UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarter ended
or
For the transition period from to
Commission File Number
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
|
|
(Zip Code) |
(Registrant’s telephone number, including area code, is (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
☒ |
|
Accelerated filer |
☐ |
|
Non-accelerated filer |
☐ |
|
Smaller reporting company |
|
|
|
|
Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No
HESS MIDSTREAM LP
FORM 10-Q
TABLE OF CONTENTS
Item |
|
|
|
Page |
No. |
|
|
|
Number |
|
|
|
|
|
|
|
PART I—FINANCIAL INFORMATION |
|
|
|
|
|
|
|
1. |
|
Financial Statements (unaudited) |
|
|
|
|
Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 |
|
2 |
|
|
Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 |
|
3 |
|
|
|
4 |
|
|
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 |
|
5 |
|
|
|
6 |
|
|
|
|
|
|
2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
18 |
3. |
|
|
35 |
|
4. |
|
|
36 |
|
|
|
|
|
|
|
|
PART II—OTHER INFORMATION |
|
|
|
|
|
|
|
1. |
|
|
37 |
|
1A. |
|
|
37 |
|
5. |
|
|
37 |
|
6. |
|
|
38 |
|
|
|
|
|
|
|
|
|
39 |
|
|
|
Certifications |
|
|
|
|
|
|
|
1
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Item 1. Financial Statements
|
June 30, |
|
|
December 31, |
|
||
|
2024 |
|
|
2023 |
|
||
(in millions, except share amounts) |
|
|
|
|
|
||
Assets |
|
|
|
|
|
||
Cash and cash equivalents |
$ |
|
|
$ |
|
||
Accounts receivable from contracts with customers: |
|
|
|
|
|
||
Accounts receivable—trade |
|
|
|
|
|
||
|
|
|
|
|
|||
Other current assets |
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
||
Equity investments |
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
||
Long-term receivable—affiliate |
|
|
|
|
|
||
Deferred tax asset |
|
|
|
|
|
||
Other noncurrent assets |
|
|
|
|
|
||
Total assets |
$ |
|
|
$ |
|
||
Liabilities |
|
|
|
|
|
||
Accounts payable—trade |
$ |
|
|
$ |
|
||
|
|
|
|
|
|||
Accrued liabilities |
|
|
|
|
|
||
Current maturities of long-term debt |
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
||
Long-term debt |
|
|
|
|
|
||
Deferred tax liability |
|
|
|
|
|
||
Other noncurrent liabilities |
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
||
Partners’ capital |
|
|
|
|
|
||
Class A shares ( |
|
|
|
|
|
||
Class B shares ( |
|
- |
|
|
|
- |
|
Total Class A and Class B partners’ capital |
|
|
|
|
|
||
Noncontrolling interest |
|
( |
) |
|
|
|
|
Total partners’ capital |
|
|
|
|
|
||
Total liabilities and partners’ capital |
$ |
|
|
$ |
|
||
See accompanying notes to unaudited consolidated financial statements.
2
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
(in millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Third-party services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating and maintenance expenses (exclusive of |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from equity investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Hess Midstream LP |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Hess Midstream LP |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average Class A shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
See accompanying notes to unaudited consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)
(UNAUDITED)
|
Partners’ Capital |
|
|
|
|
|
|
|
|||||||
|
Class A |
|
|
Class B |
|
|
Noncontrolling |
|
|
Total |
|
||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at December 31, 2023 |
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
Net income |
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Equity-based compensation |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Distributions - $ |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Recognition of deferred tax asset |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Sale of shares held by Sponsors |
|
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
Class B unit repurchase |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Transaction costs |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2024 |
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
||
Net income |
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Equity-based compensation |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Distributions - $ |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Recognition of deferred tax asset |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Sale of shares held by Sponsors |
|
( |
) |
|
|
- |
|
|
|
|
|
|
- |
|
|
Class B unit repurchase |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Transaction costs |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2024 |
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at December 31, 2022 |
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
Net income |
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Equity-based compensation |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Distributions - $ |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Recognition of deferred tax asset |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Class B unit repurchase |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Transaction costs |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2023 |
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
Net income |
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Equity-based compensation |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Distributions - $ |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Recognition of deferred tax asset |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Sale of shares held by Sponsors |
|
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
Class B unit repurchase |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Transaction costs |
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2023 |
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
See accompanying notes to unaudited consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
(in millions) |
|
|
|
|
|
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
||
Depreciation expense |
|
|
|
|
|
|
||
Income from equity investments |
|
|
( |
) |
|
|
( |
) |
Distributions from equity investments |
|
|
|
|
|
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Equity-based compensation expense |
|
|
|
|
|
|
||
Deferred income tax expense |
|
|
|
|
|
|
||
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable – trade |
|
|
( |
) |
|
|
( |
) |
Accounts receivable – affiliate |
|
|
|
|
|
|
||
Other current and noncurrent assets |
|
|
|
|
|
|
||
Accounts payable – trade |
|
|
( |
) |
|
|
( |
) |
Accounts payable – affiliate |
|
|
( |
) |
|
|
( |
) |
Accrued liabilities |
|
|
|
|
|
( |
) |
|
Other current and noncurrent liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
Additions to property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Net proceeds from (repayments of) bank borrowings with maturities of 90 |
|
|
( |
) |
|
|
|
|
Bank borrowings with maturities of greater than 90 days |
|
|
|
|
|
|
||
Repayments |
|
|
( |
) |
|
|
- |
|
Proceeds from issuance of senior notes |
|
|
|
|
|
- |
|
|
Deferred financing costs |
|
|
( |
) |
|
|
- |
|
Transaction costs |
|
|
( |
) |
|
|
( |
) |
Class B unit repurchase |
|
|
( |
) |
|
|
( |
) |
Distributions to shareholders |
|
|
( |
) |
|
|
( |
) |
Distributions to noncontrolling interest |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
||
(Increase) decrease in accrued capital expenditures and related liabilities |
|
$ |
|
|
$ |
( |
) |
|
Recognition of deferred tax asset |
|
$ |
|
|
$ |
|
||
See accompanying notes to unaudited consolidated financial statements.
5
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation
Unless the context otherwise requires, references in this report to the “Company,” “we,” “our,” “us” or like terms, refer to Hess Midstream LP and its subsidiaries.
The consolidated financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at June 30, 2024 and December 31, 2023, the consolidated results of operations for the three and six months ended June 30, 2024 and 2023, and the consolidated cash flows for the six months ended June 30, 2024 and 2023. The Company has no items of other comprehensive income (loss); therefore, net income (loss) is equal to comprehensive income (loss). The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.
The consolidated financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted from these interim consolidated financial statements. These financial statements, therefore, should be read in conjunction with the financial statements and related notes included in the Company’s annual report on Form 10‑K for the year ended December 31, 2023.
We consolidate the activities of Hess Midstream Operations LP (“the Partnership”), as a variable interest entity (“VIE”) under U.S. GAAP. We have concluded that we are the primary beneficiary of the VIE, as defined in the accounting standards, since we have the power, through our ownership, to direct those activities that most significantly impact the economic performance of the Partnership. This conclusion was based on a qualitative analysis that considered the Partnership’s governance structure and the delegation of control provisions, which provide us the ability to control the operations of the Partnership. All financial statement activities associated with the VIE are captured within gathering, processing and storage, and terminaling and export segments (see Note 11, Segments). We currently do not have any independent assets or operations other than our interest in the Partnership. Our noncontrolling interest represents the approximate
New Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU adds required disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help users of financial statements understand how the chief operating decision maker evaluates segment expenses and operating results. The ASU does not change how an entity identifies its operating segments. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this ASU on April 1, 2024, and applied the amendments retrospectively to all prior periods presented in our consolidated financial statements (see Note 11, Segments).
