cash to shareholders
IGNORES TAX
CONSEQUENCES
Paul
Singer
ignores
the
tax
consequences
of
separating
Hess
into
Singer’s
ResourceCo
and
InternationalCo
Bakken
capital
spending
generates
substantial
excess
tax
deductions
that
are
used
to
offset
taxable income generated by other U.S. assets
Singer’s ResourceCo would be generating unused tax deductions and InternationalCo
would be paying taxes on otherwise shielded income
Singer’s InternationalCo would remain a U.S. domiciled entity with a majority of cash flow
generated from foreign assets, reducing the tax efficiency of funding growth and returning
cash to shareholders
Energy companies often have unproved resources and assets that haven't yet realized their value, and trying
to split up a company like Hess would be a mistake in the long run.  It makes no sense. It's cutting your nose
to spite your face. You don't gain anything by doing that.
Fadel
Gheit,
Oppenheimer
“Activist
Investor
Elliott
Management
Seeking
to
Remake
Hess”,
Dow
Jones,
January
29,
2013


Elliott’s Central Thesis Ignores Key Issues and is
Based on Flawed Assumptions
24
“International Remainco”
may trade on a low multiple.
Credit Suisse, January 29, 2013
FLAWED VALUATION
ASSUMPTIONS
We
believe
the
Net
Asset
Valuation
assumptions
used
by
Singer
to
justify
a
break-up
are
not
analytically sound. Singer’s target price objective of $126 / share is premised on achieving and
sustaining significant multiple expansion for both Singer’s ResourceCo and for Singer’s
InternationalCo
Singer ignores the recent trend in valuation multiples for pure play Bakken companies, which calls into
question the ability of Singer’s ResourceCo to achieve meaningful multiple expansion
Elliott
assumes
Singer’s
InternationalCo
achieves
a
“premium
multiple”
despite
being
a
more highly
levered, less tax efficient company with slower growth
We believe that the financing implications of separating Hess into Singer’s ResourceCo and
InternationalCo
could
harm
the
ability
for
both
entities
to
fund
the
growth
required
to
maintain current,
more normalized peer group valuations
…We’d note that HES’
Bakken assets are partly dependent on other parts of its portfolio to fund its growth
program, while also providing steady, predictable growth to counterbalance the lumpy less predictable growth
associated with its offshore assets.
UBS, January 30, 2013


Elliott Overstates its Valuation Case by Focusing on
Historical Versus Forward-Looking Multiples
25
Source: Bloomberg, IBES.  Market data as of 01-Mar-2013.
Note: Elliott’s Bakken Peers include: CLR, OAS, and KOG.  EV / EBITDA multiples of greater than 25.0x excluded from 2010-2012 averages.
Elliott’s Bakken Peers
Historical 1 yr Forward EV / EBITDA Multiples
Elliott’s Bakken Peers
Current Forward EV / EBITDA Multiples
Valuation multiples are typically
inflated at the start of growth cycles…
…but valuation multiples normalize
as growth cycles mature
Elliott’s
Bakken
Valuation
EV / EBITDA
Multiple
In our opinion, the biggest valuation disconnect is the credit Hess receives for the Bakken relative to its peers
in the play. We see this valuation gap narrowing as HES executes
in the Bakken.
Morgan Stanley, January 30, 2013


Third Parties Agree that Elliott’s
Central Thesis Does Not Work
26
As the industry shifted to develop the Bakken in earnest, Hess moved quickly to cement its position.
Using
the
strength
of
cash
flows
from
the
international
business
that
is
the
anchor
of
an
investment
grade credit rating, Hess had the firepower to secure twin acquisition of American Oil and Gas, Tracker
resources and Marquette exploration (Utica) that now constitute the core assets in its unconventional
portfolio. Without the international business potential for any further acquisitions would have been
muted in our view, as it would not have had the firepower to secure the footprint that has anchored our
investment case. Put simply the International business enabled what Hess is essentially the core of its
investment case today.
Bank of America Merrill Lynch, January 31, 2013
It is also important to point out that there are serious practical consequences for divesting (even in part)
the company’s fastest-growing asset. The “stub”
(i.e., the remainder of Hess’s upstream portfolio) would
become a much less appealing business, with a short reserve life, slim visibility on growth (it would be
almost entirely exploration-centric), and a very high tax burden due to the overseas overweight.
Raymond James, January 30, 2013


