Chesapeake hired Robert Douglas Lawler, senior vice
president of international and deepwater operations at Anadarko,
to fill the post vacated by co-founder Aubrey McClendon in
April.

Shares of Chesapeake were up 4 percent as Lawler’s
appointment ends a three-month search for McClendon’s
replacement.

Lawler, who takes over as CEO on June 17, faces a number of
challenges in his new job. Several years of low natural gas
prices and Chesapeake’s heavy spending to acquire oil and gas
properties in shale formations have left the company saddled
with about $13 billion in debt.

Chesapeake has forecast a funding shortfall of $3.5 billion
this year and said it will sell up to $7 billion in assets to
help cover the expected gap between operating cash flow and
capital expenditures.

“He is coming into a company that has serious challenges,”
said Fadel Gheit, an oil company analyst Oppenheimer. It’s a
mine field that he has to navigate through, but he’s very
experienced and I feel he will live up to the challenge.”

Lawler, 46, worked for 25 years at Anadarko and Kerr-McGee,
which Anadarko acquired in 2006. The petroleum engineer has
experience in both onshore and offshore operations and was
mostly recently responsible for big projects including
Anadarko’s liquefied natural gas (LNG) project in Mozambique.

Lawler should help “to turn the page on the Aubrey McClendon
saga that has consumed the story for the past year,” Wells Fargo
analyst David Tameron said in a research note and others noted
that he would bring needed capital discipline to Chesapeake.

Under the watchful eye of top shareholders O. Mason Hawkins
of Southeastern Asset Management and Carl Icahn, Chesapeake has
cut spending this year and is focusing on drilling its best
properties while producing higher quantities of more valuable
crude oil.

Hawkins and Icahn took control of the board last June after
McClendon was stripped of his title as chairman of the company
he co-founded in 1989.

McClendon’s departure came after a tumultuous year during
which a series of Reuters investigations led to civil and
criminal investigations of the company.

Chesapeake also faces probes by the U.S. Securities and
Exchange Commission into a perk that gave McClendon a stake in
company wells, and by the U.S. Department of Justice into
possible antitrust violations over Michigan land deals.

A internal probe by Chesapeake into the land deals and the
well program found no intentional wrongdoing on the part of
McClendon, the company said in February.

Steven Dixon, Chesapeake’s chief operating officer has been
acting as interim CEO. At the time of his appointment in late
March, the company created a three-person office of the
chairman, that included Dixon, Chairmen Archie Dunham and Chief
Financial Officer Domenic Dell’Osso. With the appointment of
Lawler, the office of the chairman will be discontinued, the
Oklahoma City, Oklahoma company, said.

Dunham will continue as the company’s non-executive
chairman, Dixon will continue as COO and Dell’Osso remains CFO.

Anadarko spokesman John Christiansen said the company would
name a replacement for Lawler soon.

Chesapeake shares rose 82 cents to $21.09 in afternoon
trading on the New York Stock Exchange. The stock has gained 22
percent so far this year.

(Reporting By Thyagaraju Adinarayan and Maria Ajit Thomas in
Bangalore and Ernest Scheyder in New York; Editing by Sriraj
Kalluvila, Jeffrey Benkoe and Tim Dobbyn)

(Reuters) – Hedge fund TPG-Axon Capital has won nearly half the seats on SandRidge Energy Corp’s board but faces an uphill battle to reverse the oil and gas company’s slumping stock price.

SandRidge shares have tumbled 20 percent this year to around $5 on disappointing forecasts for its wells in Oklahoma and Kansas, as well as investor uncertainty over its strategic direction.

While natural gas prices have risen from last year’s 10-year lows, they remain depressed, adding pressure to SandRidge and peers like Chesapeake Energy Corp and Hess Corp to cut costs and improve well efficiency.

SandRidge faces additional uncertainties over the future of Chief Executive Officer Tom Ward, who TPG-Axon has accused of making strategic mistakes and self-dealing at the expense of shareholders. Under a deal reached in March, the board has to let go of Ward by June 30 or give TPG-Axon a controlling number of seats.

Some shareholders fear Ward’s departure will lead to an exodus of other managers who have the expertise SandRidge needs to improve.

