Hess to Buy Mairy Stakes

U.S. integrated energy company, Hess Corporation ( HES - Analyst Report ) has reached an agreement with the London-listed oil and gas exploration company Egdon Resources to acquire a considerable stake in the Mairy permit onshore France.

Per the deal, Hess will acquire an unencumbered 35% interest that brings its total stake to 85% in the Mairy permit situated in the eastern part of the Paris Basin in onshore France. In return, Hess will carry well costs capped at a gross $10.25 million for the Huiron-1 exploration well associated with Egdon’s retained 15% share in the permit. Moreover, Hess intends to carry $0.5 million of additional general and administrative costs on the permit.

The Huiron-1 exploration well will assess the probable oil and gas potential of Jurassic, Rhaetian and older formations in the eastern part of the basin. The drilling operation is expected to take around 60 days.

We believe that Hess has a competitive advantage over its peers based on improving fundamentals, commodity price leverage and exposure to areas with high resource potential. We continue to see an upstream momentum on the back of the company's large inventory of exploration and development projects.

The company also remains upbeat on its U.S. shale acreage position and expects its oil output in the region to double in the next few years. The company said that its production will rise in the coming five to seven years, backed by a pickup in unconventional oil play activity across North Dakota to Texas.

Hess, which recently entered into an agreement with Royal Dutch Shell plc ( RDS.A - Analyst Report ) to sell its interest in the Beryl area fields and the Scottish Area Gas Evacuation System for about $525 million, holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months.

While Hess is expected to perform in line with the broader market, other companies in the sector which are expected to perform well in the coming one to three months include Total SA ( TOT - Analyst Report ) with a Zacks Rank #2 (Buy) and Royal Dutch Shell Plc ( RDS.B - Snapshot Report ) with a Zacks Rank #1 (Strong Buy).