10-Q: Hess Midstream LP Q1 2026 Earnings Report

Hess Midstream LP reports increased revenues and Adjusted EBITDA for Q1 2026, driven by higher tariff rates and third-party services, despite slight decreases in throughput volumes.

Summary

• Hess Midstream LP reported total revenues of $390.1 million for the first quarter of 2026, an increase from $382.0 million in the prior-year quarter.
• Net income attributable to Hess Midstream LP was $87.6 million, or $0.68 per Class A share, compared to $71.6 million in Q1 2025.
• Adjusted EBITDA was $299.8 million for Q1 2026, up from $292.3 million in Q1 2025.
• Operating costs and expenses increased to $152.0 million from $144.6 million, primarily due to higher depreciation expense.
• Net cash provided by operating activities increased significantly to $253.3 million from $202.4 million in the prior year.
• The company declared a quarterly cash distribution of $0.7792 per Class A Share, an increase from the previous quarter.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, with solid revenue and Adjusted EBITDA growth, increased distributions, and strong operating cash flow, though some volume declines and increased costs warrant monitoring.

Positives

• Total revenues increased to $390.1 million in Q1 2026 from $382.0 million in Q1 2025.
• Net income attributable to Hess Midstream LP rose to $87.6 million from $71.6 million year-over-year.
• Adjusted EBITDA increased to $299.8 million from $292.3 million.
• Net cash provided by operating activities saw a substantial increase to $253.3 million from $202.4 million.
• The quarterly cash distribution per Class A Share increased to $0.7792 from $0.7641 in the prior quarter.
• Third-party services revenue increased significantly, indicating growing diversification.
• The company successfully placed a new compressor station into service, adding 50 MMcf/d of compression capacity.

Negatives

• Total operating costs and expenses increased to $152.0 million from $144.6 million, mainly due to higher depreciation.
• Throughput volumes decreased by 5% for oil terminaling and 9% for water gathering compared to Q1 2025.
• Income tax expense increased to $28.2 million from $23.0 million, primarily due to ownership changes.
• The fee structure in the Secondary Term of commercial agreements may provide less downside risk protection compared to the Initial Term.

Risks

• Fluctuations in crude oil, natural gas, and NGL prices can indirectly affect production rates and investments, potentially impacting throughput volumes.
• Sustained periods of low commodity prices could materially and adversely affect the quantities of oil and natural gas that can be economically produced.
• The company's ability to execute its growth strategy depends on crude oil and natural gas production in the Bakken area.
• The fee structure in the Secondary Term of commercial agreements, based on inflation escalators capped at 3%, may offer less downside protection than previous structures.
• Risks associated with Chevron's ability to satisfy obligations, including meeting drilling plans and delivering nominated volumes.
• Potential for disruptions due to natural and human causes, including accidents, severe weather, labor disputes, and cyber-attacks.
• Limitations on access to debt or capital markets on acceptable terms.
• Risks and uncertainties associated with Hess's integration with Chevron following the merger.

Future Outlook

The company expects cash generated from operations, cash on hand, borrowings under its revolving credit facility, and potential issuances of debt or equity securities to be sufficient to meet operating requirements, planned capital expenditures, debt service, and quarterly distribution requirements. The company is also pursuing strategic relationships with third-party producers to maximize utilization rates.

Management Comments

• Consolidated net income decreased $3.7 million while Adjusted EBITDA increased $7.5 million for the first quarter of 2026 compared with the first quarter of 2025.
• The company's long-term, fee-based commercial agreements with Chevron provide cash flow stability and minimize direct exposure to commodity price fluctuations.
• Management seeks to maximize profitability by effectively managing operating and maintenance expenses.
• Adjusted EBITDA is used to analyze performance and liquidity, and is considered a key metric for assessing operating performance, cash flow generation, and debt servicing ability.

Industry Context

StockSavvy.ai notes that Hess Midstream LP's performance in Q1 2026 reflects the resilience of the fee-based midstream model in the current energy market. The increase in third-party services suggests a growing diversification beyond its primary sponsor, Chevron, which is a positive trend in the industry.

Comparison to Industry Standards

• Hess Midstream LP's Adjusted EBITDA of $299.8 million for Q1 2026 demonstrates strong operational performance within the midstream energy sector.
• The company's BBB- (S&P) and Ba1 (Moody's) credit ratings are consistent with investment-grade benchmarks for midstream operators, indicating financial stability.
• The increase in distributions per Class A Share to $0.7792 aligns with industry trends of returning capital to shareholders, provided it is supported by sustainable cash flows.
• Compared to peers like Enterprise Products Partners (EPD) or Magellan Midstream Partners (MMP), Hess Midstream's fee-based structure offers a degree of insulation from commodity price volatility, a key differentiator in the sector.

Legal Proceedings

• The company is subject to federal, state, and local environmental laws and regulations. Reserves for estimated remediation liabilities were $2.0 million in Accrued liabilities and $0.9 million in Other noncurrent liabilities as of March 31, 2026.
• In the ordinary course of business, the company is party to various judicial and administrative proceedings. Based on currently available information, it is remote that the outcome of known matters would have a material adverse impact on financial condition, results of operations, or cash flows.

Related Party Transactions

• Long-term fee-based commercial agreements with Chevron for gas gathering, crude oil gathering, gas processing and fractionation, storage, terminaling and export, and water handling services.
• Chevron is obligated to provide minimum volume commitments (MVCs) under these agreements.
• Chevron pays shortfall fees if MVCs are not met.
• Deferred revenue of $15.7 million was included in Accrued liabilities as of March 31, 2026, related to MVC shortfall fees.
• Approximately 96% of revenues in Q1 2026 were attributable to commercial agreements with Chevron.
• Chevron provides operational and administrative services under omnibus and employee secondment agreements, with charges included in operating and maintenance and general and administrative expenses.
• Gas processing agreement with Little Missouri 4 (LM4), a joint venture with Targa Resources Corp., involving processing fees and reimbursement of electricity costs.

Stakeholder Impact

• Shareholders: Increased quarterly cash distribution declared, indicating a positive return on investment.
• Creditors: Stable credit ratings (BBB- by S&P, Ba1 by Moody's) and sufficient liquidity expected to meet debt service requirements.
• Suppliers: Continued business operations and fee-based agreements with Chevron and third parties provide a stable revenue stream.
• Employees: Services provided by Chevron under secondment agreements continue to support operations.

Next Steps

• Continue to pursue strategic relationships with third-party producers and midstream companies to maximize utilization rates.
• Monitor and manage operating and maintenance expenses to maximize profitability.
• Evaluate the impact of new accounting pronouncements (ASU 2024-03) on consolidated financial statements.
• The company's partnership agreement requires distribution of all available cash to shareholders.

Key Dates

Recommendation

The filing shows expected performance with increased revenues and Adjusted EBITDA, alongside a higher distribution. However, slight declines in throughput volumes and increased operating costs, coupled with the potential for less downside protection in the Secondary Term of contracts, suggest a 'hold' recommendation. Investors should monitor third-party volume growth and cost management.

Keywords

Hess Midstream LP, 10-Q, Quarterly Report, Midstream Energy, Gathering, Processing, Terminaling, Chevron, Adjusted EBITDA, Revenues, Net Income, Cash Flow, Distributions