Hess Midstream LP Announces Distribution Per Share Level Increase

Rhea-AI Summary

Hess Midstream LP (NYSE: HESM) has announced a quarterly cash distribution of $0.6677 per Class A share for Q2 2024, representing a $0.0161 increase from Q1 2024. This increase follows a $100 million unit repurchase in June 2024 and exceeds the company's targeted 5% growth in annual distributions per Class A share through 2026. Since Q1 2021, HESM has increased its distribution per Class A share by approximately 48%, with a 10% increase in 2024 year-to-date on an annualized basis. The company expects to have over $1.25 billion in financial flexibility through 2026 to support its return of capital framework, including potential additional unit repurchases.

Positive

• Increased quarterly cash distribution by $0.0161 per Class A share
• Executed $100 million unit repurchase in June 2024
• 48% increase in distribution per Class A share since Q1 2021
• 10% increase in distribution per Class A share in 2024 year-to-date (annualized)
• Over $1.25 billion in financial flexibility expected through 2026

Negative

• None.

Insights

Financial Analyst

Hess Midstream's announcement of a $0.6677 per Class A share quarterly distribution marks a significant 2.47% increase from the previous quarter. This boost, fueled by the company's recent $100 million unit repurchase, demonstrates a robust financial strategy focused on shareholder returns.

The distribution increase is particularly noteworthy as it surpasses Hess Midstream's targeted 5% annual growth rate, showcasing the company's strong cash flow generation and commitment to returning value to shareholders. Since Q1 2021, distributions per Class A share have grown by an impressive 48%, with a 10% increase in 2024 alone on an annualized basis.

The company's projection of over $1.25 billion in financial flexibility through 2026 is a strong indicator of its capacity for continued capital returns. This flexibility could potentially support further unit repurchases and distribution increases, enhancing shareholder value in the medium term.

However, investors should consider the sustainability of this aggressive distribution growth strategy in the context of the broader energy market dynamics and potential future capital expenditure needs. While the current strategy appears solid, any significant changes in the operating environment or unexpected capital requirements could impact the company's ability to maintain this pace of distribution growth.

Market Research Analyst

Hess Midstream's strategic move to increase its quarterly distribution reflects a broader trend in the midstream energy sector, where companies are focusing on returning capital to shareholders amidst a relatively stable operating environment. This approach is likely to resonate well with income-focused investors in the current market landscape.

The company's ability to exceed its targeted 5% annual distribution growth rate is particularly impressive, especially considering the challenging environment many energy companies have faced in recent years. This outperformance could potentially attract more investor attention to Hess Midstream and the midstream sector as a whole.

It's worth noting that the energy sector has been experiencing a shift in investor sentiment, with a growing emphasis on capital discipline and shareholder returns rather than aggressive growth strategies. Hess Midstream's approach aligns well with this trend, potentially positioning the company favorably among its peers.

However, investors should remain vigilant about potential risks, including changes in energy prices, regulatory environments and broader economic conditions that could impact the midstream sector. While Hess Midstream's current financial flexibility is impressive, the long-term sustainability of this strategy will depend on continued strong operational performance and favorable market conditions.

HOUSTON--(BUSINESS WIRE)-- Hess Midstream LP (NYSE: HESM) (“Hess Midstream”), today announced that the Board of Directors of its general partner declared a quarterly cash distribution of $0.6677 per Class A share for the quarter ended June 30, 2024, an increase of $0.0161 per Class A share as compared with the first quarter of 2024. This quarterly increase includes incremental distribution per Class A share growth utilizing excess adjusted free cash flow available for distributions following Hess Midstream’s accretive $100 million unit repurchase in June 2024 and, on an annualized basis, is significantly above Hess Midstream’s targeted 5% growth in annual distributions per Class A share through 2026.

“We continue to execute on our differentiated financial strategy, prioritizing consistent and ongoing return of capital to our shareholders,” said Jonathan Stein, Chief Financial Officer of Hess Midstream. “With today’s announcement, we have once again utilized our excess adjusted free cash flow beyond our growing distributions to provide further return of capital to our shareholders. Through a combination of our 5% targeted growth in annual distributions per Class A share and incremental increases in our quarterly distributions following unit repurchases, we have increased our distribution per Class A share by approximately 48% since the first quarter of 2021 and by over 10% in 2024 year to date on an annualized basis. We expect to continue to have more than $1.25 billion of financial flexibility through 2026 that can be used to support our return of capital framework, including potential additional and ongoing unit repurchases that could support further distribution per share level increases.”

