UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30,March 31, 20212022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-39163
Hess Midstream LP
(Exact name of Registrant as specified in its charter)
DELAWARE | 84-3211812 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
|
|
1501 McKinney Street | 77010 |
Houston, TX | (Zip Code) |
(Registrant’s telephone number, including area code, is (713) 496-4200)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A shares representing limited partner interests | HESM | New York Stock Exchange |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☒ |
Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ |
|
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
33,663,41744,002,846 Class A shares representing limited partner interests (“Class A Shares”) in the registrant were outstanding as of October 29, 2021.April 30, 2022.
HESS MIDSTREAM LP
FORM 10-Q
TABLE OF CONTENTS
1
PART I—FINANCIAL INFORMATION (CONT'D)
HESS MIDSTREAM LP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Item 1. Financial Statements
| September 30, |
|
| December 31, |
| March 31, |
|
| December 31, |
| ||||
| 2021 |
| 2020 |
| 2022 |
|
| 2021 |
| |||||
(in millions, except share amounts) |
|
|
|
|
|
|
|
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents | $ | 2.6 |
|
| $ | 2.6 |
| $ | 3.0 |
|
| $ | 2.2 |
|
Accounts receivable—affiliate: |
|
|
|
|
|
|
|
| ||||||
From contracts with customers |
| 135.5 |
|
|
| 93.2 |
|
| 137.5 |
|
|
| 120.3 |
|
Other current assets |
| 13.4 |
|
|
| 5.6 |
|
| 6.7 |
|
|
| 10.6 |
|
Total current assets |
| 151.5 |
|
|
| 101.4 |
|
| 147.2 |
|
|
| 133.1 |
|
Equity investments |
| 102.4 |
|
|
| 108.4 |
|
| 97.3 |
|
|
| 101.6 |
|
Property, plant and equipment, net |
| 3,118.1 |
|
|
| 3,111.3 |
|
| 3,117.9 |
|
|
| 3,125.0 |
|
Long-term receivable—affiliate |
| 0.9 |
|
|
| 0.9 |
|
| 0.7 |
|
|
| 0.8 |
|
Deferred tax asset |
| 74.5 |
|
|
| 42.5 |
|
| 112.3 |
|
|
| 117.3 |
|
Other noncurrent assets |
| 8.4 |
|
|
| 10.0 |
|
| 7.1 |
|
|
| 7.8 |
|
Total assets | $ | 3,455.8 |
|
| $ | 3,374.5 |
| $ | 3,482.5 |
|
| $ | 3,485.6 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
| ||||
Accounts payable—trade | $ | 49.4 |
|
| $ | 30.0 |
| $ | 35.6 |
|
| $ | 26.9 |
|
Accounts payable—affiliate |
| 33.2 |
|
|
| 21.0 |
|
| 27.4 |
|
|
| 37.6 |
|
Accrued liabilities |
| 60.0 |
|
|
| 54.1 |
|
| 55.5 |
|
|
| 76.2 |
|
Current maturities of long-term debt |
| 17.5 |
|
|
| 10.0 |
|
| 22.5 |
|
|
| 20.0 |
|
Other current liabilities |
| 8.6 |
|
|
| 9.9 |
|
| 2.8 |
|
|
| 10.2 |
|
Total current liabilities |
| 168.7 |
|
|
| 125.0 |
|
| 143.8 |
|
|
| 170.9 |
|
Long-term debt |
| 2,595.1 |
|
|
| 1,900.1 |
|
| 2,538.4 |
|
|
| 2,543.5 |
|
Deferred tax liability |
| 0.4 |
|
|
| 0.4 |
| |||||||
Other noncurrent liabilities |
| 22.9 |
|
|
| 23.4 |
|
| 18.1 |
|
|
| 17.7 |
|
Total liabilities |
| 2,786.7 |
|
|
| 2,048.5 |
|
| 2,700.7 |
|
|
| 2,732.5 |
|
Partners' capital |
|
|
|
|
|
|
|
|
|
| ||||
Class A shares (25,038,417 shares issued and outstanding as of |
| 135.7 |
|
|
| 125.0 |
| |||||||
Class B shares (228,266,928 shares issued and outstanding as of |
| - |
|
|
| - |
| |||||||
Class A shares (33,767,846 shares issued and outstanding as of |
| 203.9 |
|
|
| 204.1 |
| |||||||
Class B shares (219,641,928 shares issued and outstanding as of |
| - |
|
|
| - |
| |||||||
Total partners' capital |
| 135.7 |
|
|
| 125.0 |
|
| 203.9 |
|
|
| 204.1 |
|
Noncontrolling interest |
| 533.4 |
|
|
| 1,201.0 |
|
| 577.9 |
|
|
| 549.0 |
|
Total partners' capital |
| 669.1 |
|
|
| 1,326.0 |
|
| 781.8 |
|
|
| 753.1 |
|
Total liabilities and partners' capital | $ | 3,455.8 |
|
| $ | 3,374.5 |
| $ | 3,482.5 |
|
| $ | 3,485.6 |
|
See accompanying notes to unaudited consolidated financial statements.
