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Hess Boosts Buyback Plan on Favorable Business Scenario


Hess Corporation HES announced a new share repurchase plan after receiving authorization from its board of directors. Through 2018, the explorer will likely buy back shares worth $1 billion.

Late 2017, the company declared a $500-million stock buyback plan. The recent announcement reflects the firm’s strong commitment toward returning cash back to stock holders on a regular basis.

The business scenario has improved owing to the partial recovery in crude. From the historical low-mark of $26.21 per barrel touched in February 2016, the West Texas Intermediate (WTI) crude crossed the $60 psychological level. A rally in oil price is highly favorable for key upstream energy players like Hess.

The company foresees higher oil and gas production which when combined with healthy oil prices will likely boost cashflow. Hess added that with the new buyback program, it will not compromise with its potential to invest in key developments like Guyana and Bakken. Earlier, the company had announced that majority of its 2018 capital budget will likely get allotted toward low-cost resources in Bakken and projects located off the coast of Guyana.

Overall, with the robust business outlook, the management might think the company’s shares are undervalued and hence is the right time to boost share buyback.

Headquartered in New York, Hess is a leading explorer with a solid balance sheet. Through 2017, the company’s cash balance surged 77.4%, while long term debt contracted 4.4%.

However, the company’s pricing chart is unimpressive. Over the past year, the stock has lost 3.5%, against the industry’s 4.3% gain.

Hess carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector are ConocoPhillips COP, Pioneer Natural Resources Company PXD and Concho Resources Inc. CXO.

Headquartered in Houston, TX, ConocoPhillips is a major upstream energy player. The company is expected to witness year-over-year earnings growth of 380% in 2018.

Headquartered at Irving, TX, Pioneer Natural Resources is an upstream energy firm. The company has an average positive earnings surprise of 66.9% for the last four quarters.

Headquartered in Midland, TX, Concho is also an upstream energy company. The firm will likely see year-over-year earnings growth of 73.2% in 2018.

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