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires, among other disclosures, greater disaggregation of information, the use of certain categories in the rate reconciliation, and the disaggregation of income taxes paid by jurisdiction. The ASU is effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted. We continue to assess the impact of this ASU on our consolidated financial statements.
Note 2. Equity Transactions
Equity Offering Transactions
On May 19, 2023, the Sponsors sold an aggregate of
6
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On February 8, 2024, GIP sold an aggregate of
On May 31, 2024, GIP sold an aggregate of
The Company did
Class B Unit Repurchases
On March 27, 2023, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors
On June 26, 2023, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors
On March 11, 2024, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors
On June 24, 2024, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors
The repurchase transactions described above were funded using borrowings under the Partnership’s existing revolving credit facility and cash on hand (see Note 6, Debt and Interest Expense). Pursuant to the terms of the repurchase agreements described above, immediately following each purchase of the Class B Units from the Sponsors, the Partnership cancelled the repurchased units, and the Company cancelled, for no consideration, an equal number of its Class B Shares.
The repurchase transactions were accounted for in accordance with ASC 810 whereby changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. The carrying amounts of the noncontrolling interest were adjusted to reflect the changes in the ownership interest with the difference between the amounts of consideration paid and the amounts by which the noncontrolling interest were adjusted recognized as a reduction in equity attributable to Class A shareholders. Distributions to noncontrolling interest holders related to the 2024 repurchase transactions exceeded the noncontrolling interest’s carrying value resulting in a deficit balance as shown in the accompanying consolidated statement of changes in partners’ capital (deficit).
7
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
We incurred approximately $
As a result of the equity offering and the unit repurchase transactions described above, we also recognized an additional deferred tax asset of $
Note 3. Related Party Transactions
In addition to the Class B Unit repurchase transactions and distributions to the Sponsors disclosed elsewhere in the Notes to consolidated financial statements, we had the following related party transactions:
Commercial Agreements
We have long-term fee based commercial agreements with certain subsidiaries of Hess to provide i) gas gathering, ii) crude oil gathering, iii) gas processing and fractionation, iv) storage services, v) terminaling and export services, and (vi) water handling services.
For the services performed under these commercial agreements, we receive a fee per barrel of crude oil, barrel of water, Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, delivered during each month, and Hess is obligated to provide us with minimum volumes of crude oil, water, natural gas and NGLs.
Except for the water services agreements and except for a certain gathering sub-system as described below,
For certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess, we exercised our renewal options to extend each of these commercial agreement for
8
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consistent with the existing terms of the commercial agreements, during the Secondary Term of each of our commercial agreements other than our storage services agreement and terminal and export services agreement (with respect to crude oil terminaling services),
Revenues from contracts with customers, including affiliated services and third-party services, on a disaggregated basis are as follows:
|
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Affiliate services |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Oil and gas gathering services |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
Processing and storage services |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Terminaling and export services |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Water gathering and disposal services |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total affiliate services |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
Third-party services |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from contracts with customers |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These pass-through revenues are included in Affiliate services and the related pass-through costs are included in Operating and maintenance expenses in the accompanying unaudited consolidated statements of operations.
|
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Electricity and other related fees |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
Produced water trucking and disposal costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rail transportation costs |
|
|
- |
|
|
|
( |
) |
|
|
|
- |
|
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
9
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Omnibus and Employee Secondment Agreements
Under our omnibus and employee secondment agreements, Hess provides substantial operational and administrative services to us in support of our assets and operations.
|
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
LM4 Agreements
Separately from our commercial agreements with Hess, we entered into a gas processing agreement with Little Missouri 4 (“LM4”), a
|
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|||||
Earnings from equity investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distributions received from equity investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 4. Property, Plant and Equipment
Property, plant and equipment, at cost, is as follows:
|
|
Estimated useful lives |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
(in millions, except for number of years) |
|
|
|
|
|
|
|
|
||
Gathering assets |
|
|
|
|
|
|
|
|
||
Pipelines |
|
|
$ |
|
|
$ |
|
|||
Compressors, pumping stations and terminals |
|
|
|
|
|
|
|
|||
Gas plant assets |
|
|
|
|
|
|
|
|
||
Pipelines, pipes and valves |
|
|
|
|
|
|
|
|||
Equipment |
|
|
|
|
|
|
|
|||
Processing and fractionation facilities |
|
|
|
|
|
|
|
|||
Buildings |
|
|
|
|
|
|
|
|||
Logistics facilities and railcars |
|
|
|
|
|
|
|
|||
Storage facilities |
|
|
|
|
|
|
|
|||
Other |
|
|
|
|
|
|
|
|||
Construction-in-progress |
|
N/A |
|
|
|
|
|
|
||
Total property, plant and equipment, at cost |
|
|
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
|
|
$ |
|
|
$ |
|
||
10
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 5. Accrued Liabilities
Accrued liabilities are as follows:
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
(in millions) |
|
|
|
|
|
|
||
Accrued interest |
|
$ |
|
|
$ |
|
||
Accrued capital expenditures |
|
|
|
|
|
|
||
Other accruals |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Note 6. Debt and Interest Expense
Fixed‑Rate Senior Notes
On May 16, 2024 the Partnership issued $
As of June 30, 2024, the Partnership had:
The notes described above are guaranteed by certain subsidiaries of the Partnership. Each of the indentures for the senior unsecured notes described above contains customary covenants that restrict our ability and the ability of our restricted subsidiaries to (i) declare or pay any dividend or make any other restricted payments; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed
In addition, the covenants included in the indentures governing the senior unsecured notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company.
11
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Credit Facilities
As of June 30, 2024, the Partnership had $
The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes. The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the presently owned and after-acquired assets of the Partnership and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions.
Fair Value Measurement
At June 30, 2024, our total debt had a carrying value of $
Note 7. Partners’ Capital and Distributions
Our partnership agreement requires that, within
z
Period |
|
Record Date |
|
Distribution Date |
|
Distribution per Class A Share |
|
|
First Quarter 2023 |
|
|
|
$ |
|
|||
Second Quarter 2023 |
|
|
|
$ |
|
|||
Third Quarter 2023 |
|
|
|
$ |
|
|||
Fourth Quarter 2023 |
|
|
|
$ |
|
|||
First Quarter 2024 |
|
|
|
$ |
|
|||
Second Quarter 2024(1) |
|
|
|
$ |
|
|||
(1)
12
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 8. Earnings per Share
We calculate earnings per Class A Share as we do not have any other participating securities. Substantially all of income tax expense is attributed to earnings of Class A Shares reflective of our organizational structure. Class B Units of the Partnership together with the equal number of Class B Shares of the Company are convertible to Class A Shares of the Company on a
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in millions, except per share amounts) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Hess Midstream LP |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Hess Midstream LP |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average Class A shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
For the three and six months ended June 30, 2024 the weighted average number of Class A Shares outstanding included
Note 9. Concentration of Credit Risk
As of June 30, 2024 and 2023, Hess and its affiliates represented
Note 10. Commitments and Contingencies
Environmental Contingencies
The Company is subject to federal, state and local laws and regulations relating to the environment. On August, 12, 2022, the Company became aware of a produced water release from an underground pipeline located approximately 8 miles north of Ray, North Dakota. It is estimated that approximately
As of June 30, 2024 our reserves for all estimated remediation liabilities, inclusive of the produced water release above, in and were $
Legal Proceedings
In the ordinary course of business, the Company is from time to time party to various judicial and administrative proceedings. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of a known contingency, we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.
