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

To: Dennis Roth who wrote (102)	6/11/2008 11:08:22 AM
From: Dennis Roth	Respond to of 111

Hess Corp. (HES): Reiterate CL Buy following successful Australia well result - Goldman Sachs - June 11, 2008 News Hess announced that the first of four wells it is drilling on Australia’s Northwest Shelf was successful. The company indicated that results were “very encouraging,” in-line with its prior estimates and other nearby discoveries. Analysis We view today’s announcement as a very meaningful positive development for Hess shares, as it should begin to highlight the tangible upside potential of the company’s high-impact current exploration program. Relative to the $6 per share of risked value for Hess’s Australia acreage currently embedded in our target price, we believe continued success could be worth up to $18 per share, or an additional $12 per share of upside (assumes up to 10 Tcfe of gross recoverable resource). In addition to another three back-to-back wells in Australia, the company plans to drill wells on Libya’s Block 54, Block BMS-22 in Brazil and offshore Ghana in 2008. Importantly, we believe Anadarko Petroleum’s announcement today of a successful flow test at the Jubilee field offshore Ghana also has positive implications for Hess given its offsetting acreage. In total, we see $68 per share of unrisked upside from the company’s exploration program, or $21 per share on a risked basis. Implications We reiterate our Conviction Buy rating on Hess following today’s announcement, which comes earlier than we had anticipated and kicks off what will likely be a steady stream of news on exploration results throughout the remainder of this year. We continue to believe that the combination of actual exploration results and anticipation of newsflow in addition to Hess’s favorable crude oil leverage will drive shares higher. We see 22% upside to our unchanged, $150 12-month target price (based on asset value, P/E and cash flow valuation analyses; key risk is sustained lower commodity prices and unsuccessful exploration results).