elliott management’s perspectives: there are fundamental ......3q12 earnings, company announces:...
TRANSCRIPT
Ellio
tt M
anag
emen
t’s P
ersp
ectiv
es:
Ther
e A
re F
unda
men
tal,
Dee
p-R
oote
dPr
oble
ms
atH
ess
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Apr
il 20
13
ww
w.R
eass
essH
ess.
com
Add
ition
alIn
form
atio
n
Elli
ott A
ssoc
iate
s, L
.P. a
nd E
lliot
t Int
erna
tiona
l, L.
P. (
“Elli
ott”)
file
d a
defin
itive
pro
xy s
tate
men
t and
an
acco
mpa
nyin
g pr
oxy
card
with
the
Sec
uriti
es a
nd E
xcha
nge
Com
mis
sion
on
Apr
il 3,
201
3 to
be
used
to s
olic
it pr
oxie
s in
con
nect
ion
with
the
2013
Ann
ual M
eetin
g of
Add
ition
al In
form
atio
n
Sto
ckho
lder
s (in
clud
ing
any
adjo
urnm
ents
or p
ostp
onem
ents
ther
eof o
r any
spe
cial
mee
ting
that
may
be
calle
d in
lieu
ther
eof)
(the
“201
3 A
nnua
l Mee
ting”
) of H
ess
Cor
pora
tion
(the
“Com
pany
”). In
form
atio
n re
latin
g to
the
parti
cipa
nts
in s
uch
prox
y so
licita
tion
is a
vaila
ble
in
the
defin
itive
pro
xy s
tate
men
t file
d by
Elli
ott w
ith th
e S
ecur
ities
and
Exc
hang
e C
omm
issi
on o
n A
pril
3, 2
013
and
in a
ny a
men
dmen
ts to
th
at d
efin
itive
pro
xy s
tate
men
t. S
tock
hold
ers
are
advi
sed
to re
ad th
e de
finiti
ve p
roxy
sta
tem
ent a
nd o
ther
doc
umen
ts re
late
d to
the
solic
itatio
n of
sto
ckho
lder
s of
the
Com
pany
for u
se a
t the
201
3 A
nnua
l Mee
ting
beca
use
they
will
con
tain
impo
rtant
info
rmat
ion,
incl
udin
g p
yg
yp
,g
addi
tiona
l inf
orm
atio
n re
latin
g to
the
parti
cipa
nts
in s
uch
prox
y so
licita
tion.
Elli
ott’s
def
initi
ve p
roxy
sta
tem
ent a
nd a
form
of p
roxy
will
be
mai
led
to s
tock
hold
ers
of th
e C
ompa
ny. T
hese
mat
eria
ls a
nd o
ther
mat
eria
ls fi
led
by E
lliot
t in
conn
ectio
n w
ith th
e so
licita
tion
of p
roxi
es
will
be
avai
labl
e at
no
char
ge a
t the
Sec
uriti
es a
nd E
xcha
nge
Com
mis
sion
’s w
ebsi
te a
t ww
w.s
ec.g
ov. T
he d
efin
itive
pro
xy s
tate
men
t and
ot
her r
elev
ant d
ocum
ents
file
d by
Elli
ott w
ith th
e S
ecur
ities
and
Exc
hang
e C
omm
issi
on w
ill a
lso
be a
vaila
ble,
with
out c
harg
e,by
dire
ctin
g a
requ
estt
oE
lliot
t’spr
oxy
solic
itor
Oka
piP
artn
ers
atits
toll
free
num
ber(
877)
796
5274
orvi
aem
aila
tinf
o@ok
apip
artn
ers
com
a re
ques
t to
Elli
ott’s
pro
xy s
olic
itor,
Oka
pi P
artn
ers,
at i
ts to
ll-fre
e nu
mbe
r (87
7) 7
96-5
274
or v
ia e
mai
l at i
nfo@
okap
ipar
tner
s.co
m.
Cau
tiona
ry S
tate
men
t Reg
ardi
ng F
orw
ard-
Look
ing
Stat
emen
ts
The
info
rmat
ion
here
in c
onta
ins
“forw
ard-
look
ing
stat
emen
ts.”
Spe
cific
forw
ard-
look
ing
stat
emen
ts c
an b
e id
entif
ied
by th
e fa
ct th
at th
ey
dono
trel
ate
stric
tlyto
hist
oric
alor
curr
entf
acts
and
incl
ude
with
outl
imita
tion
wor
dssu
chas
“may
”“w
ill”“
expe
cts
”“be
lieve
s”
do n
ot re
late
stri
ctly
to h
isto
rical
or c
urre
nt fa
cts
and
incl
ude,
with
out l
imita
tion,
wor
ds s
uch
as m
ay,
will
, ex
pect
s, b
elie
ves,
“a
ntic
ipat
es,”
“pla
ns,”
“est
imat
es,”
“pro
ject
s,” “
targ
ets,
” “fo
reca
sts,
” “se
eks,
” “co
uld”
or t
he n
egat
ive
of s
uch
term
s or
oth
erva
riatio
ns o
n su
ch te
rms
or c
ompa
rabl
e te
rmin
olog
y. S
imila
rly, s
tate
men
ts th
at d
escr
ibe
our o
bjec
tives
, pla
ns o
r goa
ls a
re fo
rwar
d-lo
okin
g. O
ur
forw
ard-
look
ing
stat
emen
ts a
re b
ased
on
our c
urre
nt in
tent
, bel
ief,
expe
ctat
ions
, est
imat
es a
nd p
roje
ctio
ns re
gard
ing
the
Com
pany
and
pr
ojec
tions
rega
rdin
g th
e in
dust
ry in
whi
ch it
ope
rate
s. T
hese
sta
tem
ents
are
not
gua
rant
ees
of fu
ture
per
form
ance
and
invo
lve
risks
, un
certa
intie
s, a
ssum
ptio
ns a
nd o
ther
fact
ors
that
are
diff
icul
t to
pred
ict a
nd th
at c
ould
cau
se a
ctua
l res
ults
to d
iffer
mat
eria
lly.
Acc
ordi
ngly
, you
sho
uld
not r
ely
upon
forw
ard-
look
ing
stat
emen
ts a
s a
pred
ictio
n of
act
ual r
esul
ts a
nd a
ctua
l res
ults
may
var
y m
ater
ially
fro
m w
hat i
s ex
pres
sed
in o
r ind
icat
ed b
y th
e fo
rwar
d-lo
okin
g st
atem
ents
.
[ 1]
Tabl
eof
Con
tent
sTa
ble
of C
onte
nts
(1) C
hang
e is
Nec
essa
ry3
Th
ere
Are
Fun
dam
enta
l Pro
blem
s at
Hes
s7
C
ultu
re o
f Avo
idin
g A
ccou
ntab
ility
53
H
ess
Rea
cts
Def
ensi
vely
and
Fai
ls to
Add
ress
Its
Pro
blem
s84
(2) S
hare
hold
er N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m10
9
H
arve
y G
olub
: Set
ting
a Fo
cuse
d S
trate
gy11
4
Kar
l Kur
z: In
still
ing
Cap
ital D
isci
plin
e11
9
Mar
k S
mith
: Ove
rsee
ing
Ope
ratio
nal E
xcel
lenc
e12
3
Dav
id M
cMan
us: E
xecu
ting
Effe
ctiv
e R
estru
ctur
ing
127
R
odne
y C
hase
: Ins
tillin
g O
vers
ight
& A
ccou
ntab
ility
131
S
uper
ior N
omin
ees
with
Unp
aral
lele
d E
xper
ienc
e13
6
Add
itili
fti
Add
ition
al in
form
atio
n
C
ompe
nsat
ion
145
P
eer G
roup
Sel
ectio
n15
1
[ 2]
Tim
elin
eof
Even
ts:H
ess
Rel
ativ
ePe
rfor
man
ceSi
nce
Janu
ary
2011
(1)
110
4Q12
Ear
ning
s:
Com
pany
ann
ounc
es th
at m
ajor
mov
es to
re
sha p
e po
rtfol
io h
ave
been
ann
ounc
ed
Hes
s A
nnou
nces
on
Mar
ch 4
, 201
3:
Pla
n to
div
est E
nerg
y M
arke
ting,
Ret
ail,
Het
co, a
nd c
erta
in E
&P
ass
ets
and
to
MLP
Bak
ken
infra
stru
ctur
e. P
ortio
n of
Tim
elin
e of
Eve
nts:
Hes
s R
elat
ive
Perf
orm
ance
Sin
ce J
anua
ry 2
011(
1)
100
pp
E
nerg
y M
arke
ting
“stra
tegi
c”pr
ocee
ds p
rom
ised
to g
o to
sha
re
buyb
ack
and
incr
ease
d di
vide
nd
Sam
Nun
n to
ste
p do
wn
and
5 ne
w
nom
inee
s fo
und
for 2
013
AG
M
John
Mul
lin, H
ess
fam
ily e
stat
e ex
ecut
or,
is n
ew L
ead
Inde
pend
ent D
irect
or (p
rior
3Q12
Ear
ning
s, C
ompa
ny a
nnou
nces
:
Bak
ken
infra
stru
ctur
eis
“not
som
ethi
ng
90
p(p
LID
als
o se
rved
on
CE
O’s
fam
ily e
stat
e)
Cla
ims
plan
was
in p
lace
dat
ing
back
to
star
t of “
trans
form
atio
n”
Ba
kken
infra
stru
ctur
e is
not
som
ethi
ng
we
wou
ld b
e in
tere
sted
in M
LPin
g”
Ene
rgy
Mar
ketin
g &
Ret
ail a
re a
“lon
g-te
rm s
trate
gic
part
of o
ur p
ortfo
lio”
80
Sam
Nun
n ap
poin
ted
to B
oard
Ellio
tt re
leas
es
“Per
spec
tives
on
Hes
s”
70
Ellio
tt re
leas
es
seco
nd
pres
enta
tion
2Q12
Ei
60
Elli
ott b
egin
s to
acq
uire
su
bsta
ntia
lpor
tion
ofH
ess
stoc
k
2Q12
Ear
ning
s:
Afte
r mis
sing
con
sens
us E
PS
for 6
stra
ight
qu
arte
rs, a
stri
ng o
f exp
lora
tion
failu
res,
and
su
bsta
ntia
l cap
exov
erru
ns, J
ohn
Hes
s an
noun
ces
that
the
Com
pany
is in
mid
st o
f tra
nsfo
rmat
ion
that
st
arte
d in
200
9 (la
ter r
evis
ed to
201
0 st
art).
Thi
s is
co
mpa
ny’s
7th
rest
ruct
urin
gun
derc
urre
ntC
EO
Afte
r rec
eivi
ng E
lliott’
s pr
ivat
e le
tter,
Hes
s an
noun
ces
that
Ellio
tt in
tend
s to
nom
inat
e di
rect
ors
and
Hes
sw
ill50
[ 3]
subs
tant
ial p
ortio
n of
Hes
s st
ock
com
pany
’s 7
thre
stru
ctur
ing
unde
r cur
rent
CEO
.di
rect
ors
and
Hes
s w
ill
sell
term
inal
s
1. R
elat
ive
perfo
rman
ce v
ersu
s re
vise
d pe
ers,
see
slid
e 10
Ellio
tt ow
ns 4
.52%
of H
ess
stoc
k, v
alue
d at
ove
r $1
billi
on.
Hes
sis
ourl
arge
stin
itial
equi
tyin
vest
men
tin
our3
6ye
arH
ess
is o
ur la
rges
t ini
tial e
quity
inve
stm
ent i
n ou
r 36-
year
hi
stor
y. O
ur b
elie
f in
the
pote
ntia
l of H
ess
is d
emon
stra
ted
by
the
subs
tant
ial i
nves
tmen
t we
have
mad
e in
the
Com
pany
.
[ 4]
Gre
atA
sset
sW
orth
$39
to$5
0bi
llion
inVa
lue
/$96
to12
8pe
rSha
re(1
)G
reat
Ass
ets
Wor
th $
39 to
$50
bill
ion
in V
alue
/ $9
6 to
128
per
Sha
re(1
)
$88
$90
$92
Unc
onve
ntio
nals
Larg
e, u
n-re
plic
able
and
hig
hly
desi
rabl
e po
sitio
n in
cor
e of
Bak
ken,
a p
rem
ier U
.S. o
il re
sour
ce p
lay
W
DV
onG
onte
nst
udy
conc
lude
dH
ess
has
high
er
Bak
ken
Valu
e C
ontin
ues
to In
crea
se
TEV
Ellio
tt Es
timat
es
$80
$82
$84
$86 25
-Jan
1-Fe
b8-
Feb
15-F
eb22
-Feb
1-M
ar8-
Mar
W
.D. V
on G
onte
nst
udy
conc
lude
d H
ess
has
high
er
per a
cre
valu
e an
d is
ver
y co
mpa
rabl
e to
CLR
in
abso
lute
val
ueA
dditi
onal
cor
e po
sitio
n in
Utic
a sh
ale,
pro
mis
ing
emer
ging
liqu
ids
play
E
xten
sive
acr
eage
loca
ted
in c
ore
liqui
ds-r
ich
zone
TEV
~$13
.0 b
illio
n to
$ 14
.4 b
illio
n
Wal
lSt
NA
VA
vera
geof
Ellio
ttTE
V
$10
$20
$30
$40
$billions
Con
vent
iona
lsLo
ng-li
fe, o
il-w
eigh
ted
rese
rves
in “
crow
n je
wel
” as
sets
and
favo
rabl
e oi
l-lin
ked
gas
asse
ts in
So
uthe
ast A
sia
V
alha
ll (N
orw
ay),
She
nzi(
GO
M),
Cei
ba&
Oku
me
(Equ
ator
ial G
uine
a), J
DA
(Mal
aysi
a-Th
aila
nd)
Wal
l St.
NA
V A
vera
ge o
f Elli
ott T
EV
TEV
~$21
.4 b
illio
n to
$0E
lliott
Low
:A
vera
geE
lliott
Hig
h:
Woo
d M
acke
nzie
Sel
l-Sid
eR
ysta
d
$2$3
H
ighl
y de
sira
ble
asse
t bas
e to
num
erou
s pa
rties
Valu
able
mid
stre
am in
fras
truc
ture
in B
akke
n
Tiog
a ga
s pl
ant (
ultim
ate
capa
city
of 2
50m
mcf
/d) –
Wal
lSte
xpec
ts$2
00m
mof
annu
alca
shflo
w
$30.
2 bi
llion
Wal
l St.
NA
V Ex
ceed
s El
liott
TEV
TEV
Mid
stre
am
$0$1
Ellio
tt Lo
wE
lliott
Hig
hAv
erag
e Se
ll-S
ide
$billionsS
lbl
dt
bi
id
Wal
l St e
xpec
ts $
200m
m o
f ann
ual c
ash
flow
B
akke
n ra
il te
rmin
al w
ith c
apac
ity o
f 54,
000
bbl/d
ge
nera
ting
aver
age
$14+
upl
ift p
er b
bl th
roug
h th
e th
ird q
uarte
r –re
sults
in $
285m
m a
nnua
lized
Wal
l St.
NA
V Ex
ceed
s El
liott
TEV
TEV
~$2.
0 bi
llion
to
$2.5
bill
ion
Dt
$1
$2
$3
$4
$5
$billionsSa
leab
le d
owns
trea
m b
usin
esse
s –
upsi
de
pote
ntia
l fro
m u
nloc
king
wor
king
cap
ital
1,
360
reta
il st
atio
ns
20 p
etro
leum
term
inal
s
Ene
rgy
mar
ketin
g &
dis
tribu
tion
G
as fi
red
pow
er p
lant
s
TEV
~$3.
1 bi
llion
to
$3.5
bill
ion
Dow
nstr
eam
[ 5]
$0
Ellio
tt Lo
wE
lliott
Hig
hAv
erag
e Se
ll-Si
de
Sou
rces
: see
Elli
ott’s
Mar
ch P
rese
ntat
ion
to H
ess
Sha
reho
lder
s1.
Ellio
tt’s
estim
ates
, see
Elli
ott’s
Mar
ch P
rese
ntat
ion
to H
ess
Sha
reho
lder
s
The
sim
ple
trut
h is
one
wid
ely
reco
gniz
ed in
the
oil &
gas
in
dust
ry: t
here
are
fund
amen
tal p
robl
ems
at H
ess .
Des
pite
terr
ific
asse
ts, t
he C
ompa
ny c
ontin
ues
to
lack
a fo
cuse
d st
rate
gy,
to
exp
erie
nce
pers
iste
nt o
pera
tiona
l iss
ues,
to
enga
gein
woe
fully
flaw
edca
pita
lallo
catio
nan
d
to e
ngag
e in
woe
fully
flaw
ed c
apita
l allo
catio
n, a
nd
to
hav
e a
cultu
re o
f den
ial a
t the
top
of th
e or
gani
zatio
n th
at re
war
ds
unde
rper
form
ance
and
avoi
dsac
coun
tabi
lity.
unde
rper
form
ance
and
avo
ids
acco
unta
bilit
y.
Thes
e pr
oble
ms
mus
t be
ackn
owle
dged
if th
ey w
ill e
ver b
e fix
ed.
[ 6]
Ther
e A
re F
unda
men
tal P
robl
ems
at H
ess
Fund
amen
talP
robl
ems
atH
ess
Fund
amen
tal P
robl
ems
at H
ess
Unr
elen
ting
Und
erpe
rfor
man
ce
Lack
of F
ocus
Ue
et
gU
depe
oa
ce
Und
isci
plin
ed C
apita
l Allo
catio
n
Ope
ratio
nal M
ism
anag
emen
t
Endl
ess
Inef
fect
ive
Res
truc
turin
gsEn
dles
s In
effe
ctiv
e R
estr
uctu
rings
Aby
smal
Gov
erna
nce
Cul
ture
[8]
Hes
sH
asFa
iled
toD
eliv
erR
etur
nsto
Shar
ehol
ders
Hes
s H
as F
aile
d to
Del
iver
Ret
urns
to S
hare
hold
ers.
Hes
sH
asU
nder
perf
orm
ed:
Hes
s H
as U
nder
perf
orm
ed:
B
y A
ny O
bjec
tive
Mea
sure
,
O
ver A
ny R
elev
ant T
ime
Perio
d, a
nd
A
gain
st A
ny P
ertin
ent B
ench
mar
k
[ 9]
Unr
elen
ting
Und
erpe
rfor
man
ce, I
nclu
ding
Mos
t Rec
ent “
Tran
sfor
mat
ion”
M
eanw
hile
, CEO
Shi
fts T
ime
Perio
d H
e W
ants
Sha
reho
lder
s to
Eva
luat
e
“You
can
't ju
dge
us o
n a
one-
year
bas
is. Y
ou h
ave
to d
o it
over
the
long
term
.”-J
ohn
Hes
s,Ja
nuar
y20
10(1
)
“Sin
ce J
uly
24, 2
012,
the
last
day
of t
radi
ng b
efor
e w
e an
noun
ced
our u
pdat
ed s
trat
egy,
Hes
s sh
ares
hav
e in
crea
sed.
..”Jo
hnH
ess
Janu
ary
2013
(2)
Hes
s O
ver (
Und
er)P
erfo
rman
ce(3
)
John
Hes
s
John
Hes
s, J
anua
ry 2
010
120
Rel
ativ
e Pe
rfor
man
ce S
ince
Sta
rt o
f “Tr
ansf
orm
atio
n”(4
)
-Joh
n H
ess,
Jan
uary
201
3(2)
Tenu
re17
Yea
rs5-
Year
4-Ye
ar3-
Year
2-Ye
ar1-
Year
vs P
roxy
Pee
rs(3
33)%
(31)
%(4
3)%
(29)
%(4
0)%
(17)
%
vs R
evis
ed P
roxy
Pee
rs(4
60)%
(45)
%(6
3)%
(44)
%(4
7)%
(20)
%
100
110
Elli
ott’s
inte
ntto
nom
inat
ey
()%
()%
()%
()%
()%
()%
vs B
akke
n O
pera
tors
NA
(263
)%(9
84)%
(184
)%(7
0)%
(16)
%
vs X
LEN
A(3
1)%
(57)
%(4
3)%
(44)
%(2
0)%
vs X
OP
NA
(39)
%(8
1)%
(52)
%(3
9)%
(15)
%
80
90
Elli
otts
inte
nt to
nom
inat
e di
rect
ors
anno
unce
d
()
()
()
()
()
60
70
Ann
ounc
emen
t of l
ates
t stra
tegi
c pl
an th
at s
tarte
d in
“200
9” (l
ater
re
vise
d to
201
0 st
art)
50
25-Jan-10
25-Jul-10
25-Jan-11
25-Jul-11
25-Jan-12
25-Jul-12
25-Jan-13
Elli
ott b
egin
s to
acc
umul
ate
Sou
rce:
Blo
ombe
rg, C
ompa
ny fi
lings
1.H
ess
4Q 2
009
Ear
ning
s ca
ll2.
Hes
s pr
ess
rele
ase,
Jan
uary
28,
201
33.
As
of 1
1/28
/12,
dat
e be
fore
whi
ch E
lliot
t beg
an to
pur
chas
e a
subs
tant
ial
amou
nt o
f Hes
s st
ock
Pro
xy p
eers
: Use
d by
Hes
s fo
r mgm
t com
pens
atio
n: A
nada
rko,
Apa
che,
BP
,
Che
vron
, Con
ocoP
hilli
ps, D
evon
, EO
G, E
xxon
, Mar
atho
n, M
urph
y, O
ccid
enta
l, S
hell,
Sta
toil,
Tal
ism
an a
nd T
otal
; R
evis
ed p
roxy
pee
rs: e
xclu
des
Dev
on &
Ta
lism
an d
ue to
hig
h N
orth
Am
eric
a ga
s w
eigh
ting;
exc
lude
s B
P, S
hell,
Sta
toil,
To
tal d
ue to
Eur
opea
n su
per m
ajor
sta
tus;
incl
udes
Nob
le a
s ad
ditio
nal r
elev
ant
com
petit
or;
Bak
ken
Ope
rato
rs: I
nclu
des
Con
tinen
tal,
Oas
is a
nd K
odia
k4.
P
erfo
rman
ce v
ersu
s R
evis
ed p
roxy
pee
rs
gsu
bsta
ntia
l am
ount
of s
tock
[ 10
]
Hes
s Sh
ould
Hav
e Ea
sily
Out
perf
orm
ed G
iven
Its
Low
Exp
osur
e to
Nor
th
Am
eric
anN
atur
alG
asan
dH
ighe
stO
ilW
eigh
ting
ofA
nyPe
er
100%
Am
eric
an N
atur
al G
as a
nd H
ighe
st O
il W
eigh
ting
of A
ny P
eer…
$9.0
0%
Pro
duct
ion
from
N. A
mer
ican
Gas
& N
GLs
(2)
U.S
. Nat
ural
Gas
Pric
es S
ince
200
8(1)
Hes
s’s
low
exp
osur
e to
N.A
. nat
ural
gas
mea
ns m
inim
al im
pact
from
col
laps
ing
natu
ral g
as p
rices
52%
68%
79%
60%
70%
80%
90%
100%
$6.0
0
$7.0
0
$8.0
0
2%4%
8%8%
9%9%
15%
16%
23%
27%
34%
36%
37%
41%
10%
20%
30%
40%
50%
$2.0
0
$3.0
0
$4.0
0
$5.0
0
2%0%
TOT
STL
CVX
BP
RDS
HES
MRO
XOM
MUR
OXY
COP
APA
NBL
TLM
EOG
APC
DVN
Pro
xy &
Rev
ised
Pro
xy P
eers
% P
rodu
ctio
n fr
om O
il(2)
Bre
nt P
rices
Sin
ce 2
008(
3)
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12U
S N
atur
al G
as
Hig
hest
exp
osur
e of
pee
rs to
oil
mea
ns fa
vora
ble
impa
ct fr
om e
scal
atin
g oi
l pric
es
55%
55%
58%
61%
63%
64%
68%
70%
60%
70%
80%
$100
.00
$110
.00
$120
.00
32%
34%
35%
37%
45%
45%
51%
52%
55%
55%
30%
40%
50%
$70.
00
$80.
00
$90.
00
21%
20%
DVN
APC
EOG
TLM
NBL
COP
APA
RDS
XOM
STL
TOT
MUR
OXY
BP
MRO
CVX
HES
Pro
xy &
Rev
ised
Pro
xy P
eers
$60.
00
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Bre
nt O
il[ 1
1]
Sou
rces
:Com
pany
Fili
ngs,
Blo
ombe
rg1.
Janu
ary
2013
Nat
ural
Gas
2.%
of 2
012
Pro
duct
ion
3.Ja
nuar
y 20
13 B
rent
Oil
And
Mat
eria
lPos
ition
inth
eB
akke
na
Prem
ierU
SO
ilR
esou
rce
Play
…A
nd M
ater
ial P
ositi
on in
the
Bak
ken,
a P
rem
ier U
.S. O
il R
esou
rce
Play
D
espi
te s
tock
pric
e of
Bak
ken
oper
ator
s in
crea
sing
~1,
100%
sin
ce 2
008…
D
espi
teC
ontin
enta
lRes
ourc
es(a
Bakk
enpu
repl
ayw
itheq
uiva
lent
acre
age
toH
ess)
crea
ting
$10
billio
nof
mar
ket
Des
pite
Con
tinen
tal R
esou
rces
(a B
akke
n pu
re p
lay
with
equ
ival
ent a
crea
ge to
Hes
s) c
reat
ing
$10
billio
n of
mar
ket
capi
taliz
atio
n ov
er th
e la
st fo
ur y
ears
thro
ugh
effe
ctiv
e ex
ecut
ion
in th
e B
akke
n…
D
espi
te H
ess
havi
ng o
ne o
f the
lead
ing
acre
age
posi
tions
in th
e B
akke
n….
…
. Hes
s’s
stoc
k pe
rform
ance
has
lang
uish
ed
1,20
0
Lead
ing
Publ
ic B
akke
nO
pera
tors
by
Acr
eage
(2)
Hes
s is
one
of t
he la
rges
t acr
eage
1,
400%
Bkk
Ot
H
Stoc
k Pe
rfor
man
ce o
f Bak
ken
Ope
rato
rs(1
)
800
1,00
0
gg
hold
ers
in th
e B
akke
n.
W.D
. Von
Gon
ten
deta
iled
stud
y co
nclu
ded
valu
e of
Hes
s B
akke
n po
sitio
n ve
ry c
ompa
rabl
e to
Con
tinen
tal’s
.80
0%
1,00
0%
1,20
0%
Bak
ken
Ope
rato
rsH
ess
400
600
200%
400%
600%
0
200
CLR
HES
WLL
COP
EOG
XOM
MRO
STO
OXY
OAS
SM
KOG
0%
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
[ 12
]S
ourc
es:C
ompa
ny F
iling
s, B
loom
berg
1.B
akke
nop
erat
ors
incl
udes
CLR
, OA
S, a
nd K
OG
2.C
ompa
ny fi
lings
and
pre
sent
atio
ns
Hes
sC
onst
antly
Switc
hes
Prox
yPe
ers
But
Con
tinue
sto
Und
erpe
rfor
mH
ess
Con
stan
tly S
witc
hes
Prox
y Pe
ers
But
Con
tinue
s to
Und
erpe
rfor
m
Ove
r the
last
five
yea
rs, H
ess
has
drop
ped
6 pe
ers
and
adde
d 5
new
pee
rs o
ut o
f an
orig
inal
pee
r se
t of 1
6 co
mpa
nies
(a c
hurn
of 6
9%).(
1)St
ill, u
nder
perf
orm
ance
is c
lear
.
1-Ye
ar3-
Year
5-Ye
ar
Hes
s O
ver (
Und
er)P
erfo
rman
ce v
sPr
oxy
Peer
s(2) 20
12 P
roxy
P
eers
2010
Pro
xy
Pee
rs20
08 P
roxy
P
eers
1Ye
ar
2012
Pro
xy
Pee
rs20
10 P
roxy
P
eers
2008
Pro
xy
Pee
rs
3-Ye
ar
2012
Pro
xy
Pee
rs20
10 P
roxy
P
eers
2008
Pro
xy
Pee
rs
5-Ye
ar
(17)
%
(27)
%(3
1)%
(29)
%(3
1)%
(30)
%(3
2)%
(58)
%
(70)
%
[ 13
]S
ourc
e: B
loom
berg
, Com
pany
filin
gs1.
From
200
8 pr
oxy
peer
s th
roug
h 20
12 p
roxy
pee
rs2.
As
of 1
1/28
/12,
dat
e be
fore
whi
ch E
lliot
t beg
an to
pur
chas
e a
subs
tant
ial a
mou
nt o
f Hes
s st
ock
Und
erpe
rfor
ms
Even
Aga
inst
Mor
e In
tegr
ated
Pee
rs—
Peer
s W
ho H
ave
Dow
nstr
eam
Ope
ratio
nsTh
atH
ave
Not
Ben
efite
dFr
omO
ilPr
ice
Incr
ease
Dow
nstr
eam
Ope
ratio
ns T
hat H
ave
Not
Ben
efite
d Fr
om O
il Pr
ice
Incr
ease
In re
cent
mat
eria
ls to
Sha
reho
lder
s, H
ess
mea
sure
s its
elf o
n a
10 y
ear b
asis
aga
inst
onl
y 6
of it
s 9
inte
grat
ed p
roxy
pee
rs.
Aver
age
mar
ket c
ap o
f the
se 6
is o
ver 1
1x g
reat
er th
an H
ess(
1)
5-Y
ear
3-Y
ear
1-Y
ear
5-Y
ear
3-Y
ear
1-Y
ear
Und
erpe
rfor
man
ce v
s. H
ess
Che
rry-
Pick
ed In
tegr
ated
Pee
rs(1
,3)
Und
erpe
rfor
man
ce v
s. In
tegr
ated
Pee
rs fr
om P
roxy
(1,2
)
(21)
%
(20)
%
(32)
%(3
2)%
(21)
%(3
5)%
(40)
%
5 Ye
ar R
elat
ive
Perf
orm
ance
(2)
5 Ye
ar R
elat
ive
Perf
orm
ance
(3)
90
100
110
120
130
140
90
100
110
120
130
140
40
50
60
70
80
40
50
60
70
80
[ 14
]S
ourc
e: B
loom
berg
1.A
s of
11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k2.
Incl
udes
BP
, CV
X, C
OP
, XO
M, M
RO
, OX
Y, R
DS
, STL
and
TO
T. C
OP
and
MR
O w
ere
inte
grat
ed u
ntil
May
201
2 &
Jul
y 20
11 re
spec
tivel
y3.
Incl
udes
BP
, CV
X, X
OM
, RD
S, S
TL, a
nd T
OT,
as
per H
ess
pres
enta
tion
filed
on
4/5/
13
Mos
t Rel
evan
t Pee
rs a
re A
nada
rko,
Nob
le, C
onoc
o, a
nd M
arat
hon
Hes
sH
asD
ram
atic
ally
Und
erpe
rfor
med
Them
All
17Y
ears
5-Y
ear
4-Y
ear
3-Y
ear
2-Y
ear
1-Y
ear
17Y
ears
5-Y
ear
4-Y
ear
3-Y
ear
2-Y
ear
1-Y
ear
Hes
s H
as D
ram
atic
ally
Und
erpe
rfor
med
The
m A
ll
Ana
dark
oC
onoc
oPhi
llips
(CO
P / P
SX)
(52)
%(8
9)%
(90)
%(7
4)%
(38)
%
17 Y
ears
5Y
ear
4Y
ear
3Y
ear
2Y
ear
1Y
ear
(60)
%(8
9)%
(35)
%(4
4)%
(9)%
17 Y
ears
5Y
ear
4Y
ear
3Y
ear
2Y
ear
1Y
ear
(328
)%(2
77)%
“Ana
dark
ope
rhap
sH
ess’
mos
tcom
para
ble
peer
”In
tegr
ated
pee
r tha
t tra
nsfo
rmed
to p
ure-
play
E&
P
17Y
ears
5-Y
ear
4-Y
ear
3-Y
ear
2-Y
ear
1-Y
ear
17Y
ears
5-Y
ear
4-Y
ear
3-Y
ear
2-Y
ear
1-Y
ear
Ana
dark
o, p
erha
ps H
ess
mos
t com
para
ble
peer
…W
ood
Mac
kenz
ie (S
epte
mbe
r 201
2)
Nob
le E
nerg
yM
arat
hon
(MR
O /
MPC
)
gp
pp
y
(51)
%(1
64)%
(113
)%(1
17)%
(32)
%
17 Y
ears
5Y
ear
4Y
ear
3Y
ear
2Y
ear
1Y
ear
(68)
%(9
8)%
(66)
%(4
8)%
(19)
%
17 Y
ears
5Y
ear
4Y
ear
3Y
ear
2Y
ear
1Y
ear
(683
)%(3
98)%
“In
part
icul
ar, w
e be
lieve
Nob
le E
nerg
y pr
ovid
es th
e m
ost
it
bh
k”
Inte
grat
ed p
eer t
hat t
rans
form
ed to
pur
e-pl
ay E
&P
[ 15
]
appr
opria
te b
ench
mar
k…”
Ban
k of
Am
eric
a M
erril
l Lyn
ch (A
pril
1, 2
013)
Sou
rce:
Blo
ombe
rgA
s of
11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k
Hes
s’s
Mos
t Rel
evan
t Com
para
ble
in th
e B
akke
n is
Con
tinen
tal
Con
tinen
talG
ener
ated
$10
Bill
ion
inM
arke
tCap
Whi
leH
ess
Wen
tNow
here
Con
tinen
tal G
ener
ated
$10
Bill
ion
in M
arke
t Cap
Whi
le H
ess
Wen
t Now
here
2009
-201
2(1)
Hes
sC
ontin
enta
l
Incr
ease
inB
akke
nPr
oduc
tion
~55
000
boe/
d~5
670
0bo
e/d
Des
pite
sim
ilarp
rodu
ctio
ngr
owth
Incr
ease
in B
akke
n Pr
oduc
tion
~55,
000
boe/
d~5
6,70
0bo
e/d
Bak
ken
EBIT
DA
Gen
erat
ed$2
.4bn
$2.5
bn
Des
pite
sim
ilar p
rodu
ctio
n gr
owth
… a
nd c
ompa
rabl
e eq
uity
issu
ance
Equi
ty Is
sued
$0.7
bn$1
.0bn
… a
nd c
ompa
rabl
e E
BIT
DA
gene
ratio
n
Tota
l Ret
urn
1%25
5%
Cha
nge
in M
arke
t Cap
italiz
atio
n+$
0.6b
n+
$10.
1bn
Con
tinen
tal h
as c
reat
ed $
10 b
illion
of
equi
ty v
alue
, whi
le H
ess
stoo
d st
ill. W
HY
?
350%
400%
450%
CLR
HE
S
200%
250%
300%
50%
100%
150%
09
09
09
09
09
09
0
0
10
10
0
10
1
1
11
11
1
11
2
2
12
12
2
12
3
3[ 1
6]
Jan-0
Mar-0
May-0
Jul-0
Sep-0
Nov-0
Jan-1
Mar-1
May-1
Jul-1
Sep-1
Nov-1
Jan-1
Mar-1
May-1
Jul-1
Sep-1
Nov-1
Jan-1
Mar-1
May-1
Jul-1
Sep-1
Nov-1
Jan-1
Mar-1S
ourc
e: C
ompa
ny F
iling
s, B
loom
berg
1.S
ee s
lide
65
Fund
amen
talP
robl
ems
atH
ess
Fund
amen
tal P
robl
ems
at H
ess
Unr
elen
ting
Und
erpe
rfor
man
ce
Lack
of F
ocus
Ue
et
gU
depe
oa
ce
Und
isci
plin
ed C
apita
l Allo
catio
n
Ope
ratio
nal M
ism
anag
emen
t
Endl
ess
Inef
fect
ive
Res
truc
turin
gsEn
dles
s In
effe
ctiv
e R
estr
uctu
rings
Aby
smal
Gov
erna
nce
Cul
ture
[17
]
Mul
titud
e of
Bus
ines
ses
and
Geo
grap
hies
Dem
onst
rate
s La
ck o
f Foc
us T
hat
Res
ults
inH
ess
Bei
ngSu
bsca
lein
Nea
rlyEv
ery
Are
ain
Whi
chIt
Com
pete
sR
esul
ts in
Hes
s B
eing
Sub
scal
e in
Nea
rly E
very
Are
a in
Whi
ch It
Com
pete
s
Laun
dry
List
of N
on-U
pstr
eam
Dis
trac
tions
Laun
dry
List
of U
pstr
eam
Loc
atio
ns
Ups
tream
ope
ratio
ns in
17
coun
tries
(1)in
clud
ing:
CC
D
otte
d lin
e in
dica
tes
dive
stitu
re a
nnou
nced
afte
r Jan
25,
201
3 (d
ate
Ellio
ttse
ntpr
ivat
ele
ttert
oH
ess)
Al
geria
, Aus
tralia
, Bru
nei,
Chi
na, C
olom
bia,
Den
mar
k, E
gypt
, E
quat
oria
l Gui
nea,
Fra
nce,
Gha
na, I
ndon
esia
, the
Kur
dist
an
regi
on o
f Ira
q, L
ibya
, Mal
aysi
a, N
orw
ay, T
haila
nd, a
nd th
e U
nite
d S
tate
s
Ann
ounc
ed in
tent
ion
to s
ell I
ndon
esia
and
Tha
iland
on
Mh
4th
(dat
e E
lliott
sent
priv
ate
lette
r to
Hes
s)
G
reen
sha
ding
indi
cate
s bu
sine
ss d
ecla
red
“long
term
stra
tegi
c” in
N
ovem
ber 2
012
and
Janu
ary
2013
bef
ore
anno
unce
men
t to
sell
Mar
ch 4
th
G
eogr
aphi
c sp
an o
f a m
ajor
, yet
Hes
s is
a fr
actio
n in
siz
e:
Mar
ket c
ap is
und
er 1
/11t
hth
e av
erag
e of
maj
ors
in it
s pr
oxy
peer
s(2)
1/23
rdof
Exxo
n(2)
Hed
ge F
und
Fuel
Cel
l
LNG
1/
23of
Exx
on(
)
1/
12th
of C
hevr
on(2
)
Hes
s U
pstr
eam
Ope
ratio
ns(3
)R
etai
l
LNG
Ref
inin
g
Gen
erat
ion
Prop
Tra
ding
?
Term
inal
s
Mar
ketin
g
[ 18
]S
ourc
es: C
ompa
ny F
iling
s, B
loom
berg
1.H
ess
2012
10-
K, p
ro fo
rma
for d
ives
titur
es a
nnou
nced
or c
ompl
eted
thro
ugh
Apr
il 12
, 201
3
2.A
s of
11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k3.
Hes
s w
ebsi
te J
anua
ry 2
013
Com
pare
d to
Pee
rs o
f Sim
ilar M
arke
t Cap
Siz
e an
d Ev
en P
ro F
orm
a fo
r Hes
s D
ives
titur
es A
nnou
nced
or C
ompl
eted
,H
ess
Ups
trea
mO
pera
tions
Rem
ain
Spre
adA
cros
s4x
As
Man
yC
ount
ries
Hes
s U
pstr
eam
Ope
ratio
ns R
emai
n Sp
read
Acr
oss
4x A
s M
any
Cou
ntrie
s
Com
pany
Mar
ket C
ap(1
)C
ount
ries
List
ed in
10K
Cou
ntrie
sw
ith S
igni
fican
t O
pera
tions
(2)
Siz
eM
ultip
le o
f H
Num
ber
%of
Hes
sN
umbe
r%
of H
ess
Hes
s
Hes
s$1
6.8
17(3
)12
(3)
Anad
arko
$36.
82.
2x16
94%
542
%
Apa
che
$30.
41.
8x7
40%
650
%
Cb
t$1
01
06
16%
18%
Cab
ot$1
0.1
0.6x
16%
18%
Che
sape
ake
$11.
20.
7x1
6%1
8%
Con
cho
$8.1
0.5x
16%
18%
Con
tinen
tal
$12.
50.
7x1
6%1
8%
D$2
15
13
212
%2
17%
“We’
ve b
een
clea
r. W
e ar
e ve
ry
prou
d of
the
glob
al p
ortfo
lio w
e ha
ve.”
Dev
on$2
1.5
1.3x
212
%2
17%
Enca
na$1
6.0
1.0x
212
%2
17%
EO
G$3
1.5
1.9x
635
%3
25%
Mar
atho
n$2
1.9
1.3x
1271
%7
58%
Mh
$11
20
712
71%
433
%
John
Hes
s
Janu
ary
2013
(4)
Mur
phy
$11.
20.
7x12
71%
433
%
Nob
le$1
7.2
1.0x
1165
%6
50%
Pion
eer
$12.
90.
8x1
6%1
8%
Ran
ge
$10.
70.
6x1
6%1
8%
Sth
t$1
24
07
212
%2
17%
Sout
hwes
tern
$12.
40.
7x2
12%
217
%
Talis
man
$11.
90.
7x12
71%
867
%
Rel
ativ
e to
the
aver
age
of s
imila
r siz
ed p
eers
:•H
ess
oper
ates
in3x
asm
any
coun
tries
[ 19
]
Hes
s op
erat
es in
3x
as m
any
coun
tries
•Hes
s ha
s si
gnifi
cant
ope
ratio
ns in
4x
as m
any
coun
tries
Sou
rces
: H
ess
Web
site
, Com
pany
Filin
gs, B
loom
berg
1.A
s of
11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k2.
Cou
ntrie
s w
ith s
igni
fican
t ope
ratio
ns b
ased
on
each
com
pany
's d
iscl
osur
e in
the
10K
. In
clud
es
coun
tries
that
eac
h co
mpa
ny d
escr
ibes
as
“cor
e”.
If th
e C
ompa
ny d
id n
ot d
escr
ibe
any
coun
tries
as
“cor
e”, c
ount
ries
with
mea
ning
ful r
eser
ves,
pro
duct
ion
and/
or E
&P
cap
ital s
pend
w
ere
incl
uded
.3.
Pro
For
ma
for a
nnou
nced
or c
ompl
eted
div
estit
ures
4.4Q
Ear
ning
s C
all,
Janu
ary
30, 2
013
Man
agem
entH
asFa
iled
toA
rtic
ulat
ea
Rat
iona
lStr
ateg
yfo
rPor
tfolio
Man
agem
ent H
as F
aile
d to
Art
icul
ate
a R
atio
nal S
trat
egy
for P
ortfo
lio
Man
agem
ent w
ants
to ru
n a
glob
al c
ongl
omer
ate
“In te
rms
of e
xplo
ratio
n an
d pr
oduc
tion,
we
are
diffe
rent
th
an th
e ot
her i
ndep
ende
nts.
We
are
the
mos
t glo
bal.”
Jh
HC
hi
&C
EOH
“We
wan
t to
mai
ntai
n ou
r glo
bal p
rese
nce
and
our g
loba
l re
ach
beca
use
we
belie
ve th
at th
e gl
obe
prov
ides
man
y op
portu
nitie
s no
w a
nd w
ill al
so in
the
futu
re. S
o w
e w
ant t
o m
aint
ain
that
glo
bal s
cale
and
cap
abilit
y.”
-Joh
n H
ess,
Cha
irman
& C
EO H
ess
June
201
0(1)
-Gre
gory
Hill,
EV
P W
orld
wid
e E
&P
Hes
sN
ovem
ber 2
012(
2)
Ana
lyst
s do
ubtfu
l of s
trat
egic
ratio
nale
“In m
ultip
le c
lient
con
vers
atio
ns
thro
ugho
ut th
e da
y w
e fo
und
liter
ally
no
one
that
def
ende
d th
e sh
ape,
nor
gl
obal
str
ateg
y of
Hes
s.”
“We
are
skep
tical
that
Hes
s’s
curr
ent
glob
al g
row
th s
trat
egy
will
yie
ld
supe
rior r
etur
ns o
r gro
wth
, as
its
orga
niza
tion
appe
ars
to b
e sp
read
thin
an
d w
e th
ink
it is
unl
ikel
y th
at H
ess
“On
the
upst
ream
sid
e, w
e qu
estio
n w
heth
er th
e co
mpa
ny h
as th
e ba
ndw
idth
to o
pera
te in
ove
r 20
coun
trie
s…W
e do
not
bel
ieve
a
com
pany
of H
ess’
s si
ze w
ill g
et c
redi
t
–D
euts
che
Ban
k (J
anua
ry 3
0, 2
013)
yca
n ha
ve a
com
petit
ive
adva
ntag
e in
al
l the
are
as it
is p
ursu
ing.
”–
Gol
dman
Sac
hs (J
une
11, 2
012)
py
gin
the
mar
ket f
or a
sho
tgun
app
roac
h to
inve
stin
g ac
ross
the
wor
ld…
”–
Citi
grou
p (J
uly
20, 2
012) [ 2
0]
1.B
erns
tein
Con
fere
nce,
Jun
e 20
102.
Ban
k of
Am
eric
a M
erril
l Lyn
ch C
onfe
renc
e, N
ovem
ber 2
012
Hes
sIs
Not
aM
ajor
and
Shou
ldN
otbe
Run
Like
One
Hes
s Is
Not
a M
ajor
and
Sho
uld
Not
be
Run
Lik
e O
ne
“We
have
the
portf
olio
ofa
maj
orw
eha
veth
ete
chni
calc
halle
nges
ofa
maj
or”
We
have
the
portf
olio
of a
maj
or, w
e ha
ve th
e te
chni
cal c
halle
nges
of a
maj
or…
John
Hes
s, J
une
2010
(1)
Hes
s is
NO
T a
maj
or
It
is 1
/23r
d th
e si
ze o
f Exx
on a
nd 1
/12t
h th
e si
ze o
f Che
vron
Ye
t, C
EO is
ada
man
t in
runn
ing
Hes
s as
thou
gh it
wer
e of
sim
ilar s
ize
Th
e re
sult
is a
dis
trac
ted
orga
niza
tion:
Su
bsca
le in
nea
rly e
very
bas
in in
whi
ch it
com
pete
s
La
ckin
g ca
pita
l dis
cipl
ine
gp
p
O
verw
helm
ed b
y op
erat
iona
l mis
step
s re
sulti
ng in
furt
her d
istr
actio
n
[ 21
]
1.B
erns
tein
Con
fere
nce
June
201
0
Fund
amen
talP
robl
ems
atH
ess
Fund
amen
tal P
robl
ems
at H
ess
Unr
elen
ting
Und
erpe
rfor
man
ce
Lack
of F
ocus
Ue
et
gU
depe
oa
ce
Und
isci
plin
ed C
apita
l Allo
catio
n
Ope
ratio
nal M
ism
anag
emen
t
Endl
ess
Inef
fect
ive
Res
truc
turin
gsEn
dles
s In
effe
ctiv
e R
estr
uctu
rings
Aby
smal
Gov
erna
nce
Cul
ture
[22
]
Why
Cap
italA
lloca
tion
IsC
ritic
alat
Hes
sW
hy C
apita
l Allo
catio
n Is
Crit
ical
at H
ess
…M
ore
than
25%
of S
hare
hold
ers’
inve
stm
ent i
s re
inve
sted
eac
h ye
ar:
y
2008
2009
5 Ye
ar
Aver
age
2012
2011
2010
Cap
ital S
pend
ing
as %
of
Ave
rage
Mar
ket C
ap17
%18
%30
%47
%32
%28
%
2013
Cap
ital S
pend
ing
as %
of
Cur
rent
Mar
ket C
apita
lizat
ion(
1)=
26%
Futu
re c
apita
l allo
catio
n de
cisi
ons
by th
e B
oard
and
CEO
det
erm
ine
retu
rns
for c
urre
nt S
hare
hold
ers
[ 23
]S
ourc
e:C
apita
l IQ
, Com
pany
filin
gs1.
