Hess Midstream LP Form 8-K Summary
Business Context and Reporting Period
Hess Midstream LP filed a Current Report on Form 8-K dated July 27, 2021, reporting a material unit repurchase agreement and a quarterly cash distribution. The filing does not provide quarterly operating or financial statements for the period ended June 30, 2021.
Key Financial and Capital Markets Items
- Repurchase transaction: Hess Midstream Operations LP agreed to purchase 31.25 million Class B units from Hess Investments North Dakota LLC and GIP II Blue Holding Partnership, L.P. for aggregate cash consideration of $750 million, or $24.00 per unit.
- The purchase price represented an approximate 4% discount to the 30-day volume-weighted average trading price of the company’s Class A shares through July 27, 2021.
- Immediately after closing, the purchased Class B units and an equal number of Class B shares held by the general partner are to be canceled.
- Closing is conditioned on customary approvals and receipt of debt financing sufficient to fund the $750 million purchase price.
- The transaction was expected to close in August 2021 and could be terminated if not completed by September 30, 2021, subject to other termination provisions.
- Distribution: The company announced a cash distribution of $0.5042 per Class A share for the quarter ended June 30, 2021.
- The filing does not provide revenue, net income, EBITDA, cash flow, margins, total debt, liquidity balances, or leverage metrics.
Material Changes and Ownership
The repurchase would reduce the outstanding Class B units and corresponding Class B shares by 31.25 million each. After giving effect to the transaction, each sponsor was expected to beneficially own 449,000 Class A shares, 114,133,464 Class B shares, and 114,133,464 Class B units.
Each sponsor’s holdings were described as representing approximately 90.5% of the voting interest and 3.6% of the company’s economic interest, together with approximately 90.5% of the economic interest in Hess Midstream Operations LP.
Outlook, Risks, and Unusual Items
- The repurchase depends on completion of debt financing and satisfaction or waiver of customary closing conditions; failure to obtain financing could prevent completion.
- The transaction was approved by the board and the conflicts committee, which used independent legal and financial advisors.
- The transaction involves related parties because Hess Midstream is managed and controlled through entities jointly owned by Hess Investments North Dakota LLC and GIP.
- The filing includes customary representations, warranties, termination rights, and forward-looking statement disclaimers.
- Investors should consider potential effects of additional debt financing on interest expense, leverage, liquidity, and future distributions; the filing does not quantify those effects.
Facts Investors Should Verify
- Whether the $750 million repurchase closed in August 2021 and the related Class B units and shares were canceled.
- The terms, amount, maturity, interest rate, and covenants of the debt financing used to fund the transaction.
- Updated outstanding Class A shares, Class B shares, and Class B units after closing.
- Whether the $0.5042 per-share distribution was declared and paid as announced.
- Subsequent financial statements for revenue, profitability, cash flow, leverage, liquidity, and distribution coverage.