2
PART I—FINANCIAL INFORMATION (CONT'D)
HESS MIDSTREAM LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
|
| ||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
|
| |||||||||
(in millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Affiliate services |
| $ | 303.9 |
|
| $ | 264.7 |
|
| $ | 887.5 |
|
| $ | 825.1 |
|
| $ | 312.1 |
|
| $ | 288.8 |
|
|
Other income |
|
| - |
|
|
| 0.1 |
|
|
| - |
|
|
| 0.3 |
|
|
| 0.3 |
|
|
| - |
|
|
Total revenues |
|
| 303.9 |
|
|
| 264.8 |
|
|
| 887.5 |
|
|
| 825.4 |
|
|
| 312.4 |
|
|
| 288.8 |
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating and maintenance expenses (exclusive of |
| 98.1 |
|
|
| 83.9 |
|
|
| 221.5 |
|
|
| 270.8 |
|
| 66.5 |
|
|
| 59.8 |
|
| ||
Depreciation expense |
| 41.5 |
|
|
| 39.5 |
|
|
| 122.1 |
|
|
| 116.9 |
|
| 44.4 |
|
|
| 40.2 |
|
| ||
General and administrative expenses |
|
| 5.1 |
|
|
| 4.2 |
|
|
| 16.6 |
|
|
| 15.9 |
|
|
| 6.0 |
|
|
| 6.3 |
|
|
Total costs and expenses |
|
| 144.7 |
|
|
| 127.6 |
|
|
| 360.2 |
|
|
| 403.6 |
|
|
| 116.9 |
|
|
| 106.3 |
|
|
Income from operations |
| 159.2 |
|
|
| 137.2 |
|
|
| 527.3 |
|
|
| 421.8 |
|
| 195.5 |
|
|
| 182.5 |
|
| ||
Income from equity investments |
| 3.0 |
|
|
| 3.6 |
|
|
| 8.6 |
|
|
| 7.2 |
|
| 0.4 |
|
|
| 2.7 |
|
| ||
Interest expense, net |
| 28.0 |
|
|
| 23.2 |
|
|
| 74.0 |
|
|
| 71.3 |
|
|
| 31.3 |
|
|
| 23.1 |
|
| |
Gain on sale of property, plant and equipment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.1 |
| |||||||||
Income before income tax expense |
| 134.2 |
|
|
| 117.6 |
|
|
| 461.9 |
|
|
| 357.8 |
|
| 164.6 |
|
|
| 162.1 |
|
| ||
Income tax expense |
|
| 3.1 |
|
|
| 1.8 |
|
|
| 9.2 |
|
|
| 5.2 |
|
|
| 5.0 |
|
|
| 2.5 |
|
|
Net income |
|
| 131.1 |
|
|
| 115.8 |
|
|
| 452.7 |
|
|
| 352.6 |
|
|
| 159.6 |
|
|
| 159.6 |
|
|
Less: Net income attributable to noncontrolling interest |
|
| 121.2 |
|
|
| 110.2 |
|
|
| 423.2 |
|
|
| 335.2 |
|
|
| 142.7 |
|
|
| 151.0 |
|
|
Net income attributable to Hess Midstream LP |
| $ | 9.9 |
|
| $ | 5.6 |
|
| $ | 29.5 |
|
| $ | 17.4 |
|
| $ | 16.9 |
|
| $ | 8.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income attributable to Hess Midstream LP |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Basic: |
| $ | 0.39 |
|
| $ | 0.31 |
|
| $ | 1.27 |
|
| $ | 0.97 |
|
| $ | 0.50 |
|
| $ | 0.45 |
|
|
Diluted: |
| $ | 0.38 |
|
| $ | 0.31 |
|
| $ | 1.25 |
|
| $ | 0.95 |
|
| $ | 0.49 |
|
| $ | 0.43 |
|
|
Weighted average Class A shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Basic: |
| 25.0 |
|
|
| 18.0 |
|
|
| 23.1 |
|
|
| 18.0 |
|
| 33.7 |
|
|
| 19.3 |
|
| ||
Diluted: |
| 25.1 |
|
|
| 18.1 |
|
|
| 23.2 |
|
|
| 18.1 |
|
| 33.8 |
|
|
| 19.4 |
|
| ||
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
3
PART I—FINANCIAL INFORMATION (CONT'D)
HESS MIDSTREAM LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 131.1 |
|
| $ | 115.8 |
|
| $ | 452.7 |
|
| $ | 352.6 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Effect of hedge (gains) losses reclassified to income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (0.4 | ) |
Total other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (0.4 | ) |
Comprehensive income |
|
| 131.1 |
|
|
| 115.8 |
|
|
| 452.7 |
|
|
| 352.2 |
|
Less: Comprehensive income (loss) attributable |
|
| 121.2 |
|
|
| 110.2 |
|
|
| 423.2 |
|
|
| 334.8 |
|
Comprehensive income attributable to Hess Midstream LP |
| $ | 9.9 |
|
| $ | 5.6 |
|
| $ | 29.5 |
|
| $ | 17.4 |
|
See accompanying notes to unaudited consolidated financial statements.
4
PART I—FINANCIAL INFORMATION (CONT'D)
HESS MIDSTREAM LP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
(UNAUDITED)
| Partners' Capital |
|
|
|
|
|
|
|
| Partners' Capital |
|
|
|
|
|
| ||||||||||||||||||
| Class A |
|
| Class B |
|
| Noncontrolling |
|
| Accumulated Other Comprehensive Income |
|
| Total |
| Class A |
|
| Class B |
|
| Noncontrolling |
|
| Total |
| |||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at December 31, 2021 | $ | 204.1 |
| $ | - |
| $ | 549.0 |
|
| $ | 753.1 |
| |||||||||||||||||||||
Net income |
| 16.9 |
| - |
| 142.7 |
|
|
| 159.6 |
| |||||||||||||||||||||||
Equity-based compensation |
| 0.5 |
| - |
| - |
|
|
| 0.5 |
| |||||||||||||||||||||||
Distributions - $0.5167 per share |
| (17.5 | ) |
| - |
| (113.5 | ) |
|
| (131.0 | ) | ||||||||||||||||||||||
Transaction costs (see Note 14, Subsequent Events) |
| (0.1 | ) |
| - |
|
| (0.3 | ) |
|
| (0.4 | ) | |||||||||||||||||||||
Balance at March 31, 2022 | $ | 203.9 |
|
| $ | - |
|
| $ | 577.9 |
|
| $ | 781.8 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Balance at December 31, 2020 | $ | 125.0 |
|
| $ | - |
|
| $ | 1,201.0 |
|
| $ | - |
|
| $ | 1,326.0 |
| $ | 125.0 |
| $ | - |
| $ | 1,201.0 |
|
| $ | 1,326.0 |
| ||
Net income |
| 8.6 |
|
|
| - |
|
|
| 151.0 |
|
|
| - |
|
|
| 159.6 |
|
| 8.6 |
| - |
| 151.0 |
|
|
| 159.6 |
| ||||
Equity-based compensation |
| 0.4 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.4 |
|
| 0.4 |
| - |
| - |
|
|
| 0.4 |
| ||||
Distributions - $0.4471 per share |
| (8.2 | ) |
|
| - |
|
|
| (119.1 | ) |
|
| - |
|
|
| (127.3 | ) |
| (8.2 | ) |
| - |
| (119.1 | ) |
|
| (127.3 | ) | |||
Recognition of deferred tax asset |
| 26.4 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 26.4 |
|
| 26.4 |
|
|
| - |
|
|
| 26.4 |
| ||||
Sales of shares held by Sponsors |
| 31.8 |
|
|
| - |
|
|
| (31.8 | ) |
|
| - |
|
|
| - |
|
| 31.8 |
|
| - |
|
| (31.8 | ) |
|
| - |
| ||
Balance at March 31, 2021 | $ | 184.0 |
|
| $ | - |
|
| $ | 1,201.1 |
|
| $ | - |
|
| $ | 1,385.1 |
| $ | 184.0 |
|
| $ | - |
|
| $ | 1,201.1 |
|
| $ | 1,385.1 |
|
Net income |
| 11.0 |
|
|
| - |
|
|
| 151.0 |
|
|
| - |
|
|
| 162.0 |
| |||||||||||||||
Equity-based compensation |
| 0.3 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.3 |
| |||||||||||||||
Distributions - $0.4526 per share |
| (11.3 | ) |
|
| - |
|
|
| (117.5 | ) |
|
| - |
|
|
| (128.8 | ) | |||||||||||||||
Balance at June 30, 2021 | $ | 184.0 |
|
| $ | - |
|
| $ | 1,234.6 |
|
| $ | - |
|
| $ | 1,418.6 |
| |||||||||||||||
Net income |
| 9.9 |
|
|
| - |
|
|
| 121.2 |
|
|
| - |
|
|
| 131.1 |
| |||||||||||||||
Equity-based compensation |
| 0.4 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0.4 |
| |||||||||||||||
Distributions - $0.5042 per share |
| (12.7 | ) |
|
| - |
|
|
| (130.9 | ) |
|
