Hess, Elliott Management Reach Agreement to End Proxy Contest

HOUSTON - Hess Corp. (HES) settled a months-long proxy fight hours before a shareholder vote Thursday morning, agreeing to name three directors backed by dissident hedge fund Elliott Management Corp.

Elliott, which owns about 4.5% of Hess's shares, is withdrawing its slate of five nominees and will support the Hess-backed directors at the company's annual meeting here.

The settlement represents a remarkable shakeup of the international oil company's 14-member board, which will now have eight new directors. It is the latest board overhaul stemming from shareholder pressure amid a rise in activism throughout the energy patch.

John Hess, the company's chief executive, said in a statement that the settlement is in the best interests of company's shareholders. He added that the new board "will provide effective oversight to ensure that we continue to create meaningful long-term value for all Hess shareholders."

John Pike, a senior portfolio manager at Elliott, said the hedge fund is "pleased to welcome a highly qualified and refreshed board at Hess."

The settlement was hashed out overnight before being finalized Thursday morning, according to a person with knowledge of the negotiations. It followed months of sparring between Hess and Elliott over strategy and governance. Elliott said Hess's management had destroyed shareholder value by engaging in costly and ineffective tactics. Hess argued that it was successfully transitioning into becoming a more focused and profitable company, and Elliott's plans for an overhaul would derail its progress.

The directors backed by Elliott that will join the board include Harvey Golub, former chairman and chief executive of American Express Co.; Rodney Chase, former deputy chief executive of BP Plc; and David McManus, a longtime energy executive who recently served at Pioneer Resources Co.

The new directors Hess recruited include John Krenicki Jr., former CEO of GE Energy; Frederic Reynolds, former chief financial officer of CBS Corporation; William Schrader, former Chief Operating Officer at TNK-BP; Kevin Meyers, a former BP PLC and ConocoPhillips executive; and Mark Williams, a former Royal Dutch Shell PLC executive. With the exception of Mr. Reynolds, all of these directors have energy backgrounds, a bid by Hess to address criticism that its board lacked oil and gas experience.

Hess said last week that Mr. Hess, the CEO, would give up its chairman role, and Mr. Krenicki would become the company's new independent chairman if all of its five nominees were elected to the board. But on Thursday the company said that Mr. Williams, the former Shell executive, would be the new chairman. In a statement released by Hess, Mr. Krenicki said that Mr. Williams "is the perfect choice for non-executive Chairman. I fully support the choice and look forward to working closely with him and the rest of the board."

All directors, including Mr. Hess, will stand for election next year after shareholders approved a resolution eliminating the three-year, staggered terms for board members.

Mr. Hess, the company's long-time CEO and its founder's son, tightly ran Hess without much challenge until this year, when Elliott launched its "reassess Hess" campaign seeking to redress stock underperformance. The company has made many changes, including the sale of its Russia assets and a move to sell its refining and marketing assets, and more recently, the splitting of its CEO and chairman roles. Analysts with investment bank Tudor, Pickering, Holt & Co. say that Hess shares have outperformed peers by 20% since the campaign started, but that it's "tough to say whether these changes would have occurred without Elliott catalyst."

It isn't clear whether the board's new composition will lead to further strategic changes. Elliott in January proposed splitting Hess into two companies, spinning off its oil and gas properties in shale-rock formations in the U.S. from its international operators. Hess rejected the idea, and Elliott's nominees had said they wouldn't necessarily adopt the hedge fund's recommendation.

After Thursday's shareholder meeting at the Hess Tower in Houston, Elliott representatives said the new board should consider the spin-off it had proposed or even a sale of the company, if such actions would benefit shareholders.

"We think the board should look at all options," said Quentin Koffey, associate portfolio manager for Elliott, adding that he thinks the company's shares are undervalued.

Shares were down 2.15% at $69.08.

Angel Gonzalez contributed to this article.

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BP To Contest $34B Gulf Suits From State, Local Governments

LONDON - BP PLC plans to "vigorously contest" legal claims for tens of billions of dollars in damages stemming from the 2010 Gulf of Mexico disaster, describing the lawsuits as "seriously flawed."

Demands from U.S. state and local governments for $34 billion risk ballooning BP's overall bill for the Deepwater Horizon rig explosion and oil spill to more than $90 billion, more than double the amount the U.K oil giant has already provisioned for and underscores how after almost three years the Deepwater Horizon disaster still weighs on BP.