Mar
ket c
apita
lizat
ion
as o
f 4/1
2/20
13; C
apita
l spe
ndin
g is
$6.
2bn
pro
form
a fo
r all
trans
actio
ns; A
ctua
l cap
ital s
pend
ing
guid
ance
was
$6.
8bn,
28%
of c
urre
nt m
arke
t cap
No
Dis
cipl
ine
ofR
etur
ning
Cas
hto
Shar
ehol
ders
No
Dis
cipl
ine
of R
etur
ning
Cas
h to
Sha
reho
lder
s…
B
otto
mqu
artil
eam
ong
peer
sin
retu
rnin
gca
shto
shar
ehol
ders
Des
pite
Bre
nt p
rices
mor
e th
an q
uadr
uplin
g…
Bot
tom
qua
rtile
am
ong
peer
s in
retu
rnin
g ca
sh to
sha
reho
lder
s
H
ess
has
not r
epur
chas
ed s
hare
s in
ove
r a d
ecad
e
90%
88%
80%
90%
100%
21%
21%
25%
2002
-201
2 D
ivid
end
CA
GR
2002
-201
2 C
ash
Ret
urn
as %
of C
urre
nt M
arke
t Cap
(1)
75%
57%
43%
42%
50%
60%
70%
80%
14%
14%
12%
12%
11%
15%
20%
43%
42%
39%
39%
35%
22%
19%
12%
7%6%
10%
20%
30%
40%
9%9%
8%8%
7%
4%3%
3%5%10%
%6%
4%
0%
BP
COP
TOT
XOM
RDSA
STL
DVN
TLM
MRO
CVX
OXY
MUR
APC
APA
HES
EOG
0%0%
EOG
Devon
Occidental
Talisman
Apache
Murphy
Conoco
Chevron
Exxon
Anadarko
Statoil
Total
Marathon
Shell
BP
Hess
[ 24
]S
ourc
es: C
ompa
ny F
iling
s, C
apita
l IQ
1.M
arke
t cap
italiz
atio
n as
of 4
/12/
13
Lost
Ove
r$4
Bill
ion
inEx
plor
atio
nin
Last
Five
Year
sLo
st O
ver $
4 B
illio
n in
Exp
lora
tion
in L
ast F
ive
Year
s
W
ood
Mac
kenz
ie c
alcu
late
s th
at H
ess
has
lost
$4
billio
n of
val
ue fr
om it
s ex
plor
atio
n in
vest
men
t ove
r the
last
5 y
ears
(1)
H
ess
has
squa
nder
edbi
llions
and
prov
ided
zero
reco
gniti
onor
expl
anat
ion
Hes
s ha
s sq
uand
ered
bill
ions
on
adve
ntur
es a
roun
d th
e gl
obe
H
ess
has
squa
nder
ed b
illion
s an
d pr
ovid
ed z
ero
reco
gniti
on o
r exp
lana
tion
M
anag
emen
t has
per
sist
ed in
dril
ling
high
cos
t, hi
gh ri
sk p
rosp
ects
with
80+
% w
orki
ng in
tere
st
S
ell-s
ide
anal
ysts
hav
e in
clud
ed p
enal
ties
in th
eir H
ess
valu
atio
ns fo
r exp
ecte
d co
ntin
ued
expl
orat
ion
failu
re
D
euts
che
Ban
k ha
s in
the
past
dis
coun
ted
its N
AV b
y 20
% to
acc
ount
for H
ess’
s hi
gh e
xplo
ratio
n sp
endi
ng(2
)
Expl
orat
ion
Valu
e C
reat
ion(
1)Ex
plor
atio
n Va
lue
Cre
atio
n as
% o
f Cur
rent
Mar
ket C
ap(1
)(4)
$12.
0 40
%
C
itigr
oup
has
in th
e pa
st in
clud
ed a
$6
per s
hare
exp
lora
tion
pena
lty fo
r Hes
s(3)
$40
$6.0
$8.0
$10.
0
Exploration)
10%
20%
30%
Exploration($
2.0)
$0.0
$2.0
$4.0
Value Creation from ($ billions)
(10%
)
0%
Value Creation from
Bre
akin
g w
ith in
dust
ry b
est p
ract
ices
, Hes
s dr
illed
80+
% w
orki
ng in
tere
st w
ells
in n
umer
ous
regi
ons.
($6.
0)
($4.
0)
APC
STO
RDS
NBL
APA
TOT
BP
CVX
OXY
XOM
MUR
TLM
COP
MRO
HES
(30%
)
(20%
)
APC
NBL
STO
APA
RDS
TOT
MUR
BP
OXY
CVX
XOM
TLM
COP
MRO
HES
[ 25
]
The
resu
lt w
as d
estr
uctio
n of
20+
% o
f its
mar
ket c
apita
lizat
ion
1.S
ourc
e: W
ood
Mac
kenz
ie
2.D
euts
che
Ban
k 11
/6/2
012
3.C
itigr
oup
11/2
/201
24.
Mar
ket c
apita
lizat
ion
as o
f 11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k
Lost
$67
Bill
ion
ina
Hed
ging
Prog
ram
Nin
eTi
mes
Wor
seTh
anIts
Peer
sLo
st $
6.7
Bill
ion
in a
Hed
ging
Pro
gram
Nin
e Ti
mes
Wor
se T
han
Its P
eers
Rea
lized
Gai
ns
(Los
ses)
Hed
ging
Cum
ulat
ive
Rea
lized
Gai
ns
(Los
ses)
as
% o
f E&
PR
($20
0)$0
2002
2004
2006
2008
2010
2012
Rea
lized
Hed
ging
Per
form
ance
200
2-20
12(1
)E&
P R
even
ues
Ana
dark
o$1
.4bn
1%
Apa
che
($0.
4)bn
0%
BP
Non
e/N
MN
A
($1
000)
($80
0)
($60
0)
($40
0)
($20
0)
millions
Che
vron
Non
e/N
MN
A
Con
ocoP
hilli
psN
one/
NM
NA
Dev
on$0
.8bn
1%
EO
G$2
.2bn
5%
($1
800)
($1,
600)
($1,
400)
($1,
200)
($1,
000)
$
Exx
onN
one/
NM
NA
Mar
atho
n($
0.1)
bn0%
Mur
phy
Non
e/N
MN
A
Nob
le($
01)
bn0%
($1,
800)
Hes
s’s
cum
ulat
ive
real
ized
hed
ging
loss
essi
nce
2002
equi
vale
ntto
9%of
E&P
Rev
enue
s
Nob
le($
0.1)
bn0%
Occ
iden
tal
Non
e/N
MN
A
She
llN
one/
NM
NA
Sta
toil
Non
e/N
MN
A
Tli
($0
5)b
(1%
)si
nce
2002
equ
ival
ent t
o 9%
of E
&P
Rev
enue
s
Ove
r the
sam
e pe
riod,
pee
rs(2
)re
aliz
ed c
umul
ativ
e ga
ins
equa
l to
1%of
E&
P re
venu
es
Talis
man
($0.
5)bn
(1%
)
Tota
lN
one/
NM
NA
Ave
rage
1%
Hes
s($
6.7)
bn(9
%)
[ 26
]S
ourc
e: C
ompa
ny fi
lings
1.P
re-ta
x ga
ins/
loss
es o
n co
mm
odity
der
ivat
ives
2.P
roxy
or R
evis
ed P
eers
who
eng
age
in h
edgi
ng fo
r ups
tream
bus
ines
s in
clud
ing
Ana
dark
o, A
pach
e, D
evon
, EO
G, M
arat
hon,
Nob
le a
nd T
alis
man
Sym
ptom
atic
ofPo
orC
apita
lDis
cipl
ine
Hes
sEn
gage
sin
Prop
Trad
ing
Sym
ptom
atic
of P
oor C
apita
l Dis
cipl
ine,
Hes
s En
gage
s in
Pro
p Tr
adin
g
Sepa
rate
from
hed
ging
pro
duct
ion,
Hes
s al
so o
wns
a h
edge
fund
(HET
CO
) and
eng
ages
in p
rop
trad
ing.
W
HY?
Hed
ging
Pro
duct
ion
Lost
9%
of E
&P
reve
nue
whi
le p
eers
gai
ned
~1%
of E
&P
reve
nue
HET
CO
(Hed
ge F
und)
Trad
es p
ublic
equ
ities
as
wel
l as
com
mod
ities
. Gua
rant
eed
by H
ess
bala
nce
shee
t
Prop
rieta
ry T
radi
ng
Car
ried
out i
n co
rpor
ate
offic
e, s
epar
ate
from
H
ETC
O.
Hes
s re
fuse
s to
dis
clos
e its
resu
lts fr
om c
orpo
rate
pro
p tr
adin
g an
d co
nsol
idat
es
resu
lts w
ith H
ETC
O
Dis
clos
ure
sugg
ests
~$4
00m
m in
pro
p tr
adin
g lo
sses
sin
ce 2
009(
1)or
ver
y hi
gh
oper
atin
g co
sts
at H
ETC
O o
r…?
Why
do
shar
ehol
ders
hav
e to
gue
ss?
Wha
t is
this
doi
ng a
t H
ess?
($40
)
($20
)
$0
2009
2010
2011
2012
Impl
ied
Prop
Tra
ding
Los
ses
2009
-201
2(1)
($14
0)
($12
0)
($10
0)
($80
)
($60
)
($40
)
$ millions
[ 27
]S
ourc
e:C
ompa
ny fi
lings
1.10
K (p
g. 7
4) g
roup
s to
geth
er 1
00%
of t
radi
ng re
venu
es fo
r HE
TCO
and
cor
pora
te p
ropr
ieta
ry tr
adin
g. 1
0K (p
g. 2
8) a
lso
grou
ps to
geth
er 1
00%
of n
et in
com
e fo
r pro
prie
tary
trad
ing
and
50%
of i
ncom
e fro
m H
ETC
O. U
sing
cor
pora
te e
ffect
ive
tax
rate
, thi
s im
plie
s lo
sses
at c
orpo
rate
pro
prie
tary
trad
ing.
200
9 is
firs
t yea
r dis
clos
ure
incl
udes
reve
nues
. Why
doe
s H
ess
grou
p th
ese
toge
ther
rath
er th
an c
lear
ly s
how
ing
wha
t is
goin
g on
at e
ach
grou
p?
($16
0)
($14
0)
Fund
amen
talP
robl
ems
atH
ess
Fund
amen
tal P
robl
ems
at H
ess
Unr
elen
ting
Und
erpe
rfor
man
ce
Lack
of F
ocus
Ue
et
gU
depe
oa
ce
Und
isci
plin
ed C
apita
l Allo
catio
n
Ope
ratio
nal M
ism
anag
emen
t
Endl
ess
Inef
fect
ive
Res
truc
turin
gsEn
dles
s In
effe
ctiv
e R
estr
uctu
rings
Aby
smal
Gov
erna
nce
Cul
ture
[28
]
Why
Is H
ess
Hea
dqua
rter
ed in
Man
hatta
n?R
esul
ting
inTo
pLe
ader
ship
Bei
ngO
utof
Touc
hw
ithEn
ergy
Indu
stry
Res
ultin
g in
Top
Lea
ders
hip
Bei
ng O
ut o
f Tou
ch w
ith E
nerg
y In
dust
ry
S R
New
Yor
k Ci
ty
~25%
of C
VX
201
2 U
.S. P
rodu
ctio
n in
CA
klh
Los
Ang
eles
San
Ram
onD
enve
r
Tuls
a
~20%
of O
XY
201
2 P
rodu
ctio
n in
CA
Okl
ahom
a Ci
ty
Irvi
ng
El D
orad
o
Fort
Wor
thM
idla
nd
Plan
o Hou
ston
The
Woo
dlan
ds
[ 29
]
Sou
rce:
Blo
ombe
rg
Una
ble
to C
ontr
ol W
ell C
osts
in R
esou
rce
Play
s, H
ess
Has
Sw
itche
d to
aC
ompl
etio
nD
esig
nPe
ers
Ref
use
toU
sein
Sim
ilarA
crea
geto
a C
ompl
etio
n D
esig
n Pe
ers
Ref
use
to U
se in
Sim
ilar A
crea
ge
Plug
and
Per
fCom
plet
ion
Des
ign(
1)
In 1
H 2
012,
Hes
s w
ell c
osts
wer
e 39
% a
bove
Con
tinen
tal w
hen
drill
ing
sam
e ty
pe o
f wel
l
Frac
Met
hod
Plug
& P
erf
Plug
& P
erf
(3)
60%
San
d40
% to
50%
Sa
nd$1
0.5
$11.
0
$11.
5
$12.
0
$12.
5
$13.
0
well
+39%
Pro
ppan
t(3)
60%
San
d,
40%
Cer
amic
Sand
, re
mai
nder
Cer
amic
Rig
s20
16
% P
ad D
rillin
g30
%?
“Hes
s ha
s 30
% h
ighe
r w
ell c
osts
on
the
exac
t sa
me
rock
… w
hene
ver
we
are
in a
wel
l with
th
em,w
eal
way
str
yto
$8.0
$8.5
$9.0
$9.5
$10.
0
$10.
5
$million per w
In 4
Q 2
012,
Hes
s w
ell c
osts
17%
-38%
abo
ve W
hitin
g w
hen
drill
ing
sam
e ty
pe o
f wel
l
Slid
ing
Slee
ve C
ompl
etio
n D
esig
n(2)
them
, we
alw
ays
try
to
swap
out
eve
n if
it is
into
w
orse
acr
eage
.”
–Se
nior
Exe
cutiv
e of
M
a jor
Bak
ken
Ope
rato
r
$7.0
$7.5
Sd
gS
eee
Co
pet
oes
gSa
nish
O
nly
Frac
Met
hod
Slid
ing
Slee
veSl
idin
g Sl
eeve
Slid
ing
Slee
ve
Ran
geof
70%
jp
(Dec
embe
r 201
2)
$8.5
$9.0
$9.5
Pro
ppan
t(3)
100%
San
d
Ran
geof
70%
to
100
% S
and,
re
mai
nder
Cer
amic
95+%
Sand
Rig
s6
2014
%P
dD
illi10
0%50
%95
%
$7.0
$7.5
$8.0
+17%
+38%
[ 30
]
Sou
rces
: Com
pany
filin
gs, p
rese
ntat
ions
, ear
ning
s ca
ll tra
nscr
ipts
, Nor
th D
akot
a In
dust
rial C
omm
issi
on d
ata
1.1Q
and
2Q
ear
ning
s tra
nscr
ipts
and
pre
sent
atio
ns2.
4Q e
arni
ngs
trans
crip
ts a
nd p
rese
ntat
ions
3.D
ata
from
Nor
th D
akot
a In
dust
rial C
omm
issi
on
% P
ad D
rillin
g10
0%50
%~9
5%
$6.0
$6.5
Sani
sh
Onl
y
Abi
lity
toC
ontr
olW
ellC
ostI
sC
ritic
alto
Rea
lizin
gA
sset
Valu
efo
rSha
reho
lder
sA
bilit
y to
Con
trol
Wel
l Cos
t Is
Crit
ical
to R
ealiz
ing
Ass
et V
alue
for S
hare
hold
ers
H
ess
aste
dm
illion
son
Bak
ken
ellc
osts
Res
ourc
e pl
ays
requ
ire h
igh
num
ber o
f wel
ls to
be
drill
ed e
ffici
ently
. Hes
s ha
s st
rugg
led.
H
ess
was
ted
milli
ons
on B
akke
n w
ell c
osts
In
201
2, H
ess
unde
rest
imat
ed it
s B
akke
n co
sts
by $
1 bi
llion;
hav
ing
to ra
ise
guid
ance
from
$2
billio
n to
$3
billio
n in
spe
ndin
g w
hile
als
o re
duci
ng p
rodu
ctio
n gu
idan
ce
Ever
y$5
0000
0of
Cos
tOve
rrun
son
aB
akke
nW
ell
Ever
y $5
00,0
00 o
f C
ost O
verr
uns
on a
Bak
ken
Wel
l
Res
ults
in ~
$50
0 m
illio
n of
Val
ue L
ost i
f Not
Che
cked
(2)
In 1
H20
12 H
ess
wel
l cos
ts e
xcee
ded
like
peer
s by
$3.
5mm
per
wel
l(1)
($1.
0)
$0.0
$0
.5$1
.0$1
.5$2
.0$2
.5$3
.0$3
.5$4
.0
In 4
Q20
12 H
ess
wel
l cos
ts e
xcee
ded
like
peer
s by
$1.
5-$2
.5m
m(1
)
Ifun
chec
ked
cost
over
runs
coul
d($
4.0)
($3.
0)
($2.
0)
Hess NAVns
If un
chec
ked,
cos
t ove
rruns
cou
ld
resu
lt in
billi
ons
lost
for S
hare
hold
ers
($8
0)
($7.
0)
($6.
0)
($5.
0)
Redcution to H$ billion
($8.
0)In
crem
enta
l Cap
ex p
er W
ell
($ m
illion
s)
[ 31
]S
ourc
es: P
ublic
com
pany
filin
gs, c
orpo
rate
pre
sent
atio
ns a
nd e
arni
ngs
call
trans
crip
ts1.
See
slid
e 30
2.P
rese
nt v
alue
of a
dditi
onal
$3
mill
ion
cost
for e
ach
wel
l acr
oss
750,
000
net a
cres
, exc
ludi
ng a
crea
ge d
rille
d th
roug
h 3Q
. A
ssum
es 8
wel
ls p
er s
paci
ng u
nit (
4 B
akke
n, 4
TF
S),
14 ri
g pr
ogra
m, a
ddin
g 1
rig p
er y
ear u
ntil
20 ri
gs; P
reta
x va
lue
at 1
0% d
isco
unt r
ate
Una
ble
to M
anag
e R
ig P
rogr
am C
omm
ensu
rate
with
Siz
e of
Acr
eage
Pos
ition
Res
ulti
sD
estr
uctio
nof
NPV
Pote
ntia
land
Dec
eler
atin
gPr
oduc
tion
Gro
wth
Res
ult i
s D
estr
uctio
n of
NPV
Pot
entia
l and
Dec
eler
atin
g Pr
oduc
tion
Gro
wth
Hes
s’s
inab
ility
to o
pera
te a
rig
prog
ram
com
para
ble
to
peer
s of
its
size
resu
lts in
$2.
5 bi
llion
of f
orgo
ne v
alue
…
…as
evi
denc
ed b
y sl
ower
pro
duct
ion
grow
th
$12.
5
$13.
0
NPV
Impa
ct fr
om R
educ
ing
Bak
ken
Rig
Pro
gram
(1)
22
Rig
s20
R
igs
14
Rig
s
Bak
ken
Ope
rato
rPr
oduc
tion
Gro
wth
(2)
2012
2013
E
Con
tinen
tal
80%
38%
$11.
0
$11.
5
$12.
0
Hess NAVllions
$25
billi
on
Hes
s R
educ
ing
Rig
Cou
nt fr
om 1
6 to
14
Oas
is11
0%42
%
Kod
iak
267%
109%
Hes
s87
%20
%
$10.
0
$10.
5
Impact on$ bi
$2.5
bill
ion
$9.5
14
16
18
20
22
O
pera
ted
Rig
Pro
gram
In c
ontr
ast,
best
-in-c
lass
Bak
ken
oper
ator
s ar
e fo
cuse
d on
acc
eler
atin
g va
lue
Que
stio
n: “A
nd if
you
do
com
e in
bel
ow th
at ta
rget
or b
udge
t, I m
ean
do y
ou th
ink
–w
ould
we
expe
ct to
see
you
dril
l in
crem
enta
l wel
ls fo
r the
sam
e C
apE
xov
er th
e ye
ar, o
r jus
t com
e ou
t with
a lo
wer
Cap
Ex
budg
et?”
Ric
k B
ott,
Con
tinen
tal P
resi
dent
& C
OO
: “…
our g
oal i
s to
acc
eler
ate
valu
e.W
e ha
ve a
dee
p m
ulti-
deca
de in
vent
ory
and
we
wan
tto
brin
gas
muc
hof
that
valu
efo
rwar
dS
oou
rpla
nw
ould
beto
leve
rage
thos
eef
ficie
ncie
san
dbe
able
to
[ 32
]
and
we
wan
t to
brin
g as
muc
h of
that
val
ue fo
rwar
d. S
o, o
ur p
lan
wou
ld b
e to
leve
rage
thos
e ef
ficie
ncie
s an
d be
abl
e to
dr
ill ad
ditio
nal w
ells
…”(3
)
1.P
rese
nt v
alue
of a
dditi
onal
or l
esso
rrig
hel
d in
per
petu
ity a
cros
s 57
5,00
0 ne
t acr
es, e
xclu
ding
acr
eage
dril
led
thro
ugh
YE20
12.
Ass
umes
8 w
ells
per
spa
cing
uni
t (4
Bak
ken,
4 T
FS),
$6.5
mill
ion
NP
V p
er w
ell;
28 d
ay s
pud
to s
pud
time
(Hes
s 4Q
); P
reta
x va
lue
at 1
0% d
isco
unt r
ate
2.P
rodu
ctio
n gr
owth
gui
danc
e fo
r 201
3 fo
r Bak
ken
or c
orpo
rate
if n
ot d
iscl
osed
3.C
ontin
enta
l Res
ourc
es 4
Q12
Ear
ning
s ca
ll
Bur
dene
d by
Yes
terd
ay’s
Issu
es, H
ess
Is N
ot M
atch
ing
its P
eers
in W
orki
ng
toM
axim
ize
Bak
ken’
sFu
ture
Pote
ntia
lto
Max
imiz
e B
akke
ns
Futu
re P
oten
tial
Con
tinen
tal
Al
tiL
ThAc
cele
ratin
g Lo
wer
Thr
ee
Fork
s E
xplo
ratio
n P
rogr
am
Hig
h D
ensi
ty P
ilot A
ppra
isal
P
roje
ct
•20
wel
ls to
def
ine
the
prod
uctiv
ity o
f 2nd
, 3rd
and
4th
benc
hes
of th
e Th
ree
Fork
s ac
ross
75x
60 m
iles(
1)
•4 p
ilot d
ensi
ty p
roje
cts
to te
st 3
20 a
nd 1
60 a
cre
spac
ing
(14
and
28 w
ells
per
uni
t)(1
)
Whi
ting
Hid
den
Ben
ch L
ower
B
akke
nS
ilt T
estin
g•T
estin
g ad
ditio
nal t
arge
t zon
e si
tuat
ed b
etw
een
Mid
dle
Bak
ken
and
Thre
e Fo
rks
(2)
Hig
h D
ensi
ty P
ilot A
ppra
isal
P
roje
ct•I
nitia
ting
high
er d
ensi
ty p
ilots
in S
anis
h, P
rong
horn
, Hid
den
Ben
ch a
nd M
isso
uri B
reak
s(2
)
Test
ing
Addi
tiona
lThr
ee•T
estin
gth
e2n
dbe
nch
ofth
eTh
ree
Fork
sin
the
Cas
sand
ra
Whi
ting
Test
ing
Add
ition
al T
hree
Fo
rks
Zone
s•T
estin
g th
e 2
benc
h of
the
Thre
e Fo
rks
in th
e C
assa
ndra
an
d Ta
rpon
are
as(2
)
Oas
isH
igh
Den
sity
Pilo
t App
rais
al
Pro
ject
•Lau
nchi
ng in
fill p
ilots
in 2
2 sp
acin
g un
its(3
)
“We'
re d
oing
a v
ery
smal
l am
ount
of a
ppra
isal
wor
k in
th
e Th
ree
Fork
s…”
Gre
g H
ill, J
anua
ry 2
013(
5)
Pro
ject
Exte
nsio
nal A
crea
ge T
estin
g•T
estin
g Th
ree
Fork
s w
ells
in N
orth
Cot
tonw
ood,
Red
Ban
k an
d ex
tens
iona
l Mon
tana
acr
eage
(3)
Low
er T
hree
For
ks
Exp
lora
tion
Pro
gram
•Dril
ling
6 ve
rtica
l wel
ls in
to lo
wer
Thr
ee F
orks
ben
ches
in
1Q13
to d
eter
min
e ar
eas
for h
oriz
onta
l pilo
ts in
late
201
3(3)
Kod
iak
Hig
h D
ensi
ty P
ilot A
ppra
isal
P
roje
ct•2
pilo
t pro
ject
s te
stin
g 12
wel
ls p
er u
nit i
nclu
ding
6 M
iddl
e B
akke
n w
ells
and
6 T
hree
For
ks(4
)
Low
er T
hree
For
ks In
terv
als
Exp
lora
tory
Tes
ting
•Exp
lora
tory
test
ing
of th
e up
per,
mid
dle
and
TF3
Thre
e Fo
rks
inte
rval
s(4)
Sou
rces
: Pub
lic c
ompa
ny fi
lings
, cor
pora
te p
rese
ntat
ions
and
ear
ning
s ca
ll tra
nscr
ipts
1.C
ontin
enta
l 4Q
12 E
arni
ngs
call
2.W
hitin
g 4Q
12 E
arni
ngs
call
and
pres
enta
tion
3.O
asis
4Q
12 E
arni
ngs
call
4.K
odia
k 4Q
12 E
arni
ngs
call
5.H
ess
4Q 2
012
Ear
ning
s C
all
[ 33
]
Inab
ility
to M
ake
Mos
t of C
orpo
rate
Opp
ortu
nitie
s D
emon
stra
ted
in E
agle
For
dH
ess
Not
Onl
yFa
iled
toC
aptu
reO
ppor
tuni
tyH
ess
Lost
$771
Mill
ion
Hes
s N
ot O
nly
Faile
d to
Cap
ture
Opp
ortu
nity
, Hes
s Lo
st $
771
Mill
ion
Hes
s en
tere
d th
e Ea
gle
Ford
in 2
010
and
lost
mon
ey. T
he E
agle
For
d is
one
of t
he p
rem
ier U
.S. l
iqui
ds re
sour
ce p
lays
an
d ha
s se
en a
dra
mat
ic ri
se in
val
ue o
ver t
he p
ast f
ew y
ears
. Hes
s’s
loss
is th
e eq
uiva
lent
of l
osin
g m
oney
in th
e 19
90s
buyi
ng te
chno
logy
sto
cks—
hard
to d
o ev
en if
you
trie
d.y
ggy
y
Cap
ital D
estr
oyed
in E
agle
For
d
Leas
e A
cqui
sitio
n C
osts
(1)
($36
6)m
m
Dril
ling
&C
ompl
etio
nC
osts
(2)
($50
4)m
m
JV
with
unk
now
n Za
ZaE
nerg
y ha
d m
isal
igne
d in
cent
ives
:
Za
Zaw
aspa
idto
acqu
ireac
reag
ere
gard
less
ofco
stor
qual
ityD
rillin
g &
Com
plet
ion
Cos
ts(2
)($
504)
mm
Add
ition
al C
apita
lExp
endi
ture
s(3)
($14
9)m
m
Cas
h P
aym
ents
to Z
aZa(
4)($
124)
mm
Tota
l Cap
ital I
nves
ted
in E
agle
For
d($
1,14
2)m
m
ZaZa
was
pai
d to
acq
uire
acr
eage
rega
rdle
ss o
f cos
t or q
ualit
y an
d bo
re n
o ris
k to
Hes
s ca
pita
l los
ses
Za
Zare
ceiv
ed 1
0% c
ash
bonu
s an
d 10
% c
arrie
d w
orki
ng
inte
rest
whi
le p
uttin
g no
cap
ital a
t ris
k fo
r acq
uire
d ac
res
A
fter 2
yea
rs, H
ess
real
ized
its
mis
take
and
exi
ted
JV:
Sal
es P
roce
eds
in M
arch
201
3(5)
$265
mm
Eag
le F
ord
Cas
h Fl
ows(
6)$1
07m
m
Tota
l Cas
hG
ener
ated
by
Eagl
e Fo
rd$3
72m
m
Za
Zaw
alke
d aw
ay w
ith h
alf o
f Hes
s’s
Eag
le F
ord
acre
age
and
over
$10
0mm
of H
ess’
s ca
sh
In
dica
tive
of la
ck o
f cap
ital c
ontro
ls, l
itiga
tion
is o
ngoi
ng fr
om th
e JV
as
Hes
s pa
id le
ase
brok
ers
for a
crea
ge th
at w
as n
ever
de
liver
edTo
tal C
ash
Lost
in
Eagl
e Fo
rd($
771)
mm
deliv
ered
H
ess
does
not
dis
clos
e th
e ex
tent
of t
hese
loss
es. S
hare
hold
ers
mus
t loo
k to
dis
clos
ures
of Z
aZa
and
San
chez
in
orde
r to
lear
n ho
w S
hare
hold
er c
apita
l was
lost
Whi
le o
ther
s ca
ptur
ed tr
emen
dous
wea
lth in
the
Eagl
e Fo
rd (A
PC, C
OP,
EO
G, M
RO
, MU
R, R
DSA
, TLM
, etc
.),
Hes
s no
t onl
y fa
iled
to c
reat
e va
lue
but l
ost $
771m
m
[ 34
]
Sou
rces
: Hes
s an
d Za
ZaC
ompa
ny F
ilings
1.Za
Za20
12 1
0K (p
.F92
)2.
53 W
ells
dril
led
as o
f 3/1
/13;
50
wel
ls in
Cot
ulla
are
a pe
r San
chez
pre
sent
atio
n, 3
wel
ls o
utsi
de C
otul
la
area
ZaZ
a2Q
201
2 10
Q (p
.45)
; Wel
l cos
ts a
ssum
ed to
be
$10.
3mm
in 2
010/
2011
and
$8.
9mm
in
2012
/201
3 as
per
Hes
s 2Q
201
2 ea
rnin
gs c
all;
23 w
ells
dril
led
as o
f YE
2011
as
per Z
aZa
10K
201
1 (p
.3)
3.$3
80m
m in
Eag
le F
ord
cape
xin
201
2 pe
r 2Q
Hes
s ea
rnin
gs c
all;
Leas
e ac
quis
ition
cos
ts $
0 in
201
2 pe
r 20
12/2
011
ZaZa
10K
; 26
wel
ls d
rille
d in
201
2; re
mai
nder
is $
149m
m fo
r non
-D&
C c
apita
l exp
endi
ture
s
4.$2
4.8m
m in
ZaZ
ale
ase
bonu
ses
per Z
aZa
2012
10K
(p.5
3), $
14.8
mm
in Z
aZa
G&
A re
imbu
rsem
ent p
er
ZaZa
2012
10K
(p.5
4), $
84m
m in
ZaZ
aJV
dis
solu
tion
paym
ents
per
ZaZ
a3Q
201
2 10
Q (p
.12)
5.S
anch
ez p
ress
rele
ase,
Mar
ch 1
8, 2
013
6.20
10 th
roug
h 2Q
201
2 pr
oduc
tion,
real
ized
pric
es, l
ease
ope
ratin
g co
sts
from
ZaZ
afil
ings
; 3Q
2012
th
roug
h 1Q
2013
pro
duct
ion
from
San
chez
acq
uisi
tion
pres
enta
tion,
Cot
ulla
Onl
y re
aliz
ed p
rices
and
leas
e op
erat
ing
cost
s pe
r ZaZ
afil
ings
in 1
Q a
nd 2
Q 2
012
10Q
s an
d he
ld c
onst
ant;
G&
A p
er B
OE
at H
ess
U.S
. E
&P
ave
rage
; no
corp
orat
e ov
erhe
ad in
clud
ed
Fund
amen
talP
robl
ems
atH
ess
Fund
amen
tal P
robl
ems
at H
ess
Unr
elen
ting
Und
erpe
rfor
man
ce
Lack
of F
ocus
Ue
et
gU
depe
oa
ce
Und
isci
plin
ed C
apita
l Allo
catio
n
Ope
ratio
nal M
ism
anag
emen
t
Endl
ess
Inef
fect
ive
Res
truc
turin
gsEn
dles
s In
effe
ctiv
e R
estr
uctu
rings
Aby
smal
Gov
erna
nce
Cul
ture
[ 35
]
Endl
ess
Inef
fect
ive
Res
truc
turin
gsTh
atR
esul
tin
Furt
herU
nder
perf
orm
ance
Endl
ess
Inef
fect
ive
Res
truc
turin
gs T
hat R
esul
t in
Furt
her U
nder
perf
orm
ance
“Will
per
petu
al re
stru
ctur
ing
mod
e ev
er e
nd?”
-Gol
dman
Sac
hs, O
ctob
er 2
003(
1) (n
early
10
year
s ag
o!)
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Span
of
Ann
ounc
edR
estr
uctu
ring
“Aft
th3
1996
to 1
999
“Rep
ositi
onin
g”
“We
have
done
a
2001
to 2
003
“Res
hapi
ng”
“Ove
rthe
last
five
2001
to 2
006
Con
tinue
d“R
esha
ping
”
“So
abou
ttw
o
2008
to 2
010
“Reb
alan
cing
”
“We
have
done
a
2001
to 2
011
“Res
truc
turin
g”
“im
porta
nt
2009
to 2
014
“Im
port
ant
Cha
nge”
“We
wou
ldno
teth
at
2010
to ?
“Mul
tiyea
r Tr
ansf
orm
atio
n”
Res
truc
turin
g
Prom
ises
“Afte
r mor
e th
an 3
ye
ars
of
aggr
essi
vely
re
posi
tioni
ng it
s as
set b
ase
and
slas
hing
cos
ts, w
e ex
pect
Am
erad
a
We
have
don
e a
lot o
f wor
k th
ela
st
two
year
sto
re
shap
e ou
r po
rtfol
io...
It's
st
artin
g to
st
abili
ze.”
Ove
r the
last
five
ye
ars
our c
ompa
ny
has
done
a lo
t of
wor
k to
resh
ape
our p
ortfo
lio…
W
e‘re
sta
rting
to
deliv
er a
con
sist
ent
track
reco
rdof
“So
abou
t tw
o ye
ars
ago,
we
real
ly s
tarte
d to
pu
sh a
mor
e ba
lanc
ed a
ppro
ach
betw
een
acce
ssin
g un
conv
entio
nal…
to
bala
nce
the
high
We
have
don
e a
lot o
f wor
k ov
er th
e la
st 1
0 ye
ars
to
rest
ruct
ure
our
own
Com
pany
si
gnifi
cant
ly…
”
John
Hes
sJu
ly
…im
porta
nt
chan
ge fo
r H
ess…
This
ch
ange
ess
entia
lly
bega
n in
200
9 an
d sh
ould
be
larg
ely
com
plet
e in
2014
”
“We
wou
ld n
ote
that
ou
r cur
rent
boa
rd is
co
mpr
ised
of h
ighl
y ac
com
plis
hed
dire
ctor
s w
ho
dese
rve
cred
it fo
r in
itiat
ing
the
mul
tiyea
rPr
omis
esex
pect
Am
erad
a H
ess
will
fina
lly
deliv
er…
” -Leh
man
, M
ay 1
999(
2)
-Joh
n H
ess,
O
ctob
er 2
003(
3)
track
reco
rd o
f pe
rform
ance
.”
-Joh
n H
ess,
Se
ptem
ber 2
006(
4)
bala
nce
the
high
im
pact
exp
lora
tion
prog
ram
..” -Joh
n H
ess,
N
ovem
ber 2
010(
5)
-Joh
n H
ess,
Jul
y 20
11(6
)in
201
4. -Joh
n H
ess,
Ju
ly 2
012(
7)
mul
tiyea
r tr
ansf
orm
atio
nth
at
star
ted
in 2
010
and
that
con
tinue
s to
day.
”
-Jon
Pep
per,
Hes
s sp
okes
man
(9)
spok
esm
an,
Febr
uary
201
3(8)
[ 36
]
Res
ults
(9)
(21)
%(2
4)%
(87)
%(1
7)%
(167
)%(6
3)%
(43)
%
Sou
rce:
Com
pany
tran
scrip
ts, W
all S
t. R
esea
rch
1.G
oldm
an S
achs
, Oct
ober
14,
200
32.
Lehm
an B
roth
ers,
May
28,
199
93.
Hes
s 3Q
200
3 E
arni
ngs
Cal
l4.
Lehm
an B
roth
ers
Con
fere
nce,
Sep
tem
ber 2
006
5.B
ank
of A
mer
ica
Mer
rill L
ynch
Con
fere
nce,
Nov
embe
r 20
106.
Hes
s 2Q
11 E
arni
ngs
Cal
l7.
Hes
s 2Q
12 E
arni
ngs
Cal
l8.
Blo
ombe
rg: “
Hes
s Ta
ngle
d Fa
mily
Tie
s Ta
rget
ed in
Sha
reho
lder
Rev
olt”,
Feb
ruar
y 27
, 201
39.
Und
erpe
rform
ance
vs.
Rev
ised
pro
xy p
eers
; cal
cula
ted
over
per
iod
refe
rred
to in
quo
te
Toda
y Sh
areh
olde
rs A
re T
old
of H
ess’
s 7t
hA
ttem
pted
Res
truc
turin
gLi
kePr
iorR
estr
uctu
rings
Ther
eIs
No
Cle
arB
egin
ning
orEn
dLi
ke P
rior R
estr
uctu
rings
, The
re Is
No
Cle
ar B
egin
ning
or E
nd
Whe
n w
ill it
end
?W
hen
did
this
“5”
yea
r res
truc
turin
g be
gin
and
whe
n w
ill it
end
?
“…th
e m
ajor
mov
es to
resh
ape
our
portf
olio
… w
ill h
ave
been
com
plet
ed
by th
e en
d of
201
3.”
John
Hes
s,
Janu
ary
2013
(4)
Igno
re c
omm
ents
fro
m 2
010
and
2011
As
said
in J
uly
2012
: fiv
e ye
ar p
lan
Wha
t?
It be
gan
in 2
010?
W
e th
ough
t it b
egan
in
200
9? W
ell,
we
also
use
d to
thin
k it
bega
nin
2008
Did
it s
tart
B
ut it
has
bee
n on
goin
g si
nce
2001
?
No,
it
star
ted
in 2
009
and
will
en
din
2014
2009
to
2014
…bu
t co
mpl
eted
in 2
013
a fo
urye
ar p
lan
that
we
call
bega
n in
200
8…
So
is it
a th
ree
year
pl
an?
2010
-20
13?
Wha
teve
r it i
s, it
ism
ultiy
ear a
nd
“we’
d sa
y 12
to 1
8 m
onth
s [M
arch
20
14 to
Sep
tem
ber 2
014]
.”Jo
hn R
ielly
,S
VP
& C
FO, H
ess
“So
abou
t tw
o ye
ars
ago,
we
real
ly s
tarte
d
in 2
008
?20
01?
end
in 2
014
that
we
call
a “f
ive”
yea
r pla
n
“..ou
r cur
rent
boa
rd is
co
mpr
ised
of h
ighl
y
cont
inue
s to
day
,M
arch
201
3(6)
“…I m
ean,
it’s
ear
ly in
the
proc
ess,
bu
t our
gui
danc
e w
ould
be
that
we’
d co
mpl
ete
thes
e sa
les
by th
e en
d of
20
14”
“mon
etiz
atio
nof
ourB
akke
n
to p
ush
a m
ore
bala
nced
app
roac
h be
twee
n ac
cess
ing
unco
nven
tiona
l hy
droc
arbo
n re
sour
ces,
oil
and
gas,
to
bal
ance
the
high
i
tl
ti
“We
have
don
e a
lot o
f w
ork
over
the
last
10
year
sto
rest
ruct
ure
our o
wn
Com
pany
si
gnifi
cant
ly…
”
- Joh
nH
ess
“Thi
s ch
ange
es
sent
ially
beg
an in
20
09 a
nd s
houl
d be
la
rgel
y co
mpl
ete
in
2014
.”
Jh
H
“On
our J
uly
call,
we
expl
aine
d th
at H
ess
was
in th
e m
idst
of a
fiv
e-ye
ar tr
ansi
tion.
.. co
mpl
eted
by
the
end
of 2
013.
”
acco
mpl
ishe
d di
rect
ors
who
des
erve
cr
edit
for i
nitia
ting
the
mul
tiyea
r tr
ansf
orm
atio
nth
at
star
ted
in 2
010
and
that
con
tinue
s t
d”
2014
.”Jo
hn R
ielly
,S
VP
& C
FO, H
ess
Mar
ch 2
013(
6)
mon
etiz
atio
n of
our
Bak
ken
mid
stre
am a
sset
s ex
pect
ed in
201
5.”
John
Hes
s,
Mar
ch 2
013(
6)
impa
ct e
xplo
ratio
n pr
ogra
m...
”
-Joh
n H
ess,
N
ovem
ber 2
010(
1)
John
Hes
s,
July
201
1(2)
-Joh
n H
ess,
Ju
ly 2
012(
3)-J
ohn
Hes
s,
Janu
ary
2013
(4)
toda
y.”
-Jon
Pep
per,
Hes
s sp
okes
man
, Fe
brua
ry 2
013(
5)
[ 37
]
2008
2009
2010
2011
2012
2013
2014
Sou
rce:
Com
pany
tran
scrip
ts1.
Ban
k of
Am
eric
a M
erril
l Lyn
ch C
onfe
renc
e, N
ovem
ber
2010
2.H
ess
2Q 2
011
Ear
ning
s C
all
3.H
ess
2Q 2
012
Ear
ning
s C
all
4.H
ess
4Q 2
012
Ear
ning
s ca
ll, J
anua
ry 3
0, 2
013
5.B
loom
berg
: “H
ess
Tang
led
Fam
ily T
ies
Targ
eted
in
Sha
reho
lder
Rev
olt”,
Feb
ruar
y 27
, 201
36.
Hes
s bu
sine
ss u
pdat
e ca
ll, M
arch
4, 2
013
Con
trad
icto
ry S
tate
men
ts P
rove
s Th
at R
ecen
t Pla
n Is
Not
Pro
duct
of
Thor
ough
and
Thou
ghtfu
lRev
iew
Thor
ough
and
Tho
ught
ful R
evie
w
“…th
e st
rate
gic
infr
astr
uctu
re w
e ha
ve in
Nor
th D
akot
a, h
avin
g co
ntro
l of t
hat
adds
a lo
t of v
alue
…th
at’s
not
som
ethi
ng w
e w
ould
be
inte
rest
ed in
M
LPin
g…E
nerg
y M
arke
ting
and
Ret
ail M
arke
ting
rem
ain
a lo
ng-te
rm
stra
tegi
c pa
rt o
f our
por
tfolio
that
… b
uild
s up
on o
ur s
trong
bra
nd...
”-J
ohn
Hes
s, N
ovem
ber 2
012(
1,3)
“We
have
ast
rong
bran
d…it
enha
nces
the
com
pany
from
afin
anci
alan
dre
puta
tiona
lpoi
ntof
view
….a
nen
ergy
mar
ketin
gbu
sine
ss…
will
help
usif
Unt
il M
arch
201
3
Hes
s: M
arke
ting,
Ret
ail a
nd
If
tt
pp
gyg
pw
efin
dga
sin
the
Utic
a…S
oth
ey’re
goin
gto
beso
me
stra
tegi
cbe
nefit
s…”
-Joh
n H
ess,
Jan
uary
201
3(2,
4)In
fras
truc
ture
long
-term
str
ateg
ic
“…m
onet
izat
ion
of o
ur B
akke
n m
idst
ream
ass
ets
expe
cted
in 2
015…
We
have
ha
d th
is s
trate
gic
trans
form
atio
n un
derw
ay re
ally
… p
redo
min
atel
y w
hen
we
As
of M
arch
4th
2013
:
Hes
s: M
arke
ting,
Ret
ail a
nd
Infr
astr
uctu
re
star
ted
to b
uild
out
our
Bak
ken
posi
tion
in 2
010.
So
this
is n
ot s
omet
hing
th
at ju
st h
appe
ned
over
nigh
t…”
-Joh
n H
ess,
Mar
ch 2
013(
5)
“…in
ter
ms
of
purs
uing
stra
tegi
c o
ptio
ns t
o m
axim
ize
val
ue,
be i
t th
e
til
kti
bi
kti
bi
lti
Infr
astr
uctu
re
shou
ld b
e m
onet
ized
reta
il m
arke
ting
bus
ines
s o
r en
ergy
mar
ketin
g bu
sine
ss, w
e a
re e
valu
atin
g
seve
ral
optio
ns t
o m
onet
ize
thes
e b
usin
esse
s to
max
imiz
e s
hare
hold
er
valu
e. A
nd w
e a
re j
ust
star
ting
that
pro
cess
.”-J
ohn
Rie
lly, S
VP
& C
FO, M
arch
201
3(5)
[ 38
]S
ourc
e: C
ompa
ny tr
ansc
ripts
1.3Q
201
2 E
arni
ngs
call,
Nov
embe
r 2, 2
012
2.4Q
201
2 E
arni
ngs
call
Janu
ary
30, 2
013
3.E
lliot
t vie
w: O
il &
gas
are
com
mod
ities
-th
ey d
on’t
requ
ire b
rand
ing
4.E
lliot
t vie
w: O
il &
gas
are
com
mod
ities
-th
ey d
on’t
requ
ire c
ontro
lled
dist
ribut
ion
5.H
ess
busi
ness
upd
ate
call,
Mar
ch 4
, 201
3
Not
Cap
able
ofR
efoc
usin
gEx
plor
atio
nN
ot C
apab
le o
f Ref
ocus
ing
Expl
orat
ion
“We
wer
e kn
own
as a
ver
y hi
gh-im
pact
exp
lore
r. I t
hink
we
can
say
that
“W
e ar
e tra
nsiti
onin
g aw
ay fr
om a
pro
gram
that
exi
sted
for u
s in
the
Expl
orat
ion
Stra
tegy
200
3Ex
plor
atio
n St
rate
gy 2
012
that
stra
tegy
did
n’t w
ork.
We
spen
t abo
ut $
5 bi
llion
on
high
impa
ct
expl
orat
ion
and
we
certa
inly
did
n’t d
isco
ver e
noug
h re
sour
ces
to
gene
rate
acc
epta
ble
retu
rns
on th
at $
5 bi
llion
inve
stm
ent.
So
we
have
sh
ifted
our
exp
lora
tion
stra
tegy
…
[Fi
t]O
thi
f
past
, and
tow
ards
a p
rogr
am w
hich
con
cent
rate
s on
hig
h-im
pact
pr
ospe
cts.
I th
ink
the
area
s of
focu
s fo
r us
will
stil
l be
the
deep
wat
er G
ulf o
f Mex
ico,
de
epw
ater
offs
hore
Wes
t Afr
ica,
and
S
[Firs
t] O
ur th
ree
prim
ary
focu
s ar
eas
are
Gul
f of M
exic
o,
Wes
t Afr
ica
and
Asi
a-Pa
cific
…
The
seco
ndch
ange
Hes
sus
edto
drill
wel
lsat
high
wor
king
inte
rest
deep
wat
er S
outh
east
Asi
a.”
