Hess Corp. said Monday it will sell its stake in a Russian subsidiary to OAO Lukoil for $1.8 billion, the latest asset sale by the oil and gas producer as it shores up its balance sheet.
Hess has been shedding assets to raise funds as it struggles with lackluster profits and a shareholder revolt. The New York oil and gas producer has already sold its holdings in the U.K. North Sea, South Texas and Azerbaijan. The sale of its Samara-Nafta business in Russia would bring total proceeds to $3.4 billion, the company said.
"We are making excellent progress in executing our asset sales program," said Hess Chief Executive John B. Hess, adding such moves are "a central component" in plans to turn the company into "a more focused, higher growth, lower-risk, pure-play exploration and production company."
Hess owns 90% of the Samara-Nafta business that it will sell to Lukoil. Hess' partners in Samara-Nafta, chairman of Russia's Yukos Oil Co. Simon Kukes, will also sell his 10% stake to Lukoil, Hess said. Total after-tax proceeds for the entire company will be $2 billion, Hess said.
Hess will use the proceeds to reduce debt and strengthen its balance sheet, the company said.
Samara-Nafta is currently producing 50,000 barrels of oil equivalent per day in the Volga-Urals region of Russia.
Hess has been battling criticism from dissident investor Elliott Management Corp., which has aimed to elect five board members and directly pay them bonuses based on how Hess shares perform. Mr. Elliott, a hedge-fund manager that controls 4.4% of Hess's shares, wants to split Hess into two companies in a bid to boost the stock.
Mr. Elliott has pressed the company to create shareholder value by spinning off its assets in the oil-rich Bakken shale region and other U.S. unconventional formations from less prolific international assets and its vast network of gasoline stations.
Hess has said while it turns itself into a exploration and production company, it is exploring options for its refining and retail gasoline business and pruning its Asian portfolio.
Lukoil for its part is attempting to increase production after years of dwindling output at its main fields.
The deal will be closed once state antitrust authorities approve it, Lukoil said.
"We have acquired a quality asset with long-term potential growth in a new region for us," Lukoil Chief Executive Vagit Alekperov said in a statement.
Hess shares rose 2% to $73.05 in recent trading. The stock has risen 38% in the past three months.
Saabira Chaudhuri and James Marson contributed to this article.
Copyright (c) 2012 Dow Jones & Company, Inc.
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