It was laziness that Leon Hess said pushed him into the oil game. In 1933, tired of lugging sacks of coal around New Jersey, he bought a used truck and began a heating oil delivery business.
Nine decades later, his son John sold the company to Chevron for $53bn this week, in one of the biggest deals ever in the global oil and gas industry.
The transaction closes the book on a nine-decade epic featuring football franchises, boardroom battles and children’s toys as Hess grew into an oil and gas giant stretching from the North Sea to New Guinea.
In recent years the company helped transform the sleepy US state of North Dakota into a powerhouse oil producer and struck liquid gold with an exploration punt off the coast of Guyana that became the biggest find in a decade.
“It’s sweet, I have to tell you,” John Hess told the Financial Times of the deal, which he called “the right long-term decision for our shareholders”. The deal values his own family’s stake at about $5bn.
“Our company is 90 years old — an anniversary we’re celebrating this year — and it all started with my father driving a second-hand truck delivering fuel oil during the Depression,” he reflected.
The sale — two weeks after ExxonMobil snapped up Pioneer Natural Resources, another big shale player — comes as large oil and gas companies intensify a scramble to snap up the industry’s best remaining assets and secure supply for the decades ahead. Hess, analysts said, had long been a prime target.
The company grew rapidly in its early decades, building what became the world’s biggest refinery on La Croix in the US Virgin Islands in 1967 before merging two years later with Amerada Petroleum, one of the world’s largest upstream players and establishing Amerada Hess Corporation. As it snapped up assets across the globe, it also became one of the most sizeable players in the North Sea.
Leon, a publicity-averse but amiable character, became best known in the US for his ownership of the New York Titans — later the New York Jets — which he moved to neighbouring New Jersey after a spat with then New York City mayor Ed Koch. The eponymous model trucks that the company began producing in the 1960s became a staple stocking filler for children across America.
John took the helm in 1995, making the company more US-centric even as he continued to expand its international footprint.
“When Leon was in charge the UK had a great deal of autonomy,” said Stephen Boldy, a former exploration manager at Hess and now chief executive of Lansdowne Oil & Gas in Ireland.
“There was then a transition to a period with John when control was moved more back to the US — and that was probably a fairly natural thing to happen.”
By 2013 John Hess found himself the subject of a battle over corporate governance with activist investor Elliott Management.
The hedge fund, run by billionaire Paul Singer, alleged Hess lacked board accountability and discipline, and had stretched itself over too many businesses and countries. Elliott bought a 4.5 per cent stake and pushed to elect its own directors and break up the company.
John Hess survived after striking a compromise with Elliott, which would see him remain as chief executive but give up the role of chair. Ultimately, nine new directors would join the board, which continued a programme of disposals that had begun during the activist campaign.
“Their strategy was confused and they desperately needed to streamline the company,” said a person who was involved in the campaign, suggesting Hess might not have “made it to the other side” of subsequent downturns had it not slimmed down and cleaned up its balance sheet.
When America’s shale revolution kicked off 15 years ago, John Hess was a leading proponent of using novel techniques such as hydraulic fracturing and lateral drilling — that had already sparked a boom in the country’s gas production — to extract crude from US oilfields such as the Bakken shale of North Dakota. Alongside Continental Resources boss Harold Hamm, Hess transformed the state from producing fewer than 100,000 barrels of oil a day in the early 2000s to a peak of 1.5mn b/d in 2019.
“He’s certainly one of the pioneers of the shale revolution,” said Daniel Yergin, vice-chair of S&P Global, who chronicled the US’s transformation into an oil and gas giant in his book The New Map.
“He had a recognition that you could apply these shale techniques to the Bakken that made North Dakota a state that was producing more oil than some Opec countries,” Yergin said.
But as the Bakken enters its twilight years it was the bold decision to enter Guyana that ultimately made the company a target for Chevron. Hess partnered with Exxon on the Stabroek block off the coast of the South American nation after the Anglo-Dutch supermajor Shell pulled out in 2014.
“Hess’s acquisition of prospective acreage in Guyana was the best oil deal in modern history, and one of the worst decisions by Shell to exit,” said Paul Sankey, an oil and gas equity analyst.
The project is expected to produce as many as 1.5mn barrels of oil a day when it reaches its peak and accounts for as much as 80 per cent of Hess’s price tag, according to analysts.
In recent years John Hess, 69, has been a strong advocate of taking a nuanced approach to the energy transition.
“I think people, while well-intentioned, tend to oversimplify [the] major challenges,” he told the CERA Week conference in 2022. “To have a smooth energy transition we need a strong oil industry; we need a strong gas industry.”
He remains well respected within the industry. Toby Rice, chief executive of EQT, the largest US gas producer, said that by transforming the economy of Guyana and energy security more broadly, John Hess had “done more for ESG from a social perspective than a lot of the activists in this space combined”.
John Hess and his family gain shares in Chevron — whose board he joins — which he said they intend to hold “for a long time”.
Importantly for many who grew up with it, he also told CNBC that “the Hess toy truck will continue”.
“There are going to be some other things,” he added, signalling that he intended for the family’s influence over the oil industry to continue. “I am going to stay engaged in the business. I’m going to be joining the Chevron board and I intend on having my voice heard on the energy transition.”