| - |
|
|
| (143.6 | ) | |||||||||||||||
Recognition of deferred tax asset |
| 14.8 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14.8 |
| |||||||||||||||
Class B unit repurchase |
| (60.4 | ) |
|
| - |
|
|
| (689.6 | ) |
|
| - |
|
|
| (750.0 | ) | |||||||||||||||
Class B unit repurchase transaction costs |
| (0.3 | ) |
|
| - |
|
|
| (1.9 | ) |
|
| - |
|
|
| (2.2 | ) | |||||||||||||||
Balance at September 30, 2021 | $ | 135.7 |
|
| $ | - |
|
| $ | 533.4 |
|
| $ | - |
|
| $ | 669.1 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Balance at December 31, 2019 | $ | 131.1 |
|
| $ | - |
|
| $ | 1,200.6 |
|
| $ | 0.4 |
|
| $ | 1,332.1 |
| |||||||||||||||
Net income |
| 6.5 |
|
|
| - |
|
|
| 122.5 |
|
|
| - |
|
|
| 129.0 |
| |||||||||||||||
Equity-based compensation |
| 0.5 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.5 |
| |||||||||||||||
Distributions - $0.4258 per share |
| (7.6 | ) |
|
| - |
|
|
| (113.4 | ) |
|
| - |
|
|
| (121.0 | ) | |||||||||||||||
Other comprehensive income (loss) |
| - |
|
|
| - |
|
|
| - |
|
|
| (0.2 | ) |
|
| (0.2 | ) | |||||||||||||||
Balance at March 31, 2020 | $ | 130.5 |
|
| $ | - |
|
| $ | 1,209.7 |
|
| $ | 0.2 |
|
| $ | 1,340.4 |
| |||||||||||||||
Net income |
| 5.3 |
|
|
| - |
|
|
| 102.5 |
|
|
| - |
|
|
| 107.8 |
| |||||||||||||||
Equity-based compensation |
| 0.3 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.3 |
| |||||||||||||||
Distributions - $0.4310 per share |
| (7.9 | ) |
|
| - |
|
|
| (114.8 | ) |
|
| - |
|
|
| (122.7 | ) | |||||||||||||||
Other comprehensive income (loss) |
| - |
|
|
| - |
|
|
| - |
|
|
| (0.2 | ) |
|
| (0.2 | ) | |||||||||||||||
Hess Water Services Acquisition Final Settlement |
| - |
|
|
| - |
|
|
| 1.6 |
|
|
| - |
|
|
| 1.6 |
| |||||||||||||||
Balance at June 30, 2020 | $ | 128.2 |
|
| $ | - |
|
| $ | 1,199.0 |
|
| $ | - |
|
| $ | 1,327.2 |
| |||||||||||||||
Net income |
| 5.6 |
|
|
| - |
|
|
| 110.2 |
|
|
| - |
|
|
| 115.8 |
| |||||||||||||||
Equity-based compensation |
| 0.4 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.4 |
| |||||||||||||||
Distributions - $0.4363 per share |
| (8.0 | ) |
|
| - |
|
|
| (116.2 | ) |
|
| - |
|
|
| (124.2 | ) | |||||||||||||||
Balance at September 30, 2020 | $ | 126.2 |
|
| $ | - |
|
| $ | 1,193.0 |
|
| $ | - |
|
| $ | 1,319.2 |
|
See accompanying notes to unaudited consolidated financial statements.
54
PART I—FINANCIAL INFORMATION (CONT'D)
HESS MIDSTREAM LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||
(in millions) |
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| $ | 452.7 |
|
| $ | 352.6 |
|
| $ | 159.6 |
|
| $ | 159.6 |
|
Adjustments to reconcile net income to net cash provided by (used in) |
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation expense |
|
| 122.1 |
|
|
| 116.9 |
|
|
| 44.4 |
|
|
| 40.2 |
|
(Gain) loss on sale of property, plant and equipment |
|
| - |
|
|
| (0.1 | ) | ||||||||
(Gain) loss on interest rate swaps |
|
| - |
|
|
| (0.4 | ) | ||||||||
(Income) loss from equity investments |
|
| (8.6 | ) |
|
| (7.2 | ) |
|
| (0.4 | ) |
|
| (2.7 | ) |
Distributions from equity investments |
|
| 14.6 |
|
|
| 6.8 |
|
|
| 4.7 |
|
|
| 7.5 |
|
Amortization of deferred financing costs |
|
| 5.3 |
|
|
| 5.1 |
|
|
| 2.0 |
|
|
| 1.7 |
|
Equity-based compensation expense |
|
| 1.1 |
|
|
| 1.2 |
|
|
| 0.5 |
|
|
| 0.4 |
|
Deferred income tax expense (benefit) |
|
| 9.2 |
|
|
| 5.2 |
|
|
| 5.0 |
|
|
| 2.5 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts receivable – affiliate |
|
| (42.3 | ) |
|
| (4.9 | ) |
|
| (17.1 | ) |
|
| (14.9 | ) |
Other current and noncurrent assets |
|
| (7.9 | ) |
|
| (3.4 | ) |
|
| 4.0 |
|
|
| 1.4 |
|
Accounts payable – trade |
|
| 18.6 |
|
|
| 9.5 |
|
|
| 8.7 |
|
|
| (9.7 | ) |
Accounts payable – affiliate |
|
| 9.6 |
|
|
| (0.5 | ) |
|
| (2.6 | ) |
|
| (1.9 | ) |
Accrued liabilities |
|
| (0.4 | ) |
|
| (12.6 | ) |
|
| (11.0 | ) |
|
| (10.8 | ) |
Other current and noncurrent liabilities |
|
| (2.0 | ) |
|
| (1.0 | ) |
|
| (7.2 | ) |
|
| (7.9 | ) |
Net cash provided by (used in) operating activities |
|
| 572.0 |
|
|
| 467.2 |
|
|
| 190.6 |
|
|
| 165.4 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
| ||||||
Additions to property, plant and equipment |
|
| (120.0 | ) |
|
| (246.0 | ) |
|
| (54.8 | ) |
|
| (26.7 | ) |
Proceeds from sale of property, plant and equipment |
|
| - |
|
|
| 0.1 |
| ||||||||
Net cash provided by (used in) investing activities |
|
| (120.0 | ) |
|
| (245.9 | ) |
|
| (54.8 | ) |
|
| (26.7 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
| ||||||
Net proceeds from (repayments of) bank borrowings with maturities of 90 |
|
| (32.0 | ) |
|
| 146.0 |
|
|
| 1.0 |
|
|
| (10.0 | ) |
Repayments of bank borrowings with maturities of greater than 90 days |
|
| (7.5 | ) |
|
| - |
| ||||||||
Proceeds from issuance of bonds |
|
| 750.0 |
|
|
| - |
| ||||||||
Financing costs |
|
| (11.0 | ) |
|
| (1.3 | ) | ||||||||
Class B unit repurchase |
|
| (750.0 | ) |
|
| - |
| ||||||||
Class B unit repurchase transaction costs |
|
| (1.8 | ) |
|
| - |
| ||||||||
Bank borrowings with maturities of greater than 90 days |
|
|
|
|
| |||||||||||
Repayments |
|
| (5.0 | ) |
|
| (2.5 | ) | ||||||||
Distributions to shareholders |
|
| (32.2 | ) |
|
| (23.5 | ) |
|
| (17.5 | ) |
|
| (8.2 | ) |
Distributions to noncontrolling interest |
|
| (367.5 | ) |
|
| (344.4 | ) |
|
| (113.5 | ) |
|
| (119.1 | ) |
Hess Water Services Acquisition Final Settlement |
|
| - |
|
|
| 1.6 |
| ||||||||
Net cash provided by (used in) financing activities |
|
| (452.0 | ) |
|
| (221.6 | ) |
|
| (135.0 | ) |
|
| (139.8 | ) |
Increase (decrease) in cash and cash equivalents |
|
| - |
|
|
| (0.3 | ) |
|
| 0.8 |
|
|
| (1.1 | ) |
Cash and cash equivalents, beginning of period |
|
| 2.6 |
|
|
| 3.3 |
|
|
| 2.2 |
|
|
| 2.6 |
|
Cash and cash equivalents, end of period |
| $ | 2.6 |
|
| $ | 3.0 |
|
| $ | 3.0 |
|
| $ | 1.5 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
| ||||||
(Increase) decrease in accrued capital expenditures and related liabilities |
| $ | (8.6 | ) |
| $ | 43.8 |
|
| $ | 17.7 |
|
| $ | 3.6 |
|
Recognition of deferred tax asset |
| $ | 41.2 |
|
| $ | - |
|
| $ | - |
|
| $ | 26.4 |
|
See accompanying notes to unaudited consolidated financial statements.
65
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Description of Business
