SCHEDULE 13D/A: BlackRock Amends Hess Midstream LP Stake Following $430 Million Secondary Offering

BlackRock Portfolio Management LLC has updated its Schedule 13D filing for Hess Midstream LP, detailing its beneficial ownership and the recent $430 million secondary offering of Class A Shares by Blue Holding.

Summary

• BlackRock Portfolio Management LLC reported beneficial ownership of 20,365,023 Class A Shares of Hess Midstream LP, representing 15.1% of the class.
• This Schedule 13D Amendment No. 1 updates the original filing from January 30, 2025.
• On February 10, 2025, Hess Midstream LP, along with other entities, entered into an Underwriting Agreement for a secondary offering.
• Blue Holding sold 11,000,000 Class A Shares at $39.11 per share, totaling approximately $430.21 million.
• The Underwriter, Goldman Sachs & Co. LLC, was granted a 30-day option to purchase up to an additional 1,650,000 Class A Shares at the same price.
• The secondary offering closed on February 12, 2025, following which Blue Holding redeemed 11,000,000 OpCo Class B Units for Class A Shares.
• Post-offering, there are 115,086,900 Class A Shares outstanding, plus 19,336,403 convertible Class B units held by GIP Entities.
• A 60-day lock-up period from February 10, 2025, was agreed upon by the Issuer, Blue Holding, and Hess Investments North Dakota LLC, restricting the sale of Class A Shares without underwriter consent.
• BlackRock also disclosed economic exposure through cash-settled swaps: long positions on 31,413 Class A Shares and short positions on 138,254 Class A Shares, disclaiming beneficial ownership for these.

Sentiment

Score: 6

Explanation: The document is a factual disclosure of a secondary offering and beneficial ownership update. It's neutral in tone, but the successful completion of a large secondary offering at a specified price can be seen as a positive for market liquidity and valuation clarity, balanced by the potential for supply overhang.

Positives

• The secondary offering provides liquidity for the selling shareholder (Blue Holding).
• The transaction price of $39.11 per share indicates a specific valuation for the Class A Shares at the time of the offering.

Negatives

• The secondary offering could potentially increase the supply of shares in the market, which might exert downward pressure on the share price.
• The lock-up agreement restricts the ability of certain key parties (Issuer, Blue Holding, Hess Investments North Dakota LLC) to sell Class A Shares for 60 days, limiting their immediate flexibility.

Risks

• The document mentions BlackRock's involvement in cash-settled swap agreements (long and short), which expose them to economic results comparable to or opposite of ownership, implying market risk associated with these derivative positions, though BlackRock disclaims beneficial ownership.

Future Outlook

The Issuer, Blue Holding, and Hess Investments North Dakota LLC are subject to a 60-day lock-up period from February 10, 2025, restricting their ability to sell Class A Shares without the Underwriter's consent, indicating a period of stability in share supply from these parties.

Industry Context

This filing pertains to a midstream energy company, Hess Midstream LP, which operates critical infrastructure for Hess Corporation. Secondary offerings are common mechanisms for large shareholders to monetize their stakes, and the involvement of a major financial institution like BlackRock highlights ongoing institutional interest in the energy midstream sector. The transaction reflects a specific valuation point for Hess Midstream's Class A shares within the broader energy market.

Related Party Transactions

• Blue Holding (GIP II Blue Holding, L.P.) sold 11,000,000 Class A Shares in the secondary offering.
• Blue Holding redeemed 11,000,000 OpCo Class B Units for Class A Shares.
• Blue Holding and Hess Investments North Dakota LLC are subject to a 60-day lock-up agreement with the Issuer.

Stakeholder Impact

• Shareholders: The secondary offering increases the float of Class A Shares, potentially improving liquidity but also introducing supply that could impact share price.
• Blue Holding: Successfully monetized a significant portion of its stake in Hess Midstream LP.
• Hess Midstream LP: The company itself did not raise capital in this secondary offering, but the transaction affects its share structure and market dynamics.

Next Steps

• The 60-day lock-up period for the Issuer, Blue Holding, and Hess Investments North Dakota LLC will expire around April 11, 2025.
• The Underwriter's 30-day option to purchase additional shares will expire around March 12, 2025.

Key Dates

Keywords

Hess Midstream LP, HESM, BlackRock, Schedule 13D, Secondary Offering, Class A Shares, Underwriting Agreement, Goldman Sachs, Blue Holding, GIP Entities, Lock-up Agreement, Beneficial Ownership, SEC filing, Midstream, Energy Infrastructure