View:
HESS CORPORATION
1185 Avenue of the Americas
New York, New York 10036
GEORGE C. BARRY
Vice President, Secretary
and Deputy General Counsel
(212) 536-8599
Fax: (212) 536-8241
April 4, 2008
VIA EDGAR
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Mail Stop 7010
Washington, D.C. 20549
Attn: H. Roger Schwall, Assistant Director
Re: Hess Corporation
Form 10-K for Fiscal Year Ended December 31, 2007
Filed February 27, 2008
Preliminary Proxy Statement on Schedule 14A
Filed on March 7, 2008
Response to Comment Letter Dated March 20, 2008
Commission File No. 1-01204
- --------------------------------------------------------------------------------
Dear Ladies and Gentlemen:
Enclosed are our responses to the comments of the staff of the Securities
and Exchange Commission (the "Commission") as transmitted to George C. Barry by
letter dated March 20, 2008 in connection with the Form 10-K for Fiscal Year
Ended December 31, 2007 filed by Hess Corporation (the "Company") with the
Commission on February 27, 2008 (the "Annual Report") and the Preliminary Proxy
Statement on Schedule 14A filed by the Company with the Commission on March 7,
2008 (together with the Annual Report, the "Filings"). For convenience, the
staff's comments are reprinted below in bold, with the corresponding response
set immediately below the applicable comment.
Preliminary proxy statement filed March 7, 2008
Compensation Discussion and Analysis, page 10
1. You disclose that you attempt to deliver "top-tier direct compensation..."
In future filings, please revise to quantify the percentiles of where you
target your compensation and the percentiles represented by actual
compensation. If there is a divergence from the targeted amount and the
actual amount you paid or awarded,
provide a discussion of the reasons for such variance if material to an
understanding of the compensation paid to an executive officer.
We did not use such fixed targeted percentiles in determining total
compensation for our named executive officers in 2007. We set corporate,
business unit and individual performance objectives designed to result in our
overall Company performance being better than the performance of most of our
comparator group of oil and gas companies and pay accordingly if these
objectives are met. In addition, as we explain in the discussion on pages 11 and
12 of the proxy statement, we believe it is necessary to pay top tier
compensation so that our officers will be attracted to work for us rather than
our larger competitors that have greater financial resources. With respect to
variances among our named executive officers, we explain on page 12 that they
reflect differences in the size and complexity of the business units or
functions they oversee, the performance of those business units or functions and
individual performance. We discuss the reasons for those variances on pages 14,
15 and 16.
We respectfully submit that our discussion is an accurate reflection of how
our total compensation methodology worked.
2. Although you have disclosed for the named executive officers, the general
categories of metrics used to assess corporate performance and business
unit performance, you have not disclosed the actual target within each
metric. In future filings, please revise to disclose the actual
quantitative targets. To the extent you believe that this disclosure is not
required because it would result in competitive harm such that you may omit
the disclosure under Instruction 4 to Item 402(b) of Regulation S-K, please
provide a detailed supplemental analysis supporting your conclusion and
provide appropriate disclosure under Instruction 4. In discussing how
difficult it will be for you to achieve the target levels or other factors,
provide as much detail as necessary without disclosing information that
poses a reasonable risk of competitive harm.
The quantitative result for the corporate performance goal for 2007 is
disclosed on page 14 by reference to specific line items and tables in our 2007
annual report on Form 10-K. The quantitative goals for the business unit
component of the annual bonus vary not only between the exploration and
production and marketing and refining divisions, but also between units within
these divisions. As noted on page 14, the exploration and production goals
included approximately 10 financial and operating metrics, and those for
marketing and refining included approximately 20 such metrics. We do not believe
that any one of these metrics was material in determining the payout of the
business unit component of the 2007 bonus. We discuss the metrics that we
believe significantly affected the payout. We do not believe it was necessary,
nor would it enhance the reader's understanding, to include a lengthy discussion
not only of the performance of approximately 30 metrics, none of which in itself
is material, but also the weighting methodology across units and divisions that
was used to determine the payout of the business unit component of the bonus for
each of the named executive officers. Such a discussion, we believe, would not
have been "clear, concise and understandable" as required by Item 402 of
Regulation S-K.
2
In preparing our disclosure, we determined that quantitative targets for
each metric are not material to an understanding of any of the named executive
officers' compensation for 2007 (and are not otherwise material in the context
of our Compensation Discussion and Analysis). In making that determination, we
used the principles-based disclosure concept adopted by the Commission as
explained in Staff Observations in the Review of Executive Compensation
Disclosure, dated October 9, 2007, which allows each company to assess its own
facts and circumstances and determine what elements of the company's
compensation policies and decisions are material and warrant disclosure.
