HESM

Hess Midstream LP - Q1 2026 10-Q Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026. Hess Midstream LP is a fee-based, growth-oriented limited partnership operating midstream assets primarily in the Bakken and Three Forks shale plays in North Dakota. The company provides gathering, processing, storage, terminaling, and water handling services. As of the reporting date, the company's Sponsor is Chevron, following a transition from Hess Corporation and GIP II Blue Holding, L.P. in mid-2025. The company operates as a Variable Interest Entity (VIE) consolidated by Hess Midstream LP.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by $8.1 million (2.1%) year-over-year, driven by higher tariff rates, increased third-party services, and pass-through revenues. This growth partially offset lower throughput volumes in oil terminaling (-5%) and water gathering (-9%).
• Profitability: While consolidated net income decreased slightly by $3.7 million due to higher income tax expenses ($28.2M vs $23.0M), net income attributable to Hess Midstream LP increased by $16.0 million. This improvement was driven by a reduction in noncontrolling interest allocations following equity transactions.
• Operating Expenses: Total operating costs rose to $152.0 million from $144.6 million, primarily due to a $7.0 million increase in depreciation expense related to new assets placed in service.
• Cash Flow: Net cash provided by operating activities increased significantly by $50.9 million, largely due to favorable changes in working capital.

Guidance, Outlook, and Management Commentary

Operational Highlights: The company placed a new compressor station in service in Q1 2026, adding approximately 50 MMcf/d of capacity. Throughput volumes for gas processing increased 1% due to higher third-party volumes.

Capital Allocation: The company executed significant equity transactions in Q1 2026, including an Accelerated Share Repurchase (ASR) of $42.0 million of Class A shares and a repurchase of Class B units from the Sponsor for $18.0 million. These were funded via the revolving credit facility.

Distributions: On April 27, 2026, the board declared a quarterly cash distribution of $0.7792 per Class A share, an increase of $0.0151 from the previous quarter.

Risks and Contingencies: The company notes that while its fee-based structure minimizes direct commodity price exposure, production volumes depend on the economic viability of upstream drilling by Chevron and third parties. The company is subject to environmental regulations and potential litigation, though no material accrued liabilities for legal contingencies were identified.

Investor Verification Checklist

• Chevron Dependency: Verify the stability of Chevron's production plans in the Bakken, as 96% of revenues and accounts receivable are attributable to Chevron and its affiliates.
• Debt Structure: Confirm the terms and maturity dates of the $3.77 billion debt load, specifically the $1.0 billion revolving credit facility and $400 million Term Loan A, both maturing in July 2027.
• Fee Recalculation: Review the impact of the "Secondary Term" fee structure (inflation-based) versus the previous "Initial Term" (return-on-capital based) on future cash flow stability.
• Capital Expenditures: Monitor the shift in capital spending from the multi-year compression expansion (completed in 2025) to ongoing well connects and maintenance in 2026.
• Noncontrolling Interest: Track changes in the noncontrolling interest balance, which fluctuated significantly due to share/unit repurchases and equity offerings, impacting net income attributable to public shareholders.