The Hess Corporation said on Monday that it planned to sell its retail, refining and processing businesses and would change up its board in a bid to shake up its operations and fend off activist investors.
Hess pitched its wide-ranging plans, which include raising its dividend and buying back up to $4 billion worth of stock, as the culmination of a multiyear campaign to improve its operations and refashion itself into a leaner oil exploration and production company.
“It’s the logical endpoint of our five-year plan,†John Hess, the company’s chief executive and the son of its founder, said in a telephone interview on Monday. The company did not offer any estimates on how much it expected to raise from the sale proceeds.
But it also folows a public fight waged by Elliott Management, which owns a 4 percent stake and is mounting one of the biggest activist investor campaigns in recent years. Last month, the hedge fund nominated five candidates for Hess’s board, in what the firm said was an attempt to force the oil company into becoming more disciplined about its operations and spending.
Elliott was later joined by Relational Investors, an activist hedge fund with deep roots in the oil industry.
But Mr. Hess argued that the new initiatives weren’t developed in response to Elliott’s charges. Instead, he said, their roots could be traced back to efforts he undertook upon becoming chief executive in 1995.
“Elliott got on the train after it left the station,†Mr. Hess said.
In a letter to investo! rs, Hess said that it planned to fully sell off its so-called downstream assets, after having already announced plans to sell off its network of oil terminals. The company also plans to sell off its holdings in Indonesia and Thailand.
Some of the proceeds from those sales will go toward raising the company’s dividend to $1, from 40 cents, as well as committing to the share repurchase plan.
Hess will also consider ways to gain additional cash from its operations in the Bakken shale formation in the northern United States in 2015. Mr. Hess said that one possible move could be placing the assets into a master limited partnership, which would yield tax advantages, but that the business needs further development before any such move could happen.
Perhaps most prominently, Hess named six new directors to its board, most of whom are former oil industry executives. They include John Krenicki Jr., the former head of GE Energy; William Scrader, a former chief operating officer of TNK-BP; and James H. Quigley, a former chief executive of Deloitte.
In naming its director candidates last month, Elliott criticized the company’s board as being largely a collection of cronies with ties to the Hess family. Mr. Hess defended the departing directors as having helped craft the oil producer’s current strategy, but acknowledged that the board needed some shaking up.
The directors who are leaving include Thomas Kean, the former governor of New Jersey; Samuel A. Nunn, the former United States senator from Georgia; and Gregory P. Hill, Hess’s president of worldwide exploration and production.
“While our board was substantive, we realized the optics were an issue,†he said. “With the new company that we’re becoming, we feel that we have the right people for the board.â€
Hess also used its letter to rebut Elliott’s pr! oposals f! or the company, including breaking up its operations into two companies: one focused on finding and producing oil from overseas sites, and one concentrating largely on the Bakken shale formation in the United States.
The company argued in its letter that what Elliott had called for would produce only a short-term pop in its stock price and was “flawed†and unfeasible.
Mr. Hess said that he has not heard from Elliott since the hedge fund went public last month and has not heard from Relational since late last year, but said he would be willing to talk to the hedge fund if it approached him.