The quarterly distribution will be payable on August 14, 2024, to Class A shareholders of record as of the close of business on August 8, 2024.

About Hess Midstream

Hess Midstream LP is a fee-based, growth-oriented midstream company that owns, operates, develops and acquires a diverse set of midstream assets to provide services to Hess Corporation (“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.

Cautionary Note Regarding Forward-looking Information

This press release 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, including our ability to increase our distributions or achieve our targeted distribution growth rate; our business strategy and profitability; future economic and market conditions in the oil and gas industry; and our ability to execute future accretive opportunities, including incremental return of capital to shareholders and potential incremental unit repurchases.

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: the ability of Hess and other parties to satisfy their obligations to us, including Hess’ ability to meet its drilling and development plans on a timely basis or at all, its ability to deliver its nominated volumes to us, and the operation of joint ventures that we may not control; our ability to generate sufficient cash flow to pay current and expected levels of distributions; reductions in the volumes of crude oil, natural gas, natural gas liquids (“NGLs”) and produced water we gather, process, terminal or store; the actual volumes we gather, process, terminal and store for Hess in excess of our minimum volume commitments and relative to Hess’ nominations; fluctuations in the prices and demand for crude oil, natural gas and NGLs; changes in global economic conditions and the effects of a global economic downturn or inflation on our business and the business of our suppliers, customers, business partners and lenders; our ability to comply with government regulations or make capital expenditures required to maintain compliance, including our ability to obtain or maintain permits necessary for capital projects in a timely manner, if at all, or the revocation or modification of existing permits; our ability to successfully identify, evaluate and timely execute our capital projects, investment opportunities and growth strategies, whether through organic growth or acquisitions; costs or liabilities associated with federal, state and local laws, regulations and governmental actions applicable to our business, including legislation and regulatory initiatives relating to environmental protection and health and safety, such as spills, releases, pipeline integrity and measures to limit greenhouse gas emissions and climate change; our ability to comply with the terms of our credit facility, indebtedness and other financing arrangements, which, if accelerated, we may not be able to repay; reduced demand for our midstream services, including the impact of weather or the availability of the competing third-party midstream gathering, processing and transportation operations; potential disruption or interruption of our business due to catastrophic events, such as accidents, severe weather events, labor disputes, information technology failures, constraints or disruptions and cyber-attacks; any limitations on our ability to access debt or capital markets on terms that we deem acceptable, including as a result of weakness in the oil and gas industry or negative outcomes within commodity and financial markets; liability resulting from litigation; risks and uncertainties associated with Hess’ proposed merger with Chevron Corporation; and other factors described in Item 1A—Risk Factors in our Annual Report on Form 10-K and any additional risks described in our other filings with the Securities and Exchange Commission.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240729833296/en/

Investor Contact:

Jennifer Gordon

(212) 536-8244

Media Contact:

Lorrie Hecker

(212) 536-8250

Source: Hess Midstream LP

FAQ

What is Hess Midstream's new quarterly cash distribution per Class A share for Q2 2024?

Hess Midstream's new quarterly cash distribution is $0.6677 per Class A share for the quarter ended June 30, 2024.

How much did Hess Midstream (HESM) increase its quarterly distribution compared to Q1 2024?

Hess Midstream increased its quarterly distribution by $0.0161 per Class A share compared to the first quarter of 2024.

What was the value of Hess Midstream's unit repurchase in June 2024?

Hess Midstream executed a $100 million unit repurchase in June 2024.

By what percentage has Hess Midstream (HESM) increased its distribution per Class A share since Q1 2021?

Hess Midstream has increased its distribution per Class A share by approximately 48% since the first quarter of 2021.

What is Hess Midstream's expected financial flexibility through 2026?

Hess Midstream expects to have more than $1.25 billion of financial flexibility through 2026 to support its return of capital framework.