Hess Midstream Partners Q4 Earnings Call Highlights
View original at finance.yahoo.comHess Midstream Partners Q4 Earnings Call Highlights Hess Midstream Partners logo Hess Midstream Partners (NYSE:HESM) executives said the company finished 2025 with record operational execution, completed major multiyear projects on time and on budget, and is entering a period of materially lower capital spending that m…
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The company is seeing extreme cold rather than widespread power-line impacts experienced in prior years
80% confidenceThe company expects lower volumes in the first half of the year relative to the second half
80% confidenceFull-year 2025 adjusted EBITDA increased about 9% from 2024
80% confidenceThe capital spending trend is consistent with Chevron's plan, including a reduction in rigs from four to three
80% confidenceThe company continues to expect third-party volumes to average about 10% across oil and gas, though quarter-to-quarter variability can occur
80% confidenceThe company reiterated its longer-term framework calling for 5% annualized net income and adjusted EBITDA growth and approximately 10% annualized adjusted free cash flow growth through 2028
80% confidenceThe company's guidance and outlook are consistent with Chevron's optimized development program
80% confidenceCapital spending is expected to decline further in 2027 and 2028 to less than $75 million per year
80% confidenceFull-year 2026 guidance for net income is $650 million to $700 million and adjusted EBITDA is $1,225 million to $1,275 million, approximately flat at the midpoint compared with 2025
80% confidenceSystems representing about 85% of revenues are fixed-fee with annual inflation escalators capped at 3%, while terminaling, water gathering, and a gas gathering subsystem representing about 15% of revenues reset through an annual rate redetermination process through 2033
80% confidenceThe company's gross adjusted EBITDA margin in the fourth quarter held at approximately 83%, above its 75% target, reflecting continued strong operating leverage
80% confidenceImproving weather should help activity and production recovery
80% confidenceAdjusted free cash flow in the first quarter of 2026 is expected to increase relative to the fourth quarter of 2025 because first-quarter capital spending is projected to be lower
80% confidenceThe company expects 2027 and 2028 capex to be about $75 million, if not lower
80% confidenceApproximately 95% of 2026 revenues are covered by minimum volume commitments (MVCs), providing significant revenue protection on a full-year basis
80% confidenceThe company's guidance through 2028 implies about $1 billion of financial flexibility to continue returning capital to shareholders and paying down debt
80% confidenceLonger laterals discussed by Chevron can reduce Hess Midstream's well-connect capital needs by delivering similar volumes with fewer wells
80% confidenceThe company continues to target a gross adjusted EBITDA margin of approximately 75% in 2026
80% confidenceAdjusted free cash flow in 2026 is expected to be $850 million to $900 million, representing 12% growth over 2025 at the midpoint
80% confidenceThe company's system is substantially built
80% confidenceIntegration and coordination with Chevron has helped the company optimize midstream and upstream investments to avoid overbuilding
80% confidence2026 capital spending is expected to be approximately $150 million, a roughly 40% reduction versus 2025
80% confidenceTariff rates across most systems are higher in 2026 than in 2025
80% confidenceThe quarter-to-quarter decline in net income and adjusted EBITDA was primarily due to lower revenues driven by severe winter weather and slow recovery through December, as well as lower interruptible third-party volumes and annual maintenance at LM4
80% confidenceThe company expects to generate adjusted free cash flow of $850 million to $900 million in 2026
80% confidenceChevron recently reiterated a target of 200,000 barrels per day plateau production in the Bakken
80% confidenceFirst-quarter 2026 volumes are expected to be lower across the system due to continued severe winter weather in January and into early February, along with normal contingencies for the balance of the winter period
80% confidenceFirst-quarter 2026 net income is expected to be approximately $150 million to $160 million and adjusted EBITDA approximately $295 million to $305 million
80% confidenceThe company expects excess adjusted free cash flow of approximately $210 million after funding its targeted 5% annual distribution growth, which it plans to use for incremental shareholder returns and debt repayment
80% confidenceThe company is funding incremental shareholder returns from free cash flow after distributions rather than leveraged buybacks
80% confidence