“We are concerned that the reconstituted board may be drawn to focus on short-term change to the detriment of long-term shareholder gain,” said Paul Rivett, vice president of operations at Canada’s Fairfax Financial, SandRidge’s largest shareholder.

Fairfax, which is run by investment guru Prem Watsa and owns 12.7 percent stake in SandRidge, had supported Ward in his battle against TPG-Axon, which has a 7.3 percent stake.

TPG-Axon and Mount Kellett Capital Management, which owns 5 percent of the company, originally called for SandRidge to consider selling itself, but that is now seen unlikely in the near term because of the falling share price.

SandRidge’s 10-member board, which now includes four TPG-Axon-backed directors, is in the process of reviewing strategy, but no major decisions have been announced. The company is due to report earnings on May 7, when more details may emerge.

Ward has not responded to repeated requests for comment about his or his family’s land deals. SandRidge declined to comment and has previously said that its board found no wrongdoing by Ward in the land deals.

Analysts said that with a sale off the table, SandRidge’s future rests on its 2 million acres in the Mississippian, an oil and gas formation in Oklahoma and Kansas. SandRidge is the largest operator there and plans to spend most of its $1.5 billion drilling budget in the area this year.

The value of SandRidge’s acreage suffered a blow in February when Chesapeake sold some of its stake in the Mississippian to China’s Sinopec Group for roughly $2,400 an acre, significantly below what many analysts had projected for the region.

SandRidge itself has twice cut its forecast for the amount of oil it expects to recover from its Mississippian wells, causing a sell-off in the company’s shares and sparking debate about its valuation.

“The downward revision of the Mississippian type curve at the end of February was a pretty big deal,” said Mark Hanson, oil and gas analyst for Morningstar in Chicago.

SLIDING VALUE

Still, Dinakar Singh, the former Goldman Sachs trader who runs TPG-Axon, said SandRidge should streamline by focusing drilling on only its best assets in the Mississippian.

“Not every one of those acres is good,” Singh said, noting that he believes there are at least 700,000 acres that look very good. “One has to make sure that you’re being very efficient in spending CapEx only in areas where the data is good.”

Since TPG-Axon won its board seats in March, SandRidge has seen the departure of several key employees. Chief Operating Officer Matthew Grubb left that month. Last week, two high-profile exploration and production executives announced their exits.

“The one thing that I fear the most is that some of the second-tier people, the engineers, might leave,” said Mike Breard, analyst at Hodges Capital Management in Dallas. “I’m sure they’ve got their resumes out there.”

Halting SandRidge’s stock slide will be crucial if TPG-Axon wants to make any return on its investment. The hedge fund has not disclosed how much money it has lost in total, but it has said that one third of its 36.2 million shares have lost around a quarter of their value.

TPG has said SandRidge is worth as much as $14 a share, while Mount Kellett has suggested $20 a share.

Others take a more pessimistic view. Morningstar’s Hanson believes SandRidge’s stock is fully valued at $8 per share, citing underperformance by the company’s wells. The stock had traded above $60 in June 2008.

Although some investors are disappointed by the results so far, the company can change the way it drills and operates wells in a bid to improve productivity. Every shale formation is different, so it often takes time for a company to “crack the code” and perfect its drilling, Breard said.

“The upside potential is a lot greater than the downside risk. It’s worth something no matter who is running it,” he said.

(Reporting By Anna Driver in Houston and Mike Erman in New York; Editing by Patricia Kranz, Tiffany Wu and Leslie Gevirtz)

* Investors worried about management loss

* TPG-Axon’s Singh hopes for streamlined drilling plan

* SandRidge reports Q1 results May 7

By Anna Driver and Michael Erman

May 3(Reuters) – Hedge fund TPG-Axon Capital has won nearly
half the seats on SandRidge Energy Corp’s board but faces
an uphill battle to reverse the oil and gas company’s slumping
stock price.

SandRidge shares have tumbled 20 percent this year to around
$5 on disappointing forecasts for its wells in Oklahoma and
Kansas, as well as investor uncertainty over its strategic
direction.