13
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On or about March 14, 2023, the Company received a Notice of Violation (the “Notice”) from the North Dakota Department of Environmental Quality (“DEQ”) in connection with the produced water release described under Environmental Contingencies above. The Notice alerts the Company that it may have violated the State’s water pollution control laws, but neither imposes nor waives any enforcement action. On January 11, 2024, the DEQ proposed an Administrative Consent Agreement (“ACA”) that included an administrative penalty of $
Based on currently available information, we believe it is remote that the outcome of known matters, including the produced water release described above, would have a material adverse impact on our financial condition, results of operations or cash flows. Accordingly, as of June 30, 2024 and December 31, 2023, we did
Note 11. Segments
Our operations are located in the United States and are organized into
Our CODM evaluates the segments’ operating performance based on Adjusted EBITDA, defined as net income (loss) before interest expense, income tax expense (benefit), and depreciation and amortization, as further adjusted for other non-cash, non‑recurring items, if applicable. For all of the segments, the CODM uses segment Adjusted EBITDA in the annual budgeting and monthly forecasting process. The CODM considers budget-to-current forecast and prior forecast-to-current forecast variances for Adjusted EBITDA on a monthly basis for evaluating performance of each segment and making decisions about allocating capital and other resources to each segment.
14
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following tables reflect certain financial data for each reportable segment:
|
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Total Reportable Segments |
|
|
Interest and Other |
|
|
Consolidated |
|
||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
For the Three Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues and other income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|||||
Operating and maintenance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from equity investments |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Total Reportable Segments |
|
|
Interest and Other |
|
|
Consolidated |
|
||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
For the Three Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues and other income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|||||
Operating and maintenance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from equity investments |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
15
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Total Reportable Segments |
|
|
Interest and Other |
|
|
Consolidated |
|
||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
For the Six Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues and other income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|||||
Operating and maintenance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from equity investments |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Total Reportable Segments |
|
|
Interest and Other |
|
|
Consolidated |
|
||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
For the Six Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues and other income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|||||
Operating and maintenance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from equity investments |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
The following table presents a reconciliation of reportable segment Adjusted EBITDA to income before income tax expense:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Reconciliation of reportable segment Adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total reportable segment Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income tax expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
16
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Total assets for the reportable segments are as follows:
|
|
|
|
|||||
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
(in millions) |
|
|
|
|
|
|
||
Gathering |
|
$ |
|
|
$ |
|
||
Processing and Storage(1) |
|
|
|
|
|
|
||
Terminaling and Export |
|
|
|
|
|
|
||
Interest and Other |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
(1)
Note 12. Subsequent Events
On
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited financial statements and accompanying footnotes included under Item 1. Financial Statements and in conjunction with the audited consolidated financial statements and accompanying footnotes in our Annual Report on Form 10‑K for the year ended December 31, 2023 (our “2023 Annual Report”).
Unless otherwise stated or the context otherwise indicates, references in this report to “Hess Midstream LP,” “the Company,” “us,” “our,” “we” or similar terms refer to Hess Midstream LP, including its consolidated subsidiaries. References to “Partnership” refer to Hess Midstream Operations LP.
This discussion contains forward‑looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in our 2023 Annual Report.
Overview
We are a fee-based, growth-oriented, limited partnership that owns, operates, develops and acquires a diverse set of midstream assets and provides fee-based services to Hess Corporation (“Hess”) and third-party customers. We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner that is owned 50/50 by Hess and GIP II Blue Holding, L.P. (“GIP” and together with Hess, the “Sponsors”). Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken.
On February 8, 2024, GIP sold an aggregate of 11,500,000 of our Class A Shares representing limited partner interests in the Company (“Class A Shares”), inclusive of the underwriter’s option to purchase up to 1,500,000 of additional shares, which was fully exercised, in an underwritten public offering at a price to the underwriter of $32.83 per Class A Share. GIP received net proceeds from the offering of approximately $377.5 million. On May 31, 2024, GIP sold an aggregate of 10,000,000 of our Class A Shares in an underwritten public offering at a price to the underwriter of $34.025 per Class A Share. GIP also granted the underwriter an option to purchase up to an additional 1,500,000 Class A shares at the same price per Class A share, which was exercised in full on June 3, 2024. GIP received net proceeds from the offering of approximately $391.3 million. The Company did not receive any proceeds from the offering transaction. The offering transaction was conducted pursuant to a registration rights agreement among us and the Sponsors.
On March 14, 2024, the Partnership purchased directly from the Sponsors 2,816,901 Class B units representing limited partner interests in the Partnership (“Class B Units”) for an aggregate purchase price of approximately $100 million. The purchase price per Class B Unit was $35.50, the closing price of the Class A shares on March 11, 2024. On June 26, 2024, the Partnership, purchased directly from the Sponsors 2,724,052 Class B Units for an aggregate purchase price of approximately $100.0 million. The purchase price per Class B Unit was $36.71, the closing price of the Class A Shares on June 24, 2024. The repurchase transactions were funded using borrowings under the Partnership’s existing revolving credit facility and cash on hand.
As a result of the equity offerings and unit repurchase transactions described above, our public ownership increased from approximately 29.8% at December 31, 2023, to approximately 41.0% at June 30, 2024, on a consolidated basis.
We utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through an immediate increase in our quarterly distribution level per Class A Share in each of the first two quarters of 2024, which, on an annualized basis, is significantly above our target of at least 5% growth in annual distributions per Class A Share through 2026.
Our assets and operations are organized into the following three reportable segments: (1) gathering (2) processing and storage and (3) terminaling and export.
Second Quarter Results
Significant financial and operating highlights for the second quarter of 2024 included:
18
Revenues and other income in the second quarter of 2024 were $365.5 million compared with $324.0 million in the prior‑year quarter. Second quarter 2024 revenues and other income were up $41.5 million compared with the prior-year quarter primarily due to higher physical volumes. The second quarter 2024 results also included a one-time $8.0 million reduction in revenues related to setting the 2024 tariff rates for certain subsystems. Total operating costs and expenses in the second quarter of 2024 were $143.2 million, compared with $125.9 million in the prior-year quarter. The increase was primarily attributable to higher maintenance expenses, pass-through expenses and higher depreciation expense for additional assets placed in service. Interest expense in the second quarter of 2024 was $49.7 million, up from $43.8 million in the prior-year quarter, primarily attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued in May 2024, higher interest rates on our credit facilities and higher borrowings on our revolving credit facility. Income tax expense increased $7.9 million resulting from ownership changes following secondary equity offering and Class B Unit repurchase transactions. As a result, consolidated net income increased $12.4 million and Adjusted EBITDA increased $29.7 million for the second quarter of 2024 compared with the second quarter of 2023.
Throughput volumes increased 19% for gas gathering and 17% for gas processing in the second quarter of 2024 compared with the second quarter of 2023, primarily due to higher production and higher gas capture. Throughput volumes increased 23% for crude oil gathering and 17% for terminaling in the second quarter of 2024 compared with the second quarter of 2023, primarily due to higher production. Water gathering volumes increased 43%, reflecting higher crude oil production and increased utilization of our water gathering infrastructure.
For additional discussion of the results of operations at the segment level, see “Results of Operations” below. For additional information regarding Adjusted EBITDA, our non‑GAAP financial measure, see “How We Evaluate Our Operations” and “Reconciliation of Non‑GAAP Financial Measure” below.
