NEW YORK (TheStreet) -- Shares of Hess Corp. (HES) are higher by 1.98% to $66.95 in pre-market trading on Thursday morning, after the crude oil and natural gas exploration and production company announced it has agreed to sell a 50% interest in its Bakken Midstream assets for $2.675 billion.
The company is selling the 50% interest in Bakken to Global Infrastructure Partners. The two companies are creating a premier midstream joint venture called Hess Infrastructure Partners.
The joint venture will incur $600 million of debt through a 5-year term loan A facility. Proceeds will be distributed equally to both partners with Hess receiving total after-tax cash proceeds net of $3 billion.
"This transaction delivers significant and immediate value to our shareholders. The joint venture with its strategically located assets will be one of the largest midstream operators in the Bakken," Hess CEO John Hess said in a statement.
"By capitalizing on the financial strength and midstream energy experience of Global Infrastructure Partners, the two joint venture will be in a strong position to fund future energy infrastructure investments and continue to grow its midstream business," Hess added.
Separately, TheStreet Ratings team rates HESS CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate HESS CORP (HES) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HES's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
- 46.68% is the gross profit margin for HESS CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, HES's net profit margin of -25.29% significantly underperformed when compared to the industry average.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, HESS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has significantly decreased to $362.00 million or 68.73% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: HES Ratings Report