While natural gas prices have risen from last year’s
10-year lows, they remain depressed, adding pressure to
SandRidge and peers like Chesapeake Energy Corp and Hess
Corp to cut costs and improve well efficiency.

SandRidge faces additional uncertainties over the future of
Chief Executive Officer Tom Ward, who TPG-Axon has accused of
making strategic mistakes and self-dealing at the expense of
shareholders. Under a deal reached in March, the board has to
let go of Ward by June 30 or give TPG-Axon a controlling number
of seats.

Some shareholders fear Ward’s departure will lead to an
exodus of other managers who have the expertise SandRidge needs
to improve.

“We are concerned that the reconstituted board may be drawn
to focus on short-term change to the detriment of long-term
shareholder gain,” said Paul Rivett, vice president of
operations at Canada’s Fairfax Financial, SandRidge’s largest
shareholder.

Fairfax, which is run by investment guru Prem Watsa and owns
12.7 percent stake in SandRidge, had supported Ward in his
battle against TPG-Axon, which has a 7.3 percent stake.

TPG-Axon and Mount Kellett Capital Management, which owns 5
percent of the company, originally called for SandRidge to
consider selling itself, but that is now seen unlikely in the
near term because of the falling share price.

SandRidge’s 10-member board, which now includes four
TPG-Axon-backed directors, is in the process of reviewing
strategy, but no major decisions have been announced. The
company is due to report earnings on May 7, when more details
may emerge.

Ward has not responded to repeated requests for comment
about his or his family’s land deals. SandRidge declined to
comment and has previously said that its board found no
wrongdoing by Ward in the land deals.

Analysts said that with a sale off the table, SandRidge’s
future rests on its 2 million acres in the Mississippian, an oil
and gas formation in Oklahoma and Kansas. SandRidge is the
largest operator there and plans to spend most of its $1.5
billion drilling budget in the area this year.

The value of SandRidge’s acreage suffered a blow in February
when Chesapeake sold some of its stake in the Mississippian to
China’s Sinopec Group for roughly $2,400 an acre,
significantly below what many analysts had projected for the
region.

SandRidge itself has twice cut its forecast for the amount
of oil it expects to recover from its Mississippian wells,
causing a sell-off in the company’s shares and sparking debate
about its valuation.

“The downward revision of the Mississippian type curve at
the end of February was a pretty big deal,” said Mark Hanson,
oil and gas analyst for Morningstar in Chicago.

SLIDING VALUE

Still, Dinakar Singh, the former Goldman Sachs trader who
runs TPG-Axon, said SandRidge should streamline by focusing
drilling on only its best assets in the Mississippian.

“Not every one of those acres is good,” Singh said, noting
that he believes there are at least 700,000 acres that look very
good. “One has to make sure that you’re being very efficient in
spending CapEx only in areas where the data is good.”

Since TPG-Axon won its board seats in March, SandRidge has
seen the departure of several key employees. Chief Operating
Officer Matthew Grubb left that month. Last week, two
high-profile exploration and production executives announced
their exits.

“The one thing that I fear the most is that some of the
second-tier people, the engineers, might leave,” said Mike
Breard, analyst at Hodges Capital Management in Dallas. “I’m
sure they’ve got their resumes out there.”

Halting SandRidge’s stock slide will be crucial if TPG-Axon
wants to make any return on its investment. The hedge fund has
not disclosed how much money it has lost in total, but it has
said that one third of its 36.2 million shares have lost around
a quarter of their value.

TPG has said SandRidge is worth as much as $14 a share,
while Mount Kellett has suggested $20 a share.

Others take a more pessimistic view. Morningstar’s Hanson
believes SandRidge’s stock is fully valued at $8 per share,
citing underperformance by the company’s wells. The stock had
traded above $60 in June 2008.

Although some investors are disappointed by the results so
far, the company can change the way it drills and operates wells
in a bid to improve productivity. Every shale formation is
different, so it often takes time for a company to “crack the
code” and perfect its drilling, Breard said.

“The upside potential is a lot greater than the downside
risk. It’s worth something no matter who is running it,” he
said.

