The Hess Corporation is a billion dollar energy business and a Fortune 500 company; however, some of Hess’s competitors have greater capital gain, more significant revenue and better expansion. Hess Corporation did very well by ranking 74 out of 500 of the United States companies on the Fortune 500 Magazine list and by ranking 445 in the FT Global 500 list; however, Exxon Mobil Corporation ranked #1 in Fortune 500 Magazine and #2 on the FT Global 500. British Petroleum, also known as BP, is another strong competitor of Hess Corporation and although not ranked on the Fortune 500 list, for obvious reasons, British Petroleum ranked #34 on the FT Global list.
All three of these companies are large publically traded integrated oil companies; however, Exxon Mobil leads the pack in many ways. Aside from the company’s top ratings, Exxon Mobil reported last year proved reserves of 24.9 billion barrels of oil equivalent, including its major holdings in oil sands through Imperial Oil, whereas British Petroleum reported 17.8 billion barrels of oil equivalent and Hess Corporation report only 2.4 billion barrels of oil equivalent.
Exxon Mobil also supplies refined products to more than 25,000 gas stations in 100 countries, British Petroleum operates 21,800 gas stations worldwide, and Hess Corporation markets gasoline through more than 1,360 Hess gas stations in 16 states within the United States. However, one thing that does separate Hess Corporation from these two other competitors is that Hess Corporation also provides power to the Northeast and Mid-Atlantic region of the United States. Regarding Hess Corporation’s business environment, I was able to locate an online career organization that provides some great insight regarding corporation reviews and ratings, which also include employee satisfaction and approval ratings for company CEOs.
The company is called “Glassdoor” and they have nearly three million reviews from anonymous employees, job seekers, and sometimes even from companies themselves. According to Glassdoor, 63% of employees would recommend working for Hess Corporation to a friend, and they give their CEO, John Hess, an 82% approval rating. Hess Corporation is viewed as a professional corporation that offers a “cross cultural” working environment, which exposes corporate ethics and a professional learning experience.
They also value opinions from junior level employees just as much as they value the opinions of senior position employees. In comparison, Exxon Mobil and British Petroleum are viewed in the same light, despite the historic Valdez oil tanker and Gulf of Mexico deep-water rig incidents. Exxon Mobil has a 65% recommendation level and the company’s CEO, Rex W.
Tillerson received an 89% approval rating and British Petroleum has a 71% recommendation level and the company’s CEO, Robert Dudley, received an 84% approval rating. British Petroleum, aside from acquiring higher percentage levels of recommendations, also seems to outdo Hess Corporation and Exxon Mobil in ratings with respect to career opportunities, compensation and benefits, work/life balance, senior leadership, culture, and values. Employees give British Petroleum 3.5 stars, while Exxon Mobil and Hess Corporation trail with 3.4 and 3.3 stars respectively. However, after reviewing all three of the company’s income statements, balance sheets, and cash flows, I learned that British Petroleum was financially healthier than the other two companies.
In the sense that British Petroleum’s income statement revealed that the company’s EBITDA growth in 2011 was over 2,700%, while Exxon Mobile’s was 26.98% and Hess Corporation was only 7.23%. The balance sheet for Hess Corporation disclosed its’ total current assets at 8.34 billion, Exxon Mobil 72.96 billion and British Petroleum at 57.37 billion. Last, Hess Corporation’s cash flow statement states a -97.44% free cash flow growth, while both Exxon Mobil and British Petroleum experienced growths at 17.68% and 103.07% respectively.
There are two sections in the statements I reviewed that concern me and those are the incredible EBITDA growth of British Petroleum and the huge negative decrease in free cash flow for Hess Corporation. How can British Petroleum experience such an unbelievable earnings before interest, taxes, depreciation and amortization? Especially after the April 2010 Gulf of Mexico deep-water rig incident, which killed 11 people, significantly damaged the environment and affected the livelihoods of those living in the nearby communities. After the Gulf of Mexico deep-water rig incident clean up and restoration, which lasted well in 2011, British Petroleum had paid out nearly $20 billion.
