Over the past couple of years, Hess (HES 1.40%), the Houston-based exploration and production company, has been aggressively streamlining its portfolio by divesting noncore assets to unlock greater value for shareholders. It announced this week that it has found a buyer for its offshore resources in Thailand. Let's look at what impact the deal may have on the company, as well as what Hess' future may hold.

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Hess sells offshore Thailand assets
On Wednesday, Hess announced that it has sold its interests in the Sinphuhorm and Pailin fields offshore Thailand to PTT Exploration and Production, Thailand's largest publicly traded oil and natural gas company, for approximately $1 billion.

Judging by the deal's metrics and the immediate impact on Hess' financial position, the sale looks to be an incremental positive for the company. First, the deal's price tag of $1 billion was more or less in line with expectations of $975 million by Simmons & Co. International, a Houston-based investment bank specializing in energy deals.

The sale also won't have too much of an impact on Hess' production. Last year, the Sinphuhorm and Pailin fields contributed an average 17,000 barrels of oil equivalent per day, or boe/d, to Hess' net production. That amounts to roughly 5% of company-wide production, which averaged 336,000 for the full-year 2013. Lastly, and perhaps most important from investors' perspective, the proceeds from the sale will allow Hess to return more cash to shareholders by repurchasing additional shares of common stock under its current $4 billion authorization.

Asset sales unlocking value
As part of its strategy to become more focused and more profitable, Hess has divested some $7.8 billion worth of assets over the past year, including its dry gas acreage in Ohio's Utica shale for $924 million in January and the sale of its East Coast and St. Lucia storage terminal network to Buckeye Partners (BPL) for $850 million in October.

By selling these noncore assets, Hess hopes to free up more cash to fund higher-growth, lower-risk drilling programs in North Dakota's Bakken shale, the Gulf of Mexico, and elsewhere, as it transforms into a pure-play exploration and production company. Though these asset sales have weighed on production, reducing the company's full-year 2013 output by about 72,000 barrels of oil equivalent per day, they've done wonders for its financial health.

Last year, asset sale proceeds allowed the company to pay down $2.4  billion of short-term debt and improve its cash balance by roughly $1 billion. They also enabled the company to return $1.9 billion in cash to shareholders through share repurchases, as well as boost its annual dividend by 150% to $1 per share.

Production growth to accelerate
Meanwhile, Hess' production is expected to grow sharply this year thanks to continued improvements in the Bakken, the company's most prized asset, and the start-up of two major international projects. Based on strong Bakken performance over the past year -- including a 20% year-over-year increase in output and a 15% year-over-year decline in drilling and completion costs -- the company recently raised its production guidance for the region.

Hess now expects Bakken production to reach 150,000 boe/d in 2018, which would represent a more than 220% jump over last year's production of 67,000 boe/d. Meanwhile, Hess' Tubular Bells project in the Gulf of Mexico, expected to come online in the third quarter of this year, should contribute an additional 25,000 boe/d of net production.

Additionally, Hess plans in 2014 to bring online three new wells at the Valhall oil field in the southern part of the Norwegian North Sea, which should boost the company's net production from the field to between 30,000 and 35,000 boe/d this year, up from 23,000 boe/d in 2013.

The takeaway
I think Hess' decision to divest noncore assets and focus on its most profitable upstream opportunities should pay off in the long run. If Hess can continue its recent trend of strong execution in the Bakken, earnings and cash flow should gradually improve. Hess also looks reasonably attractive from a valuation standpoint, with shares currently trading at a meaningful discount to the company's net asset value. Credit Suisse reckons Hess' share price could reach $100 by year-end, which would suggest nearly 15% upside from current levels.