UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): January 29, 2020

Hess Midstream LP

(Exact Name of Registrant as Specified in Its Charter)

1501 McKinney Street

Houston, Texas 77010

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: (713) 496-4200

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b‑2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark 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. ☐

 

 

 

 

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Item 2.02.  Results of Operations and Financial Condition.

On January 29, 2020, Hess Midstream LP issued a news release reporting estimated results for the fourth quarter of 2019. A copy of this news release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein.

Item 9.01.  Financial Statements and Exhibits.

(d)Exhibit

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  January 29, 2020

 

 

 

Exhibit 99.1

 

HESS MIDSTREAM LP

 

HESS MIDSTREAM LP REPORTS ESTIMATED RESULTS FOR THE FOURTH QUARTER OF 2019

Highlights:

HOUSTON, January 29, 2020—Hess Midstream LP (NYSE: HESM) (“Hess Midstream”) today reported fourth quarter 2019 net income of $75.1 million compared with net income of $78.9 million for the fourth quarter of 2018, as recast for the acquisition of Hess Infrastructure Partners LP (“HIP”) by Hess Midstream Partners LP. After deduction for noncontrolling interests, net income attributable to Hess Midstream was $16.1 million, or $0.28 per Class A share. Hess Midstream generated Adjusted EBITDA of $158.4 million, including contributions from produced water handling business of $4.0 million and excluding impacts from transaction costs of $26.2 million. DCF for the fourth quarter of 2019 was $140.1 million.

 

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Commenting on the fourth quarter 2019 results, John Gatling, President and Chief Operating Officer of Hess Midstream said, “2019 was an impressive year for Hess Midstream as we delivered significant growth, completed the acquisition of Hess Infrastructure Partners, eliminated IDR payments and converted to an Up-C corporate structure. We enter 2020 as a large-scale, full service midstream company positioned well for significant future growth in both Adjusted EBITDA and free cash flow, underscored by rising volumes from both Hess and third parties and underpinned by our unique contract structure.”

On December 16, 2019, Hess Midstream Partners LP completed its previously announced acquisition of HIP, incentive distribution rights simplification and conversion from a master limited partnership into an “Up-C” structure by merging with Hess Midstream, an entity taxed as a corporation for U.S. federal income tax purposes (collectively, the “Transaction”). At the effective time of the Transaction, each common unit held by public unitholders of Hess Midstream Partners LP converted on a one-for-one basis into a newly issued Class A share representing a limited partner interest in Hess Midstream. As part of the Transaction, Hess Midstream Partners LP changed its name to “Hess Midstream Operations LP” and will continue as a consolidated subsidiary of Hess Midstream, the new publicly listed entity. Hess Midstream Partners LP common units ceased trading on the New York Stock Exchange (“NYSE”) and the Class A shares began trading on the NYSE under the ticker symbol “HESM” on December 17, 2019.

Hess Midstream’s results contained in this release include the historical results of HIP for all periods prior to the closing of the Transaction on December 16, 2019, as the Transaction was accounted for as a business combination of entities under common control. We refer to certain results as “attributable to Hess Midstream LP,” which exclude (i) the noncontrolling interests in Hess Midstream Operations LP retained by affiliates of Hess Corporation (“Hess”) and Global Infrastructure Partners, (ii) the noncontrolling interests in the historical operating subsidiaries of Hess Midstream Partners LP, and (iii) historical activity of HIP prior to its acquisition by Hess Midstream, which is included in “net parent investment.”

Financial Results

Revenues and other income in the fourth quarter of 2019 were $253.5 million, including $1.4 million of shortfall fee payments related to minimum volume commitments (“MVC”). Revenues were up from $185.9 million in the prior‑year quarter, primarily attributable to higher throughput volumes and tariff rates. Total costs and expenses in the fourth quarter of 2019 were $163.2 million up from $93.8 million in the prior-year quarter, primarily attributable to costs related to the Transaction, higher maintenance on expanded infrastructure and pass-through rail transportation and produced water trucking and disposal costs. Net income for the fourth quarter of 2019 was $75.1 million and net cash provided by operating activities was $136.3 million.

Adjusted EBITDA for the fourth quarter of 2019 was $158.4 million, including contributions from produced water handling business of $4.0 million and excluding impacts from costs related to the Transaction of $26.2 million. Relative to distributions, DCF for the fourth quarter of 2019 of $140.1 million resulted in an approximately 1.2x distribution coverage ratio.

