HESM — Hess Midstream LP

Summary of Hess Midstream LP Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $158 million, down from $168 million in Q4 2025.
• Adjusted EBITDA: $300 million, compared to $309 million in the previous quarter.
• Total Revenues: Decreased by approximately $15 million, with gathering revenues down by $14 million and processing revenues down by $6 million, while terminaling revenues increased by $5 million.
• Adjusted Free Cash Flow: $237 million, a 14% increase from Q4 2025.
• Capital Expenditures: $10 million, significantly lower due to severe winter weather.
• Distribution Increase: 2% increase for Class A shares, reflecting an annualized growth of approximately 8%.

2. Strategic Updates and Business Highlights

• Successfully executed an accretive $60 million share and unit repurchase.
• Continued focus on operational priorities despite severe winter weather impacting throughput volumes.
• Average throughput volumes: 430 million cubic feet per day for gas processing, 119,000 barrels per day for crude terminaling, and 115,000 barrels per day for water gathering.
• Completion of a second compressor station, contributing to reduced capital expenditures and enhanced operational efficiency.
• The company is leveraging existing infrastructure to generate significant free cash flow while maintaining a strong focus on shareholder returns.

3. Forward Guidance and Outlook

• Q2 2026 Guidance: Expected net income of $150 million to $160 million and adjusted EBITDA of approximately $295 million to $305 million, factoring in planned maintenance at the Tioga Gas Plant.
• Full Year 2026 Guidance: Net income projected between $650 million and $700 million; adjusted EBITDA between $1.225 billion and $1.275 billion, with capital expenditures expected around $105 million.
• Anticipated adjusted free cash flow for the year is between $910 million and $960 million, with excess cash flow projected at approximately $280 million after funding distribution growth.

4. Bad News, Challenges, or Points of Concern

• Weather Impact: Severe winter weather in January and February led to lower throughput volumes and revenues.
• Maintenance Impact: Planned maintenance at the Tioga Gas Plant in Q2 is expected to reduce throughput by 5 million to 10 million cubic feet per day.
• Market Conditions: While no immediate macroeconomic changes were noted, ongoing geopolitical tensions could impact third-party volumes in the future.

5. Notable Q&A Insights

• Capital Expenditures: The reduction in CapEx from $150 million to $100 million reflects a strategic right-sizing due to efficiencies gained from longer laterals and reduced well connect requirements.
• Third-Party Volumes: The company is targeting 10% third-party volumes, with no significant changes anticipated due to macroeconomic conditions.
• Debt Strategy: The company aims to maintain a conservative financial strategy, using free cash flow for debt repayment while continuing to provide returns to shareholders.
• Terminal Revenue Structure: Terminal revenues are based on a cost-of-service model with annual adjustments, which contributed to strong performance in Q1, though future quarters may vary based on throughput and weather conditions.

Overall, Hess Midstream LP demonstrated solid operational performance in Q1 2026 despite weather-related challenges, with a strong focus on shareholder returns and strategic capital management. The outlook remains positive, with expectations for increased volumes and cash flow in the latter half of the year.