Hess Midstream (HESM) Q3 Earnings call transcript Oct 30, 2024
In the recent third quarter earnings call, Hess Midstream provided insights into its operational and financial performance, highlighting the company's focus on strong operational efficiency, strategic investments, and a commitment to shareholder returns. Let's dive into the key takeaways from the call, shedding light on the company's performance and outlook.
Operational Performance and Financial Highlights
Hess Midstream showcased robust operational performance during the third quarter, with throughput volumes averaging 419 million cubic foot per day for gas processing, 122,000 barrels of oil per day for crude terminalling, and 128,000 barrels of water per day for water gathering. The company's operational stability, coupled with strong gas capture, underscores its commitment to delivering reliable services to its customers.
Financially, Hess Midstream's adjusted EBITDA for the third quarter stood at $287 million, up from $276 million in the previous quarter, driven by higher throughput volumes and a focus on cost control. The company's gross adjusted EBITDA margin remained above the target at approximately 80%, highlighting its operational leverage and efficient cost management.
Growth Strategies and Investments
Hess Midstream's strategic investments, particularly in building new compressor stations and associated gathering pipelines, are expected to drive growth across its oil and gas systems. The company's plan to start construction of a new gas processing plant in 2025, with an expected online date in 2027, further underscores its commitment to expansion and supporting Hess Corporation's production growth.
Shareholder Returns and Financial Flexibility
Hess Midstream's focus on shareholder returns has been a cornerstone of its financial strategy. The company has returned $1.85 billion to shareholders since 2021 and has increased its distribution per Class A share by over 50% since 2021. With a low leverage of approximately 3.2x adjusted EBITDA, Hess Midstream has demonstrated its ability to deliver significant returns while maintaining balance sheet strength. The company's financial flexibility, with expectations to generate over $1.25 billion through 2026, further underscores its commitment to shareholder returns.
Looking Ahead
Looking forward, Hess Midstream anticipates net income of approximately $170 million to $185 million and adjusted EBITDA of approximately $295 million to $310 million for the fourth quarter. Despite challenges from power losses due to wildfires, the company remains optimistic about its growth trajectory, with expectations of approximately 10% annualized growth in oil and gas volumes and adjusted EBITDA through 2026.
In conclusion, Hess Midstream's third quarter earnings call highlighted its operational and financial strength, strategic investments, and commitment to shareholder returns. With a focus on sustainable growth and a solid financial strategy, Hess Midstream is well-positioned to navigate challenges and capitalize on opportunities in the energy sector.
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