Hess Midstream (HESM) 30 Oct 242024 Q3 Earnings call transcript

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.

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

release issued earnings www.hessmidstream.com. Our was our appears website, on this morning and

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

Thanks, Jennifer. Midstream's Today Quarter performance review then Hess and discuss welcome Good results and guidance. Call. outlook quarter Corporation's Conference and Bakken. everyone, our third Hess results Jonathan will to I'll review XXXX and Third the afternoon, for our financial

day continued gathering. Midstream of million of and for operating barrels for per strong quarter, terminalling day financial throughput deliver processing, third per foot XXX,XXX cubic XXX crude to day volumes per water barrels with the averaging Hess for water In oil and XXX,XXX performance gas

quarter, gas third maintenance at remained was completed plant, relatively the stable Little the second primarily to due planned X throughputs activity in As which successfully Missouri quarter. compared to guided, the

gas to capture Aside availability planned strong high quarter. the our system be continued in maintenance, and remained from the

was above equivalent third Hess per oil which of the equivalent production to range of averaged Bakken of their day. Hess of Now barrels oil today, turning Earlier end highlights. per quarter guidance XXX,XXX to reported net XXX,XXX upstream barrels day, the for XXX,XXX high

as Excluding range the anticipates barrels second proceeds relatively was XXX,XXX to flat per primarily day equivalent the in the the proceeds of in Bakken. to quarter lower to fourth in volumes, Hess of percentage Dakota. impact production oil Bakken volumes Hess under of XXX,XXX expected, in net be program compared of third and the X-rig production to percentage quarter. to run reiterated of plans reflecting expected the its quarter, North received contracts a wildfires continue Hess in

reaffirming guidance. We're announced throughput guidance. Midstream previously our Hess XXXX to Turning

year full day XXX between barrels terminaling XXX,XXX per forecasting volumes processing volumes per crude of and volumes barrels we're and foot average gathering average water oil between average per gas XXX,XXX XXX,XXX to For XXX,XXX water XXXX, day. to XXX million between and to and of day, million cubic

We expect by to throughput compared across XXXX, oil in approximately systems to XXXX with our grow XX% in and line guidance. gas

a continues in be partially growth the wildfires. capture, activity Hess' on gas development quarter by Our October by continued and offset the driven focus fourth to

turning Now capital program. XXXX Hess Midstream's to

our in on are supporting third-party plans and progress Hess the XXXX focused make We development continue capital excellent to and Bakken. on

processing pipelines. Engineering foot capital per build our to plant the guided, to to stations greenfield gas X activities plant. projects start be is new XXXX. quarter our on for of As and multiyear associated expected and in the million cubic construction increased planned XXX Construction third expenditures online XXXX continued as gathering compressor planning in in day is and gas continued

summary, in capital focused generation delivering expected results safely XXXX drive approximately and our shareholders. I'll full to to turn flow year the we guidance. continue now review strategy execution for and production our Hess' Jonathan over support to return cash our on financial $XXX of remain faster sustainable additional expenditures continued million, of capital growth. In expect to and drilling to will reflecting projects and Hess We be the which call multiyear executing the to our growth priorities the operational potential of

afternoon, Good John. Thanks, everyone.

strategy with differentiated prioritizes shareholder that a have return accretive capital a continue record We XXXX, the of shareholders returned billion track to to of demonstrated execute returns. of beginning $X.XX repurchases. shareholders to through financial we Since

and In A addition, increases XX% repurchase, per by and distribution our annualized XXXX share year-to-date on in combination since to distribution an of by distribution basis. annual have the X% over level our Class X we each growth increased XX% targeted following XXXX over

of September our in potential EBITDA unit our share recent while of of per including strength. In both our our completed As total per sheet differentiated Furthermore, repurchases, leverage one greater midstream highlighting and significant shareholder, that including yield an share X.Xx a peers, XXXX, also result, was earnings through generate maintaining $X.XX flow capacity, the announced billion financial return our in shareholder of January, repurchase flexibility returns we deliver A repurchases. of among our we adjusted adjusted million of that for accretive unit ability the is on A we have Class incremental expect XXXX approximately peers. shareholder balance than basis an highest Utilizing million cash year-to-date of basis. to one to $XXX $XXX free this is Class lowest

per the increase increase annual utilizing additional growth an in done Class available included excess share have free third following past, distribution distributions and our our repurchase. for quarter flow cash the targeted A the X% we As adjusted

share annualized over result, A basis, XXXX. significantly a annual XXXX our is of Class our XX% As distribution per an above X% on through targeted growth growth

