It's been reported that Elliott Management is getting geared up for another proxy fight with Hess with the intent of ousting the CEO. Elliott also wants a cut in dividend, increase share buyback, sell Malaysia assets, and possible sale of the company. Although I am not a fan of activist investors, Elliott has a point in shaking up the management at Hess. It is not just the CEO but the President also needs to go. These two individuals at the top have made decisions in the last few years that have led to tremendous value destruction at Hess. Look at the value lost in Marcellus, Utica, Eagle Ford, Australia, China, Indonesia, and the list goes on. One bright spot for Hess is Guyana but that is contingent on project staying within budget and no major political road blocks. Instead of selling money producing assets this year, Hess would have been better off giving up 5% of Guyana to bring in another partner to share in its development costs.
Now back to Elliott's suggestions. Dividend cut is always a death wish for the stock price so I don't know where that's coming from. Share buyback gives a temporary boost to the stock price but a good number of shares brought back to the treasury are handed out to upper management as stock awards. Management never looses. When commodity prices are up, the company does well
and they get rewarded handsomely. When commodity prices are down, the company does poorly, but the management gets rewarded for having the foresight to restructure the organization (layoffs). Elliott does have a point in finding a buyer for Hess. While Guyana is hot and Bakken not so bad, Hess may be able to fetch a good price. If something goes wrong with Guyana (God forbid another Macondo or a political event ), shareholders are screwed.