re HES - the Credit Suisse Report dated 4/26 (available in Etrade) and the April earnings transcripts in Sekingalpha provide some color. There seems to be a consensus that based on a Sum of parts, HES is worth 80-90$/share. You can throw just about any value metric at HES (EV/EBITDA, EV Cash flow, Tangible book, EV/ BOE, PE) and HES looks cheap.
The problem is managements track record which basically boil down to a high finding cost for reserves. Last year for example, they spent almost 50$/brl to find reserves. HES claims that some expenses (like the Bakken acreage, infrastructure spending in Bakken etc.) are prepaid expenses for 2P reserves. The proof lies in the pudding and if HES management is correct finding costs for proved reserves should fall, as spending flattens and becomes more efficient. Right now, management record card looks bad, because they essentially spent all their cash flow, pay very little dividend and show little proved reserve growth. But we know from some comparisons with competitors data (discussed earlier in this thread) that HES got their acreage in Bakken very cheap and has at least some very high flow rates. I also think that the money spent on rail loading infrastructure (to move the oil) and pipelines will be worth the expense. Shuttinfg down the money loosing refinery (while a hit too book value) is a win win too, so at some point (2013,2014?) management should be able to unlock value.
Incidentally, reading through the report (and some others), CVX (which I don't own) looks pretty good on almost all metrics, including upstream PV10/ EV. CVX is also a company that has become better over time from a laggard to almost being on the same level than XOM and probably better on some counts. So, I think I'll do some work on CVX and maybe start a position in that name rather than adding to TOT or COP. |
