Hess also said in a press release that it would divest oil and gas assets in Indonesia and Thailand and sell midstream businesses in the North Dakota Bakken shale by 2015.
Hess's shares have already risen 26 percent during 2013, after underperforming energy sector competitors and the S&P 500 in recent years.
The company's breakup plan follows similar moves made by Conoco Phillips and Marathon Petroleum to split exploration businesses from refining and marketing and deliver value to investors.
With proceeds from asset sales and a reduction in overall expense, Hess appears to be ready for a more aggressive drilling program that could increase the company's oil and gas production growth rate in coming years.
The company now targets a five year production growth rate of 5 to 8 percent, and forecasts "mid-teens" production growth between 2012 and 2014.
Shareholders also will see an immediate payout as Hess executes the multi-year plan to focus exclusively on oil exploration and production.
Hess on Monday said that its annual dividend will increase to $1 a share beginning in the third quarter. The company also said it had authorized up to $4 billion in share buybacks tied to the timing of asset sales.
"Our Board and management team have been pursuing a multi-year strategy to transform Hess into a focused E&P company," John Hess, chairman and CEO of Hess, said in a statement.
"By 2014, Hess will be a pure play E&P company with a tremendous portfolio comprised of higher growth, lower risk assets."
Hess's decision to exit retail, marketing and trading comes on the heels of a large stake taken by activist investor Elliott Associates, which in January said it would make a near $1 billion investment in the company in an effort to gain seats on the company's board.
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While Elliott Associates doesn't appear to have impacted Hess's new corporate strategy or board configuration—the company said on Monday it's nominated six new independent board directors—those betting on the company's refocus on oil and gas drilling may have won out.
In a New York Times interview, John Hess said a board composed of directors without energy experience created poor optics. Hess's new directors appear to have significant operational or financial experience in the energy sector.
Following Elliott's stake, Hess hired Goldman Sachs to sell its terminal network in the U.S. and close a terminal in Port Reading, N.J., which will release $1 billion in working capital. The network, concentrated on the East Coast, has a storage capacity of 28 million barrels of oil spread among 19 terminals.
The company also announced asset sales worth a total of $2.4 billion, in addition to divestitures ranging from oilfields in Russia to the Eagle Ford shale in Texas, in recent months.
In November, Jim Cramer said at The Deal's Deal Economy 2013 that Hess should split off its downstream businesses because its oil and gas assets would be worth more without the added expense of running its refining business.
Other oil and gas giants, notably Transocean, are also feeling the heat of activist investors in 2013.
The moves indicate that the energy sector is poised for another busy year of asset sales and board transitions after many of the nation's largest players, from ConocoPhillips and Sunoco to Chesapeake Energy, underwent dramatic change in 2012.
(Read More: Finding an Edge in the Booming US Energy Market)
In January, Carl Icahn increased his stake in oil rig contractor Transocean to 5.6 percent and called for the company to pay out a dividend of $4 a share to investors.
Icahn, who is now Transocean's largest shareholder, noted in a filing that the recommendation may go up for vote at the company's annual shareholders meeting and could be ratified without board support if a majority of shareholders approve the proposal.
Speculation that Transocean could increase its capital return to shareholders began in 2012 after the company admitted to criminal charges for its role in a 2010 oil spill in the Gulf of Mexico and agreed to pay out $1.4 billion in fines to settle claims with the Department of Justice.
Icahn has had a busy 12 months in the oil and gas space, highlighted by an activist stake in embattled driller Chesapeake Energy, which has netted billions in asset sales and a revamping of the company's board.
Sandridge Energy—another noteworthy energy sector activist play—is currently battling hedge funds Mount Kellett Capital Management and TPG-Axon Capital Management over whether CEO Tom Ward should be fired.
Occidental Petroleum is another underperforming energy sector giant facing similar pressure amid leadership change.
All told, activist investments and management changes indicate a cloudy outlook for the oil and gas industry, even as refining profits rebound and gas prices remain high.
Many drillers have spent wildly to gain access to highly valued shale assets, but may be stretched financially as drilling programs kick into gear.
For Hess, an exit from midstream businesses may help the company finally drill its portfolio of shale energy reserves, helping to boost overall production in coming years.