–Jo
hn O
’Con
nor,
FmrP
resi
dent
Wor
ldw
ide
E&
P H
ess,
Apr
il 20
03(1
)
The
seco
nd c
hang
e …
Hes
s us
ed to
dril
l wel
ls a
t hig
h w
orki
ng in
tere
st,
80%
to 1
00%
wor
king
inte
rest
. We
are
not g
oing
to d
o th
at a
nym
ore.
”–
Gre
gory
Hill
, EV
P W
orld
wid
e E
&P
Hes
s, N
ovem
ber 2
012(
2)
Less
than
ten
seco
nds
late
r :“T
here
is o
ne la
st a
rea
… th
at is
Kur
dist
an. W
e se
e lo
ts o
f hyd
roca
rbon
s
Less
than
thre
e m
onth
s la
ter:
On
Janu
ary
22, 2
013,
Hes
s’s
agre
emen
t to
acqu
ire a
dditi
onal
acr
eage
in
the
Par
isB
asin
and
carr
yE
gdon
Res
ourc
eson
Hui
ron-
1ex
plor
atio
nw
ell
ther
e, a
nd w
e’re
sho
otin
g se
ism
ic th
is y
ear a
nd w
e w
ill d
rill o
ur fi
rst w
ell
next
yea
r in
2013
.”(2
)
Aus
tral
iaB
razi
lC
olom
bia
Egyp
tK
urdi
stan
Liby
a
Rea
lity
sinc
e: u
nabl
e to
sta
y w
ithin
“fo
cus
area
”
the
Par
is B
asin
and
car
ry E
gdon
Res
ourc
es o
n H
uiro
n1
expl
orat
ion
wel
l w
as a
nnou
nced
. Hes
s ha
s 85
% w
orki
ng in
tere
st.(3
)C
hina
Fran
cePe
ru
Rea
lity:
una
ble
to s
tay
with
in “
focu
s ar
ea”
nor
avoi
d hi
gh w
orki
ng in
tere
st d
rillin
g
[ 39
]
Nei
ther
Kur
dist
an n
or F
ranc
e ar
e in
“fo
cus
area
s” a
nd a
re b
eing
dr
illed
at 8
0% a
nd 8
5% w
orki
ng in
tere
st re
spec
tivel
yS
ourc
e: C
ompa
ny F
iling
s, E
arni
ngs
Cal
l Tra
nscr
ipts
,1.
1Q 2
003
Ear
ning
s C
all
2.B
ank
of A
mer
ica
Mer
rill L
ynch
Con
fere
nce,
Nov
embe
r 201
23.
Egd
onR
esou
rces
pre
ss re
leas
e Ja
nuar
y 22
, 201
3
Una
ble
toLi
veW
ithin
Cas
hFl
owU
nabl
e to
Liv
e W
ithin
Cas
h Fl
ow
“…Th
e ke
y to
[pro
fitab
le g
row
th] w
ill be
[tha
t] w
e w
ill b
e ab
le to
live
with
in o
ur m
eans
and
deliv
er, I
thin
k, v
ery
attra
ctiv
e fin
anci
al
retu
rns
on a
goi
ng fo
rwar
d ba
sis
as I
said
.”-J
ohn
Hes
sJu
ly20
12(1
)Jo
hn H
ess,
Jul
y 20
12
“Our
Com
pany
has
alw
ays
been
dis
cipl
ined
, alw
ays
has
had
the
goal
ofliv
ing
with
inou
rmea
ns”
Shar
ehol
ders
hav
e he
ard
this
too
man
y tim
es b
efor
eH
isto
rical
cas
h flo
ws
tell
a di
ffere
nt s
tory
(6)
2011
2012
goal
of l
ivin
g w
ithin
our
mea
ns.
-Joh
n H
ess,
Feb
ruar
y 20
09(2
)
“We
wan
t to
live
with
in o
ur c
ash
flow
. We
usua
lly m
oder
ate
the
spen
ding
base
d up
on w
hat w
e ex
pect
the
cash
flow
to b
e fo
r th
eye
ar”
2008
-20
12
2010
-20
12
the
year
.-J
ohn
Hes
s, F
ebru
ary
2008
(3)
“Our
fina
nces
, we
wan
t to
live
with
in o
ur c
ash
flow
. If y
ou lo
ok
at o
ur c
ompa
ny's
pas
t you
'll se
e th
at w
e're
pre
tty d
isci
plin
ed
abou
ttha
t”
(50.
0%)
(40.
0%)
(30.
0%)
(20.
0%)
(10.
0%)
0.0%
10
.0%
20
.0%
2003
-20
12
Cl
tiF
Ch
Fl%
fOti
Ch
Fl
abou
t tha
t.-J
ohn
Hes
s, S
epte
mbe
r 200
6(4)
“…W
e ba
sica
lly h
ave
a ph
iloso
phy
of m
anag
ing
the
capi
tal s
pend
fo
r the
Cor
pora
tion
with
in th
e ca
sh fl
ows
that
the
busi
ness
es
thro
wof
f”C
umul
ativ
e Fr
ee C
ash
Flow
as
a %
of O
pera
ting
Cas
h Fl
ow
HE
SR
evis
ed P
roxy
Pee
r Med
ian
Pro
xy P
eer M
edia
n
thro
w o
ff.”
-Joh
n O
’Con
nor,
FmrP
resi
dent
Wor
ldw
ide
E&
P H
ess,
Ja
nuar
y 20
05(5
)
[ 40
]1.
Hes
s 2Q
201
2 E
arni
ngs
Con
fere
nce
Cal
l, Ju
ly 2
5, 2
012
2.C
redi
t Sui
sse
Gro
up E
nerg
y S
umm
it, F
ebru
ary
5, 2
009
3.C
redi
t Sui
sse
Gro
up E
nerg
y C
onfe
renc
e, F
ebru
ary
7, 2
008
4.Le
hman
Bro
ther
s C
EO
Ene
rgy
Con
fere
nce,
Sep
tem
ber 5
, 200
65.
Hes
s 4Q
200
4 E
arni
ngs
Con
fere
nce
Cal
l, Ja
nuar
y 26
, 200
56.
Com
pany
Fili
ngs.
Fre
e C
ash
Flow
def
ined
as
Ope
ratin
g C
ash
Flow
less
Cap
ex
Pers
ista
ntIn
abili
tyto
Del
iver
Ret
urns
toSh
areh
olde
rsPe
rsis
tant
Inab
ility
to D
eliv
er R
etur
ns to
Sha
reho
lder
s
“It s
houl
d be
obv
ious
that
we
have
mad
e a
lot o
f mov
es w
ith a
mul
ti-ye
ar s
trate
gy to
put
our
com
pany
in a
pos
ition
to g
ener
ate
long
-term
sha
reho
lder
val
ue,t
hat w
e lo
ok a
t thi
ngs
for a
ll sh
areh
olde
rs b
enef
it.”
-Jo
hn H
ess,
Jan
uary
201
3(1)
Hes
sR
evis
ed P
roxy
Pee
rsR
elat
ive
Perf
orm
ance
(2) :
“The
mos
t im
porta
nt p
art o
f our
fina
ncia
l stra
tegy
is,
obvi
ousl
y, u
ltim
atel
y, w
e w
ant t
o bu
ild a
com
pany
to
hb
ith
tdli
fit
tilfi
il
Wha
t is
obvi
ous
is th
at d
espi
te J
ohn
Hes
s’s
pere
nnia
l cla
ims,
yea
r afte
r yea
r sto
ck p
erfo
rman
ce fa
ils
Sep
tem
ber 2
011
-N
ovem
ber 2
012
(28%
)
have
a b
usin
ess
that
del
iver
s fir
stqu
artil
efin
anci
al
shar
ehol
der r
etur
ns”
Sep
tem
ber 2
011(
3)
“As
apo
tent
ials
hare
hold
eror
curr
ents
hare
hold
er
Sep
tem
ber 2
010
-N
ovem
ber 2
012
(40%
)
As
a po
tent
ial s
hare
hold
er o
r cur
rent
sha
reho
lder
yo
u sh
ould
feel
ver
y go
od a
bout
the
grow
th b
eing
ca
ptur
ed…
”S
epte
mbe
r 201
0(4)
Janu
ary
2009
-N
ovem
ber 2
012
(75%
)
“We
are
prou
d of
our
org
aniz
atio
n's
abilit
y to
del
iver
pe
rform
ance
and
rem
ain
conf
iden
t tha
t our
futu
re
inve
stm
ent o
ppor
tuni
ties
will
cre
ate
valu
e fo
r ou
rsha
reho
lder
s.”
Janu
ary
2009
(5)
Febr
uary
200
8 -
(66%
)“W
e th
ink
[hig
h-im
pact
exp
lora
tion]
is th
e be
st w
ay to
cr
eate
shar
ehol
derv
alue
and
we'
ve b
een
deliv
erin
g on
that
.”Fe
brua
ry20
08(6
)
(60%
)(3
0%)
0%
30%
60
% N
ovem
ber 2
012
[41
]1.
4Q 2
012
Ear
ning
s ca
ll, J
anua
ry 3
0, 2
013
2.R
evis
ed p
roxy
pee
rs fr
om th
e da
te o
f quo
te th
roug
h 11
/28/
12, d
ate
befo
re w
hich
E
lliott
bega
n to
pur
chas
e a
subs
tant
ial a
mou
nt o
f Hes
s st
ock
3.B
arcl
ays
Con
fere
nce,
Sep
tem
ber 8
, 201
1
4.B
arcl
ays
Con
fere
nce,
Sep
tem
ber 1
6, 2
010
5.4Q
200
8 E
arni
ngs
call,
Jan
uary
28,
200
96.
Cre
dit S
uiss
e C
onfe
renc
e, F
ebru
ary
7, 2
008
Febr
uary
200
8(6)
Fund
amen
talP
robl
ems
atH
ess
Fund
amen
tal P
robl
ems
at H
ess
Unr
elen
ting
Und
erpe
rfor
man
ce
Lack
of F
ocus
Ue
et
gU
depe
oa
ce
Und
isci
plin
ed C
apita
l Allo
catio
n
Ope
ratio
nal M
ism
anag
emen
t
Endl
ess
Inef
fect
ive
Res
truc
turin
gsEn
dles
s In
effe
ctiv
e R
estr
uctu
rings
Aby
smal
Gov
erna
nce
Cul
ture
[ 42
]
His
tory
ofA
bysm
alG
over
nanc
eC
ultu
reat
Hes
sH
isto
ry o
f Aby
smal
Gov
erna
nce
Cul
ture
at H
ess
Std
BdC
orpo
rate
gov
erna
nce
failu
res
unde
r Joh
n H
ess’
s te
nure
St
agge
red
Boa
rd
M
ultip
le a
ttem
pts
by S
hare
hold
ers
to d
esta
gger
Boa
rd li
kely
blo
cked
by
John
Hes
s
C
ompe
nsat
ion
p M
anag
emen
t and
dire
ctor
s aw
arde
d $5
40 m
illion
whi
le u
nder
perfo
rmin
g pe
ers
by 4
60%
(1)
$8
mill
ion
paid
dire
ctly
to B
oard
mem
bers
by
CEO
’s fa
mily
est
ate
for s
ervi
ce a
s ex
ecut
ors(
2)
D
irect
or te
nure
17
yea
r ave
rage
tenu
re o
f non
-man
agem
ent d
irect
ors
at re
tirem
ent
N
o ef
fort
to e
ver r
efre
sh th
e B
oard
: las
t ret
irem
ent o
f non
-man
agem
ent d
irect
or w
as in
200
3
O
il &
Gas
ope
ratin
g ex
perie
nce
N
ever
eve
n on
ein
depe
nden
t dire
ctor
with
oil
& g
as o
pera
ting
expe
rienc
e
Le
ast i
ndep
ende
nce
C
onsi
sten
tly 3
join
t-exe
cuto
rs o
f Hes
s es
tate
ser
ved
as d
irect
ors
C
ontin
ually
inte
rlock
ing
dire
ctor
and
man
agem
ent r
elat
ions
hips
(3)
N
ever
few
erth
an3
dire
ctor
sth
atar
em
anag
emen
tmem
bers
atan
yon
etim
e
[ 43
]S
ourc
es:C
ompa
ny F
iling
s, B
loom
berg
1.S
ee s
lide
462.
See
slid
e 50
3.S
ee s
lide
49
N
ever
few
er th
an 3
dire
ctor
s th
at a
re m
anag
emen
t mem
bers
at a
ny o
ne ti
me
Cur
rent
Boa
rd E
xem
plifi
es L
ack
of A
dequ
ate
Dire
ctor
Ove
rsig
htC
ontin
ues
Tren
d Th
at H
as B
een
in P
lace
Dur
ing
Entir
e Te
nure
of C
urre
nt
Cha
irman
&C
EOC
hairm
an &
CEO
30%
35%
14 y
rsH
ess
Peer
Ave
rage
(3)
Leas
t ind
epen
dent
, lea
st e
nerg
y ex
perie
nce,
mos
t man
agem
ent d
irect
ors
and
one
of th
e lo
nges
t ten
ures
5%10%
15%
20%
25%
30%
10 y
rs
12 y
rs0%
fo
r H
ess
?!?!
3 M
anag
emen
t Dire
ctor
svs
.
0%5%
Oil
& G
as O
pera
ting
Exp
erie
nce
Tenu
re8
yrs
Pee
r Ave
rage
of 1
.4
Nam
eA
ge (2)
Tenu
re(2
)R
elat
ive
Perf
orm
ance
Ove
r Ten
ure(
3)
Oil
& G
as
Ope
ratin
g Ex
perie
nce
Bac
kgro
und
(1)
John
Hes
s58
35 /
17(4
60%
)H
ess
Man
agem
ent
Hes
s C
hairm
an&
CEO
Thom
as H
. Kea
n77
23(1
,022
%)
Non
eG
over
nmen
t; Jo
int e
xecu
tor H
ess
esta
te; D
irect
or &
Sec
. of H
ess
Cha
ritab
le T
rust
Edith
Hol
iday
6120
(589
%)
Non
eG
over
nmen
t
Nic
hola
s F.
Bra
dy82
19(5
50%
)N
one
Gov
ernm
ent/F
inan
ce; J
oint
exe
cuto
rHes
s es
tate
; inv
ests
for H
ess
Cha
ritab
le T
rust
Rob
ert W
ilson
7217
(335
%)
Non
eH
ealth
care
; Joh
nson
-Hes
s fa
mily
con
nect
ion
Fran
k A
. Ols
on80
15(3
96%
)N
one
Auto
Ren
tal
Cra
ig M
atth
ews
6911
(153
%)
Non
eE
lect
ricity
Ern
st v
on M
etzs
ch73
10(4
4%)
Non
eFi
nanc
e
Ris
aLa
vizz
onM
oure
y58
9(6
8%)
Non
eN
onpr
ofit;
John
son
Hes
sfa
mily
conn
ectio
nR
isa
Lavi
zzon
-Mou
rey
589
(68%
)N
one
Non
-pro
fit; J
ohns
on-H
ess
fam
ily c
onne
ctio
n
F. B
orde
n W
alke
r(4)
599
(68%
)H
ess
Man
agem
ent
Hes
sE
VP
& P
resi
dent
, Mar
ketin
g an
d R
efin
ing
John
Mul
lin II
I71
6(5
6%)
Non
eFi
nanc
e; J
oint
exe
cuto
r of H
ess
esta
te
Sam
uelB
odm
an74
4(4
7%)
Non
eG
over
nmen
t/Che
mic
als
Gre
gory
P. H
ill52
4(4
7%)
Hes
s M
anag
emen
tH
ess
EV
P &
Pre
side
nt, W
orld
wid
e Ex
plor
atio
n an
d Pr
oduc
tion
[ 44
]
gy
()
g,
p
Sam
uel A
. Nun
nJr
.74
6 m
oN
AN
one
Gov
ernm
ent;
Cha
irman
CS
ISof
whi
ch J
ohn
Hes
s is
a T
rust
eeS
ourc
es:C
ompa
ny F
iling
s, B
loom
berg
1.N
on-m
anag
emen
t dire
ctor
s2.
Age
and
tenu
re c
alcu
late
d as
of d
ate
of 2
013
annu
al g
ener
al m
eetin
g; T
enur
e fo
r Joh
n H
ess
show
s bo
th a
s di
rect
or a
nd a
s C
EO
, res
pect
ivel
y3.
Rev
ised
pro
xy p
eers
: Ana
dark
o, A
pach
e, E
OG
, Che
vron
, Con
ocoP
hillip
s, E
xxon
, Mar
atho
n, M
urph
y, N
oble
, Occ
iden
tal.
Und
erpe
rform
ance
cal
cula
ted
from
1st
day
of th
e ye
ar fo
llow
ing
appo
inte
d to
th
e B
oard
thro
ugh
11/2
8/12
, dat
e be
fore
whi
ch E
lliot
t beg
an to
pur
chas
e a
subs
tant
ial a
mou
nt o
f sto
ck. J
ohn
Hes
s ca
lcul
ated
from
the
year
he
was
app
oint
ed C
EO
4.O
n M
arch
4, 2
013,
F. B
orde
n W
alke
r was
repl
aced
with
out a
vot
e by
Jam
es H
. Qui
gley
Hes
s H
as M
ade
No
Atte
mpt
to R
efre
sh It
s B
oard
Unt
ilSh
areh
olde
rNom
inee
sSt
eppe
dFo
rwar
dU
ntil
Shar
ehol
der N
omin
ees
Step
ped
Forw
ard
N
ot a
sin
gle
non-
man
agem
ent d
irect
or h
as re
tired
from
the
Hes
s B
oard
sin
ce 2
003
Th
e av
erag
e te
nure
of a
dire
ctor
whe
n st
eppi
ng o
ff th
e H
ess
Boa
rd is
17
year
s
H
ess
has
neve
r had
eve
n on
e in
depe
nden
t dire
ctor
with
oil
& g
as o
pera
ting
expe
rienc
e Hes
s ha
s ne
ver r
efre
shed
its
Boa
rd d
espi
te d
espe
rate
nee
d fo
r new
idea
s
[ 45
]
Boa
rd a
nd M
anag
emen
t Rec
eive
d $5
40 M
illio
n in
Com
pens
atio
n W
hile
Del
iver
ing
Unr
elen
ting
Und
erpe
rfor
man
ceW
hile
Del
iver
ing
Unr
elen
ting
Und
erpe
rfor
man
ce
Hes
s O
ver (
Und
er)P
erfo
rman
ce(2
,3)
$540
mm
Pai
d to
Boa
rd a
nd M
anag
emen
tJo
hn H
ess
Tenu
re17
Yea
rs5-
Year
4-Ye
ar3-
Year
2-Ye
ar1-
Year
vs P
roxy
Pee
rs(3
33)%
(31)
%(4
3)%
(29)
%(4
0)%
(17)
%
C
ompe
nsat
ion
to J
ohn
Hes
s: $
195m
m(1
)
vs R
evis
ed P
roxy
Pee
rs(4
60)%
(45)
%(6
3)%
(44)
%(4
7)%
(20)
%
vs B
akke
n O
pera
tors
NA
(263
)%(9
84)%
(184
)%(7
0)%
(16)
%
vs X
LEN
A(3
1)%
(57)
%(4
3)%
(44)
%(2
0)%
C
ompe
nsat
ion
to M
anag
emen
t exc
l. C
EO: $
313m
m(1
)
C
ompe
nsat
ion
to B
oard
: $32
mm
(1)
vs X
OP
NA
(39)
%(8
1)%
(52)
%(3
9)%
(15)
%
Des
pite
hig
hest
oil
wei
ghtin
g of
any
pee
r……
and
mat
eria
l pos
ition
in th
e B
akke
n, le
adin
g U
.S. o
il pl
ay
In 3
of t
he la
st 5
yea
rs, J
ohn
Hes
s ha
s ra
nked
in th
e To
p 25
Hig
hest
Pai
d C
EOs(
4)...
…de
spite
und
erpe
rfor
min
g pe
ers
by (5
5%)(5
)
[ 46
]
Sou
rce:
Blo
ombe
rg, C
ompa
ny fi
lings
1.A
djus
ted
for i
nfla
tion
usin
g B
loom
berg
Urb
an C
PI;
Joh
n H
ess
com
pens
atio
n ca
lcul
ated
ove
r his
te
nure
as
CE
O, e
xclu
ding
infla
tion
John
Hes
s w
as p
aid
a cu
mul
ativ
e $1
65 m
illio
n; N
EO
’s
com
pens
atio
n ca
lcul
ated
ove
r Joh
n H
ess’
s te
nure
as
CE
O, e
xclu
ding
infla
tion
NE
Os
wer
e pa
id a
cu
mul
ativ
e $2
46 m
illio
n; D
irect
or c
ompe
nsat
ion
over
the
tenu
re o
f eac
h di
rect
or, e
xclu
ding
infla
tion
com
pens
atio
n to
tale
d $2
6 m
illio
n2.
As
of 1
1/28
/12,
dat
e be
fore
whi
ch E
lliot
t beg
an to
pur
chas
e a
subs
tant
ial a
mou
nt o
f Hes
s st
ock
3.P
roxy
pee
rs: U
sed
by H
ess
for m
gmt c
ompe
nsat
ion:
Ana
dark
o, A
pach
e, B
P, C
hevr
on,
Con
ocoP
hillip
s, D
evon
, EO
G, E
xxon
, Mar
atho
n, M
urph
y, O
ccid
enta
l, S
hell,
Sta
toil,
Tal
ism
an a
nd
Tota
l ; R
evis
ed p
roxy
pee
rs: e
xclu
des
Dev
on &
Tal
ism
an d
ue to
hig
h N
orth
Am
eric
a ga
s w
eigh
ting;
ex
clud
es B
P, S
hell,
Sta
toil,
Tot
al d
ue to
Eur
opea
n su
per m
ajor
sta
tus;
incl
udes
Nob
le a
s ad
ditio
nal
rele
vant
com
petit
or;
Bak
ken
Ope
rato
rs: I
nclu
des
Con
tinen
tal,
Oas
is a
nd K
odia
k4.
ww
w.F
orbe
s.co
m; A
ccor
ding
to F
orbe
s, J
ohn
Hes
s co
mpe
nsat
ion
rank
ed #
23, #
132,
#94
, #3
and
#25
in 2
012,
201
1, 2
010,
200
9, 2
008
resp
ectiv
ely
for a
ll S
&P
500
com
pani
es5.
Ver
sus
revi
sed
prox
y pe
ers;
Fro
m J
anua
ry 1
, 200
8 th
roug
h D
ecem
ber 3
1,20
12
Unr
espo
nsiv
eto
Wid
eC
ritic
ism
That
Com
pany
Lack
sPa
yfo
rPer
form
ance
Unr
espo
nsiv
e to
Wid
e C
ritic
ism
Tha
t Com
pany
Lac
ks P
ay fo
r Per
form
ance
…
2012
Say
onPa
ySu
ppor
t(1)
Shar
ehol
ders
obj
ect t
o H
ess
com
pens
atio
nPr
oxy
advi
sors
crit
ical
of H
ess
pay
polic
ies
2012
Say
on
Pay
Supp
ort(1
)“S
hare
hold
er re
turn
s co
ntin
ue to
und
erpe
rfor
m p
eers
sim
ilar
in s
ize
and
indu
stry
(as
wel
l as
the
broa
d in
dust
ry a
nd m
arke
t in
dex)
ove
r the
last
1-a
nd 3
-fisc
al y
ear p
erio
ds, w
hile
CEO
co
mpe
nsat
ion
outr
anke
d m
ost p
eers
. Whi
le th
e co
mpa
ny
has
chan
ged
its a
ppro
ach
to lo
ng-te
rm e
quity
aw
ards
as
of
S&P
500
2012
, goa
ls fo
r per
form
ance
sha
res
(whi
ch re
plac
ed s
tock
op
tions
with
resp
ect t
o ha
lf of
the
awar
d va
lue)
do
not a
ppea
r rig
orou
s re
lativ
e to
his
toric
al a
war
d op
portu
nitie
s.”
ISS
Pro
xy A
dvis
ory
Ser
vice
s, 2
012
Hes
s C
ore
Rep
ort(4
)
Ener
gy
Com
pani
es
O
nly
51%
supp
orto
nH
ess
Say
onP
ay(1
)
“The
Com
pany
has
bee
n de
ficie
nt in
link
ing
exec
utiv
e pa
y to
cor
pora
te p
erfo
rman
cein
the
past
yea
r, as
indi
cate
d by
th
e "D
" gra
de re
ceiv
ed b
y th
e C
ompa
ny in
Gla
ss L
ewis
' pay
-fo
r-per
form
ance
mod
el. A
pro
perly
stru
ctur
ed p
ay p
rogr
am
shou
ldm
otiv
ate
exec
utiv
esto
driv
eco
rpor
ate
perfo
rman
ce40
%60
%80
%10
0%
Hes
s
O
nly
51%
sup
port
on H
ess
Say
on P
ay(1
)
42
7th
out o
f 450
in S
&P 5
00(2
)
14
9th
out o
f 156
Ene
rgy
com
pani
es(2
)
Av
erag
e S
&P
500
supp
ort f
or “S
ay o
n P
ay”
vote
s in
201
2 w
as 8
7%(2
)
shou
ld m
otiv
ate
exec
utiv
es to
driv
e co
rpor
ate
perfo
rman
ce,
thus
alig
ning
exe
cutiv
e an
d lo
ng-te
rm s
hare
hold
er in
tere
sts.
In
this
cas
e, th
e C
ompa
ny h
as n
ot im
plem
ente
d su
ch a
pr
ogra
m. F
urth
erm
ore,
we
note
that
the
Com
pany
rece
ived
pa
y-fo
r-per
form
ance
gra
des
of "D
" and
"D" i
n ou
r 201
1 an
d 20
10P
roxy
Pape
rsre
spec
tivel
yIn
ourv
iew
shar
ehol
ders
H
ess’
s cu
mul
ativ
e C
EO
com
pens
atio
n ov
er th
e pa
st 5
ye
ars
rank
s in
the
73rd
perc
entil
ere
lativ
e to
pee
rs,
whi
le to
tal s
hare
hold
er re
turn
s ov
er th
e sa
me
5 ye
ar
perio
d ra
nk in
the
20th
perc
entil
e(3)
2010
Pro
xy P
aper
s, re
spec
tivel
y. In
our
vie
w, s
hare
hold
ers
shou
ld b
ede
eply
con
cern
ed w
ith th
e co
mpe
nsat
ion
com
mitt
ee's
sus
tain
ed fa
ilure
in th
is a
rea.
”
Gla
ss L
ewis
201
2 H
ess
Cor
pora
tion
Pro
xy P
aper
(5)
[ 47
]
Sou
rces
: Com
pany
Fili
ngs,
Blo
ombe
rg1.
Hes
s es
tate
is a
ssum
ed to
sup
port
Say
on
Pay
and
is e
xclu
ded
from
cal
cula
tion
2.O
ther
com
pani
es d
id n
ot h
ave
say
on p
ay v
otes
; Hes
s es
tate
is n
ot e
xclu
ded
from
cal
cula
tion
3.S
hare
hold
er re
turn
s an
d m
arke
t cap
italiz
atio
n as
of 1
1/28
/12,
dat
e be
fore
whi
ch E
lliot
t beg
an to
pur
chas
e a
subs
tant
ial a
mou
nt o
f sto
ck4.
ISS
com
men
tary
on
Hes
s, H
ess
Cor
pora
tion
2012
Cor
e R
esea
rch
Rep
ort
5.G
lass
Lew
is c
omm
enta
ry o
n H
ess,
Hes
s C
orpo
ratio
n 20
12 P
roxy
Pap
er
pp
And
Mis
alig
ned
Com
pens
atio
nH
asPe
rsis
ted
forY
ears
… A
nd M
isal
igne
d C
ompe
nsat
ion
Has
Per
sist
ed fo
r Yea
rs
“ISS
' qua
ntita
tive
anal
ysis
indi
cate
s th
at C
EO
pay
sig
nific
antly
out
rank
ed p
eer c
ompa
nies
with
in s
imila
r sec
tor a
nd s
ize
rang
es, w
hile
1-a
nd 3
-yea
r TS
Rs
wer
e at
or n
ear t
he b
otto
m ra
nkin
g of
the
sam
e pe
er g
roup
. Spe
cific
ally,
rela
tive
TSR
pe
rfor
man
ce h
as b
een
at th
e lo
wer
end
of t
he b
otto
m q
uart
ile o
f pee
rs w
hile
CEO
pay
has
bee
n in
the
top
quar
tile.
”IS
SP
Ad
iS
iH
CR
t201
2
“The
Com
pany
has
bee
n de
ficie
nt in
link
ing
exec
utiv
e pa
y to
cor
pora
te p
erfo
rman
ce in
the
past
yea
r…. A
pro
perly
st
ruct
ured
pay
pro
gram
sho
uld
mot
ivat
e ex
ecut
ives
to d
rive
corp
orat
e pe
rform
ance
, thu
s al
igni
ng e
xecu
tive
and
long
-term
sh
areh
olde
r int
eres
ts. I
n th
is c
ase,
the
Com
pany
has
not
impl
emen
ted
such
a p
rogr
am…
In o
ur v
iew
, sha
reho
lder
ssh
ould
bede
eply
conc
erne
dw
ithth
eco
mpe
nsat
ion
com
mitt
ee's
sust
aine
dfa
ilure
inth
isar
eaIn
light
ofth
e
ISS
Pro
xy A
dvis
ory
Ser
vice
s, H
ess
Cor
e R
epor
t 201
2
shou
ld b
e de
eply
con
cern
ed w
ith th
e co
mpe
nsat
ion
com
mitt
ees
sust
aine
d fa
ilure
in th
is a
rea.
.. In
ligh
t of t
he
Com
pany
's fa
ilure
to a
lign
exec
utiv
e pa
y w
ith p
erfo
rman
ce, w
e be
lieve
the
issu
es li
sted
abo
ve a
re g
rave
eno
ugh
to
war
rant
a v
ote
agai
nst t
he C
ompa
ny's
exe
cutiv
e co
mpe
nsat
ion
prog
ram
…”
Gla
ss L
ewis
, Hes
s P
roxy
Pap
er 2
012
“Whi
le th
e co
mpe
nsat
ion
com
mitt
ee h
as m
ade
som
e ch
ange
s to
the
exec
utiv
e co
mpe
nsat
ion
prog
ram
…it
is n
ot c
lear
that
“Our
ana
lysi
s fin
ds th
at th
e C
ompa
ny h
as n
ot a
dequ
ate
linke
d ex
ecut
ive
com
pens
atio
n w
ith p
erfo
rman
ce, m
uch
like
the
prev
ious
yea
r. S
hare
hold
ers
shou
ld b
e ve
ry c
once
rned
by
this
tren
d, e
spec
ially
due
to th
e la
ck o
f tra
nspa
renc
y in
th
C’
lldi
lfh
itd
ti”
thes
e w
ill im
prov
e th
e si
gnifi
cant
his
toric
al p
ay-fo
r-pe
rfor
man
ce m
isal
ignm
ent e
vide
nced
at t
he c
ompa
ny.”
ISS
Pro
xy A
dvis
ory
Ser
vice
s, H
ess
Cor
e R
epor
t 201
2
the
Com
pany
’s o
vera
ll di
sclo
sure
of h
ow it
aw
ards
com
pens
atio
n….”
Gla
ss L
ewis
, Hes
s P
roxy
Pap
er 2
011
“…sh
areh
olde
rs s
houl
d co
ntin
ue to
mon
itor t
he p
ay-fo
r-pe
rform
ance
alig
nmen
t at H
ess,
in li
ght o
f the
CE
O's
abo
ve
med
ian
pay
and
lack
of p
erfo
rman
ce-c
ondi
tione
d lo
ng-te
rm in
cent
ives
.” ISS
Pro
xyA
dvis
ory
Ser
vice
sH
ess
Cor
eR
epor
t201
1IS
S P
roxy
Adv
isor
y S
ervi
ces,
Hes
s C
ore
Rep
ort 2
011
“Hes
s’ e
xecu
tive
com
pens
atio
n re
ceiv
ed a
D g
rade
in o
ur p
ropr
ieta
ry p
ay-fo
r-pe
rform
ance
mod
el…
”G
lass
Lew
is, H
ess
Pro
xy P
aper
201
0
Gla
ss L
ewis
His
toric
al H
ess
Com
pens
atio
n Sc
ore
[ 48
]
2006
2007
2008
2009
2010
2011
2012
CD
CC
DD
D
Sou
rces
: IS
S P
roxy
Ser
vice
s an
d G
lass
Lew
is
Cul
ture
of C
ozin
ess
Und
erm
ines
Cre
dibi
lity
of B
oard
to S
elec
t Nom
inee
s;
Exte
rnal
Nom
inee
sR
equi
red
Exte
rnal
Nom
inee
s R
equi
red
Fran
klin
Le
on H
ess
Mul
lin II
I
Kea
n
Wal
ker
Mut
ual
Esta
te
Hill
Bra
dy
Whi
te
Mou
ntai
n In
sura
nce
Dill
on R
ead
Ols
onH
olid
ayJo
hnH
ess
NU
IG
over
nmen
t
John
Hes
s
NU
IO
verla
pM
atth
ews
Bod
man
John
son
Fam
ilyW
eath
erfo
rd
Lavi
zzo-
Mou
rey
Wils
onvo
n M
etzs
ch
Nun
n
[ 49
]
Cen
ter f
or
Stra
tegi
c &
In
t’l
Stud
ies
Bev
erly
En
terp
rises
Hes
s’s
Boa
rdro
om D
eem
s Th
is A
ppro
pria
te:
3 “I
ndep
ende
nt”
Dire
ctor
s A
re P
aid
Mill
ions
to S
erve
As
Join
t Exe
cuto
rs o
f Jo
hnH
ess’
sFa
mily
Esta
teJo
hn H
ess
s Fa
mily
Est
ate
Nic
hola
s B
rady
John
Mul
lin II
ITh
omas
Kea
ny
Lead
Inde
pend
ent D
irect
orLe
adIn
depe
nden
t Dire
ctor
Inde
pend
ent D
irect
orp A
ND
Join
t-Exe
cuto
r, H
ess
Esta
te
p AN
D
Join
t-Exe
cuto
r, H
ess
Esta
te
p
AN
D
Join
t-Exe
cuto
r, H
ess
Esta
te
Com
pens
atio
n pa
id b
y Jo
hn H
ess’
s fa
mily
est
ate
for s
ervi
ng a
s ex
ecut
or(1
) :
$8 m
illio
ndi
rect
ly to
Boa
rd m
embe
rs
$3 m
illio
n di
rect
ly to
Lea
d In
depe
nden
t Dire
ctor
s
[ 50
]S
ourc
e: C
ompa
ny fi
lings
1.C
ompe
nsat
ion
calc
ulat
ed a
s pe
r Las
t Will
& T
esta
men
t of L
eon
Hes
s
Shar
ehol
ders
Hav
eTr
ied
toH
old
Hes
sA
ccou
ntab
leSh
areh
olde
rs H
ave
Trie
d to
Hol
d H
ess
Acc
ount
able
With
hold
ing
vote
s on
dire
ctor
s %
of T
otal
Sha
res
Vote
d fo
r Dec
lass
ifica
tion(
3)
Tryi
ng to
de-
stag
ger B
oard
Obj
ectin
g vi
a Sa
y on
Pay
Mos
t Rec
ent V
otes
With
held
Fro
m D
irect
ors(
1)Sa
y on
Pay
Sup
port
(4)
Brad
y
Kea
n
2010
2012
S&P
500
Ols
on
Hol
iday
Bod
man
2011
2008
Ener
gy
Com
pani
es
S&
PA
vera
geB
odm
an
Von
Met
zsch
2012
0%10
%20
%30
%40
%50
%
90
+%of
outs
ide
shar
ehol
ders
vote
dto
39
%39
%an
d33
%of
vote
sw
ithhe
ldag
ains
t
0%20
%40
%60
%80
%10
0%
2007
40%
60%
80%
100%
Hes
s
O
nly
51%
supp
orto
nH
ess
Say
onP
ay(4
)
S&
P A
vera
ge
90
+% o
f out
side
sha
reho
lder
s vo
ted
to
decl
assi
fy th
e H
ess
Boa
rd in
3 s
epar
ate
vote
s
C
harte
r/byl
aws
requ
ire 8
0% o
f out
stan
ding
. In
2008
, Boa
rd re
com
men
ded
ford
e-st
agge
ring:
24
6mm
sha
res
vote
d to
de-
stag
ger
76
%of
outs
tand
ing
shar
es
39
%, 3
9% a
nd 3
3% o
f vot
es w
ithhe
ld a
gain
st
Bra
dy, K
ean
and
Ols
on, r
espe
ctiv
ely(
1)
14
%, 1
4%, a
nd 1
4% o
f vot
es w
ithhe
ld a
gain
st
Hol
iday
, Bod
man
, and
von
Met
zsch
(1)
Fo
rcon
text
in20
12th
eav
erag
epe
rcen
tage
O
nly
51%
sup
port
on H
ess
Say
on
Pay
(4)
42
7th
out o
f 450
in S
&P
500
(5)
14
9th
out o
f 156
Ene
rgy
com
pani
es(5
)
A
vera
ge S
&P
500
sup
port
for “
Say
on
Pay
” vot
es in
201
2 w
as 8
7%(5
)
76
% o
f out
stan
ding
sha
res
87
% o
f vot
ing
shar
es
37 m
m s
hare
s vo
ted
agai
nst d
ecla
ssifi
catio
n (J
ohn
Hes
s co
ntro
lled
37m
m s
hare
s)D
id J
ohn
Hes
s vo
te a
gain
st h
is b
oard
’s
reco
mm
enda
tion
and
agai
nst
Fo
r con
text
, in
2012
the
aver
age
perc
enta
ge
of v
otes
with
held
from
a n
omin
ee in
a n
on-
cont
este
d S
&P
500
ele
ctio
n w
as 3
.7%
(2)
H
ess’
s cu
mul
ativ
e C
EO
com
pens
atio
n ov
er
the
past
5 y
ears
rank
s in
the
73rd
perc
entil
ere
lativ
e to
pee
rs, w
hile
tota
l sha
reho
lder
re
turn
s ov
er th
e sa
me
5 ye
ar p
erio
d ra
nk in
th
e 20
thpe
rcen
tile(
6)
[ 51
]
gde
clas
sific
atio
n?
Sou
rces
:Com
pany
Filin
gs, F
acts
et, I
SS
Vot
ing
Ana
lytic
s1.
% o
f vot
ed s
hare
s w
ithhe
ld; H
ess
esta
te is
ass
umed
to h
ave
vote
d fo
r nom
inee
s an
d is
exc
lude
d fro
m c
alcu
latio
n2.
Fact
setS
hark
Rep
elle
nt3.
Hes
s es
tate
is a
ssum
ed to
hav
e vo
ted
agai
nst d
ecla
ssifi
catio
n an
d is
exc
lude
d fro
m c
alcu
latio
n
4.H
ess
esta
te is
ass
umed
to s
uppo
rt S
ay o
n P
ay a
nd is
exc
lude
d fro
m c
alcu
latio
n5.
Oth
er c
ompa
nies
did
not
hav
e sa
y on
pay
vot
es; H
ess
esta
te is
not
excl
uded
from
cal
cula
tion
6.S
hare
hold
er re
turn
s an
d m
arke
t cap
italiz
atio
n as
of 1
1/28
/12,
dat
e be
fore
whi
ch E
lliot
t beg
an to
pu
rcha
se a
sub
stan
tial a
mou
nt o
f sto
ck
37m
m S
hare
s Pr
even
ted
All
Dire
ctor
s fr
om B
ecom
ing
Acc
ount
able
And
John
Hes
sH
ad37
mm
Shar
es…
And
Joh
n H
ess
Had
37m
m S
hare
s
How
did
Joh
n H
ess
vote
in 2
008?
How
will
Joh
n H
ess
vote
this
yea
r?
D
e-st
agge
ring
the
Hes
s B
oard
requ
ires
80%
of o
utst
andi
ng (n
ot ju
st v
otin
g)
shar
es
In
200
7, S
hare
hold
ers’
bac
ked
de-
ti
thH
Bd
ith97
%
% o
f Tot
al S
hare
s Vo
ted
for
Dec
lass
ifica
tion(
1)
In
201
2, S
hare
hold
ers
agai
n ba
cked
de-
stag
gerin
g th
e B
oard
with
ove
r 94%
of o
utsi
de
vote
rs e
lect
ing
to d
e-st
agge
r(1)
N
ow,t
he H
ess
Boa
rd a
gain
has
reco
mm
ende
d FO
Rd
ti
thB
dst
agge
ring
the
Hes
s Bo
ard
with
ove
r 97%
of
out
side
vot
ers
elec
ting
to d
e-st
agge
r(1)
In
200
8, th
e H
ess
Boa
rd re
com
men
ded
FOR
de-
stag
gerin
g th
e B
oard
(had
they
20
12
FOR
de-
stag
gerin
g th
e Bo
ard
Ye
t, at
the
sam
e tim
e th
e B
oard
opp
oses
a
shar
ehol
der p
ropo
sal t
o re
mov
e th
e 80
% v
otin
g re
quire
men
t tha
t pre
vent
ed d
e-st
agge
ring
the
Boa
rd th
ree
times
bef
ore
not,
they
may
hav
e ha
d go
vern
ance
ag
enci
es re
com
men
d w
ithho
lds
on a
ll of
th
eir n
omin
ees)
24
5.7m
m s
hare
s vo
ted
to d
e-st
agge
r
76
%of
outs
tand
ing
shar
es
2008
76
% o
f out
stan
ding
sha
res
87
% o
f vot
ing
shar
es
1.
8mm
sha
res
abst
aine
d
37
.1 m
m s
hare
s vo
ted
agai
nst
decl
assi
ficat
ion
(Joh
nH
ess
0%20
%40
%60
%80
%10
0%
2007
decl
assi
ficat
ion
(Joh
n H
ess
cont
rolle
d 36
.6m
m s
hare
s)
Did
Joh
n H
ess
vote
aga
inst
the
reco
mm
enda
tion
of h
is O
WN
BO
AR
D o
f whi
ch h
e is
Cha
irman
?
How
will
hevo
teth
isye
ar?
[ 52
]
How
will
he
vote
this
yea
r?
Sou
rces
:Com
pany
Filin
gs, F
acts
et, I
SS
Vot
ing
Ana
lytic
s1.
Hes
s es
tate
is a
ssum
ed to
hav
e vo
ted
agai
nst d
ecla
ssifi
catio
n an
d is
exc
lude
d fro
m c
alcu
latio
n
Cul
ture
of A
void
ing
Acc
ount
abili
ty
With
Dis
clos
ure
Com
es A
ccou
ntab
ility
:D
enia
lIs
Easy
Whe
nTh
ere
IsN
oD
iscl
osur
eD
enia
l Is
Easy
Whe
n Th
ere
Is N
o D
iscl
osur
e
Nb
fAl
tDU
dt
Cll
2007
2013
(1)
No
Ana
lyst
Day
for n
early
7 y
ears
Num
ber o
f Ana
lyst
Day
s or
Upd
ate
Cal
ls 2
007-
2013
(1)
6 7 8 2 3 4 5
0 fo
r
0 1
Hes
sP
roxy
Pee
rsR
evis
ed P
roxy
Pee
rs
Hes
s?!
?!
Num
ber o
f Pag
es in
Mos
t Det
aile
d Pr
esen
tatio
n in
Pas
t Yea
r(1)
ube
oag
esos
tet
aed
ese
tato
ast
ea
100
120 4060
80
[54
]S
ourc
es: B
loom
berg
, Cap
IQan
d C
ompa
ny W
ebsi
tes
1.20
07 th
roug
h 3/
1/13
20
40
Hes
sPr
oxy
Pee
rsR
evis
ed P
roxy
Pee
rs
Cul
ture
ofA
void
ing
Acc
ount
abili
tyC
ultu
reof
Avo
idin
g A
ccou
ntab
ility
Den
y La
ck o
f Foc
us
Den
y St
ock
Perf
orm
ance
y
Den
y U
ndis
cipl
ined
Cap
ital A
lloca
tion
Den
y O
pera
tiona
l Mis
man
agem
ent
Den
y A
bysm
al G
over
nanc
e C
ultu
re
Rec
ogni
tion
of re
ality
, and
the
acco
unta
bilit
y th
at c
omes
with
it a
t a p
ublic
com
pany
, see
m to
be
prec
isel
y w
hat H
ess’
s M
anag
emen
t and
Boa
rd a
re d
oing
eve
ryth
ing
in th
eir p
ower
to a
void
[55
]
Des
pite
17
Year
Ten
ure
of C
EO a
nd 1
3 Ye
ar A
vera
ge T
enur
e of
the
Boa
rd,
Hes
sTe
llsSh
areh
olde
rsto
Onl
yR
emem
berL
astS
ixM
onth
sH
ess
Tells
Sha
reho
lder
s to
Onl
y R
emem
ber L
ast S
ix M
onth
s
“Sin
ce J
uly
24, 2
012,
the
last
day
of t
radi
ng b
efor
e w
e an
noun
ced
our u
pdat
ed s
trat
egy,
Hes
s sh
ares
hav
e in
crea
sed.
..”-J
ohn
Hes
sJa
nuar
y28
2013
(1)
120
John
Hes
s, J
anua
ry 2
8, 2
013
100
110
1/25
/13
date
bef
ore
Ellio
tt’s
inte
ntio
n to
no
min
ate
dire
ctor
s be
cam
e pu
blic
7080
90
47%
Und
erpe
rform
ance
(2,4
)
5% O
utpe
rform
ance
(2,5
)
$0.7
bn o
f Mar
ket C
ap
Reg
aine
d(3,
5)
50
60
70
$9.4
bn o
f Mar
ket C
ap
Fore
gone
(3,4
)
11/2
9/12
dat
e E
llitt
bt
50E
lliott
bega
n to
pu
rcha
se
subs
tant
ial
stoc
k
[ 56
]1.
Hes
s pr
ess
rele
ase,
Jan
uary
28,
201
32.
Und
erpe
rform
ance
cal
cula
ted
vers
us R
evis
ed p
roxy
pee
rs: A
nada
rko,
Apa
che,
Che
vron
, C
onoc
oPhi
llips,
Exx
on, M
arat
hon,
Mur
phy,
Nob
le, O
ccid
enta
l3.
Mar
ket c
apita
lizat
ion
impl
ied
by R
evis
ed P
roxy
Pee
r per
form
ance
less
act
ual m
arke
t cap
italiz
atio
n
4.Ja
nuar
y 25
, 201
0 to
Jul
y 24
, 201
2, d
ate
befo
re w
hich
man
agem
ent c
laim
s to
hav
e up
date
d th
eir
stra
tegy
(als
o co
inci
dent
ally
the
stoc
k’s
low
est p
oint
)5.
