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Hess Faces Billion Dollar Lawsuit Over Refinery Closure

Zacks Equity Research
Updated

Hess Corporation HES was sued by the government of the U.S. Virgin Islands for more than $1 billion. The company faces charges of abandoning an oil refinery at St. Croix it had pledged to run through the year 2022. As alleged, there was a pattern of misconduct by Hess management and attempts to strip the facility's assets.

Hess used to run the refinery through its joint venture (JV) with Petróleos de Venezuela, the national oil company of Venezuela. The JV christened Hovensa LLC has also filed for bankruptcy. For operating the refinery, the company received billions of dollars in tax breaks from the territorial government. The case focuses on the terms of those tax breaks, which included conditions to promote the establishment and operate the refining.

The lawsuit also alleges that Hess entered into contracts that artificially boosted the cost of Venezuelan crude it purchased and suppressed the cost of the petroleum products the refinery sent to Hess gas stations along the East Coast.

New York-based Hess, previously known as Amerada Hess Corporation, is a global exploration and production company that develops, produces, purchases, transports and sells crude oil and natural gas. The company’s E&P activities are spread globally. As of year-end 2014, Hess’ proved reserves tally was 1.43 billion oil-equivalent barrels. While the company replaced 158% of its production, this resulted in a reserve life of 11.7 years.

Hess now operates as a pure play E&P and is working toward becoming a more focused, higher growth and lower risk company. The company continues to concentrate on its E&P portfolio by divesting assets that do not fit its growth profile. Hess currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Seadrill Partners LLC SDLP, Alon USA Partners LP ALDW and Tesoro Corporation TSO. Each of these stocks sports a Zacks Rank #1 (Strong Buy) and appears more rewarding for the short term.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
HESS CORP (HES): Free Stock Analysis Report
 
TESORO CORP (TSO): Free Stock Analysis Report
 
SEADRILL PTNRS (SDLP): Free Stock Analysis Report
 
ALON USA PTNRS (ALDW): Free Stock Analysis Report
 
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Zacks Investment Research