BP Chief Executive Bob Dudley said the firm intends to contest the state economic claims "vigorously in court."

Alabama, Mississippi, Florida and Louisiana are seeking the money in compensation for economic losses and property damage caused by the incident, the company disclosed in an earnings filing Tuesday. BP is already facing spill costs of around $58 billion, which includes penalties, damages and cleanup costs the U.K.-based energy giant has already paid out, committed to spend or could yet be fined when the matter goes before a New Orleans judge in a civil trial due to start Feb. 25.

However, BP said such a scenario was unlikely and sought to play down the validity of the claims, saying it considered the methodologies used to calculate the state government claims to be "seriously flawed, not supported by the legislation" and substantially overstated.

Chief Financial Officer Brian Gilvary said the bulk of the state claims are based around losses in potential tax revenues and as such will be hard to prove as BP has put a lot of stimulus money into the Gulf states to deal with the spill.

"That will be an interesting thing to try to prove given that we have provided one of the biggest fiscal stimuli that the Gulf has ever seen; we hired up over 40,000 people to deal with it and paid taxes as a consequence," Mr Gilvary said.

BP has already provided for what it believes is a "fair and reasonable" assessment of the state economic losses in its $42.2 billion provision, Mr. Gilvary said. But he declined to say how much had been allocated.

In January, Alabama, Mississippi and Florida presented their claims to BP for alleged losses including economic losses and property damages as a result of the Gulf of Mexico oil spill, BP said in its fourth-quarter statement.

Louisiana had also asserted similar claims as had various local governments. These claims total over $34 billion and more claims are expected to be presented, the company said.

BP has already spent or committed to spend $37 billion in cleanup costs, criminal fines and settlements with individuals and businesses harmed by the spill. Around $24 billion of that has already been paid out with the remaining sum of about $13 billion to be paid out over a number of years.

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BP To Contest $34B Gulf Suits From State, Local Governments

LONDON - BP PLC plans to "vigorously contest" legal claims for tens of billions of dollars in damages stemming from the 2010 Gulf of Mexico disaster, describing the lawsuits as "seriously flawed."

Demands from U.S. state and local governments for $34 billion risk ballooning BP's overall bill for the Deepwater Horizon rig explosion and oil spill to more than $90 billion, more than double the amount the U.K oil giant has already provisioned for and underscores how after almost three years the Deepwater Horizon disaster still weighs on BP.

BP Chief Executive Bob Dudley said the firm intends to contest the state economic claims "vigorously in court."

Alabama, Mississippi, Florida and Louisiana are seeking the money in compensation for economic losses and property damage caused by the incident, the company disclosed in an earnings filing Tuesday. BP is already facing spill costs of around $58 billion, which includes penalties, damages and cleanup costs the U.K.-based energy giant has already paid out, committed to spend or could yet be fined when the matter goes before a New Orleans judge in a civil trial due to start Feb. 25.

However, BP said such a scenario was unlikely and sought to play down the validity of the claims, saying it considered the methodologies used to calculate the state government claims to be "seriously flawed, not supported by the legislation" and substantially overstated.

Chief Financial Officer Brian Gilvary said the bulk of the state claims are based around losses in potential tax revenues and as such will be hard to prove as BP has put a lot of stimulus money into the Gulf states to deal with the spill.

"That will be an interesting thing to try to prove given that we have provided one of the biggest fiscal stimuli that the Gulf has ever seen; we hired up over 40,000 people to deal with it and paid taxes as a consequence," Mr Gilvary said.

BP has already provided for what it believes is a "fair and reasonable" assessment of the state economic losses in its $42.2 billion provision, Mr. Gilvary said. But he declined to say how much had been allocated.

In January, Alabama, Mississippi and Florida presented their claims to BP for alleged losses including economic losses and property damages as a result of the Gulf of Mexico oil spill, BP said in its fourth-quarter statement.

Louisiana had also asserted similar claims as had various local governments. These claims total over $34 billion and more claims are expected to be presented, the company said.

BP has already spent or committed to spend $37 billion in cleanup costs, criminal fines and settlements with individuals and businesses harmed by the spill. Around $24 billion of that has already been paid out with the remaining sum of about $13 billion to be paid out over a number of years.

Copyright (c) 2012 Dow Jones & Company, Inc.

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