HESM — Hess Midstream LP

Summary of Hess Midstream Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $174 million, up from $158 million in Q1 2026.
• Adjusted EBITDA: $314 million, compared to $300 million in Q1 2026.
• Total Revenues: Increased by approximately $10 million, driven by a $7 million rise in gathering revenues and a $3 million increase in processing revenues.
• Adjusted Free Cash Flow: Approximately $232 million, a slight decrease of 2% from Q1 2026.
• Capital Expenditures: $31 million for Q2 2026, with expectations for higher spending in Q3.
• Gross Adjusted EBITDA Margin: Maintained at 85%, exceeding the 75% target.

2. Strategic Updates and Business Highlights

• Successful completion of planned maintenance at TGP on time and under budget.
• Continued focus on operational efficiencies and cost reductions, contributing to lower operating expenses.
• Ongoing capital program includes the completion of greenfield high-pressure gathering pipeline infrastructure.
• Commitment to shareholder returns with an increased distribution and plans for share repurchases.

3. Forward Guidance and Outlook

• Q3 2026 Guidance: Expected net income of $165 million to $175 million and adjusted EBITDA of $310 million to $320 million, with anticipated higher revenues offset by increased operating expenses.
• Full Year 2026 Guidance: Net income projected between $650 million and $700 million and adjusted EBITDA between $1.225 billion and $1.275 billion. Adjusted free cash flow expected to be between $910 million and $960 million, indicating a 20% year-over-year increase at the midpoint.

4. Bad News, Challenges, or Points of Concern

• Volume Fluctuations: While throughput volumes are expected to grow in the second half, Q2 showed flat to lower volumes in oil, raising concerns about potential volatility.
• Operational Risks: Future EBITDA guidance is sensitive to weather conditions and execution of maintenance plans, with interruptions potentially impacting performance.
• Increased Operating Expenses: Anticipated higher OpEx in Q3 due to deferred maintenance could pressure margins and cash flow.

5. Notable Q&A Insights

• Volume Growth Drivers: Management emphasized that the expected volume growth in the second half is primarily due to Chevron's drilling program and improved productivity, with a target of at least 5% growth quarter-on-quarter.
• Cost Management: The company is experiencing operational efficiencies but maintains a conservative EBITDA margin target of 75%, despite consistently exceeding this benchmark.
• Capital Allocation Strategy: The Board evaluates the balance between debt repayment and shareholder returns, with a focus on reducing leverage from the current 3x to around 2.5x by 2028. No new debt is planned for funding share buybacks.

Overall, Hess Midstream demonstrated solid financial performance in Q2 2026, with a strong commitment to shareholder returns, though challenges related to operational execution and cost management remain.