Hess Midstream (HESM) 25 Apr 242024 Q1 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the First 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.

Gigi. you, Thank and quarter everyone, for in participating Good conference thank call. first earnings our afternoon, you

today the GAAP Our on the was projections A may reconciliation with website, federal www.hessmidstream.com. statements earnings measures financial on the the securities Today's non-GAAP conference appears release to within are the measures. Gatling, conference issued Stein, those of include discuss Chief laws. differences this These call be risks earnings the John Chief in Officer; call, such turn implied and between Midstream's and these me now unknown John cause over those subject I'll can With release. and filings we or SEC. Also, the of contains meaning forth and that may and of section financial statements forward-looking are Operating actual These financial expressed comparable risks certain Risk directly results known non-GAAP uncertainties and in call to Gatley measures Hess Financial other Jonathan set the and morning in differ President found to our Officer. Factors today's from statements. most

capture to review our business Thanks, strategy. I'll demonstrates In and terminal per Conference for XXX to and gas safe averaged first winter offset experienced overall Jennifer. slightly strong Corporation's Hess guidance, continued objectives for Bakken. results of XXX,XXX gas and will XXX,XXX oil broadly outlook quarter, quarter safe water of our financial afternoon, January, per of review a volumes lower a were volumes results then In Throughput water fourth the by crude weather delivery barrels resulting oil in the in also gathering. XXXX quarter, processing, the for Hess our for reflecting day day the guidance. everyone, performance, per our manner. continued performance. I'll compared volumes discuss progress flat to Midstream's cubic severe welcome Good we First in line first XXXX barrels with which Today, Quarter and Call. our focus million on foot Jonathan day and efficient

teen commitment to continue support achieving Hess' end X XXXX. to by of the flaring We

between production the average today, severe to reiterated Hess Hess compared first net of fourth perceived February reported to quarter upstream to Bakken barrels also of contracts, turning which and and Now which March. equivalent strong flat not XXXX, the highlights. of included quarter running net continue volume day Earlier Bakken net Hess their quarter a XX,XXX day for X-rig per drilling per as in a XXX,XXX broadly Midstream to followed the barrels second January, production equivalent from impact quarter. program again, oil in day, was throughput XXXX per oil barrels of test in of reflecting plans the and percent production do XXX,XXX expect winter experienced proceeds averaged recovery weather by XXX,XXX in First

was which We're earnings Turning previously in included announced release. guidance, Hess XXXX Midstream guidance. our throughput to reaffirming our

average between average processing volumes terminaling of systems driven primarily XXX,XXX day increase per oil and For XXXX, XXX,XXX and This per barrels day, to gas day. compared gathering gas water XXXX, per to full by we're between across water Hess' activity. development XXX,XXX of oil average foot an volumes proved and between our to barrels XX% represents forecasting year and cubic million to approximate million XXX XXX,XXX volumes and XXX

quarter. on the focusing Now second

to Hess' Plant, capture. planned higher continued production routine the our at planning We gas Gas quarter, in to seasonal focus expect driven the second growth volume and gas the and conduct quarter addition on first maintenance Tioga systems, mainly across we're from maintenance our normally In oil growth activity. which by is

to turning XXXX capital Hess Now program. Midstream's

expected gas expected will aggregate to $XXX are foot summary, we Full compression to and and per year We online and of to $XXX basin. capacity are development growth pipelines focused provide million unchanged million. X Hess are priorities on generation XX continue our and compressor to capital our which gas gathering additional focused supporting include per the announced XXXX and stations, to our turn potential in remain to review schedule. are and the They day. are progress to the to January financial capital Jonathan excellent The safely remain results in progressing drive flow on return high-pressure continue an between sustainable million XXXX guidance. cubic cash when of our XXXX greenfield, over shareholders. in on multiyear construction I'll third-party plans which now in XXX day brought expenditures capital the make delivering our and and to projects operational strategy, and In million initially we to additional expandable call total executing

Thanks, afternoon, everyone. John, good and

We differentiated Since billion record that have returns. continue demonstrated returned to through have shareholders the of accretive financial reduced capital by count over XX%. of shareholder with track shareholders of unit prioritize beginning execute to a $X.XX our return total our repurchases strategy we that to XXXX,

to distribution distribution repurchase. of addition X increases annual growth the each level and our combination In following targeted X%

approximately XX% We our by share period. over A this increased per have distribution Class

in generate through X.Xx potential including $X.XX return we yield deliver significant peers. also our sheet for is distributable immediate quarterly Supported basis distribution capacity to to one by accretive lowest through returns, for XXXX distribution our increase. Midstream share repurchases. shareholder As unit in was annual financial addition we balance returns X.X% strength. in the that to targeted flexibility announced capital shareholder incremental our return a our Class differentiated among X% level while flow this per completed highlighting repurchase, approximately XXXX in further than of is we peers, of recently our of both maintaining Furthermore, our earnings result, of first one a Class billion A ability shareholder In A basis. January, Utilizing increase share transaction a highest of and per of adjusted to the Class shareholders our million, an EBITDA our this March, greater A $XXX announced repurchase expect we leverage on our cash total that share of an

