Hess Corp. said Monday it plans to sell its oil terminal network in the United States and close its refinery at Port Reading, NJ, part of its strategy to completely exit the refining business and transform into an exploration and production (E&P) company focused on unconventional assets.

Meanwhile, a hedge fund — Elliott Associates LP, an associated entity of Elliott International Ltd. — notified Hess on Friday that it plans to file for regulatory clearance to acquire a larger stake in the company. According to Hess, correspondence received from Elliott indicates the hedge fund could seek a stake of more than $800 million in the company, and is considering nominating candidates for election to the board of directors.

“By closing the Port Reading refinery and selling our terminal network, Hess will complete its transformation from an integrated oil and gas company to one that is predominantly an E&P company and be able to redeploy substantial additional capital to fund its future growth opportunities,” said CEO John Hess. In a separate statement, he said the company “is focused on developing lower risk, higher return assets such as those related to our leadership position in the Bakken oil shale in North Dakota.”

Earlier this month the New York City-based major announced that it would spend $6.8 billion on capital expenditures in 2013, with the largest share — $2.7 billion, or 40% — devoted to its unconventional resources (see Shale Daily, Jan. 11).

Hess holds 800,000 net acres in the Bakken Shale, making it the second-largest leaseholder in the play behind Continental Resources Inc.’s 984,000 net acres. Company reports show Hess also holds about 200,000 net acres in the Utica Shale (see Shale Daily, Dec. 5, 2012; Aug. 16, 2012).

Hess’ oil terminal network along the East Coast comprises 19 terminals — 12 with deepwater access — with a total storage capacity of 28 million bbl. The company also is selling a 10 million bbl capacity oil terminal on the Caribbean island Saint Lucia.

The terminals collectively served as the primary outlet for Hess’ share of production destined for the Hovensa LLC refinery in St. Croix, U.S. Virgin Islands (see Daily GPI, Jan. 27, 2012). Hess had a 50% interest in Hovensa refinery, a joint venture with Brazil’s national oil company Petroleos de Venezuela SA (PDSVA). The 350,000 b/d refinery was shut down in February 2012. According to Hess and PDVSA, losses at Hovensa had totaled $1.3 billion over a three-year period and were expected to continue.

“With the closure of the Hovensa refinery in 2012 as well as Hess’ ability to access refined products from third parties to supply these marketing businesses, the terminal system is no longer core to the company’s operations,” the company stated Monday. “In addition to the proceeds from the sale of the terminal network, the transaction should also release approximately $1 billion of working capital for redeployment to fund Hess’ future growth opportunities.”

The Port Reading refinery is to closed by the end of February. The facility has a fluid catalytic cracking unit to manufacture gasoline and components used for blending heating oil.

“The refinery incurred losses in two of the past three years,” the company said. “The financial outlook for the facility is expected to remain challenged due to the requirement for future expenditures to comply with environmental regulations for low sulfur heating oil and the weak forecast for gasoline refining margins.”

Hess has retained Goldman, Sachs & Co. as financial adviser to sell the terminal network.

Regarding the Elliott hedge fund, Elliott issue, John Hess said earlier this month the company had not received any contact from the hedge fund, and the two sides were not in discussions. “As we do with all shareholders who engage with us, if Elliott wishes to do so, we will meet to hear their ideas,” he said.

Hess has a 4Q2012 earnings conference call scheduled for 10 a.m. Wednesday. Shares of Hess were trading at $62.56/share in afternoon trading Monday on the New York Stock Exchange, an increase of $3.66/share (up 6.21%).