NEW YORK ( TheStreet) -- The Hess (HES - Get Report) 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
, which has spun off its refining assets to
, which is spinning off its refining assets to
. 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?