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

results. our to Turning

changes pass-through volumes revenues in resulting revenues million. million. EBITDA revenues depreciation for as gathering quarter. income by quarter, compared relative third excluding to costs was net second million net segment the quarter and relative results, For approximately and LMX $XXX to the prior the The $XXX for million, approximately second primarily and revenue proportional excluding revenues following, for third onetime $X flat increased of quarter, was by throughput higher quarter million, expenses, quarter. EBITDA EBITDA decreased $XXX million $XXX total the approximately quarter $XXX of Total was revenues terminalling increased primarily by cost increase quarter million to increased that and in our by pass-through was Adjusted reduction the the adjusted amortization, to compared by adjusted the driven million $X third were and attributable approximately share $X resulting processing the of second million in included the million earnings in second for $X $X follows: to

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

million. million. drawn were approximately deferred costs, end. $XX on We And amortization was net a interest, expenditures at flow finance million Third of excluding $XX had revolving million, approximately approximately cash of free quarter capital balance adjusted $XXX quarter resulting $XX our in facility of credit

Turning to guidance.

higher of X% at with to to fourth volumes, program $XXX and Omnibus wildfires For the approximate adjusted $XXX approximately throughput due growing third and of approximately supported the anticipated income continued the an adjusted to well volume the This to million and allocations expect losses October EBITDA agreements. we million as and $XXX be million. midpoint from represents XXXX, in a from as offset quarter, net compared be EBITDA increase operating $XXX active quarter to partially G&A succumbent impacts XXXX maintenance power under expectations by higher by expenses million

metrics greater CapEx very distribution supporting in guidance in With operational continued additional to ahead to a underpin A a we and X.Xx shareholder capital than return annualized strategy summary, and growth. we'll Midstream stable XX% with per expect we than EBITDA MVCs our flow pleased as return with can XX% in adjusted of continue capacity, grow in answer utilized my growth and as delivered providing have XXXX, over any I together visible leverage questions. XXXX. year seeing through repurchases. XX% growth year our potential January, to financial to through gas now falls and that and XXXX. In adjusted shareholders. This $X.XX of call oil forward of That, incremental look in and our supports to happy EBITDA financial Looking a reminder, differentiated we cash per excess trajectory our XXXX, X% ongoing be to of volumes, capital be concludes expect focus through our free unique will And to on below than the consistent growth to shareholders per financial returns, turn unit remarks. our to are greater a XXXX approximately Hess including greater flexibility share that billion of Class We'll from targeted operator. the be

from the comes UBS. question Marfatia [Operator of Instructions] first from Our line Naomi

year. of you thinking appetite Or an XX% A I do. few on on remarks. with assume merger. first has early I announced pending should outside goals? it forward? final may question and My about we of to now your or financial XX% may is if appetite. as weeks HESM sponsorship probably see those sponsors ago, back anything appreciate on buy on sponsors the flexibility HESM thoughts to not know owned GLP given be Well, Curious the it's to the what that prepared Do the opportunity from relates the sponsorship your secondary going

question. the Okay. Thanks for

no of secondaries, value also strategy the us period I that mean, of preset the demand view they recent would no There's And XX-day the first investors. to to driven be I disciplined So their terms yes, of from in that end to relative -- continue There's will of terms highlight to Hess XXXX. about then pace in take think, in would change And transaction Midstream. all, of in evaluate that. that was just GIP to demand I that. relative lockup on

forward, to the that's we forward, positions [ secondaries, working assets of raising return to the helped. from It's really this the look that, evaluate, in has result repurchases to sponsors, part have In change of separate and very expect we in really that's that repurchases a in increases you're for the forward, but that including execute the But up, the repurchases accretive slightly program, return advantage are to been about our terms talked establish capital the really ownership ownership have, their we'll of continue sponsors of changes the program, as which a -- In not as generally more that looking secondaries of we capital part capital part they've the program, taken Many certainly, been than mechanism really HESM, to going really, of billion included each as leveraging the levels. for that and the increases, continue ] our continue are our return on that the return on because capacity that again, $X.XX on we leveraging simultaneously again, liquidity ownership $X.XX the of haven't execute terms public and as of our are of billion program. public. is of we'll slightly we of to a to the for have past, we goal purchase. But really small, and stock set way flexibility really our capital certainly, greater financial we that also public have. demand-driven. more not program, mechanism in But really

