10-K: Hess Midstream Reports Strong 2024 Results, Driven by Bakken Production Growth

Hess Midstream LP reported increased throughput volumes and financial results for 2024, primarily attributed to higher production activity in the Bakken shale play.

Summary

• Hess Midstream LP reported strong financial and operating results for the year ended December 31, 2024.
• Throughput volumes increased across multiple segments, including gas processing (14%), terminaling (7%), and water gathering (32%) compared to 2023.
• These increases were primarily driven by increased Hess drilling activity and higher gas capture.
• Consolidated net income for 2024 was $659.0 million, with net income attributable to Hess Midstream LP of $223.1 million.
• Adjusted EBITDA for 2024 reached $1,136.1 million.
• The company continued its equity transactions, including public offerings of Class A shares by GIP and repurchases of Class B Units from the Sponsors.
• Hess Midstream continues execution of multi-year projects to expand compression capacity and related pipeline infrastructure, adding approximately 50 MMcf/d of net compression capacity in 2024.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, increased throughput, and continued investment in growth. However, the dependence on Hess and the uncertainties surrounding the Chevron merger slightly temper the overall sentiment.

Positives

• Increased throughput volumes across multiple segments.
• Strong financial performance with increased net income and Adjusted EBITDA.
• Continued return of capital to shareholders through distributions.
• Continued investment in infrastructure expansion to support future growth.
• Successful execution of equity transactions, increasing public float.

Negatives

• Revenues and other income were partially offset by $28.5 million attributable to lower tariff rates.
• Total operating costs and expenses increased in 2024 compared to 2023.
• Interest expense increased in 2024, primarily due to new senior notes issued.

Risks

• Substantial dependence on Hess Corporation and subject to many of the same risks facing Hess.
• Potential conflicts of interest arising from Chevrons potential ownership of Hess following the completion of the Chevron Merger.
• Business uncertainties while the Chevron Merger is pending.
• Potential lawsuits relating to the Chevron Merger.
• Any decrease in the volumes of natural gas or crude oil handled.
• Exposure to commodity price risk.
• Operational hazards and risks inherent in the midstream business.
• Restrictions imposed by credit facilities and indebtedness.
• Inability to make acquisitions on economically acceptable terms.
• Regulatory, legal, and environmental risks, including those related to climate change and pipeline integrity.
• Potential inability to obtain or renew necessary permits.
• Impact of climate change and sustainability initiatives on business operations and demand for services.

Future Outlook

The Company expects continued growth supported by fee-based contracts and a disciplined financial strategy, with a focus on capitalizing on Hess Bakken production growth and attracting additional third-party business. All of our volumes are expected to be above currently established MVC levels in 2025, 2026 and 2027.

Industry Context

The announcement highlights Hess Midstream's strong position within the Bakken shale play, a major oil-producing region in North America. The company's performance is closely tied to the production activity of Hess Corporation and the overall health of the oil and gas industry in the region.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitor performance. A comprehensive comparison would require analyzing the financial and operational metrics of other midstream companies operating in the Bakken, such as ONEOK, Targa Resources, and Energy Transfer, and comparing their growth rates, profitability, and contract structures.

Legal Proceedings

• The Company finalized a settlement agreement with the DEQ for a total administrative penalty amount of $320,000 in December 2024, related to a produced water release in 2022.

Related Party Transactions

• Substantially all of the Company's revenues are derived from transactions with Hess and its affiliates.
• The Company has long-term, fee-based commercial agreements with Hess for various midstream services.
• The Company has an omnibus agreement and an employee secondment agreement with Hess.
• The Company has a gas processing agreement with LM4, a joint venture with Targa Resources Corp.

Stakeholder Impact

• Shareholders: Positive impact due to increased distributions and strong financial performance.
• Employees: No direct impact mentioned, but the overall health of the company suggests job security.
• Customers: Positive impact due to increased capacity and continued investment in infrastructure.
• Suppliers: No direct impact mentioned.
• Creditors: Positive impact due to strong financial performance and ability to service debt.

Next Steps

• Continue execution of multi-year projects to build new compressor stations and associated pipeline infrastructure.
• Bring two new greenfield compressor stations online in 2025.
• Pursue strategic relationships with third-party producers and other midstream companies.
• Monitor the progress and outcome of the arbitration related to the Chevron Merger.

Key Dates