Hess Midstream LP (HESM) is a fee-based, growth-oriented midstream company that owns, operates, develops, and acquires a diverse set of midstream assets in the Bakken and Three Forks shale plays in North Dakota. HESM's operations are organized into three reportable segments: gathering, processing and storage, and terminaling and export.

Financials

In the first quarter of 2024, Hess Midstream delivered strong financial and operational results, demonstrating its ability to execute its strategy and generate consistent returns for shareholders. HESM reported net income of $161.9 million, up from $142.2 million in the prior-year quarter. Annual net income for 2023 was $118.6 million. Revenues for the first quarter of 2024 were $355.6 million, compared to $305.0 million in the same period of 2023. For the full year 2023, Hess Midstream generated $1,348.6 million in revenue.

Operational Performance

Hess Midstream's operational performance was also impressive, with throughput volumes increasing across its key assets. Gas processing volumes averaged 393 million cubic feet per day in the first quarter of 2024, up from 338 million cubic feet per day in the prior-year quarter. Crude oil terminaling volumes averaged 117,000 barrels per day, compared to 104,000 barrels per day in the first quarter of 2023. Water gathering volumes increased to 116,000 barrels per day, up from 79,000 barrels per day in the same period last year.

The company's strong operational execution translated into robust financial results. Adjusted EBITDA, a key performance metric for Hess Midstream, was $275.8 million in the first quarter of 2024, up from $239.0 million in the prior-year quarter. For the full year 2023, Hess Midstream generated $866.4 million in operating cash flow and $642.9 million in free cash flow.

Capital Return Strategy

Hess Midstream's financial strategy continues to prioritize the return of capital to shareholders. Since the beginning of 2021, HESM has returned $1.65 billion to shareholders through accretive repurchases, reducing its total unit count by over 20%. In addition, Hess Midstream has increased its distribution per Class A share by approximately 45% over this period, targeting at least 5% annual distribution growth.

In the first quarter of 2024, Hess Midstream completed a $100 million unit repurchase transaction, which was accretive on both a distributable cash flow per Class A share basis and an earnings per Class A share basis. Following this repurchase, HESM expects to have more than $1.25 billion of financial flexibility through 2026 that can be used for continued execution of its return of capital framework, including potential ongoing unit repurchases.

Liquidity

Hess Midstream's strong financial position is further evidenced by its leverage ratio of approximately 3.2x adjusted EBITDA, one of the lowest among its midstream peers. This financial flexibility and balance sheet strength provide HESM with the ability to continue investing in growth projects while also returning capital to shareholders.

Outlook

Looking ahead, Hess Midstream is reaffirming its previously announced 2024 guidance. For the full year 2024, HESM expects net income of $670 million to $720 million and adjusted EBITDA of $1.125 billion to $1.175 billion, with total expected capital expenditures of $250 million to $275 million. This is expected to generate adjusted free cash flow of $685 million to $735 million, with the excess being available for further shareholder returns.

Growth Strategy

Hess Midstream's growth strategy is focused on supporting the development activities of its anchor customer, Hess Corporation, as well as capturing incremental third-party volumes in the Bakken. HESM is progressing several multi-year projects, including the construction of greenfield, high-pressure gas gathering pipelines and two new compressor stations, which are expected to provide an additional 85 million cubic feet per day of gas compression capacity when brought online in 2025.

Conclusion

The company's strong operational performance, financial discipline, and commitment to shareholder returns have positioned Hess Midstream as a differentiated midstream player in the industry. With its diversified asset base, long-term commercial agreements, and growth opportunities, Hess Midstream is well-equipped to continue delivering consistent and sustainable returns to its shareholders.