Hess Midstream LP (“the Company”) is a fee-based, growth-oriented, Delaware limited partnership that operates, develops and acquires a diverse set of midstream assets and provides fee-based services to Hess Corporation (“Hess”) and third-party customers. We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner that is owned 50/50 by Hess and GIP II Blue Holding, L.P. (“GIP” and together with Hess, the “Sponsors”).
Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken. Our assets and operations are organized into the following 3 reportable segments: (1) gathering, (2) processing and storage and (3) terminaling and export (see Note 13, Segments).
Unless the context otherwise requires, references in this report to the “Company,” “we,” “our,” “us” or like terms, refer to Hess Midstream LP and its subsidiaries.
Note 2. Basis of Presentation
The consolidated financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at September 30, 2021March 31, 2022 and December 31, 2020,2021, the consolidated results of operations for the three and nine months ended September 30, 2021 and 2020, and the consolidated cash flows for the ninethree months ended September 30, 2021March 31, 2022 and 2020.2021. The Company has no items of other comprehensive income (loss); therefore, net income (loss) is equal to comprehensive income (loss). The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.
The consolidated financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted from these interim consolidated financial statements. These financial statements, therefore, should be read in conjunction with the financial statements and related notes included in the Company’s annual report on Form 10‑K for the year ended December 31, 2020.2021.
We consolidate the activities of Hess Midstream Operations LP (“the Partnership”), as a variable interest entity (“VIE”) under U.S. GAAP. We have concluded that we are the primary beneficiary of the VIE, as defined in the accounting standards, since we have the power, through our ownership, to direct those activities that most significantly impact the economic performance of the Partnership. This conclusion was based on a qualitative analysis that considered the Partnership’s governance structure and the delegation of control provisions, which provide us the ability to control the operations of the Partnership. All financial statement activities associated with the VIE are captured within gathering, processing and storage, and terminaling and export segments (see Note 13, Segments). We currently do not have any independent assets or operations other than our interest in the Partnership. Our noncontrolling interest represents the approximate 90.186.7% interest in the Partnership retained by Hess and GIP at September 30, 2021March 31, 2022 and93.7% at December 31, 2020.2021. See Note 3, Equity Transactions, and Note 14, Subsequent Events for a description of changes in noncontrolling interest related to the equity transactions.
7
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 3. Equity Transactions
Equity Offering
On March 15, 2021, the Sponsors completedsold an underwritten public equity offeringaggregate of 6,900,000 of our Class A shares representing limited partner interests (“Class A Shares”), inclusive of the underwriters’ option to purchase up to 900,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $21.00 per Class A share, less underwriting discounts. The Sponsors received net proceeds from the offering of approximately $139.9 million, after deducting underwriting discounts; wediscounts. The Company did 0t receive any proceeds in the offering.
The offering was conducted pursuant to a registration rights agreement among us and the Sponsors. The Class A Shares sold in the offering were obtained by the Sponsors by exchanging to us 6,900,000the respective number of their Class B Units in the Partnership, together with an equal number of our Class B Shares. AsShares and, as a result, of the exchange, the total number of Class A and Class B shares did not change, but Hess Midstream LP’s consolidated ownership in the Partnership increased from change. The Company6.3% at December 31, 2020 to 8.8% at the time of offering. Hess Midstream LP retained control in the Partnership based on the delegation of control provisions, as described in Note 2, Basis of Presentation. As a result of the transaction,offering, we recognized an adjustment to the carrying amount of noncontrolling interest and Class A shareholders’ capital balance of $31.8 million to reflect the change in ownership interest. We also recognized an additional deferred tax asset of $26.4 million for the temporary differences related to the change in the temporary difference between carrying amount and tax basis of our investment in the Partnership. The effect of recognizing the additional deferred tax asset was included in Class A shareholders’ equity balance in the accompanying consolidated statement of changes in partners’ capital due to the transaction being characterized as a transaction among or with shareholders.
See also Note 14, Subsequent Events, for a description of an underwritten public equity offering by the Sponsors that occurred in October 2021.
Class B Unit Repurchase
On July 27, 2021, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from each Sponsor 15,625,000 Class B units representing limited partner interests in the Partnership for an aggregate purchase price of $750.0 million (the “Repurchase Transaction”). The purchase price per Class B Unit was $24.00, representing an approximate 4% discount to the 30-day volume weighted average trading price of Class A shares representing limited partner interests in the Company through July 27, 2021. Pursuant to the terms of the repurchase agreement, immediately following the purchase of the Class B units from the Sponsors, the Partnership cancelled those units, and the Company cancelled, for no consideration, an equal number of Class B Shares representing limited partner interests in the Company held by the Company’s general partner. The Repurchase Transaction closed on August 10, 2021 and was funded through issuance by the Partnership of $750.0 million aggregate principal amount of senior unsecured notes (see Note 7, Debt and Interest Expense).
