HESM Q4 2025 Earnings Call Summary

Full-Year 2025 Results:
- Net Income: Approximately $685 million
- Adjusted EBITDA: $1.238 billion (9% growth from 2024)
Q4 2025 Results:
- Net Income: $168 million (down from $176 million in Q3)
- Adjusted EBITDA: $309 million (down from $321 million in Q3)
- Total Revenues (excluding pass-through): Decreased by $19 million, with notable declines in gathering, processing, and terminaling revenues.
- Gross Adjusted EBITDA Margin: Maintained at 83%, above the target of 75%.
- Adjusted Free Cash Flow: Approximately $208 million.
- Capital Expenditures: Approximately $47 million for Q4.

Successfully completed multiyear projects on time and on budget, with a focus on gas gathering and compression systems.
Projected capital spending for 2026 is expected to decrease to approximately $150 million, a 40% reduction from 2025, with further reductions anticipated in 2027 and 2028 to below $75 million annually.
The company plans to leverage historical investments to drive significant free cash flow, supporting a targeted 5% annual distribution growth through 2028, alongside potential share repurchases and debt repayment.

2026 Guidance:
- Net Income: Expected between $150 million and $160 million.
- Adjusted EBITDA: Expected between $295 million and $305 million.
- Anticipated adjusted free cash flow in 2026: Between $850 million and $900 million.
- Volume guidance for 2026 remains consistent with prior expectations, despite lower volumes anticipated in Q1 due to severe winter weather.
Long-term outlook includes annualized adjusted EBITDA and net income growth of approximately 5% and 10% free cash flow growth through 2028, supported by inflation-adjusted tariffs and reduced capital expenditures.

Volume Declines: Q4 volumes were flat year-over-year but decreased compared to Q3 due to severe winter weather, which is expected to continue impacting Q1 2026.
Revenue Vulnerability: While 95% of revenues are protected by minimum volume commitments (MVCs), the company faces risks from potential production declines and weather-related disruptions.
Third-Party Activity: Some third-party customers in the Bakken are scaling back activity, which may affect Hess Midstream's volumes, although the company maintains a 10% average expectation for third-party volumes.

Debt Repayment Strategy: The company plans to prioritize debt repayment using free cash flow after distributions, with an expectation to naturally deleverage below the three times leverage target over the next few years.
Weather Impact: Current severe winter weather has affected operations, but the company expects a recovery in production as conditions improve.
Long-Term Leverage Target: There is no specific leverage target; the company aims to strengthen its balance sheet through natural deleveraging as EBITDA grows and debt levels remain stable.
Growth Drivers: Future growth is expected to be driven by inflation escalators, reduced capital spending, and optimization of upstream and midstream investments in collaboration with Chevron.

This summary encapsulates the key points from the earnings call, providing a balanced view of Hess Midstream's performance and outlook.

HESM — Hess Midstream LP