19
How We Generate Revenues
We generate substantially all of our revenues by charging fees for gathering, compressing and processing natural gas and fractionating NGLs; gathering, terminaling, loading and transporting crude oil and NGLs; storing and terminaling propane; and gathering and disposing of produced water. We have entered into long‑term, fee‑based commercial agreements with Hess effective January 1, 2014, for oil and gas services agreements, and effective January 1, 2019, for water services agreements.
Except for the water services agreements and except for a certain gathering sub-system, as described below, each of our commercial agreements with Hess had an initial 10-year term. We exercised our renewal options to extend each of these commercial agreements for one additional 10-year term (“Secondary Term”) effective January 1, 2024, through December 31, 2033. There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For this gathering sub-system, the initial term is 15 years effective January 1, 2014, and the Secondary Term is 5 years. For the water services agreements the initial term is 14 years effective January 1, 2019, and the Secondary Term is 10 years. We have the sole option to renew these remaining agreements for their Secondary Term that is exercisable at a later date. Upon the expiration of the Secondary Term, if any, the agreements will automatically renew for subsequent one-year periods unless terminated by either party no later than 180 days prior to the end of the applicable Secondary Term.
These agreements include dedications covering substantially all of Hess’ existing and future owned or controlled production in the Bakken, minimum volume commitments, inflation escalators and fee recalculation mechanisms, all of which are intended to provide us with cash flow stability and growth, as well as downside risk protection. In particular, Hess’ minimum volume commitments under our commercial agreements provide minimum levels of cash flows and the fee recalculation mechanisms under the agreements allow fees to be adjusted annually to provide us with cash flow stability during the initial term of the agreements. During the Secondary Term of the agreements, the fee recalculation model is replaced by an inflation-based fee structure. See Note 3, Related Party Transactions for additional description of our commercial agreements.
Our revenues also include revenues from (i) third-party volumes contracted directly with us, (ii) third-party volumes contracted with Hess and delivered to us under the commercial agreements with Hess described above, and (iii) pass-through third-party rail transportation costs, third-party produced water trucking and disposal costs, electricity fees and certain other third-party fees, for which we recognize revenues in an amount equal to the costs. Together with Hess, we are pursuing strategic relationships with third-party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.
20
How We Evaluate Our Operations
Our management uses a variety of financial and operating metrics to analyze our operating results and profitability. These metrics include (i) volumes, (ii) operating and maintenance expenses, and (iii) Adjusted EBITDA.
Volumes. The amount of revenues we generate primarily depends on the volumes of crude oil, natural gas, NGLs and produced water that we handle at our gathering, processing, terminaling, storage facilities and disposal facilities. These volumes are affected primarily by the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets, including changes in crude oil prices, which may further affect volumes delivered by Hess. Although Hess has committed to minimum volumes under our commercial agreements described above, our results of operations will be impacted by our ability to:
Operating and Maintenance Expenses. Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses are comprised primarily of costs charged to us under our omnibus agreement and employee secondment agreement, third‑party contractor costs, utility costs, insurance premiums, third‑party service provider costs, related property taxes and other non‑income taxes and maintenance expenses, such as expenditures to repair, refurbish and replace storage facilities and to maintain equipment reliability, integrity and safety. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of substantial expenses, such as gas plant turnarounds. We seek to manage our maintenance expenditures by scheduling periodic maintenance on our assets in order to minimize significant variability in these expenditures and minimize their impact on our cash flow.
Adjusted EBITDA. We previously reported the non-GAAP measure of “Adjusted EBITDA,” which we defined as reported net income (loss) before net interest expense, income tax expense, depreciation and amortization and our proportional share of depreciation of our equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non-cash and non-recurring items, if applicable. As this definition varied from other definitions of Adjusted EBITDA, we determined it was appropriate to discontinue reporting Adjusted EBITDA as previously defined. Beginning with the second quarter of 2024, and as presented in this report, “Adjusted EBITDA” is defined as reported net income (loss) before net interest expense, income tax expense (benefit), and depreciation and amortization, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non‑cash and non‑recurring items, if applicable. Prior period calculations of Adjusted EBITDA have been recast to conform to the new presentation, as applicable. We use Adjusted EBITDA to analyze our performance and liquidity.
Adjusted EBITDA is a non‑GAAP supplemental financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
21
We believe that the presentation of Adjusted EBITDA provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA are net income (loss) and net cash provided by (used in) operating activities. Adjusted EBITDA should not be considered as an alternative to GAAP net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
22
Results of Operations
Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023
Results of operations for the three months ended June 30, 2024 and 2023 are presented below (in millions, unless otherwise noted).
For the Three Months Ended June 30, 2024 |
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Interest and Other |
|
|
Consolidated Hess Midstream LP |
|
|||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Affiliate services |
|
$ |
193.7 |
|
|
$ |
135.2 |
|
|
$ |
29.6 |
|
|
$ |
- |
|
|
$ |
358.5 |
|
Third-party services |
|
|
1.8 |
|
|
|
4.3 |
|
|
|
- |
|
|
|
- |
|
|
|
6.1 |
|
Other income |
|
|
- |
|
|
|
- |
|
|
|
0.9 |
|
|
|
- |
|
|
|
0.9 |
|
Total revenues |
|
|
195.5 |
|
|
|
139.5 |
|
|
|
30.5 |
|
|
|
- |
|
|
|
365.5 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating and maintenance expenses |
|
|
50.8 |
|
|
|
27.3 |
|
|
|
9.4 |
|
|
|
- |
|
|
|
87.5 |
|
Depreciation expense |
|
|
31.5 |
|
|
|
14.6 |
|
|
|
4.4 |
|
|
|
- |
|
|
|
50.5 |
|
General and administrative expenses |
|
|
2.3 |
|
|
|
1.0 |
|
|
|
0.2 |
|
|
|
1.7 |
|
|
|
5.2 |
|
Total operating costs and expenses |
|
|
84.6 |
|
|
|
42.9 |
|
|
|
14.0 |
|
|
|
1.7 |
|
|
|
143.2 |
|
Income (loss) from operations |
|
|
110.9 |
|
|
|
96.6 |
|
|
|
16.5 |
|
|
|
(1.7 |
) |
|
|
222.3 |
|
Income from equity investments |
|
|
- |
|
|
|
3.7 |
|
|
|
- |
|
|
|
- |
