10-Q: Hess Midstream LP Reports First Quarter 2025 Results, Boosts Distribution

Hess Midstream LP announces its financial results for the first quarter of 2025, highlighting increased revenues and a higher cash distribution per Class A Share.

Summary

• Hess Midstream LP reported a consolidated net income of $161.4 million for the first quarter of 2025.
• Net income attributable to Hess Midstream LP was $71.6 million, or $0.65 per Class A Share.
• The company's net cash provided by operating activities was $202.4 million.
• Adjusted EBITDA for the quarter was $292.3 million.
• A cash distribution of $0.7098 per Class A Share was declared, representing an increase of $0.0086 per share compared to the previous quarter.
• Revenues and other income increased to $382.0 million, up from $355.6 million in the prior-year quarter, driven by higher physical volumes.
• Total operating costs and expenses rose to $144.6 million, compared to $133.6 million in the prior-year quarter.
• Interest expense, net, increased to $56.4 million from $48.5 million in the prior-year quarter.
• Income tax expense increased to $23.0 million, up from $14.3 million in the prior-year quarter.
• Throughput volumes increased for gas processing (8%), oil terminaling (7%), and water gathering (9%) compared to the first quarter of 2024.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company reported increased revenues and a higher distribution, but also faced increased expenses and debt-related costs. The outlook is stable, with continued reliance on existing commercial agreements.

Positives

• Revenues increased due to higher physical volumes.
• The company increased its cash distribution per Class A share.
• Throughput volumes increased across multiple segments.
• The company is pursuing strategic relationships with third-party producers to maximize utilization rates.

Negatives

• Operating costs and expenses increased due to higher employee costs, pass-through costs, and depreciation.
• Interest expense increased due to new debt issuances and an extinguishment loss.
• Income tax expense increased due to ownership changes.
• The company recognized an extinguishment loss of approximately $2.0 million related to the redemption of senior unsecured notes.

Risks

• Commodity price fluctuations can indirectly influence activities and results of operations over the long-term.
• The company's future results are significantly affected by its commercial agreements with Hess.
• The majority of the company's systems entered the Secondary Term of commercial agreements, which includes a fixed fee structure that may provide less downside risk protection.
• The company's ability to execute its growth strategy in the Bakken depends on crude oil and natural gas production in that area.

Future Outlook

The company expects that its long-term, fee-based commercial agreements with Hess will provide cash flow stability and minimize direct exposure to commodity price fluctuations. The company also expects that all of its volumes will be above currently established MVC levels in 2025, 2026 and 2027.

Industry Context

Hess Midstream operates in the midstream energy sector, providing services such as gathering, processing, and transportation of crude oil, natural gas, and NGLs. The company's performance is influenced by the production levels in the Bakken and Three Forks shale plays, as well as the overall supply and demand dynamics in the oil and gas markets.

Comparison to Industry Standards

• It is difficult to compare Hess Midstream directly to other companies without detailed knowledge of their specific asset base, contract structures, and geographic focus.
• However, generally, midstream companies with similar asset profiles and contract structures often trade based on multiples of EBITDA or distributable cash flow.
• Key competitors in the midstream space include Enterprise Products Partners, Magellan Midstream Partners, and Energy Transfer Partners.
• These companies often have diversified asset bases and customer portfolios, which can provide greater stability compared to companies heavily reliant on a single customer or region.

Legal Proceedings

• The Company is subject to federal, state and local laws and regulations relating to the environment.
• On August, 12, 2022, the Company became aware of a produced water release from an underground pipeline located approximately 8 miles north of Ray, North Dakota.
• It is estimated that approximately 34,000 barrels of produced water were released, causing impacts to soils, crops, and groundwater.
• Remediation infrastructure was put in place and remediation and monitoring is ongoing.
• Based on currently available information, we believe it is remote that the outcome of known matters would have a material adverse impact on our financial condition, results of operations or cash flows.

Related Party Transactions

• The company has long-term fee-based commercial agreements with certain subsidiaries of Hess to provide various services.
• Revenues attributable to these agreements with Hess were 98% for both the three months ended March 31, 2025 and 2024.
• Hess provides substantial operational and administrative services to the company under omnibus and employee secondment agreements.

Stakeholder Impact

• Shareholders will receive an increased cash distribution of $0.7098 per Class A Share.
• The company's performance is tied to the success of Hess's operations in the Bakken, impacting both companies.
• The company's environmental remediation efforts impact the local community and environment.

Next Steps

• The company will continue to focus on expanding its compression capacity and gas capture capabilities.
• The company will continue to pursue strategic relationships with third-party producers to maximize utilization rates.
• The company will pay a quarterly cash distribution of $0.7098 per Class A Share on May 14, 2025.

Key Dates

Keywords

Hess Midstream, Financial Results, Midstream, EBITDA, Distribution, Volumes, Bakken, Operations