Hess Has Been Aggressively
Focusing its Portfolio Since 2010
27
PHASE I
(2010 –
JUL 24, 2012)
Asset sales ($1.7 billion)
Jambi Merang (Indonesia)
Central & Southern North Sea gas
assets, Cook & Maclure, Bittern /
Triton & Schiehallion fields (UK)
Snorre & Snohvit fields (Norway)
PHASE II
(JUL 25, 2012 –
MAR 3, 2013)
Sales agreements reached /
completed ($1.5 billion)
Beryl (UK)
ACG/BTC (Azerbaijan)
Eagle Ford (U.S.)
Samara Nafta (Russia)
PHASE III
(MAR 4, 2013 –
2015)
Further asset sales
Monetize Bakken midstream
Closed HOVENSA joint venture
refinery in St. Croix, U.S. Virgin
Islands
Closed Port Reading refinery in
New Jersey
Sale in progress
Terminal network
Exit Downstream
Retail (1,361 gas stations and
convenience stores)
Energy marketing (incl. power
plants)
Energy trading (Hetco)
UPSTREAM
DOWNSTREAM
Sales in progress
Sinphuhorm field (Thailand)
Pailin field (Thailand)
Natuna field (Indonesia)
Pangkah field (Indonesia)


Hess Has Been Aggressively Cutting Capital
Spending…With More to Come in 2014
We are transitioning from a period of intense investment in our high return assets to one of
increasing production yield and positive cash generation
We are substantially reducing our capital and exploration spending
2013 upstream capital expenditures reduced by 17%
2013 exploration spending reduced by 29%
Bakken expenditures are expected to be $2.2 billion in 2013 versus $3.1 billion in 2012, a 29% decrease
Additional reductions in capital and exploratory expenditures are planned for 2014
Additional cost reduction program underway
28
Peak
Bakken
Capex
¹ Pro forma for all announced asset sales, 2013B upstream capital expenditures expected to be $6.2 billion.
2
Excludes exploration capital for unconventional assets.


Hess: 17 Year Outperformance vs. S&P 500
Source: Bloomberg as of March 28, 2013
Note:
Integrated
proxy
peers
include
BP,
CVX,
XOM,
RDS,
STL,
and
TOT.
29


Hess is an Efficient Operator and
Partner of Choice in the Bakken
30
Source: Bakken drilling and completion cost data for Hess represents actual Q4 2012 drilling and completion costs per well.  Peer costs represent peer estimated Q4 2012 pre-drill
costs provided to Hess for wells where Hess has an ownership interest but is not an operator.  Peer groups based on a weighted average of well costs based on total number of wells
balloted.  Proxy Peers include XOM/XTO, STL/BEXP, COP, OXY, and EOG. Bakken Pure Play Peers include CLR, OAS, and KOG.
Efficient Bakken operator
Our Bakken well drilling and completion costs
are below or in line with our peers
We expect further cost efficiencies to result from
our shift to pad drilling
High peer participation rates in Hess wells
Bakken wells had 85% average participation
rate in 2012
Exceptional Bakken well performance
Hess completed 10 of the top 25 highest
30-day initial production rate wells in 2012,
including 3 of the top 5 wells
Bakken well costs continue to trend lower and we
have greater confidence Hess can hit capex
guidance.
—Morgan Stanley, January 30, 2013
$ 10.0
$ 9.4
$ 9.0
Proxy Peers
Bakken
Hess
Q4 2012 Bakken
Well Costs ($mm / Well)
0 %
20 %
40 %
60 %
80 %
100 %
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2012 Well Participation Rates
Average: 85%
Pure Play Peers


The Right Directors and the Right Governance to
Lead the Transformed Hess
Hess’
management and Board of Directors have built the Company’s world class
asset portfolio and led the strategic transformation that has been delivering
shareholder value
In August of 2012, we met with an independent search firm to help us identify
new candidates in anticipation of upcoming vacancies on our Board 
We
have
identified
six
outstanding
new
independent
Directors
who
believe
in
the
value creation opportunities of the transformed Hess
These individuals have held senior leadership positions at some of the world’s largest
companies including Royal Dutch Shell, BP, ConocoPhillips, GE, CBS / Viacom, and Deloitte
As
a
result
of
the
proposed
changes,
13
of
the
14
Directors
will
be
independent
None of the Hess Directors are tethered to Elliott’s unusual compensation scheme and flawed
agenda
We also have taken the following actions to enhance our corporate governance
Formally adopting a lead independent director position with enhanced duties
Appointing John H. Mullin III as the new lead independent Director
Adopting a mandatory director retirement policy
Naming new chairpersons for each Board committee
31


DELIVERING SHAREHOLDER VALUE
APRIL  2013