think kind outlook we in about We've lot strategically going than follow-up of Great. forward. anything a volume Bakken. recently about you HESM seen of mix maybe the did how in thinking just talk it activities past? on in then third-party different the how basin, long-term a should about Can the And

of We Thank outlook. forecast of our you the question. XX% see follow-up kind capture our do approximately Overall, volume opportunities third-party for volumes. remains to long-term still continue third-party additional to Yes.

that's we as of always get for out look the the to strategic think footprint, infrastructure ground. maximum our in looking I ways utilization we're at that

We footprint very top of really that sits good have a good rock. on

opportunity capture make our had, the to is third-party our and So just we've future. which when definitely that we into positioned we're capture we continue Hess' when would going sure and same maintain opportunities well from primary is we objective is the to production growth But we're can third-party volumes. there. say to for those that to supporting additional perspective, looking there capture. out are then that it strategy incremental continue I would that

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

Just want to the wildfires. on start

versus entire cost so of fourth So the to Or the was headwind HESM? how much volumes to that assuming volumes, impact more on an through hitting segment footprint for are that one is impact more quarter? the in than flow does an And this other?

impact The it's was the outages going would volume particularly The question. say small impact related to portion the but things. relatively volume about scheme the grand impact, the is for of cost, to Thanks There is the primarily northwestern week-long side. of in Yes. the associated power be I on state. a some in fires, with there

was I response the community think area and just from the phenomenal. the firefighters in the

think well. I really responded everybody rallied just together and

addition, of a constraint volumes the to area. to to through does around as get In in responded system. power bit electricity But co-ops to pads, the it's a on your system. And the to that to be are we're entire the question that that well the how stations primarily up came well. able well And electricity the through also us provide this going power compressor far back impacting go really

-- not then several you're recovery power coming period impact was oil So when days gas. a it getting the there's of down, any several disruptions. the obviously, Again, back and was or days wells are from

would it through we're overall, would quarter again, think through It be impact like and the the flow the feeling of really volumes oil, should system. I system. remainder been our water strong. So ultimately, But the strong, and fourth recovery gas has coming

Could quarter and you if tailwind excluding Great. of did to the you the we XXXX. you the puts the quick that could bottom of any, that be that notice updated And you guidance, a get takes that range? for were what outperform to top lower if the and what, EBITDA? fourth guidance of rest as And of just the midpoint the walk follow-up, through impact, for

Okay, sure.

wildfires just with John in the -- start up by all to X% we're me increase the Certainly, EBITDA in just in just QX EBITDA if talking let relative QX, growth we XX% still XX% XXXX versus year you have. this the that emphasizing what QX. alone then even QX look And Full growth year, to So EBITDA. approximately. and basis, XXXX, about described,

it's as said, forward. limiting going really volume more volume the really, John and but impact, So our having still the impact so growth we're but the of growth wildfires, reducing it, volume

things we on seasonally, maintenance continue there. see the active be would bit the program the other then is -- winter mitigate in our be back QX. on against second look program. about on allocation number probably The maintenance And if active talked we'll of on a maintenance the Historically, years, you call That QX able that to The has optimize really to maintenance. was conditions to do team more QX. us severe a weather lower really typically in worked helps we potential

variability And thing. have QX, that allocations continue grow we important the of are is thing good a that's then terms the So X%. typically really, year-end to allocation really through benefits But in in or -- accruals bonuses. could and

it range to highlighted, In are have really, do terms of that. the there. drivers. the we a range, leads that you range And what is or as what follows And on the really

quarter impacts that can in North though even fourth out. the We'll fourth the how weather Obviously, we done some plays are have see contingencies it's Dakota. get to First, in more quarter. maintenance trying weather

the do. a As to program, I maintenance lot mentioned,

the year-end. accruals. wells and we'll through allocations final We'll So see ]. benefits based third-party volume And Hess' just normal and the of I of is number course, final have mentioned, as on variability on, then progress performing on [ online bonus volumes a of the