So how can they have had such a high EBITDA last year? Regarding Hess Corporation and the decrease in free cash flow, one can only wonder what happened? Why the decrease? It is not like they had an incident that took lives or devastated several states in the United States. Was it mismanagement of funds? Over expanding? Overspending? Although Hess Corporation has produced decent economic profits, the returns have been affected by volatility of the market. The company’s cash flow generation is weak and its’ financial leverage is low. However, an economic profit analysis shows that Hess Corporation’s three year historical return on investment capital was above the company’s estimate and therefore has a good value creation rating, which means that Hess’s stocks are undervalued.
Today Hess’s stocks are trading at about $54.27 a share when some financial analysts believe they could perhaps trade at about $70 a share. Management can use the above information for future expense planning. Financial statements, such as those above, show how money is predicted to move around at a given period. It is usually a good indicator for whether or not there will be enough money to execute planned activities and whether or not the cash coming in is enough to cover the company’s financial expenses. The cash flow statement helps determine the company’s liquidity. Income statements tend to measure the company’s sales and expenses.
They are typically prepared each month and at fiscal year-end. They tend to show the results of operations and are prepared using the Generally Accepted Accounting Principles. These always contain specific revenue and expense categories regardless of the nature of the business. Balance sheets provide a clear picture of the financial stability and overall health of the company. It lists in great detail the tangible and the intangible goods that the company owns or owes, which are simple accounting principles (Assets = Liabilities + Owner/Shareholder Equities).
Hess Corporations financial statements seem to be in order; however, strengths are need in cash flow management. Last week a SWOT analysis revealed that Hess Corporation has a steady financial performance, which consistently has allowed for expansion. It also showed a steady increase in all areas regarding recorded production of barrels of proved crude oil and natural gas liquid reserves as well as a strong and diversified base of oil and gas reserves, which gives it a significant competitive advantage. However, a declining performance in marketing and refinery operations has proved to be a challenge.
Regarding Hess Corporation’s technology advancements, Hess has a great history of technology ingenuity, which dates back to the 1930s when Leon Hess, founder of the company. Hess installed heaters in oil delivery trucks to help warm them with thin heavy industrial oil so that it could flow easily, which would help speed up deliveries and enable him to reach more customers in an expeditious manner. Innovated technological or ingenuity has played a key role in the company’s growth, from building pipelines to terminal delivery systems and exploration of oil fields to deep-water drilling. Hess Corporation created its Exploration & Production Technology group to further the application of technology and the identification of innovative solutions.
The company also deploys a Global Process Excellence group based in Marketing & Refining to better leverage best practices across the enterprise and around the world. Some of Hess’s technological ingenuities over the years have been focused on driven excellence and figuring out how to better leverage work all around, such as studying ways to get more oil out of formations, using the latest ultrasound technology to test equipment integrity, pioneering designs of super-fast computers using 900 processors and 450 graphics processing units to simultaneously process massive amounts of seismic data.
This allows Hess Corporation geoscientists to review huge amounts of seismic data and analyze it quickly, which results in intelligent exploration decisions. In the past the company relied on suppliers to analyze data. At this time, thanks to Hess’s latest technology ingenuity they can do it, and do it effectively, efficiently and expeditiously. Hess’s engineers and geoscientists are also using newer hardware and 3D software to locate pockets of oil and natural gas, which increase speed and accuracy. Hess Corporation offices in London, New York, Houston and Kuala Lumpur now feature Tele-presence rooms, which are advanced video conferencing facilities.
The clarity of these communications cause meeting participants to forget that those across the table are actually an ocean away. Tele-presence is to video phones as IMAX is to home movies. The addition of these rooms has enhanced and speeded global communication and reduced travel among the company’s employees. This is an essential improvement that makes Hess a more competitive and faster-acting operation. Additionally, Hess Corporation has improved their credit card processing systems at Hess Express retail stores across the East coast of the United States.