July
24,
201
2 to
Nov
embe
r 28,
201
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
subs
tant
ial a
mou
nt o
f H
ess
stoc
k
Hes
s C
hoos
es J
uly
Star
t Dat
e B
ecau
se It
Is N
ear 5
Yea
r Low
…A
ndin
Mat
eria
lsto
Shar
ehol
ders
Hes
sIg
nore
sIm
pact
ofD
ivid
ends
…A
nd in
Mat
eria
ls to
Sha
reho
lder
s, H
ess
Igno
res
Impa
ct o
f Div
iden
ds
$85
$90
Dat
e ch
osen
by
Hes
s to
sta
rt c
alcu
latio
n of
its
perf
orm
ance
$65
$70
$75
$80
$ $45
$50
$55
$60
$65
$35
$40
$45 34
%
35%
36%
40
%
+1%
+7%
Sinc
e H
ess
has
paid
lim
ited
divi
dend
s, e
xclu
sion
of d
ivid
ends
dis
tort
s pe
er re
turn
s
21%
28%
20%
24
%
28%
32
%
Hes
sR
etur
nA
sA
ctua
lHes
sM
urph
yR
etur
nA
sA
ctua
lMur
phy
Hes
s R
etur
n A
s R
epre
sent
ed b
y H
ess
Act
ual H
ess
Incl
udin
g D
ivid
ends
Mur
phy
Ret
urn
As
Rep
rese
nted
by
Hes
s
Act
ual M
urph
y In
clud
ing
Div
iden
ds
[ 57
]
Sou
rce:
Hes
s M
arch
4, 2
013
pres
enta
tion
In M
ater
ials
to S
hare
hold
ers,
Hes
s U
ses
Mis
lead
ing
Cha
rt T
hat I
gnor
es
Rel
evan
tPee
rsan
dH
ides
Impa
ctof
Oil
Pric
es
800%
Bren
t Pric
eS&
P 50
0
Rel
evan
t Pee
rs a
nd H
ides
Impa
ct o
f Oil
Pric
es
John
Hes
sT
Abs
olut
e pe
rfor
man
ce a
nd c
ompa
rison
to S
&P
500
inap
prop
riate
ly ig
nore
s dr
amat
ic in
crea
se in
oil
pric
es a
nd m
ater
ial u
nder
perf
orm
ance
ver
sus
peer
s
400%
600%
Oil
pric
es o
utpe
rform
S
&P
500
by
220%
Tenu
re17
Yea
rs
Hess
235%
Prox
y Pe
ers
568%
(Und
er)/
Ove
r Per
form
ance
(333
)%
0%
200%
(Und
er)/
Ove
r Per
form
ance
()
Revi
sed
Pro
xy P
eers
694%
(Und
er) /
Ove
r Per
form
ance
(460
)%
“Hes
s ha
s…ou
tper
form
ed th
e S
&P
500
–th
e go
ld s
tand
ard
benc
hmar
k in
dex…
”
John
Hes
s:H
ess’
sC
herr
yPi
cked
Av
erag
e pe
er m
arke
t cap
ove
r 11x
gre
ater
Com
paris
onto
Inte
grat
ed P
eers
inap
prop
riate
ly ig
nore
s si
ze a
nd c
apita
l em
ploy
ed o
utsi
de u
pstr
eam
Hes
s Le
tter,
Apr
il 20
13(1
)
“…w
e ar
e E
&P
led.
88%
of o
ur
capi
tal e
mpl
oyed
is E
&P.
..” July
201
1(3)
“…w
e've
com
plet
ed o
ur tr
ansi
tion
to b
eing
a p
redo
min
antly
ex
plor
atio
nan
dpr
oduc
tion
Hes
s’s
Che
rry-
Pick
edIn
tegr
ated
Pee
rs
BPR
DS
CVX
STL
OO
gp
pg
than
Hes
s(2)
N
ot a
sin
gle
one
of th
ese
com
pani
es w
as in
H
ess’
s pr
oxy
peer
s a
deca
de a
go
4 of
6 n
on-U
.S. b
ased
; 2 o
f whi
ch w
ere
not i
n pr
oxy
peer
s un
til la
st y
ear
All
thhi
ltit
lit
ti“D
lii
Shh
ldV
l”
expl
orat
ion
and
prod
uctio
n co
mpa
ny...
[with
] ove
r 90%
of o
ur
capi
tal e
mpl
oyed
.” Nov
embe
r 201
2(4)
XOM
TOT
py
py
E
xclu
des
MR
O, C
OP
and
OX
Y: p
eers
in
tegr
ated
for m
ost,
if no
t all,
of t
he c
ited
10
year
per
iod
[ 58
]
All
the
whi
le ti
tling
pre
sent
atio
n: “
Del
iver
ing
Shar
ehol
der V
alue
”
Sou
rce:
Hes
s A
pril
4, 2
013
pres
enta
tion
1.H
ess
Lette
r to
Sha
reho
lder
s A
pril
15, 2
013
2.A
s of
11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k3.
2Q 2
011
Ear
ning
s ca
ll4.
3Q 2
012
Ear
ning
s ca
ll
And
Eve
n If
Hes
s D
oes
Wan
t to
Be
Com
pare
d A
gain
st th
e S&
P 50
0It
Has
Und
erpe
rfor
med
Dra
mat
ical
lyO
vert
heLa
st5
Year
sIt
Has
Und
erpe
rfor
med
Dra
mat
ical
ly O
ver t
he L
ast 5
Yea
rs
Ove
r the
last
five
yea
rs, H
ess
has
unde
rper
form
ed th
e S&
P 50
0 by
33%
to 5
8%, d
espi
te B
rent
oil
pric
es in
crea
sing
ove
r 20%
dur
ing
this
per
iod(
1)–
3x th
e pe
rfor
man
ce o
f the
S&
P 50
0(2)
5-Y
ear
3-Y
ear
1-Y
ear
5-Y
ear
3-Y
ear
1-Y
ear
Und
erpe
rfor
man
ce v
s. S
&P
500
as o
f Jan
uary
201
3(3)
Und
erpe
rfor
man
ce v
s. S
&P
500
as o
f Nov
embe
r 201
2(2)
(12)
%
(33)
%(3
3)%
(58)
%
(45)
%(4
9)%
[59
]
Sou
rce:
Blo
ombe
rg1.
S&
P50
0 to
tal r
etur
n ca
lcul
ated
usi
ng S
PD
R S
&P
500
ETF
(SP
Y); 1
mon
th fo
rwar
d B
rent
pric
e; F
rom
1/2
5/20
08 to
1/2
5/20
13, B
rent
incr
ease
d by
25%
, fro
m 1
1/29
/200
7 to
11
/28/
2012
, Bre
nt in
crea
sed
by 2
1%2.
As
of 1
1/28
/12,
dat
e be
fore
whi
ch E
lliot
t beg
an to
pur
chas
e a
subs
tant
ial a
mou
nt o
f Hes
s st
ock
3.A
s of
1/2
5/13
, dat
e be
fore
whi
ch E
lliot
t int
entio
n to
nom
inat
e di
rect
ors
beca
me
publ
ic
Hes
sH
ides
Beh
ind
Ana
lyst
Pric
eTa
rget
sTh
atPr
ice
inM
anag
emen
tMed
iocr
ityH
ess
Hid
es B
ehin
d A
naly
st P
rice
Targ
ets
That
Pric
e in
Man
agem
ent M
edio
crity
Hes
s’s
Mar
ch 4
thpr
esen
tatio
n po
ints
to W
all S
tree
t pric
e ta
rget
s as
just
ifica
tion
that
not
hing
is w
rong
…
Yet t
hese
targ
ets
mer
ely
refle
ct H
ess’
s po
or e
xecu
tion
Tw
o ye
ars
ago,
Hes
s’s
pric
e ta
rget
was
$10
0 / s
hare
P
oor e
xecu
tion
drov
e th
at p
rice
targ
et d
own
35%
to $
65 /
shar
e pr
ior t
o E
lliott’
s pu
blic
invo
lvem
ent
Sp
ecte
r of a
ccou
ntab
ility
pus
hing
cha
nge
at H
ess
incr
ease
d th
e ta
rget
pric
e by
23%
to $
80
/ sha
re
N
ti
lh
tlit
ft
Mt
dB
dh
tl
thb
N
o m
ater
ial c
hang
e to
qua
lity
of a
sset
s. M
anag
emen
t and
Boa
rd h
ave
no e
xcus
e to
low
er th
e ba
r…
$128
$130
$140
Hes
s Av
erag
e Se
ll-si
de T
arge
t Pric
e
$100
$128
$$110
$120
$130
Pot
entia
l for
acc
ount
abilit
y to
Pro
duct
ion
mis
ses
and
Cap
Ex
over
runs
dro
ve p
rice
targ
et d
own
$80
$96
$80
$90
$100
Ove
r sam
e tim
e pe
riod,
maj
ority
of P
eer p
rice
targ
ets
have
ris
enshar
ehol
ders
resu
lting
in v
alue
en
hanc
ing
actio
ns li
fts p
rice
targ
et
$65
$60
$70
Nea
rly 2
Y
ears
Ago
25-J
an-1
3To
day
Ellio
tt Lo
w
Cas
eE
lliott
Hig
h C
ase
…H
ess
cann
ot e
xcus
e th
is a
way
(1)
(2)
Aft
it
dth
iti
Mh
13t
il
Hd
dth
lidf
thi
tti
[ 60
]S
ourc
e:B
loom
berg
1.M
ay 2
011
2.A
pril
12, 2
013
Afte
r we
poin
ted
this
out
in o
ur M
arch
13
mat
eria
ls, H
ess
drop
ped
the
slid
e fr
om th
eir p
rese
ntat
ion
Cul
ture
ofA
void
ing
Acc
ount
abili
tyC
ultu
re o
f Avo
idin
g A
ccou
ntab
ility
Den
y La
ck o
f Foc
us
Den
y St
ock
Perf
orm
ance
y
Den
y U
ndis
cipl
ined
Cap
ital A
lloca
tion
Den
y O
pera
tiona
l Mis
man
agem
ent
Den
y A
bysm
al G
over
nanc
e C
ultu
re
Rec
ogni
tion
of re
ality
, and
the
acco
unta
bilit
y th
at c
omes
with
it a
t a p
ublic
com
pany
, see
m to
be
prec
isel
y w
hat H
ess’
s M
anag
emen
t and
Boa
rd a
re d
oing
eve
ryth
ing
in th
eir p
ower
to a
void
[61
]
Cla
imin
gA
bsur
dSy
nerg
ies
Hes
sVi
ews
Dis
para
teA
sset
Bas
eas
aSt
reng
thC
laim
ing
Abs
urd
Syne
rgie
s, H
ess
View
s D
ispa
rate
Ass
et B
ase
as a
Str
engt
h
Hes
s cl
aim
s it
is “
real
izin
g sy
nerg
ies
from
the
tran
sfer
of t
echn
ical
ski
lls a
nd o
pera
ting
capa
bilit
ies
glob
ally
.”(1
)
If th
at is
the
case
, the
n…
Why
is H
ess
a le
ss e
ffici
ent o
pera
tor i
n un
conv
entio
nal p
lays
than
inde
pend
ents
with
out
glob
al o
ffsho
re a
sset
s?
Con
tinen
tal
Pi
onee
r
EOG
Why
has
Hes
s ha
d si
gnifi
cant
ly le
ss e
xplo
ratio
n su
cces
s th
an e
xplo
ratio
n fo
cuse
d in
depe
nden
ts w
ithou
t unc
onve
ntio
nal a
sset
s?
Tullo
w
Kos
mos
C
obal
t
Rea
lity:
Hes
s Sh
areh
olde
rs h
ave
only
see
n di
s-sy
nerg
ies.
In 2
009,
con
trar
y to
eve
ry o
ther
ope
rato
r in
the
play
, Hes
s em
bark
ed o
n an
d pe
rsis
ted
with
a p
rogr
am o
f dril
ling
dual
late
ral w
ells
.(2)
The
subs
eque
nt w
ell p
erfo
rman
ce w
as s
ubst
antia
lly b
elow
indu
stry
ave
rage
.(3)
This
exp
erim
ent w
as th
e re
sult
of a
ttem
ptin
g to
brin
g hi
gh-te
ch, c
ompl
ex d
rillin
g te
chni
ques
that
char
acte
rizes
deep
wat
erde
velo
pmen
tint
oa
play
that
requ
ired
alo
w
1.H
ess’
s “D
eliv
erin
g S
hare
hold
er V
alue
” pre
sent
atio
n M
arch
4, 2
013
2.N
orth
Dak
ota
Indu
stria
l Com
mis
sion
3.E
lliot
t est
imat
e ba
sed
on p
ublic
wel
l dat
a fro
m N
orth
Dak
ota
Indu
stria
l Com
mis
sion
[ 62
]
tech
niqu
es th
at c
hara
cter
izes
dee
p w
ater
dev
elop
men
t int
o a
play
that
requ
ired
a lo
w-
cost
lean
man
ufac
turin
g ap
proa
ch.
Cul
ture
ofA
void
ing
Acc
ount
abili
tyC
ultu
re o
f Avo
idin
g A
ccou
ntab
ility
Den
y La
ck o
f Foc
us
Den
y St
ock
Perf
orm
ance
y
Den
y U
ndis
cipl
ined
Cap
ital A
lloca
tion
Den
y O
pera
tiona
l Mis
man
agem
ent
Den
y A
bysm
al G
over
nanc
e C
ultu
re
Rec
ogni
tion
of re
ality
, and
the
acco
unta
bilit
y th
at c
omes
with
it a
t a p
ublic
com
pany
, see
m to
be
prec
isel
y w
hat H
ess’
s M
anag
emen
t and
Boa
rd a
re d
oing
eve
ryth
ing
in th
eir p
ower
to a
void
[63
]
Hes
sFa
lsel
yC
laim
sC
onve
ntio
nalA
sset
sFu
nded
Bak
ken
Opp
ortu
nity
Hes
s Fa
lsel
y C
laim
s C
onve
ntio
nal A
sset
s Fu
nded
Bak
ken
Opp
ortu
nity
“…ou
r con
vent
iona
l por
tfolio
gen
erat
e[s]
the
cash
nee
ded
to fu
nd th
e un
conv
entio
nal g
row
th th
at w
e ha
ve in
the
Bak
ken
and
the
Utic
a.”
John
Hes
s, J
anua
ry 2
013(
1)
[ 64
]
1.4Q
201
2 E
arni
ngs
call
Janu
ary
30, 2
013
Rea
lity:
Bak
ken
Was
Fund
edB
yH
ess
Bal
ance
Shee
tR
ealit
y: B
akke
nW
as F
unde
d B
y H
ess
Bal
ance
She
et
Rea
lity
Dit
iil
dti
thd
2009
-201
2H
ess(
1)C
ontin
enta
l(2)
Incr
ease
inB
akke
nPr
oduc
tion
~55
000
boe/
d~5
670
0bo
e/d
Des
pite
sim
ilar p
rodu
ctio
ngr
owth
, and
acqu
iring
72%
few
er a
cres
Incr
ease
in B
akke
n Pr
oduc
tion
55,0
00 b
oe/d
56,7
00bo
e/d
Incr
ease
in B
akke
n N
et A
crea
ge~1
55,0
00~5
60,0
00
Cap
ital E
xpen
ditu
res
$5.4
bn$4
.6bn
Infra
stru
ctur
eS
pend
$1.2
bn
di
dd
bi
d
…H
ess
spen
t 44%
mor
e ca
pita
l…Ac
quis
ition
s$1
.8bn
$1.2
bn
Tota
l Bak
ken
Spen
d$8
.4bn
$5.8
bn
Deb
t Iss
ued
$4.2
bn$3
.1bn
… a
nd is
sued
mor
e de
bt, i
ssue
d co
mpa
rabl
e eq
uity
, sol
d m
ore
asse
tsE
quity
Issu
ed$0
.7bn
$1.0
bn
Ass
etSa
les
$1.5
bn$0
.3bn
Tota
l$6
.4bn
$4.4
bn
Bak
ken
EBIT
DA
Gen
erat
ed(3
)$2
.4bn
$2.5
bn
Sha
reho
lder
s ha
ve n
ot s
een
the
sam
e be
nefit
Tota
l Ret
urn
1%25
5%
Cha
nge
in M
arke
t Cap
italiz
atio
n+$
0.6b
n+
$10.
1bn
Hes
s co
nglo
mer
ate
stru
ctur
e ha
s yi
elde
d co
st o
verr
uns,
ope
ratio
nal h
iccu
ps, a
nd a
n af
finity
for o
verb
uild
ing.
Pure
pla
y C
LR a
chie
ved
sim
ilar p
rodu
ctio
n gr
owth
and
acq
uire
d m
ore
acre
s at
low
er c
ost a
nd g
reat
er b
enef
it [ 65
]S
ourc
es: C
ompa
ny F
iling
s, E
arni
ngs
Tran
scrip
ts, B
loom
berg
, Cap
IQ1.
Hes
s co
mpa
ny fi
lings
, ear
ning
s tra
nscr
ipts
2.C
ontin
enta
l com
pany
filin
gs, e
arni
ngs
call
trans
crip
ts3.
Ellio
tt es
timat
e ba
sed
on a
vera
ge o
f OA
S, K
OG
and
NO
G E
BIT
DA
bef
ore
G&
A p
er B
OE
less
CLR
G
&A
per
BO
E fo
r eac
h pe
riod;
exc
lude
s im
pact
of i
nfra
stru
ctur
e
Whe
reD
idC
ash
From
Con
vent
iona
lAss
ets
Go?
Whe
re D
id C
ash
From
Con
vent
iona
l Ass
ets
Go?
Cas
h di
d no
t go
to s
hare
hold
ers…
2009
-201
2 C
ash
Ret
urn
as %
of C
urre
nt M
arke
t Cap
(1)
46%
28%
25%
21%
0%5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
CO
P
XOM
TOT
DVN
19%
18%
17%
14%
13%
12%
STL
RD
SA BP
CVX
MU
R
MR
OIn
stea
dca
shus
edon
12%
10%
10%
3%
2% 2% 2%
MR
O
OXY
TLM
APA
HES
EOG
APC
Expl
orat
ion
Valu
e C
reat
ion
as %
of C
urre
nt M
arke
t Cap
(2)(3
)
30%
40%Inst
ead,
cas
h us
ed o
n…
2%AP
CC
ash
Spen
t 200
9-20
12(4
)
Exp
lora
tion
$4.3
bn
Acq
uisi
tions
of
Con
vent
iona
l$1
.9bn
10%
20%
tion from Exploration
Dow
nstre
amS
pend
ing
$1.3
bn
Hed
ging
$2.3
bn(2
0%)
(10%
)
0%
Value Creat
[ 66
]
(30%
)
APC
NBL
STO
APA
RDS
TOT
MUR
BP
OXY
CVX
XOM
TLM
COP
MRO
HES1.
As
of 4
/12/
132.
Mar
ket c
apita
lizat
ion
as o
f 11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k
3.S
ourc
e: W
ood
Mac
kenz
ie4.
Com
pany
filin
gs
Cul
ture
ofA
void
ing
Acc
ount
abili
tyC
ultu
re o
f Avo
idin
g A
ccou
ntab
ility
Den
y La
ck o
f Foc
us
Den
y St
ock
Perf
orm
ance
y
Den
y U
ndis
cipl
ined
Cap
ital A
lloca
tion
Den
y O
pera
tiona
l Mis
man
agem
ent
Den
y A
bysm
al G
over
nanc
e C
ultu
re
Rec
ogni
tion
of re
ality
, and
the
acco
unta
bilit
y th
at c
omes
with
it a
t a p
ublic
com
pany
, see
m to
be
prec
isel
y w
hat H
ess’
s M
anag
emen
t and
Boa
rd a
re d
oing
eve
ryth
ing
in th
eir p
ower
to a
void
[ 67
]
Hes
sFa
lsel
yC
laim
sIt
IsLo
wes
tCos
tBak
ken
Ope
rato
rH
ess
Fals
ely
Cla
ims
It Is
Low
est C
ost B
akke
nO
pera
tor
“…ou
r wel
l cos
ts n
ow ra
nk u
s am
ong
the
low
est c
ost a
nd b
est i
n ou
r pee
r gr
oup
”gr
oup.
John
Hes
s, M
arch
201
3(1)
[ 68
]
1.H
ess
busi
ness
upd
ate
call,
Mar
ch 4
, 201
3
Rea
lity:
Hes
sIs
Not
Low
Cos
tOpe
rato
r;Li
kefo
rLik
eH
ess
Rem
ains
Hig
herC
ost
Hes
s Is
Not
Low
Cos
t Ope
rato
r; L
ike
for L
ike,
Hes
s R
emai
ns H
ighe
r Cos
t
Slid
ing
Slee
ve C
ompl
etio
n D
esig
n(2)
Plug
and
Per
fCom
plet
ion
Des
ign(
1)
Hes
s w
ell c
osts
39%
abo
ve C
ontin
enta
lH
ess
wel
l cos
ts 1
7% to
38%
abo
ve W
hitin
g
1H’1
2 dr
illing
the
sam
e ty
pe o
f wel
l4Q
’12
drilli
ng th
e sa
me
type
of w
ell:
“In th
e fir
st h
alf o
f the
yea
r, w
etra
nsiti
oned
from
a$1
1.5
$12.
0
$12.
5
$13.
0
$8.5
$9.0
$9.5
we
trans
ition
ed fr
om a
hi
gher
cos
t 38-
stag
e hy
brid
co
mpl
etio
n de
sign
to a
lo
wer
cos
t slid
ing
slee
ve
desi
gn.” –
Gre
gH
illP
resi
dent
$8.5
$9.0
$9.5
$10.
0
$10.
5
$11.
0
$million per well
$7.0
$7.5
$8.0
+39%
+38%
+17%
Gre
g H
ill, P
resi
dent
H
ess,
Jan
uary
201
3(3)
$7.0
$7.5
$8.0
$6.0
$6.5
Sani
sh
Onl
y
Frac
Met
hod
Plug
& P
erf
Plug
& P
erf
40%
to50
%
Sani
sh
Onl
y
Frac
Met
hod
Slid
ing
Slee
veSl
idin
g Sl
eeve
Slid
ing
Slee
ve
Ran
geof
70%
Pro
ppan
t(4)
60%
San
d,
40%
Cer
amic
40%
to 5
0%
Sand
, re
mai
nder
Cer
amic
Rig
s20
16
%Pa
dD
rillin
g30
%?
Pro
ppan
t(4)
100%
San
d
gto
100
% S
and,
re
mai
nder
Cer
amic
95+%
Sand
Rig
s6
2014
%Pa
dD
rillin
g10
0%50
%~9
5%
[ 69
]
% P
ad D
rillin
g30
%?
% P
ad D
rillin
g10
0%50
%95
%
Sou
rces
: Pub
lic c
ompa
ny fi
lings
, cor
pora
te p
rese
ntat
ions
, ear
ning
s ca
ll tra
nscr
ipts
and
Nor
th D
akot
a In
dust
rial C
omm
issi
on d
ata
1.1Q
and
2Q
ear
ning
s tra
nscr
ipts
and
pre
sent
atio
ns2.
4Q e
arni
ngs
trans
crip
ts a
nd p
rese
ntat
ions
3.H
ess
4Q e
arni
ngs
call
4.D
ata
from
Nor
th D
akot
a In
dust
rial C
omm
issi
on
Cul
ture
ofA
void
ing
Acc
ount
abili
tyC
ultu
re o
f Avo
idin
g A
ccou
ntab
ility
Den
y La
ck o
f Foc
us
Den
y St
ock
Perf
orm
ance
y
Den
y U
ndis
cipl
ined
Cap
ital A
lloca
tion
Den
y O
pera
tiona
l Mis
man
agem
ent
Den
y A
bysm
al G
over
nanc
e C
ultu
re
Rec
ogni
tion
of re
ality
, and
the
acco
unta
bilit
y th
at c
omes
with
it a
t a p
ublic
com
pany
, see
m to
be
prec
isel
y w
hat H
ess’
s M
anag
emen
t and
Boa
rd a
re d
oing
eve
ryth
ing
in th
eir p
ower
to a
void
[ 70
]
Hes
s C
laim
s It
is “
Min
dful
” of
Gov
erna
nce,
Yet
…N
ewLe
ad“I
ndep
ende
nt”
Dire
ctor
Just
as“I
ndep
ende
nt”
asth
eLa
stO
neN
ew L
ead
Inde
pend
ent
Dire
ctor
Jus
t as
Inde
pend
ent
as
the
Last
One
On
Mar
ch 4
thH
ess
anno
unce
d th
e ap
poin
tmen
t of a
new
lead
“in
depe
nden
t” d
irect
or…
Nic
hola
s B
rady
Form
er L
ead
Inde
pend
ent D
irect
or
John
Mul
lin II
I
New
Lea
d In
depe
nden
t Dire
ctor
Lead
Inde
pend
ent D
irect
orLe
ad In
depe
nden
t Dire
ctor
AN
D
Join
t-Exe
cuto
r, H
ess
esta
te
AN
D
Join
t-Exe
cuto
r, H
ess
esta
te
C
olle
ctiv
ely
rece
ived
$3
mill
ion
dire
ctly
from
Joh
n H
ess’
s fa
mily
est
ate.
P
aper
wor
kfo
rJoh
nM
ullin
tost
epdo
wn
asex
ecut
orw
asfil
edtw
ow
eeks
afte
rHes
san
noun
ced
P
aper
wor
k fo
r Joh
n M
ullin
to s
tep
dow
n as
exe
cuto
r was
file
d tw
o w
eeks
afte
r Hes
s an
noun
ced
Mul
lin’s
new
pos
ition
.
D
oes
Hes
s th
ink
this
was
hes
clea
n Jo
hn M
ullin
’s re
latio
nshi
p w
ith th
e H
ess
fam
ily?
Suc
h cl
osen
ess
ough
t to
be in
appr
opria
te fo
r boa
rd m
embe
rshi
p, le
t alo
ne le
ad d
irect
orsh
ip…
[ 71
]
D
oes
the
Boa
rd b
elie
ve it
is m
eetin
g its
obl
igat
ions
to s
hare
hold
ers?
Sou
rce:
Com
pany
filin
gs, N
ew Y
ork
Sta
te C
ourt
Filin
gs
Man
agem
ent N
omin
ees
App
ear t
o B
e Pi
cked
for T
heir
Con
curr
ence
on
a Pl
an
That
Supp
osed
lyPr
edat
esTh
emby
3to
17Ye
ars
That
Sup
pose
dly
Pred
ates
The
m b
y 3
to 1
7 Ye
ars
Shar
ehol
derN
omin
ees:
Man
agem
entN
omin
ees:
Shar
ehol
der N
omin
ees:
Inde
pend
ent
Man
agem
ent N
omin
ees:
Han
dpic
ked
for C
oncu
rren
ce?
“The
se i
ndep
ende
ntdi
rect
ors
agr
eed
to
joi
n o
ur b
oard
, be
caus
e th
ey
belie
ve i
n o
ur o
utst
andi
ng p
lan,
and
th
ey r
ecog
nize
tha
t ou
r pl
an is
the
“W
hile
this
lette
r pre
sent
s E
lliot
t’s
yg
prig
ht p
lan
for
all
of o
ur s
hare
hold
ers.
”
“We
have
had
this
str
ateg
ic
tran
sfor
mat
ion,
asm
yre
mar
ksno
ted,
ppe
rspe
ctiv
es, S
hare
hold
er N
omin
ees
will
form
thei
r ow
n, in
depe
nden
t vie
ws
on th
e C
ompa
ny, i
ts a
sset
s, a
nd it
s st
rate
gy. T
hese
five
acc
ompl
ishe
d in
divi
dual
sbr
ing
deep
know
ledg
ean
dtr
ansf
orm
atio
n, a
s m
y re
mar
ks n
oted
, un
derw
ay, r
eally
goi
ng b
ack…
sinc
e I
beca
me
Cha
irman
…In
fact
, Elli
ott g
ot o
n th
e tr
ain
afte
r it
real
ly l
eft
the
st
atio
n…Th
is i
s a
cul
min
atio
nof
a
mul
tiye
arst
rate
gy”
indi
vidu
als
brin
g de
ep k
now
ledg
e an
d ex
perie
nce
in a
reas
that
are
sev
erel
y la
ckin
g in
the
exis
ting
boar
d.”
-Elli
ott L
ette
r to
Sha
reho
lder
s,
Janu
ary
29th
2013
(2)
mul
ti y
ear
stra
tegy
…
-Joh
n H
ess,
Mar
ch 4
th20
13(1
)
Janu
ary
2920
13
[ 72
]S
ourc
e:C
ompa
nytra
nscr
ipts
1.H
ess
busi
ness
upd
ate
call,
Mar
ch 4
, 201
32.
Elli
ott L
ette
r to
Sha
reho
lder
s Ja
nuar
y 29
, 201
3
Qui
gley
Was
Pla
ced
on B
oard
in M
arch
201
3 W
ithou
t a V
ote,
Des
pite
Sh
areh
olde
rsC
ontin
ually
Cal
ling
forD
esta
gger
ing
ofth
eB
oard
Shar
ehol
ders
Con
tinua
lly C
allin
g fo
r Des
tagg
erin
gof
the
Boa
rd
Man
agem
ent N
omin
ee
Jam
es H
. Qui
gley
Fo
rmer
CE
O, D
eloi
tte
Ups
trea
m O
il &
Gas
O
pera
ting
Expe
rienc
eR
estr
uctu
ring
Expe
rienc
e
For o
ver 5
yea
rs, s
hare
hold
ers
have
bee
n as
king
to v
ote
on d
irect
ors
annu
ally
;
Non
eN
one
y,
gy;
For o
ver 5
yea
rs, s
hare
hold
ers
have
bee
n ig
nore
d
% o
f Tot
al S
hare
s Vo
ted
for D
ecla
ssifi
catio
n(1)
In3
sepa
rate
vote
s90
+%of
outs
ide
shar
ehol
ders
In 3
sep
arat
e vo
tes,
90+
% o
f out
side
sha
reho
lder
s vo
ted
to d
ecla
ssify
the
Hes
s B
oard
60%
80%
100%
“The
abi
lity
to e
lect
dire
ctor
s is
the
sing
le m
ost i
mpo
rtant
0%20%
40%
2007
2008
2012
use
of th
e sh
areh
olde
r fra
nchi
se, a
nd a
ll di
rect
ors
shou
ld
be a
ccou
ntab
le o
n an
ann
ual b
asis
.”
IS
S Pr
oxy
Adv
isor
y Se
rvic
es(2
)
[ 73
]S
ourc
es: C
ompa
ny F
iling
s, F
acts
et, I
SS
Ana
lytic
s1.
Hes
s es
tate
is a
ssum
ed to
vot
e ag
ains
t dec
lass
ifica
tion
and
is e
xclu
ded
from
ca
lcul
atio
n; C
ompa
ny fi
lings
, Fac
tset
, IS
S V
otin
g A
naly
tics;
2.IS
S c
omm
enta
ry o
n H
ess,
Hes
s C
orpo
ratio
n 20
12 C
ore
Res
earc
h R
epor
t
Cul
ture
ofA
void
ing
Acc
ount
abili
tyC
ultu
re o
f Avo
idin
g A
ccou
ntab
ility
Den
y La
ck o
f Foc
us
Den
y St
ock
Perf
orm
ance
y
Den
y U
ndis
cipl
ined
Cap
ital A
lloca
tion
Den
y O
pera
tiona
l Mis
man
agem
ent
Den
y A
bysm
al G
over
nanc
e C
ultu
re
Rec
ogni
tion
of re
ality
, and
the
acco
unta
bilit
y th
at c
omes
with
it a
t a p
ublic
com
pany
, see
m to
be
prec
isel
y w
hat H
ess’
s M
anag
emen
t and
Boa
rd a
re d
oing
eve
ryth
ing
in th
eir p
ower
to a
void
[ 74
]
Whi
le H
ess
May
Den
y Th
ese
Prob
lem
s,
Ever
yone
Els
e A
ckno
wle
dges
The
ir Ex
iste
nce.
[ 75
]
Mar
ketH
asA
ckno
wle
dged
That
Fund
amen
talP
robl
ems
Exis
tatH
ess
Mar
ket H
as A
ckno
wle
dged
Tha
t Fun
dam
enta
l Pro
blem
s Ex
ist a
t Hes
s…
“HE
S h
as b
een
wha
t we
call
a ‘v
alue
trap
’ for
som
e tim
e.”
Soc
iete
Gen
eral
e(J
anua
ry 3
0, 2
013)
“In m
ultip
le c
lient
con
vers
atio
ns th
roug
hout
the
day
we
foun
d lit
eral
ly n
o on
e th
at d
efen
ded
the
shap
e, n
or g
loba
l str
ateg
y of
“The
sim
ple
fact
is th
e m
arke
t doe
sn’t
trus
t Hes
s to
run
its b
usin
ess
wel
l, an
d th
us p
lace
s a
disc
ount
on
ever
ythi
ng th
e co
mpa
ny
cont
rols
.”M
orni
ngst
ar(J
anua
ry29
,201
3)
Hes
s.”
Deu
tsch
e B
ank
(Jan
uary
30,
201
3)
“And
so,
one
of t
he p
robl
ems
is th
e bo
ard
is s
tuffe
d w
ith in
cred
ibly
long
-ser
ving
mem
bers
, non
e of
who
m s
eem
to h
ave
any
it
idth
iil
th’
llk
fil
id
td
thh
Ad
iid
tll
th
Mor
ning
star
(Jan
uary
29,
201
3)
“Thi
s is
the
mos
t und
erm
anag
ed m
ajor
oil
com
pany
in th
e w
orld
.”Ji
m C
ram
er, C
NB
C F
aber
Rep
ort (
Janu
ary
29, 2
013)
expe
rienc
e ou
tsid
e th
e co
mpa
ny ru
nnin
g an
oil
com
pany
, so
ther
e’s
a re
al la
ck o
f oil
indu
stry
dep
th h
ere.
And
coi
ncid
enta
lly,t
hey
also
hap
pen
to h
ave
very
str
ong
finan
cial
con
nect
ions
with
the
Hes
s fa
mily
, hel
ping
to ru
n th
e ch
arita
ble
boar
d, h
elpi
ng to
run
the
esta
te o
f the
foun
ders
.”R
eute
rs B
reak
ingv
iew
s(J
anua
ry 2
9, 2
013)
“…H
ess'
boa
rd h
as c
onsi
sten
tly fa
iled
its s
hare
hold
ers
and
has
neve
r bro
ught
man
agem
ent t
o ta
sk, e
ver…
. In
light
of t
he
com
pany
’s p
oor p
erfo
rman
ce th
e la
st d
ecad
e, th
is is
cle
arly
a b
oard
that
giv
es J
ohn
Hes
s w
hat h
e w
ants
, rat
her t
han
doin
g w
hat
is g
ood
for s
hare
hold
ers.
”M
orni
ngst
ar (J
anua
ry 2
9, 2
013)
“The
sto
ck p
rice
refle
cts
conc
ern
abou
t bal
loon
ing
capi
tal c
osts
, chr
onic
lack
of f
ree
cash
flow
, a h
igh
oil p
rice
brea
keve
n,an
d re
cent
di
fficu
lty e
xecu
ting
agai
nst g
uida
nce
and
expe
ctat
ions
.”
“We
thin
k th
e m
arke
t will
larg
ely
adop
t a w
ait a
nd s
ee a
ppro
ach
and
not g
ive
any
free
pass
es to
man
agem
ent u
ntil
clea
r pat
h to
war
ds th
eir c
ash
flow
targ
ets
and
exec
utio
n ca
pabi
lity
is e
vide
nced
…Fr
om a
val
uatio
n pe
rspe
ctiv
e, w
e th
ink
the
stoc
k is
rela
tivel
y ch
eap
as a
resu
lt of
the
com
pany
’s le
ss-th
an-s
tella
r his
toric
al p
erfo
rman
ce re
cord
and
per
ceiv
ed e
xecu
tion
risk.
”B
arcl
ays
(Jul
y26
2012
)
yg
gg
pD
euts
che
Ban
k (O
ctob
er 1
7, 2
012)
Bar
clay
s (J
uly
26, 2
012) [ 7
6]
And
Has
Don
eSo
Fora
Long
Tim
e…
And
Has
Don
e So
For
a L
ong
Tim
e
“The
larg
e va
riabi
lity
in c
apex
vers
us o
rigin
al g
uida
nce
(just
set
six
mon
ths
ago)
dem
onst
rate
s so
me
lack
of c
apita
l dis
cipl
ine
with
in th
e co
mpa
ny.”
Citi
grou
p (J
uly
25, 2
012)
“The
key
issu
e fo
r HE
S in
our
min
d is
cap
ital i
nten
sity
and
the
inab
ility
of m
anag
emen
t in
rece
nt y
ears
to li
ve w
ithin
the
limits
of i
ts
cash
flow
sFu
rther
mor
egi
ven
the
lack
ofgr
owth
inoi
land
gas
prod
uctio
nov
erth
ela
st5
year
sth
ere
isa
case
tobe
mad
eth
atth
e
“On
the
upst
ream
sid
e, w
e qu
estio
n w
heth
er th
e co
mpa
ny h
as th
e ba
ndw
idth
to o
pera
te in
ove
r 20
coun
tries
… W
e do
not
bel
ieve
aco
mpa
ny o
f Hes
s’s
size
will
get c
redi
t in
the
mar
ket f
or a
sho
tgun
app
roac
h to
inve
stin
g ac
ross
the
wor
ld.” C
itigr
oup
(Jul
y 20
, 201
2)
cash
flow
s. F
urth
erm
ore,
giv
en th
e la
ck o
f gro
wth
in o
il an
d ga
s pr
oduc
tion
over
the
last
5 y
ears
, the
re is
a c
ase
to b
e m
ade
that
the
com
pany
sho
uld
retu
rn m
ore
cash
bac
k to
sha
reho
lder
s in
stea
d of
atte
mpt
ing
to g
row
at a
ll.”
Citi
grou
p (J
uly
20, 2
012)
“We
are
skep
tical
that
Hes
s’s
curr
ent g
loba
l gro
wth
stra
tegy
will
yiel
d su
perio
r ret
urns
or g
row
th, a
s its
org
aniz
atio
n ap
pear
s to
be
spre
ad th
in a
nd w
e th
ink
it is
unl
ikel
y th
at H
ess
can
have
a c
ompe
titiv
e ad
vant
age
in a
ll th
e ar
eas
it is
pur
suin
g.”
“We
belie
ve H
ess
shou
ld c
onsi
der f
urth
er re
duci
ng it
s ex
plor
atio
n pr
ogra
m b
eyon
d w
hat h
as a
lread
y be
en a
nnou
nced
. It i
s no
t cle
ar
to u
s gi
ven
the
leve
ls o
f exp
lora
tion
spen
ding
ver
sus
cash
flow
s th
at a
mid
-siz
ed o
il co
mpa
ny c
an s
ucce
ssfu
lly p
ursu
e a
glob
al
expl
orat
ion
stra
tegy
as
Hes
s ha
s at
tem
pted
….T
he c
ompa
ny’s
hig
h-ris
k/hi
gh-p
oten
tial e
xplo
ratio
n an
d ac
reag
e st
rate
gy s
ince
200
9 is
thus
farn
otyi
eldi
ngfa
vora
ble
resu
lts”
Gol
dman
Sac
hs (J
une
11, 2
012)
“The
7%
pul
lbac
k in
the
stoc
k w
as s
ever
e, a
nd in
our
vie
w, is
indi
cativ
e of
a lo
ss o
f inv
esto
r con
fiden
ce in
HE
S’s
exe
cutio
n ca
pabi
litie
s, fo
llow
ing
a st
ring
of p
rodu
ctio
n m
isse
s an
d a
lack
of n
otab
le e
xplo
ratio
n su
cces
s, in
add
ition
to a
gro
win
g de
ficit
betw
een
cape
xan
d ca
sh fl
ow. E
nter
ing
1Q’1
2, H
ES
had
mis
sed
its p
rodu
ctio
n gu
idan
ce fo
r fou
r of t
he p
rece
ding
5 q
uarte
rs,
mea
ning
eec
tion
asat
apr
emi
m”
is th
us fa
r not
yie
ldin
g fa
vora
ble
resu
lts.
Gol
dman
Sac
hs (J
une
11, 2
012)
“Alth
ough
we
thin
k th
e co
mpa
ny’s
und
erly
ing
asse
t val
ue is
wor
th s
igni
fican
tly h
ighe
r tha
n ou
r nea
r-te
rm p
rice
targ
et, w
e no
w
belie
ve th
e sh
ares
will
likel
y co
ntin
ue to
stru
ggle
thro
ugho
ut th
is y
ear a
nd w
ill tra
de s
ubst
antia
lly b
elow
our
est
imat
e of
its
fair
asse
t va
lue
due
to th
e la
ck o
f vis
ible
cat
alys
ts a
s w
ell i
ncre
ased
inve
stor
ske
ptic
ism
ove
r man
agem
ent’s
exe
cutio
n re
cord
…”
mea
ning
exe
cutio
n w
as a
t a p
rem
ium
.” S
imm
ons
(Apr
il 26
, 201
2) [ 77
]
yp
gB
arcl
ays
(Apr
il 26
, 201
2)
AR
eally
Long
Tim
e…
A R
eally
Lon
g Ti
me
“To
sum
mar
ize,
the
key
grow
th a
sset
s un
derp
erfo
rm, e
xpec
tatio
ns a
re lo
wer
ed, a
nd a
key
inve
stor
fear
–H
ess’
s pr
open
sity
to
outs
pend
cas
h flo
w –
is s
toke
d by
an
early
upw
ard
revi
sion
to th
e 20
12 b
udge
t.”D
euts
che
Ban
k (A
pril
25, 2
012)
“Fl
ith
hf
thhi
hd
lth
thh
thl
ti
ldd
ltd
iid
dth
biti
“The
com
pany
has
con
tinue
d to
be
a ne
t iss
uer o
f equ
ity…
at a
tim
e w
hen
mos
t of t
he o
ther
maj
ors
have
bee
n bu
ying
sto
ck b
ack…
an
d ha
s pr
oduc
ed lo
w re
turn
on
capi
tal e
mpl
oyed
for m
ost o
f the
pre
sent
dec
ade.
”
“Flo
win
g th
roug
h fro
m th
e hi
gh c
apex
and
low
gro
wth
, the
com
pany
has
the
low
est y
ield
and
low
est d
ivid
end
grow
th c
ombi
natio
n am
ongs
t maj
or o
ils.”
Deu
tsch
e B
ank
(Jul
y 27
, 201
1)
Ber
nste
in (O
ctob
er 2
2, 2
009)
“The
com
pany
’s re
finin
g an
d m
arke
ting
asse
ts re
mai
n em
phat
ical
ly n
ot fo
r sal
e, d
espi
te th
e fa
ct th
at re
depl
oyin
g do
wns
tream
in
vest
ed c
apita
l…to
the
muc
h hi
gher
retu
rnin
g up
stre
am w
ould
mak
e so
lid b
usin
ess
sens
e.”
JP M
orga
n (S
epte
mbe
r 17,
200
9)
“Hin
dsig
ht:W
eca
n’tb
elie
veyo
u’re
back
tom
ore
hedg
ing
”
“Not
with
stan
ding
the
rom
ance
of L
eon
Hes
s’s
deve
lopm
ent o
f the
com
pany
from
one
oil
deliv
ery
truck
into
a m
ulti-
billio
n do
llar
ente
rpris
e, b
y th
e ea
rly 2
000’
s th
e co
mpa
ny’s
repu
tatio
n w
ith in
vest
ors
was
one
of a
stru
gglin
g oi
l ess
entia
lly ru
n as
if it
wer
e pr
ivat
e.”
Deu
tsch
e B
ank
(Aug
ust 7
, 200
7)
Hin
dsig
ht: W
e ca
nt b
elie
ve y
oure
bac
k to
mor
e he
dgin
g.D
euts
che
Ban
k (S
epte
mbe
r 29,
200
8)
“The
chan
gein
2008
estim
ated
EP
Sis
due
toou
rbel
iefi
nth
ein
dust
ry-w
ide
cost
pres
sure
sbe
ing
sust
aine
din
tone
xtye
aran
dth
e
“His
toric
mis
trus
t, w
ith c
erta
in m
ajor
pot
entia
l sha
reho
lder
s re
luct
ant t
o in
vest
bas
ed o
n th
e is
sues
the
com
pany
face
d in
the
past
w
ith a
dis
tinct
ly m
ixed
reco
rd o
f sha
reho
lder
val
ue c
reat
ion
to s
ay th
e le
ast.
Ulti
mat
ely,
Joh
n H
ess
is s
till i
n ch
arge
, and
th
at p
rovi
des
a m
ajor
link
to th
e pa
st. H
ess
has
hist
oric
ally
sho
wn
poor
per
form
ance
on
oper
atio
nal m
etric
s…”
Deu
tsch
e B
ank
(Aug
ust 6
, 200
7)Th
e ch
ange
in 2
008
estim
ated
EPS
is d
ue to
our
bel
ief i
n th
e in
dust
ryw
ide
cost
pre
ssur
es b
eing
sus
tain
ed in
to n
ext y
ear a
nd th
e co
mpa
ny’s
inab
ility
to m
anag
e th
em q
uite
as
succ
essf
ully
as
do th
e M
ajor
s.”
Ban
k of
Am
eric
a (A
pril
26, 2
007)
“Con
tinue
d ex
plor
atio
n lo
sses
are
val
ue d
estr
uctiv
e.”
Deu
tsch
e B
ank
(Oct
ober
25,
200
6) [ 78
]
“It is
impo
rtant
to h
ighl
ight
that
the
high
est p
aid
com
pani
es a
re a
lso
the
best
per
form
ers,
with
the
argu
able
exc
eptio
n of
Hes
s.H
e is
a
dyna
stic
exe
cutiv
e le
ft in
a b
usin
ess
that
reso
nate
s w
ith fa
mily
fortu
nes…
”D
euts
che
Ban
k (A
ugus
t 24,
200
6)
AR
eally
Rea
llyLo
ngTi
me
…A
Rea
lly, R
eally
Lon
g Ti
me
“The
key
que
stio
n, in
our
vie
w, g
oing
forw
ard
is w
heth
er H
ess
is s
tarti
ng to
spr
ead
itsel
f too
thin
via
a g
row
ing
proj
ect p
ortfo
lio li
st.”
“We
thin
k th
e fre
quen
cy o
f HE
S’s
ana
lyst
mee
tings
cou
ld b
e in
crea
sed.
How
abo
ut b
iann
ual?
