{ "docId": "019dd923-622c-750b-8b9c-3c8a15220fd2", "docSlug": "348f49356270", "documentTitle": "Hess Corporation (HES)", "authorId": "02_Elliott_Management", "authorName": "Elliott Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2013-04-15 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 35, "pageCount": 161, "prevPage": 34, "nextPage": 36, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 8, "notes": "The slide uses a combination of narrative bullet points and a financial table to illustrate a failure in capital allocation.", "elementsJson": [ "headline_text", "paragraph", "bullet_list", "data_table", "callout_box", "footnote" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b9c-3c8a15220fd2/35", "deckHref": "/decks/019dd923-622c-750b-8b9c-3c8a15220fd2", "deckJsonHref": "/decks/019dd923-622c-750b-8b9c-3c8a15220fd2.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b9c-3c8a15220fd2#slide-35", "components": [ { "bbox": { "h": 0.2, "w": 0.5, "x": 0.45, "y": 0.6 }, "kind": "callout", "text": "While others captured tremendous wealth in the Eagle Ford (APC, COP, EOG, MRO, MUR, RDSA, TLM, etc.), Hess not only failed to create value but lost $771mm", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "305002c7-da00-4a68-a5da-6903b9617bcb", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.5, "w": 0.5, "x": 0.45, "y": 0.05 }, "kind": "list", "text": "JV with unknown ZaZa Energy had misaligned incentives: ZaZa was paid to acquire acreage regardless of cost or quality and bore no risk to Hess capital losses; ZaZa received 10% cash bonus and 10% carried working interest while putting no capital at risk for acquired acres; After 2 years, Hess realized its mistake and exited JV; ZaZa walked away with half of Hess's Eagle Ford acreage and over $100mm of Hess's cash; Indicative of lack of capital controls, litigation is ongoing from the JV as Hess paid lease brokers for acreage that was never delivered; Hess does not disclose the extent of these losses. Shareholders must look to disclosures of ZaZa and Sanchez in order to learn how shareholder capital was lost", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f4ac4c4e-a929-4d5f-89c4-e4ba0ff64a8f", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "Total Cash Lost: $771mm", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd952-f5d2-7501-bd94-4353147c32a1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.4, "x": 0.05, "y": 0.2 }, "kind": "paragraph", "text": "Hess entered the Eagle Ford in 2010 and lost money. The Eagle Ford is one of the premier U.S. liquids resource plays and has seen a dramatic rise in value over the past few years. Hess's loss is the equivalent of losing money in the 1990s buying technology stocks—hard to do even if you tried.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e43a006f-6f23-4e46-aa74-76382f9c4167", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.9, "w": 0.15, "x": 0.85, "y": 0.05 }, "kind": "source-note", "text": "Sources: Hess and ZaZa Company Filings. 1. ZaZa 2012 10K (p.F92). 2. 53 Wells drilled as of 3/1/13; 50 wells in Cotulla area per Sanchez presentation, 3 wells outside Cotulla area ZaZa 2Q 2012 10Q (p.54). Well costs assumed to be $10.3mm in 2010/2011 and $8.9mm in 2012/2013 as per Hess 2Q 2012 earnings call; 23 wells drilled as of YE2011 as per ZaZa 10K 2011 (p.3). 3. $380mm in Eagle Ford capex in 2012 per Hess earnings call; Lease acquisition costs $0 in 2012 per 2012/2011 ZaZa 10K; 26 wells drilled in 2012; remainder is $149mm for non-D&C capital expenditures. 4. $24.8mm in ZaZa lease bonuses per ZaZa 2012 10K (p.53). $14.8mm in ZaZa G&A reimbursement per ZaZa 2012 10K (p.54). $84mm in ZaZa JV dissolution payments per ZaZa 3Q 2012 10Q (p.12). 5. Sanchez press release, March 18, 2013. 6. 2010 through 2Q 2012 production, realized prices, lease operating costs from ZaZa filings; 3Q2012 through 1Q2013 production from Sanchez acquisition presentation, Cotulla Only realized prices and lease operating costs per ZaZa filings in 1Q and 2Q 2012 10Qs and held constant; G&A per BOE at Hess U.S. E&P average; no corporate overhead included.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4930ce85-e92b-44ed-8238-9f45b2920b1a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.5, "w": 0.4, "x": 0.05, "y": 0.4 }, "kind": "table", "text": "Capital Destroyed in Eagle Ford table", "attrs": null, "subkind": "data", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "90798a39-3f8e-4235-b9e0-484925921147", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.4, "x": 0.05, "y": 0.05 }, "kind": "title", "text": "Inability to Make Most of Corporate Opportunities Demonstrated in Eagle Ford; Hess Not Only Failed to Capture Opportunity, Hess Lost $771 Million", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f5928fbd-23ca-475b-bbd5-300fe05bc674", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "58ce257f-178a-44ca-87d3-a3a7f72b9127", "evidence": "The slide explicitly details misaligned incentives, lack of capital controls, and non-disclosure of losses to shareholders.", "confidence": 0.9 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }