Hess Cutting Hundreds of Workers As It Battles Activist Investor

Hess Cutting Hundreds of Workers As It Battles Activist Investor
Hess Corp is cutting roughly 13 percent of its workforce.

Reuters

HOUSTON, Jan 16 (Reuters) - Hess Corp is cutting roughly 13 percent of its workforce and streamlining operations as it battles an activist hedge fund shareholder pushing for the U.S. oil and gas producer to post its first quarterly profit since 2014.

Most of the cuts, which could start as early as Tuesday and continue through the week, are in Houston, home to a majority of the company's employees, according to two sources familiar with the matter.

Lorrie Hecker, a Hess spokeswoman, confirmed the cuts, saying about 300 workers, or about 13 percent of the company's workforce, would be dismissed.

Executives from the New York-based company's headquarters were flying to Houston on Tuesday to meet with employees. The job cuts are part of a plan to reduce expenses by more than $150 million a year, the company said.

"We are doing all we can to ease the transition for employees who are impacted including severance, outplacement assistance and other benefits and support," Hecker said in an emailed statement to Reuters.

The cuts come despite a more than 20 percent rise in oil prices in the past three months as the U.S. shale industry recovers on rising demand and shrinking global stockpiles.

Hess had not cut staff two years ago even as some peers let thousands of workers go, with executives publicly saying they would retain talent in anticipation of a price rebound. Recent asset sales and pressure from investors to improve results have the company reversing course just as rivals post improved results from rising commodity prices.

Hedge fund Elliott Management Corp last month launched an activist campaign against Hess, saying it was frustrated by the company's "continuing underperformance" and floated the idea of pushing to remove John Hess as chief executive.

Elliott declined to comment.

GUYANA

The reorganization comes as Hess has been hiving off assets in response to demands from Elliott and others. Last year Hess sold its interests in projects in Norway and Equatorial Guinea. Some employees being let go had roles connected to those assets, one of the two sources said.

Hess has been stockpiling $2.53 billion in cash and short-term investments in order to fund its share of costs for an oil project off the coast of Guyana run by Exxon Mobil Corp . The first phase requires Hess to contribute $955 million out of the $4.4 billion total investment.

Hess shares fell about 0.8 percent to $54.11 in afternoon trading. (Reporting by Ernest Scheyder; Editing by Phil Berlowitz)



WHAT DO YOU THINK?


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BJ  |  January 23, 2018
I went to work for Amerada Hess in the late 70's. Just before Leon came to Houston and personally fired half the staff. But he first stopped off in Lafayette. The day before sent telex to the office manager telling him to fire half the staff Monday morning. The manager could pick who he wanted. Manager sent telex back to NY saying he didn't know how he could arbitrarily fire half his staff. Telex back said for him and his #2 to meet Leon's private jet at airport. Leon didn't even get off plane: fired manager from doorway and asked #2 if he would have a problem. And #2 said no. I word there for just 6 months. Came from Mobil Oil. While some folks thought the majors were overly authoritarian they had nothing over Hess. A dozen stories to back that up but will stop here.
Ron  |  January 22, 2018
Hess has been mismanaged for several years now. John Hess should have been removed long ago and several of his cronies removed as well. Elliot Management Corp has put on this pressure and is now responsible for the end of the working careers of several good people who gave their lives to Hess. Now just to be kicked to the curb like yesterday's trash. Other E&P types saw the handwriting on the wall and adjusted and are now in a good position under the new market conditions. Don't buy what Hess has said as they lived as if nothing changed in the market and never prepared as they should have and now are making employees pay that price with their jobs....
Alan Smith  |  January 19, 2018
Hess DID cut staff just a year ago in December 2016. Was about 10% reduction then, and now it's over 10% again. It just didn't make the press then.
Scott Southerland  |  January 17, 2018
How do you stockpile 2.5 billion dollars and be paying investors or taxes? I'd like to learn that trick.