|
|
|
3.7 |
|
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
49.7 |
|
|
|
49.7 |
|
Income (loss) before income tax expense |
|
|
110.9 |
|
|
|
100.3 |
|
|
|
16.5 |
|
|
|
(51.4 |
) |
|
|
176.3 |
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16.0 |
|
|
|
16.0 |
|
Net income (loss) |
|
|
110.9 |
|
|
|
100.3 |
|
|
|
16.5 |
|
|
|
(67.4 |
) |
|
|
160.3 |
|
Less: Net income (loss) attributable to |
|
|
69.6 |
|
|
|
62.8 |
|
|
|
10.4 |
|
|
|
(32.0 |
) |
|
|
110.8 |
|
Net income (loss) attributable to |
|
$ |
41.3 |
|
|
$ |
37.5 |
|
|
$ |
6.1 |
|
|
$ |
(35.4 |
) |
|
$ |
49.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gas gathering (MMcf/d)(1) |
|
|
440 |
|
|
|
|
|
|
|
|
|
|
|
|
440 |
|
|||
Crude oil gathering (MBbl/d)(2) |
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|||
Gas processing (MMcf/d)(1) |
|
|
|
|
|
419 |
|
|
|
|
|
|
|
|
|
419 |
|
|||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
|
126 |
|
|
|
|
|
|
126 |
|
|||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
15 |
|
|||
Water gathering (MBbl/d)(2) |
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
|
124 |
|
|||
(1) Million cubic feet per day
(2) Thousand barrels per day
23
For the Three Months Ended June 30, 2023 |
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Interest and Other |
|
|
Consolidated Hess Midstream LP |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Affiliate services |
|
$ |
174.1 |
|
|
$ |
121.6 |
|
|
$ |
26.2 |
|
|
$ |
- |
|
|
$ |
321.9 |
|
Third-party services |
|
|
0.4 |
|
|
|
1.2 |
|
|
|
- |
|
|
|
- |
|
|
|
1.6 |
|
Other income |
|
|
- |
|
|
|
- |
|
|
|
0.5 |
|
|
|
- |
|
|
|
0.5 |
|
Total revenues |
|
|
174.5 |
|
|
|
122.8 |
|
|
|
26.7 |
|
|
|
- |
|
|
|
324.0 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating and maintenance expenses |
|
|
43.8 |
|
|
|
23.8 |
|
|
|
5.5 |
|
|
|
- |
|
|
|
73.1 |
|
Depreciation expense |
|
|
28.2 |
|
|
|
14.5 |
|
|
|
4.3 |
|
|
|
- |
|
|
|
47.0 |
|
General and administrative expenses |
|
|
2.5 |
|
|
|
1.1 |
|
|
|
0.2 |
|
|
|
2.0 |
|
|
|
5.8 |
|
Total operating costs and expenses |
|
|
74.5 |
|
|
|
39.4 |
|
|
|
10.0 |
|
|
|
2.0 |
|
|
|
125.9 |
|
Income (loss) from operations |
|
|
100.0 |
|
|
|
83.4 |
|
|
|
16.7 |
|
|
|
(2.0 |
) |
|
|
198.1 |
|
Income from equity investments |
|
|
- |
|
|
|
1.7 |
|
|
|
- |
|
|
|
- |
|
|
|
1.7 |
|
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
43.8 |
|
|
|
43.8 |
|
Income (loss) before income tax expense |
|
|
100.0 |
|
|
|
85.1 |
|
|
|
16.7 |
|
|
|
(45.8 |
) |
|
|
156.0 |
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8.1 |
|
|
|
8.1 |
|
Net income (loss) |
|
|
100.0 |
|
|
|
85.1 |
|
|
|
16.7 |
|
|
|
(53.9 |
) |
|
|
147.9 |
|
Less: Net income (loss) attributable to |
|
|
78.7 |
|
|
|
66.8 |
|
|
|
13.3 |
|
|
|
(36.0 |
) |
|
|
122.8 |
|
Net income (loss) attributable to |
|
$ |
21.3 |
|
|
$ |
18.3 |
|
|
$ |
3.4 |
|
|
$ |
(17.9 |
) |
|
$ |
25.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gas gathering (MMcf/d)(1) |
|
|
369 |
|
|
|
|
|
|
|
|
|
|
|
|
369 |
|
|||
Crude oil gathering (MBbl/d)(2) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
94 |
|
|||
Gas processing (MMcf/d)(1) |
|
|
|
|
|
358 |
|
|
|
|
|
|
|
|
|
358 |
|
|||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
|
108 |
|
|
|
|
|
|
108 |
|
|||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
12 |
|
|||
Water gathering (MBbl/d)(2) |
|
|
87 |
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|||
(1) Million cubic feet per day
(2) Thousand barrels per day
Gathering
Revenues and other income increased $21.0 million in the second quarter of 2024 compared to the second quarter of 2023, of which $17.2 million is attributable to higher gas gathering volumes that were above MVCs in the second quarter of 2024 and 2023, $6.1 million is attributable to higher water gathering and disposal revenue, $5.0 million is attributable to higher crude oil gathering volumes that were above MVCs in the second quarter of 2024 and above MVC levels of the second quarter of 2023, and $3.4 million is attributable to higher pass‑through revenue. Additionally, $1.4 million of the increase is attributable to services provided directly to third parties. These revenue increases were partially offset by $12.1 million attributable to lower tariff rates, including a $3.6 million one-time reduction related to setting the 2024 tariff rates for certain subsystems.
Operating and maintenance expenses increased $7.0 million, of which $3.4 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees, $2.3 million is attributable to compressor stations overhauls and other maintenance activities, and $1.3 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements. Depreciation expense increased $3.3 million due to new compressors and other new gathering assets brought into service.
24
Processing and Storage
Revenues and other income increased $16.7 million in the second quarter of 2024 compared to the second quarter of 2023, of which $15.1 million is attributable to higher gas processing volumes that were above MVCs in the second quarter of 2024 and 2023, $3.4 million is attributable to higher tariff rates and $3.1 million is attributable to services provided directly to third parties. These revenue increases were partially offset by a $4.4 million one-time reduction related to setting the 2024 tariff rate and $0.5 million lower pass-through revenue.
Operating and maintenance expenses increased $3.5 million, of which $3.0 million is attributable to higher third-party processing fees and $1.0 million is attributable to higher maintenance activity, slightly offset by $0.5 million attributable to lower pass-through costs.
Income from equity investments increased $2.0 million in the second quarter of 2024 compared to the second quarter of 2023 primarily due to higher volumes processed at the LM4 plant.
Terminaling and Export
Revenues and other income increased $3.8 million in the second quarter of 2024 compared to the second quarter of 2023, of which $3.5 million is attributable to higher crude oil terminaling volumes that were above MVCs in the second quarter of 2024 and above MVC levels of the second quarter of 2023, $1.6 million is attributable to pass-through revenue, and $0.4 million is attributable to other income. These revenue increases were partially offset by $1.7 million attributable to lower tariff rates.
Operating and maintenance expenses increased $3.9 million in the second quarter of 2024 compared to the second quarter of 2023, of which $2.3 million is primarily attributable to the rail car recertification program and $1.6 million is attributable to rail transportation pass-through costs.
Interest and Other
Interest expense, net of interest income, increased $5.9 million in the second quarter of 2024 compared to the second quarter of 2023, of which $4.9 million is attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued during the second quarter of 2024 and $1.8 million is attributable to higher interest rates on our credit facilities and higher borrowings on our revolving credit facility, partially offset by $0.8 million interest income. Income tax expense increased $7.9 million in the same period driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2023 and 2024.
25
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Results of operations for the six months ended June 30, 2024 and 2023 are presented below (in millions, unless otherwise noted).