(Reporting By Anna Driver in Houston and Mike Erman in New
York; Editing by Patricia Kranz, Tiffany Wu and Leslie Gevirtz)

(Reuters) – Devon Energy Corp (DVN.N: Quote, Profile, Research, Stock Buzz) on Wednesday reported a large quarterly loss as the U.S. oil and gas company wrote down the value of some assets, but production was better-than expected, a factor that helped push shares higher.

Devon and other energy companies have made big investments in drilling for oil in U.S. shale formations following a collapse in natural gas prices. Devon’s oil output in the quarter rose to a record for its North American operations, a sign that the company’s efforts is taking hold.

“On the positive side, they continue to increase their liquids production because they don’t make money on gas,” said Fadel Gheit, analyst at Oppenheimer & Co. “The only way this stock is going to get unstuck, is if they grow their oil production.

Shares of Devon climbed 2 percent on Wednesday but have risen only 5 percent so far this year, underperforming an 11 percent gain in the Standard & Poor’s 500 index .SPX.

As part of its efforts to unlock value in the shares, Devon said it is evaluating where to put some of its midstream assets in a tax-advantaged master limited partnership (MLP). A final decision will be made by the end of this quarter, John Richels, Devon’s chief executive officer told analysts on a conference call.

The company also said it plans to immediately repatriate about $2 billion dollars of cash held in foreign subsidiaries. Those proceeds will first be used to pay down short-term borrowings, Devon told analysts.

Devon’s loss in the first quarter was $1.3 billion, or $3.34 per share, compared with a year-earlier profit of $393 million, or 97 cents per share.

Excluding one-time items, Devon had a profit of 66 cents per share. Analysts on average had expected earnings of 55 cents, according to Thomson Reuters I/B/E/S.

The Oklahoma City company’s oil and natural gas output fell 1 percent to 687,000 barrels of oil equivalent per day. Crude oil production rose 14 percent to 162,000 barrels per day, better than a number of analysts’ s projections.

For example, analysts at Houston based energy investment bank Simmons & Co had expected oil output of 158,000 barrels per day.

The average price Devon realized for its crude oil fell 14 percent in the quarter, while natural gas liquids prices declined 20 percent, hit by oversupply.

Devon’s shares were up 95 cents at $56.01 in midday trading.

(Reporting by Anna Driver; Editing by Gerald E. McCormick, Lisa Von Ahn and Marguerita Choy)

(Reuters) – Chesapeake Energy Corp (CHK.N: Quote, Profile, Research, Stock Buzz) reported quarterly profit that exceeded Wall Street expectations on Wednesday, as the U.S. oil and gas company produced more crude oil from shale basins like the Eagle Ford in Texas and expenses fell.

Chesapeake, under the direction of a board handpicked by its largest investors and interim Chief Executive Steve Dixon, is focused on drilling its best properties and increasing output of more profitable crude oil while lowering spending.

The shift came after Chesapeake, led by former CEO Aubrey McClendon, had spent heavily to amass large acreage positions in U.S. shale basins. That strategy left the company saddled with huge debt and caused financial stress when natural gas prices began to collapse in 2008.

Chesapeake said its plans to curb spending and sell up to $7 billion in assets to raise cash are on target. It has long-term debt of $13.4 billion and faces a $3.5 billion funding gap this year.

“We are generating more efficient production growth, stronger cash flow and better returns on capital,” Dixon told analysts on a conference call.

Phil Weiss, energy company analyst at Argus in New York, said the company’s oil production, which is more profitable than natural gas production, was higher than he forecast.

“In general, it looks like they are making progress,” said Weiss. “They lowered their cost guidance on a couple of items so that’s a good thing.”

The company has signed or negotiated deals totaling $2 billion so far this year to sell assets and will at a minimum reach the low end of its target for proceeds of $4 billion to $7 billion this year, Dixon told analysts.

The Oklahoma City company, which is searching for a permanent CEO, said its average daily production grew 9 percent to 4 billion cubic feet of natural gas equivalent per day. Of that total, oil production rose 56 percent.

McClendon left the company on April 1. He was one of the first oil and gas executives to recognize the vast potential of the country’s shale basins. But he stepped down as CEO after a tumultuous year in which a series of Reuters stories about questionable practices triggered civil and criminal investigations of the No. 2 U.S. natural gas producer.

