Hess Needs Higher Crude Prices This Christmas
Back in October, I highlighted concerns I see with Hess , pointing out that the company was selling off too many assets too quickly and would need to do something to maintain its value with shareholders. That hasn't happened.
Since our October video, the company has actually issued an earnings warning to shareholders largely due to the widening spread during the quarter between WTI crude and Brent crude. This, again, suggests to me that the new, slimmer Hess has become entirely too dependent on higher WTI oil prices for growth. This should raise even more red flags with investors and strengthens my argument that present valuation is still too lofty for this E&P player, especially since the company doesn't seem to have a strong gameplan to play offense if crude oil prices weaken. Additionally, the company's 8.13% stake in the Waha oilfield asset in Libya remains problematic due to geopolitical and production issues which could mean a fire-sale for the asset could be forthcoming if earnings don't improve for Hess in the first half of 2014.
How is this company creating problems for OPEC?
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!
The article Hess Needs Higher Crude Prices This Christmas originally appeared on Fool.com.John Licata has no position in any stocks mentioned. You can follow John on Twitter @bluephoenixinc. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.