For the Six Months Ended June 30, 2024 |
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Interest and Other |
|
|
Consolidated Hess Midstream LP |
|
|||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Affiliate services |
|
$ |
380.3 |
|
|
$ |
270.6 |
|
|
$ |
57.0 |
|
|
$ |
- |
|
|
$ |
707.9 |
|
Third-party services |
|
|
3.3 |
|
|
|
8.0 |
|
|
|
0.1 |
|
|
|
- |
|
|
|
11.4 |
|
Other income |
|
|
- |
|
|
|
- |
|
|
|
1.8 |
|
|
|
- |
|
|
|
1.8 |
|
Total revenues |
|
|
383.6 |
|
|
|
278.6 |
|
|
|
58.9 |
|
|
|
- |
|
|
|
721.1 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating and maintenance expenses (exclusive |
|
|
97.1 |
|
|
|
52.5 |
|
|
|
16.0 |
|
|
|
- |
|
|
|
165.6 |
|
Depreciation expense |
|
|
62.3 |
|
|
|
29.3 |
|
|
|
8.7 |
|
|
|
- |
|
|
|
100.3 |
|
General and administrative expenses |
|
|
4.4 |
|
|
|
2.2 |
|
|
|
0.4 |
|
|
|
3.9 |
|
|
|
10.9 |
|
Total operating costs and expenses |
|
|
163.8 |
|
|
|
84.0 |
|
|
|
25.1 |
|
|
|
3.9 |
|
|
|
276.8 |
|
Income (loss) from operations |
|
|
219.8 |
|
|
|
194.6 |
|
|
|
33.8 |
|
|
|
(3.9 |
) |
|
|
444.3 |
|
Income from equity investments |
|
|
- |
|
|
|
6.4 |
|
|
|
- |
|
|
|
- |
|
|
|
6.4 |
|
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
98.2 |
|
|
|
98.2 |
|
Income (loss) before income tax expense |
|
|
219.8 |
|
|
|
201.0 |
|
|
|
33.8 |
|
|
|
(102.1 |
) |
|
|
352.5 |
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
30.3 |
|
|
|
30.3 |
|
Net income (loss) |
|
|
219.8 |
|
|
|
201.0 |
|
|
|
33.8 |
|
|
|
(132.4 |
) |
|
|
322.2 |
|
Less: Net income (loss) attributable to |
|
|
142.1 |
|
|
|
130.1 |
|
|
|
21.8 |
|
|
|
(65.9 |
) |
|
|
228.1 |
|
Net income (loss) attributable to Hess Midstream LP |
|
$ |
77.7 |
|
|
$ |
70.9 |
|
|
$ |
12.0 |
|
|
$ |
(66.5 |
) |
|
$ |
94.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gas gathering (MMcf/d)(1) |
|
|
422 |
|
|
|
|
|
|
|
|
|
|
|
|
422 |
|
|||
Crude oil gathering (MBbl/d)(2) |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|||
Gas processing (MMcf/d)(1) |
|
|
|
|
|
406 |
|
|
|
|
|
|
|
|
|
406 |
|
|||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
|
121 |
|
|
|
|
|
|
121 |
|
|||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
15 |
|
|||
Water gathering (MBbl/d)(2) |
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
120 |
|
|||
(1) Million cubic feet per day
(2) Thousand barrels per day
26
For the Six Months Ended June 30, 2023 |
|
Gathering |
|
|
Processing and Storage |
|
|
Terminaling and Export |
|
|
Interest and Other |
|
|
Consolidated Hess Midstream LP |
|
|||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Affiliate services |
|
$ |
338.5 |
|
|
$ |
235.4 |
|
|
$ |
51.4 |
|
|
$ |
- |
|
|
$ |
625.3 |
|
Third-party services |
|
|
0.7 |
|
|
|
1.8 |
|
|
|
- |
|
|
|
- |
|
|
|
2.5 |
|
Other income |
|
|
- |
|
|
|
- |
|
|
|
1.2 |
|
|
|
- |
|
|
|
1.2 |
|
Total revenues |
|
|
339.2 |
|
|
|
237.2 |
|
|
|
52.6 |
|
|
|
- |
|
|
|
629.0 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating and maintenance expenses (exclusive |
|
|
82.2 |
|
|
|
44.0 |
|
|
|
9.4 |
|
|
|
- |
|
|
|
135.6 |
|
Depreciation expense |
|
|
57.0 |
|
|
|
29.0 |
|
|
|
8.4 |
|
|
|
- |
|
|
|
94.4 |
|
General and administrative expenses |
|
|
4.9 |
|
|
|
2.3 |
|
|
|
0.5 |
|
|
|
4.5 |
|
|
|
12.2 |
|
Total operating costs and expenses |
|
|
144.1 |
|
|
|
75.3 |
|
|
|
18.3 |
|
|
|
4.5 |
|
|
|
242.2 |
|
Income (loss) from operations |
|
|
195.1 |
|
|
|
161.9 |
|
|
|
34.3 |
|
|
|
(4.5 |
) |
|
|
386.8 |
|
Income from equity investments |
|
|
- |
|
|
|
3.3 |
|
|
|
- |
|
|
|
- |
|
|
|
3.3 |
|
Interest expense, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
85.4 |
|
|
|
85.4 |
|
Income (loss) before income tax expense |
|
|
195.1 |
|
|
|
165.2 |
|
|
|
34.3 |
|
|
|
(89.9 |
) |
|
|
304.7 |
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14.6 |
|
|
|
14.6 |
|
Net income (loss) |
|
|
195.1 |
|
|
|
165.2 |
|
|
|
34.3 |
|
|
|
(104.5 |
) |
|
|
290.1 |
|
Less: Net income (loss) attributable to |
|
|
156.4 |
|
|
|
132.4 |
|
|
|
27.6 |
|
|
|
(72.1 |
) |
|
|
244.3 |
|
Net income (loss) attributable to Hess Midstream LP |
|
$ |
38.7 |
|
|
$ |
32.8 |
|
|
$ |
6.7 |
|
|
$ |
(32.4 |
) |
|
$ |
45.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gas gathering (MMcf/d)(1) |
|
|
358 |
|
|
|
|
|
|
|
|
|
|
|
|
358 |
|
|||
Crude oil gathering (MBbl/d)(2) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
94 |
|
|||
Gas processing (MMcf/d)(1) |
|
|
|
|
|
348 |
|
|
|
|
|
|
|
|
|
348 |
|
|||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
|
106 |
|
|
|
|
|
|
106 |
|
|||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
11 |
|
|||
Water gathering (MBbl/d)(2) |
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|||
(1) Million cubic feet per day
(2) Thousand barrels per day
Gathering
Revenues and other income increased $44.4 million in the first six months of 2024 compared to the first six months of 2023, of which $31.6 million is attributable to higher gas gathering volumes that were above MVCs in the first six months of 2024 and 2023, $12.2 million is attributable to higher water gathering and disposal revenue, $7.4 million is attributable to higher crude oil gathering volumes that were above MVCs in the first six months of 2024 and above MVC levels of the first six months of 2023, and another $7.4 million is attributable to higher pass‑through revenue. Additionally, $2.6 million of the increase is attributable to services provided directly to third parties. These revenue increases were partially offset by $16.8 million primarily attributable to lower crude oil tariff rates.
Operating and maintenance expenses increased $14.9 million in the first six months of 2024 compared to the first six months of 2023, of which $7.4 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees, $5.2 million is attributable to compressor stations overhauls and other maintenance activities, and $2.3 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements. Depreciation expense increased $5.3 million due to new compressors and other new gathering assets brought into service.
27
Processing and Storage
Revenues and other income increased $41.4 million in the first six months of 2024 compared to the first six months of 2023, of which $29.4 million is attributable to higher gas processing volumes that were above MVCs in the first six months of 2024 and 2023, $6.4 million is attributable to higher tariff rates, and $6.2 million is attributable to services provided directly to third parties, slightly offset by $0.6 million lower pass-through revenue.
Operating and maintenance expenses increased $8.5 million in the first six months of 2024 compared to the first six months of 2023, of which $4.8 million is attributable to higher third-party processing fees and $3.7 million is attributable to higher maintenance activity.
Income from equity investments increased $3.1 million in the first six months of 2024 compared to the first six months of 2023 primarily due to higher volumes processed at the LM4 plant.
Terminaling and Export
Revenues and other income increased $6.3 million in the first six months of 2024 compared to the first six months of 2023, of which $5.7 million is attributable to higher crude oil terminaling volumes that were above MVCs in the first six months of 2024 and above MVC levels of the first six months of 2023, $3.4 million is attributable to pass-through revenue, and $0.7 million is attributable to other income and services provided directly to third parties. These revenue increases were partially offset by $3.5 million attributable to lower tariff rates.