First-quarter profit was $15 million, or 2 cents per share, compared with a net loss of $71 million, or 11 cents per share, in the same period a year earlier.

Excluding one-time items, Chesapeake had a per-share profit of 30 cents per share. Analysts, on average, expected a profit of 25 cents, according to Thomson Reuters I/B/E/S.

Production expenses fell 18 percent from a year earlier as the company increased the use of techniques like drilling multiple wells from a single drilling pad to increase efficiency, the company said.

Chesapeake’s average natural gas prices rose to $4.46 per thousand cubic feet equivalent (mcfe) from $4.02, and crude oil prices rose to $94.85 per barrel from $92.63.

Shares of Chesapeake fell nearly 1 percent to $19.38 in morning trade on the New York Stock Exchange. The stock was up in premarket trading, but a 3 percent drop in crude oil prices sparked widespread weakness in the sector.

(Reporting by Anna Driver; Editing by Gerald E. McCormick and Jeffrey Benkoe)

The shale boom in the United States has prompted refining
companies to invest in infrastructure and transportation assets
to increase the flow of less-expensive crude from places like
the Eagle Ford formation in South Texas to refineries located
along the Gulf Coast and elsewhere.

For example, Valero said it ordered 2,500 railcars in the
first quarter and was able to ship crude oil from Texas to its
refinery in Quebec City.

Marathon Petroleum’s Galveston Bay plant, which it acquired
from BP Plc on Feb. 1, is well positioned to process
“growing supplies of North American crude oil,” said Gary
Heminger, Marathon Petroleum’s chief executive officer.

Valero’s first-quarter profit topped Wall Street
expectations as the San Antonio-based refiner’s margins were
higher than expected. Analysts said Marathon’s profit matched
their estimates, helped by a lower tax rate and corporate
expenses.

Shares of Valero rose 3 percent to $42.44 in early New York
Stock Exchange trading. Marathon’s shares fell 1.3 percent to
$81.34.

Valero also said it would evaluate the creation of a master
limited partnership (MLP) for its logistics assets following the
spinoff of its retail business.

Valero had a profit of $654 million, or $1.18 per share,
compared with a loss of $432 million, or 78 cents, a year
before, when the company took a charge related to its plant in
Aruba.

Analysts on average had expected a profit of $1.00 per
share, according to Thomson Reuters I/B/E/S.

Credit Suisse said in a note to clients that this year is
likely to be “transformational” for Marathon, helped by higher
profitability at the Galveston Bay plant.

Marathon finalized its purchase of the Galveston Bay
refinery in February. The plant, known for a 2005 explosion that
killed 15 workers, was purchased from BP Plc as part of a
$2.4 billion sale of Gulf Coast assets.

Marathon, the third-largest stand-alone U.S. refining
company, said its first-quarter profit rose 22 percent to $725
million, or $2.17 per share. Those earnings met the analysts’
average estimate, according to Thomson Reuters I/B/E/S.

North American shale basins and the Gulf of Mexico are seen as more secure places for energy companies to invest because they typically offer a steady source of growth. Conoco said in December that more than half of its nearly $16 billion budget for 2013 will be spent in North America.

Exxon’s U.S. oil and natural gas liquids production rose 2 percent in the first quarter, compared with an overall output decline of 3.5 percent.

“Lower production at Exxon is an ongoing trend, they need so many projects to come online to offset field decline,” said Brian Youngberg, energy company analyst at Edward Jones. “But Conoco’s shift toward the U.S. continues to proceed well.”

Conoco said oil and gas production rose a combined 42 percent in the Bakken Shale in North Dakota and Texas’ Permian Basin and Eagle Ford Shale. Conoco’s total output from continuing operations edged 1 percent lower.

Fourth-largest U.S. oil company Occidental Petroleum Corp (OXY.N: Quote, Profile, Research, Stock Buzz) said its daily domestic oil and gas production rose to a record 478,000 barrels of oil equivalent (boe), most of which was oil or natural gas liquids.