”M
erril
l Lyn
ch (M
ay 2
2, 2
006)
yq
,,g
gg
pg
gp
jp
Gol
dman
Sac
hs (A
pril
26, 2
006)
“The
agg
ress
ive
upst
ream
exp
lora
tion
stor
y dr
iven
by
John
O’C
onno
r is
unde
r pre
ssur
e, a
s a
run
of d
ry h
oles
is lo
omin
g la
rger
. With
no
com
plet
ion
targ
et, t
he s
tory
has
an
unce
rtain
futu
re, c
osts
are
risi
ng a
nd p
rosp
ects
are
pus
hed
from
this
yea
r to
next
.”D
euts
che
Ban
k (A
pril
26, 2
006)
“Des
pite
a n
ew re
cord
qua
rterly
oil
pric
e en
viro
nmen
t and
seq
uent
ially
muc
h hi
gher
pro
duct
ion
leve
ls, w
orld
wid
e un
it pr
ofita
bilit
y ro
seon
lym
argi
nally
beca
use
ofco
ntin
ued
heav
yhe
dgin
glo
ss(n
osu
rpris
ehe
re)a
nda
shar
pin
crea
seof
cost
s”
“Thi
s co
mpa
ny h
as n
ot h
isto
rical
ly s
how
n go
od c
apita
l dis
cipl
ine,
del
iver
ing
one
of th
e hi
ghes
t F&D
cos
ts in
the
sect
or a
nd o
ne
of th
e lo
wer
retu
rns
on c
apita
l.”B
ank
of A
mer
ica
(Jan
uary
27,
200
5)
rose
onl
y m
argi
nally
… b
ecau
se o
f con
tinue
d he
avy
hedg
ing
loss
(no
surp
rise
here
) and
a s
harp
incr
ease
of c
osts
.Le
hman
Bro
ther
s (J
anua
ry 2
7, 2
005)
“Hes
s’s
long
-term
sha
re p
erfo
rman
ce h
as b
een
ham
pere
d by
an
inab
ility
to s
how
sus
tain
able
vol
ume
grow
th a
nd v
alue
cre
atio
n in
th
e up
stre
am…
As
a re
sult,
Hes
s’s
10-y
ear s
hare
pric
e pe
rform
ance
has
bee
n th
e w
eake
st a
mon
g th
e in
tegr
ated
oils
.”M
erril
l Lyn
ch (O
ctob
er 2
1, 2
004)
ey
c(O
ctob
e,
00)
“Fol
low
ing
seve
ral y
ears
of m
isse
d ta
rget
s, [H
ess]
has
refra
ined
from
offe
ring
prod
uctio
n gu
idan
ce m
uch
beyo
nd th
e cu
rrent
yea
r.W
hils
t thi
s pl
ays
to it
s be
nefit
by
avoi
ding
the
risk
of o
ver p
rom
isin
g / u
nder
del
iver
y, it
als
o cl
ouds
the
outlo
ok o
ver t
heco
min
g ye
ars.
HE
S’s
relu
ctan
ce to
com
mit
to a
ny lo
ng-te
rm p
rodu
ctio
n ob
ject
ives
is u
nder
stan
dabl
e in
the
cont
ext o
f a p
oor t
rack
reco
rd
whe
re a
suc
cess
ion
of a
ggre
ssiv
e gr
owth
targ
ets
has
been
mis
sed.
”C
itigr
op
Smith
Bar
ne(O
ctob
er11
2004
)C
itigr
oup
Sm
ith B
arne
y (O
ctob
er 1
1, 2
004)
“…H
ess
need
s to
spe
nd a
ggre
ssiv
ely
to a
rrest
its
impl
odin
g pr
oduc
tion
prof
ile. T
he ri
sk is
whe
ther
thes
e ca
pita
l inv
estm
ents
will
gene
rate
com
petit
ive
retu
rns,
a c
once
rn to
inve
stor
s gi
ven
the
rece
nt h
isto
ry o
f pro
duct
ion
and
rese
rve
disa
ppoi
ntm
ents
…”
Mer
rill L
ynch
(Apr
il 29
, 200
4)
“The
ques
tion
inou
rvie
wis
whe
ther
Hes
sis
truly
crea
ting
acu
lture
that
isfo
cuse
don
prof
itabi
lity
first
”
[ 79
]
The
ques
tion,
in o
ur v
iew
, is
whe
ther
Hes
s is
trul
y cr
eatin
g a
cultu
re th
at is
focu
sed
on p
rofit
abilit
y fir
st.
Gol
dman
Sac
hs (F
ebru
ary
6, 2
004)
Not
e:Fo
r all
repo
rts p
rior t
o M
ay 2
006,
Am
erad
a H
ess
or A
HC
, was
cha
nged
nam
e to
Hes
s or
HE
S
AR
eally
Rea
llyR
eally
Long
Tim
e…
A R
eally
, Rea
lly, R
eally
Lon
g Ti
me
“Hes
s’s
near
-term
stra
tegi
c ou
tlook
is fa
irly
clea
r-cu
t: th
e co
mpa
ny m
ust i
mpr
ove.
[H
ess]
will
need
to re
gain
pro
ject
man
agem
ent
cred
ibilit
y af
ter d
isap
poin
ting
resu
lts…
”B
ank
of A
mer
ica
(Jan
uary
6, 2
004)
“Hav
ing
lagg
ed th
e re
cent
rebo
und
in th
e se
ctor
—ad
ding
to w
hat h
as b
een
long
-term
sec
ular
und
erpe
rfor
man
ce…
”G
oldm
an S
achs
(Dec
embe
r 9, 2
003)
“We
belie
ve H
ess
had
four
issu
es it
nee
ded
to o
verc
ome:
Top
man
agem
ent w
as n
ot a
s st
rong
as
at it
s co
mpe
titor
s; E
&P
asse
t ba
se w
as v
ery
mat
ure
and
shor
t-liv
ed; B
alan
ce s
heet
was
wea
k; C
apita
l dis
cipl
ine
was
exp
ress
ed in
wor
ds, b
ut n
ot p
ract
iced
in
actio
ns”
in a
ctio
ns.
Gol
dman
Sac
hs (D
ecem
ber 9
, 200
3)
“Hes
sre
leas
edan
othe
rqua
rtero
fdis
appo
intin
gea
rnin
gs…
Whi
leof
fsho
rede
velo
pmen
tdel
ays
are
notu
ncom
mon
forl
arge
oila
nd
“Will
per
petu
al re
stru
ctur
ing
mod
e ev
er e
nd?”
Gol
dman
Sac
hs (O
ctob
er 1
4, 2
003)
Hes
s re
leas
ed a
noth
er q
uarte
r of d
isap
poin
ting
earn
ings
…W
hile
offs
hore
dev
elop
men
t del
ays
are
not u
ncom
mon
for l
arge
oil
and
gas
proj
ects
, H
ess
has
cons
iste
ntly
dis
appo
inte
d th
e m
arke
t with
ope
ratio
nal p
erfo
rman
ce o
ver t
he p
ast s
ever
al q
uarte
rs.”
Ban
k of
Am
eric
a C
redi
t Res
earc
h (J
uly
29, 2
003)
“…[H
ess]
a c
ompa
ny th
at w
e co
nsid
er th
e m
ost f
unda
men
tally
flaw
ed E
&P
or in
tegr
ated
in o
ur in
vest
men
t gra
de u
nive
rse…
U
nfor
tuna
tely,
thes
e da
ys a
lack
of a
stou
ndin
gly
bad
new
s is
cau
se fo
r cel
ebra
tion!
”M
Stl
Cdi
tRh
(M1
2003
)
“With
bel
ow c
ost o
f cap
ital R
OA
CE,
hig
h up
stre
am c
osts
, and
stra
tegi
c im
pedi
men
ts d
ue to
recu
rring
hig
h de
bt le
vels
, we
belie
ve
the
Hes
s sh
ares
sho
uld
cont
inue
to tr
ade
at a
mat
eria
l dis
coun
t vs.
the
inte
grat
ed p
eer g
roup
. Mor
eove
r…w
e re
mai
n un
conv
ince
dth
at th
e co
mpa
ny’s
pla
nned
ups
tream
gro
wth
will
lead
to im
prov
ed p
rofit
abili
ty a
nd re
turn
s.”
UB
S W
arbu
r g (A
pril
30, 2
003)
Mor
gan
Stan
ley
Cre
dit R
esea
rch
(May
1, 2
003)
g(
p,
)
“The
bur
den
of h
igh
debt
leve
ls a
nd lo
w re
turn
s, w
ith a
band
oned
targ
ets
and
a w
eak
near
-term
pro
duct
ion
prof
ile, l
eave
s th
e m
anag
emen
t in
need
of r
eest
ablis
hing
cre
dibi
lity
and
shar
e pr
ice
perf
orm
ance
.”D
euts
che
Ban
k (A
pril
8, 2
003)
“The
mat
eria
l ero
sion
of s
hare
hold
er e
quity
so
soon
afte
r the
com
plet
ion
of th
ese
two
acqu
isiti
ons
is a
cle
ar d
isap
poin
tmen
t... [ 8
0]
[It] a
lso
mus
t rai
se q
uest
ions
as
to th
e ac
quis
ition
due
dilig
ence
pro
cess
with
in H
ess…
We
belie
ve in
vest
ors’
con
fiden
ce in
the
com
pany
has
bee
n m
ater
ially
und
erm
ined
…”
UB
S W
arbu
rg (F
ebru
ary
3, 2
003)
Not
e:Fo
r all
repo
rts p
rior t
o M
ay 2
006,
Am
erad
a H
ess
or A
HC
, was
cha
nged
nam
e to
Hes
s or
HE
S
Bac
kin
toth
eEa
rlyPa
rtof
the
Last
Dec
ade
…B
ack
into
the
Early
Par
t of t
he L
ast D
ecad
e
“We
belie
eH
ess
sho
ldtra
deat
a5%
10%
disc
ont
toth
eD
omes
ticO
ilsba
sed
on[a
nd]3
)Dam
aged
man
agem
entc
redi
bilit
”
“The
con
tinue
d st
ring
of n
egat
ive
new
s ha
s le
ft m
anag
emen
t with
som
e w
ork
to d
o to
rebu
ild in
vest
or c
onfid
ence
.”B
ank
of A
mer
ica
Cre
dit R
esea
rch
(Jan
uary
31,
200
3)
“We
belie
ve H
ess
shou
ld tr
ade
at a
5%
-10%
dis
coun
t to
the
Dom
estic
Oils
bas
ed o
n…[a
nd] 3
) Dam
aged
man
agem
ent c
redi
bilit
y.”
JP M
orga
n (J
anua
ry 3
0, 2
003)
“Cre
dibi
lity
mat
ters
, and
Hes
s ha
s lit
tle o
f it l
eft.”
Cre
dit S
uiss
e (J
anua
ry 3
0, 2
003)
“W
hil
it
ii
dth
t’i
ll
ttit
dt
hh
ld’
itW
“RE
ITE
RAT
E U
ND
ER
PE
RFO
RM
; E&
P D
ETER
IOR
ATIO
N A
SER
IOU
S IS
SUE
Ther
e is
no
chan
ge to
our
Und
erpe
rform
ratin
g fo
r H
ess
desp
ite th
e co
ntin
ued
slid
e in
its
shar
es. W
e be
lieve
larg
e w
rite
dow
ns a
t its
LLO
G a
nd T
riton
acq
uisi
tions
cou
pled
with
cont
inue
d er
osio
n in
its
base
E&
P pr
oper
ties
poin
t to
serio
us p
robl
ems
with
the
com
pany
's e
xplo
ratio
n an
d pr
oduc
tion
busi
ness
.”G
oldm
an S
achs
(Jan
uary
30,
200
3)
“…W
e be
lieve
eve
n if
the
disp
osal
pro
gram
is c
ompl
eted
the
portf
olio
impr
ovem
ent i
s un
likel
y to
be
suffi
cien
t to
resu
lt in
retu
rns
“…W
hile
inve
stor
s re
mai
n w
orrie
d ov
er th
e m
anag
emen
t’s s
eem
ingl
y sl
oppy
atti
tude
to s
hare
hold
ers’
equ
ity…
We
are
incr
easi
ngly
con
cern
ed o
ver H
ess’
s co
ntin
uing
abi
lity
to g
ener
ate
thes
e ‘n
on re
curri
ng’
char
ges
…C
arel
essn
ess
with
sha
reho
lder
seq
uity
is a
wor
ryin
g tra
it in
any
cor
pora
tion.
”C
redi
t Sui
sse
(Jan
uary
30,
200
3)
in e
xces
s of
Hes
s’s
cost
of c
apita
l.”U
BS
War
burg
(Nov
embe
r 5, 2
002)
“…P
rodu
ctio
n fo
reca
sts
wer
e re
vise
d lo
wer
sup
port
ing
conc
erns
that
we
have
had
rega
rdin
g ec
onom
ic v
alue
cre
atio
n…”
Mor
gan
Sta
nley
(Oct
ober
25,
200
2)
“Hes
s’s
stoc
k fe
ll 12
% to
day
on th
e ba
ck o
f a d
owng
rade
to 2
003
and
2004
pro
duct
ion
expe
ctat
ions
and
a fu
rther
writ
e-do
wn
of th
eLL
OG
pro
perti
es .
Whi
le n
eith
er o
f the
se th
ings
is d
evas
tatin
g to
the
com
pany
’s v
alue
, we
belie
ve th
at m
anag
emen
t cre
dibi
lity
at
Hes
s ha
s be
en s
tret
ched
ver
y th
in…
This
cha
rge
will
be s
een
by in
vest
ors
as a
con
tinua
tion
of a
dis
turb
ing
patte
rn o
f spe
cial
ch
arge
s at
Hes
s…ag
ain
calli
ng in
to q
uest
ion
the
com
pany
’s ju
dgm
ent…
”C
redi
t Sui
sse
(Oct
ober
24,
200
2) [ 81
]
()
Not
e:Fo
r all
repo
rts p
rior t
o M
ay 2
006,
Am
erad
a H
ess
or A
HC
, was
cha
nged
nam
e to
Hes
s or
HE
S
Even
Bac
kin
toth
eTw
entie
thC
entu
ry…
Even
Bac
k in
to th
e Tw
entie
th C
entu
ry
“In 2
003,
Hes
s’s
RO
AC
E o
f 7.6
% is
the
low
est i
n its
pee
r gro
up a
nd is
wel
l bel
ow H
ess’
s co
st o
f cap
ital o
f 10%
-12%
.”U
BS
War
burg
(Sep
tem
ber 2
2, 2
000)
“Hes
s an
noun
ced
a br
oad-
base
d re
stru
ctur
ing
prog
ram
invo
lvin
g re
duct
ions
in o
verh
ead
and
capi
tal e
xpen
ditu
res…
Reg
ardi
ng th
e st
ock,
we
mai
ntai
n ou
r lon
gsta
ndin
g N
eutra
l rat
ing.
Inv
esto
r int
eres
t is
not e
xpec
ted
to b
ecom
e m
ater
ial i
n th
is c
ompa
ny u
ntil
“Hes
s’s
cons
iste
ntly
poo
r ret
urns
…”
UB
S W
arbu
rg (S
epte
mbe
r 22,
200
0)
retu
rns
rese
mbl
e th
e co
st o
f cap
ital o
n a
sust
aina
ble
basi
s.”
Mor
gan
Sta
nley
(Dec
embe
r 14,
199
8)
“Exp
lora
tion
expe
nse
is s
igni
fican
tly a
bove
ave
rage
…H
ess,
with
a m
arke
t cap
italiz
atio
n of
$4.
5 bi
llion,
had
199
7 ex
plor
atio
n ex
pens
e of
$37
3 m
illion
; in
com
paris
on, E
xxon
, with
a m
arke
t cap
italiz
atio
n of
$17
5 bi
llion,
had
exp
lora
tion
expe
nse
of $
753
milli
on.
(Inot
herw
ords
Exxo
n’s
expl
orat
ion
expe
nse
ison
lytw
ice
ashi
ghas
Hes
s’s
whi
leits
mar
ketc
apita
lizat
ion
isal
mos
t40
times
as(In
oth
er w
ords
, Exx
ons
expl
orat
ion
expe
nse
is o
nly
twic
e as
hig
h as
Hes
ss,
whi
le it
s m
arke
t cap
italiz
atio
n is
alm
ost 4
0 tim
esas
hi
gh).”
Gol
dman
Sac
hs (S
epte
mbe
r 4, 1
998)
“Whi
le H
ess
has
not b
een
an e
arni
ngs
stor
y fo
r man
y ye
ars
now,
the
abs
ence
of p
rofit
s is
get
ting
stal
e.” U
BS (J
anua
ry 2
3, 1
998
)
“Hes
s co
ntin
ues
to b
e th
e pe
renn
ial t
urna
roun
dst
ory.
”
“Giv
en th
e co
ntin
ued
inco
nsis
tenc
y in
Hes
s re
sults
…w
e w
ould
not
add
to p
ositi
ons
at th
ese
leve
ls” S
mith
Bar
ney
(Oct
ober
23,
1997
)
US
(Ja
uay
3,99
8)
py
Pai
ne W
ebbe
r (M
ay 7
, 199
7) [ 82
]
Not
e:Fo
r all
repo
rts p
rior t
o M
ay 2
006,
Am
erad
a H
ess
or A
HC
, was
cha
nged
nam
e to
Hes
s or
HE
S
Hes
s’s
prob
lem
sar
ede
eply
root
ed,p
erva
sive
,and
fund
amen
tal.
Hes
ss
prob
lem
s ar
e de
eply
root
ed, p
erva
sive
, and
fund
amen
tal.
[ 83
]
Ellio
tt Pu
t For
war
d a
Prop
osal
in J
anua
ry:
Hes
s R
eact
ed D
efen
sive
ly a
nd H
as F
aile
d to
Add
ress
Its
Prob
lem
s
Ellio
tt Pu
t For
war
d a
Prop
osal
and
Hes
s R
eact
ed D
efen
sive
ly w
ith N
o En
gage
men
torG
enui
neA
naly
sis
Enga
gem
ent o
r Gen
uine
Ana
lysi
s
Hes
s R
espo
nse
Mar
ch 4
thEl
liott
Pres
enta
tion
Janu
ary
29th
Shar
ehol
der
Nom
inee
s
Ele
ctth
e fiv
ew
orld
-cla
ss n
omin
ees
R
ejec
ted
P
ushe
d ou
t all
five
dire
ctor
s or
igin
ally
up
for e
lect
ion
Fo
und
five
new
nom
inee
sw
hoFo
und
five
new
nom
inee
s w
ho
prea
ppro
ved
Hes
s re
spon
se
Com
plet
eR
evie
wof
All
“Con
duct
a fu
ll st
rate
gic
and
oper
atio
nal
revi
ew to
con
side
r all
path
way
s to
max
imiz
e l
il
di”
Min
or a
dopt
ion
Rev
iew
of A
ll Pa
thw
ays
to
Max
imiz
e Va
lue
valu
e –
incl
udin
g:”
I.“S
ubst
antia
l res
truct
urin
g pr
ogra
m
(incl
udin
g a
pote
ntia
l spi
n of
f of [
the]
B
akke
n as
set)
to re
focu
s [th
e] p
ortfo
lio
I.P
rom
ised
to s
ell d
owns
tream
and
m
onet
ize
mid
stre
am a
sset
s al
l the
whi
le
clai
min
g it
was
alw
ays
the
plan
.an
d M
anag
emen
t”
II.R
evie
w to
“im
prov
e op
erat
ions
and
ac
coun
tabi
lity
to h
alt [
a] h
isto
ry o
f poo
r
Dis
mis
sed
furt
her r
estr
uctu
ring
with
fa
lse
excu
ses,
cal
ling
it a
“liq
uida
tion”
II.D
enie
d an
y op
erat
iona
l iss
ues
and
calle
d th
e re
view
“irr
elev
ant”
exec
utio
n,” a
nd
III.R
evie
w to
“brin
g di
scip
line
to c
apita
l al
loca
tion.
”III
.Den
ied
any
capi
tal a
lloca
tion
issu
es
and
calle
d th
e re
view
“irr
elev
ant”
but
prom
ised
up
to a
$4
billi
on s
hare
[ 85
]
pp
repu
rcha
se a
nd a
n in
crea
sed
divi
dend
(n
eith
er h
ad b
een
done
in a
dec
ade)
Fello
w S
hare
hold
er A
lso
Find
s H
ess
Rea
ctio
n “M
isle
adin
g, S
elf-S
ervi
ng,
and
Def
ensi
ve”
and
Def
ensi
ve
“…W
e fin
d m
any
of y
our r
espo
nses
to th
e sh
areh
olde
rs’ c
once
rns
to b
e m
isle
adin
g,
self
serv
ing,
and
def
ensi
ve…
Giv
en th
e in
cons
iste
ncie
s in
man
y of
you
r rec
ent
com
mun
icat
ions
, we
expe
ct th
at th
e sh
areh
olde
rs w
ould
wel
com
e E
lliott’
s no
min
ees
toth
eB
oard
toen
sure
prop
eran
dtim
ely
exec
utio
nan
dto
avoi
dris
kof
back
slid
ing
”to
the
Boa
rd to
ens
ure
prop
er a
nd ti
mel
y ex
ecut
ion
and
to a
void
risk
of b
acks
lidin
g.
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LCM
arch
201
3(1)
[ 86
]
1.R
elat
iona
l Let
ter t
o Jo
hn H
ess,
Mar
ch 5
, 201
3
Hes
s Pu
lled
Slat
e O
rigin
ally
Up
for E
lect
ion
Foun
dN
ewN
omin
ees
Will
ing
toA
gree
toH
ess
Plan
Foun
d N
ew N
omin
ees
Will
ing
to A
gree
to H
ess
Plan
Hes
sSl
ate
Oil
&G
asTe
nre
Inde
pend
ence
Shar
ehol
derV
ote
Orig
inal
sla
te s
ever
ely
lack
ed o
pera
ting
expe
rienc
e, in
depe
nden
ce, a
nd h
ad lo
ng te
nure
Hes
s Sl
ate
Oil
& G
asO
pera
ting
Expe
rienc
e
Tenu
reIn
depe
nden
ce??
?Sh
areh
olde
rVot
eW
ithhe
ld in
Las
t El
ectio
n (2
010)
(1)
Nic
hola
s F.
Bra
dyN
one
19 Y
ears
Join
t exe
cuto
rHes
s es
tate
; inv
ests
for H
ess
Cha
ritab
le T
rust
38
.8%
Gre
gory
P. H
illH
ess
4 Ye
ars
Offi
cer o
fHes
s1.
2%
Thom
as H
. Kea
nN
one
23 Y
ears
Join
t exe
cuto
r Hes
s es
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ctor
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ec. o
f H
ess
Trus
t39
.2%
Sam
uel A
. Nun
nJr
.N
one
6 M
onth
sC
hairm
anC
SIS,
of w
hich
Joh
n H
ess
is a
Tru
stee
NA
Fran
k A
. Ols
onN
one
15 Y
ears
33.2
%
In re
spon
se to
Elli
ott,
Hes
s fo
und
five
new
nom
inee
s w
illin
g to
agr
ee w
ith H
ess
plan
“The
se i
ndep
ende
nt d
irect
ors
agr
eed
to j
oin
our
boa
rd,
beca
use
they
bel
ieve
in
our
out
stan
ding
pla
n, a
nd t
hey
re
cogn
ize
that
our
pla
n is
the
righ
t pl
an f
or a
ll o
f ou
r sh
areh
olde
rs.”
“We
have
had
this
str
ateg
ic tr
ansf
orm
atio
n, a
s m
y re
mar
ks n
oted
, und
erw
ay, r
eally
goi
ng b
ack…
sinc
e I b
ecam
e C
hairm
an…
In
fact
, Elli
ott g
ot o
n th
e tr
ain
afte
r it
real
ly l
eft
the
sta
tion…
This
is
a c
ulm
inat
ion
of a
mul
ti y
ear
stra
tegy
…”
-Joh
n H
ess,
Mar
ch 2
013(
2)
[87
]S
ourc
e: C
ompa
ny F
iling
s1.
% o
f vot
ed s
hare
s w
ithhe
ld; H
ess
esta
te is
ass
umed
to v
ote
for n
omin
ees
and
is
excl
ude
from
cal
cula
tion;
Com
pany
filin
gs, F
acts
et, I
SS
Vot
ing
Ana
lytic
s2.
Hes
s bu
sine
ss u
pdat
e ca
ll, M
arch
4, 2
013
How
gen
uine
and
sus
tain
able
is H
ess’
s ch
ange
in re
spon
se to
Elli
ott?
Wha
t Sha
reho
lder
s R
eally
Wan
t Is
For A
ll D
irect
ors
to B
e A
ccou
ntab
lePr
oper
Com
paris
onIs
Hes
s’s
New
Nom
inee
sA
gain
stIn
cum
bent
Boa
rdPr
oper
Com
paris
on Is
Hes
ss
New
Nom
inee
s A
gain
st In
cum
bent
Boa
rd
Will
iam
Sch
rade
r
Hes
s’s
New
Nom
inee
s
Nam
eA
ge (1)
Ret
urn
Ove
r Te
nure
(2)
Tenu
re(2
)Ba
ckgr
ound
Incu
mbe
nts
John
Kre
nick
iJr.
Dr.
Kev
in M
eyer
s
John
Hes
s58
(460
%)
35 /
17H
ess
Cha
irman
& C
EO
Edith
Hol
iday
61(5
89%
)20
Gov
ernm
ent;
Wor
ked
dire
ctly
for N
icho
las
Brad
y in
Sen
ate
and
Trea
sury
;
Rob
ert
Wils
on72
(335
%)
17H
ealth
care
; Joh
nson
-Hes
s fa
mily
con
nect
ion
Dr.
Mar
k W
illia
ms
Jh
Qi
l
Fred
eric
Rey
nold
s
()
;y
Cra
ig M
atth
ews
69(1
53%
)11
Ele
ctric
ity
Ern
st v
on M
etzs
ch73
(44%
)10
Fina
nce
Ris
aLa
vizz
o-M
oure
y58
(68%
)9
Non
-pro
fit;J
ohns
on-H
ess
fam
ily c
onne
ctio
n
Jh
Mlli
III71
(56%
)6
FiJ
it
tfH
tt
John
Qui
gley
John
Mul
lin II
I71
(56%
)6
Fina
nce;
Joi
nt e
xecu
tor o
f Hes
s es
tate
Sam
uelB
odm
an74
(47%
)4
Gov
ernm
ent/C
hem
ical
s
Ave
rage
Ten
ure(
2)
Ups
trea
mO
il&
Gas
Lead
“In
depe
nden
t”
14 y
ears
Ups
trea
m O
il &
Gas
O
pera
ting
Expe
rienc
eea
dde
pede
tD
irect
or A
ND
Joi
nt
Exec
utor
of H
ess
Esta
teN
one
Non
eR
estr
uctu
ring
Expe
rienc
e
“We
wou
ld u
rge
the
boar
d to
con
side
r mor
e pr
oact
ivel
y w
heth
er th
ese
nom
inee
s m
ight
be
mor
e su
itabl
e fo
r the
com
pany
at t
his
poin
t in
its d
evel
opm
ent t
han
som
e of
the
long
-ser
ving
in
cum
bent
s w
ho d
o no
t see
m to
hav
e be
en a
ble
to c
halle
nge
man
agem
ent s
uffic
ient
ly to
ave
rt
the
com
pany
’s e
xten
ded
decl
ine
in p
erfo
rman
ce a
nd s
hare
pric
e.”
ISS
PA
di
Si
[ 88
]
Sou
rces
:Com
pany
Fili
ngs,
Blo
ombe
rg1.
Tenu
re c
alcu
late
d as
of d
ate
of 2
013
annu
al g
ener
al m
eetin
g; T
enur
e fo
r Joh
n H
ess
show
s bo
th a
s di
rect
or a
nd a
s C
EO
, res
pect
ivel
y2.
Tenu
re e
xclu
ding
Joh
n H
ess
is 1
1 ye
ars
-ISS
Pro
xy A
dvis
ory
Serv
ices
, R
ecom
men
datio
n: B
arne
s &
Nob
le P
roxy
Con
test
, Sep
tem
ber 2
010
Hes
s C
laim
s Pr
oces
s to
Upd
ate
Dire
ctor
s B
egan
Las
t Aug
ust
But
Hes
sPu
shed
Out
Sam
Nun
nW
hoW
asA
ctua
llyA
dded
inA
ugus
tB
ut H
ess
Push
ed O
ut S
am N
unn
Who
Was
Act
ually
Add
ed in
Aug
ust
Bef
ore
Shar
ehol
derN
omin
eeIn
volv
emen
tA
fterS
hare
hold
erN
omin
eeIn
volv
emen
t
“We
are
also
add
ing…
dire
ctor
s to
the
boar
d. L
ast
“Hes
s C
orpo
ratio
n (N
YS
E: H
ES)
ann
ounc
ed
Bef
ore
Shar
ehol
der N
omin
ee In
volv
emen
tA
fter S
hare
hold
er N
omin
ee In
volv
emen
t
gA
ugus
t, w
e m
et w
ith a
sea
rch
firm
to b
egin
id
entif
ying
can
dida
tes…
.”
Bef
ore
I con
tinue
, I w
ould
like
to re
cogn
ize
our
exis
ting
dire
ctor
sfo
rmer
Sen
ator
Sam
p(
)to
day
the
elec
tion
of fo
rmer
U.S
. Sen
ator
Sam
N
unn
to it
s B
oard
of D
irect
ors.
”
exis
ting
dire
ctor
s…fo
rmer
Sen
ator
Sam
N
unn…
will
be
retir
ing
from
our
boa
rd.”
John
Hes
sM
arch
201
3(2)
Aug
ust2
012(
1)
[ 89
]S
ourc
e: C
ompa
ny tr
ansc
ripts
1.P
ress
rele
ase
Aug
ust 2
, 201
22.
Hes
s bu
sine
ss u
pdat
e ca
ll M
arch
4, 2
013
Hes
sC
laim
edIts
Rea
ctio
nW
asa
Plan
That
Had
Bee
nin
Plac
efo
rYea
rsH
ess
Cla
imed
Its
Rea
ctio
n W
as a
Pla
n Th
at H
ad B
een
in P
lace
for Y
ears
“We
have
had
this
stra
tegi
ctra
nsfo
rmat
ion
unde
rway
real
lygo
ing
back
noto
nly
We
have
had
this
stra
tegi
c tra
nsfo
rmat
ion…
unde
rway
real
ly g
oing
bac
k, n
ot o
nly
sinc
e I b
ecam
e C
hairm
an a
nd w
e st
arte
d to
shi
ft to
E&
P, b
ut p
redo
min
antly
whe
n w
e st
arte
d to
bui
ld o
ur B
akke
npo
sitio
n in
201
0. S
o th
is is
not
som
ethi
ng th
at ju
st
happ
ened
ove
rnig
ht a
nd is
resp
onse
to a
n ac
tivis
t. In
fact
, Ellio
tt go
t on
the
train
af
teri
trea
llyle
ftth
est
atio
nTh
isis
aca
refu
llyst
ruct
ured
stra
tegy
that
'sbe
engi
ven
afte
r it r
eally
left
the
stat
ion.
Thi
s is
a c
aref
ully
stru
ctur
ed s
trate
gy th
ats
been
giv
en
a lo
t of t
houg
ht, a
nd it
's re
ally
the
natu
ral c
ulm
inat
ion
of th
e st
rate
gic
trans
form
atio
n I w
ent t
hrou
gh in
my
rem
arks
...”
John
Hes
sM
arch
2013
(1)
Mar
ch 2
013(
1)
[ 90
]
1.H
ess
busi
ness
upd
ate
call,
Mar
ch 4
, 201
3
Yet
This
Isth
eFi
rstD
ivid
end
Incr
ease
orSh
are
Buy
back
ina
Dec
ade
$
Yet,
This
Is th
e Fi
rst D
ivid
end
Incr
ease
or S
hare
Buy
back
in a
Dec
ade
Hes
s D
ivid
ends
(1)
Aut
horiz
ed S
hare
Buy
back
s as
% o
f Mar
ket C
ap(1
)(2)
12%
14%
16%
18%
$0.8
0
$0.9
0
$1.0
0
4%6%8%10%
$0.5
0
$0.6
0
$0.7
0
0%2%
2002
2004
2006
2008
2010
2012
2013
-201
5$0
.30
$0.4
0
2002
2004
2006
2008
2010
2012
2014
E
As
a re
sult
of S
hare
hold
er N
omin
ee in
volv
emen
t, H
ess:
R
aise
d its
div
iden
d by
150
%, t
he fi
rst d
ivid
end
incr
ease
in o
ver a
dec
ade
A
utho
rized
a s
hare
buy
back
of u
p to
$4
billi
on, t
he fi
rst H
ess
buyb
ack
in o
ver a
dec
ade
[ 91
]S
ourc
es: C
ompa
ny fi
lings
, tra
nscr
ipts
1.Fo
reca
sts
as p
er m
anag
emen
t com
men
tary
, Hes
s bu
sine
ss u
pdat
e ca
ll, M
arch
4, 2
013
2.M
arke
t cap
italiz
atio
n as
of 4
/12/
13
Bef
ore
Sha
reho
lder
Nom
inee
Invo
lvem
ent:
Hes
sH
adC
alle
dR
estr
uctu
ring
Plan
Com
plet
eH
ess
Had
Cal
led
Res
truc
turin
gPl
an C
ompl
ete
Bef
ore
Shar
ehol
der N
omin
ee In
volv
emen
tA
fter S
hare
hold
er N
omin
ee In
volv
emen
t
Que
stio
n on
Jan
uary
201
3 ea
rnin
gs c
all:
“ So
Igue
ssth
equ
estio
nis
dow
ela
rgel
ykn
ow
“We
have
had
this
stra
tegi
c tra
nsfo
rmat
ion…
un
derw
ay re
ally
goi
ng b
ack…
sinc
e I b
ecam
e C
hairm
an…
In fa
ct, E
lliot
t got
on
the
trai
n a
fter
itre
ally
left
the
stat
ion
This
isa
So, I
gue
ss th
e qu
estio
n is
do
we
larg
ely
know
al
l of t
he la
rger
mov
ing
piec
es a
t thi
s ju
nctu
re?
Is th
at a
fair
stat
emen
t?”
it re
ally
lef
t th
e s
tatio
n… T
his
is a
cu
lmin
atio
n o
f a
mul
ti-ye
ar s
trate
gy…
”
John
Hes
sM
arch
201
3(2)
John
Hes
s R
espo
nse:
“Abs
olut
ely,
that
is th
e co
rrec
t und
erst
andi
ng o
f m
y re
mar
ks, t
hat t
he m
ajor
mov
es to
resh
ape
ourp
ortfo
lioin
term
sof
dive
stitu
reto
com
plet
eou
r por
tfolio
in te
rms
of d
ives
titur
e to
com
plet
e th
e st
rate
gic
resh
apin
g of
our
por
tfolio
, will
hav
e be
en c
ompl
eted
by
the
end
of 2
013.
”
“…th
ese
dive
stitu
res
will
com
plet
e th
e t
ti
hi
ftf
li”
stra
tegi
c re
shap
ing
of o
ur p
ortfo
lio…
”
John
Hes
sJa
nuar
y 20
13(1
)
[ 92
]S
ourc
e: C
ompa
ny tr
ansc
ripts
1.4Q
201
2 E
arni
ngs
call
Janu
ary
30, 2
013
2.H
ess
busi
ness
upd
ate
call,
Mar
ch 4
, 201
3
Bef
ore
Sha
reho
lder
Nom
inee
Invo
lvem
ent:
Bak
ken
Mid
stre
amM
LPW
asIn
appr
opria
teB
akke
n M
idst
ream
MLP
Was
Inap
prop
riate
Bef
ore
Shar
ehol
der N
omin
ee In
volv
emen
tA
fter S
hare
hold
er N
omin
ee In
volv
emen
t
“Tod
ay w
e ar
e an
noun
cing
the
culm
inat
ion
of
that
pro
cess
…S
peci
fical
ly, w
e w
ill b
e… p
ursu
ing
the
mon
etiz
atio
n of
our
Bak
ken
mid
stre
am
asse
ts”
“…th
e st
rate
gic
infra
stru
ctur
e w
e ha
ve in
Nor
th D
akot
a…th
e Ti
oga
Gas
Pla
nt…
that
's n
ot
som
ethi
ng th
at w
e w
ould
be
inte
rest
ed in
M
LPin
g”
asse
ts.
John
Hes
sM
arch
201
3(3)
MLP
ing.
John
Hes
sN
ovem
ber 2
012(
1)
“But
we
certa
inly
do
not b
elie
ve th
at a
n M
LP in
the
Bak
ken
is a
ppro
pria
te a
t thi
s tim
e.”
John
Hes
sJo
hn H
ess
Janu
ary
2013
(2)
[ 93
]S
ourc
e: C
ompa
ny tr
ansc
ripts
1.3Q
201
2 E
arni
ngs
call,
Nov
embe
r 2, 2
012
2.4Q
201
2 E
arni
ngs
call
Janu
ary
30, 2
013
3.H
ess
busi
ness
upd
ate
call,
Mar
ch 4
, 201
3
Bef
ore
Sha
reho
lder
Nom
inee
Invo
lvem
ent:
Ener
gyM
arke
ting
and
Ret
ailW
asSt
rate
gic
Ener
gy M
arke
ting
and
Ret
ail W
as S
trat
egic
Bef
ore
Shar
ehol
der N
omin
ee In
volv
emen
tA
fter S
hare
hold
er N
omin
ee In
volv
emen
t
“Tod
ay w
e ar
e an
noun
cing
the
culm
inat
ion
of
that
pro
cess
by
exiti
ng o
ur d
owns
tream
bu
sine
sses
and
bec
omin
g a
pure
pla
y E
&P
com
pany
Spec
ifica
llyw
ew
illbe
dive
stin
gou
r
“Our
Ene
rgy
Mar
ketin
g an
d R
etai
l Mar
ketin
g bu
sine
sses
rem
ain
a lo
ng-te
rm s
trat
egic
par
t of
our
por
tfolio
…S
o w
e ar
e ve
ry h
appy
hav
ing
it in
the
portf
olio
and
itis
ast
rate
gic
part
ofth
eco
mpa
ny. S
peci
fical
ly, w
e w
ill b
e di
vest
ing
our
reta
il, e
nerg
y m
arke
ting,
and
ene
rgy
tradi
ng
busi
ness
es…
”
John
Hes
s
in th
e po
rtfol
io a
nd it
is a
stra
tegi
c pa
rt of
the
portf
olio
.”
John
Hes
sN
ovem
ber 2
012(
1)
Mar
ch 2
013(
3)
“…w
e ha
ve m
orph
ed o
ur fu
el m
arke
ting
busi
ness
into
an
ener
gy m
arke
ting
busi
ness
…
whi
ch o
bvio
usly
will
hel
p us
if w
e fin
d ga
s in
th
eU
tica
So
they
'rego
ing
tobe
som
eth
e U
tica…
So
they
re g
oing
to b
e so
me
stra
tegi
c be
nefit
s th
ere…
We
have
a s
trong
br
and.
We
thin
k it
–if
anyt
hing
it e
nhan
ces
the
com
pany
from
a fi
nanc
ial a
nd re
puta
tiona
l poi
nt
of v
iew.
”
John
Hes
sJa
nuar
y 20
13(2
)
[ 94
]S
ourc
e: C
ompa
ny tr
ansc
ripts
1.3Q
201
2 E
arni
ngs
call,
Nov
embe
r 2, 2
012
2.4Q
201
2 E
arni
ngs
call
Janu
ary
30, 2
013
3.H
ess
busi
ness
upd
ate
call,
Mar
ch 4
, 201
3
Hes
s R
efus
ed to
Con
side
r a M
ore
Fuls
ome
Rev
iew
and
Res
orte
d to
Sca
re
Tact
ics
ofC
allin
gIt
an“A
ttem
ptto
Liqu
idat
eth
eC
ompa
ny”
Tact
ics
of C
allin
g It
an
Atte
mpt
to L
iqui
date
the
Com
pany
In a
lette
r to
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs:
“Wh
hill
Elli
ili
idh
”
“…liq
uida
te H
ess
as q
uick
ly a
s po
ssib
le.”
“We
hope
that
you
will
urg
e E
lliot
t to
ceas
e its
atte
mpt
to li
quid
ate
the
com
pany
…”
John
Hes
s, M
arch
201
3(1)
Hes
s Le
tter t
o S
hare
hold
ers,
Mar
ch 2
013(
2)
Ellio
tt ha
s ne
ver s
ugge
sted
liqu
idat
ing
the
com
pany
.
“th
ebo
ard
has
back
hand
edly
dism
isse
d[s
hare
hold
er’s
anal
ysis
]as
apl
anto
“liqu
idat
e”
ggq
gp
y
Publ
ic s
hare
hold
ers
have
see
n th
is b
efor
e…
… th
e bo
ard
has
back
hand
edly
dis
mis
sed
[sha
reho
lder
s an
alys
is] a
s a
plan
to l
iqui
date
th
e co
mpa
ny…
“Li
quid
atio
n” is
wha
t res
ults
whe
n a
boar
d ta
kes
its e
ye o
ff th
e bu
sine
ss e
quat
ion
for t
oo lo
ng, n
ot w
hat h
appe
ns w
hen
shar
ehol
ders
insi
st o
n ta
king
a lo
ok fo
r the
mse
lves
.”
“ [The
com
pany
]with
itsrh
etor
icab
out“
liqui
datio
n”a
ppea
rsto
have
dug
inits
heel
son
[The
com
pany
] with
its
rhet
oric
abo
ut l
iqui
datio
n, a
ppea
rs to
hav
e du
g in
its
heel
s on
ex
actly
the
dry-
eyed
, dis
cipl
ined
bus
ines
s an
alys
is w
hich
will
be
criti
cal t
o st
ream
linin
g th
e bu
sine
ss a
nd a
lloca
ting
capi
tal e
ffect
ivel
y.”
-IS
S P
roxy
Adv
isor
y S
ervi
ces,
R
ecom
men
datio
n:A
OL
Inc
Pro
xyC
onte
stJu
ne20
12
[ 95
]1.
Mar
ch 5
, 201
3 Le
tter t
o R
elat
iona
l Inv
esto
rs2.
Hes
s Le
tter t
o S
hare
hold
ers,
Mar
ch 2
6, 2
013
Rec
omm
enda
tion:
AO
L In
c P
roxy
Con
test
, Jun
e 20
12
Spec
ifica
lly, W
e Su
gges
ted
The
Cre
atio
n of
Man
agea
ble
Ente
rpris
es
Acc
ount
able
toSh
areh
olde
rsA
ccou
ntab
le to
Sha
reho
lder
s
Unc
onve
ntio
nal
Cre
ate
Hes
s R
esou
rce
Co.
Inst
ead
of a
n op
aque
, unm
anag
eabl
e co
nglo
mer
ate
Unl
ock
grea
t com
pani
es th
at w
ill b
e ac
coun
tabl
e to
sha
reho
lder
s
Unc
onve
ntio
nal
72
5,00
0 ne
t acr
es in
the
Bak
ken
17
7,00
0 ne
t acr
es in
the
Utic
a S
hale
Bak
ken
and
Utic
a w
ith d
ropd
own
of m
idst
ream
ass
ets
TEV
= $
13.0
to $
14.4
billi
on(1
)
Glo
bal O
ffsho
re a
nd O
ther
Con
vent
iona
l
Long
-life
, oil-
wei
ghte
d re
serv
es in
“cro
wn
jew
el”
asse
ts in
clud
ing
She
nzi(
GO
M),
Valh
all(
Nor
way
),
Cei
ba&
Oku
me
(Equ
ator
ial G
uine
a)
Cre
ate
Hes
s In
tern
atio
nal
Focu
s re
mai
ning
con
vent
iona
l por
tfolio
on
core
are
as o
f co
mpe
titiv
e ad
vant
age
thro
ugh
dive
stitu
re o
f non
-cor
e as
sets
Fa
vora
ble
gas
asse
ts in
Sou
thea
st A
sia
incl
udin
g JD
A &
Nat
una
Sea
Blo
ck
Mon
etiz
e re
sour
ce p
lay
infr
astr
uctu
reTEV
= $
21.4
to $
30.2
billi
on(1
)
Mid
stre
am
Valu
able
Bak
ken
infra
stru
ctur
e in
clud
ing
Tiog
a ga
s
Dow
nstr
eam
& N
o-St
ream
M
isce
llane
ous
busi
ness
es -
man
y w
ith c
apita
l tie
d up
at l
ow ra
tes
of re
turn
TEV
= $
2.0
to $
2.5
billio
n(1)
gg
gpl
ant a
nd B
akke
n ra
il te
rmin
al
Div
est d
owns
trea
m a
sset
s
TEV
=$3
1to
$35
billio
n(1)
p
Shar
e Pr
ice
= $9
5.70
to $
128.
46(1
)
TEV
= $3
.1 to
$3.
5 bi
llion(
1)
Hes
s’s
Mar
ch p
rom
ises
(if
del
iver
ed) a
ffect
less
th
an 1
0% o
f pot
entia
l sh
are
uplif
t (1)
over
TE
V =
$39
to $
50 b
illio
n(1)
Sou
rce:
Com
pany
filin
gs1.
Elli
ott e
stim
ates
; Per
sha
re v
alue
s ca
lcul
ated
net
of d
ebt,
cash
pro
form
a fo
r ann
ounc
ed/c
ompl
eted
tran
sact
ions
(Aze
rbai
jan
&U
Kas
sets
), pe
nsio
n, ta
x at
tribu
tes,
inte
rest
tax
shie
ld
[ 96
]
pan
othe
r 2 y
ear p
erio
d
We
Thin
k It
Mak
es S
ense
Bec
ause
…D
iffer
entA
sset
sR
equi
reD
iffer
entM
anag
emen
tCap
abili
ties
Diff
eren
t Ass
ets
Req
uire
Diff
eren
t Man
agem
ent C
apab
ilitie
s
H
igh
sens
itivi
tyto
capi
talc
osts
Res
ourc
e Pl
ays
Lo
wse
nsiti
vity
toca
pita
lcos
t
Offs
hore
Ass
ets
Hig
hse
nsiti
vity
to c
apita
l cos
ts
Man
ylo
w c
ost w
ells
Le
an m
anuf
actu
ring
proc
ess
Low
sens
itivi
ty to
cap
ital c
ost
Fe
whi
gh c
ost w
ells
Ta
x re
gim
es a
nd/o
r PS
Cs
allo
w fo
r cos
t re
cove
ry th
at m
utes
impa
ct o
f cos
t ove
rrun
Req
uire
sre
lent
less
focu
son
cost
Req
uire
ste
chno
logi
calf
ocus
&pl
anni
ng
30%
40%
Illus
tativ
e R
esou
rce
Pla
y N
PV
Illus
trativ
e O
ffsh
ore
Ass
et N
PV
Illus
trat
ive
Sens
itivi
ty o
f NAV
to C
hang
es in
Cap
ital E
xpen
ditu
res(
1)
Req
uire
s re
lent
less
focu
s on
cos
tR
equi
res
tech
nolo
gica
l foc
us &
pla
nnin
g
0%10%
20%
30%
ge in NPV (30)
%
(20)
%
(10)
%0%
% Chang (40)
%(5
0)%
(40)
%(3
0)%
(20)
%(1
0)%
0%10
%20
%30
%40
%50
%%
Cha
nge
in C
apita
l Cos
ts
Res
ourc
epl
ays
and
offs
hore
asse
tsar
em
anag
eddi
ffere
ntly
;
[ 97
]
Res
ourc
e pl
ays
and
offs
hore
ass
ets
are
man
aged
diff
eren
tly;
Hes
s is
inca
pabl
e of
man
agin
g bo
th (e
vide
nced
by
seve
re c
ost o
verr
uns
in th
e B
akke
n)
1.E
lliot
t est
imat
es
We
Thin
k It
Mak
es S
ense
Bec
ause
…C
urre
ntPo
rtfo
lioM
ixU
nder
valu
edan
dPe
naliz
edby
Ana
lyst
sC
urre
nt P
ortfo
lio M
ix U
nder
valu
ed a
nd P
enal
ized
by
Ana
lyst
s
B
akke
nO
pera
tors
: NA
V-ba
sed
valu
atio
n
Focu
s on
acr
eage
val
ue s
ees
thro
ugh
initi
al c
apita
l int
ensi
ty
O
nly
2H
ess
anal
ysts
cov
er o
ther
Bak
ken
oper
ator
s
Bak
ken
Ope
rato
rs (1
)H
ess
Larg
e C
ap
Int’l
(2)
Mor
e Im
porta
ntLe
ss Im
porta
nt
La
rge-
cap
Inte
rnat
iona
ls: h
eavy
relia
nce
on m
ultip
le-b
ased
valu
atio
n
Per
ceiv
ed ri
sk o
f FC
F ga
p an
d ca
pita
l int
ensi
ty re
duce
mul
tiple
20
of 2
2H
ess
anal
ysts
cov
er la
rge
cap
inte
rnat
iona
ls
8.4x
$128
.47
2012
E EB
ITD
AX
Mul
tiple
(3)
Cap
ital
Inte
nsity
(4)
3.0x
$34.