They now employ the latest credit and debit card processing technology to ensure that each transaction for gasoline and groceries is faster and more secure. At the pumps, Hess Express customers will also notice that technology ensures accuracy in measuring their fuel and ensuring that their transaction cannot be tampered with and remain secure. They also employ solar-powered equipment and develop hydrogen fuel cells to be used in automobile fleet industries Last, Hess Corporation is streamlining their audit and finance process in New York by using new software that track shipments, trades and spot sales their products around the world with speed and accuracy.
It then allows Hess Corporation to service their customers in a timely way and track their shipments by the minute, no matter where in the world they may be. It is no surprise that Exxon Mobil and British Petroleum are also advancing in the technology arena with very similar goals, which leads one to wonder about these companies best practices, operational process and procedures and products. Are they also similar? Well after conducting a benchmarking analysis, I was able to confirm that they share a lot of similarities. First of all, “Best Practices” is synonymous with “Social Responsibility,” which is a core value at Hess Corporation.
The company is committed to meeting the highest standards of corporate citizenship by protecting the health and safety of employees, safeguarding the environment and creating a long-lasting, positive impact in the communities where they conduct business. Hess endorses the Universal Declaration on Human Rights and is an active participant in three voluntary initiatives designed to protect the environment, promote human rights and encourage financial transparency: the United Nations Global Compact, The Voluntary Principles on Security and Human Rights and the Extractive Industries Transparency Initiative. Hess has been ranked 15th on Corporate Responsibility Officer’s 100 Best Corporate Citizens 2009.
The company was also named as a Leader in Forbes Most Trustworthy Companies 2009 and most recently, Hess Corporation was listed in the Carbon Disclosure Project’s Global 500 Carbon Disclosure Leadership Index. Regarding operational processes and procedures, they tend to be standard across the industry because governments have established entities, which oversee mandated policy and procedures. However, most companies have their own polices, process and guidelines in addition to the government’s, which tend to be more confidential and internal mainly because they are a collection of related, structured activities, which produce a specific service or product for a particular group of consumers. All three of these companies offer the same products of service with the exception of one product.
Hess Corporation, Exxon Mobil and British Petroleum are all players in the oil business and produce billions of barrels of oil on a yearly basis, they all also have business activities with tens of thousands of gasoline stations throughout the world; however, only one of the three is also a retail electric provider, which provides power to the thousands of people in the Northeast and Mid-Atlantic region of the United States. In closing, globalization has affected all three of these company’s business strategies in a positive manner; as a matter of fact, these companies would not exist or be as profitable as they are today if they were not a global organization.
Hess Corporation operates in many countries in the world and is committed to attracting highly energized diverse talent. The company has exploration and production operations in the United States, United Kingdom, Norway, Denmark, Russia, Equatorial Guinea, Algeria, Libya, Gaboon, Egypt, Ghana, Malaysia, Thailand, Indonesia, Azerbaijan, Australia, Brazil, Peru, and St. Lucia.
ReferencesBritish Petroleum BP. (2012). www.bp.com. Retrieved from http://www.bp.com/sectiongenericarticle800.do?categoryId=9036575&contentId=7067541 Forbes. (2012). finapps.forbes.com. Retrieved from http://http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=HES Glassdoor. (2012). www.glassdoor.com. Retrieved from http://http://www.glassdoor.com Hoovers a D&B Company. (2012). http://www.hoovers.com. Retrieved from http://http://www.hoovers.com/lc/industry-information.html#.UIQCfm9kzkp Seeking Alpha. (2012). www.seekingalpha.com. Retrieved from http://seekingalpha.com/article/694521-hess-shares-look-cheap Wikipedia. (2012). www.wikipedia.org. Retrieved from http://en.wikipedia.org/wiki/Hess_Corporation