“WEAK” BEAT

Exxon’s quarterly profit edged up, helped by higher earnings in its chemicals business but oil and gas production fell.

Earnings per share for the world’s largest publicly traded oil company topped Wall Street expectations but the gains largely came after a big stock buyback reduced the number of outstanding shares.

Analysts at Credit Suisse characterized it as a “weak” beat in a note to clients.

Exxon said it will lower its quarterly share buyback to $4 billion in the second quarter, below the $5 billion in the first quarter.

First-quarter profit for the world’s largest publicly traded oil company was $2.12 per share. Analysts, on average, expected the Irving, Texas, company to report a profit of $2.05 per share.

Conoco’s first-quarter results met Wall Street expectations and Occidental beat the Street, helped by higher profits in its midstream and marketing business and lower costs, analysts said.

Conoco had a first-quarter profit of $2.1 billion, or $1.73 per share, down from $2.9 billion, or $2.27 per share, a year earlier.

Occidental reported a first-quarter net profit of $1.36 billion, or $1.68 per share, compared with $1.56 billion, or $1.92 per share, a year earlier.

Excluding items, the Los Angeles company earned $1.69 per share, topping analysts’ average estimate of $1.54 per share, according to Thomson Reuters I/B/E/S.

Shares of Exxon fell nearly 1 percent to $88.62. Conoco shares edged down 6 cents to $58.19 and Occidental was up 8 cents to $84.41.

(Reporting By Anna Driver; Editing by Nick Zieminski)

North American shale basins and the Gulf of Mexico are seen
as more secure places for energy companies to invest because
they typically offer a steady source of growth. Conoco said in
December that more than half of its nearly $16 billion budget
for 2013 will be spent in North America.

Exxon’s U.S. oil and natural gas liquids production rose 2
percent in the first quarter, compared with an overall output
decline of 3.5 percent.

“Lower production at Exxon is an ongoing trend, they need so
many projects to come online to offset field decline,” said
Brian Youngberg, energy company analyst at Edward Jones. “But
Conoco’s shift toward the U.S. continues to proceed well.”

Conoco said oil and gas production rose a combined 42
percent in the Bakken Shale in North Dakota and Texas’ Permian
Basin and Eagle Ford Shale. Conoco’s total output from
continuing operations edged 1 percent lower.

Fourth-largest U.S. oil company Occidental Petroleum Corp
said its daily domestic oil and gas production rose to a
record 478,000 barrels of oil equivalent (boe), most of which
was oil or natural gas liquids.

“WEAK” BEAT

Exxon’s quarterly profit edged up, helped by higher earnings
in its chemicals business but oil and gas production fell.

Earnings per share for the world’s largest publicly traded
oil company topped Wall Street expectations but the gains
largely came after a big stock buyback reduced the number of
outstanding shares.

Analysts at Credit Suisse characterized it as a “weak” beat
in a note to clients.

Exxon said it will lower its quarterly share buyback to $4
billion in the second quarter, below the $5 billion in the first
quarter.

First-quarter profit for the world’s largest publicly traded
oil company was $2.12 per share. Analysts, on average, expected
the Irving, Texas, company to report a profit of $2.05 per
share.

Conoco’s first-quarter results met Wall Street expectations
and Occidental beat the Street, helped by higher profits in its
midstream and marketing business and lower costs, analysts said.

Conoco had a first-quarter profit of $2.1 billion, or $1.73
per share, down from $2.9 billion, or $2.27 per share, a year
earlier.

Occidental reported a first-quarter net profit of $1.36
billion, or $1.68 per share, compared with $1.56 billion, or
$1.92 per share, a year earlier.

Excluding items, the Los Angeles company earned $1.69 per
share, topping analysts’ average estimate of $1.54 per share,
according to Thomson Reuters I/B/E/S.

Shares of Exxon fell nearly 1 percent to $88.62. Conoco
shares edged down 6 cents to $58.19 and Occidental was up 8
cents to $84.41.

Shares of Hess rose nearly 3 percent to $70.20 in midday New
York Stock Exchange trading.

Earlier this year, in response to criticism from hedge fund
Elliott Management, Hess accelerated its plans to turn itself
into a company focused solely on oil and gas exploration and
production.

