Hess Midstream Q3 2024 Earnings Summary

On October 24, 2024, Hess Midstream (HESM) reported robust third-quarter performance and a positive growth outlook during its earnings call.

The company highlighted significant throughput volumes across its operations, with President and COO John Gatling noting that Hess Corporation (NYSE:HES)'s Bakken production exceeded expectations.

CFO Jonathan Stein underscored a solid financial strategy prioritizing shareholder returns, with substantial capital returned since early 2021. Looking ahead, Hess Midstream reaffirmed its 2024 throughput guidance and projected continued growth in throughput and EBITDA through 2026.

Key Takeaways

• Hess Midstream reported strong Q3 performance with high throughput volumes in gas processing, crude terminaling, and water gathering.
• Bakken production by Hess Corporation exceeded guidance, aiding robust performance.
• The company is committed to returning $1.85 billion to shareholders since 2021.
• Q4 2024 projections include net income between $170 million and $185 million and adjusted EBITDA between $295 million and $310 million.
• Expected capital expenditures for 2024 are around $270 million, with plans for a new gas processing plant.
• The outlook indicates steady third-party volume growth in the Bakken, focusing on additional volume capture and supporting Hess's production growth.
• The company is evaluating potential M&A opportunities to strengthen its basin position.

Company Outlook

• Hess Midstream expects to maintain Bakken production levels in Q4 2024.
• Throughput guidance for 2024 is forecasted at 405 to 415 million cubic feet per day for gas processing, 120,000 to 130,000 barrels per day for crude terminaling, and 115,000 to 125,000 barrels per day for water gathering.
• Approximately 10% growth in throughput is anticipated compared to 2023, with continued growth expected through 2026.

Bearish Highlights

• Wildfires in North Dakota disrupted volumes due to power outages, resulting in a week-long operational interruption.

Bullish Highlights

• Hess Midstream's financial strategy has yielded strong shareholder returns while maintaining a solid balance sheet.
• Capital allocation supports growth, with an expected 5% EBITDA increase in Q4 and total growth of around 12% from 2023 to 2024.
• Anticipated gas processing volume growth exceeds oil volume growth, with a new plant expected online by 2027.

Misses

• No specific misses were noted in the earnings call.

Q&A Highlights

• Wildfires primarily impacted volume rather than costs, with recovery expected in Q4.
• Share repurchases remain part of the broader capital return initiative.
• The company maintains strict criteria for M&A to focus on capital returns.

In conclusion, Hess Midstream has shown strong Q3 results and is geared towards steady growth with strategic investments and a focus on shareholder returns, well-positioned to navigate challenges in the energy sector.

InvestingPro Insights

Hess Midstream's strong Q3 performance and ongoing growth prospects are bolstered by a focus on shareholder returns, dividend growth, and operational efficiency, consistently exceeding market expectations.

Full Transcript – Hess Midstream Partners LP (NYSE:HESM) Q3 2024 Conference Call

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2024 Hess Midstream Conference Call. My name is Gigi, and I'll be your operator for today. [Operator Instructions]. Please be advised that today's conference is being recorded for replay purposes. I would now like to turn the conference over to Jennifer Gordon, Vice President of Investor Relations. Please proceed.

Jennifer Gordon

Thank you, Gigi. Good afternoon, everyone, and thank you for participating in our third-quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hessmidstream.com. Today's conference call contains projections and other forward-looking statements within the meaning of federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied. These risks include those set forth in the Risk Factors section of Hess Midstream's SEC filings. Today's call may also reference certain GAAP financial measures. Reconciliation of the differences between these non-GAAP financial measures and the most comparable GAAP financial measures can be found in the earnings release.

With me today are John Gatling, President and Chief Operating Officer; and Jonathan Stein, Chief Financial Officer. I'll now turn the call over to John Gatling.

John Gatling

Thanks, Jennifer. Good afternoon, everyone, and welcome to Hess Midstream's Third Quarter 2024 Conference Call. I will discuss our Q3 performance and review Hess Corporation's results and outlook for the Bakken. Jonathan will follow with our financial results and guidance.

In Q3, Hess Midstream maintained strong operating and financial performance, with throughput volumes averaging 419 million cubic feet per day for gas processing, 122,000 barrels of oil per day for crude terminaling, and 128,000 barrels of water per day for water gathering. As guided, throughput remained stable from Q2 due to planned maintenance at the Little Missouri four gas plant, which was successfully completed. System availability remained high, and gas capture continued strongly.

For the Bakken, Hess's reported Q3 net production averaged 206,000 barrels of oil equivalent per day, exceeding the top of guidance at 200,000 to 205,000 barrels. Production is expected to be 200,000-205,000 barrels net in Q4, mainly due to lower anticipated volumes under percentage of proceeds contracts along with wildfire impacts.

We formally reaffirm our 2024 throughput guidance, expecting gas processing at 405 million-415 million cubic feet per day, crude terminaling at 120,000-130,000 barrels, and water gathering at 115,000-125,000 barrels. Aiming for approximately 10% growth across oil and gas systems in 2024 compared to 2023, driven by Hess development and gas capture focus, partially offset by October wildfires.

Jonathan Stein

Thanks, John. Good afternoon, everyone. Our financial strategy prioritizes returns to shareholders, supported by a track record of strong returns.

Since 2021, we have returned $1.85 billion to shareholders via share repurchases and increased distributions by over 50%. Total shareholder return yield is among the highest in the midstream sector, with leveraged roughly 3.2 times adjusted EBITDA supporting capacity to execute our program.

For Q3, we recorded a net income of $165 million, adjusted EBITDA of $287 million, reflecting throughput-driven revenue increases. Our gross adjusted EBITDA margin held steady at about 80%. Forecasting Q4 net income between $170 million-$185 million, with adjusted EBITDA of $295 million-$310 million, indicating a 5% increase over Q3, considering volume growth despite wildfire effects.

The plan through 2026 suggests around 10% annualized growth in oil and gas volumes, with steady CapEx supporting adjusted free cash flow enhancements.

This concludes my remarks. I will now turn the call back to the operator.

Operator

[Operator Instructions]. Thank you for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information, see our T&C.