As a result of the Repurchase Transaction, at September 30, 2021, the Company held a 9.9% controlling interest in the Partnership and the Sponsors held a 90.1% noncontrolling economic interest in the Partnership. The Repurchase Transaction was accounted for in accordance with ASC 810 whereby changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. The carrying amount of the noncontrolling interest was adjusted to reflect the change in the ownership interest from approximately 91.2% to approximately 90.1% with the difference between the amount of consideration paid and the amount by which the noncontrolling interest was adjusted recognized in equity attributable to Class A shareholders. We incurred approximately $2.2 million of costs directly attributable to the Repurchase Transaction that were charged to equity. We also recognized an additional deferred tax asset of approximately $14.8 million for the temporary differences related to the change between carrying amount and tax basis of our investment in the Partnership, the effect of which was included in Class A shareholders’ equity balance in the accompanying consolidated statement of changes in partners’ capital.
86
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
See Note 14, Subsequent Events for a description of equity transactions completed in April 2022.
Note 4. Related Party Transactions
Commercial Agreements
Effective January 1, 2014, we entered into long-term fee-based (i) gas gathering, (ii) crude oil gathering, (iii) gas processing and fractionation, (iv) storage services, and (v) terminal and export services agreements with certain subsidiaries of Hess. Effective January 1, 2019, we entered into long-term fee-based water services agreements with a subsidiary of Hess. For the services performed under these commercial agreements, we receive a fee per barrel of crude oil, barrel of water, Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, delivered during each month, and Hess is obligated to provide us with minimum volumes of crude oil, water, natural gas and NGLs. Minimum volume commitments (“MVCs”) are equal to 80% of Hess’ nominations in each development plan that apply on a three-year rolling basis such that MVCs are set for the three years following the most recent nomination. Without our consent, the MVCs resulting from the nominated volumes for any quarter or year contained in any prior development plan shall not be reduced by any updated development plan unless dedicated production is released by us. The applicable MVCs may, however, be increased as a result of the nominations contained in any such updated development plan.
Except for the water services agreements and except for a certain gathering sub-system as described below, each of our commercial agreements with Hess has an initial 10-year term effective January 1, 2014 (“Initial Term”). For this gathering sub-system, the Initial Term is 15 years effective January 1, 2014 and for the water services agreements the Initial Term is 14 years effective January 1, 2019. Each of our commercial agreements other than our storage services agreement includes an inflation escalator and a fee recalculation mechanism that allows fees to be adjusted annually during the Initial Term for updated estimates of cumulative throughput volumes and our capital and operating expenditures in order to target a return on capital deployed over the Initial Term of the applicable commercial agreement (or, with respect to the crude oil services fee under our terminal and export services agreement, the 20-year period commencing on the effective date of the agreement).
We have the unilateral right, exercisable by the delivery of a written notice on or before the date that is three years prior to the expiration of the Initial Term, to extend each commercial agreement for one additional 10-year term (“Secondary Term”). For a certain gathering sub-system, the Secondary Term is 5-years and for the water services agreements the Secondary Term is 10 years. On December 30, 2020, we exercised our renewal options to extend the terms of certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess for the Secondary Term through December 31, 2033. There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining water gathering and disposal agreements as well as the remaining gas gathering agreement, we have the sole option to renew these agreements for an additional term that is exercisable at a later date.
During the Secondary Term of each of our commercial agreements other than our storage services agreement and terminal and export services agreement (with respect to crude oil terminaling services), the fee recalculation model under each applicable agreement will be replaced by an inflation-based fee structure. The initial fee for the first year of the Secondary Term will be determined based on the average fees paid by Hess under the applicable agreement during the last three years of the Initial Term (with such fees adjusted for inflation through the first year of the Secondary Term). For each year following the first year of the Secondary Term, the applicable fee will be adjusted annually based on the percentage change in the consumer price index, provided that we may not increase any fee by more than 3% in any calendar year solely by reason of an increase in the consumer price index, and no fee will ever be reduced below the amount of the applicable fee payable by Hess in the prior year as a result of a decrease in the consumer price index. During the Secondary Term of our commercial agreements, Hess will continue to have MVCs equal to 80% of Hess’ nominations in each development plan that apply on a three-year rolling basis through the Secondary Term.
For the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, approximately 100% of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes contracted with Hess and delivered to us under these agreements. We retain control of our assets and the flow of volumes based on available capacity within our integrated gathering, processing and terminaling systems. Together with Hess, we are pursuing strategic relationships with third‑party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.
97
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Revenues from contracts with customers on a disaggregated basis are as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2021 |
| 2020 |
|
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Oil and gas gathering services |
| $ | 135.3 |
|
| $ | 118.7 |
|
| $ | 397.4 |
|
| $ | 349.2 |
|
| $ | 145.3 |
|
| $ | 128.7 |
| |
Processing and storage services |
|
| 111.1 |
|
|
| 90.1 |
|
|
| 319.9 |
|
|
| 273.7 |
|
|
| 113.8 |
|
|
| 103.5 |
| |
Terminaling and export services |
|
| 35.5 |
|
|
| 31.7 |
|
|
| 103.0 |
|
|
| 130.5 |
|
|
| 34.7 |
|
|
| 32.6 |
| |
Water gathering and disposal services |
|
| 22.0 |
|
|
| 24.2 |
|
|
|
| 67.2 |
|
|
| 71.7 |
|
|
| 18.3 |
|
|
| 24.0 |
|
Total revenues from contracts with customers |
| $ | 303.9 |
|
| $ | 264.7 |