As amount done maintains same the reduced flow we have in before at level with distributed distribution approximately the past, share following increase count cash the the this the repurchase, repurchase. as our

of to repurchases. framework, have expect we including repurchase, potential XXXX return of billion financial unit $X.XX can execution the flexibility that to more than continued of continue be our capital to unit ongoing through Following

Turning to our results.

have significant million reset to lower operating fourth capture rates Total severe January, described for in the of we $X volumes weather quarter increased higher a well January, approximately of relative leverages, oil $XXX by of due net XXXX. slightly offset the million, XXXX, quarter the time. million million at quarter decreased to as gas the fourth Adjusted driven was quarter of primarily driven EBITDA of follows: to as quarter the in was costs reduction the tariff revenue were for strength slightly continued by as $XXX primarily that as compared excluding first pass-through quarter to $XXX in by income winter by in XXXX. XXXX, Adjusted for compared $XXX first the million the first XXXX fourth For EBITDA for

the for quarter, of were $X activity fourth by the due of changes Terminaling As by in follows: million. expenses first processing segment decreased and range. due revenues favorable expenses, the and where we the resulting compared quarter million. of excluding to allocations $XXX depreciation as more With as revenues million, and by quarter, of pass-through approximately the result, lower seasonably wells weather with end XXXX. EBITDA high high revenue Gathering general approximately million, earnings as seasonally $XX Total LMX guidance amortization, to $XXX in to as come above fourth in maintenance had cost operating revenues proportional of million, approximately approximately a administrative net by for primarily and million online, physical share volumes we well XXXX revenues increased growing our rest expect unseasonably costs decreased decreased and continued $X our adjusted maintenance lower $X growth due accelerated expenses and of

adjusted maintained at operating quarter approximately leverage. EBITDA was for XX%, continued our strong first Our highlighting gross the margin

million. First our which excluding expenditures net free $XX in resulting unit approximately million, of flow amortization $XX was funding facility $XXX includes million approximately balance quarter was quarter on transaction. $XXX end, drawn approximately at interest, adjusted had of And our $XXX costs, a of capital revolving credit million repurchase We deferred cash recent finance million. of

guidance. to Turning

by offset at planned second reflecting includes maintenance higher to quarter the scheduled $XXX mentioned. million be approximately income higher the maintenance higher to $XXX be expect million work gas QX, million from to net we the to as adjusted million, costs. $XXX operating routine EBITDA including and OpEx in and Tioga volumes approximately revenue, John $XXX plant, XXXX, For This of seasonally

We with increase the CapEx levels. and higher second third also consistent quarters, seasonally expect in to activity

$XXX $XXX of and of For the capital guidance billion expected adjusted income to full million, million announced $XXX $X.XXX are generate of reaffirming $XXX expect with all adjusted higher million million and distribution grow net adjusted billion, expect expect we share previously total million flow to $XXX distribution year to XXXX, expenditures X% free annually to EBITDA with growing at we to $X.XXX of to million distribution. A $XXX least cash after fully Class flow we new funding of targeted targeted the cash million, free excess approximately $XXX for from our level,

quarter gas and resulting the systems the and second higher growing revenues adjusted volumes through of increasing expect EBITDA expected We rest in seasonally quarters oil, of with across and year. in XXXX the water operating year, the costs in third through each

half financial to questions. half. happy incremental EBITDA by answer and We'll and As have will X% now bite call trajectory our delivered of the shareholders. very to to financial summary, a of higher anticipate to any that we of shareholders strategy midpoint operator. opeartional year and pleased over to In of our the ongoing relative consistent remarks. to capital implied visible This additional the to our on the intended first in the focus growth guidance, differentiated a I second forward approximately turn concludes we our underpin metrics with in unique be be adjusted capital are to report to the my

Thank you. [Operator Instructions].

of Our first Citi Erwin the from line question comes from Doug

for Thanks the question. Okay.

the with growth second start to trying expectations. half Just

You year. relative about kind of the X% to the half first just talked of

drivers of if bridge some second the can of kind Just wondering year. the of that into talk half growth the about you main that there

of end And turnarounds the wondering about puts Just of impacts driven one-time absence the the high you and on the of some versus of the that the range talk top maybe of weather the organic that. of some of and end could drive year. kind or takes growth the for low of could is rest then much how by just just that

Maybe financial hand then talk a take about little the Jonathan side. to and to I'll Sure. volume, I'll it the over bit

obviously, as I So was script. my we challenging and volumes, had I say very that on the weather the would the in January. in January But recovery weather February in from strong mentioned the March,

