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Gold/Mining/Energy : ENERGY EXPLORATION & PRODUCTION -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (94)	6/9/2008 12:05:54 PM
From: Dennis Roth	Read Replies (1) \| Respond to of 111

Hess Corp. (HES) Buy: Adding Hess to the Americas Conviction Buy List - Goldman Sachs - June 09, 2008 Source of opportunity We are adding Hess to the Americas Conviction Buy List and see 21% upside to our revised $150 ($130 before) 12-month target price. We believe Hess shares will continue to outperform in an increasingly bullish crude oil price environment given the company’s significant commodity price leverage and meaningful exploration optionality. With results from several wells expected over the course of this year, we believe that the combination of actual results and anticipation of newsflow in addition to Hess’s favorable leverage to higher crude oil prices will drive shares up. Catalyst Key catalysts include: (1) rising consensus EPS revisions as the Street raises its oil price outlook; (2) exploration drilling news, likely beginning in late summer with results from four back-to-back wells being drilled in Australia, the first of which was spud at the end of May. We expect additional news through the end of this and early next year from wells on Libya’s Block 54, the highly-anticipated Block BMS-22 in the Santos Basin of Brazil, and offshore Ghana. Valuation We have raised our 12-month target price to $150 ($130 before) following an updated risk/reward assessment of Hess’s current high-impact exploration program. Our target price is based on asset value, P/E and cash flow valuation analyses. Notably, we estimate that Hess shares would be worth $160 at current strip oil prices and excluding exploration optionality. We see $68 per share of unrisked upside from its impact exploration program, or $21 per share on a risked basis, resulting in an upside valuation for Hess shares at strip oil prices in excess of $180. Key risks Key risks are sustained lower oil prices and unsuccessful exploration.