|
|
| $ | 887.5 |
|
| $ | 825.1 |
|
| $ | 312.1 |
|
| $ | 288.8 |
|
Other income |
|
| - |
|
|
| 0.1 |
|
|
|
| - |
|
|
| 0.3 |
|
|
| 0.3 |
|
|
| - |
|
Total revenues |
| $ | 303.9 |
|
| $ | 264.8 |
|
|
| $ | 887.5 |
|
| $ | 825.4 |
|
| $ | 312.4 |
|
| $ | 288.8 |
|
The following table presents MVC shortfall fees earned during each period:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2021 |
| 2020 |
|
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Oil and gas gathering services |
| $ | 13.3 |
|
| $ | 5.8 |
|
| $ | 30.2 |
|
| $ | 8.7 |
|
| $ | 21.3 |
|
| $ | 7.5 |
| |
Terminaling and export services |
|
| 11.9 |
|
|
| 1.8 |
|
|
| 24.6 |
|
|
| 1.8 |
|
|
| 6.3 |
|
|
| 5.0 |
| |
Water gathering and disposal services |
|
| - |
|
|
| 0.9 |
| |||||||||||||||||
Processing and storage services |
|
| 4.4 |
|
|
| - |
|
|
| 4.4 |
|
|
| - |
|
|
| 6.3 |
|
|
| - |
| |
Water gathering and disposal services |
|
| 2.0 |
|
|
| 0.2 |
|
|
|
| 4.5 |
|
|
| 1.4 |
| ||||||||
Total |
| $ | 31.6 |
|
| $ | 7.8 |
|
|
| $ | 63.7 |
|
| $ | 11.9 |
|
| $ | 33.9 |
|
| $ | 13.4 |
|
The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These third-party costs are included in Operating and maintenance expenses in the accompanying unaudited consolidated statements of operations.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2021 |
| 2020 |
|
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Electricity and other related fees |
| $ | 19.7 |
|
| $ | 10.3 |
|
| $ | 38.9 |
|
| $ | 29.7 |
|
| $ | 10.5 |
|
| $ | 9.3 |
| |
Produced water trucking and disposal costs |
|
| 9.0 |
|
|
| 14.0 |
|
|
| 27.1 |
|
|
| 45.6 |
|
|
| 7.9 |
|
|
| 9.4 |
| |
Rail transportation costs |
|
| - |
|
|
| 5.0 |
|
|
|
| 0.1 |
|
|
| 49.3 |
|
|
| 4.3 |
|
|
| 0.1 |
|
Total |
| $ | 28.7 |
|
| $ | 29.3 |
|
|
| $ | 66.1 |
|
| $ | 124.6 |
|
| $ | 22.7 |
|
| $ | 18.8 |
|
108
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Omnibus and Employee Secondment Agreements
Under our omnibus and employee secondment agreements, Hess provides substantial operational and administrative services to us in support of our assets and operations. For the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, we had the following charges from Hess. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the fundamental nature of the services being performed for our operations.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2021 |
| 2020 |
|
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating and maintenance expenses |
| $ | 16.7 |
|
| $ | 16.7 |
|
| $ | 48.2 |
|
| $ | 47.5 |
|
| $ | 16.9 |
|
| $ | 15.7 |
| |
General and administrative expenses |
|
| 3.7 |
|
|
| 3.9 |
|
|
|
| 11.5 |
|
|
| 11.2 |
|
|
| 3.7 |
|
|
| 4.2 |
|
Total |
| $ | 20.4 |
|
| $ | 20.6 |
|
|
| $ | 59.7 |
|
| $ | 58.7 |
|
| $ | 20.6 |
|
| $ | 19.9 |
|
LM4 Agreements
Separately from our commercial agreements with Hess, we entered into a gas processing agreement with Little Missouri 4 (“LM4”), a 50/50 joint venture with Targa Resources Corp., under which we pay a processing fee per Mcf of natural gas and reimburse LM4 for our proportionate share of electricity costs. These processing fees are included in Operating and maintenance expenses in the accompanying consolidated statements of operations. In addition, we share profits and losses and receive distributions from LM4 under the LM4 amended and restated limited liability company agreement based on our ownership interest. For the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, we had the following activity related to our agreements with LM4:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2021 |
| 2020 |
|
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Processing fee incurred |
| $ | 8.0 |
|
| $ | 6.8 |
|
| $ | 22.0 |
|
| $ | 18.2 |
|
| $ | 4.5 |
|
| $ | 6.9 |
| |
Earnings from equity investments |
|
| 3.0 |
|
|
| 3.6 |
|
|
| 8.6 |
|
|
| 7.2 |
|
|
| 0.4 |
|
|
| 2.7 |
| |
Distributions received from equity investments |
|
| 3.1 |
|
|
| 3.0 |
|
|
| 14.6 |
|
|
| 6.8 |
|
|
| 4.7 |
|
|
| 7.5 |
|
Note 5. Property, Plant and Equipment
Property, plant and equipment, at cost, is as follows:
|
| Estimated useful lives |
| September 30, 2021 |
| December 31, 2020 |
|
| Estimated useful lives |
| March 31, 2022 |
|
| December 31, 2021 |
| |||||
(in millions, except for number of years) |
|
|
|
|
|
|
|
|
|
| ||||||||||
Gathering assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pipelines |
| 22 years |
| $ | 1,491.4 |
|
| $ | 1,470.6 |
|
| 22 years |
| $ | 1,511.1 |
|
| $ | 1,489.7 |
|
Compressors, pumping stations and terminals |
| 22 to 25 years |
|
| 807.2 |
|
|
| 778.6 |
|
| 22 to 25 years |
|
| 857.8 |
|
|
| 809.0 |
|
Gas plant assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pipelines, pipes and valves |
| 22 to 25 years |
|
| 460.0 |
|
|
| 460.0 |
|
| 22 to 25 years |
|
| 460.0 |
|
|
| 460.0 |
|
Equipment |
| 12 to 30 years |
|
| 428.3 |
|
|
| 428.3 |
|
| 12 to 30 years |
|
| 428.2 |
|
|
| 428.3 |
|
Processing and fractionation facilities |
| 25 years |
|
| 412.7 |
|
|
| 408.7 |
| ||||||||||
Buildings |
| 35 years |
|
| 182.3 |
|
|
| 182.3 |
|
| 35 years |
|
| 182.3 |
|
|
| 182.3 |
|
Processing and fractionation facilities |
| 25 years |
|
| 213.1 |
|
|
| 189.0 |
| ||||||||||
Logistics facilities and railcars |
| 20 to 25 years |
|
| 386.5 |
|
|
| 386.2 |
|
| 20 to 25 years |
|
| 386.7 |
|
|
| 386.5 |
|
Storage facilities |
| 20 to 25 years |
|
| 19.5 |
|
|
| 19.5 |
|
| 20 to 25 years |
|
| 19.5 |
|
|
| 19.5 |
|
Other |
| 20 to 25 years |
|
| 21.5 |
|
|
| 20.9 |
|
| 20 to 25 years |
|
| 25.8 |
|
|
| 25.8 |
|
Construction-in-progress |
| N/A |
|
| 281.3 |
|
|
| 227.3 |
|
| N/A |
|
| 94.4 |
|
|
| 131.6 |
|
Total property, plant and equipment, at cost |
|
|
|
| 4,291.1 |
|
|
| 4,162.7 |
|
|
|
|
| 4,378.5 |
|
|
| 4,341.4 |
|
Accumulated depreciation |
|
|
|
| (1,173.0 | ) |
|
| (1,051.4 | ) |
|
|
|
| (1,260.6 | ) |
|
| (1,216.4 | ) |
Property, plant and equipment, net |
|
|
| $ | 3,118.1 |
|
| $ | 3,111.3 |
|
|
|
| $ | 3,117.9 |
|
| $ | 3,125.0 |
|
119
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6. Accrued Liabilities
Accrued liabilities are as follows:
|
| September 30, 2021 |
| December 31, 2020 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| |||||
(in millions) |
|
|
|
|
|
|
|
|
|
| ||||||
Accrued interest |
| $ | 17.8 |
|
| $ | 30.9 |
| ||||||||
Accrued capital expenditures |
| $ | 19.7 |
|
| $ | 13.6 |
|
|
| 16.4 |
|
|
| 26.5 |
|
Accrued interest |
|
| 18.7 |
|
|
| 18.0 |
| ||||||||
Other accruals |
|
| 21.6 |
|
|
| 22.5 |
|
|
| 21.3 |
|
|
| 18.8 |
|
Total |
| $ | 60.0 |
|
| $ | 54.1 |
|
| $ | 55.5 |
|
| $ | 76.2 |
|
Note 7. Debt and Interest Expense
Fixed‑Rate Senior Notes
On August 5, 2021,As of March 31, 2022, the Partnership issuedhad $750.0 million aggregate principal amount of 4.250% fixed‑rate senior notes due 2030 that were issued to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on February 15 and August 15. The Partnership used the proceeds to fund the Repurchase Transaction (see Note 3, Equity Transactions).
