• Net Income (2024): $659 million.
• Adjusted EBITDA (2024): $1.136 billion, a 12% increase from 2023.
• Gas Processing Volumes (Q4 2024): 447 million cubic feet per day.
• Crude Terminaling Volumes (Q4 2024): 127,000 barrels of oil per day.
• Water Gathering Volumes (Q4 2024): 130,000 barrels of water per day.
• Capital Expenditures (2025): Approximately $300 million.
• Projected Adjusted EBITDA (2025): $1.235 billion to $1.285 billion, an 11% increase at the midpoint compared to 2024.
• Net Income (Q4 2024): $172 million.
• Adjusted EBITDA (Q4 2024): $298 million.
• Gross Adjusted EBITDA Margin (Q4 2024): Approximately 80%.
• Adjusted Free Cash Flow (Q4 2024): Approximately $164 million.
• Leverage Ratio: Approximately 3.1 times adjusted EBITDA.
• Distribution Growth (2024): Increased by over 10%.
• Shareholder Returns (Since 2021): $1.95 billion returned through repurchases.

• Warning! GuruFocus has detected 9 Warning Signs with HESM.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hess Midstream LP (NYSE:HESM) reported a 14% year-over-year growth in gas processing throughputs for 2024.
• The company extended its guidance release, projecting gas volumes to grow by more than 25% from 2024 through 2027.
• Hess Midstream LP (NYSE:HESM) achieved a full year adjusted EBITDA of $1.136 billion in 2024, representing a 12% growth from 2023.
• The company plans to maintain a 4-rig drilling program in 2025, supporting continued production growth.
• Hess Midstream LP (NYSE:HESM) has a strong financial strategy with a focus on returning capital to shareholders, having returned $1.95 billion since 2021.

Negative Points

• Severe winter weather in January 2025 is expected to impact first-quarter volumes, potentially affecting financial performance.
• The company anticipates a temporary reduction in gas volumes in 2027 due to planned regulatory inspections and maintenance at the Tioga Gas Plant.
• Capital expenditures are expected to remain high, with $300 million planned for 2025, which may impact free cash flow.
• Hess Midstream LP (NYSE:HESM) faces potential challenges in maintaining growth beyond 2027 without further infrastructure investments.
• The company's growth is heavily reliant on Hess Corporation's development activity, which could pose risks if there are changes in Hess's strategy.

Q & A Highlights

Q: Can you explain the multiyear growth outlook and the potential for upside to your EBITDA growth target? A: Jonathan Stein, CFO: We have set MVCs that provide visibility to volume growth, with gas processing expected to grow by 10% in 2026 and 5% in 2027. The MVCs underpin this growth, with Hess volumes being the primary driver. John Gatling, COO, added that the growth is supported by Hess's 4-rig development plan and improved well productivity, with both oil and gas volumes expected to grow significantly through 2027.

Q: How is Hess Midstream planning to grow in the Bakken, and is there any plan to expand beyond it? A: John Gatling, COO: There are no plans to expand beyond the Bakken. The growth is primarily underpinned by Hess's production, with additional opportunities from third-party volumes. While we are open to bolt-on acquisitions, our focus remains on organic growth supported by our existing infrastructure.

Q: What is driving the increase in CapEx for 2025, and what are the expectations for growth CapEx beyond 2027? A: John Gatling, COO: The increase in CapEx is due to activity phasing and the need to keep pace with Hess's accelerated well productivity. We expect CapEx to remain in the $250 million to $300 million range through 2027, after which it should decline as major infrastructure projects are completed. Jonathan Stein, CFO, added that ongoing capital will continue, but project capital will phase out, leading to declining CapEx post-2027.

Q: How does Hess Midstream view the use of leverage as it approaches a target below 2.5 times in 2026? A: Jonathan Stein, CFO: The $1.25 billion of financial flexibility is funded by leverage capacity and excess free cash flow. Our primary focus remains on returning capital to shareholders, with potential bolt-on acquisitions being evaluated. The leverage capacity allows us to continue prioritizing shareholder returns through repurchases and dividend increases.

Q: How is the first quarter guidance adjusted for weather impacts, and what is the expected recovery for the rest of the year? A: John Gatling, COO: The first quarter guidance accounts for severe winter weather impacts, with a conservative approach to expectations. Recovery has been strong, and we expect volumes to return to normal levels, with significant growth anticipated for the rest of the year. Jonathan Stein, CFO, noted that the full-year EBITDA guidance implies an 11% average growth from Q2 to Q4.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.