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Hess (HES) Pipeline Unit Goes Public by IPO Worth $250M

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Global exploration & production company Hess Corporation (HES - Free Report) has recently made its Houston pipeline unit, Hess Midstream Partners LP, public by launching an initial public offering (IPO) of 12,500,000 units. Hess plans to raise $250 million in the IPO through the sale of 12.5 million units at a price of $19 to $21.  

Hess Midstream is a master limited partnership formed in 2014 by Hess and Global Infrastructure Partners to own pipeline and storage assets in the Bakken Shale. The partnership would be listed under the New York Stock Exchange under the ticker HESM. Goldman Sachs, Morgan Stanley, Citigroup, J.P. Morgan, MUFG and Wells Fargo Securities are the lead underwriters of the offering.

About 22.5% of the ownership stake is being sold in the IPO and the figure would reach 25.8% if the underwriters purchase the extra 1.87 million units. The rest of the pipeline and storage business will be managed by Hess Infrastructure Partners, which is a joint venture between Hess and Global Infrastructure investment funds.

Zacks Rank and Key Picks

New York-based Hess, which was initially an integrated company, sold its gas stations and exited the refining business to operate purely as an Exploration & Production entity. Since 2013 Hess has predominantly been an E&P entity and has changed its growth approach from high-impact exploration to low-risk unconventional oil and gas resources. The company currently has a smaller, more focused exploration portfolio.

The company underperformed the Zacks categorized US Oil and Gas Exploration & Production industry over the prior three months. During the period, shares of Hess declined by 20% while the broader industry fell 13%.  

However, the company has an impressive earnings surprise history as it has reported positive earnings surprise in each of the trailing four quarters, the average being 8.8%.

The company currently carries a Zacks Ranks #3 (Hold).

Better-ranked players in the broader industry include Antero Resources Corp. (AR - Free Report) , Pioneer Natural Resources Company and Crescent Point Energy Corp. . All the three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources reported positive earnings surprise in each of the preceding four quarters, the average being 239.10%.

Pioneer Natural Resources is expected to deliver year-over-year growth of 1118.6% in its earnings in 2017.

Crescent Point Energy reported positive earnings surprise in each of the preceding four quarters, the average being 127.16%.

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