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Operational Highlights

Throughput volumes were up in all segments in the fourth quarter of 2019 compared to the fourth quarter of 2018. In the gathering segment, throughput volumes increased 28% for gas gathering, 25% for crude oil gathering and 72% for water gathering compared to the prior-year quarter, driven by growing Hess production. In the crude oil terminaling segment, throughput volumes increased 22% compared to the prior-year quarter, also driven by growing Hess production. In the gas processing segment, throughput volumes increased 29% compared to the prior-year quarter, driven by completion of the ramp-up of processing volumes through the Little Missouri 4 (“LM4”) gas processing plant and backfilling of the Tioga Gas Plant with growing Hess production and third-party volumes, which is expected to continue through the second quarter of 2020.

Capital Expenditures

Capital expenditures for the fourth quarter of 2019 totaled $108.2 million, including $106.5 million of expansion capital expenditures and $1.7 million of maintenance capital expenditures. Capital expenditures in the prior-year quarter were $66.9 million, including $64.9 million of expansion capital expenditures and $2.0 million of maintenance capital expenditures. The increase in expansion capital expenditures was primarily attributable to expansion of our gathering system and compression capacity, and civil construction and fabrication activities for the planned expansion of the Tioga Gas Plant.

Quarterly Cash Distributions

On January 27, 2020, our general partner’s board of directors declared a cash distribution of $0.4258 per Class A share for the fourth quarter of 2019, an increase of 3.6% over the distribution on the Hess Midstream Partners LP common units for the prior quarter and 15% compared to the distribution on the Hess Midstream Partners LP common units for the fourth quarter of 2018. The distribution is expected to be paid on February 14, 2020 to shareholders of record as of the close of business on February 6, 2020. Holders of Class A shares will receive a Form 1099 with respect to distributions received on Class A shares.

Guidance

Hess Midstream is targeting 15% annual distribution per share growth through 2021, with a targeted distribution coverage ratio of 1.2x.

Hess Midstream reaffirms its previously announced guidance for full year 2020:

 

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Investor Webcast

Hess Midstream will review fourth quarter financial and operating results and other matters on a webcast today at 12:00 p.m. Eastern Time. The live audio webcast is accessible on the Investor page of our website www.hessmidstream.com. Conference call numbers for participation are 866-395-9624, or 213-660-0871 for international callers. The passcode number is 6572858. A replay of the conference call will be available at the same location following the event.

About Hess Midstream

Hess Midstream LP is a fee‑based, growth-oriented midstream company that operates, develops and acquires a diverse set of midstream assets to provide services to Hess and third‑party customers. Hess Midstream owns oil, gas and produced water handling assets that are primarily located in the Bakken and Three Forks Shale plays in the Williston Basin area of North Dakota. More information is available at www.hessmidstream.com.

Reconciliation of U.S. GAAP to Non‑GAAP Measures

In addition to our financial information presented in accordance with U.S. generally accepted accounting principles (“GAAP”), management utilizes certain additional non‑GAAP measures to facilitate comparisons of past performance and future periods. “Adjusted EBITDA” presented in this release is 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, non‑recurring items, if applicable. “Distributable Cash Flow” (“DCF”) is defined as Adjusted EBITDA less net interest, excluding amortization of deferred financing costs, cash paid for federal and state income taxes and maintenance capital expenditures. DCF does not reflect changes in working capital balances. “Free cash flow” is defined as Adjusted EBITDA less capital expenditures. We believe that investors’ understanding of our performance is enhanced by disclosing these measures as they may assist in assessing our operating performance as compared to other publicly traded companies in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods, and assessing the ability of our assets to generate sufficient cash flow to make distributions to our shareholders. These measures are not, and should not be viewed as, a substitute for GAAP net income or cash flow from operating activities and should not be considered in isolation. Reconciliations of reported net income (GAAP) to Adjusted EBITDA and free cash flow, and net cash provided by operating activities (GAAP) to DCF, are provided below.

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Forward‑looking Statements

This press release may include forward-looking statements within the meaning of the federal securities laws. Generally, the words “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “believe,” “intend,” “project,” “plan,” “predict,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and current projections or expectations. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the filings made by Hess Midstream with the U.S. Securities and Exchange Commission, which are available to the public. Hess Midstream undertakes no obligation to, and does not intend to, update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

For Hess Midstream LP

Investor Contact:

Jennifer Gordon

(212) 536-8244

Media Contact:

Robert Young

(713) 496-6076

 

 

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HESS MIDSTREAM LP

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS, EXCEPT PER-SHARE/LIMITED PARTNER UNIT DATA)

 

 

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HESS MIDSTREAM LP

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS, EXCEPT PER-SHARE/LIMITED PARTNER UNIT DATA)

 

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HESS MIDSTREAM LP

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

 

 

 

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HESS MIDSTREAM LP

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

 

 

 

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HESS MIDSTREAM LP

SUPPLEMENTAL OPERATING DATA (UNAUDITED)

(IN THOUSANDS)

 

 

 

 

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