O C T O B E R 2 0 1 2

The PillarsHESS 2020 UPDATE

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O P E R AT I O N A L E X C E L L E N C E

C A P I TA L D I S C I P L I N E

R I S K M A N A G E M E N T

“Innovation” is a word heard often in business today, but it is rarely understood clearlythroughout an organization, with all stakeholders aligned to drive competitive advantage and profitable growth. The Innovation Pillar Team has taken on the challenge of articulating a clear definition of what we mean by “innovation” at Hess, why it is important, understand how we do it now and determine how we can use it as a key ingredient in achieving our Hess 2020 goal of “Best Performing Energy Investment.”

Our starting point is a common definition of innovation at Hess:

“Discovering and applying new ideas that create value.”

We are not an R&D organization focused on major science discovery or inventingworld-changing new products. We are a group of talented people who understand adynamic energy arena, see competitive trends and opportunities, and who can “connect the dots” differently to drive our business forward. We will win by being quick studies, good learners, and smart “fast followers.”

The HLT and the Innovation Pillar Team have agreed on a simple but engaging vision for how innovation will help our business flourish:

“Hess is a place where everybody creates the future.”

Good ideas come from every part of the business regardless of job title, business unit or location. The team identified four key steps necessary to make that vision come alive:

Innovation

I N N O V AT I O N

T R U S T E D PA R T N E R S H I P S

G R O W O U R O W N T I M B E R

Borden Walker Pillar Team Champion

E&PScott HeckSVP, E&P Technology

Randy JohnsonVP, Engineering Technology

Jim ShermanVP Geoscience Technology

Geoff ToniniManager, Supply Chain

Shaun OwPlanning Advisor

M&RChris BaldwinSVP, Marketing & Refining

John GartmanSVP, Energy Marketing

Steve Dixon VP, Natural Gas Operations

Dave Klavsons VP, Chief Merchandising Officer, Retail Marketing Category Management

Bill KenworthyDirector, Regional Operations

Justin MayerDirector, Brand Marketing & Innovation

Debi RednikBusiness Process Excellence Lead

Janet Faragasso EVP Admin Assistant

OUR TEAM

JUMP TO

> A Culture of Innovation

> Establishing a Process for Innovation

> Recognizing Innovation

> Celebrating Innovation

> Final Thoughts

EVP & President, Marketing and Refining, Pillar Champion

CORPORATENick Brountas VP, General Counsel - Marketing & Refining and Corporate

Martin Dunagin VP, Corporate Tax

Jamie Lane VP, HR - Talent & Organizational Development

Jeff SteinhornVP & Chief Information Officer

Bill Rothe Chief Information Officer, Enterprise Systems

Eric WalkerDirector, HR - Global Exploration & New Ventures and E&P Services

Steve CrosbyDirector, Digital Media

Liza AbadCorporate Strategy Advisor

MESSAGE FROM BORDEN WALKER

Recognize and celebrate innovation at Hess today

Align the entire organization around a common vision of innovation

Create a collaborative culture that fosters new ideas

Establish processes for innovative ideas to be solicited, evaluated, and adopted

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Borden Walker Pillar Team Champion

E&PScott HeckSVP, E&P Technology

Randy JohnsonVP, Engineering Technology

Jim ShermanVP Geoscience Technology

Geoff ToniniManager, Supply Chain

Shaun OwPlanning Advisor

M&RChris BaldwinSVP, Marketing & Refining

John GartmanSVP, Energy Marketing

Steve Dixon VP, Natural Gas Operations

Dave Klavsons VP, Chief Merchandising Officer, Retail Marketing Category Management

Bill KenworthyDirector, Regional Operations

Justin MayerDirector, Brand Marketing & Innovation

Debi RednikBusiness Process Excellence Lead

Janet Faragasso EVP Admin Assistant

A Culture of InnovationEmployee attitudes toward innovation – its role in our Hess 2020 vision, where it exists at Hess, how our leadership approaches it and how our employees contribute to it – are critical to how we develop a culture of innovation. We asked more than 3,500 Hess employees in a survey conducted earlier this year by Penn Schoen Berland (PSB), a national polling firm, to describe innovation at Hess. Hess responses were compared to those from employees at more than 200 companies known for successful innovation. Hess employee focus groups and interviews rounded out the research.