As of September 30, 2021,March 31, 2022, the Partnership also had $550.0 million aggregate principal amount of 5.125% fixed‑rate senior notes due 2028 that were issued to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on June 15 and December 15.
12
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In addition, as of September 30, 2021,March 31, 2022, the Partnership had $800.0 million aggregate principal amount of 5.625% fixed‑rate senior notes due 2026 that were issued to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on February 15 and August 15.
The notes described above are guaranteed by certain subsidiaries of the Partnership. Each of the indentures for the senior notes described above contains customary covenants that restrict our ability and the ability of our restricted subsidiaries to (i) declare or pay any dividend or make any other restricted payments; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00. As of September 30, 2021,March 31, 2022, we were in compliance with all debt covenants under the indentures.
In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company.
See Note 14, Subsequent Events for a description of senior unsecured notes issued in April 2022.
Credit Facilities
As of September 30, 2021,March 31, 2022, the Partnership had senior secured credit facilities (the “Credit Facilities”) consisting of a $1,000.0 million 5-year revolving credit facility and a fully drawn $400.0 million 5-year Term Loan A facility, which was initially fully drawn, maturing in 2024. Facility fees accrue on the total capacity of the revolving credit facility. Borrowings under the 5-year Term Loan A facility will generally bear interest at LIBOR plus the applicable margin ranging from 1.55% to 2.50%, while the applicable margin for the 5-year syndicated revolving credit facility ranges from 1.275% to 2.000%. Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. At September 30, 2021,March 31, 2022, borrowings of $152.0105.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $392.5385.0 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.
1310
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes. The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the presently owned and after-acquired assets of the Partnership and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions. The Credit Facilities contain representations and warranties, affirmative and negative covenants and events of default that the Partnership considers to be customary for an agreement of this type, including a covenant that requires the Partnership to maintain a ratio of total debt to EBITDA (as defined in the Credit Facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to the Partnership obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter. As of September 30, 2021,March 31, 2022, the Partnership was in compliance with these financial covenants.
Fair Value Measurement
At September 30, 2021,March 31, 2022, our total debt had a carrying value of $2,612.62,560.9 million and had a fair value of approximately $2,707.52,566.8 million, based on Level 2 inputs in the fair value measurement hierarchy. The carrying value of the amounts under the Term Loan A facility and revolving credit facility at September 30, 2021,March 31, 2022, approximated their fair value. Any changes in interest rates do not impact cash outflows associated with fixed rate interest payments or settlement of debt principal, unless a debt instrument is repurchased prior to maturity.
Note 8. Partners’ Capital and Distributions
Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash, as defined in the partnership agreement, to shareholders of record on the applicable record date. The following table details the distributions declared and/or paid for the periods presented:
z
Period |
| Record Date |
| Distribution Date |
| Distribution per Class A share |
| |
First Quarter 2020 |
| May 4, 2020 |
| May 14, 2020 |
| $ | 0.4310 |
|
Second Quarter 2020 |
| August 6, 2020 |
| August 14, 2020 |
| $ | 0.4363 |
|
Third Quarter 2020 |
| November 5, 2020 |
| November 13, 2020 |
| $ | 0.4417 |
|
Fourth Quarter 2020 |
| February 4, 2021 |
| February 12, 2021 |
| $ | 0.4471 |
|
First Quarter 2021 |
| May 3, 2021 |
| May 13, 2021 |
| $ | 0.4526 |
|
Second Quarter 2021 |
| August 9, 2021 |
| August 13, 2021 |
| $ | 0.5042 |
|
Third Quarter 2021(1) |
| November 4, 2021 |
| November 12, 2021 |
| $ | 0.5104 |
|
Period |
| Record Date |
| Distribution Date |
| Distribution per Class A share |
| |
First Quarter 2021 |
| May 3, 2021 |
| May 13, 2021 |
| $ | 0.4526 |
|
Second Quarter 2021 |
| August 9, 2021 |
| August 13, 2021 |
| $ | 0.5042 |
|
Third Quarter 2021 |
| November 4, 2021 |
| November 12, 2021 |
| $ | 0.5104 |
|
Fourth Quarter 2021 |
| February 3, 2022 |
| February 14, 2022 |
| $ | 0.5167 |
|
First Quarter 2022(1) |
| May 5, 2022 |
| May 13, 2022 |
| $ | 0.5492 |
|
(1) For more information, see Note 14, Subsequent Events.
Note 9. Equity‑Based Compensation
Equity‑based award activity for the ninethree months ended September 30, 2021March 31, 2022 is as follows:
|
|
|
|
| Weighted Average |
| ||
|
|
|
|
| Award Date |
| ||
|
| Number of Shares |
|
| Fair Value |
| ||
Outstanding and unvested shares at December 31, 2020 |
|
| 228,344 |
|
| $ | 13.78 |
|
Granted |
|
| 78,347 |
|
|
| 22.40 |
|
Vested |
|
| (110,109 | ) |
|
| 14.91 |
|
Outstanding and unvested shares at September 30, 2021 |
|
| 196,582 |
|
| $ | 16.58 |
|
|
|
|
|
| Weighted Average |
| ||
|
|
|
|
| Award Date |
| ||
|
| Number of Shares |
|
| Fair Value |
| ||
Outstanding and unvested shares at December 31, 2021 |
|
| 187,931 |
|
| $ | 16.75 |
|
Granted |
|
| 53,548 |
|
|
| 33.52 |
|
Vested |
|
| (95,778 | ) |
|
| 16.89 |
|
Outstanding and unvested shares at March 31, 2022 |
|
| 145,701 |
|
| $ | 22.82 |
|
As of September 30, 2021,March 31, 2022, $2.23.2 million of compensation cost related to unvested restricted shares awarded under our long-term incentive plan remains to be recognized over an expected weighted‑average period of 1.92.3 years.