At pages 13-16 of the proxy statement, which includes a discussion of the
elements of the bonus plan, we discuss and analyze the target metrics that we
believe were the most important factors relevant to the Compensation and
Management Development Committee's bonus decision, certain of which are
qualitative and not quantitative, and we provide an individual analysis for each
of the named executive officers, including details as to whether each named
executive officer achieved his individual performance goals. Because we use a
mix of qualitative and quantitative performance measures, disclosure of target
numbers would not be meaningful or provide a clearer or more complete picture of
compensation determinations.
We believe that the approach we have taken is consistent with the guidance
in Staff Observations in the Review of Executive Compensation Disclosure and the
analysis called for by John W. White in his speech entitled "Where's the
Analysis: Tackling Your 2008 Compensation Disclosures" presented on October 9,
2007 at the Second Annual Proxy Disclosure Conference in San Francisco, CA,
which emphasized that performance targets are a disclosure point that may or may
not need to be addressed depending upon the compensation policies material to a
company's particular facts and circumstances. Accordingly, we respectfully
submit that we are not required to disclose quantitative corporate performance
and business unit performance targets in future filings.
Additionally, we treat our internal future financial and operational
targets as confidential. We believe competitors could use this information in
devising their own market and growth strategies in order to compete more
successfully with the Company. If the Company were to fail to attain targets for
a particular fiscal period, we believe competitors could use that information in
competing with the Company for both business and employees. However, we did
provide specific disclosure on page 13 to enhance investor understanding of the
difficulty in achieving the undisclosed target levels by stating that "For the
years 2004 through 2007, attainment of maximum payout on the business unit
metrics for exploration and production and marketing and refining on average was
never achieved, and attainment of target payout on business unit metrics for
marketing and refining was not achieved in three of those years."
We believe that our disclosure provides both discussion and analysis of the
key drivers of compensation decisions for our named executive officers and thus
gives investors an understanding of all of the elements that were material.
3
Proposal to Approve the Adoption of 2008 Long-term Incentive Plan, page 40
3. We note that "[a] maximum of 13,000,000 shares of the company's common
stock would be available for delivery under the 2008 Incentive Plan."
Please provide us with the supplemental information required by Instruction
5 to Item 10 of Schedule 14A.
Pursuant to Instruction 5 to Item 10 of Schedule 14A, we hereby advise that
we intend to file with the Commission a Registration Statement on Form S-8 under
the Securities Act of 1933, registering the Company's shares of common stock
subject to the 2008 Incentive Plan as soon as practicable after receiving
shareholder approval of the 2008 Incentive Plan.
Form 10-K for the Fiscal year Ended December 31, 2007
Engineering Comments
General
4. Please provide us with a copy of your reserve report as of December 31,
2007. Please provide this on electronic media, such as CD-ROM, if possible.
If you would like this information to be returned to you, please follow the
guidelines in Rule 12b-4 under the Exchange Act of 1934. See also Rule 83
under the Freedom of Information Act if you wish to request confidential
treatment of that information. Please send the report to James Murphy at
mail stop 7010.
A CD-ROM copy of the Report of DeGolyer and MacNaughton, Registered
Professional Engineers, as of December 31, 2007 on Proved Reserves attributable
to Hess Corporation will be sent via FedEx to Mr. James Murphy on the date
hereof. Pursuant to Rule 12b-4, we request that the reserve report be returned
to the Company. Pursuant to Rule 83 of the Commission's Rules of Practice, a
confidential treatment request for certain of the tables in that report
accompanies the CD-ROM sent to Mr. Murphy and a copy of the request, but not the
report, has been sent to the Office of Freedom of Information and Privacy Act
Operations.
* * * *
We hereby acknowledge that: (i) the Company is responsible for the adequacy
and accuracy of the disclosure in the Filings; (ii) the staff comments or
changes to the disclosure in response to the staff comments do not foreclose the
Commission from taking any action with respect to the Filings; and (iii) the
Company may not assert staff comments as a defense in any proceedings initiated
by the Commission or any person under the federal securities laws of the United
States.
4
If you have any questions concerning the foregoing, please contact me at
(212) 536-8599.
Sincerely,
/s/ George C. Barry
cc: Sean Donahue
Mellissa Campbell Duru
Division of Corporation Finance
Kevin Keogh, White & Case LLP
5