The Results: Employees overwhelmingly believe that innovation is key to the company’s future success, but many feel Hess is not yet as innovative as it needs to be. Employees from all areas of the company identified several factors as necessary for growing and sustaining innovation across Hess:

• A collaborative culture where information is shared and ideas listened to• Sufficient time to innovate• A sustained, long-term approach• A culture that rewards intelligent risk

Based on what we heard from employees, the Innovation Pillar Team has developed an action plan to foster a culture of innovation at Hess based on four key themes:

CORPORATENick Brountas VP, General Counsel - Marketing & Refining and Corporate

Martin Dunagin VP, Corporate Tax

Jamie Lane VP, HR - Talent & Organizational Development

Jeff SteinhornVP & Chief Information Officer

Bill Rothe Chief Information Officer, Enterprise Systems

Eric WalkerDirector, HR - Global Exploration & New Ventures and E&P Services

Steve CrosbyDirector, Digital Media

Liza AbadCorporate Strategy Advisor

AGREE DISAGREE AGREE DISAGREE UNSURE

INNOVATION IS CRITICAL FOR HESS’ FUTURE SUCCESS AS

“THE BEST PERFORMING ENERGY

INVESTMENT”

HESS ISAN INNOVATIVE

COMPANY TODAY

• Fewer than 50% of respondents feel their leaders support innovative efforts

• But of the 30% of respondents who think we are innovative today, 72% cite positive encouragement from leaders

Trust/Empowerment Silos/Collaboration

Time/Resources Rewards & Recognition

• Direct feedback to Hess leaders on the culture they create

• All employees encouraged to pursue and participate in the innovation process

• Leaders articulate business challenges and engage the organization

• Embrace networking – both internal and external

• Actively encourage knowledge sharing

• Provide collaboration tools/processes for ideas to be solicited, evaluated, developed

• Provide resources: e.g., people, funding

• Leverage continuous improvement to increase capacity

• Continuous Communication

• Recognize the initiative to innovate

• Active learning from failures

• Develop major recognition award

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Expand “Brightidea” innovation management tool to solicit ideas from customers and employees.

Develop / define a structured innovation process to develop significant new business models.

RETAIL MARKETING

ENERGY MARKETING

E&P TECHNOLOGIESDevelop a competitive advantage in recovery and productivity in unconventional resources. Focus on partnering with leading outside thinkers / technologists, e.g., universities, oil service companies, technology firms.

BREAKTHROUGH SUBSTANTIAL INCREMENTAL

New products, services, technologies, or strategies that yield a significant increase in revenue and profits

Mid-level significance to customers, operations, company growth and profitability

Small degree of financial impact. Creates customer satisfaction, improves process efficiency, and otherwise has a positive impact

IMAGINE SCREEN DEVELOP LAUNCHBUSINESS CHALLENGES

ARTICULATEDSTRUCTURED EVALUATION

PROCESS

BUSINESS SPECIFICCRITERIA/APPROVALS

IDEAS SOLICITED/COLLECTED

IDEA BANK

BusinessStrategicChallenge

NewBusinessChallenge

SolveCustomer

NeedTHE BEST IDEAS

Research/Refine Socialize

Integrate

Learn

Monitor

Pilot

Review Results

GONO

Establishing a Process for InnovationA hallmark of innovative organizations is a clearly defined system for soliciting, evaluating, developing, and implementing new ideas. Several processes exist already across Hess, notably the Retail Idea Bank and the E&P Technology review process.

Leveraging the software tool that supports the Retail Idea Bank, the Innovation Pillar Team conducted pilots in global IT and the EPT group to determine if such a tool could be used across Hess as a single solution for idea management. We learned that what may be a powerful tool for some organizations may not be as effective for others. Therefore, we are looking for processes that best fit the broad spectrum of businesses we have. Three pilots are underway this year:

These pilots are based on a four-step innovation process model developed by the Innovation Pillar Team. The team recognizes that organizations across Hess may operate more effectively with adaptations of this concept, but one basic principle of the model is that everyone has an opportunity to share ideas.

Recognizing InnovationOur model of innovation is based on three levels:

4

Breakthrough

Substantial

Incremental

• Dunkin’ Donuts Self-Serve• Gas Buddy App

• LEAN approach to Bakken / unconventionals

• Multi-stage frac• GPU Seismic• iPad Electric Pricing

• Niche Power Plants

• eProcurement• Telepresence

• Fresh Food

PRODUCT PROCESSSTRATEGY/

BUSINESS MODELS

Innovation does take place in pockets across Hess today and has for years. The Innovation Matrix below lists a few recent Hess innovations and groups them by these levels. The common denominator is that they all started with an idea. As we build a sustainable innovation capability and embed that into the core of our organization, we will be able to track and report on our progress as an innovative company through established metrics.

Our goal is to continue to fill the pipeline with ideas and the matrix with successes. We challenge every employee to ask, “How can I contribute to these goals?” Celebrating InnovationAs we work to grow and sustain a culture of innovation in every part of the organization, it is important to recognize, celebrate, and leverage successes. We plan to showcase innovation in Hess Connect stories and on digital signage in Hess locations globally, as well as engage everyone through new, innovative channels the team is developing.

Final ThoughtsOur organization is made up of smart, diverse individuals. If we can leverage our various levels of expertise, knowledge and experience, collectively we have the basis to bring innovative ideas to the forefront and develop these ideas to drive competitive advantage and profitable growth. The goal of the Innovation Pillar Team is to lay the groundwork for an innovative culture to flourish. We look to every employee to get involved in cultivating it.

Borden

• North Dakota Rail