Hess Midstream LP Form 8-K Summary
Business Context and Reporting Period
Hess Midstream LP filed this Form 8-K on December 17, 2019, reporting the completion of a previously announced restructuring transaction on December 16, 2019. The filing covers historical and pro forma information through September 30, 2019, plus audited annual information for 2016–2018.
Transaction and Key Financial Position Changes
- Hess Midstream Operations LP acquired all partnership interests in Hess Infrastructure Partners LP from Hess Corporation and GIP II Blue Holding Partnership LP.
- The acquired interests include an 80% economic interest in three pipeline and logistics businesses, a 100% economic interest in the produced-water gathering and disposal business, and all outstanding incentive distribution rights of Hess Midstream.
- Consideration consisted of approximately $1.15 billion of assumed existing debt, approximately 230 million newly issued limited partner units, and approximately $550 million of cash paid to Hess and GIP.
- Following the transaction, Hess Midstream owns 100% of the underlying assets consolidated under Hess Midstream.
Accounting, Reporting, and Material Changes
The transaction was accounted for as a common-control business combination. The transferred net assets are recorded at historical cost, and prior-period financial statements will be retrospectively adjusted on a consolidated basis. Hess Midstream stated that HIP results will be reflected in its consolidated financial statements beginning in the fourth quarter of 2019.
The filing provides supplemental consolidated combined financial statements, selected financial data, pro forma consolidated financial statements, and historical financial statements for HIP. The supplied filing text does not provide the underlying revenue, profit, cash-flow, margin, debt-balance, liquidity, or leverage metrics from those exhibits.
Guidance, Outlook, Risks, and Unusual Items
- No specific earnings, operating, or financial guidance is provided in the supplied filing text.
- The principal unusual item is the common-control restructuring and the resulting retrospective presentation of historical financial statements.
- Investors should consider the effects of the assumed debt, substantial unit issuance, cash consideration, and retrospective consolidation on per-unit results, ownership, leverage, and comparability.
Important Facts to Verify
- Review Exhibit 99.1 and Exhibit 99.2 for the consolidated combined revenue, net income, operating cash flow, capital expenditures, margins, and liquidity data.
- Verify the amount, terms, maturity profile, and interest rates of the approximately $1.15 billion of assumed HIP debt.
- Review Exhibit 99.4 for pro forma ownership, earnings, leverage, and per-unit effects of the transaction.
- Confirm the accounting treatment and retrospective periods used for the common-control combination.
- Assess the economic and governance implications of issuing approximately 230 million units to Hess and GIP and acquiring the incentive distribution rights.