{ "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": 78, "pageCount": 161, "prevPage": 77, "nextPage": 79, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 0, "notes": "The slide uses a series of pull-quotes from various financial institutions to build a narrative of persistent management failure.", "elementsJson": [ "headline_text", "quote_block" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b9c-3c8a15220fd2/78", "deckHref": "/decks/019dd923-622c-750b-8b9c-3c8a15220fd2", "deckJsonHref": "/decks/019dd923-622c-750b-8b9c-3c8a15220fd2.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b9c-3c8a15220fd2#slide-78", "components": [ { "bbox": null, "kind": "callout", "text": "The 7% pullback in the stock was severe, and in our view, is indicative of a loss of investor confidence in HES's execution capabilities, following a string of production misses and a lack of notable exploration success.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-f5d2-7501-bd98-b657ba858c82", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.35, "x": 0.52, "y": 0.14 }, "kind": "quote", "text": "We are skeptical that Hess's current global growth strategy will yield superior returns or growth, as its organization appears to be spread thin and we think it is unlikely that Hess can have a competitive advantage in all the areas it is pursuing.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "06d18d95-0288-4a74-8ec8-966d2316c396", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.35, "x": 0.13, "y": 0.43 }, "kind": "quote", "text": "The key issue for HES in our mind is capital intensity and the inability of management in recent years to live within the limits of its cash flows. Furthermore, given the lack of growth in oil and gas production over the last 5 years, there is a case to be made that the company should return more cash back to shareholders instead of attempting to grow at all.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1e662d13-e39f-4099-88c0-4d36863d6a2e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.35, "x": 0.13, "y": 0.27 }, "kind": "quote", "text": "On the upstream side, we question whether the company has the bandwidth to operate in over 20 countries... We do not believe a company of Hess's size will get credit in the market for a shotgun approach to investing across the world.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4071b263-e3b1-4aae-9b1c-2df2014a6100", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.35, "x": 0.52, "y": 0.53 }, "kind": "quote", "text": "The 7% pullback in the stock was severe, and in our view, is indicative of a loss of investor confidence in HES's execution capabilities, following a string of production misses and a lack of notable exploration success, in addition to a growing deficit between capex and cash flow. Entering 1Q'12, HES had missed its production guidance for four of the preceding 5 quarters, meaning execution was at a premium.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7a5ca3d2-ff3b-4c89-a246-28e3d0038dc3", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.35, "x": 0.52, "y": 0.76 }, "kind": "quote", "text": "Although we think the company's underlying asset value is worth significantly higher than our near-term price target, we now believe the shares will likely continue to struggle throughout this year and will trade substantially below our estimate of its fair asset value due to the lack of visible catalysts as well increased investor skepticism over management's execution record...", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8710deb7-2dd5-4670-9d93-e0546b0f47f9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.35, "x": 0.52, "y": 0.3 }, "kind": "quote", "text": "We believe Hess should consider further reducing its exploration program beyond what has already been announced. It is not clear to us given the levels of exploration spending versus cash flows that a mid-sized oil company can successfully pursue a global exploration strategy as Hess has attempted... The company's high-risk/high-potential exploration and acreage strategy since 2009 is thus far not yielding favorable results.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9b57a421-426e-426b-89b8-ed5f15d2a404", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.35, "x": 0.13, "y": 0.14 }, "kind": "quote", "text": "The large variability in capex versus original guidance (just set six months ago) demonstrates some lack of capital discipline within the company.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "db43c85c-9362-4ccc-ace5-bdd5139dc1c5", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"The large variability in capex versus original guidance (just set six months ago) demonstrates some lack of capital discipline within the company.\" — Citigroup (July 25, 2012); \"On the upstream side, we question whether the company has the bandwidth to operate in over 20 countries... We do not believe a company of Hess's size will get credit in the market for a shotgun approach to investing across the world.\" — Citigroup (July 20, 2012); \"The key issue for HES in our mind is capital intensity and the inability of management in recent years to live within the limits of its cash flows. Furthermore, given the lack of growth in oil and gas production over the last 5 years, there is a case to be made that the company should return more cash back to shareholders instead of attempting to grow at all.\" — Citigroup (July 20, 2012); \"We are skeptical that Hess's current global growth strategy will yield superior returns or growth, as its organization appears to be spread thin and we think it is unlikely that Hess can have a competitive advantage in all the areas it is pursuing.\" — Goldman Sachs (June 11, 2012); \"We believe Hess should consider further reducing its exploration program beyond what has already been announced. It is not clear to us given the levels of exploration spending versus cash flows that a mid-sized oil company can successfully pursue a global exploration strategy as Hess has attempted... The company's high-risk/high-potential exploration and acreage strategy since 2009 is thus far not yielding favorable results.\" — Goldman Sachs (June 11, 2012); \"The 7% pullback in the stock was severe, and in our view, is indicative of a loss of investor confidence in HES's execution capabilities, following a string of production misses and a lack of notable exploration success, in addition to a growing deficit between capex and cash flow. Entering 1Q'12, HES had missed its production guidance for four of the preceding 5 quarters, meaning execution was at a premium.\" — Simmons (April 26, 2012); \"Although we think the company's underlying asset value is worth significantly higher than our near-term price target, we now believe the shares will likely continue to struggle throughout this year and will trade substantially below our estimate of its fair asset value due to the lack of visible catalysts as well increased investor skepticism over management's execution record...\" — Barclays (April 26, 2012)", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-f5d2-7501-bd98-bae53b482343", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.4, "x": 0.13, "y": 0.08 }, "kind": "title", "text": "...And Has Done So For a Long Time", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c3a5f78b-75e4-4654-8259-719e03fbfa92", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "authority-citation", "slug": null, "matchId": "6be2ddc7-f018-44a3-aee3-2bf0e017dd5b", "evidence": "Uses multiple analyst quotes to build a credible case against management.", "confidence": 0.9 } ], "arcBeats": [ { "to": 84, "from": 77, "beatId": "e0b1ade6-05ea-43bb-b076-9aa676d6ed58", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Cite Precedent", "beatSlug": null, "evidence": "The presentation cites historical precedent for acknowledging Hess's problems", "position": 2, "confidence": 0.9, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [ { "to": 84, "from": 76, "name": "The Reveal", "slug": "05-the-reveal", "bestFor": "Product launches, strategic pivots, unexpected findings", "matchId": "7c02518c-0b5e-4a3e-a160-1848e5662700", "evidence": "The presentation reveals the extent of Hess's problems and the need for change", "position": 1, "objective": "Reveal the extent of Hess's problems and the need for change", "structure": "Setup the Question -> Build Suspense -> The Big Reveal", "confidence": 0.8, "description": "Build mystery and anticipation, then deliver a surprising or powerful conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }