Hess Corporation (HES): Business Model Canvas

Introduction:

The oil and gas industry has been an integral part of the world's economy for decades. As the world's population continues to grow, there is a steady increase in demand for energy. According to the International Energy Agency (IEA), global demand for oil and gas is expected to increase by 4.2% and 2.8% respectively in 2021. This is great news for companies operating within the sector, like Hess Corporation (HES). Founded in 1919, Hess Corporation is an American-based company that specializes in upstream exploration and production of crude oil and natural gas.

In this article, we'll take a closer look at Hess Corporation's business model and what makes it successful in the oil and gas industry. Additionally, we'll explore how technological innovation and environmental monitoring have helped Hess Corporation become an industry leader.

• Latest statistics indicate that global demand for oil and gas will increase in 2021 (IEA)
• Hess Corporation operates within the upstream sector of the oil and gas industry

Key Partnerships

Hess Corporation (HES) is a global independent exploration and production company engaged in the exploration, development, production, transportation, purchase and sale of crude oil and natural gas. Hess Corporation relies on key partnerships to support its operations and drive value for stakeholders.

The following are some of the key partnerships Hess Corporation has established:

• Joint venture partners: Hess Corporation partners with other oil and gas companies to share exploration, development, and production risks and costs. Some of its joint venture partners include ExxonMobil, Chevron, and BP.
• Suppliers: Hess Corporation partners with a range of suppliers to provide the necessary equipment, goods and services to support its operations, including drilling rigs, pipelines, and transportation services.
• Community partners: Hess Corporation values its relationships with the communities where it operates, and as such, partners with various stakeholders to promote economic development, health and safety, and environmental stewardship in these areas.
• Governmental partners: Hess Corporation operates under the regulatory environment of various governments and governmental agencies, and as such, partners with these entities to ensure compliance with regulations and to obtain the necessary permits and approvals to explore and produce oil and gas.

Through these key partnerships, Hess Corporation is able to leverage the strengths and capabilities of others to achieve its strategic objectives and drive value for all stakeholders.

Key Activities

Hess Corporation, an American multinational independent energy company, engages in several key activities to ensure its successful operation in the oil and gas industry. These Key Activities include:

• Exploration and Production (E&P): Hess Corporation primarily engages in E&P activities in the United States, Asia, and Europe. The company identifies, evaluates, acquires, and develops oil and gas reserves to meet the energy needs of its customers. Hess Corporation also invests in technologies and processes that improve its E&P operations, including hydraulic fracturing and directional drilling.
• Refining and Marketing (R&M): The company's R&M activities include the refining of crude oil and the marketing and sale of refined petroleum products. Hess Corporation owns and operates one refinery in the United States and has several marketing and supply agreements with other refineries around the world.
• Midstream: This includes the transportation and storage of crude oil and natural gas liquids. Hess Corporation owns and operates pipelines and storage facilities in the Bakken shale region of North Dakota and has invested in pipeline projects in Ghana and Equatorial Guinea to enhance its midstream operations.
• Renewable Energy: Hess Corporation has incorporated a renewable energy sector to diversify its portfolio and align with the international goal of reducing carbon emissions. The company has invested in solar projects and is exploring opportunities in offshore wind energy.
• Clean Energy Transition: Hess Corporation is committed to a low-carbon future and has set clear targets to reduce the carbon intensity of its operations. The company is investing in carbon capture, utilization, and storage (CCUS) projects to capture and store emissions from its operations.
• Research and Development: Hess Corporation invests heavily in R&D to develop new technologies and processes that enhance its E&P, R&M, and midstream operations while reducing its carbon footprint. The company has partnerships with academic institutions and research organizations to advance its R&D efforts.

Overall, these Key Activities enable Hess Corporation to operate efficiently and sustainably while delivering value to customers and shareholders.

Key Resources

• Oil and Gas Reserves: Hess Corporation is a company that deals with exploration, development, production, and transportation of crude oil and natural gas. Thus, its key resources are the oil and gas reserves located in various parts of the world where the company operates.
• Human Capital: Hess Corporation is a global company operated by highly skilled personnel in all aspects of the business such as geologists, engineers, scientists, technicians, and other specialized experts. These employees help to come up with innovative ideas that drive the growth of the company.
• Technology: Hess Corporation has invested heavily in technology that helps to improve efficiency, reduce costs, and mitigate risks during exploration, development, and production of oil and gas. Such technologies include seismic imaging, horizontal drilling, enhanced oil recovery, and remote monitoring systems.
• Infrastructure: Hess Corporation has an extensive infrastructure that includes oil and gas fields, drilling platforms, pipelines, refineries, and transportation systems. These infrastructures are vital in ensuring that the company has a continuous and efficient supply chain from upstream to downstream to meet customer needs.
• Capital: Hess Corporation has access to capital that enables them to fund their operations and projects such as exploration and development of new oil and gas reserves, acquisitions, expansion of infrastructure, and investment in new technologies.
• Supplier Networks: Hess Corporation has established relationships with key suppliers of products and services such as drilling rig providers, equipment manufacturers, and service providers that help to support its operations on a big scale.

In conclusion, Hess Corporation has various key resources that have enabled it to become a leading company in the oil and gas industry. The company's reserves, human capital, technology, infrastructure, capital, and supplier networks provide a competitive advantage for Hess Corporation in its operations.

Value Propositions

Hess Corporation (HES) aims to provide value to its customers, stakeholders, and investors through the following value propositions:

• Investment in Technology: We believe that investment in technology is the key to sustainable growth in the oil and gas industry. We invest heavily in advanced technologies such as seismic imaging, artificial intelligence, and digitalization to improve efficiency, reduce costs, and increase production.
• Focus on Exploration: Our focus on exploration has enabled us to discover new reserves and increase our production capacity. We leverage advanced technologies and our geological expertise to identify and develop new resources in a safe, responsible, and cost-effective manner.
• Commitment to Safety: Safety is our top priority. We have implemented a robust set of policies, procedures, and controls to ensure the safety of our employees, contractors, and the communities where we operate. Our commitment to safety not only protects our people but also ensures the sustainability of our operations.
• Environmental Responsibility: At Hess, we recognize the impact of our operations on the environment. We strive to minimize our environmental footprint by implementing sustainable practices, reducing emissions, and actively seeking to reduce waste in our operations. We are committed to preserving the environment for future generations.
• Customer Service: We aim to provide our customers with the highest level of service. We understand that our customers have unique needs, and we work with them to develop customized solutions that meet their requirements. Our commitment to customer service is reflected in our ability to deliver high-quality products, on time and on budget.

By delivering on these value propositions, Hess Corporation is well positioned to become a leading player in the oil and gas industry, delivering value to all stakeholders, including customers, employees, investors, and the communities where we operate.

Customer Relationships:

Customer relationships are a crucial aspect of any organization. For Hess Corporation, creating and sustaining long-lasting relationships with customers is imperative to our success. We firmly believe in delivering exceptional customer service and providing a seamless experience to maintain customer loyalty. We have implemented various strategies to enhance our customer relationships, including: 1. Personalization: We believe that every customer is unique and deserves a personalized experience. We strive to provide tailor-made solutions and services to meet individual customer needs. This approach helps us build trust and strengthens our relationship with customers. 2. Reliability: We understand that reliability is crucial to building customer relationships. Our goal is to deliver quality products and services while ensuring that our customers can count on us in every situation. 3. Communication: Timely communication is critical to creating strong customer relationships. We have established clear channels of communication with our customers, including email, phone, online chat and social media platforms. We actively engage with customers to ensure their satisfaction, address their concerns and answer any questions they may have. 4. Value Addition: We believe in adding value to our customers at every step of their journey with us. From providing special offers and discounts to offering personalized guidance and advice, we strive to exceed customer expectations. 5. Feedback: We encourage customers to provide feedback on their experiences with us. This feedback helps us understand our customers better and enables us to identify areas of improvement. We take every suggestion and complaint seriously and work towards implementing changes to further improve customer relationships. In conclusion, Hess Corporation places a high value on customer relationships. We believe that building robust relationships with our customers is vital to our success. We strive to provide exceptional customer service by personalizing solutions, ensuring reliability, engaging in timely and transparent communication, adding value and seeking customer feedback.

Channels

Direct Selling: Hess Corporation (HES) directly sells their products and services to customers through their network of retail stations, including convenience stores and truck stops. Online Platforms: Along with direct selling, the company also sells its products and services through online platforms, including websites and mobile applications. Customers can order and pay for fuel and other products online and pick them up at designated locations. Hess Corporation also provides an e-commerce platform for businesses to purchase fuel and related products. Partnerships: The company has partnerships with major retailers, distributors, and fleet operators to expand its reach in the market. Hess Corporation has partnered with supermarkets like Safeway and Kroger to open retail stations at their locations, providing more access to fuel and convenience stores. The company also has agreements with large commercial airlines, shipping companies, and industrial businesses to sell jet fuel and lubricants. Advertising: Hess Corporation uses various methods to advertise its products and services. The company has print and digital advertisements, billboards, and commercials on TV and radio. The company also uses social media platforms like Twitter and Facebook to connect with its customers and promote its products and services. Supply Chain: As a vertically integrated company, Hess Corporation also has channels used to ensure the smooth running of its supply chain. The company owns refineries where crude oil is refined into finished products before selling them. It also has channels for transporting the products from refineries to storage facilities and retail stations. Cross-selling: Hess Corporation cross-sells its products and services by utilizing the one-stop-shop model. Customers who come to the retail stations to purchase fuel also have access to convenience stores where they can purchase snacks and other products. The company also sells car wash and repair services, providing customers with a full-service experience. Customer Service: Lastly, Hess Corporation has channels for customer service. Customers can reach the company's customer service team via phone, email, and social media with their concerns and questions. The company also has a loyalty program that provides customers with discounts and other benefits.