Operating and maintenance expenses increased $6.6 million in the first six months of 2024 compared to the first six months of 2023, of which $3.4 million is attributable to rail transportation pass-through costs and $3.2 million is primarily attributable to the rail car recertification program.
Interest and Other
Interest expense, net of interest income, increased $12.8 million in the first six months of 2024 compared to the first six months of 2023, of which $8.7 million is attributable to higher interest rates on our credit facilities and higher borrowings on our revolving credit facility and $4.9 million is attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued during the second quarter of 2024, partially offset by $0.8 million interest income. Income tax expense increased $15.7 million in the same period driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2023 and 2024.
28
Other Factors Expected to Significantly Affect Our Future Results
We currently generate substantially all of our revenues under fee‑based commercial agreements with Hess, including third parties contracted with affiliates of Hess. These contracts provide cash flow stability and minimize our direct exposure to commodity price fluctuations, since we generally do not own any of the crude oil, natural gas, or NGLs that we handle and do not engage in the trading of crude oil, natural gas, or NGLs. However, commodity price fluctuations indirectly influence our activities and results of operations over the long-term, since they can affect production rates and investments by Hess and third parties in the development of new crude oil and natural gas reserves. The markets for oil and natural gas are volatile and will likely continue to be volatile in the future.
The throughput volumes at our facilities depend primarily on the volumes of crude oil and natural gas produced by Hess and third parties in the Bakken, which, in turn, are ultimately dependent on Hess’ and third parties’ exploration and production margins. Exploration and production margins depend on the price of crude oil, natural gas, and NGLs. These prices are volatile and influenced by numerous factors beyond our or our customers’ control, including the domestic and global supply of and demand for crude oil, natural gas and NGLs. Sustained periods of low prices for oil and natural gas could materially and adversely affect the quantities of oil and natural gas that Hess and third parties can economically produce. The commodities trading markets, as well as global and regional supply and demand factors, may also influence the selling prices of crude oil, natural gas and NGLs. To the extent our plans include revenues for volumes above currently established MVC levels, such revenues could decline to the MVC levels as a result of market volatility. Furthermore, our ability to execute our growth strategy in the Bakken, including attracting third-party volumes, will depend on crude oil and natural gas production in that area, which is also affected by the supply of and demand for crude oil and natural gas.
The majority of our systems entered the Secondary Term of our commercial agreements, which includes a fixed fee structure based on the average fees paid by Hess during 2021-2023 adjusted annually for inflation up to 3% a year. Such a fee structure may provide less downside risk protection in the future compared to the fee structure we had during the initial term of the commercial agreements. For our terminaling and water gathering systems, the rates will continue to be reset through our annual rate redetermination process through 2033. For all of our systems, MVCs will continue to provide downside risk protection through 2033. Generally, all of our volumes are expected to be above currently established MVC levels in 2024, 2025 and 2026.
29
Reconciliation of Non‑GAAP Financial Measure
The following table presents a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(in millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Reconciliation of Adjusted EBITDA to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
160.3 |
|
|
$ |
147.9 |
|
|
$ |
322.2 |
|
|
$ |
290.1 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation expense |
|
|
50.5 |
|
|
|
47.0 |
|
|
|
100.3 |
|
|
|
94.4 |
|
Interest expense, net |
|
|
49.7 |
|
|
|
43.8 |
|
|
|
98.2 |
|
|
|
85.4 |
|
Income tax expense |
|
|
16.0 |
|
|
|
8.1 |
|
|
|
30.3 |
|
|
|
14.6 |
|
Adjusted EBITDA |
|
$ |
276.5 |
|
|
$ |
246.8 |
|
|
$ |
551.0 |
|
|
$ |
484.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciliation of Adjusted EBITDA to net cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net cash provided by operating activities |
|
$ |
271.6 |
|
|
$ |
204.6 |
|
|
$ |
456.9 |
|
|
$ |
403.3 |
|
Changes in assets and liabilities |
|
|
(42.3 |
) |
|
|
1.0 |
|
|
|
1.7 |
|
|
|
2.1 |
|
Amortization of deferred financing costs |
|
|
(2.3 |
) |
|
|
(2.1 |
) |
|
|
(4.4 |
) |
|
|
(4.2 |
) |
Interest expense, net |
|
|
49.7 |
|
|
|
43.8 |
|
|
|
98.2 |
|
|
|
85.4 |
|
Distribution from equity investments |
|
|
(3.9 |
) |
|
|
(1.8 |
) |
|
|
(7.4 |
) |
|
|
(4.4 |
) |
Income from equity investments |
|
|
3.7 |
|
|
|
1.7 |
|
|
|
6.4 |
|
|
|
3.3 |
|
Other |
|
|
- |
|
|
|
(0.4 |
) |
|
|
(0.4 |
) |
|
|
(1.0 |
) |
Adjusted EBITDA |
|
$ |
276.5 |
|
|
$ |
246.8 |
|
|
$ |
551.0 |
|
|
$ |
484.5 |
|
30
Capital Resources and Liquidity
We expect our ongoing sources of liquidity to include:
We believe that cash generated from these sources will be sufficient to meet our operating requirements, our planned short‑term capital expenditures, debt service requirements, our quarterly cash distribution requirements, future internal growth projects or potential acquisitions.
Our partnership agreement requires that we distribute all of our available cash, as defined in the agreement, to our shareholders. On July 29, 2024, we declared a quarterly cash distribution of $0.6677 per Class A Share, to be paid on August 14, 2024 to shareholders of record on August 8, 2024. Simultaneously, the Partnership will make a distribution of $0.6677 per Class B Unit of the Partnership to the Sponsors.
Fixed‑Rate Senior Notes
On May 16, 2024 the Partnership issued $600.0 million aggregate principal amount of 6.500% fixed‑rate senior unsecured notes due 2029 to qualified institutional investors. Interest is payable semi‑annually on June 1 and December 1, commencing December 1, 2024. The Partnership used the proceeds to reduce indebtedness outstanding under the Partnership’s revolving credit facility, with the remaining net proceeds for general corporate purposes.
As of June 30, 2024, the Partnership had:
The notes described above are guaranteed by certain subsidiaries of the Partnership. Each of the indentures for the senior notes described above contains customary covenants that restrict our ability and the ability of our restricted subsidiaries to (i) declare or pay any dividend or make any other restricted payments; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00. As of June 30, 2024, we were in compliance with all debt covenants under the indentures.
In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company.
31
Credit Facilities
As of June 30, 2024, the Partnership had $1.4 billion senior secured credit facilities (the “Credit Facilities”) consisting of a $1.0 billion 5-year revolving credit facility and a $400.0 million 5‑year Term Loan A facility. The Credit Facilities mature in July 2027. Facility fees accrue on the total capacity of the revolving credit facility. Borrowings under the 5-year Term Loan A facility generally bear interest at Secured Overnight Financing Rate (“SOFR”) plus the applicable margin ranging from 1.65% to 2.55%, while the applicable margin for the 5‑year syndicated revolving credit facility ranges from 1.375% to 2.050%. Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. As of June 30, 2024, there were no borrowings outstanding under the Partnership’s revolving credit facility, and borrowings of $392.5 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.
The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes. The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the presently owned and after-acquired assets of the Partnership and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions. The Credit Facilities contain representations and warranties, affirmative and negative covenants and events of default that the Partnership considers to be customary for an agreement of this type, including a covenant that requires the Partnership to maintain a ratio of total debt to EBITDA (as defined in the Credit Facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to the Partnership obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter. As of June 30, 2024, we were in compliance with these financial covenants.