Roger Read, a Wells Fargo analyst, said in a note to clients
that the earnings beat “could bode well for Hess management” in
its proxy fight with Elliott.

“We are making substantial progress toward our goal of
becoming a pure-play exploration and production company.
However, there is still much to do,” Hess Chief Executive John
Hess told analysts on a conference call.

As part of its strategy, Hess has announced the sale of
assets in Texas and Russia and other international properties
and has said it will exit the refining and retail businesses.
. Proceeds from the asset sales will first be
allocated to retire $2.5 billion in short-term debt, Hess said.

Elliott Management, which owns 4.5 percent of Hess’ shares,
has accused management of destroying shareholder value and has
asked the company to consider spinning off its U.S. onshore
assets. Elliott is also pushing to elect five independent
directors to the board of the New York-based company.

Hess took action to increase shareholder returns in March,
announcing a higher dividend and a $4 billion share buyback. It
has also said it will nominate six new directors at the annual
meeting in May in the wake of criticism that the current board
lacks independence.

First-quarter net income soared to $1.28 billion, or $3.72
per share, from $545 million, or $1.60 per share, a year
earlier, boosted by a gain of $588 million, largely from the
sale of assets in the UK North Sea and
Azerbaijan.

Excluding certain special items, Hess earned $1.95 per
share. On that basis, analysts’ average forecast was $1.59,
according to Thomson Reuters I/B/E/S.

Revenue soared 39 percent to $4.12 billion.

Production fell 2 percent to 389,000 barrels of oil
equivalent (boe) per day due to the asset sales and lower output
in the Valhall field in Norway.

Production from the oil-rich Bakken shale in North Dakota
was up 55 percent at 65,000 boe per day. Bakken production in
May will likely stay around that level as the company builds an
inventory of wells that have been drilled but not yet completed,
Hess said on the call.

Analysts at CapitalOne SouthCoast said Hess’ earnings beat
was driven by higher-than-expected oil and gas prices and lower
costs.

Hess said its average worldwide crude oil selling price rose
about 5 percent from a year earlier to $94.50 per barrel in the
quarter. The company’s natural gas price was $6.62 per thousand
cubic feet (mcf), up from $6.23 per mcf a year earlier.

The cost to drill a well in the Bakken fell 36 percent from
a year earlier to $8.6 million, Hess said.

It remains unclear what safety measures, if any, were
required of the company or whether West Fertilizer failed to
comply. But on Wednesday night, the company’s fertilizer complex
in West, Texas – population, 2,600 – exploded with such force
that 60 to 80 homes were flattened, the school and nursing home
took heavy damage and at least 14 people were killed,
authorities said.

In a 2011 filing with the EPA, the operators of West
Fertilizer told regulators that a typical emergency scenario at
the facility that holds anhydrous ammonia could result in a
10-minute release of the substance in gas form. That chemical,
used as a fertilizer, is toxic to inhale but is not considered
highly flammable or explosive, and the safety plan did not
envisage any blast scenario.

In a separate filing earlier this year to the Texas
Department of State Health Services, West Fertilizer disclosed
that, as of the end of 2012, the company was also storing more
volatile chemical compounds at the same address, including 270
tons of ammonium nitrate.

The same type of solid fertilizer was mixed with fuel and
used by Timothy McVeigh to raze the Oklahoma City federal
building in 1995, killing 168 people. Sales of as little as 25
pounds (11 kg) of the substance are now tracked by the U.S.
Department of Homeland Security.

Investigators said on Thursday they remained concerned about
volatile chemicals that may remain on the site, posing further
risk. One official, McLennan County Deputy Sheriff Matt Cawthon,
said ammonium nitrate was found at the scene. It was not known
whether the site used or stored the substance before 2012.

“This is a fertilizer company and as it is, it has that type
of component in it and it is a volatile product,” Cawthon told
reporters. “I don’t know about anhydrous ammonia. I’ve been told
about ammonium nitrate.”

Authorities are investigating what caused Wednesday’s blast,
Cawthon said.

Public records show that the family-run company in recent
years had at least two types of operations at its complex – one
that sold and stored liquid fertilizer and another that dealt
with dry fertilizer, using what experts consider more volatile
ingredients.

