HESM — Hess Midstream LP

Summary of Hess Midstream Q3 2025 Earnings Call

1. Key Financial Results and Metrics:

• Net Income: $176 million, down from $180 million in Q2 2025.
• Adjusted EBITDA: $321 million, up from $316 million in Q2 2025, driven by increased third-party gas gathering and processing volumes.
• Gross Adjusted EBITDA Margin: Maintained at approximately 80%, exceeding the 75% target.
• Capital Expenditures: Approximately $80 million for Q3 2025; full-year capital expenditures expected to be around $270 million.
• Adjusted Free Cash Flow: Approximately $187 million for Q3 2025; projected excess adjusted free cash flow of $140 million after funding targeted distributions.
• Distribution Increase: 2.4% increase in distributions for Class A shares, targeting at least 5% annual growth through 2027.

2. Strategic Updates and Business Highlights:

• Operational Performance: Increased gas throughput volumes (462 million cubic feet per day) and crude terminaling (130,000 barrels per day) despite localized flooding impacts.
• Share Repurchase: Executed a $100 million share and unit repurchase in Q3 2025.
• Capital Program: Completed the first of two new compressor stations; the second is expected to be completed in Q4 2025. Activities on the Capa gas plant have been suspended.
• Customer Volumes: Increased third-party volumes due to Northern Border pipeline maintenance.

3. Forward Guidance and Outlook:

• Q4 2025 Guidance: Expected net income of $170 million to $180 million and adjusted EBITDA of $315 million to $325 million, reflecting lower third-party volumes and scheduled maintenance.
• Full-Year 2025 Guidance: Narrowed to net income of $685 million to $695 million and adjusted EBITDA of $1.245 billion to $1.255 billion, indicating approximately 10% year-on-year growth at the midpoint.
• 2026 Guidance: To be provided after the budget process concludes in December; expected to show flat EBITDA due to lower capital expenditures and ongoing operational efficiencies.

4. Bad News, Challenges, or Points of Concern:

• Declining Net Income: Slight decrease in net income compared to the previous quarter.
• Suspended Projects: The suspension of the Capa gas plant may limit future growth opportunities.
• Volatility in Share Price: Concerns about share price fluctuations and the impact on investor sentiment.
• Rig Count Changes: Potential reduction in Chevron's rig count could impact future oil and gas volumes, though current plans maintain a plateau.

5. Notable Q&A Insights:

• Bakken Trends: Management indicated that gas-to-oil ratios (GORs) are stable due to active drilling programs, with expectations for gas volumes to grow as oil plateaus.
• Capital Expenditure Outlook: Expected to be significantly lower than prior guidance ($250 million to $300 million), with a base level of around $125 million for ongoing operations.
• Relationship with Chevron: Integration with Chevron is progressing well, with successful distribution increases and a focus on capital discipline.
• Future MVCs: The process for setting 2028 minimum volume commitments (MVCs) remains unchanged, with Chevron providing a development plan that aligns with Hess Midstream’s operational goals.

This summary encapsulates the key financial metrics, strategic initiatives, forward guidance, and notable insights from the Q&A, providing a balanced view of Hess Midstream's performance and outlook.