Hess, John B. 1954–
John B. Hess
Chairman and chief executive officer, Amerada Hess
Born: April 5, 1954.
Education: Harvard College, BA, 1975; Harvard University, MBA, 1977.
Family: Son of Leon Hess (business executive) and Norma (maiden name unknown); married Susan Elizabeth Kessler.
Career: Amerada Hess, 1976–1986, graduate trainee, senior vice president; 1986–1995, senior executive vice president; 1995–, chairman and chief executive officer.
■ Amerada Hess, also known simply as Hess, is a family business. With 2003 sales of about $14.3 billion, Amerada (an acronym of "America" and "Canada") Hess is an integrated oil and gas company that conducts exploration and production globally. As of 2004 the company's proven reserves totaled 646 million barrels of oil and 2.3 billion cubic feet of natural gas. Hess owns 50 percent of a refinery it operates in the U.S. Virgin Islands and owns a smaller one in New Jersey; it sells gasoline through more than one thousand gas stations, primarily in the eastern United States. A third-generation oil and gas businessman, John Hess took over the company in 1995 from his father, Leon Hess. Following his father's death, John Hess found himself walking in the footsteps of a giant.
A PATRIARCH'S AMERICAN DREAM
Mores Hess, Leon's father, was a Lithuanian immigrant trained to be a kosher butcher who also ran a fuel-delivery business, coal yard, and gas station. His business faltered during the Depression. Leon Hess was a delivery boy for his father when he took over the bankrupt company in 1933. He began building the company with a product for which other oil companies had little use: no. 6 residual fuel oil, a black, tarry sub-stance left over after refining. Hess saw that utilities and other big users were switching from coal to no. 6 when they could get it, and he built a fleet of trucks capable of keeping the fuel oil warm until delivery, gradually expanding his reach far beyond New Jersey and New York.
By 1938 Leon Hess had 12 trucks and was able to build his first oil terminal at Perth Amboy, New Jersey. The oil terminal expanded during World War II while Leon Hess served in the U.S. Army under General George Patton. Ultimately Hess landed at Normandy just after D-Day and was wounded. Following the war Hess returned to work and by 1950 had bought an oil terminal in Houston. By 1958 the company started crude oil exploration and production in Mississippi, buying both a pipeline and petroleum reserves. In 1963 Hess acquired a refinery in Corpus Christi, Texas, and then built the biggest project of his life, the Virgin Islands Refinery. In 1969 the company merged with Amerada Petroleum to create Amerada Hess. By the time of his death in 1999, Leon Hess's personal stock holdings were worth more than $700 million. Leon Hess granted only one interview over his 60-year career, during which he said: "My parents always told me to guard my reputation. I was brought up all my life to stay out of the limelight and I'm never going to change" (Newsday, January 25, 1995).
A PRIVILEGED CHILDHOOD
While John Hess grew up with many of the trappings of wealth, he still pumped gas for the family Hess stations. The only son among three siblings, he joined his father on foreign oil fields at age seven and began working for the family business in 1976, as a graduate trainee. As a Harvard undergraduate he studied in Beirut, became fluent in Arabic and Farsi, and later befriended Middle Eastern oil ministers. By 1984 he was a senior vice president, managing exploration and production operations and contributing to the development of fields in Canada and the Gulf of Mexico. At a 1987 event bringing together various leaders in the oil industry, he introduced Abu Dhabi's oil minister, Mana Said al-Otaiba, in faultless Arab dialect. By 1991 he was earning $700,000 a year and being groomed to succeed his father. William P. Tavoulareas, retired president of Mobil Corporation, said he had confidence in his abilities, but added: "How can any son follow an act like that?" (BusinessWeek, June 29, 1987).
A FATHER PASSES THE REINS
From 1990 to 1995 Amerada Hess struggled with erratic performance that seemed attributable to Leon Hess's advancing age. The firm had a $268.2 million loss in 1993 as sales dropped to $5.9 billion. A rebound in 1994 was modest: a $73.7 million net on $6.7 billion in sales. In 1995's opening quarter Hess earned just $25.2 million on $1.98 billion in sales, down from the previous year.