XX% -- see at end the each again, we out But those year look forward XXXX, then XXXX the of annualized then approximately volume in into QX depend kind in per no EBITDA XXXX. So year next come on for growing where will guidance, through XX% of in really and change moving increase long-term growth, to are those each through XXXX continued that as emphasizing we'll impacts and growth range. in range then X% our the we of up XXXX, and

of So of quarter volume us ahead in continuing and growth growth lot of ahead forward. and a EBITDA this in us then

Our the Citi. Doug next comes from of from question line Irwin

'XX 'XX. just and Maybe growth in the on a some of follow-up

to initial CapEx just you growth about some year what in for a with that means talked that I -- outlook? and maybe when think drilling growth 'XX you're expectations some upstream. 'XX pulling relative laid XX% Midstream out has the first activity into Hess accelerated forward curious I'm

Yes.

drilling like is absolutely more a volume a anticipated, out perspective, think guided a growth through XXXX our good that So in a feel our completing from into I wells and volume pace XX% some tailwind higher and have volume say going MVCs the and to say I'd we've volume year which Hess is bit from We've us the overall, than perspective, a the drilling Hess into faster would XXXX. that's completions we that our perspective. through I story. certainty increased we going definitely delivery at trajectory. From had is just increases growth sets as supports drilling approximate in January. that

performance think with to of we've infrastructure that's growth the approximate perspective, as growth the we us that feel a we continued but again, got the So really that, roll drilling from combination Hess we support 'XX. well volume XX% also 'XX positioning like into build that through that

helpful. past, 'XX. That's forward. CapEx 'XX, range good forward you've of know HESM it you've pulled about talked then million sounds million in And CapEx. bit that I But little the into like maybe a a maybe at for to going Great. $XXX being $XXX on

expect to next kind ] some still So messaging curious step of year? Or 'XX you Should on just as spending directional [ initial accelerating down CapEx? year we are maybe well? next

our the guidance think same. remains previous No, Yes. I

well I connects infrastructure think outlook and consistent. for remains longer-term build our

infrastructure its is wells continues you've here drilling projects got and Hess to between as timing that these in program making also drill of the the out. 'XX, place and think I for shifting with 'XX 'XX or then -- multiyear a a little thing sure bit just

that infrastructure is making Just in sure place.

of shifting years. additional thing, timing It's really cost the there's this. more say would between no to a I So X

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

was projects. a I about talked multiyear terms John potentially mentioned would these No, [ project. that and be multiyear that year, next of the cap about We've think that we'll think remarks, obviously his as ], prepared starting potentially in in -- plan

at So 'XX of really kind give in of January. 'XX as of guidance look then 'XX, terms in and of we'll pace even kind kind at 'XX, -- least

at I of projects. So look kind as multiyear those

the once be some a we John of as X [takes a on said, but little 'XX, cap across not basis, may [ but So bit John a next shifting X years, years, you the mind will, XXXX, and at through and the just [ X least and there little ] takes, more, the year, your later total can those same, if period the capital have ] to one maybe then changes. be among the to less It between some across call just bit ] plan certainly, one those, that that give as one said, years, time, a ]. really of maybe as and execution projects movement have [ you'll themselves, it, year day years certainly just

Our comes next Katz Chase. of JPMorgan the Noah line question from from

in on streams seeing to all trends Bakken at your First, touch long wanted And expectation basin the across term? the value growth in I is the you're large what future for currently? the

Sure.

about North has an the Resources see going the oil Dakota I consistent flattish North of Pipeline where is what kind of the oil we with Industrial volumes trending I is talked Department think Mineral perspective. from and Commission, think Dakota the Authority

kind time. expected, As happen. of a occurring thing just natural expected That's continue to will increase that's over gas to GORs and

continue So gas to increase. volumes we do expect to

X.X to Justin growth gas. range from think gas the of up approximately Kringstad's Bcf shown of X some about Bcf I

about continue definitely of little faster in continue trajectory the that growing but perspective, gas would is than overall, range oil, across we Gas the a to systems, From through all we've systems. area systems talked bit water of growth. the XX% oil, of 'XX. our the anticipate that's the Hess kind growing are that kind of see and growth So basin showing we that to

helpful. about 'XX should Anything follow-up, would the think as coming MVCs be can XXXX a the beyond processing there plant And the how you frame MVCs, with we online?