West Fertilizer is owned by 83-year-old Donald Adair, and
employed fewer than 10 people, according to a background report
on the company from business information firm D&B. Adair and his
wife, Wanda Adair, could not be reached for comment. A person
who answered the phone at Adair Grains Inc, West Fertilizer’s
parent company, said the owners had survived the blast.

Ted Uptmore, listed as manager of the plant, could not be
reached for comment, and other people listed in public records
as working at the plant did not return phone calls. Craig
Rogers, an owner at Security Truck Service, LLC, a contractor
who hauls fertilizers and was listed as carrying out an
independent safety inspection of the plant in June 2011, did not
return a call requesting comment.

In a filing with the EPA in 2011, West Fertilizer outlined
safety measures to deal with an incident involving only the less
flammable liquid gas, anhydrous ammonia. The filing, obtained by
the left-leaning Center for Effective Government, did not
envisage an emergency scenario that would cause a fire or
explosion.

PLANT’S SAFETY HISTORY AVERAGE

The privately held fertilizer plant, which has been in
operation since 1962, has been cited for safety violations by
regulators in the past. Records show the EPA fined West in 2006
for $2,300 for failing to update its risk management plan, a
blueprint required to ensure safe operations.

At the time, the EPA found that the firm had poor employee
training programs and did not have a formal written maintenance
program in place. The EPA has not fined West Fertilizer since
then, and the agency listed no outstanding violations as of
Thursday.

The EPA, which has officials on the scene, said in a
statement, “The facility, which is required by law to submit an
updated plan at least every five years, submitted an updated
plan in 2011.”

West Fertilizer is subject to EPA regulation because the
quantity of ammonia it stores on site is more than 10,000 pounds
(4,530 kg).

In December 2006, it received a 10-year permit from Texas
regulators that allowed for the operation of two 12,000-gallon
(45,425-liter) storage tanks for anhydrous ammonia. The permit
required West Fertilizer to carry out daily visual, auditory and
olfactory inspections. It was not clear whether the firm
required, or obtained, additional permits for operations
involving more volatile compounds.

In 1985, the company, formerly known as West Chemical &
Fertilizer, was cited five times by the federal Occupational
Safety & Health Administration. Two of the violations were
characterized as “serious,” with one related to the storage and
handling of anhydrous ammonia, federal records show. There were
no records of OSHA fines in more recent years.

At a news conference on Thursday, Zak Covar, executive
director of the Texas Commission on Environmental Quality
described the plant’s safety history as average.

“They don’t have any negative complaints,” Covar told
reporters.

The Adair family is a fixture in the town of West. Wanda
Adair, age 79, is listed as a co-owner at West Fertilizer, and
as a director of the West Chamber of Commerce and a director of
the local branch of the Kiwanis Club, a volunteer group. A call
to the West Chamber of Commerce went unanswered.

A COMMON WAY TO OPERATE

Thousands of sites across rural America store potentially
explosive materials and blend fertilizer for farmers, similar to
West Fertilizer. In EPA reports, about 10,000 facilities say
they store anhydrous ammonia.

Nitrogen-rich fertilizers help promote crop growth and are
used by farms across the country.

Anhydrous ammonia is only flammable at temperatures
exceeding 1,500 degrees F (816 C) and would not be expected to
trigger such a massive blast, according to an expert.

“Farmers inject anhydrous ammonia into the soil and it is
not very explosive per se,” said K.A. Barbarick, a professor of
crop sciences at Colorado State University.

Despite the fiery TV images and death toll from the blast,
some in the fertilizer industry are not expecting calls for new
restrictions on where and how such facilities can operate.

An estimated 6,500 farm retail stores in the United States
blend, store or sell fertilizers to farmers, said Daren Coppock,
chief executive of the Agricultural Retailers Association. The
West Fertilizer plant is far from the only one near homes, he
said.

(Additional reporting by Rod Nickel in Winnipeg, Ryan McNeill
in New York, Erwin Seba and Kristen Hays in Houston; Editing by
Janet Roberts, Mary Milliken and Peter Cooney)