Customer Segments

Hess Corporation (HES) targets a variety of customer segments, including:

• Industrial and Commercial Customers: Hess provides oil and gas products to industrial and commercial customers such as transportation companies, manufacturing facilities, and power plants.
• Institutional Investors: As a publicly traded company, Hess also caters to institutional investors who are interested in investing in the oil and gas industry.
• Retail Customers: Hess operates a chain of gas stations and convenience stores, catering to retail customers who are looking for gasoline, snacks, and other convenience items while on the go.
• Government Agencies: Hess also provides oil and gas products to government agencies at the local, state, and federal levels.

Each customer segment has different needs and requires different levels of service. Hess strives to provide high-quality products and excellent customer service to all of its customers, regardless of their segment.

Cost Structure

The following are the cost elements associated with Hess Corporation's operations:

• Exploration costs: Hess Corporation invests heavily in exploration activities to find new sources of oil and gas. This includes costs for drilling, seismic surveys, and related activities.
• Production costs: Once oil and gas reserves are discovered, Hess Corporation incurs costs to extract and produce them. This includes costs for equipment, labor, maintenance, and supplies.
• Transportation costs: Hess Corporation incurs costs to transport oil and gas from production sites to refineries and distribution points. This includes costs for pipelines, trucks, tankers, and other transportation infrastructure.
• Refining costs: Hess Corporation owns and operates refineries to process crude oil into usable products such as gasoline, diesel, and jet fuel. Refining costs include costs for equipment, labor, maintenance, and supplies.
• Marketing and distribution costs: Hess Corporation incurs costs to market and distribute its products to customers. This includes costs for advertising, sales personnel, distributors, and other marketing and distribution expenses.
• General and administrative expenses: Hess Corporation incurs costs for its corporate operations, including costs for executive salaries, legal and regulatory compliance, and other administrative expenses.
• Interest expense: Hess Corporation incurs interest expense on its debt obligations.
• Depreciation, depletion, and amortization: Hess Corporation depreciates its fixed assets, depletes its natural resources, and amortizes its intangible assets over time. These expenses are non-cash expenses but are still included in the company's cost structure.

Revenue Streams

As an energy company, Hess Corporation generates revenue from various sources. The following are the primary revenue streams of Hess:

• Oil and Gas Exploration: Hess explores, develops, produces, and sells crude oil, natural gas, and natural gas liquids from its reserves. It generates revenue by selling these products to refiners, marketing companies, and other customers.
• Midstream Services: Hess operates midstream facilities, including gas processing plants, oil terminals, and pipelines. It generates revenue from facility leasing, transportation fees, and storage fees.
• Marketing and Refining: Hess operates retail gas stations and a refining business. It generates revenue from selling refined petroleum products, such as gasoline and diesel, as well as from selling lubricants and other specialty products.
• Energy Trading: Hess engages in energy trading activities, including physical and financial transactions in the wholesale markets. It generates revenue from price spreads and market volatility.
• Royalties and Other Income: Hess receives royalties and other income from its joint ventures, partnerships, and other investments. This includes income from offshore production sharing agreements and other working interest properties.

Overall, Hess Corporation generates revenue by selling energy products and services to its customers, as well as by monetizing its energy reserves and transportation assets. The company's revenue streams are diversified and complement each other, which helps to mitigate risk and maximize profitability.

Conclusion

In conclusion, the Business Model Canvas for Hess Corporation (HES) shows a detailed overview of its business model. Hess Corporation has a unique business model which is built around oil and gas exploration, production, and marketing. The company has a strong focus on technology innovation and sustainable operations while maintaining its core values, including integrity, teamwork, and excellence.

• Hess Corporation's value proposition is centered around providing reliable energy services to its customers worldwide.
• The company's key activities involve exploration, production, and marketing of oil and natural gas, including the development of new technologies to optimize operations.
• Hess Corporation's customer segments are diverse, ranging from individuals and small businesses to large corporations and governments.
• The company's primary channels of distribution include pipelines, rail, and ocean transportation in addition to leasing and rental contracts.
• Hess Corporation's cost structure is built on fixed and variable costs, which include exploration and production costs, transportation costs, labor costs, and marketing costs.
• The company generates its revenue from the sale of oil and natural gas, as well as from the leasing of properties, transportation services, and other sources.
• Hess Corporation's key partnerships include technology and equipment suppliers, joint ventures, and strategic alliances with other oil and gas companies.

Overall, Hess Corporation has a strong business model, which has helped the company achieve significant growth and success in the oil and gas industry. Going forward, the company will look to continue to innovate and expand its operations while remaining true to its core values.