Like his father before him, Leon Hess worked well past 80. At a press conference during which he passed the torch to his son, Leon Hess wept and said, "You have a good young management team in place" (Platt's Oilgram News, May 4, 1995).
Oil analysts noted that a change of management was long overdue at the company: Lehman Brothers oil analyst Bernard Picchi stated, "it's fair to say that the company has been a little out of step with the rest of the industry." He noted the company's "parochial" and "inward looking" way of operating and how this extended even to its representation in trade associations (Platt's Oilgram News, May 4, 1995).
John Hess was cut from a different cloth than his father. He had an Ivy League education, while his father never went to college. He also had a lot in common with his predecessor, including a competitive spirit and fierce work ethic. Said Nicholas Brady, a board member of Amerada Hess and a former Treasury secretary: "Like his father, John is tireless. They're the same in their preoccupation with business. It's a way of life for John" (New York Times, May 21, 1999). Another trait that Hess shared with his father was an aversion to the media. Both routinely turned down requests for interviews. John Hess quickly and quietly emerged as the antithesis to the modern, high-profile CEO of a leading publicly traded company.
Although John Hess was thought to be very close to his father, who was the best man at his wedding, the relationship had a drawback: Hess may have had the title and control of the firm, but from 1994 to 1999 he was still symbolically under the shadow of his father, who controlled 12.9 percent of Hess stock, compared with his son's 1.7 percent. Said Eugene L. Nowak, oil analyst with Dean Witter Reynolds: "Leon is not going to fade away" (BusinessWeek, May 22, 1995). The shadow receded when Leon Hess died on May 7, 1999, of complications from blood disease, at the age of 85.
A CHANGE IN COURSE
After taking over the day-to-day responsibilities of the company, John Hess crafted a plan to put a new face on the company, moving away from the less profitable business of refining and marketing and shifting more business into oil production. The company was in dire need of a new direction: In 1998 it lost $458.9 million on revenues of $6.6 billion.
In 2000 Hess attempted to seize a piece of the international oil arena with a takeover bid for U.K.-based independent oil company Lasmo but failed after losing out to a competitor. It was a major setback for Hess. He seemed to recover in 2001 with the company's agreement to buy the exploration and production company Triton Energy and its stakes in Latin America, Africa, and Southeast Asia. Hess bought Triton Energy for $2.7 billion in cash and about $500 million in assumed debt. Said Gene Nowak, analyst with ABN Amro: "Initially, investors were concerned John Hess was going to continue to tilt the company into refining and marketing which is traditionally a low-return business. But he has strongly tilted the company to exploration and production. This deal puts over 75 percent of its assets into that sector" (Lloyd's List, July 13, 2001).
In 2003, however, elements of the Triton deal came back to haunt John Hess. The company announced a $530 million after-tax impairment charge related to the Triton acquisition. UBS Warburg analyst Matthew Warburton placed part of the blame on Triton, which he said made poor decisions regarding reservoir mechanics and field management. Moreover, War-burton also cited Hess's failure to do its homework in evaluating Triton's value, noting that Hess had written off 25 percent of the value of the total price paid for Triton.
See also entry on Amerada Hess Corporation in International Directory of Company Histories.
sources for further information
"Ceiba Field, Triton Deal Haunt Hess for Moment," International Petroleum Finance, February 4, 2003.
Falk, Bill, "A Demanding Patriarch," Newsday, January 25, 1995.
"Hess Senior Proves a Hard Act to Follow," Lloyd's List, July 13, 2001.
Johnston, David, and Robert DiNardo, "A Legend Will Step Down," Platt's Oilgram News, May 4, 1995, p. 1.
Norman, James R., "Leon Hess: Can The Bottom-of-the-Barrel Oil Baron Get Back on Top?" BusinessWeek, June 29, 1987, p. 50.
Sandomir, Richard, "Pro Football, Hess Family Likely to Hire Goldman Sachs for Jets Sale," New York Times, May 21, 1999.
Weber, Joseph, "A New Hess Helming Hess," BusinessWeek, May 22, 1995, p. 49.
"Hess, John B. 1954–." International Directory of Business Biographies. . Encyclopedia.com. (August 9, 2018). http://www.encyclopedia.com/economics/news-wires-white-papers-and-books/hess-john-b-1954
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