QX we we the grow to when the volumes to some through you As 'XX anticipate of to year. expect stable there. a growth mean I QX, do guidance we're strong 'XX, we growth that year, that our relatively the growth the trajectory. would look the expecting be We into end and had through rest from strong from of have the at

Hess' good, feel from opportunity very well. from perspective, lot on growth, them you performance the earlier a as So there's to like this release our has been morning of to as continue probably we saw the support

So, higher throughput into volumes. again, just translating we're that

would out we're is weather now. the As We've unpredictable. weather mean, takes, good far of and puts of kind delivery winter the as overall the the very snap coming always that of exception And we in We're seeing I very January. had that of winter cold very remaining a the strong. had throughput and I kind with say

anything So wanted Jonathan, I there's add? you know, to if don't else

No, we of Yes. of the expect And good. that through rest I think walk the for kind year. trends let me just the that was

continue growth, we look but we growth. as continued that as into said, will revenue QX, expect to drive volume John So

the we into And as OpEx. at we seasonally maintenance QX, have plant that, costs Tioga go with we expect on discussed. some As then top higher we incremental of associated routine

that will So you QX. EBITDA into if for guidance our take

be expect and volume level. into move would we therefore, we continued as already revenue higher again OpEx So growth growth. at a QX,

have then in lower And the the we into in seasonally really, continuing, volume typically also in we expect as primarily volumes. growth So gives accelerated expect have EBITDA of again. QX, again, really QX, that OpEx growth EBITDA There by we'll QX, you move we have so but benefit driven we trend. we'll growth that

the higher and and again OpEx then growing and QX through QX. QX in expecting revenue year lower OpEx then continuing Your quarter each

That's at quarter throughout And here year, think touch rate kind relative fee Okay. of just the the just those that those the directionally Could rest helpful. Got the given in kind reset year of are the the even just to about really rates inflation quarter quarter. structure this of kind what then just maybe escalators rest we year. help one new just And as some stable you maybe it. on contract now? then impacts Or mechanism. quantify is last of the first say in of the of the for frame up or

Sure.

XXXX rates you across do that to move the were in can described, that was little way average. XXXX Did that That are inflated took that mentioned a rate. higher service average. But So our the you overall, noise systems inflated rates from reminder, we the we into gas, particularly, our this you XXXX rates period, the to this bit you those have XXXX see design just results. saw through XXXX. comparison. therefore, we designed up fee fixed period. we're of to And year and smooth a -- And create average as the in late into was to and all we as it's was got a as that a a then get comparing rate cost there, as That of as on we to basis again transition of for were

just of supporting Now steadily going And structure And with year, at increasing rate really of that continued set end basis. over the XX% fees forward, then that be our on fee growth in way therefore, XXXX, year. increasing set, with the fixed really create you each will, go based all on inflation the they a the now fee are through will therefore, CPI as a EBITDA period.

it. Got That's helpful.

One moment question. next for our

from from Our Goldman Coltas Sachs. comes question next the Jackie of line

level here? So costs there business that in some going were there we is the quarter should how about throughout forward? you think the -- it year. continued should this higher can quarter we think mentioned that fourth think seasonality levels, the kind But hold after Or and lower about this change of

Jonathan. the to hand take first this Yes. at and Maybe I'll then over shot it

QX, the as reiterated, mentioned first OpEx in the planning my QX normal lower spend a month, fourth fourth As more Jonathan January additional mentioned, were and script normally -- from a quarter weather Jonathan able are to activities seasonal some we it talked we QX. a favorable to And little and was perspective. to We do quarter. be side. in meta on I quarter higher bit maintenance activities from in our in then again, in beyond seasonally caused us, difficult about and as get maintenance done we in the expect and was increase

expect in and QX. also we impact QX QX and see to So then our to normal relative in seasonal do OpEx higher

if So there's add Jonathan, to to you don't I wanted anything know, that.

thing QX would and being The QX, we talked QX I Yes. then are about the and typically lower. in add QX there is higher and only seasonality

And really to I that we highlights I important year and our XXXX, ability post at if highlight, think really keep this to costs expanding costs the relative think for excluding grow. continues while footprint be you XXXX. it's stable G&A, operating our to to flat system costs forecast as to our look their leverage operating that operating admin have for

first to to continue or meet certainly, Already continue target exceeded for that. exceed quarter, we target already the expect But certainly our margin the we've to seasonality, that. EBITDA XXXX. given We XX% in

a I terms that to be year-over-year really that. again in able spot idea to cost ability the OpEx of good So in kind think flat operating Obviously, have of leverage. highlights really

it That's me. much. it. so Got you for Thank

you. Thank

Thank conference you you. concludes today's Thank participating. This call. for

now disconnect. may You