Will Hess Spin Off Its Retail Division?

NEW YORK -- Now that Murphy Oil Corp. announced it would spin off its retail division, analysts and industry experts have cited Hess Corp. as the next likely convenience store industry company to do so.

CNBC stock market expert Jim Cramer was first to bring up the possibility on television earlier this week, and analysts have agreed with the assessment. Deutsche Bank's Paul Sankey was one such analyst to mention Hess as a prime candidate to spin off its retail division.

Although it does not have c-store operations, Sankey also cited Occidental Petroleum Corp. (Oxy) as another company who soon could divest assets.

"To paraphrase Wayne Gretzky, we can't keep skating after the Murphy puck. We need to skate to where it's going next, and that, it our space, first has to be Oxy and Hess," he told clients, the National Post reported. "In both cases, investors have major questions over strategy and execution, and both are trading below [net asset value]."

Sankey added that Hess' asset base it far too diverse for a company its size. "The stock price reflects concern about ballooning capital costs, chronic lack of free cash flow, a high oil breakeven, and recent difficulty executing against guidance and expectations," he noted.

Often, companies announce spinoffs close to quarterly earnings reports dates. Hess is reporting earnings on Oct. 31, so it's possible a spinoff could be announced in the near future.

However, even if Hess does plan to divest assets -- as analysts note makes sense -- the New York City-based company may not spin off its retail division, which totaled 1,361 c-stores and gas stations as of June 30.

Analysts have relayed that the oil company could decide to divest other assets into a master limited partnership (MLP) instead.

As CSNews Online previously reported, Hess was also named as a potential acquisition target for the cash-rich Chevron Corp. In addition, Sankey revealed he thinks ConocoPhillips Inc. is a "sleeper" pick to shed some assets as well, even though it already spun off Phillips 66 on May 1.

ConocoPhillips no longer owns any c-store related assets.

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