NEW YORK (TheStreet) -- The Hess (HES) story sounds complicated: They're selling their refining assets, they've received overtures from super-investor Paul Singer for $800 million in shares and board seats and they've orchestrated one of the greatest stock-price rallies in the oil patch, jumping almost $20 a share since early December. But the single takeaway from the Hess story is far more simple: Smart oil companies are concentrating solely on growing their production of crude oil.
The Hess refining assets have been such a strong component of its corporate structure that it's difficult to think of Hess without its 20 terminal fields and east coast refining presence. But the plan to sell everything "downstream" (the transport, storage and refining assets) has really made Wall Street happy; since announcing its restructuring plan, shares have soared. The added interest of Elliot Associates (the hedge fund of Paul Singer) has further boosted shares, as many believe he is investing to position the company for a sale.
What's important are not Singer's motivations for a more active role at Hess. The point is, Hess is vastly changing the historic make-up of its company and its focus and following the lead of Conoco Phillips (COP), which has spun off its refining assets to Phillips 66 (PSX), and Marathon Oil (MRO), which is spinning off its refining assets to Marathon Petroleum (MPC). All of these oil companies seem to have the same long-term idea: Free up as much investment capital as possible to pursue crude oil production exclusively.
It's where the big oil companies believe the profits will be for the long term: In crude oil production. And if they are right, they are also predicting a higher price for crude and an increasing demand profile for the next decade. Both of these "predictions" fly in the face of the current wisdom, with demand dropping in the United States and Europe and production increasing in the Bakken, Oil sands, Gulf of Mexico, Brazil, Iraq, Libya, the Arctic -- just about everywhere you can name.I think Conoco, Marathon and Hess are entirely right -- and if they are, there is only one further question to answer in choosing where to invest: Which of the big E+P companies is making the smartest investments for growing their crude volumes?
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV