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Hess to Divest Shenzi Field Stake in GoM for $505 Million

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Hess Corporation (HES - Free Report) recently agreed to divest 28% working interest in the Shenzi Field — located in the deepwater Gulf of Mexico (GoM) — to BHP Billiton of BHP Group (BBL - Free Report) , an Australia-based company. The divestment is expected to fetch Hess $505 million.

The effective date of the deal is Jul 1, 2020. Net production from the Shenzi Field, a six-lease development, for the first eight months of this year averaged 11,000 barrels of oil equivalent per day, a significant portion of which was oil. The company expects the deal to close before 2020-end, following which BHP is expected to hold a 72% stake in the field. Repsol S.A., another partner in the field, will hold the remaining 28% interest.

The divestment is in line with the company’s strategy of preserving cash and the value of assets. Especially, given the current volatile market situation, Hess intends to focus on more profitable assets with higher returns. As such, it intends to invest the proceeds from the divestment in Guyana operations.

The company made world-class oil discoveries at the Stabroek Block, located off the coast of Guyana. It estimates gross resources of much more than 8 billion barrels of oil equivalent from its 18 promising discoveries in the Stabroek Block. The discoveries made so far on the block have the potential to add five FPSO vessels that will be capable of yielding 750,000 barrels of oil per day by 2025.

Hess is expected to record significant production from the Guyana prospect in the coming years. It holds a 30% interest in the Stabroek Block while Esso Exploration and Production Guyana Limited, a subsidiary ofExxon Mobil Corporation (XOM - Free Report) , has a 45% operating stake. A subsidiary of CNOOC Limited (CEO - Free Report) has a 25% interest in the block.

Price Performance & Zacks Rank

Hess has gained 12% in the past six months against the 2.8% decline of the industry it belongs to. Currently, Hess carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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