Amerada Hess

Agenda• Vision• Atomization• Profit Model• Business Design

– Value Driver

• Repositioning and Growth• Future technologies• Challenges• Questions

Hess’ Vision

• To be the leading independent in each of our businesses.

• To maximize shareholder value through superior financial performance.

• To be in the top one-third of oil companies based on returns on capital employed.

Traditional View

• Competitors: second tiers Top 20 -Marathon, Occidental, Alberta Energy, Unocal,

Talisman-Retail: Shell, Exxon Mobil, ConocoPhillips

• Clients– 12,000 industrial, commercial and institutional clients– Spot market– Retail: residential consumers in East Coast

Atomization

Consolidation

Retail marketing

Refining

1200 gas stations

E&P 43% North Sea20% US, Africa 13%

E&P

HovensaPort Reading

Hess Microgen

Total Energy Solution

Disintegration Atomization

Shell, Exxon Mobil,Conoco (gas stations )

Oxy, Anadarko, Unocal

Net income in E&P 85% of total

Northeast Utilities

Competitors

Koch, Shell, BP

Net income in Retail: 15% of total

Time

US$

Market price

Cost of production

Price/Unit

Profit models

• Gas Stations/Hess Express

• Different profit model for each business unit

• E & P• Refining

MarketPrice

BrandPrice

Time

Profit

0

Profit after the investment period

Profit models• Different profit model for each business unit

• Hess Microgen• Total Energy Solutions

Profit Model - Company

• As a company, Hess relies on the profit Multiplier Model

Total Energy Solutions

Exploration & Production

Refining

Hess Express

Hess Microgen

Capital efficiency

Customer selection and

differentiation

Value capture/Profit model

Scope of activities

Strategiccontrol

Organisationalsystems

•Which customers do I want to have?

•How do I meet their needs and priorities?

•How do I earn a profit from my customers?

•Which activities do I perform myself vs. partner to accomplish?

•How do I protect my profit stream from competitors and customers?

• Flat organization guiding the business units

Shareholder Value – Driven Force

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Expected operating profit growth

Sustainability: risk minimisation & predictability

Shareholders or Customers?

Strategic Control

Value Capture/Profit Model

Scope

Customer Selection & Value Proposition

OrganisationalSystems

FLAT ORGANIZATION Strong presence of the CEO in all areas of

the businessAlign management and shareholder

•Maintain solid foundation – assets•Focus on one region – East Coast•Additional Services to customers

• Gourmet coffee, branded fast foods

• Truck toys•Total Energy Solutions•Cogeneration

Decentralized Business Units with a corporate guidance

Broad Integrated Use of partners for Exploration, Production, and Refining

Business Design

-Yetagun joint venture-Wilco Hess joint venture-Hovensa

Profit Multiplier Model

Shareholder

CustomerCustomerValueValue

ShareholderShareholderValueValue

EmployeeEmployeeValueValue

Vision: To maximize shareholder value through superior financial performance.

Downstream focus on customers

Creating solutions to customers

Visit to Hess gas station should be as pleasant as possible

Customers rely on energy service/product

•Offices with restaurant/chief

•Gingerbread house day

•Family day

Repositioning for Growth

Customer Solutions

Infrastructure

ServiceInnovation

Hess 2000’s

Use of infrastructure as support

Differentiation of a commodity

Hess 1990

Moving from the middle to create value

• One of the 17 companies that supports ITF - Industry Technology Facilitator

• Owns 53% of Nuvera Fuel Cells, a company which business is to develop and commercialize fuel cell technology.

• Cogeneration

Future Technologies

Challenges

• The company is achieving its goal to diversify geographically

• Volume of reserves are low comparatively with Majors Players – Reserve replacement rate is 7.7 vs. 11 years Majors

• Return over Investment below industrial average– 1.79 VS 5.77

• Decrease the level of debt – D/E 1.09 vs. industry average 0.25

• Continue developing new sources of energy – renewals

Questions

Refining

Exploration and Production

Retail Marketing

Energy Marketing