60
4.3x
$19.
01
Hes
s: B
akke
nis
a m
ater
ial p
erce
ntag
e of
val
ue b
ut h
idde
n w
ithin
in
tern
atio
nal m
ix
Res
ult i
s H
ess
is p
enal
ized
twic
e:
Pen
alty
#1:
Mul
tiple
-bas
ed v
alua
tion
unde
rval
ues
Bak
ken
P
enal
ty #
2: H
ess
give
n lo
wer
mul
tiple
than
pee
rs d
ue in
par
t to
Inte
nsity
(4)
FCF
Gap
/ M
arke
t C
ap(5
)(2
5)%
(19)
%
NtA
tE
asy
to
(1)%
Bak
ken
easy
to
Hes
s Se
ll-si
de A
naly
sts
Cov
erin
g B
akke
n-F
ocus
ed C
ompa
nies
(6)
Hes
s Se
ll-si
de A
naly
sts
Cov
erin
g La
rge
Cap
Inte
rnat
iona
ls
high
er c
apita
l int
ensi
ty a
nd c
ash
flow
gap
(par
tially
cau
sed
by
Bak
ken
build
-out
)N
et A
sset
Va
lue
calc
ulat
e du
e to
re
peat
abili
ty o
f w
ell r
esul
ts
Diff
icul
t to
calc
ulat
eca
lcul
ate,
oth
er
asse
ts m
ore
chal
leng
ing
BA
ML
Cdi
tAi
l[n
ull]
Wel
ls F
argo
Bar
clay
sC
apita
l One
Citi
grou
pG
oldm
an S
achs
Edd
JD
th
Bk
How
ard
Wei
l
Opp
enhe
imer
JP M
orga
nIS
I Gro
up
Si
tG
l
Tudo
r Pic
kerin
gU
BS
Cre
dit A
gric
ole M
orga
n S
tanl
ey
Avg
Targ
etA
vgTa
rget
Dah
lman
Ros
e
Edw
ard
Jone
sD
euts
che
Bank
Cre
dit S
uiss
eS
imm
ons
Ray
mon
d Ja
mes
Soci
ete
Gen
eral
e
Glo
bal H
unte
r
[ 98
]
Avg
Tar
get
Pric
e(7)
= $6
3A
vgTa
rget
Pr
ice(
7)=$
88
Sou
rces
: Blo
ombe
rg, C
ap IQ
, Com
pany
Fili
ngs
1.B
akke
nO
pera
tors
incl
udes
Con
tinen
tal,
Oas
is a
nd K
odia
k2.
Larg
e C
ap in
clud
e A
PC
, AP
A, C
VX
, CO
P, X
OM
, MR
O, M
UR
, NB
L, O
XY
3.20
12 E
BIT
DA
X m
ultip
le is
Ent
erpr
ise
valu
e di
vide
d by
Con
sens
us E
BITD
AX; a
s of
11/
28/1
2
4.C
apita
l Int
ensi
ty is
201
1 D
evel
opm
ent C
apex
divi
ded
by 2
011
BO
E P
rodu
ctio
n5.
FCF
as %
of M
arke
t Cap
is C
onse
nsus
201
2 fre
e ca
sh fl
ow d
ivid
ed b
y m
arke
t cap
; as
of 1
1/28
/12
6.B
akke
nfo
cuse
d co
mpa
nies
incl
ude
Con
tinen
tal,
Oas
is, K
odia
k an
d W
hitin
g7.
As
of 1
/25/
13
How
ever
, Whi
le E
lliot
t Put
For
war
d Th
is P
ropo
sal F
or C
onsi
dera
tion,
Shar
ehol
derN
omin
ees
Are
Trul
yIn
depe
nden
tSh
areh
olde
r Nom
inee
s A
re T
ruly
Inde
pend
ent
“Whi
leth
isle
tterp
rese
nts
Elli
ott’s
pers
pect
ives
Shar
ehol
der
Whi
le th
is le
tter p
rese
nts
Elli
otts
per
spec
tives
, Sha
reho
lder
N
omin
ees
will
form
thei
r ow
n, in
depe
nden
t vie
ws
on th
e C
ompa
ny, i
ts a
sset
s, a
nd it
s st
rate
gy.T
hese
five
acc
ompl
ishe
d in
divi
dual
s br
ing
deep
kno
wle
dge
and
expe
rienc
e in
are
as th
at a
re
seve
rely
lack
ing
in th
e ex
istin
g bo
ard.
” Elli
ott L
ette
r to
Sha
reho
lder
s,
Janu
ary
29th
2013
“Sha
reho
lder
Nom
inee
s ar
e co
mpl
etel
y in
depe
nden
t, w
ould
Janu
ary
2920
13
cons
titut
e a
min
ority
of d
irect
ors,
and
, unl
ike
Hes
s’s
nom
inee
s,
have
not
pre
appr
oved
any
pla
n. If
ele
cted
to th
e B
oard
, eac
h of
th
ese
exec
utiv
es w
ill b
ring
subs
tant
ial e
xper
tise,
exp
erie
nce,
and
in
depe
nden
ceth
atw
ebe
lieve
isso
rely
need
edat
Hes
s”
inde
pend
ence
that
we
belie
ve is
sor
ely
need
ed a
t Hes
s.
Elli
ott L
ette
r to
Sha
reho
lder
s,
Mar
ch 2
6th
2013
[ 99
]
And
Sha
reho
lder
Nom
inee
s H
ave
Hel
ped
Lead
Ver
y D
iffer
ent T
ypes
of
Tran
sfor
mat
ions
Tran
sfor
mat
ions
Dav
idM
cMan
usK
arlK
urz
Dav
id M
cMan
us
(For
mer
EVP
, Pio
neer
)
Kar
l Kur
z
(For
mer
CO
O, A
nada
rko)
Kar
l Kur
z he
lped
lead
a
trans
form
atio
n of
Ana
dark
o D
avid
McM
anus
hel
ped
Pio
neer
N
atur
alR
esou
rces
exec
ute
aP
etro
leum
ear
lier i
n th
e de
cade
th
at s
aw A
nada
rko
high
gra
de it
s po
rtfol
io w
hile
man
agin
g bo
th U
.S.
onsh
ore
reso
urce
pla
ys a
nd
Nat
ural
Res
ourc
es e
xecu
te a
re
stru
ctur
ing
and
then
div
estm
ent
of it
s in
tern
atio
nal p
ortfo
lio s
o th
at
the
com
pany
cou
ld fo
cus
on it
s U
Sre
sour
cepl
ayas
sets
yde
epw
ater
offs
hore
ass
ets.
U.S
. res
ourc
e pl
ay a
sset
s.
“Pio
neer
man
agem
ent h
as d
eliv
ered
[a] t
ext b
ook
repo
sitio
ning
of a
por
tfolio
pre
viou
sly
spre
ad
acro
ss m
ore
than
sev
en c
ount
ries
to b
ecom
e a
100%
U.S
. foc
used
reso
urce
pla
yer.”
“We
belie
ve th
at A
nada
rko
has
trans
form
ed it
self
from
a c
ompa
ny w
ith a
n in
ferio
r ass
et b
ase
and
ques
tiona
ble
capi
tal a
lloca
tion
succ
ess
into
a
com
pany
with
a s
trong
ass
et b
ase.
The
com
pany
co
ntin
ues
to d
eliv
er a
t-or-a
bove
exp
ecta
tions
and
w
ebe
lieve
that
itca
nco
ntin
ueto
surp
rise
toth
e
[ 100
]
Ban
k of
Am
eric
a M
erril
l Lyn
ch (O
ctob
er 2
, 201
2)
we
belie
ve th
at it
can
con
tinue
to s
urpr
ise
to th
e up
side
..”Le
hman
Bro
ther
s (M
ay 7
, 200
8)
Hes
s’s
Kne
e-Je
rk R
eact
ion
Is In
dica
tive
of a
Boa
rd T
hat H
as D
ug in
Its
Hee
ls
onEx
actly
the
Dry
eyed
Dis
cipl
ined
Bus
ines
sA
naly
sis
That
IsSo
rely
Nee
ded
on E
xact
ly th
e D
ry-e
yed,
Dis
cipl
ined
Bus
ines
s A
naly
sis
That
Is S
orel
y N
eede
d
Inst
ead
of a
thou
ghtfu
l res
pons
e, b
ased
on
an d
ispa
ssio
nate
an
alys
is o
f the
fact
s, H
ess
has
resp
onde
d w
ith d
emon
stra
bly
y,
py
fals
e fu
ndin
g an
d ta
x ar
gum
ents
in o
rder
to a
void
an
obje
ctiv
e re
view
of n
ew id
eas
It is
cle
ar th
at m
anag
emen
t has
nei
ther
take
n th
e sh
areh
olde
r pr
opos
al s
erio
usly
nor
eva
luat
ed it
in a
ny d
epth
[ 101
]
Mis
lead
ing
Stat
emen
tson
Fund
ing
Mis
lead
ing
Stat
emen
ts o
n Fu
ndin
g
“And
just
hav
ing
the
Bak
ken
or U
tica
stan
dalo
ne, t
hey
wou
ld n
ot b
e se
lf-fu
ndin
g. T
hey
coul
d no
t get
acc
ess
to th
e cr
edit
mar
kets
and
that
's a
real
is
sue
”is
sue.
John
Hes
sJa
nuar
y 20
13(1
)
“Eve
n w
ithou
t any
initi
al d
ebt,
Sin
ger’s
Res
ourc
eCo
wou
ld li
kely
be
a su
b-in
vest
men
t gra
de c
redi
t with
lim
ited
stan
d-al
one
debt
cap
acity
. As
a re
sult,
R
esou
rceC
o’s
abilit
y to
fund
gro
wth
in th
e B
akke
n an
d he
nce
real
ize
futu
re
valu
e fo
r Hes
s sh
areh
olde
rs w
ould
be
harm
ed.”
Hes
s P
rese
ntat
ion
to S
hare
hold
ers
Mar
ch 2
013(
2)
[ 102
]1.
4Q 2
012
Ear
ning
s ca
ll Ja
nuar
y 30
, 201
32.
Hes
s pr
esen
tatio
n “D
eliv
erin
g S
hare
hold
er V
alue
”, M
arch
4, 2
013
Rea
lity:
St
anda
lone
Hes
sR
esou
rce
Co
Cou
ldEa
sily
Fund
Itsel
fin
the
Cap
italM
arke
tsSt
anda
lone
Hes
s R
esou
rce
Co.
Cou
ld E
asily
Fun
d Its
elf i
n th
e C
apita
l Mar
kets
N
umer
ous
exam
ples
of U
.S. r
esou
rce
focu
sed
com
pani
es w
ith n
egat
ive
free
cash
flow
Man
agem
ent e
ither
has
not
don
e its
hom
ewor
k or
doe
s no
t und
erst
and
the
cred
it m
arke
ts
A
ll ab
le to
fund
them
selv
es in
the
publ
ic m
arke
ts a
nd a
ll tra
de a
t pre
miu
m m
ultip
les
to H
ess
C
ontin
enta
l has
had
neg
ativ
e fre
e ca
sh fl
ow fo
r the
pas
t 5 y
ears
yet
has
:
$2
.9bn
of p
ublic
deb
t tra
ding
at a
n av
erag
e yi
eld
unde
r 3.5
%
Ent
erpr
ise
valu
eof
over
$20b
nan
dtra
des
at~1
13x
EB
ITD
A
Com
pany
(1)
Mar
ket C
apEV
/ LT
M
EBIT
DA
X(2,
3)N
etD
ebt /
LTM
EB
ITD
AX(
3)20
13 F
CF
as %
of
Mar
ket C
apW
eigh
ted
Avg
. Yi
eld(
4)
Con
tinen
tal
$16.
9bn
11.3
x2.
1x(7
)%3.
3%
E
nter
pris
e va
lue
of o
ver $
20bn
and
trad
es a
t ~11
.3x
EB
ITD
A
Hal
con
$2.6
bn12
.6x
5.7x
(24)
%7.
2%
Kod
iak
$2.5
bn11
.7x
3.8x
(6)%
4.6%
Oas
is$3
.6bn
9.1x
2.0x
(10)
%4.
7%
SM
Ene
rgy
$3.9
bn5.
2x1.
4x(9
)%4.
8%
Bak
ken
Ope
rato
rs
Pio
neer
$17.
1bn
9.1x
1.1x
(4)%
2.8%
Cab
ot$1
3.6b
n18
.5x
1.3x
1%N
/A
Ran
ge$1
2.8b
n18
.1x
3.3x
(3)%
4.1%
Hes
s R
esou
rce
Co.
$13.
0bn
to $
14.4
bn10
.0x
to 1
1.1x
(5)
(2)%
/ (3
)%(6
)
Bes
t-in-
Cla
ss
Res
ourc
e P
ure
play
s
“..th
ere
will
be
times
whe
n C
LR m
ay o
utsp
end
its in
tern
ally
gen
erat
ed c
ash
flow
.How
ever
, so
long
as
it is
ear
ning
the
retu
rns
on in
vest
men
t in
the
incr
emen
tal b
arre
l pro
duce
d by
thes
e bo
rrow
ings
… th
is
shou
ld b
e of
min
or c
once
rn.
Moo
dy’s
Mar
ch20
12(7
)
[ 103
]
-Moo
dys
Mar
ch 2
012(
7)
Sou
rces
: Blo
ombe
rg, C
apIQ
1.A
ll va
lues
as
of 3
/8/1
32.
Adj
uste
d fo
r pub
lic e
quity
and
deb
t iss
uanc
es p
ost1
2/31
/12
if a
pplic
able
3.P
ro fo
rma
adju
stm
ents
mad
e fo
r add
ition
al a
mou
nts
borr
owed
on
revo
lvin
g fa
cilit
ies
if ap
plic
able
4.A
vera
ge o
f yie
ld to
wor
st b
ased
on
ask
pric
e fo
r eac
h bo
nd5.
Ellio
tt es
timat
es:
LTM
EB
ITD
AX
cal
cula
ted
usin
g H
ess
Bak
ken
prod
uctio
n, a
vera
ge o
f OA
S, K
OG
and
NO
G E
BIT
DA
X p
re-G
&A
per
qua
rter a
nd H
ess
U.S
. E&
P G
&A
/BO
E p
lus
allo
catio
n of
cor
pora
te
over
head
; exc
lude
s U
tica
6.E
lliott
estim
ates
: (2)
% e
xclu
des
Utic
a; (3
)% in
clud
es U
tica;
Bot
h nu
mbe
rs c
alcu
late
d of
f Elli
ott l
ow c
ase
of $
13.0
bn7.
Moo
dy’s
Con
tinen
tal C
redi
t Opi
nion
, Mar
ch 6
, 201
2
Rea
lity:
R
esou
rce
Co.
Wou
ld B
e O
ne o
f the
Bes
t Fun
ded
U.S
. Unc
onve
ntio
nal P
ure
Play
sPl
ays
Giv
en a
bilit
y to
rais
e ca
pita
l via
deb
t mar
kets
or r
aise
pro
ceed
s fr
om in
fras
truc
ture
, Hes
s R
esou
rce
Co.
ha
s am
ple
cash
to s
tand
alon
e
Bak
ken
Stan
dalo
ne
Uni
t20
1320
1420
1520
1620
17B
akke
n P
rodu
ctio
nM
BO
E/D
68
87
105
120
131
Bak
ken
EB
ITD
A$m
m$1
432
$185
3$2
218
$253
7$2
780
Cas
h flo
w g
ap d
ue to
hig
h-re
turn
inve
stm
ents
in
itiat
edb
acr
edib
leop
erat
ordo
esno
tlim
itde
bt(1
)
(2)
Bak
ken
EB
ITD
A$m
m$1
,432
$1,8
53$2
,218
$2,5
37$2
,780
Wel
l Cap
ex$m
m(1
,700
)
(1,9
18)
(2
,141
)
(2,1
48)
(2
,141
)
Cas
h Ta
xes
$mm
-
-
-
-
(111
)
Free
Cas
h Fl
ow$m
m($
268)
($64
)$7
7$3
89$5
29
initi
ated
by
a cr
edib
le o
pera
tor d
oes
not l
imit
debt
ca
paci
ty o
r fin
anci
al fl
exib
ility
()
(3)
(4)
$4,0
00
Free
Cas
h Fl
owM
onet
izat
ion
of 5
0% o
f Mid
stre
amIn
itial
Deb
t Cap
acity
Per m
anag
emen
t pro
duct
ion
guid
ance
:
Bak
ken
Free
Cas
h Fl
ow &
Sou
rces
of C
ash
(6)
(5)
$1,5
00
$2,0
00
$2,5
00
$3,0
00
$3,5
00
sh Flow ($mm)
Bak
ken
shou
ld b
e ca
sh fl
ow b
reak
even
YE
2014
Th
is d
oes
not i
nclu
de th
e su
bsta
ntia
l cas
h ge
nera
ted
by m
idst
ream
ass
ets
($50
0)$0
$500
$1,0
00
$1,5
00
2013
2014
2015
2016
Sou
rces
of
Cas
h
Free Cas
$3
+ bi
llion
of e
xces
s ca
sh c
an b
e us
ed to
fu
nd U
tica
deve
lopm
ent
[ 104
]
1.M
anag
emen
t gui
danc
e fo
r 201
3; th
erea
fter E
lliot
t est
imat
es b
ased
on
Con
tinen
tal 6
00 E
UR
type
cur
ve; R
ig p
rogr
am b
ased
on
achi
evin
g m
anag
emen
t gui
danc
e of
120
MB
OE
/D b
y m
id-d
ecad
e2.
Ellio
tt es
timat
e ba
sed
on a
vera
ge o
f OA
S, K
OG
and
NO
G 4
Q E
BIT
DA
bef
ore
G&
A p
er B
OE
; les
s al
loca
tion
of H
ess
E&
P G
&A
and
cor
pora
te o
verh
ead;
OA
S, K
OG
and
NO
G d
o no
t con
trol m
idst
ream
in
frast
ruct
ure;
ther
efor
e th
ere
is n
o m
eani
ngfu
l dou
ble
coun
ting
in v
alue
of M
LP s
pino
ff3.
Ellio
tt es
timat
es: C
apex
is m
anag
emen
t gui
danc
e fo
r 201
3; th
erea
fter E
lliot
t est
imat
es fo
r rig
pro
gram
usi
ng a
wel
l cap
exof
$8.
2m;
$8.2
m w
ell c
apex
is C
ontin
enta
l’s e
stim
ate
for t
heir
wel
l cos
t by
YE20
134.
Ass
ume
75%
of w
ell c
apex
is in
tang
ible
with
100
% ID
C; t
angi
ble
cape
xde
prec
iate
d at
MA
CR
s 7;
35%
tax
rate
on
taxa
ble
inco
me
5.V
alua
tion
assu
mes
50%
of E
lliot
t low
cas
e m
idst
ream
val
uatio
n6.
2x L
TM E
BIT
DA
Mis
lead
ing
Stat
emen
tson
Tax
Mis
lead
ing
Stat
emen
ts o
n Ta
x
“Bak
ken
capi
tal s
pend
ing
gene
rate
s su
bsta
ntia
l exc
ess
tax
dedu
ctio
ns th
at
are
used
to o
ffset
taxa
ble
inco
me
gene
rate
d by
oth
er U
.S. a
sset
s. S
inge
r’s
Res
ourc
eCo
wou
ld b
e ge
nera
ting
unus
ed ta
x de
duct
ions
and
Inte
rnat
iona
lCo
wou
ldbe
payi
ngta
xes
onot
herw
ise
shie
lded
inco
me
”w
ould
be
payi
ng ta
xes
on o
ther
wis
e sh
ield
ed in
com
e.
Hes
s P
rese
ntat
ion
to S
hare
hold
ers
Mar
ch 2
013(
1)
[ 105
]
1.H
ess
pres
enta
tion
“Del
iver
ing
Sha
reho
lder
Val
ue”,
Mar
ch 4
, 201
3
Rea
lity:
Valu
eof
Tax
Savi
ngs
from
Ded
uctio
nsis
Imm
ater
ial
Valu
e of
Tax
Sav
ings
from
Ded
uctio
ns is
Imm
ater
ial
Impa
ct o
f Tax
Shi
eld
from
Bak
ken
= $0
.13
per s
hare
(1)
Tax
Cal
cula
tions
Uni
t20
1320
1420
1520
1620
17B
akke
n P
rodu
ctio
nM
BO
E/D
68
87
10
5
120
13
1
Bak
ken
EB
ITD
A$m
m$1
,432
$1,8
53$2
,218
$2,5
37$2
,780
TD
iti
Bkk
$(1
776)
(202
0)(2
225)
(225
1)(2
231)
(2)
(3)
(4)
Hes
s B
akke
n sh
ould
be
com
e a
taxp
ayer
in
2017
per
man
agem
ent
Tax
Dep
reci
atio
n B
akke
n$m
m(1
,776
)
(2
,020
)
(2,2
25)
(2
,251
)
(2,2
31)
Ta
xabl
e In
com
e$m
m($
345)
($16
7)($
7)$2
86$5
49
Cas
h Ta
xes
$mm
$0$0
$0$0
($11
1)
(4)
pg
prod
uctio
n gu
idan
ce
B
akke
n op
erat
ions
sho
uld
beco
me
a ta
xpay
er in
201
7
N
PV
of s
hifti
ng 4
yea
rs o
f dec
linin
g de
duct
ions
out
to
the
year
s w
hen
Bak
ken
is ta
xpay
er is
~$0
.13
/ sha
re
Ta
x an
alys
is o
f the
Utic
a is
hig
hly
depe
nden
t on
wel
l ty
pe c
urve
, liq
uid
cont
ent a
nd d
evel
opm
ent r
amp
assu
mpt
ions
–w
hich
man
agem
ent h
as n
ever
dis
clos
ed
Bak
ken
Utic
a
E
xist
ing
NO
Ls c
an re
mai
n at
Hes
s In
tern
atio
nal p
ost-
spin
off.(
5)Ta
x an
alys
is is
lim
ited
to fu
ture
ded
uctio
ns
In
the
even
t the
NO
Ls m
ust t
rave
l with
the
Bak
ken,
im
pact
wou
ld b
e an
add
ition
al ~
$0.0
8 pe
r sha
re(6
)
U
sing
Utic
a pe
ers’
type
cur
ve e
stim
ates
and
a
reas
onab
le d
evel
opm
ent p
rogr
am, t
he v
alue
of t
ax
shie
ld w
ould
be
an a
dditi
onal
$0.
10 p
er s
hare
(7)
B
y th
e tim
e de
velo
pmen
t ram
ps in
the
Utic
a, th
e re
sulti
ng ta
x de
duct
ions
shou
ld b
e a
usef
ul ta
x sh
ield
Nei
ther
taxa
ble
inco
me
nor d
epre
ciat
ion
from
Bak
ken
mid
stre
am a
sset
s in
clud
ed (i
f fun
ded
appr
opria
tely
in
MLP
mar
ket,
asse
ts w
ould
gen
erat
e in
com
e ta
x no
t de
duct
ions
)
1E
llitt
tit
bd
bl
ll
ti
gfo
r an
inco
me
gene
ratin
g B
akke
n
D
oes
not i
nclu
de u
nnec
essa
ry in
frast
ruct
ure
spen
d
[ 106
]
1.E
lliott
estim
ates
bas
ed o
n be
low
cal
cula
tions
2.M
anag
emen
t gui
danc
e fo
r 201
3; th
erea
fter E
lliot
t est
imat
es b
ased
on
Con
tinen
tal 6
00 E
UR
type
cur
ve; R
ig p
rogr
am b
ased
on
achi
evin
g m
anag
emen
t gui
danc
e of
120
MB
OE
/D b
y m
id-d
ecad
e3.
Ellio
tt es
timat
e ba
sed
on a
vera
ge o
f OA
S, K
OG
and
NO
G 4
Q E
BIT
DA
bef
ore
G&
A p
er B
OE
; les
s al
loca
tion
of H
ess
E&
P G
&A
and
cor
pora
te o
verh
ead;
OA
S, K
OG
and
NO
G d
o no
t con
trol m
idst
ream
in
frast
ruct
ure;
ther
efor
e th
ere
is n
o m
eani
ngfu
l dou
ble
coun
ting
in v
alue
of M
LP s
pino
ff4.
Ellio
tt es
timat
es: C
apita
l exp
endi
ture
s ar
e m
anag
emen
t gui
danc
e fo
r 201
3; th
erea
fter E
lliot
t est
imat
es fo
r rig
pro
gram
usi
ng a
wel
l cap
exof
$8.
2m;
$8.2
m w
ell c
apex
is C
ontin
enta
l’s e
stim
ate
for t
heir
wel
l cos
t by
YE20
13; A
ssum
e 75
% o
f wel
l cap
exis
inta
ngib
le w
ith 1
00%
IDC
; tan
gibl
e ca
pex
depr
ecia
ted
at M
AC
Rs
7; H
isto
rical
dep
reci
atio
n is
cal
cula
ted
usin
g 70
% ID
C5.
Ellio
tt vi
ew b
ased
on
coun
sel f
rom
tax
and
acco
untin
g ad
viso
rs6.
Ass
umes
$91
mill
ion
of fe
dera
l tax
loss
car
ry fo
rwar
ds a
re re
cogn
ized
imm
edia
tely
ver
sus
reco
gniz
ed in
201
7+ fr
om B
akke
n ge
nera
ted
inco
me
7.A
ssum
es 7
5% o
f wel
l cap
exis
inta
ngib
le w
ith 1
00%
IDC
; tan
gibl
e ca
pex
depr
ecia
ted
at M
AC
Rs
7
Mis
lead
ing
Stat
emen
tson
Inte
rnat
iona
lCo
Fina
ncia
lFle
xibi
lity
Mis
lead
ing
Stat
emen
ts o
n In
tern
atio
nalC
oFi
nanc
ial F
lexi
bilit
y
“…In
tern
atio
nalC
ow
ould
be
forc
ed to
ass
ume
all o
f Hes
s’ e
xist
ing
debt
and
th
eref
ore
rest
rict I
nter
natio
nalC
o’s
finan
cial
flex
ibilit
y, fu
ture
gro
wth
rate
, and
ab
ility
to re
turn
cas
h to
sha
reho
lder
s.”
Hes
s P
rese
ntat
ion
to S
hare
hold
ers
Mar
ch 2
013(
1)
[ 107
]
1.H
ess
pres
enta
tion
“Del
iver
ing
Sha
reho
lder
Val
ue”,
Mar
ch 4
, 201
3
Rea
lity:
Hes
s In
tern
atio
nal W
ould
Gen
erat
e B
illio
ns in
Cas
h Fl
ow A
nd R
etai
n In
vest
men
tGra
deR
atin
gIn
vest
men
t Gra
de R
atin
g
“
Stro
ng C
ash
Flow
; Inv
estm
ent G
rade
Rat
ing
Lo
ng li
ved
oil a
sset
s pr
oduc
ing
subs
tant
ial c
ash
flow
W
ood
Mac
kenz
ie a
nd R
ysta
dbo
th p
roje
ct H
ess
Inte
rnat
iona
l wou
ld a
vera
ge ~
$2.8
bill
ion
of fr
ee c
ash
flow
per
yea
rbef
ore
expl
orat
ion
for t
he n
ext d
ecad
e(1,
2)
“We
note
that
stra
tegi
c in
itiat
ives
sug
gest
ed b
y El
liott
are
not n
eces
saril
y le
vera
ging
or d
etrim
enta
l to
cred
it qu
ality
. A
s su
ch, w
e be
lieve
the
com
pany
co
uld
carr
y ou
t the
se s
teps
whi
le m
aint
aini
ng a
n in
vest
men
t gra
de ra
ting.
”
-J.P
. Mor
gan
Cre
dit R
esea
rch,
Febr
uary
201
3(3)
HES
HES
A
PAA
PCC
OP
DVN
EOG
MR
OM
UR
NB
LO
XYTL
MH
ESS
Intl(
3)A
PAA
PCC
OP
DVN
EOG
MR
OM
UR
NB
LO
XYTL
M
Rat
ing
Baa
2/B
BB
A3/
A-
Baa
3/B
BB
-A
1/A
B
aa1/
BB
B+
A3/
A-
Baa
2/B
BB
Baa
3/B
BB
Baa
2/B
BB
A
1/A
B
aa2/
BB
B
Deb
t ($b
n)$8
.1$8
.1$1
2.3
$13.
3$2
1.7
$11.
6$6
.3$6
.9$2
.2$4
.1$7
.6$4
.4
Deb
t / E
BIT
DA
X(4)
1.0x
1.3x
1.0x
1.
6x
1.0x
2.
6x
1.4x
0.
7x
0.6x
1.
4x
0.5x
1.
1x
Acc
ordi
ng to
JP
Mor
gan’
s an
alys
is, H
ess
Inte
rnat
iona
l Co’
s le
vera
ge w
ould
fall
with
in th
e ra
nge
of H
ess’
s ap
plic
able
pro
xy p
eers
and
wou
ld re
ceiv
e an
inve
stm
ent g
rade
ratin
g fr
om th
e ra
ting’
s ag
enci
es
[ 108
]S
ourc
es: W
ood
Mac
kenz
ie, S
ell-s
ide
repo
rts, R
ysta
dU
cube
, Cap
italIQ
1.S
ourc
e: W
ood
Mac
kenz
ie2.
Rys
tad
UC
ube
3.JP
Mor
gan
Febr
uary
4, 2
013
4.20
12 E
BIT
DA
X
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Shar
ehol
derN
omin
eeIn
volv
emen
tBeg
ins
toLi
ftM
anag
emen
tDis
coun
t
110Sh
areh
olde
r Nom
inee
Invo
lvem
ent B
egin
s to
Lift
Man
agem
ent D
isco
unt
Hes
s R
elat
ive
Perf
orm
ance
vs.
Rev
ised
Pee
rs
90100
110
Hes
s M
anag
emen
t an
noun
ces
Ellio
tt
80
90
inte
ntio
n to
nom
inat
e di
rect
ors;
sal
e of
te
rmin
al n
etw
ork
60
70
Ellio
ttbe
gins
toE
lliott
rele
ases
50
Ellio
tt be
gins
to
acqu
ire H
ess
stoc
k“P
ersp
ectiv
es o
n H
ess”
Sin
ce S
hare
hold
er N
omin
ee in
volv
emen
t ann
ounc
ed o
n Ja
nuar
y 28
th:
H
ess
has
outp
erfo
rmed
Pro
xy P
eers
by
23%
H
ess
has
outp
erfo
rmed
Rev
ised
Pro
xyPe
ers
by22
%
[ 110
]
Hes
s ha
s ou
tper
form
ed R
evis
ed P
roxy
Pee
rs b
y 22
%
H
ess
has
outp
erfo
rmed
Bak
ken
Ope
rato
rs b
y 26
%
Per
form
ance
cal
cula
ted
thro
ugh
4/12
/13
Favo
rabl
eR
eact
ion
toSh
areh
olde
rNom
inee
Invo
lvem
ent
Favo
rabl
e R
eact
ion
to S
hare
hold
er N
omin
ee In
volv
emen
t
“Ellio
tt’s
nom
inee
s as
sure
gre
ater
acc
ount
abilit
y an
d ar
e m
ore
likel
y to
con
tinue
to e
xplo
re a
ll av
enue
s to
enh
ance
sha
reho
lder
val
ue
whi
le p
rovi
ding
mor
e pe
rtine
nt E
&P
expe
rienc
e.”
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC (M
arch
27,
201
3)
“We
curr
ently
bel
ieve
the
best
way
for H
ess
shar
ehol
ders
to m
axim
ize
thei
r val
ue is
thro
ugh
the
elec
tion
of E
lliott
Man
agem
ent’s
nom
inee
s to
the
boar
d.”
Citi
grou
p (A
pril
5, 2
013)
“Ellio
tt di
sclo
sed
5 im
pres
sive
can
dida
tes
for t
he B
oard
...”
UB
S (J
anua
ry 3
0, 2
013)
“…a
who
’s w
ho li
st o
f cor
pora
te fi
xers
and
exp
erie
nced
oil
exec
s.”
Ban
kof
Am
eric
aM
erril
lLyn
ch(J
anua
ry31
2013
)B
ank
of A
mer
ica
Mer
rill L
ynch
(Jan
uary
31,
201
3)
“In o
ur v
iew,
the
indu
stry
exp
erie
nce
avai
labl
e in
the
slat
e of
nom
inee
s E
lliott
is p
ropo
sing
for H
ES
’s B
oard
of D
irect
ors
isim
pres
sive
an
d as
a re
sult,
the
nom
inee
s co
uld
brin
g in
dust
ry in
sigh
t una
vaila
ble
on th
e cu
rrent
Boa
rd.”
JP M
orga
n (J
anua
ry 3
0, 2
013)
“…[W
e] b
elie
ve th
at th
e sl
ate
of n
ew d
irect
ors
that
it h
as p
ropo
sed
can
brin
g a
lot t
o th
e ta
ble.
”S
ocie
teG
ener
ale
(Jan
uary
31,
201
3)
“We
belie
vea
new
inve
stor
with
the
inte
ntto
mak
ene
wno
min
atio
nsto
the
boar
dis
am
ove
inth
erig
htdi
rect
ion
forH
ess’
sco
rpor
ate
We
belie
ve a
new
inve
stor
with
the
inte
nt to
mak
e ne
w n
omin
atio
ns to
the
boar
d is
a m
ove
in th
e rig
ht d
irect
ion
for H
ess
s co
rpor
ate
gove
rnan
ce.”
Citi
grou
p (J
anua
ry 2
8, 2
013)
“Pro
pose
d di
rect
ors
have
stre
et c
red.
In p
ropo
sing
its
alte
rnat
e sl
ate
of d
irect
ors,
Elli
ott n
omin
ated
four
indi
vidu
als
with
var
ious
tb
kd
ith
ilt
hd
HG
lb
thf
CE
OfA
iE
”
[ 111
]
man
agem
ent b
ackg
roun
ds in
the
oil p
atch
and
Har
vey
Gol
ub, t
he fo
rmer
CEO
of A
mer
ican
Exp
ress
.”B
ank
of A
mer
ica
Mer
rill L
ynch
, Cre
dit R
esea
rch
(Jan
uary
29,
201
3)
Shar
ehol
der N
omin
ees
Hav
e Ex
act S
kills
Nec
essa
ry to
R
eass
ess
and
Ref
ocus
Hes
s
[ 112
]
The
Rig
htN
omin
ees
ForS
hare
hold
erVa
lue
atH
ess
The
Rig
ht N
omin
ees
For S
hare
hold
er V
alue
at H
ess
Shar
ehol
derN
omin
ees
Hes
s ne
eds
dire
ctor
s th
at (1
) will
ack
now
ledg
e is
sues
, and
(2) a
re c
apab
le o
f fix
ing
them
Shar
ehol
der N
omin
ees
Expe
rienc
eH
ess
Nee
dsR
odne
y C
hase
Har
vey
Gol
ubK
arl
Kur
zD
avid
M
cMan
usM
ark
Smith
Rec
ogni
tion
ofPr
oble
ms
atH
ess
Rec
ogni
tion
of P
robl
ems
at H
ess
True
Inde
pend
ence
Stro
ng S
hare
hold
er V
alue
Orie
ntat
ion
Sen
ior O
il &
Gas
Ups
tream
Ope
ratin
g E
xper
ienc
e
Sub
stan
tial R
estru
ctur
ing
Expe
rienc
e
Sen
iorM
anag
emen
t Con
vent
iona
l E&
P E
xper
ienc
e
Sen
iorM
anag
emen
t Unc
onve
ntio
nal E
&P
Exp
erie
nce
Mid
stre
am E
xper
ienc
e
[ 113
]
Pub
lic B
oard
Exp
erie
nce
Shar
ehol
derN
omin
ees
Ack
now
ledg
eTh
ePr
oble
ms
and
Can
Fix
Them
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Kar
l Kur
z: In
still
ing
Cap
ital D
isci
plin
e
Har
vey
Gol
ub: S
ettin
g a
Focu
sed
Stra
tegy
gp
p
Mar
k Sm
ith: O
vers
eein
g O
pera
tiona
l Exc
elle
nce
Dav
id M
cMan
us: E
xecu
ting
Effe
ctiv
e R
estr
uctu
ring
Supe
rior N
omin
ees
With
Unp
aral
lele
d Ex
perie
nce
Rod
ney
Cha
se: I
nstil
ling
Ove
rsig
ht &
Acc
ount
abili
ty
Supe
oo
ees
tU
paa
eed
pee
ce
We
wan
t to
be c
lear
that
we
inte
nd to
sup
port
all o
f the
Ellio
tt no
min
ees
at th
e up
com
ing
annu
al m
eetin
g of
sha
reho
lder
s. O
urre
ason
ing
is th
at w
hile
the
com
pany
’s n
ew n
omin
ees
are
an im
prov
emen
t ove
r the
incu
mbe
nt d
irect
ors,
Ellio
tt’s
nom
inee
s as
sure
grea
ter a
ccou
ntab
ility
and
are
mor
e lik
ely
to c
ontin
ue to
exp
lore
all
aven
ues
to e
nhan
ce s
hare
hold
er v
alue
whi
le p
rovi
ding
mor
e
[ 114
]
gy
yp
pg
perti
nent
E&
P ex
perie
nce.
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC (M
arch
27,
201
3)
Har
vey
Gol
ubH
arve
y G
olub F
orm
er C
hairm
an &
CE
O, A
mer
ican
Exp
ress
For
mer
Non
-Exe
c C
hairm
an A
IG, C
ampb
ell S
oup
Co,
Rea
ders
Dig
est,
Rip
plew
ood
Cha
irman
of M
iller
Buc
kfire
, Adv
isor
y B
oard
of K
lein
wor
t Ben
son
Inve
stor
sF
orm
er D
irect
or D
ow J
ones
, RH
JI In
tern
atio
nal
Leg
enda
ry A
bilit
y to
Foc
us O
rgan
izat
ions
(s
ubje
ct o
f bus
ines
s sc
hool
cas
e st
udie
s)
Unp
aral
lele
d Tu
rnar
ound
Exp
erie
nce
His
tory
of A
ccom
plis
hing
Mea
ning
ful R
etur
ns
for S
hare
hold
ers
as D
irect
orS
trong
Sha
reho
lder
Val
ue O
rient
atio
n
Rel
evan
cyto
H
ess
Har
vey’
s un
para
llele
d ex
ecut
ive,
adv
isor
y an
d pu
blic
boa
rd e
xper
ienc
e re
stru
ctur
ing,
refo
cusi
ng a
nd tu
rnin
g-ar
ound
st
rugg
ling
ente
rpris
es w
ill al
low
him
to p
rovi
de u
npre
cede
nted
per
spec
tive
to th
e H
ess
Boa
rd
S
elec
ted
care
er a
ccom
plis
hmen
ts a
t Am
eric
an E
xpre
ss
Le
d a
dram
atic
turn
arou
nd o
f Am
eric
an E
xpre
ss –
with
sha
res
appr
ecia
ting
by o
ver 7
50%
dur
ing
his
tenu
re –
by s
ettin
g a
lt
ti
diti
hdd
ib
it
lii
tti
tt
lii
tid
di
clea
r stra
tegi
c di
rect
ion,
she
ddin
g no
n-co
re b
usin
esse
s, s
tream
linin
g m
anag
emen
t rep
ortin
g st
ruct
ures
, elim
inat
ing
redu
ndan
cies
an
d cr
eatin
g a
cultu
re o
f per
form
ance
and
acc
ount
abilit
y
Fu
lfille
d ev
ery
prom
ise
and
com
mitm
ent m
ade
as C
EO b
y fo
ster
ing
a cu
lture
that
priz
ed in
telle
ctua
l hon
esty
, a w
illing
ness
to
chal
leng
e th
e co
nven
tiona
l wis
dom
, and
a fo
cus
on “g
ettin
g th
ings
don
e”
Pre
pare
dex
trem
ely
succ
essf
ulco
llabo
rativ
ele
ader
ship
trans
ition
that
has
beco
me
am
odel
fore
ffect
ive
succ
essi
onpl
anni
ng
Pre
pare
d ex
trem
ely
succ
essf
ul, c
olla
bora
tive
lead
ersh
ip tr
ansi
tion
that
has
bec
ome
a m
odel
for e
ffect
ive
succ
essi
on p
lann
ing
S
elec
ted
high
light
s fro
m p
ublic
boa
rd e
xper
ienc
e
A
s N
on-E
xecu
tive
Cha
irman
at A
IG, h
elpe
d co
nstru
ct th
e st
rate
gic
plan
to e
stab
lish
corp
orat
e fo
cus,
to d
ives
t non
-cor
e as
sets
, and
to
retu
rn th
e co
mpa
ny to
priv
ate-
sect
or o
wne
rshi
p
AsN
onE
xecu
tive
Cha
irman
atC
ampb
ellS
oup
supe
rvis
edst
rate
gic
asse
ssm
ento
fthe
ente
rpris
eth
atle
dto
the
dive
stm
ento
f [ 115
]
As
Non
-Exe
cutiv
e C
hairm
an a
t Cam
pbel
l Sou
p, s
uper
vise
d st
rate
gic
asse
ssm
ent o
f the
ent
erpr
ise
that
led
to th
e di
vest
men
t of
God
iva
Cho
cola
tier–
a su
cces
sful
, pro
fitab
le b
usin
ess
but o
ne th
at re
quire
d a
skill-
set t
hat w
as n
ot a
cor
e st
reng
th a
t Cam
pbel
l
Wha
tSha
reho
lder
san
dC
EOs
Say
Abo
utH
arve
yG
olub
asa
Lead
erW
hat S
hare
hold
ers
and
CEO
s Sa
y A
bout
Har
vey
Gol
ub a
s a
Lead
er
“Har
vey
Gol
ub is
eve
ryth
ing
that
you
wou
ld w
ant i
n a
dire
ctor
. A
nd o
ne o
f th
e th
ings
that
I ap
prec
iate
mos
t abo
ut h
im is
that
he
has
alw
ays
resp
ecte
d th
e sp
ace
betw
een
the
Non
-Exe
cutiv
e C
hairm
an a
nd th
e C
EO
role
s. H
e ch
alle
nged
me
He
held
me
acco
unta
ble
But
hedi
dno
ttry
todo
my
job
for
chal
leng
ed m
e. H
e he
ld m
e ac
coun
tabl
e. B
ut h
e di
d no
t try
to d
o m
y jo
b fo
r m
e… A
nd h
e ha
s ch
alle
nged
us
to s
harp
en o
ur s
trate
gy, a
nd b
ette
r exe
cute
th
at s
trate
gy b
y ho
ldin
g us
to h
igh
perfo
rman
ce s
tand
ards
. He
ofte
n te
lls u
s,
‘Thi
s is
wha
t you
sai
d yo
u w
ould
do.
Are
you
del
iver
ing
and,
if n
ot, w
hy n
ot?”
yy
yg
y
Dou
glas
Con
ant,
form
er C
EO
of C
ampb
ell S
oup
Co,
Sep
tem
ber 2
009
“Har
vey
Gol
ub h
as d
one
an a
bsol
utel
y se
nsat
iona
l job
, and
we'
re p
roba
bly
$4
billi
on b
ette
r bec
ause
of i
t.”
War
ren
Buf
fet,
1999
Ber
kshi
re H
atha
way
Ann
ual M
eetin
g
[ 116
]
Setti
nga
Focu
sed
Stra
tegy
:Har
vey
Gol
ubSe
tting
a F
ocus
ed S
trat
egy:
Har
vey
Gol
ub
“Suc
cess
ful c
ompa
nies
gen
eral
ly h
ave
two
thin
gs -
a go
od s
trate
gy
and
solid
exe
cutio
n. A
goo
d st
rate
gy e
stab
lishe
s co
rpor
ate
focu
s an
d de
term
ines
whi
ch b
usin
esse
s a
com
pany
sho
uld
stay
in a
nd e
xit o
ver
time.
And
sol
id e
xecu
tion
gets
the
job
done
.”
[ 117
]
Har
vey
Gol
ub:W
hyIa
mEx
cite
dto
Join
the
Boa
rdof
Hes
sH
arve
y G
olub
: Why
I am
Exc
ited
to J
oin
the
Boa
rd o
f Hes
s
“Hes
s ha
s an
inte
rest
ing
set o
f ass
ets
that
hav
e no
t yie
lded
co
mpe
titiv
e sh
areh
olde
r ret
urns
ove
r tim
e. A
nd th
ey o
ught
to.
Wor
king
with
the
Boa
rd to
refo
cus
Hes
s in
ord
er to
del
iver
retu
rns
to
shar
ehol
ders
repr
esen
ts a
n ex
citin
g op
portu
nity
.”
[ 118
]
Shar
ehol
derN
omin
ees
Ack
now
ledg
eTh
ePr
oble
ms
and
Can
Fix
Them
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Kar
l Kur
z: In
still
ing
Cap
ital D
isci
plin
e
Har
vey
Gol
ub: S
ettin
g a
Focu
sed
Stra
tegy
gp
p
Mar
k Sm
ith: O
vers
eein
g O
pera
tiona
l Exc
elle
nce
Dav
id M
cMan
us: E
xecu
ting
Effe
ctiv
e R
estr
uctu
ring
Supe
rior N
omin
ees
With
Unp
aral
lele
d Ex
perie
nce
Rod
ney
Cha
se: I
nstil
ling
Ove
rsig
ht &
Acc
ount
abili
ty
Supe
oo
ees
tU
paa
eed
pee
ce
We
wan
t to
be c
lear
that
we
inte
nd to
sup
port
all o
f the
Ellio
tt no
min
ees
at th
e up
com
ing
annu
al m
eetin
g of
sha
reho
lder
s. O
urre
ason
ing
is th
at w
hile
the
com
pany
’s n
ew n
omin
ees
are
an im
prov
emen
t ove
r the
incu
mbe
nt d
irect
ors,
Ellio
tt’s
nom
inee
s as
sure
grea
ter a
ccou
ntab
ility
and
are
mor
e lik
ely
to c
ontin
ue to
exp
lore
all
aven
ues
to e
nhan
ce s
hare
hold
er v
alue
whi
le p
rovi
ding
mor
e
[ 119
]
gy
yp
pg
perti
nent
E&
P ex
perie
nce.
