Hess Midstream LP - Q3 2025 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarter ended September 30, 2025. Hess Midstream LP is a fee-based midstream partnership operating primarily in the Bakken and Three Forks shale plays in North Dakota. The company provides gathering, processing, storage, terminaling, and export services. A significant corporate development occurred on July 18, 2025, when Hess Corporation merged with Chevron Corporation. Consequently, Chevron is now the indirect parent of Hess Midstream LP and the counterparty to its long-term commercial agreements. As of September 30, 2025, the Partnership holds an investment-grade credit rating of 'BBB-' from S&P Global Ratings.
Key Financial Metrics
| Metric (in millions, except per share) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 |
|---|---|---|---|---|
| Total Revenues | $420.9 | $378.5 | $1,217.1 | $1,099.6 |
| Net Income | $175.5 | $164.7 | $516.6 | $486.9 |
| Net Income Attributable to Hess Midstream LP | $97.7 | $58.6 | $259.6 | $152.7 |
| Diluted EPS (Class A) | $0.75 | $0.63 | $2.14 | $1.82 |
| Adjusted EBITDA | $320.7 | $286.9 | $929.0 | $837.9 |
| Operating Cash Flow (9M) | $738.2 | $681.8 | ||
| Total Debt (Long-term + Current) | $3,794.9 | $3,471.9 | ||
| Cash and Cash Equivalents | $5.5 | $4.3 |
Material Changes vs. Prior Period
- Revenue Growth: Q3 2025 revenues increased 11% year-over-year to $420.9 million, driven by higher physical volumes (gas processing up 10%, oil terminaling up 7%) and higher tariff rates.
- Profitability: Net income attributable to Hess Midstream LP surged 67% to $97.7 million in Q3 2025 compared to $58.6 million in Q3 2024. This increase is largely due to ownership changes following equity transactions that reduced the noncontrolling interest share of income.
- Expense Increases: Operating costs rose due to higher employee costs, depreciation from new assets, and pass-through costs for electricity and water disposal. Interest expense increased to $57.1 million due to higher borrowings and new debt issuance.
- Debt Structure: In February 2025, the company issued $800 million of 5.875% senior notes due 2028 to redeem $800 million of 5.625% notes due 2026. Total debt increased to approximately $3.79 billion.
Guidance, Outlook, and Risks
- Distribution Increase: On October 27, 2025, the board declared a quarterly cash distribution of $0.7548 per Class A Share, an increase of $0.0178 from the previous quarter.
- Operational Outlook: The company completed a new compressor station in Q3 2025, adding 35 MMcf/d of capacity. Capital expenditures are focused on compression capacity and pipeline infrastructure to meet production growth targets.
- Merger Integration: Following the Hess-Chevron merger, the company faces integration risks. While the merger is complete, uncertainties remain regarding the realization of synergies and operational continuity.
- Contractual Stability: The majority of systems are in the "Secondary Term" of commercial agreements with Chevron, featuring inflation-based fee structures (capped at 3%) and minimum volume commitments (MVCs) through 2033, providing downside protection.
- Environmental Contingencies: The company maintains reserves of $2.7 million for environmental remediation, primarily related to a 2022 produced water release in North Dakota.
Investor Verification Checklist
- Chevron Dependency: Verify the impact of Chevron's production plans on Hess Midstream's volumes, as Chevron accounts for approximately 97% of revenues.
- Debt Covenants: Confirm continued compliance with the 5.00x Total Debt to Consolidated EBITDA covenant following the investment-grade rating upgrade.
- Noncontrolling Interest: Monitor the fluctuation of the noncontrolling interest balance, which has turned negative due to distributions exceeding carrying value, and its impact on net income attributable to public shareholders.
- Capital Expenditures: Track the execution of the $199.9 million (9M 2025) capital program, specifically the timeline for the second new compressor station expected in early 2026.
- Third-Party Growth: Assess the progress of third-party volume acquisition, which currently represents a small but growing portion of total throughput.