Cash Flows
Operating Activities. Net cash provided by operating activities increased $53.6 million for the six months ended June 30, 2024, compared to the same period in 2023. The change in operating cash flows resulted primarily from an increase in revenues and other income of $92.1 million, an increase in distributions received from equity investments of $3.0 million, a decrease in cash used by changes in working capital of $0.4 million, partially offset by an increase in expenses, other than depreciation, amortization, equity-based compensation and other non-cash gains and losses of $41.9 million.
Investing Activities. Net cash used in investing activities increased $11.4 million for the six months ended June 30, 2024, compared to the same period in 2023 driven by higher payments for additions to property, plant, and equipment primarily related to our compression capacity and related infrastructure expansion program.
Financing Activities. Net cash used in financing activities decreased $52.1 million for the six months ended June 30, 2024, compared to the same period in 2023. In the first six months of 2024, we received proceeds of $591.1 million, net of financing costs, from our issuance of $600.0 million aggregate principal amount of 6.500% fixed-rate senior unsecured notes, that we used to reduce indebtedness outstanding under our revolving credit facility and for general corporate purposes. In the first six months of 2024, we repaid $345.0 million of net borrowings under our Credit Facilities compared to $180.0 million net proceeds from borrowings under our Credit Facilities during the same period in 2023. In addition, in the first six months of 2024, we paid higher distributions to shareholders and noncontrolling interests of $14.3 million, partially offset by lower transaction costs of $0.3 million.
Capital Expenditures
Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations.
32
The following table sets forth a summary of capital expenditures and reconciles capital expenditures on an accrual basis to additions to property, plant and equipment on a cash basis:
|
Six Months Ended June 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
(in millions) |
|
|
|
|
|
||
Total capital expenditures |
|
107.9 |
|
|
|
109.4 |
|
(Increase) decrease in accrued capital expenditures |
|
24.0 |
|
|
|
(1.8 |
) |
(Increase) decrease in capital expenditures included |
|
(13.2 |
) |
|
|
(0.3 |
) |
Additions to property, plant and equipment |
$ |
118.7 |
|
|
$ |
107.3 |
|
Capital expenditures in 2024 are primarily attributable to continued expansion of our compression capacity and gas capture capabilities and related infrastructure to meet Hess’ and third parties’ current and future production growth and gas capture targets. The activities focus on the construction of two new compressor stations and associated pipeline infrastructure, which are expected to be placed in service in 2025. Capital expenditures in 2023 were also attributable to continued expansion of our compression capacity and related infrastructure.
33
Cautionary Note Regarding Forward-looking Information
This Quarterly Report on Form 10‑Q, including information incorporated by reference herein, contains “forward-looking statements” within the meaning of U.S. federal securities laws. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; our industry; our expected revenues; our future profitability; our maintenance or expansion projects; our projected budget and capital expenditures and the impact of such expenditures on our performance; and future economic and market conditions in the oil and gas industry.
Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements:
34
As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices. We generally do not take ownership of the crude oil, natural gas or NGLs that we currently gather, process, terminal, store or transport for our customers. Because we generate substantially all of our revenues by charging fees under long-term commercial agreements with Hess with minimum volume commitments, Hess bears the risks associated with fluctuating commodity prices and we have minimal direct exposure to commodity prices.
In the normal course of our business, we are exposed to market risks related to changes in interest rates. Our financial risk management activities may include transactions designed to reduce risk by reducing our exposure to interest rate movements. Interest rate swaps may be used to convert interest payments on certain long‑term debt. At June 30, 2024, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.
At June 30, 2024, our total debt had a carrying value of $3,460.3 million and a fair value of approximately $3,397.8 million, based on Level 2 inputs in the fair value measurement hierarchy. A 15% increase or decrease in interest rates would decrease or increase the fair value of our fixed rate debt by approximately $98.1 million or $97.5 million, respectively. The carrying value of the amounts under our Term Loan A facility and revolving credit facility at the quarter-end approximated their fair value. Any changes in interest rates do not impact cash outflows associated with fixed rate interest payments or settlement of debt principal, unless a debt instrument is repurchased prior to maturity. Our exposure to market risk related to changes in interest rates has not materially changed from what we previously disclosed in our 2023 Annual Report.
35
Item 4. Controls and Procedures
Based upon their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) as of June 30, 2024, John B. Hess, Chief Executive Officer, and Jonathan C. Stein, Chief Financial Officer, concluded that these disclosure controls and procedures were effective as of June 30, 2024.
There was no change in internal control over financial reporting, as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act, in the quarter ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
36
Item 1. Legal Proceedings
Information regarding legal proceedings is contained in Note 10, Commitments and Contingencies in the Notes to Consolidated Financial Statements and is incorporated herein by reference.
Item 1A. Risk Factors
Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 includes certain risk factors that could materially affect our business, financial condition, or future results. Those risk factors have not materially changed.
Item 5. Other Information
During the three months ended June 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
37
PART II – OTHER INFORMATION (CONT’D)
Item 6. Exhibits
. |
|
Exhibits |
|
|
|
|
|
|
|
|
|
4.1 |
|
|
|
|
10.1 |
|
|
|
|
31.1 |
|
|
|
|
31.2 |
|
|
|
|
32.1* |
|
|
|
|
32.2* |
|
|
|
|
101(INS) |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
101(SCH) |
|
Inline XBRL Taxonomy Extension Schema Document With Embedded Linkbase Documents |
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
||
* Furnished herewith
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HESS MIDSTREAM LP (Registrant) |
||
|
|
|
By: HESS MIDSTREAM GP LP, its General Partner |
||
|
|
|
By: HESS MIDSTREAM GP LLC, its General Partner |
||
|
|
|
By |
|
/s/ John B. Hess |
|
|
John B. Hess |
|
|
Chairman of the Board of Directors and Chief Executive Officer |
|
|
|
By |
|
/s/ Jonathan C. Stein |
|
|
Jonathan C. Stein |
|
|
Chief Financial Officer |
Date: August 8, 2024
39
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John B. Hess, certify that:
1. I have reviewed this quarterly report on Form 10‑Q of Hess Midstream LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2024
By |
|
/s/ John B. Hess |
|
|
John B. Hess |
|
|
Chairman of the Board of Directors and |
|
|
Chief Executive Officer |
|
|
HESS MIDSTREAM GP LP, its General Partner |
|
|
HESS MIDSTREAM GP LLC, its General Partner |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Jonathan C. Stein, certify that:
1. I have reviewed this quarterly report on Form 10‑Q of Hess Midstream LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2024
By |
|
/s/ Jonathan C. Stein |
|
|
Jonathan C. Stein |
|
|
Chief Financial Officer |
|
|
HESS MIDSTREAM GP LP, its General Partner |
|
|
HESS MIDSTREAM GP LLC, its General Partner |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hess Midstream LP (the “Partnership”) on Form 10‑Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John B. Hess, Chairman of the Board of Directors and Chief Executive Officer of Hess Midstream GP LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
Date: August 8, 2024
By |
|
/s/ John B. Hess |
|
|
John B. Hess |
|
|
Chairman of the Board of Directors and Chief Executive Officer |
|
|
HESS MIDSTREAM GP LP, its General Partner |
|
|
HESS MIDSTREAM GP LLC, its General Partner |
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hess Midstream LP (the “Partnership”) on Form 10‑Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan C. Stein, Chief Financial Officer of Hess Midstream GP LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that:
Date: August 8, 2024
By |
|
/s/ Jonathan C. Stein |
|
|
Jonathan C. Stein |
|
|
Chief Financial Officer |
|
|
HESS MIDSTREAM GP LP, its General Partner |
|
|
HESS MIDSTREAM GP LLC, its General Partner |
A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.