we'll our in think I give MVCs January. Well,

per What setup XXX that So if us to I on MVC, say that that really would nothing obviously, [ gross will it looking just the a be at point. ] is million implies approximately if at say day. this cubic about feet implies XXXX right puts --

So move continue growth as to see we expect XXXX, we to into some there.

per growth think talked as feet we've the plant of really supporting you decade. of gas cubic really about Although million as XXX really, day, the the really rest

year, us [ So it at But which through give of continuously the really not continue decade, to point. may nothing quite really just get one kind to to the in all it's is ability rest in more this grow ] be say the we'll really of to amazing. going January,

the next Satish comes line Wells question from Our from Praneeth of Fargo.

of kind maybe volume against XX% the outlook oil I and growth trying on you see guess provided. quoted as just bit flat Does of gas numbers. kind And positive 'XX be XX% all But XX% volume Hess you there think volume things, maybe we I Justin's we at Obviously, compare going the a 'XX? some I and XXXX. it that the cadence, for you that is lumpy? expect of guess more number drilling. a 'XX for outlook, that in I mean think on I'm that back out side. to also, if to of you to guidance or that volumes the growth third-party of put about would impact side outlook the little growth kind

Yes.

where got we've through third XX% so we've XXXX. there. would talking opportunity And of drilling about the approximate XX% kind that obviously growth that it's add-on in say it about, perspective, think for that really are had are you we're opportunities we've again, been think parties. I our the I those the mean out I I overall, that third-party from that rock basin. the that trajectory creates volumes

higher the of of average. we're system basin that expect opportunity Hess capture top out still that on and that volume grow the incremental XX% average. I that. a going an of rock the think opportunity still trajectory Hess a parties. Midstream would that's a of And continue creates the utilization side, infrastructure I to lot would always for to have sitting about is to see say drilling drilling to basin growth We looking into that to than at than on a the lot we're in third pace There's volumes. say there. third-party just in maximize we bring And I those activity our the faster

I look So build we've showing planning gas that towards plant, bullish kind a think indicated of longer-term growth. to that's volume we're the

I chance next also providing a that other think over gets the support there's to on and growth services several parties a addition very third-party to component to years. that provide third as attractive us in go trajectory the actually well to to its Hess

from point a Praneeth, just did most update just last thing, of year. one we our of MVCs view, modeling

your of of lumpiness, if the the you on So will, kind question to trajectory.

set of most those now expected are XX% volumes. at of So

oil you less bit if side, bit per that, side, it's 'XX on a you look that in little at growth So and much can the approximately year than more XX% on pretty see 'XX. a the gas

Got you.

And I you somewhat in an But check here financial where out of fall then stands. just the the you're stack there? I where wanted consistency that in of your to in of yes, of M&A autopilot capital Okay. return. kind have guess on Obviously, does that M&A, in guess terms flexibility I just

opportunity the about talk bit of the I'll maybe can and then Jonathan it. about talk first, little financial a So side

the remains So same. from the our really perspective, strategy opportunity

our we're basin. those that the looking in for position to strategic look, and bolt-ons continue We always strengthen

that, on and we're not for distracted we're the constantly lookout from think I that.

present themselves. So opportunities those to continue

continue we'll our primary the we're see a other We them as they incrementally third-party our standpoint continue obviously focused down of -- system. to basin we're in around add Hess, producers Hess support the back on evaluate Obviously, provide it's customer, and well. but earlier little and our how that to to bit to volumes. to providing And value to to path. From go support as question very trying the capturing anchor the also

nature supports the at and customers. how not looking and where both anything portfolio other of from strategic and our in perspective, from So restricting there's third-party it it's than Hess opportunity -- of fits us the our really the it kind not

wanted flexibility Jonathan, So there's side. if on financial anything I don't the you know, to add

really after great. is of we've billion leverage distributions. financial that flow was obviously, target. Xx have Part that just part to of about. is $X.XX mean, from of And excess talked I flexibility free That that relative our the conservative the cash we

at as don't past, in to extent John not look said, bolt-on we've We're now So the get opportunity -- is but corporate the bolt-ons. continue you to can any said the -- available, execute our prioritize high the absent capital then and we'll we to evaluate -- return opportunity bar those, is that the relative our growth have any and to of program. but

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

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