Hess Corp. (HES): More Potential Upside for This E&P Business

Looking forward, the company expects to realize around $8.5 billion in cash from the divestment of its offshore operations in several countries including Algeria, Nigeria and Kazakhstan. Investors might like ConocoPhillips (NYSE:COP) due to its juicy dividend yield at 4.2%.

Exxon Mobil Corporation (NYSE:XOM) has the highest valuation among the three. It is trading at around $95.20 per share, with the total market cap of $423.2 billion. The market values ExxonMobil at around 6 times its trailing EBITDA. ExxonMobil has much higher proved reserves than the other two companies, at more than 25 billion BOE.

It is also considered the largest natural-gas company in the U.S., with 74 trillion cubic feet equivalent of natural gas in its proved reserves.ConocoPhillips (NYSE:COP) has around 21.7 trillion cubic feet equivalent in its gas proved reserves. Exxon Mobil Corporation (NYSE:XOM) offers investors a much lower dividend yield at only 2.7%. However, its payout ratio is only 23%, much lower than the payout ratio of ConocoPhillips at 43%.

Exxon Mobil Corporation (NYSE:XOM) has been quite excited with the Kearl oil sands project, with around 4.6 billion BOE in its proved reserves. The project could be considered the first oil- sands operation without an up-grader. The president of ExxonMobil development company, Neil Duffin, said that Kearl’s reserves could “meet energy needs for the next 40 years.”

My Foolish take

Personally, I think Hess Corp. (NYSE:HES) could deliver a sweet return to shareholders due to its relatively low valuation, extremely low payout ratio, and the upcoming potential asset divestment activities. With more proceeds from asset sales, Hess could focus on its core business, strengthen its balance sheet and return more cash to its shareholders.

The article More Potential Upside for This E&P Business originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has a position in Hess. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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