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March 7th, 2013

Hess Announces Exit From Retail Electric, Natural Gas and Oil Markets

by Andrew Price, President & COO

Hess surprised energy markets on Monday by announcing that it would seek to exit retail sales of electricity, natural gas and oil. Although the announcement was a shock to those of us in the energy business, there were many signs that, in hindsight, pointed to this outcome. What does this announcement mean for CES customers who currently have contracts with Hess? Should you consider entering into a new contract with Hess for retail commodity? Read on for guidance on these questions.

Hess announced, just two months ago, that it would close its last oil refinery and sell its 19 oil-storage terminals. This most recent announcement completes a transition to a pure energy exploration and production company. In addition to retail electricity, natural gas and oil, Hess will be divesting its 1,350 gasoline stations in 16 states.  The logic behind the moves is clear; exploration and production accounted for more than 90% of profits last year. Activist shareholder Paul Singer, through his company Elliott Management Corp, has been pushing for significant changes at Hess. Singer and Elliott Management have indicated that the announced changes do not go far enough and have called for Hess to split into onshore and offshore exploration and production companies.

What does the Hess announcement mean for you? Long time CES clients know that we work very hard to stay completely supplier neutral. Navigating the constantly changing landscape of energy suppliers amidst mergers, divestments, expansions, contractions, and bankruptcies is one of the services we offer clients. We work with all suppliers in the marketplace that are transparent, credit worthy, competitive with pricing and fair on contract terms. Over the years Hess has distinguished itself in each of these categories and has become a leading supplier of electricity, natural gas and oil to CES clients. I know I speak for all of CES when I say that we will be very sorry to see Hess leave the market. A few key points to keep in mind:

  • Hess, and any successor, is obligated to honor all terms and conditions in existing contracts.
  • Hess has not exited the retail market yet. It will take an indefinite period of time for Hess to find a new home for its retail divisions. Hess has indicated that it expects to complete divestment by the end of 2014.  
  • Hess has indicated that they will continue business as usual and that they will continue to offer electricity and natural gas pricing under long term contract.

As Hess seeks a buyer for its retail operations, it is in its best interest to continue to manage these divisions as ongoing concerns to maximize the value to potential suitors. CES will continue to solicit pricing from Hess on behalf of clients and does not currently have concerns with advising clients to enter into new supply contracts with Hess. As always, Hess will have to continue to offer extremely competitive pricing and fair contract terms to win new business with CES clients. CES will continue to monitor developments at Hess closely and will alert clients to any notable changes in status.

Finally, for those of you with kids, I have heard unsubstantiated rumors that Hess will have a 2013 version of its surprisingly durable toy trucks. Whether the toy truck tradition, which dates back to 1964, survives beyond 2013 is anyone’s guess. I would be sorry to see it go.

Please don’t hesitate to reach out to me, your CES Account Executive, or anyone at CES if you would like to discuss the Hess announcement.

(Tags: Hess Energy, Electricity, Natural Gas, Retail Energy, Competitive Supplier)

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