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC (M
arch
27,
201
3)
Kar
lKur
zK
arl K
urz
For
mer
CO
O, A
nada
rko
Pet
role
um C
orpo
ratio
nF
orm
er S
VP
Nor
th A
mer
ica
Ope
ratio
ns M
idst
ream
and
Mar
ketin
g, S
VP
Uni
ted
Sta
tes
Oh
dM
kti
VPM
idt
dM
kti
Ons
hore
and
Mar
ketin
g, V
P M
idst
ream
and
Mar
ketin
gM
anag
ing
Dire
ctor
and
Co-
Hea
d of
Ene
rgy
Gro
up a
t CC
MP
Cap
ital f
rom
200
9 to
201
2C
urre
nt D
irect
or o
f Sem
grou
pan
d G
loba
l Geo
phys
ical
Tra
ck R
ecor
d of
Effe
ctiv
e R
estru
ctur
ings
Sen
ior M
gmt U
ncon
vent
iona
l Exp
erie
nce
Stro
ng C
apita
l Allo
catio
n C
apab
ilitie
s
His
tory
of V
alue
Cre
atio
n in
Mid
stre
amS
enio
r Mgm
t Con
vent
iona
l Exp
erie
nce
Stro
ng S
hare
hold
er V
alue
Orie
ntat
ion
Rel
evan
cyto
H
ess
Kar
l’s s
igni
fican
t exp
erie
nce
tran
sfor
min
g in
depe
nden
t E&
P co
mpa
nies
and
ope
ratin
g a
glob
al p
ortfo
lio o
f con
vent
iona
l and
un
conv
entio
nal a
sset
s, a
s w
ell a
s hi
s tr
ack
reco
rd o
f val
ue c
reat
ion
acro
ss e
xplo
ratio
n, p
rodu
ctio
n, m
idst
ream
, mar
ketin
g an
d pr
ivat
e eq
uity
will
add
sign
ifica
nt v
alue
to th
e H
ess
Boa
rd
S
elec
ted
care
er a
ccom
plis
hmen
ts d
urin
g te
nure
at A
nada
rko
AC
OO
fAd
kh
ld
ld
flt
fti
il
dib
ildt
fAd
k’
tti
lti
bilit
As
CO
O o
f Ana
dark
o, h
elpe
d le
ad a
suc
cess
ful t
rans
form
atio
n in
clud
ing:
bui
ld-o
ut o
f Ana
dark
o’s
top-
tier e
xplo
ratio
n ca
pabi
lity,
M
LP s
pin-
off o
f Ana
dark
o’s
pipe
line
asse
ts, a
nd s
hift
tow
ard
incr
ease
d ca
pita
l dis
cipl
ine
and
impr
oved
ope
ratio
nal e
xecu
tion
H
elpe
d le
ad p
ortfo
lio re
posi
tioni
ng th
roug
h ac
quiri
ngK
err-
McG
ee a
nd W
este
rn G
as R
esou
rces
(tot
al $
23bn
) as
wel
l as
the
subs
tant
ial d
ives
titur
e an
d po
rtfo
lio h
igh-
grad
ing
prog
ram
that
follo
wed
, res
ultin
g in
$16
bn o
f pro
ceed
s an
d ov
er 5
.3 B
Boe
of
net r
esou
rces
add
ed a
t $1.
80/b
oe
S
pear
head
ed c
once
ptua
lizat
ion
and
exec
utio
n of
MLP
spi
n-of
f of W
este
rn G
as P
artn
ers,
cre
atin
g ov
er $
6.7b
n of
sha
reho
lder
va
lue
thro
ugh
mid
stre
am m
onet
izat
ion
whi
le m
aint
aini
ng c
ontro
l of t
he M
LP a
nd it
s as
sets
thro
ugh
its G
P ow
ners
hip
A
s V
P of
Mid
stre
am &
Mar
ketin
g, re
turn
ed b
usin
ess
from
per
sist
ent l
osse
s to
con
sist
ent p
rofit
abili
ty; i
mpr
oved
mor
ale
thro
ugh
com
mon
vis
ion,
re-e
ngin
eerin
g co
st s
truct
ure;
cre
ated
cul
ture
of a
ccou
ntab
ility
, int
elle
ctua
l hon
esty
and
per
form
ance
[ 120
]
S
elec
ted
high
light
s fro
m p
ublic
boa
rd e
xper
ienc
e
A
s in
depe
nden
t dire
ctor
of S
emgr
oup,
pla
yed
inte
gral
role
in re
stru
ctur
ing
the
com
pany
afte
r its
ban
krup
tcy
and
grow
ing
it to
a
mar
ket c
apita
lizat
ion
of o
ver $
2.2b
n
Cap
italA
lloca
tion:
Kar
lKur
zC
apita
l Allo
catio
n: K
arl K
urz
“Cit
ldi
ili
ith
itil
fll
ti’
“Cap
ital d
isci
plin
e is
the
criti
cal p
roce
ss o
f allo
catin
g a
com
pany
’s
mos
t pre
ciou
s re
sour
ce a
fter i
ts p
eopl
e, c
ash
flow
, to
ensu
re
desi
red
inve
stm
ent r
etur
ns fo
r the
ben
efit
of a
ll st
akeh
olde
rs.
At
Ana
dark
ow
ecr
eate
da
cultu
reof
capi
tald
isci
plin
eth
roug
hA
nada
rko,
we
crea
ted
a cu
lture
of c
apita
l dis
cipl
ine
thro
ugh
deve
lopm
ent o
f a fo
cuse
d al
loca
tion
fram
ewor
k:
C
onst
rain
ing
capi
tali
nor
dert
odr
ive
portf
olio
dept
han
d
Con
stra
inin
g ca
pita
l in
orde
r to
driv
e po
rtfol
io d
epth
and
co
nsta
ntly
hig
h-gr
ade
the
portf
olio
,
In
still
ing
inte
llect
ual i
nteg
rity
via
an h
ones
t but
pro
bing
pos
t-st
gte
ectu
ate
gty
aa
oes
tbut
pob
gpo
stm
orte
m p
roce
sses
, and
C
reat
ing
a le
arni
ng c
ultu
re th
at e
mph
asiz
ed c
ontin
uous
im
prov
emen
t.”
[ 121
]
Kar
lKur
z:W
hyIa
mEx
cite
dto
Join
the
Boa
rdof
Hes
sK
arl K
urz:
Why
I am
Exc
ited
to J
oin
the
Boa
rd o
f Hes
s
“I am
exc
ited
to a
pply
my
prev
ious
exp
erie
nces
turn
ing
arou
nd
unde
rper
form
ing
com
pani
es to
Hes
s. T
he p
rosp
ect o
f wor
king
with
m
anag
emen
tto
trans
form
Hes
sin
toa
high
lym
otiv
ated
orga
niza
tion
man
agem
ent t
o tra
nsfo
rm H
ess
into
a h
ighl
y m
otiv
ated
org
aniz
atio
n th
at c
onsi
sten
tly d
eliv
ers
top
quar
tile
resu
lts is
an
oppo
rtuni
ty I
coul
d ne
ver p
ass
up.”
[ 122
]
Shar
ehol
derN
omin
ees
Ack
now
ledg
eTh
ePr
oble
ms
and
Can
Fix
Them
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Kar
l Kur
z: In
still
ing
Cap
ital D
isci
plin
e
Har
vey
Gol
ub: S
ettin
g a
Focu
sed
Stra
tegy
gp
p
Mar
k Sm
ith: O
vers
eein
g O
pera
tiona
l Exc
elle
nce
Dav
id M
cMan
us: E
xecu
ting
Effe
ctiv
e R
estr
uctu
ring
Supe
rior N
omin
ees
With
Unp
aral
lele
d Ex
perie
nce
Rod
ney
Cha
se: I
nstil
ling
Ove
rsig
ht &
Acc
ount
abili
ty
Supe
oo
ees
tU
paa
eed
pee
ce
We
wan
t to
be c
lear
that
we
inte
nd to
sup
port
all o
f the
Ellio
tt no
min
ees
at th
e up
com
ing
annu
al m
eetin
g of
sha
reho
lder
s. O
urre
ason
ing
is th
at w
hile
the
com
pany
’s n
ew n
omin
ees
are
an im
prov
emen
t ove
r the
incu
mbe
nt d
irect
ors,
Ellio
tt’s
nom
inee
s as
sure
grea
ter a
ccou
ntab
ility
and
are
mor
e lik
ely
to c
ontin
ue to
exp
lore
all
aven
ues
to e
nhan
ce s
hare
hold
er v
alue
whi
le p
rovi
ding
mor
e
[ 123
]
gy
yp
pg
perti
nent
E&
P ex
perie
nce.
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC (M
arch
27,
201
3)
Mar
kSm
ithM
ark
Smith
SV
P an
d C
FO, U
ltra
Pet
role
um C
orpo
ratio
nC
FO o
f Gul
f Liq
uids
, Inc
(Mid
stre
am)
VP
of B
usin
ess
Dev
elop
men
t at J
. M. H
uber
Ene
rgy
VP
of U
pstre
am B
usin
ess
Dev
elop
men
t at C
onst
ella
tion
Ene
rgy
Tec
hnic
al b
ackg
roun
d in
Pet
role
um E
ngin
eerin
g
Sen
ior M
gmt U
ncon
vent
iona
l Exp
erie
nce
Las
er F
ocus
on
Ope
ratin
g E
ffici
enci
esE
xper
ienc
e M
onet
izin
g M
idst
ream
Fin
anci
al E
xper
tise
& H
isto
ry o
f Dra
win
g O
n C
reat
ive
Sol
utio
ns to
Unl
ock
Valu
eS
trong
Sha
reho
lder
Val
ue O
rient
atio
nR
elev
ancy
to
Hes
s
Mar
k’s
expe
rienc
e on
an
exec
utiv
e te
am th
at m
anag
es th
e lo
wes
t-cos
t ope
rato
r in
an u
ncon
vent
iona
l res
ourc
e pl
ay a
nd
oper
ates
with
a s
harp
focu
s on
RO
CE
will
be a
gre
at re
sour
ce fo
r the
Hes
s B
oard
S
elec
ted
care
er a
ccom
plis
hmen
ts d
urin
g te
nure
at U
ltra
Pet
role
um
O
vers
aw m
easu
rem
ent a
nd b
ench
mar
king
sys
tem
that
has
allo
wed
Ultr
a to
dec
reas
e av
erag
e dr
illing
day
s in
the
Pin
edal
e by
81
%i
2006
dl
dt
thl
tll
it
bi
thi
dt
81%
sin
ce 2
006
and
led
to th
e lo
wes
t all-
in c
osts
per
boe
in th
e in
dust
ry
S
pear
head
ed 2
012
trans
actio
n of
UP
L m
idst
ream
thro
ugh
crea
tive
RE
IT s
truct
ure
that
mon
etiz
ed a
sset
s at
11.
5x c
ash
flow
w
hile
reta
inin
g op
erat
ing
cont
rol
S
truct
ured
tax
effic
ient
, hig
hly
com
plex
tran
sact
ions
incl
udin
g m
onet
izat
ions
of U
PL’
s C
hine
se a
sset
s an
d P
ined
ale
liqui
ds
gath
erin
gsy
stem
asw
ella
sre
stru
ctur
ings
ofU
PL’
sin
tern
atio
nalt
axfra
mew
ork
gath
erin
g sy
stem
as
wel
l as
rest
ruct
urin
gs o
f UPL
s in
tern
atio
nal t
ax fr
amew
ork
M
anag
es d
isci
plin
ed c
apita
l allo
catio
n pr
oces
s w
hich
has
incl
uded
taki
ng to
ugh
non-
cons
ent a
ctio
ns o
n hi
gh c
ost w
ells
H
elpe
d bu
ild c
ultu
re w
hich
str
esse
s op
erat
ing
effic
ienc
y, in
tens
ive
data
ana
lytic
s to
driv
e de
cisi
on-m
akin
g, c
ontin
ual
impr
ovem
ent a
nd a
dopt
ion
of b
est p
ract
ices
[ 124
]
Ope
ratio
nalE
xcel
lenc
e:M
ark
Smith
Ope
ratio
nal E
xcel
lenc
e: M
ark
Smith
“At U
ltra
Pet
role
um, w
e ha
ve c
once
ntra
ted
on c
reat
ing
a cu
lture
of
oper
atio
nal d
isci
plin
e an
d ef
ficie
ncy.
We
focu
s re
lent
less
ly o
n co
sts,
be
stpr
actic
esan
dco
nsta
ntbe
nchm
arki
ngto
cont
inuo
usly
impr
ove
best
pra
ctic
es, a
nd c
onst
ant b
ench
mar
king
to c
ontin
uous
ly im
prov
e th
e ef
ficie
ncy
and
effe
ctiv
enes
s of
our
ope
ratio
ns. T
his
proc
ess
is
neve
r don
e an
d re
quire
s co
nsta
nt v
igila
nce.
”
[ 125
]
Mar
kSm
ith:W
hyIa
mEx
cite
dto
Join
the
Boa
rdof
Hes
sM
ark
Smith
: Why
I am
Exc
ited
to J
oin
the
Boa
rd o
f Hes
s
“Hes
s is
a c
ompa
ny w
ith g
reat
ass
ets
that
I be
lieve
are
not
bei
ng
valu
ed a
ppro
pria
tely
in th
e m
arke
t. I a
m e
xcite
d no
t onl
y to
app
ly th
e le
sson
sIh
ave
lear
ned
atU
ltra
toH
ess’
sop
erat
ions
inth
eB
akke
nle
sson
s I h
ave
lear
ned
at U
ltra
to H
ess
s op
erat
ions
in th
e B
akke
n,
but a
lso
to h
elp
Hes
s ac
hiev
e its
pot
entia
l and
real
ize
valu
e fo
r all
stak
ehol
ders
: sha
reho
lder
s an
d em
ploy
ees.
”
[ 126
]
Shar
ehol
derN
omin
ees
Ack
now
ledg
eTh
ePr
oble
ms
and
Can
Fix
Them
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Kar
l Kur
z: In
still
ing
Cap
ital D
isci
plin
e
Har
vey
Gol
ub: S
ettin
g a
Focu
sed
Stra
tegy
gp
p
Mar
k Sm
ith: O
vers
eein
g O
pera
tiona
l Exc
elle
nce
Dav
id M
cMan
us: E
xecu
ting
Effe
ctiv
e R
estr
uctu
ring
Supe
rior N
omin
ees
With
Unp
aral
lele
d Ex
perie
nce
Rod
ney
Cha
se: I
nstil
ling
Ove
rsig
ht &
Acc
ount
abili
ty
Supe
oo
ees
tU
paa
eed
pee
ce
We
wan
t to
be c
lear
that
we
inte
nd to
sup
port
all o
f the
Ellio
tt no
min
ees
at th
e up
com
ing
annu
al m
eetin
g of
sha
reho
lder
s. O
urre
ason
ing
is th
at w
hile
the
com
pany
’s n
ew n
omin
ees
are
an im
prov
emen
t ove
r the
incu
mbe
nt d
irect
ors,
Ellio
tt’s
nom
inee
s as
sure
grea
ter a
ccou
ntab
ility
and
are
mor
e lik
ely
to c
ontin
ue to
exp
lore
all
aven
ues
to e
nhan
ce s
hare
hold
er v
alue
whi
le p
rovi
ding
mor
e
[ 127
]
gy
yp
pg
perti
nent
E&
P ex
perie
nce.
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC (M
arch
27,
201
3)
Dav
idM
cMan
usD
avid
McM
anus
For
mer
EV
P an
d H
ead
of In
tern
atio
nal O
pera
tions
, Pio
neer
Nat
ural
Res
ourc
es C
oF
orm
er E
VP
at B
G
Pre
side
nt o
f AR
CO
Eur
ope
Cur
rent
Dire
ctor
at R
ockh
oppe
rExp
lora
tion,
Fle
x LN
G a
nd C
aza
Oil
& G
as
Rel
evan
cyto
H
ess
Ext
ensi
ve E
xper
ienc
e E
valu
atin
g &
E
xecu
ting
Effe
ctiv
e R
estru
ctur
ing
Tra
ck R
ecor
d of
Val
ue C
reat
ion
Im
men
se In
tern
atio
nal E
nerg
y E
xper
ienc
eS
olid
Cor
pora
te G
over
nanc
e R
ecor
dS
trong
Sha
reho
lder
Val
ue O
rient
atio
n
Dav
id’s
dee
p ex
perie
nce
exec
utin
g a
port
folio
repo
sitio
ning
and
trem
endo
us in
tern
atio
nal o
il &
gas
exp
erie
nce
will
allo
w h
im to
co
ntrib
ute
uniq
ue in
sigh
t to
the
curr
ent s
trat
egic
dec
isio
n-m
akin
g pr
oces
s on
the
Hes
s B
oard
S
elec
ted
care
er a
ccom
plis
hmen
ts d
urin
g te
nure
at P
ione
er
Le
d va
lue
accr
etiv
e, s
trate
gic
dive
stitu
re o
f Pio
neer
’s in
tern
atio
nal p
ortfo
lio in
clud
ing
obje
ctiv
e as
sess
men
t of a
ll op
port
uniti
es
ilbl
tti
it
til
tbd
ihi
tPi
’t
d20
0%av
aila
ble
to m
onet
ize
inte
rnat
iona
l ass
et b
ase
–du
ring
his
tenu
re P
ione
er’s
retu
rned
ove
r 200
%
M
anag
ed in
tern
atio
nal p
ortfo
lio, s
ettin
g an
d ex
ecut
ing
cons
olid
atio
n st
rate
gy in
Nor
th A
frica
whi
ch in
crea
sed
net a
sset
val
ue b
y 10
tim
es o
ver 6
yea
rs th
roug
h su
cces
sful
exp
lora
tion
and
appr
aisa
l pro
gram
H
eavi
ly in
volv
ed in
exe
cutiv
e co
mm
ittee
dec
isio
n-m
akin
g on
Pio
neer
’s U
.S. o
nsho
re re
sour
ce p
lay
deve
lopm
ent –
onsh
ore
prod
uctio
ngr
ewfro
m27
mbo
e/d
to95
mbo
e/d
ane
arly
30%
CA
GR
durin
ghi
ste
nure
prod
uctio
n gr
ew fr
om 2
7mbo
e/d
to 9
5mbo
e/d
a ne
arly
30%
CA
GR
dur
ing
his
tenu
re
W
orke
d co
nstru
ctiv
ely
with
boa
rd, i
nclu
ding
dis
side
nt n
omin
ees
from
act
ivis
t inv
esto
r Sou
thea
ster
n A
sset
Man
agem
ent
S
elec
ted
high
light
s fro
m p
ublic
boa
rds
and
prev
ious
pos
ition
s
A
s E
VP
at B
G, o
vers
aw e
xecu
tion
of B
G’s
larg
est p
roje
ct –
deve
lopm
ent o
f 200
,000
bbl
/d fi
eld
and
rela
ted
faci
litie
s in
Kaz
akhs
tan
[ 128
]
A
s in
depe
nden
t Non
-Exe
cutiv
e C
hairm
an a
t Cap
e ov
ersa
w e
xten
sive
acq
uisi
tion
prog
ram
as
Cap
e ex
ecut
ed o
n its
stra
tegy
to
build
a c
ore
posi
tion
in A
ustra
lia
A
s in
depe
nden
t dire
ctor
at R
ockh
oppe
rExp
lora
tion,
ove
rsaw
hig
h pe
rfor
min
g ex
plor
atio
n-fo
cuse
d E
&P
com
pany
and
su
perv
ised
the
farm
-dow
n of
a la
rge
wor
king
inte
rest
in th
e Fa
lkla
nd Is
land
s
Port
folio
Rep
ositi
onin
g:D
avid
McM
anus
Port
folio
Rep
ositi
onin
g: D
avid
McM
anus
“Por
tfolio
con
stru
ctio
n sh
ould
alw
ays
begi
n w
ith a
n ev
alua
tion
of th
e co
mpa
ny’s
cor
e st
reng
ths.
If a
n as
set d
oesn
’t pl
ay to
a s
treng
th, i
t sh
ould
n’tb
eth
ere.
Ifan
asse
tis
notm
ater
ialw
ithre
spec
tto
NAV
orsh
ould
nt b
e th
ere.
If a
n as
set i
s no
t mat
eria
l with
resp
ect t
o N
AV o
r do
esn’
t hav
e th
e po
tent
ial t
o be
, it s
houl
dn’t
be th
ere.
Pro
per p
ortfo
lio
man
agem
ent r
equi
res
a co
nsta
nt s
harp
eva
luat
ion
of th
e po
rtfol
io to
de
term
ine
valu
e an
d to
que
stio
n is
it w
orth
som
ethi
ng m
ore
to
qg
som
eone
els
e?”
[ 129
]
Dav
idM
cMan
us:W
hyIa
mEx
cite
dto
Join
the
Boa
rdof
Hes
sD
avid
McM
anus
: Why
I am
Exc
ited
to J
oin
the
Boa
rd o
f Hes
s
“Hes
s is
unm
ista
kabl
y m
ater
ially
und
erva
lued
, with
ove
rsig
ht a
nd
disc
iplin
e la
ckin
g. B
ut a
t the
end
of t
he d
ay, e
very
one
wan
ts to
see
Hes
s su
ccee
dIb
elie
vem
yba
ckgr
ound
and
expe
rienc
esha
vepa
rticu
lar
succ
eed.
I be
lieve
my
back
grou
nd a
nd e
xper
ienc
es h
ave
parti
cula
r re
leva
nce
to th
e di
fficu
lties
at H
ess
and
belie
ve I
can
mak
e a
subs
tant
ial
cont
ribut
ion
to u
nloc
king
the
upsi
de p
oten
tial a
t Hes
s.”
[ 130
]
Shar
ehol
derN
omin
ees
Ack
now
ledg
eTh
ePr
oble
ms
and
Can
Fix
Them
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Kar
l Kur
z: In
still
ing
Cap
ital D
isci
plin
e
Har
vey
Gol
ub: S
ettin
g a
Focu
sed
Stra
tegy
gp
p
Mar
k Sm
ith: O
vers
eein
g O
pera
tiona
l Exc
elle
nce
Dav
id M
cMan
us: E
xecu
ting
Effe
ctiv
e R
estr
uctu
ring
Supe
rior N
omin
ees
With
Unp
aral
lele
d Ex
perie
nce
Rod
ney
Cha
se: I
nstil
ling
Ove
rsig
ht &
Acc
ount
abili
ty
Supe
oo
ees
tU
paa
eed
pee
ce
We
wan
t to
be c
lear
that
we
inte
nd to
sup
port
all o
f the
Ellio
tt no
min
ees
at th
e up
com
ing
annu
al m
eetin
g of
sha
reho
lder
s. O
urre
ason
ing
is th
at w
hile
the
com
pany
’s n
ew n
omin
ees
are
an im
prov
emen
t ove
r the
incu
mbe
nt d
irect
ors,
Ellio
tt’s
nom
inee
s as
sure
grea
ter a
ccou
ntab
ility
and
are
mor
e lik
ely
to c
ontin
ue to
exp
lore
all
aven
ues
to e
nhan
ce s
hare
hold
er v
alue
whi
le p
rovi
ding
mor
e
[ 131
]
gy
yp
pg
perti
nent
E&
P ex
perie
nce.
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC (M
arch
27,
201
3)
Rod
ney
Cha
seR
odne
y C
hase
For
mer
Dep
uty
Chi
ef E
xecu
tive,
BP
plc
For
mer
CE
O o
f Exp
lora
tion
& P
rodu
ctio
n, C
EO
of M
arke
ting
& R
efin
ing,
Cha
irman
/CE
O B
P fB
PA
iof
BP
Amer
ica
Cur
rent
or F
orm
er In
depe
nden
t Cha
irman
at G
enel
, Nal
co, P
etro
frac
Rel
evan
cyto
H
ess
Led
Suc
cess
ful R
estru
ctur
ings
At B
oth
Exe
cutiv
e an
d B
oard
Lev
els
Sen
ior O
il &
Gas
Ups
tream
Exp
erie
nce
Suc
cess
ion
Pla
nnin
g E
xper
ienc
eC
orpo
rate
Gov
erna
nce
Exp
ertis
eS
trong
Sha
reho
lder
Val
ue O
rient
atio
n
Rod
ney’
s de
ep e
xper
ienc
e in
eve
ry fa
cet o
f oil
& g
as a
nd s
igni
fican
t ind
ustr
y pu
blic
boa
rd e
xper
ienc
e w
ill be
a m
eani
ngfu
l ad
ditio
n to
the
Hes
s B
oard
S
elec
ted
care
er a
ccom
plis
hmen
ts d
urin
g 38
yea
rs a
t BP
Le
d up
stre
am a
nddo
wns
trea
m b
usin
esse
s of
BP,
ove
rsee
ing
mat
eria
l res
truct
urin
g, in
tegr
atin
g su
bsta
ntia
l ass
ets,
and
i
titti
fb
dlt
Stk
tf
dit
b16
0%d
ihi
tdi
td
il
din
stitu
ting
a pe
rfor
man
ce-b
ased
cul
ture
. Sto
ck o
utpe
rform
ed it
s pe
ers
by 1
60%
dur
ing
his
tenu
re a
s di
rect
or a
nd s
enio
r lea
der
Sp
earh
eade
d po
rtfo
lio ra
tiona
lizat
ion
effo
rt at
BP
to s
treng
then
bus
ines
s fo
cus
and
driv
e pe
rform
ance
gro
wth
incl
udin
g th
e sa
le o
f BP
Min
eral
s ($
4bn)
and
BP
’s s
take
in R
uhrg
as($
2bn)
and
the
acqu
isiti
ons
of A
moc
o ($
57bn
), A
RC
O ($
27bn
), M
obil
Eur
ope,
Cas
trol (
$6bn
) and
Veb
aO
il ($
5bn)
Dire
cted
crea
tion
of$2
0bn
Rus
sian
JVw
ithTN
KBP
’sla
rges
tsin
gle
asse
tove
rthe
last
deca
de~3
0%IR
Rov
er9-
year
D
irect
ed c
reat
ion
of $
20bn
Rus
sian
JV
with
TN
K, B
Ps
larg
est s
ingl
e as
set o
ver t
he la
st d
ecad
e.
30%
IRR
ove
r 9-y
ear
perio
d on
BP
’s $
6.9b
n in
vest
men
t
S
elec
ted
high
light
s fro
m 1
0 ye
ars
as a
n in
depe
nden
t dire
ctor
A
s C
hairm
an o
f Nal
co, l
ed N
alco
bac
k to
pub
lic o
wne
rshi
p af
ter p
rivat
e eq
uity
, rec
ruiti
ng a
new
CEO
and
man
agem
ent
team
to d
rive
a st
ron g
per
form
ance
turn
arou
nd a
nd e
vent
ually
to o
vers
ee th
e sa
le o
f the
com
pany
to E
cola
b
[ 132
]
gp
yp
y
A
s th
e in
itial
Inde
pend
ent C
hairm
an o
f Pet
rofa
can
d G
enel
Ene
rgy,
was
inte
gral
to th
e se
tting
of s
trate
gies
, ove
rsee
ing
the
exec
utio
n of
per
form
ance
pla
ns a
nd th
e cr
eatio
n of
per
form
ance
cul
ture
s an
d ef
fect
ive
gove
rnan
ce b
ased
on
inde
pend
ent
boar
d ov
ersi
ght
Wha
tCol
leag
ues
Say
Abo
utR
odne
yC
hase
asa
Lead
erW
hat C
olle
ague
s Sa
y A
bout
Rod
ney
Cha
se a
s a
Lead
er
“Ove
r the
cou
rse
of h
is 3
8-ye
ar c
aree
r, R
odne
y ha
s m
ade
an
outs
tand
ing
cont
ribut
ion
to B
P. H
e ha
s pl
ayed
a c
ritic
al p
art i
n al
l the
m
ajor
dev
elop
men
ts o
f rec
ent y
ears
that
hav
e tra
nsfo
rmed
the
com
pany
into
one
of t
he w
orld
's le
adin
g en
ergy
bus
ines
ses.
”
Lord
Bro
wne
, CE
O o
f BP
Plc
, Jan
uary
200
3
[ 133
]
Ove
rsig
ht&
Acc
ount
abili
ty:R
odne
yC
hase
Ove
rsig
ht &
Acc
ount
abili
ty: R
odne
y C
hase
“The
key
role
of a
boa
rd m
embe
r is
to a
ppoi
nt m
anag
emen
t, to
set
, to
geth
er w
ith m
anag
emen
t, a
clea
r stra
tegy
with
def
ined
goa
ls a
nd
met
rics,
and
to h
old
man
agem
ent a
ccou
ntab
le fo
r effe
ctin
g th
at
stra
tegy
. The
ove
rsig
ht ro
le o
f the
boa
rd is
crit
ical
.”
[ 134
]
Rod
ney
Cha
se:W
hyIa
mEx
cite
dto
Join
the
Boa
rdof
Hes
sR
odne
y C
hase
: Why
I am
Exc
ited
to J
oin
the
Boa
rd o
f Hes
s
“I be
lieve
a s
usta
ined
and
rigo
rous
focu
s on
stra
tegy
and
its
exec
utio
n, c
ombi
ned
with
a ro
bust
cor
pora
te g
over
nanc
e st
ruct
ure,
ca
n he
lp H
ess
max
imiz
e lo
ng te
rm v
alue
for s
hare
hold
ers.
I am
ex
cite
d to
hel
p H
ess
acco
mpl
ish
thes
e go
als.
”
[ 135
]
Shar
ehol
derN
omin
ees
Ack
now
ledg
eTh
ePr
oble
ms
and
Can
Fix
Them
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Kar
l Kur
z: In
still
ing
Cap
ital D
isci
plin
e
Har
vey
Gol
ub: S
ettin
g a
Focu
sed
Stra
tegy
gp
p
Mar
k Sm
ith: O
vers
eein
g O
pera
tiona
l Exc
elle
nce
Dav
id M
cMan
us: E
xecu
ting
Effe
ctiv
e R
estr
uctu
ring
Supe
rior N
omin
ees
With
Unp
aral
lele
d Ex
perie
nce
Rod
ney
Cha
se: I
nstil
ling
Ove
rsig
ht &
Acc
ount
abili
ty
Supe
oo
ees
tU
paa
eed
pee
ce
We
wan
t to
be c
lear
that
we
inte
nd to
sup
port
all o
f the
Ellio
tt no
min
ees
at th
e up
com
ing
annu
al m
eetin
g of
sha
reho
lder
s. O
urre
ason
ing
is th
at w
hile
the
com
pany
’s n
ew n
omin
ees
are
an im
prov
emen
t ove
r the
incu
mbe
nt d
irect
ors,
Ellio
tt’s
nom
inee
s as
sure
grea
ter a
ccou
ntab
ility
and
are
mor
e lik
ely
to c
ontin
ue to
exp
lore
all
aven
ues
to e
nhan
ce s
hare
hold
er v
alue
whi
le p
rovi
ding
mor
e
[ 136
]
gy
yp
pg
perti
nent
E&
P ex
perie
nce.
Dav
id H
. Bat
chel
der,
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC (M
arch
27,
201
3)
Shar
ehol
derN
omin
ees
Hav
eU
npar
alle
led
Ope
ratin
gEx
perie
nce
Shar
ehol
der N
omin
ees
Hav
e U
npar
alle
led
Ope
ratin
g Ex
perie
nce
Shar
ehol
der N
omin
ees
John
Hes
s’s
Nom
inee
s
Rod
ney
Cha
se
Fo
rmer
Dep
uty
Gro
up C
hief
Exe
cutiv
e,
BP
Fo
rmer
Cha
irman
/CE
Oof
BP
Am
eric
a,
CE
Oof
Mar
ketin
g&
Ref
inin
gC
EO
of
Form
er C
OO
, TN
K-B
P jo
int v
entu
reW
illia
m S
chra
der
CEO
of M
arke
ting
& R
efin
ing,
CEO
of
E&P
Har
vey
Gol
ub
Form
er C
hairm
an &
CE
O, A
mer
ican
E
xpre
ss
Fo
rmer
Non
Exe
cutiv
eC
hairm
anAI
G
Fo
rmer
Vic
e C
hairm
an,G
E
P
res.
&C
EO
, GE
Ene
r gy
Infra
stru
ctur
e Jo
hn K
reni
ckiJ
r.
Form
er N
on-E
xecu
tive
Cha
irman
, AIG
gy
Kar
lKur
z
Form
er C
OO
, Ana
dark
o P
etro
leum
Fo
rmer
SV
Pof
E&
P fo
r the
Am
eric
as,
Con
ocoP
hillip
sD
r. K
evin
Mey
ers
Dav
id M
cMan
us
Form
er E
VP,
Pio
neer
Nat
ural
Res
ourc
es
Fo
rmer
EV
P at
BG
, For
mer
Pre
side
nt o
f A
RC
O E
urop
e
Dow
nstre
amD
irect
or, R
oyal
Dut
ch S
hell
Dr.
Mar
k W
illia
ms
Mar
kSm
ith
Cur
rent
SV
P &
CFO
, Ultr
a P
etro
leum
Fo
rmer
EV
P an
d C
FO, C
BS
Cor
pora
tion
Fred
ricR
eyno
lds [ 137
]
Shar
ehol
der N
omin
ees
Hav
e Th
e R
elev
ant O
il &
Gas
Ope
ratin
g an
d R
estr
uctu
ring
Expe
rienc
eN
eede
dat
Hes
sR
estr
uctu
ring
Expe
rienc
e N
eede
d at
Hes
s
Seni
orM
anag
emen
tW
hich
nom
inee
s ar
e N
o20
%Y
Shar
ehol
der N
omin
ees
John
Hes
s’s
Nom
inee
s
Seni
or M
anag
emen
t U
pstr
eam
Oil
& G
as
Ope
ratin
g Ex
perie
nce
bette
r sui
ted
for a
pu
re-p
lay
E&P
com
pany
?Ye
s80
%
20%
Yes
40%
No
60%
Res
truc
turin
g Ex
perie
nce
Whi
ch n
omin
ees
are
bette
r sui
ted
for a
co
rpor
ate
tran
sfor
mat
ion?
Yes
80%
No
20%
Yes
40%
No
60%
Publ
icB
oard
Expe
rienc
e
No
20%
Yes
40%
N
Whi
ch n
omin
ees
are
mor
e lik
ely
to
Seni
or M
gmt C
onve
ntio
nal
4D
irect
ors
2D
irect
ors
Publ
ic B
oard
Exp
erie
nce
Yes
80%
40%
No
60%
posi
tivel
y im
pact
go
vern
ance
?
Seni
or M
gmt U
ncon
vent
iona
l E&
P Ex
perie
nce
E&P
Expe
rienc
e4
Dire
ctor
s
2 D
irect
ors
2 D
irect
ors
1* D
irect
orW
hich
nom
inee
s w
ill
have
the
abili
ty to
as
k th
e rig
ht
ques
tions
?
[ 138
]
Mid
stre
am E
xper
ienc
e3
Dire
ctor
s0
Dire
ctor
s
* U
ncon
vent
iona
l exp
erie
nce
incl
udes
Kev
in M
eyer
s fo
r 1½
yea
rs in
his
role
as
SV
P C
onoc
oPhi
llips
Am
eric
asS
enio
r Man
agem
ent O
il &
Gas
Ups
tream
Ope
ratin
g E
xper
ienc
e do
es n
ot in
clud
e M
ark
Will
iam
s as
his
prim
ary
exec
utiv
e ex
perie
nce
was
ove
rsee
ing
She
ll do
wns
tream
div
isio
n
John
Hes
s’s
Nom
inee
sLa
ckU
ncon
vent
iona
lExp
erie
nce
John
Hes
ss
Nom
inee
s La
ck U
ncon
vent
iona
l Exp
erie
nce
Am
idst
a fl
urry
of d
efen
sive
hyp
erbo
le a
nd in
sults
, H
ess
clai
ms
itsN
omin
ees
have
“dee
pan
ddi
rect
lyre
leva
ntsh
ale
expe
rienc
e”
“Eve
n th
e m
ost c
asua
l obs
erve
r wou
ld re
cogn
ize
that
Hes
s no
min
ees
have
dee
p an
d di
rect
ly re
leva
nt s
hale
exp
erie
nce.
In
his
time
at C
onoc
oPhi
llips
, for
exa
mpl
e,
Hes
sno
min
eeD
rK
ein
Me
ers
”
Hes
s cl
aim
s its
Nom
inee
s ha
ve
deep
and
dire
ctly
rele
vant
sha
le e
xper
ienc
e.
Hes
s no
min
ee D
r. Ke
vin
Mey
ers…
”H
ess
Lette
r to
Sha
reho
lder
sM
arch
201
3(1)
The
real
ity is
that
Joh
n H
ess’
s N
omin
ees
have
nea
rly
no u
ncon
vent
iona
l sha
le e
xper
ienc
e ot
her t
han
18
mon
ths
that
one
nom
inee
spe
nt a
s SV
P of
the
Am
eric
as a
t Con
ocoP
hilli
ps (p
rior t
o th
at ro
le, t
he
bulk
of h
is s
enio
r man
agem
ent c
aree
r was
spe
nt
over
seei
ng c
onve
ntio
nal a
sset
s in
Ala
ska)
.
[ 139
]
1.H
ess
Lette
r to
Sha
reho
lder
s, M
arch
26,
201
3
John
Hes
s’s
Nom
inee
sLa
ckU
ncon
vent
iona
lExp
erie
nce
John
Hes
ss
Nom
inee
s La
ck U
ncon
vent
iona
l Exp
erie
nce
Am
idst
ano
ther
def
ensi
ve b
out o
f ass
ertio
ns,
Hes
scl
aim
sal
lofi
tsN
omin
ees
have
rest
ruct
urin
gex
perie
nce
Hes
s cl
aim
s al
l of i
ts N
omin
ees
have
rest
ruct
urin
g ex
perie
nce.
“All
of H
ess’
six
new
dire
ctor
s ha
ve e
xper
ienc
e ex
ecut
ing
or a
dvis
ing
on m
ajor
co
r por
ate
rest
ruct
urin
gs.”
pg
Hes
s Le
tter t
o S
hare
hold
ers
Mar
ch 2
013(
1)
In it
s m
ost w
ater
ed d
own
sens
e pe
rhap
s ev
eryo
ne
has
rest
ruct
urin
g ex
perie
nce
(and
Joh
n H
ess
mor
e g
p(
than
mos
t), b
ut w
hen
take
n as
a m
eani
ngfu
l mar
k of
ha
ving
effe
ctiv
ely
turn
ed a
roun
d an
org
aniz
atio
n, n
ot
one
of J
ohn
Hes
s’s
Nom
inee
s ha
ve e
xper
ienc
e on
par
w
ith w
hat K
arl K
urz
help
ed a
ccom
plis
h at
Ana
dark
o,
Dav
id M
cMan
us h
elpe
d ex
ecut
e at
Pio
neer
, or w
hat
Har
vey
Gol
ubac
hiev
ed a
t Am
eric
an E
xpre
ss.
[ 140
]
1.H
ess
Lette
r to
Sha
reho
lder
s, M
arch
26,
201
3
Mos
t Crit
ical
ly, J
ohn
Hes
s’s
Nom
inee
s Fa
il to
Rec
ogni
ze T
hat R
eal C
hang
e Is
Nee
ded
AtH
ess
Is N
eede
d A
t Hes
s
Sha
reho
lder
Nom
inee
s br
ing
reco
gniti
on th
at re
al c
hang
e is
nee
ded
and
an a
bilit
y to
effe
ct c
hang
e th
rou g
h th
e B
oard
room
. Sha
reho
lder
Nom
inee
s ha
ve le
d su
bsta
ntia
l tur
naro
unds
and
driv
en
gop
erat
iona
l ach
ieve
men
ts, n
ot th
roug
h “li
quid
atio
ns,”
but r
athe
r thr
ough
impa
ctfu
l cha
nge
that
re
orie
nted
thei
r cor
pora
tions
in a
man
ner t
hat b
enef
ited
all S
hare
hold
ers.
John
Hes
s’s
Nom
inee
s
“ The
sein
depe
nden
tdire
ctor
sag
reed
tojo
in
Shar
ehol
der N
omin
ees
“ Sha
reho
lder
Nom
inee
sw
illfo
rmth
eiro
wn
Thes
e in
depe
nden
t dire
ctor
s ag
reed
to jo
in
our b
oard
, bec
ause
they
bel
ieve
in o
ur
outs
tand
ing
plan
and
they
reco
gniz
e th
at
our p
lan
is th
e rig
ht p
lan…
”
Sha
reho
lder
Nom
inee
s w
ill fo
rm th
eir o
wn,
in
depe
nden
t vie
ws
on th
e C
ompa
ny, i
ts
asse
ts, a
nd it
s st
rate
gy.”
John
Hes
s’s
Plan
A
ll Sh
areh
olde
rs C
an H
ope
to G
et A
nd
No
Con
fiden
ce in
Tim
ing
or E
xecu
tion
Obj
ectiv
e, C
lear
-Eye
d A
naly
sis
Eval
uatin
g A
ll O
ptio
ns
to M
axim
ize
Shar
ehol
der V
alue
[ 141
]
Giv
en T
he P
erva
sive
, Dee
p-ro
oted
, Per
sist
ent P
robl
ems
at H
ess
Exte
rnal
lyIm
pose
dB
oard
Res
truc
turin
gIs
Nee
ded
Exte
rnal
ly Im
pose
d B
oard
Res
truc
turin
g Is
Nee
ded
La
rge
turn
over
nee
ded
to c
hang
e B
oard
dyn
amic
and
cul
ture
P
rovi
des
oppo
rtuni
ty to
rese
t cul
ture
and
intro
duce
acc
ount
abili
ty
N
eed
dire
ctor
s w
ith n
o lin
ks to
cur
rent
Boa
rd a
nd m
anag
emen
t
N
eed
dire
ctor
s th
at h
ave
not a
gree
d to
any
pla
n
S
elf-r
estru
ctur
ing
of B
oard
is n
ot s
uffic
ient
N
o ac
know
ledg
emen
t of t
he fu
ndam
enta
l pro
blem
s
C
hang
es to
dat
e ha
ve b
een
reac
tion
to S
hare
hold
er N
omin
ees
Sh
hld
dB
dth
tdt
tti
ld
hi
“Ele
ctin
g ne
w m
anag
emen
t nom
inee
s is
itse
lf lik
ely
to b
e se
en a
s a
vote
for t
he o
ld o
rder
;
S
hare
hold
ers
dese
rve
a B
oard
that
dem
onst
rate
s pr
oact
ive
lead
ersh
ip
gg
y;
elec
ting
diss
iden
t nom
inee
s, if
they
car
ry m
eani
ngfu
l cre
dent
ials
and
exp
erie
nce,
sen
ds a
fa
r stro
nger
sig
nal t
o th
e in
cum
bent
boa
rd, a
nd is
thus
mor
e lik
ely
to e
ffect
cha
nge.
”
-IS
S P
roxy
Adv
isor
y S
ervi
ces,
R
ecom
men
datio
n: B
arne
s &
Nob
le P
rox y
Con
test
, Sep
tem
ber 2
010
[142
]
y,
p
Shar
ehol
derN
omin
ees
Ack
now
ledg
eTh
ePr
oble
ms
and
Can
Fix
Them
Shar
ehol
der N
omin
ees
Ack
now
ledg
e Th
e Pr
oble
ms
and
Can
Fix
The
m
Ther
e ar
e fu
ndam
enta
l pro
blem
s at
Hes
s th
at h
ave
pers
iste
d fo
r nea
rly tw
o
Hes
s’s
attit
ude
that
not
hing
fund
amen
tal i
s w
rong
, tha
t no
subs
tant
ive
prob
lem
s d
tb
ddd
dth
tHi
“dli
iS
hh
ldl
”ii
l
deca
des
and
have
resu
lted
in u
nrel
entin
g un
derp
erfo
rman
ce.
need
to b
e ad
dres
sed,
and
that
Hes
s is
“del
iver
ing
Sha
reho
lder
val
ue” i
s pr
ecis
ely
the
min
dset
that
ens
ures
con
tinue
d un
derp
erfo
rman
ce.
Wb
liH
hb
ii
dI
ibl
ih
We
belie
ve H
ess
has
grea
t ass
ets
but i
s m
ism
anag
ed. I
t is
a pu
blic
com
pany
that
sh
ould
be
run
for a
ll S
hare
hold
ers
but h
as b
een
held
cap
tive
by a
CE
O a
nd B
oard
that
ar
e ap
pare
ntly
unw
illing
to ta
ke a
n ob
ject
ive,
cle
ar-e
yed
look
at t
heir
own
reco
rd. T
he
first
ste
p in
cor
rect
ing
a pr
oble
m is
reco
gniz
ing
it ex
ists
.
Shar
ehol
der N
omin
ees
will
del
iver
the
tran
sfor
mat
ive
chan
ge th
ey d
eliv
ered
at
thei
r prio
r org
aniz
atio
ns, b
ecau
se th
ey p
osse
ss n
ot o
nly
the
capa
bilit
y to
do
so,
bt
lth
hili
td
illi
tk
ld
bld
fith
but a
lso
the
hum
ility
and
will
ingn
ess
to a
ckno
wle
dge
prob
lem
s an
d fix
them
.
