It's the Christmas season, so that means it's also time to buy your Hess (HES 1.69%) toy trucks, a new model of which is released every year around this time. Warehouse club BJ's Wholesale, however, might be taking that a little too literally as it's rumored to be interested in buying the whole gas station too.
What started as a marketing tool to entice motorists to buy more Hess gas the Hess toy truck has become something of a cultural phenomenon that in the past 50 years has also blossomed into a major collector's item with an original 1964 model going for around $2,000 or so on eBay. BJ's is reportedly willing to pay slightly more than that if it can also get all of the oil and gas company's 1,300 filling stations with it.
As Hess continues the process of transforming itself into a pure play exploration and production company, shedding its network of gas stations remains one of the last steps to complete. It already sold its terminal network to Buckeye Partners, agreed to exit the energy marketing business in a deal worth over $1 billion, and just announced it was selling its Indonesian assets for another $1.3 billion.
Once the transformation is finished, it will be focused almost entirely on developing its Bakken shale assets, as it sold some 43,000 acres out of its Eagle Ford shale portfolio to Sanchez Energy. The Bakken accounts for 19% of Hess's production and 23% of its revenues as the region increased to 71,000 barrels of oil equivalent in the third quarter, a 14% jump from the year ago period. It brought 50 operated wells on production giving it 122 wells in operation so far this year.
The maneuvers follow the path tread by others to become focused E&P players, like ConocoPhillips (COP 1.23%) that spun off its Phillips 66 refinery business and Marathon Oil that let go of Marathon Petroleum (MPC 0.70%). Hess has also closed its Port Reading refinery for good having shut it during Hurricane Sandy.
Its retail business is one of the last to go, but BJ's Wholesale, which has gas stations at half of its warehouse clubs, isn't the only possible buyer of Hess's network. Marathon Petroleum is said to be interested as well as it would nearly double its own network of 1,470 stations it operates through its Speedway subsidiary.
An alternative Hess is considering is spinning off the stations as a stand-alone alone company, similar to what Valero Energy (VLO 0.86%) and Murphy Oil (MUR 1.77%) did in spinning off their retail operations into CST Brands and Murphy USA, respectively.
Hess says it will do whatever deal is necessary to maximize value for shareholders, which has worked out well so far as its stock trades some 65% higher than it did a year ago due in large part to the disposal of its assets. So perhaps the bigger question is not who will buy the retail business, but rather as an E&P play will it still sell its Hess toy trucks every Christmas if it's not trying to bring customers in to buy more gas?