[ 143
]
Con
tact
s&
Add
ition
alIn
form
atio
nC
onta
cts
& A
dditi
onal
Info
rmat
ion
Inve
stor
s
Bru
ce H
. Gol
dfar
b / P
at M
cHug
h / G
eoff
Sor
bello
Oka
pi P
artn
ers
LLC
Tel:
+1-2
12-2
97-0
720
f@
info
@ok
apip
artn
ers.
com
Pres
sPr
ess
John
Har
tzTe
l: +1
-212
-446
-187
2Te
l 2: +
1-71
8-92
6-35
03
ForA
dditi
onal
Info
rmat
ion
jhar
tz@
sloa
nepr
.com
ww
w.R
eass
essH
ess.
com
For A
dditi
onal
Info
rmat
ion
[144
]
I. A
dditi
onal
Info
rmat
ion
on C
ompe
nsat
ion
Shar
ehol
derN
omin
eeC
ompe
nsat
ion
isPa
yfo
rPer
form
ance
Shar
ehol
der N
omin
ee C
ompe
nsat
ion
is P
ay fo
r Per
form
ance
Wha
t it i
s: $
30,0
00 fo
r eac
h 1%
that
Hes
s’s
stoc
k ou
tper
form
s H
ess’
s ow
n pr
oxy
peer
s as
mea
sure
d at
the
end
ofth
eSh
areh
olde
rNom
inee
’sth
ree
eart
erm
asa
dire
ctor
(201
6)en
d of
the
Sha
reho
lder
Nom
inee
’s th
ree-
year
term
as
a di
rect
or (2
016)
S
imila
r to
Hes
s’s
Per
form
ance
Sha
re U
nit (
PS
U) p
rogr
am b
ut w
ith m
ore
rigor
ous
goal
s
Th
epe
ergr
oup
isth
eex
acts
ame
asth
egr
oup
used
fort
heP
SU
prog
ram
Th
e pe
er g
roup
is th
e ex
act s
ame
as th
e gr
oup
used
for t
he P
SU p
rogr
am
Th
e m
easu
rem
ent o
f tot
al re
turn
is th
e sa
me
as th
e P
SU
pro
gram
Th
ego
als
are
mor
erig
orou
sth
anP
SU
prog
ram
beca
use
Shar
ehol
derN
omin
eeis
only
paid
ifTh
e go
als
are
mor
e rig
orou
sth
an P
SU p
rogr
am b
ecau
se S
hare
hold
er N
omin
ee is
onl
y pa
id if
ou
tper
form
pee
r gro
up a
nd p
aym
ent c
omm
ensu
rate
with
am
ount
of o
utpe
rform
ance
. Hes
s pa
ys
man
agem
ent 5
0% to
100
% o
f tar
get b
onus
eve
n if
Hes
s in
3rd
quar
tile
Th
eob
ligat
ion
topa
yis
cont
ract
ually
fixed
and
nots
ubje
ctto
Ellio
tt’s
disc
retio
n
The
oblig
atio
n to
pay
is c
ontra
ctua
lly fi
xed
and
not s
ubje
ct to
Elli
ott’s
dis
cret
ion
Th
e pa
ymen
t has
no
tie w
hats
oeve
r to
Ellio
tt’s
P&L
or in
vest
men
t
Th
edu
ratio
nis
mor
elo
ngte
rmor
ient
edth
anan
ypl
ancu
rren
tlyat
Hes
s
The
dura
tion
is m
ore
long
term
orie
nted
than
any
pla
n cu
rren
tly a
t Hes
s
Th
e pa
ymen
t is
capp
ed a
t 300
% o
utpe
rform
ance
(300
% o
utpe
rform
ance
wou
ld im
ply
Hes
s sh
are
pric
e at
~$
250
per s
hare
whi
le p
eers
are
flat
)
[ 146
]
An
Exam
ple
An
Exam
ple
If:
S
hare
hold
er N
omin
ee is
ele
cted
to th
e B
oard
, and
D
urin
g th
e th
ree
year
s fo
llow
ing
the
2013
Ann
ual M
eetin
g
H
ess
Com
mon
Sto
ck h
ad a
tota
l ret
urn
of 3
0%
P
eer g
roup
has
a to
tal r
etur
n of
20%
Th
eref
ore,
out
perfo
rman
ce o
f 10%
Then
: N
omin
ee w
ould
rece
ive
com
pens
atio
n of
$30
0,00
0 ($
30,0
00 ×
10)
[ 147
]
Nom
inee
Com
pens
atio
nEn
dors
edB
ySh
areh
olde
rsan
dG
over
nanc
eEx
pert
sN
omin
ee C
ompe
nsat
ion
Endo
rsed
By
Shar
ehol
ders
and
Gov
erna
nce
Expe
rts
“We
unde
rsta
nd fr
om re
adin
g th
eir p
roxy
sta
tem
ent t
hat a
ny c
ontin
uing
agr
eem
ent b
etw
een
Elli
ott a
nd th
eir n
omin
ees
will
be
pure
ly e
xecu
tory
and
such
nom
inee
s w
ill n
ot o
we
any
duty
or a
llegi
ance
to E
lliot
t. M
oreo
ver,
we
find
that
the
tiid
db
Elli
ttt
thi
ii
it
td
blt
tht
fth
’ti
ico
mpe
nsat
ion
prov
ided
by
Ellio
tt to
thei
r nom
inee
s is
con
sist
ent a
nd c
ompa
rabl
e to
that
of t
he c
ompa
ny’s
con
tinui
ng
dire
ctor
s; s
peci
fical
ly, c
ontin
uing
dire
ctor
s ha
ve s
imila
r ups
ide
pote
ntia
l on
hist
oric
al s
hare
gra
nts
rece
ived
dur
ing
thei
r te
nure
as
dire
ctor
s. W
e be
lieve
Elli
ott’s
nom
inee
s an
d yo
ur c
ontin
uing
dire
ctor
s ar
e al
l com
pens
ated
in a
man
ner
cons
iste
nt w
ith th
eir f
iduc
iary
dut
ies
to a
ll th
e sh
areh
olde
rs.”
Dav
id H
. Bat
chel
der
“Hes
s ha
s po
rtray
ed th
ese
bonu
ses
as s
omeh
ow o
bjec
tiona
ble…
it is
diff
icul
t to
see
the
mer
it in
man
agem
ent’s
ar
gum
ents
. The
bon
uses
see
m s
urgi
cally
tailo
red
to ti
e th
e pa
yoff
to H
ess’
s st
ock
pric
e pe
rform
ance
com
pare
d to
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC
com
petit
ors.
Tha
t is
inte
nded
to a
lign
the
inte
rest
s of
thos
e di
rect
ors
with
thos
e of
the
com
pany
’s s
hare
hold
ers.
Elli
ott
mak
es th
e pr
omis
e at
the
outs
et a
nd th
en h
as n
o ro
le to
pla
y af
terw
ards
, oth
er th
an to
pay
up
if m
ilest
ones
are
met
. No
one
is b
ehol
den
to E
lliot
t and
the
inde
pend
ence
of t
hose
dire
ctor
s is
not
com
prom
ised
.”La
wre
nce
A. C
unni
ngha
m,
Pro
fess
or, G
eorg
e W
ashi
ngto
n U
nive
rsity
Law
Sch
ool
“The
Elli
ott a
ppro
ach
mak
es s
ense
for H
ess
shar
ehol
ders
. It’s
a s
traig
htfo
rwar
d an
d ob
ject
ive
ince
ntiv
e pl
an th
at c
lear
ly
conn
ects
the
inte
rest
s of
inde
pend
ent n
omin
ees
with
the
inte
rest
s of
sha
reho
lder
s ov
er th
e m
ediu
m a
nd lo
ng te
rm. T
his
kind
ofap
proa
chle
nds
itsel
fto
allo
win
gth
ese
nom
inee
sif
elec
ted
tofo
cus
onin
depe
nden
tdec
isio
n-m
akin
gan
dki
nd o
f app
roac
h le
nds
itsel
f to
allo
win
g th
ese
nom
inee
s, if
ele
cted
, to
focu
s on
inde
pend
ent d
ecis
ion
mak
ing
and
fulfi
lling
thei
r fid
ucia
ry o
blig
atio
ns o
n be
half
of s
hare
hold
ers.
”R
anda
ll Th
omas
, P
rofe
ssor
, Van
derb
ilt L
aw S
choo
l
[ 148
]
And
Mor
eG
over
nanc
eEx
pert
s
“The
Elli
ott p
lan
mak
es p
erfe
ct s
ense
for H
ess
shar
ehol
ders
. In
fact
, it i
s st
ate-
of-th
e-ar
t and
oug
ht to
be
mor
e br
oadl
y ad
opte
d. T
ying
dire
ctor
com
pens
atio
n di
rect
ly to
out
perfo
rman
ce a
gain
st p
eers
per
fect
ly a
ligns
the
dire
ctor
s w
ith th
e
And
Mor
e G
over
nanc
e Ex
pert
s
inte
rest
s of
sha
reho
lder
s. T
he p
aym
ents
are
lega
l obl
igat
ions
, not
dis
cret
iona
ry, a
nd th
ey b
ear n
o re
latio
nshi
p w
hats
oeve
r with
any
reco
mm
enda
tions
put
forw
ard
by E
lliot
t. I t
hink
it is
a g
reat
pla
n th
at s
erve
s H
ess
shar
ehol
ders
w
ell.”
Yair
List
oken
, P
rofe
ssor
, Yal
e La
w S
choo
l
“Hes
s sh
areh
olde
rs s
houl
d no
t fin
d th
is a
ppro
ach
obje
ctio
nabl
e, b
ut s
houl
d in
fact
be
happ
y th
at E
lliot
t is
will
ing
to p
ay it
s ow
n m
oney
to c
ompe
nsat
e di
rect
or n
omin
ees
base
d di
rect
ly o
n H
ess’
s st
ock
pric
e pe
rform
ance
rela
tive
to it
s pe
er
grou
p.Th
isap
proa
chis
trans
pare
ntan
dcl
ear,
and
ital
igns
the
inte
rest
sof
inde
pend
entn
omin
ees
with
thos
eof
Hes
sgr
oup.
Thi
s ap
proa
ch is
tran
spar
ent a
nd c
lear
, and
it a
ligns
the
inte
rest
s of
inde
pend
ent n
omin
ees
with
thos
e of
Hes
s sh
areh
olde
rs.”
M. T
odd
Hen
ders
on
Pro
fess
or, U
nive
rsity
of C
hica
go L
aw S
choo
l
“The
Elli
ott n
omin
ee c
ompe
nsat
ion
plan
clo
sely
alig
ns th
e in
tere
sts
of th
ose
nom
inee
s w
ith th
e m
ediu
m a
nd lo
ng te
rm
inte
rest
s of
Hes
s sh
areh
olde
rs a
nd h
as n
o im
pact
on
a di
rect
or's
inde
pend
ence
or a
bilit
y to
fulfi
ll hi
s du
ties
to
stoc
khol
ders
. The
pay
out c
riter
ia a
re o
bjec
tive,
not
dis
cret
iona
ry, a
nd th
ey ti
e on
ly to
mar
ket p
rice
perfo
rman
ce o
ver a
fa
irly
long
per
iod,
rega
rdle
ss o
f whe
ther
the
Boa
rd a
dopt
s E
lliot
t's p
ropo
sals
.”La
wre
nce
AH
amer
mes
hLa
wre
nce
A. H
amer
mes
h,
Pro
fess
or, W
iden
er In
stitu
te o
f Del
awar
e C
orpo
rate
Law [ 1
49]
Shar
ehol
derN
omin
eeC
ompe
nsat
ion
Serv
esas
Cat
chup
toC
urre
ntD
irect
ors
Shar
ehol
der N
omin
ee C
ompe
nsat
ion
Serv
es a
s C
atch
-up
to C
urre
nt D
irect
ors
Afte
r yea
rs o
f rec
eivi
ng u
nres
tric
ted
stoc
k, H
ess’
s cu
rren
t Boa
rd m
embe
rs h
ave
sim
ilar
upsi
de to
Sha
reho
lder
Nom
inee
com
pens
atio
n
Cur
rent
Non
-M
anag
emen
t Boa
rd
Mem
bers
Com
pens
atio
n Pe
r 1%
Incr
ease
Hes
s St
ock(
1)
Nic
hola
s F.
Bra
dy$9
1,91
7
Sam
uelB
odm
an$2
5,10
4
Edi
th H
olid
ay$2
0,58
0
Thom
asH
Kea
n$2
4,08
9“M
oreo
ver,
we
find
that
the
com
pens
atio
nTh
omas
H. K
ean
$24,
089
Cra
ig M
atth
ews
$17,
422
Ris
aLa
vizz
o-M
oure
y$2
2,93
9
Mor
eove
r, w
e fin
d th
at th
e co
mpe
nsat
ion
prov
ided
by
Elli
ott t
o th
eir n
omin
ees
is
cons
iste
nt a
nd c
ompa
rabl
e to
that
of t
he
com
pany
’s c
ontin
uing
dire
ctor
s; s
peci
fical
ly,
cont
inui
ng d
irect
ors
have
sim
ilar u
psid
e po
tent
ialo
nhi
stor
ical
shar
egr
ants
rece
ived
John
Mul
lin II
I$2
8,17
6
Sam
uel A
. Nun
nJr
.$2
,349
Fran
k A
.Ols
on$2
7,90
0
pote
ntia
l on
hist
oric
al s
hare
gra
nts
rece
ived
du
ring
thei
r ten
ure
as d
irect
ors.
”
Dav
id H
. Bat
chel
der
Hes
s sh
areh
olde
r, R
elat
iona
l Inv
esto
rs L
LC(2
)
Ern
st v
on M
etzs
ch$5
4,34
2
Rob
ert
Wils
on$5
0,68
6
Ave
rage
Cur
rent
Boa
rd$3
322
8
[ 150
]
Ave
rage
Cur
rent
Boa
rd$3
3,22
8
Ave
rage
Rem
aini
ng B
oard
$31,
176
Sou
rce:
Blo
ombe
rg, C
ompa
ny fi
lings
1.C
alcu
late
d us
ing
shar
e ho
ldin
gs a
s of
3/1
5/12
pro
xy fi
ling
and
valu
atio
n as
of 4
/5/1
32.
Rel
atio
nal I
nves
tors
lette
r to
John
Hes
s on
Mar
ch 2
7, 2
013
II. A
dditi
onal
Info
rmat
ion
on P
eers
Who
Are
Hes
s’s
Peer
s?W
ho A
re H
ess
s Pe
ers?
Com
pany
Des
crip
tion
Che
vron
(CV
X)
U.S
. Sup
erM
ajor
; Poo
r com
para
ble
due
to s
ize
and
busi
ness
mix
E(X
OM
)U
SS
Mj
Pbl
dt
id
bi
iEx
xon
(XO
M)
U.S
. Sup
erM
ajor
; Poo
r com
para
ble
due
to s
ize
and
busi
ness
mix
BP
(BP
)E
urop
ean
Sup
erM
ajor
; Poo
r com
para
ble
due
to s
ize,
bus
ines
s m
ix a
nd d
iffer
ence
s in
Eur
opea
n eq
uity
mar
kets
She
ll (R
DS
A)
Eur
opea
n S
uper
Maj
or; P
oor c
ompa
rabl
e du
eto
siz
e, b
usin
ess
mix
and
diff
eren
ces
in E
urop
ean
equi
ty m
arke
ts
Sta
toil
(STO
)Eu
rope
an S
uper
Maj
or; P
oor c
ompa
rabl
e du
eto
siz
e, b
usin
ess
mix
and
diff
eren
ces
in E
urop
ean
equi
ty m
arke
ts
Tota
l (TO
T)Eu
rope
an S
uper
Maj
or; P
oor c
ompa
rabl
e du
eto
siz
e, b
usin
ess
mix
and
diff
eren
ces
in E
urop
ean
equi
ty m
arke
ts
Apa
che
(APA
)C
once
ntra
ted
expo
sure
to E
gypt
(58%
of I
ncom
e), w
hich
has
suf
fere
d du
e to
Ara
b S
prin
g
Ana
dark
o (A
PC
)M
ost c
ompa
rabl
e pe
er a
ccor
ding
to W
ood
Mac
kenz
ie;
Gas
ex p
osur
e ov
erst
ated
due
to c
onsi
sten
t mon
etiz
atio
n of
exp
lora
tion
asse
ts p
rior t
o pr
oduc
tion
pp
pp
Con
ocoP
hillip
s (C
OP
)R
easo
nabl
e co
mpa
rabl
e gi
ven
trans
ition
from
inte
grat
ed to
E&
P
Dev
on (D
VN
)N
orth
Am
eric
a on
ly;s
igni
fican
t exp
osur
e to
Nor
th A
mer
ican
nat
ural
gas
and
NG
Ls
EO
G (E
OG
)R
easo
nabl
e co
mpa
rabl
e to
Hes
s re
sour
ce p
lay
busi
ness
; nat
ural
gas
wei
ghtin
g is
a he
adw
ind
for E
OG
Mth
(MR
O)
Rbl
bli
titi
fi
tt
dt
E&
Pi
dil
Mar
atho
n (M
RO
)R
easo
nabl
e co
mpa
rabl
e gi
ven
trans
ition
from
inte
grat
ed to
E&P
, siz
ean
d oi
l exp
osur
e
Mur
phy
(MU
R)
Rea
sona
ble
com
para
ble
but h
ighe
r exp
osur
e to
Nor
th A
mer
ican
nat
ural
gas
and
NG
Ls, s
ubst
antia
lly lo
wer
pe
rcen
tage
of v
alue
from
unc
onve
ntio
nal o
il a
s pe
rcen
tage
of n
et a
sset
val
ue
Nob
le (N
BL)
Mos
t com
para
ble
peer
acc
ordi
ng to
Ban
k of
Am
eric
a M
erril
l Lyn
ch;
Com
para
ble
mix
ofEx
plor
atio
n/R
esou
rce
Exp
osur
eC
ompa
rabl
e m
ix o
f Exp
lora
tion/
Res
ourc
e E
xpos
ure
Occ
iden
tal (
OX
Y)
Sub
stan
tially
larg
er th
an H
ess;
Lar
ge c
hem
ical
ope
ratio
ns
Talis
man
(TLM
)S
igni
fican
tly h
ighe
r exp
osur
e to
Nor
th A
mer
ican
nat
ural
gas
and
NG
Ls
Con
tinen
tal(
CLR
)M
ost c
ompa
rabl
epe
er fo
r Hes
s’s
Bak
ken
posi
tion
[ 152
]
Kod
iak
(KO
G)
Bak
ken
pure
-pla
y o
pera
tor
Oas
is (O
AS
)B
akke
npu
re-p
lay
ope
rato
r
Hes
sR
elat
ive
Perf
orm
ance
Hes
s R
elat
ive
Perf
orm
ance
As
of 1
1/28
/12
End
Dat
e(1)
As o
f 1/2
5/13
End
Dat
e(2)
17-Y
ear
5-Ye
ar4-
Year
3-Ye
ar2-
Year
1-Ye
ar17
-Yea
r5-
Year
4-Ye
ar3-
Year
2-Ye
ar1-
Year
U.S
. Sup
erM
ajor
U.S
. Sup
erM
ajor
CV
X(3
59)%
(71)
%(5
9)%
(61)
%(6
6)%
(25)
%C
VX
(368
)%(1
00)%
(83)
%(7
2)%
(54)
%(8
)%O
OXO
M(3
20) %
(38)
%(2
7)%
(39)
%(6
1)%
(30)
%XO
M(2
85) %
(55)
%(2
5)%
(50)
%(4
5)%
(4)%
Eur
opea
n S
uper
Maj
orE
urop
ean
Sup
erM
ajor
BP
33%
2%(6
)%9%
(39)
%(1
8)%
BP
77%
(19)
%(2
2)%
17%
(24)
%1%
RD
SA
(61)
%(4
8)%
(58)
%(6
0)%
(50)
%(2
0)%
RD
SA
(11)
%(7
1)%
(76)
%(5
0)%
(39)
%2%
STO
N/A
(22)
%(4
5)%
(22)
%(4
9)%
(13)
%S
TON/
A(5
9)%
(41)
%(2
4)%
(38)
%0%
TOT
(222
)%(1
7)%
(21)
%(2
0)%
(42)
%(2
1)%
TOT
(192
)%(3
7)%
(34)
%(1
1)%
(28)
%(1
)%
Larg
e C
ap In
depe
nden
tLa
rge
Cap
Inde
pend
ent
AP
A(3
60)%
(8)%
(8)%
5%(0
)%3%
AP
A(3
59)%
(26)
%(9
)%18
%8%
19%
AP
C(2
77)%
(60)
%(8
9)%
(35)
%(4
4)%
(9)%
AP
C(2
76)%
(83)
%(1
14)%
(27)
%(3
1)%
3%C
OP
(271
)%(4
1)%
(73)
%(7
5)%
(62)
%(2
7)%
CO
P(2
52)%
(63)
%(9
1)%
(78)
%(5
1)%
(16)
%C
OP
/PS
X(3)
(328
)%(5
2)%
(89)
%(9
0)%
(74)
%(3
8)%
CO
P/P
SX(3
)(3
22)%
(77)
%(1
12)%
(97)
%(6
5)%
(29)
%D
VN
(124
)%6%
18%
7%(5
)%1%
DV
N(8
0)%
(3)%
12%
20%
11%
19%
DV
N(1
24)%
6%18
%7%
(5)%
1%D
VN
(80)
%(3
)%12
%20
%11
%19
%E
OG
(708
)%(7
1)%
(46)
%(4
8)%
(60)
%(3
2)%
EO
G(7
28)%
(86)
%(8
8)%
(34)
%(5
0)%
(14)
%M
RO
(522
)%(3
2)%
(123
)%(8
1)%
(87)
%(3
2)%
MR
O(5
35)%
(61)
%(1
08)%
(95)
%(5
6)%
(3)%
MR
O/M
PC
(4)
(683
)%(5
1)%
(164
)%(1
13)%
(117
)%(3
2)%
MR
O/M
PC
(4)
(746
)%(9
1)%
(156
)%(1
39)%
(86)
%(3
)%M
UR
(566
)%(1
8)%
(53)
%(2
5)%
(21)
%(2
9)%
MU
R(5
70)%
(32)
%(4
7)%
(29)
%(1
7)%
(5)%
NB
L(3
98)%
(68)
%(9
8)%
(66)
%(4
8)%
(19)
%N
BL
(422
)%(9
6)%
(123
)%(4
2)%
(52)
%(4
)%O
XY(8
15)%
(46)
%(5
8)%
(12)
%(1
7)%
3%O
XY(8
81)%
(75)
%(5
9)%
(15)
%(1
3)%
20%
()
()
()
()
()
()
()
()
()
()
TLM
(89)
%4%
(5)%
22%
11%
(3)%
TLM
(51)
%(1
1)%
(4)%
30%
20%
3%
Bak
ken
Ope
rato
rsB
akke
n O
pera
tors
CLR
N/A
(222
)%(2
53)%
(92)
%(5
5)%
(15)
%C
LRN/
A(2
80)%
(282
)%(1
10)%
(65)
%3%
KO
GN/
A(3
04)%
(1,7
16)%
(276
)%(1
06)%
(14)
%K
OG
N/A
(378
)%(2
,354
)%(2
76)%
(87)
%8%
OA
SN/
AN
/AN/
AN
/A(4
9)%
(17)
%O
AS
N/A
N/A
N/A
N/A
(56)
%0%
Pro
xy P
eers
(5)
(333
)%(3
1)%
(43)
%(2
9)%
(40)
%(1
7)%
Pro
xy P
eers
(5)
(322
)%(5
2)%
(53)
%(2
7)%
(27)
%1%
Rev
ised
Pee
rs(6
)(4
60)%
(45)
%(6
3)%
(44)
%(4
7)%
(20)
%R
evis
ed P
eers
(6)
(468
)%(6
8)%
(75)
%(4
3)%
(36)
%(1
)%In
tegr
ated
Pee
rs(7
)(3
17)%
(35)
%(5
2)%
(40)
%(5
3)%
(20)
%In
tegr
ated
Pee
rs(7
)(3
06)%
(60)
%(6
0)%
(42)
%(3
9)%
(1)%
Bak
ken
Ope
rato
rs (8
)N/
A(2
63)%
(984
)%(1
84)%
(70)
%(1
6)%
Bak
ken
Ope
rato
rs (8
)N/
A(3
29)%
(1,3
18)%
(193
)%(6
9)%
4%XO
PN/
A(3
1)%
(57)
%(4
3)%
(44)
%(2
0)%
XOP
N/A
(54)
%(7
0)%
(42)
%(3
6)%
(4)%
XLE
N/A
(39)
%(8
1)%
(52)
%(3
9)%
(15)
%XL
EN/
A(6
3)%
(96)
%(4
2)%
(34)
%0%
[ 153
]
Sou
rce:
Blo
ombe
rg, C
ompa
ny fi
lings
1.A
s of
11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of H
ess
stoc
k2.
As
of 1
/25/
13, d
ate
befo
re w
hich
Elli
ott i
nten
tion
to n
omin
ate
dire
ctor
s be
cam
e pu
blic
3.In
corp
orat
ing
spin
off o
f PS
X w
hich
took
pla
ce in
May
201
24.
Inco
rpor
atin
g sp
inof
f of M
PC
whi
ch to
ok p
lace
in J
uly
2011
5.P
roxy
pee
rs: U
sed
by H
ess
for m
gmt c
ompe
nsat
ion:
Ana
dark
o, A
pach
e, B
P, C
hevr
on, C
onoc
oPhi
llips,
Dev
on, E
OG
, Exx
on, M
arat
hon,
Mur
phy,
Occ
iden
tal,
She
ll, S
tato
il, T
alis
man
and
Tot
al
6.R
evis
ed p
roxy
pee
rs: e
xclu
des
Dev
on &
Tal
ism
an d
ue to
hig
h N
orth
Am
eric
a ga
s w
eigh
ting;
exc
lude
s B
P,
She
ll, S
tato
il, T
otal
due
to E
urop
ean
supe
r maj
or s
tatu
s; in
clud
es N
oble
as
addi
tiona
l rel
evan
t com
petit
or7.
Inte
grat
ed P
eers
incl
udes
BP
, CV
X, C
OP
, XO
M, M
RO
, OX
Y, R
DS
, STL
and
TO
T. C
OP
and
MR
O w
ere
inte
grat
ed u
ntil
May
201
2 &
Jul
y 20
11 re
spec
tivel
y8.
Bak
ken
Ope
rato
rs: I
nclu
des
Con
tinen
tal,
Oas
is a
nd K
odia
k
()
()
()
()
()
()
()
()
()
Hes
s C
herr
y-Pi
cks
Prox
y Pe
ers
Year
by
Year
St
illM
anag
esto
Und
erpe
rfor
mTh
emA
llSt
ill M
anag
es to
Und
erpe
rfor
m T
hem
All
10 –
Yea
r7-
Year
5-Ye
ar3-
Year
1-Ye
ar
2003
Pro
xyP
eers
2006
Pro
xy P
eers
2008
Pro
xy P
eers
2010
Pro
xyP
eers
2012
Pro
xy P
eers
Ana
dark
oA
nada
rko
Ana
dark
oA
nada
rko
Ana
dark
oIn
dica
tes
chan
ge in
Hes
s pr
oxy
peer
sAp
ache
Apac
heAp
ache
Apac
he
Ashl
and
BG
BP
BP
BP
BP
Burli
ngto
nBu
rling
ton
Che
vron
Che
vron
Che
vron
Che
vron
Con
oco
Con
oco
Con
oco
Con
oco
Dev
onD
evon
Dev
onD
evon
Dev
on
EO
GE
OG
Exx
onE
xxon
Exx
onE
xxon
Ker
r-McG
ee
Mar
atho
nM
arat
hon
Mar
atho
nM
arat
hon
Mar
atho
n
Mur
phy
Mur
phy
Mur
phy
Oxy
Oxy
Oxy
Oxy
Oxy
Shel
lSh
ell
She
llS
hell
Sta
toil
Suno
coSu
noco
Suno
co
Talis
man
Teso
roTe
soro
Teso
ro
Tota
l
Uno
cal
Val
ero
Val
ero
Val
ero
[ 154
]
Val
ero
Val
ero
Val
ero
Willi
ams
Sou
rce:
Com
pany
filin
gs1.
Per
form
ance
cal
cula
ted
from
firs
t day
of t
he y
ear t
o 11
/28/
12, d
ate
befo
re w
hich
Elli
ott b
egan
to
purc
hase
a s
ubst
antia
l am
ount
of H
ess
stoc
k; fo
r exa
mpl
e, p
erfo
rman
ce fo
r 200
3 pr
oxy
peer
s ca
lcul
ated
from
1/1
/200
3 to
11/
28/1
2
(99)
%(3
1)%
(48)
%(6
0)%
(11)
%
Bas
ed o
n M
arke
t Cap
italiz
atio
n an
d E&
P R
even
ueM
ostC
ompa
rabl
ePe
ers
Are
Larg
eC
apIn
depe
nden
tsan
dC
ontin
enta
l
M
arke
t cap
italiz
atio
n:
Mos
t Com
para
ble
Peer
s A
re L
arge
Cap
Inde
pend
ents
and
Con
tinen
tal
Mar
ket C
ap
as M
ultip
leof
Hes
s(1)
Rev
enue
as
Mul
tiple
of H
ess
E&
P R
even
ueas
Mul
tiple
of
Hes
s
Pro
duct
ion
as M
ultip
le
of H
ess
U.S
. Sup
erM
ajor
S
uper
Maj
ors
are
~5 to
24x
Hes
s
La
rge
Cap
Inde
pend
ents
are
0.7
x to
4.1
x H
ess
R
even
ue:
CV
X12
.3x
6.1x
5.8x
6.4x
XO
M23
.9x
12.0
x6.
6x10
.4x
Euro
pean
Sup
erM
ajor
BP7.
8x10
.0x
4.5x
8.1x
E
&P
Rev
enue
is m
ore
rele
vant
than
Tot
al R
even
ue
whe
n ev
alua
ting
rela
tive
size
bec
ause
dow
nstre
am
oper
atio
ns g
ener
ate
high
reve
nues
but
hav
e lim
ited
econ
omic
s. F
or e
xam
ple,
Hes
s do
wns
tream
gen
erat
es
68%
ofits
reve
nue
butr
epre
sent
sle
ssth
an9%
ofH
ess
RD
SA
12.8
x12
.4x
6.2x
7.9x
STO
4.6x
3.4x
5.0x
4.3x
TOT
6.6x
6.4x
4.2x
5.4x
Larg
eC
apIn
depe
nden
t68
% o
f its
reve
nue
but r
epre
sent
s le
ss th
an 9
% o
f Hes
s ne
t inc
ome
Larg
e C
ap In
depe
nden
t
APA
1.8x
0.5x
1.6x
1.9x
APC
2.2x
0.4x
1.1x
1.8x
CO
P4.
1x1.
5x3.
2x3.
8x
DV
N1
3x0
3x0
7x1
7xB
ased
on
mar
ket c
apita
lizat
ion
and
reve
nue,
H
ess’
sm
ostc
ompa
rabl
epe
ers
are
Larg
eC
apD
VN
1.3x
0.3x
0.7x
1.7x
EO
G1.
9x0.
3x0.
7x1.
1x
MR
O1.
3x0.
4x1.
1x1.
1x
MU
R0.
7x0.
8x0.
4x0.
5x
NB
L1
0x0
1x0
4x0
6x
Hes
s’s
mos
t com
para
ble
peer
s ar
e La
rge
Cap
In
depe
nden
ts a
nd C
ontin
enta
l
“Sha
reho
lder
s ne
ed to
be
satis
fied
that
the
peer
gro
up is
i
td
th
ik
df
thf
NB
L1.
0x0.
1x0.
4x0.
6x
OX
Y3.
7x0.
6x1.
7x1.
9x
TLM
0.7x
0.2x
0.7x
1.0x
Bak
ken
Ope
rato
rs
CLR
07
01
02
02
appr
opria
te a
nd n
ot c
herr
y-pi
cked
for t
he p
urpo
se o
f ju
stify
ing
or in
flatin
g pa
y. In
gen
eral
, we
belie
ve a
pee
r gro
up
shou
ld ra
nge
from
0.5
to 2
tim
es th
e m
arke
t cap
italiz
atio
n of
the
Com
pany
. In
this
cas
e, G
lass
Lew
is h
as id
entif
ied
10
peer
s ou
tsid
e of
this
rang
e, w
hich
repr
esen
ts a
ppro
xim
atel
y 62
.5%
of t
he p
eer g
roup
.”
[ 155
]
CLR
0.7x
0.1x
0.2x
0.2x
KO
G0.
1x0.
0x0.
0x0.
0x
OA
S0.
2x0.
0x0.
1x0.
1xS
ourc
e: C
ompa
ny fi
lings
1.M
arke
t cap
italiz
atio
n as
of 1
1/28
/12,
dat
e be
fore
whi
ch E
lliot
t beg
an to
pur
chas
e a
subs
tant
ial a
mou
nt o
f Hes
s st
ock
Gla
ss L
ewis
, Hes
s P
roxy
Pap
er 2
011
With
Low
Exp
osur
e to
Col
laps
ing
N.A
. Nat
ural
Gas
Pric
es, H
ess
Shou
ld
Hav
eO
utpe
rfor
med
All
ofth
eIn
depe
nden
tsEs
peci
ally
DVN
EOG
and
TLM
Hav
e O
utpe
rfor
med
All
of th
e In
depe
nden
ts, E
spec
ially
DVN
, EO
G, a
nd T
LM%
of P
rodu
ctio
nN
orth
Amer
ican
Gas
or N
GLs
% o
f Pro
duct
ion
Oil
Hes
s9%
70%
N.A
. Nat
ural
Gas
Pric
es S
ince
200
8(1)
U.S
. nat
ural
gas
pric
es h
ave
colla
psed
ove
r the
pas
t 5 y
ears
Euro
pean
Supe
rMaj
or
U.S
. Sup
erM
ajor
CV
X8%
68%
XO
M16
%52
%
$6.0
0
$7.0
0
$8.0
0
$9.0
0
Euro
pean
Sup
erM
ajor
BP8%
63%
RD
SA
9%51
%
STO
4%55
%
TOT
2%55
%$3
.00
$4.0
0
$5.0
0
TOT
2%55
%
Larg
e C
ap In
depe
nden
t
APA
36%
45%
APC
68%
32%
CO
P34
%45
%
$2.0
0
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
US
Nat
ural
Gas
H
ess
has
only
9%
of p
rodu
ctio
n ex
pose
d to
low
U.S
. nat
ural
gas
and
NG
L pr
icin
g
CO
P34
%45
%
DV
N79
%21
%
EO
G52
%34
%
MR
O15
%64
%
MU
R23
%58
%
Hes
s ha
s lo
wes
t exp
osur
e to
N.A
. gas
of a
ny In
depe
nden
t pee
r
MU
R23
%58
%
NB
L37
%37
%
OX
Y27
%61
%
TLM
41%
35%
*Not
e: A
PC
’s N
orth
Am
eric
an g
as e
xpos
ure
over
stat
ed d
ue to
co
nsis
tent
mon
etiz
atio
n of
exp
lora
tion
asse
ts p
rior t
o pr
oduc
tion
[ 156
]
Bak
ken
Ope
rato
rs
CLR
30%
70%
KO
G10
%90
%
OA
S8%
92%
Sou
rce:
Com
pany
filin
gs1.
Janu
ary
2013
Nat
ural
Gas
Hes
s Is
No
Mor
e In
tegr
ated
Tha
n A
ny o
f The
Lar
ge C
ap In
depe
nden
tsB
utIs
Subs
tant
ially
Less
Inte
grat
edTh
anTh
eSu
perM
ajor
sB
ut Is
Sub
stan
tially
Les
s In
tegr
ated
Tha
n Th
e Su
perM
ajor
s
W
hen
eal
atin
g%
ofG
ross
PP
&E
or%
ofN
etIn
com
e
Ave
rage
% o
f Gro
ss
PP&E
Out
side
of E
&P(1
)
5-Y
r
3-
Yr
1-Y
r
Hes
s7%
6%6%
Ave
rage
% o
f Net
Inco
me
Out
side
of E
&P5-
Yr
3-Y
r
1
-Yr
6%3%
9%
Whe
n ev
alua
ting
% o
f Gro
ss P
P&E
or %
of N
et In
com
e ou
tsid
e of
E&
P op
erat
ions
, Hes
s is
sim
ilar t
o La
rge
Cap
In
depe
nden
ts
C
OP
and
MR
Oha
vetra
nsiti
oned
from
Inte
grat
eds
toE
&P
Euro
pean
Supe
rMaj
or
U.S
. Sup
erM
ajor
CV
X15
%13
%12
%
XO
M28
%25
%21
%
6%8%
9%
25%
28%
36%
CO
P an
d M
RO
hav
e tra
nsiti
oned
from
Inte
grat
eds
to E
&P
pure
-pla
ys b
y sp
inni
ng o
ff th
eir d
owns
tream
ope
ratio
ns, P
SX
an
d M
PC
resp
ectiv
ely
H
ess
was
pos
ition
ed to
und
ergo
a s
imila
r tra
nsiti
on
Euro
pean
Sup
erM
ajor
BP10
%10
%10
%
RD
SA
24%
24%
23%
STO
10%
9%8%
TOT
10%
8%8%
13%
16%
8%
14%
17%
19%
11%
10%
12%
16%
16%
17%
If H
ess
wan
ts to
be
com
pare
d to
Inte
grat
eds,
then
C
OP
and
MR
O a
re th
e m
ost r
elev
ant p
eers
TOT
10%
8%8%
Larg
e C
ap In
depe
nden
t
APA2
6%6%
6%
APC
9%9%
10%
CO
P13
%11
%0%
16%
16%
17%
0%0%
0%
4%4%
5%
11%
15%
0%C
OP
13%
11%
0%
DV
N2
0%0%
0%
EO
G0%
0%0%
MR
O19
%11
%0%
MU
R20
%17
%12
%
11%
15%
0%
17%
17%
22%
0%0%
0%
17%
6%4%
16%
18%
15%
MU
R20
%17
%12
%
NB
L0%
0%0%
OX
Y17
%17
%17
%
TLM
0%0%
0%
16%
18%
15%
0%0%
0%
11%
12%
14%
0%0%
0%
[ 157
]
Bak
ken
Ope
rato
rs
CLR
0%0%
0%
KO
G0%
0%0%
OA
S0%
0%0%
Sou
rce:
Com
pany
filin
gs1.
Gro
ss P
P&
E u
sed
as a
pro
xy fo
r cap
ital e
mpl
oyed
whi
ch m
any
of th
e pe
ers
fail
to d
iscl
ose
2.A
PA
bre
aks
out m
idst
ream
for P
P&
E b
ut n
ot fo
r inc
ome;
DV
N b
reak
s ou
t mid
stre
am
oper
atio
ns fo
r inc
ome
but n
ot fo
r gro
ss P
P&
E
0%0%
0%
0%0%
0%
0%0%
0%
Idio
sync
ratic
Eve
nts
Mak
e A
pach
e (A
PA) a
nd B
P N
ot C
ompa
rabl
e to
Hes
s O
verT
heLa
st5
Year
sO
ver T
he L
ast 5
Yea
rs
Apa
che
suffe
red
from
the
Ara
b S
prin
g
Fo
r Apa
che:
20%
of p
rodu
ctio
n, 3
0% o
f cas
h flo
w, a
nd 5
8% o
f ope
ratin
g in
com
e co
me
from
Egy
pt
“AP
A's
sto
ck p
erfo
rman
ce h
as s
igni
fican
tly la
gged
its
peer
ave
rage
and
the
S&
P 5
00 s
ince
the
Egy
ptia
n re
volu
tion.
We
are
mor
e pe
ssim
istic
abo
ut E
gypt
's
futu
re th
an in
any
tim
e in
the
last
two
year
s an
d ar
e re
duci
ngou
rPT
to$9
5fro
m$1
05W
eth
ink
AP
A
“Sin
ce e
arly
-201
1, E
gypt
has
bee
n a
pers
iste
nt
over
hang
for A
PA
. Whi
le in
sim
ple
term
s th
e re
gion
ac
coun
ts fo
r …23
% o
f our
NA
V, t
his
unde
rsta
tes
the
impo
rtanc
e of
the
asse
t for
the
portf
olio
.… W
hile
a
com
plet
elif
ting
ofth
eE
gypt
over
hang
isun
likel
yth
ere
duci
ng o
ur P
T to
$95
from
$10
5. W
e th
ink
AP
A
wou
ld b
e be
tter o
ff ex
iting
Egy
pt b
y se
lling
its
oper
atio
ns a
nd u
sing
the
proc
eeds
to b
uy b
ack
shar
es, r
educ
e de
bt a
nd b
oost
inve
stm
ents
el
sew
here
.”
Oh
i(F
b28
2013
)
com
plet
e lif
ting
of th
e E
gypt
ove
rhan
g is
unl
ikel
y, th
e m
arke
t is
disc
ount
ing
a ve
ry b
earis
h ou
tcom
e fo
r an
asse
t tha
t has
suf
fere
d no
vis
ible
eco
nom
ic im
pact
fro
m th
e de
terio
ratin
g po
litic
al &
fisc
al s
ituat
ion
over
th
e pa
st 2
yea
rs.”
Dt
hB
k(M
h7
2013
)
BP
sto
ck p
rice
decl
ined
sub
stan
tially
due
to M
acon
do-Opp
enhe
imer
(Feb
ruar
y 28
, 201
3)-D
euts
che
Ban
k (M
arch
7, 2
013)
BP
’sst
ock
colla
psed
bym
ore
than
50%
inth
ew
ake
ofM
acon
do
BPs
stoc
k co
llaps
ed b
y m
ore
than
50%
in th
e w
ake
of M
acon
do
90100
110
BP
Rel
ativ
e Pe
rfor
man
ce S
ince
Jan
uary
1, 2
008(
1)
Apr
il 20
th20
10 –
Oil
spill
at
BP’s
Mac
ondo
pros
pect
5060
70
80
90
[ 158
]S
ourc
e: C
ompa
ny fi
lings
1.B
P p
erfo
rman
ce v
ersu
s re
mai
nder
of H
ess
prox
y pe
ers
50
01-Jan-0801-Mar-0801-May-08
01-Jul-0801-Sep-0801-Nov-0801-Jan-0901-Mar-0901-May-09
01-Jul-0901-Sep-0901-Nov-0901-Jan-1001-Mar-1001-May-10
01-Jul-1001-Sep-1001-Nov-1001-Jan-1101-Mar-1101-May-11
01-Jul-1101-Sep-1101-Nov-1101-Jan-1201-Mar-1201-May-12
01-Jul-1201-Sep-1201-Nov-1201-Jan-13
On
The
Bas
is o
f Siz
e, N
.A. G
as E
xpos
ure,
and
% o
f PP&
E O
utsi
de o
f U
pstr
eam
, Ana
dark
o A
nd N
oble
Are
The
Mos
t Com
para
ble
Peer
s; C
onoc
o A
nd M
arat
hon
Are
Inst
ruct
ive
Giv
en S
imila
r Tra
nsiti
ons
to P
ure-
play
E&
P;
Con
tinen
talI
sC
lose
stC
ompa
rabl
eFo
rBak
ken
Posi
tion
Con
tinen
tal I
s C
lose
st C
ompa
rabl
e Fo
r Bak
ken
Posi
tion
Inde
pend
ent
vs.
Supe
rMaj
or
Mkt
Cap
as
M
ultip
leof
Hes
s(1)
E&P
Rev
enue
as M
ultip
le
of H
ess
% o
f Pro
duct
ion
Nor
thAm
eric
anG
as o
r NG
Ls
Ave
rage
% o
f Gro
ss
PP&E
Out
side
of
E&P(
1)
5-Y
r
3-Y
r
1-Y
r
Mos
t Com
para
ble
Peer
s
Anad
arko
Inde
pend
ent
22x
11x
68%
(4)
9%9%
10%
In
depe
nden
tE&P
with
inte
rnat
iona
l sca
le c
ompa
rabl
e to
Hes
s
Sig
nific
ant U
.S. o
nsho
re re
sour
ce p
lay
expo
sure
In
tern
atio
nal e
xplo
ratio
n is
key
corp
orat
e fo
cus
Hes
sIn
depe
nden
t9%
7%6%
6%
(AP
C)
Inde
pend
ent
2.2x
1.1x
68%
(4)
9%9%
10%
S
igni
fican
t ope
ratio
ns in
Gul
f of M
exic
o
Con
side
rabl
e ca
pita
l dep
loye
d in
mid
stre
am o
pera
tions
M
ost c
ompa
rabl
e pe
er a
ccor
ding
to W
ood
Mac
kenz
ie(2
)
Nob
le(N
BL)
Inde
pend
ent
1.0x
0.4x
37%
0%0%
0%
In
depe
nden
tE&P
with
inte
rnat
iona
l sca
le c
ompa
rabl
e to
Hes
s
Sig
nific
ant U
.S. o
nsho
re re
sour
ce p
lay
expo
sure
In
tern
atio
nal e
xplo
ratio
n is
key
corp
orat
e fo
cus
P
ortfo
lioin
clud
essu
iteof
core
inte
rnat
iona
lass
ets
inW
estA
frica
and
(NB
L)p
P
ortfo
lio in
clud
es s
uite
of c
ore
inte
rnat
iona
l ass
ets
in W
est A
frica
and
lo
ng-li
fe g
as a
sset
s
Mos
t com
para
ble
peer
acc
ordi
ng to
Ban
k of
Am
eric
a M
erril
l Lyn
ch(3
)
Inst
ruct
ive
Giv
en S
imila
r Tra
nsiti
ons
to P
ure-
play
E&
P
In
depe
nden
t E&
Pw
ith d
iver
sifie
d po
rtfol
io o
f int
erna
tiona
l ass
ets
Tr
ansi
tione
dfro
min
tegr
ated
E&
Pto
pure
-pla
yE&
P(c
ompl
eted
2012
)C
onoc
o(C
OP
/PS
X)
Inde
pend
ent
4.1x
3.2x
34%
13%
11%
0%Tr
ansi
tione
d fro
m in
tegr
ated
E&
P to
pur
epl
ay E
&P
(com
plet
ed 2
012)
S
igni
fican
t U.S
. ons
hore
reso
urce
pla
y ex
posu
re
Und
ergo
ing
sign
ifica
nt d
ives
titur
e pr
ogra
m
Mat
eria
l ove
rlap
with
Hes
s as
set b
ase:
Gul
f of M
exic
o, N
orw
ay, W
est
Afri
ca, a
nd M
alay
sia
Mar
atho
nIn
depe
nden
t1
3x1
1x15
%19
%11
%0%
In
depe
nden
tE&P
with
inte
rnat
iona
l sca
le c
ompa
rabl
e to
Hes
s
Tran
sitio
ned
from
inte
grat
ed E
&P
to p
ure-
play
E&P
(com
plet
ed 2
011)
(MR
O/M
PC
)In
depe
nden
t1.
3x1.
1x15
%19
%11
%0%
S
igni
fican
t U.S
. ons
hore
reso
urce
pla
y ex
posu
re
Low
exp
osur
e to
Nor
th A
mer
ican
nat
ural
gas
and
NG
Ls
Mos
tCom
para
ble
Bak
ken
Ope
rato
r
Con
tinen
tal
(CLR
)In
depe
nden
t0.
7x0.
2x30
%0%
0%0%
Si
gnifi
cant
acre
age
posi
tion
in th
e Ba
kken
[ 159
]S
ourc
e: C
ompa
ny fi
lings
1.A
s of
11/
28/1
2, d
ate
befo
re w
hich
Elli
ott b
egan
to p
urch
ase
a su
bsta
ntia
l am
ount
of
Hes
s st
ock
2.S
ourc
e: W
ood
Mac
kenz
ie -
Sep
tem
ber 2
012
Hes
s C
orpo
rate
Rep
ort
3.B
ank
of A
mer
ica
Mer
rill L
ynch
, Apr
il 1
2013
4.A
PC
’s N
orth
Am
eric
an g
as e
xpos
ure
over
stat
ed d
ue to
con
sist
ent m
onet
izat
ion
of o
il-fo
cuse
d ex
plor
atio
n as
sets
prio
r to
prod
uctio
n
(CLR
)
Con
tact
s&
Add
ition
alIn
form
atio
nC
onta
cts
& A
dditi
onal
Info
rmat
ion
Inve
stor
s
Bru
ce H
. Gol
dfar
b / P
at M
cHug
h / G
eoff
Sor
bello
Oka
pi P
artn
ers
LLC
Tel:
+1-2
12-2
97-0
720
f@
info
@ok
apip
artn
ers.
com
Pres
sPr
ess
John
Har
tzTe
l: +1
-212
-446
-187
2Te
l 2: +
1-71
8-92
6-35
03
ForA
dditi
onal
Info
rmat
ion
jhar
tz@
sloa
nepr
.com
ww
w.R
eass
essH
ess.
com
For A
dditi
onal
Info
rmat
ion
[160
]