1411
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 10. Earnings per Share
We calculate earnings per Class A Share as we do not have any other participating securities. Substantially all of income tax expense is attributed to earnings of Class A Shares reflective of our organizational structure. Class B Units of the Partnership together with the equal number of Class B Shares of the Company are convertible to Class A Shares of the Company on a 1-for-one basis. In addition, our restricted equity-based awards may have a dilutive effect on our earnings per share. Diluted earnings per Class A Share are calculated using the “treasury stock method” or “if-converted method,” whichever is more dilutive.
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||
(in millions, except per share amounts) | 2021 |
| 2020 |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||||
Net income | $ | 131.1 |
|
| $ | 115.8 |
|
| $ | 452.7 |
|
| $ | 352.6 |
|
| $ | 159.6 |
|
| $ | 159.6 |
|
Less: Net income attributable to noncontrolling interest |
| 121.2 |
|
|
| 110.2 |
|
|
| 423.2 |
|
|
| 335.2 |
|
|
| 142.7 |
|
|
| 151.0 |
|
Net income attributable to Hess Midstream LP |
| 9.9 |
|
|
| 5.6 |
|
|
| 29.5 |
|
|
| 17.4 |
|
|
| 16.9 |
|
|
| 8.6 |
|
Net income attributable to Hess Midstream LP |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic: | $ | 0.39 |
|
| $ | 0.31 |
|
| $ | 1.27 |
|
| $ | 0.97 |
|
| $ | 0.50 |
|
| $ | 0.45 |
|
Diluted: | $ | 0.38 |
|
| $ | 0.31 |
|
| $ | 1.25 |
|
| $ | 0.95 |
|
| $ | 0.49 |
|
| $ | 0.43 |
|
Weighted average Class A shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Basic: |
| 25.0 |
|
|
| 18.0 |
|
|
| 23.1 |
|
|
| 18.0 |
|
|
| 33.7 |
|
|
| 19.3 |
|
Diluted: |
| 25.1 |
|
|
| 18.1 |
|
|
| 23.2 |
|
|
| 18.1 |
|
|
| 33.8 |
|
|
| 19.4 |
|
For the three and nine months ended September 30,March 31, 2022 and 2021 the weighted average number of Class A shares outstanding included 99,697101,612 and 99,889122,222 dilutive restricted shares, respectively, compared with 98,306 and 76,198 dilutive restricted shares for the three and nine months ended September 30, 2020, respectively.
Note 11. Concentration of Credit Risk
Hess represented approximately 100% of our total revenues and accounts receivable for the three and nine months ended September 30, 2021March 31, 2022 and 2020.2021.
Note 12. Commitments and Contingencies
Environmental Contingencies
The Company is subject to federal, state and local laws and regulations relating to the environment. As of September 30,March 31, 2022 and December 31, 2021, our reserves for estimated remediation liabilities included in Accrued liabilities and Other noncurrent liabilities were $0.40.8 million and $3.1 million, respectively, compared with $0.9 million and $3.1 million, respectively, as of December 31, 2020.respectively.
Legal Proceedings
In the ordinary course of business, the Company is from time to time party to various judicial and administrative proceedings. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of a known contingency, we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.
As of September 30, 2021March 31, 2022 and December 31, 2020,2021, we did 0t have material accrued liabilities for legal contingencies. Based on currently available information, we believe it is remote that the outcome of known matters would have a material adverse impact on our financial condition, results of operations or cash flows.
1512
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 13. Segments
Our operations are located in the United States and are organized into 3 reportable segments: (1) gathering, (2) processing and storage and (3) terminaling and export. Our reportable segments comprise the structure used by our Chief Operating Decision Maker (“CODM”) to make key operating decisions and assess performance. These segments are strategic business units with differing products and services. Our CODM evaluates the segments’ operating performance based on multiple measures including Adjusted EBITDA, defined as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and our proportional share of depreciation of equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non-cash, non‑recurring items, if applicable.
The following tables reflect certain financial data for each reportable segment:
|
| Gathering |
| Processing and Storage |
| Terminaling and Export |
| Interest and Other |
| Consolidated |
|
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated |
| ||||||||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
For the Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
For the Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Revenues and other income |
| $ | 157.3 |
|
| $ | 111.1 |
|
| $ | 35.5 |
|
| $ | - |
|
| $ | 303.9 |
|
| $ | 163.6 |
|
| $ | 113.8 |
|
| $ | 35.0 |
|
| $ | - |
|
| $ | 312.4 |
|
Net income (loss) |
|
| 91.7 |
|
|
| 45.0 |
|
|
| 26.9 |
|
|
| (32.5 | ) |
|
| 131.1 |
|
|
| 98.2 |
|
|
| 78.1 |
|
|
| 21.9 |
|
|
| (38.6 | ) |
|
| 159.6 |
|
Net income (loss) attributable to |
|
| 8.7 |
|
|
| 4.5 |
|
|
| 2.5 |
|
|
| (5.8 | ) |
|
| 9.9 |
|
|
| 13.0 |
|
|
| 10.4 |
|
|
| 2.9 |
|
|
| (9.4 | ) |
|
| 16.9 |
|
Depreciation expense |
|
| 25.4 |
|
|
| 12.0 |
|
|
| 4.1 |
|
|
| - |
|
|
| 41.5 |
|
|
| 25.9 |
|
|
| 14.4 |
|
|
| 4.1 |
|
|
| - |
|
|
| 44.4 |
|
Proportional share of equity affiliates' depreciation |
|
| - |
|
|
| 1.3 |
|
|
| - |
|
|
| - |
|
|
| 1.3 |
|
|
| - |
|
|
| 1.3 |
|
|
| - |
|
|
| - |
|
|
| 1.3 |
|
Income from equity investments |
|
| - |
|
|
| 3.0 |
|
|
| - |
|
|
| - |
|
|
| 3.0 |
|
|
| - |
|
|
| 0.4 |
|
|
| - |
|
|
| - |
|
|
| 0.4 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 28.0 |
|
|
| 28.0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 31.3 |
|
|
| 31.3 |
|
Income tax expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3.1 |
|
|
| 3.1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5.0 |
|
|
| 5.0 |
|
Adjusted EBITDA |
|
| 117.1 |
|
|
| 58.3 |
|
|
| 31.0 |
|
|
| (1.4 | ) |
|
| 205.0 |
|
|
| 124.1 |
|
|
| 93.8 |
|
|
| 26.0 |
|
|
| (2.3 | ) |
|
| 241.6 |
|
Capital expenditures* |
|
| 45.4 |
|
|
| 13.7 |
|
|
| - |
|
|
| - |
|
|
| 59.1 |
|
|
| 35.7 |
|
|
| 0.9 |
|
|
| 0.5 |
|
|
| - |
|
|
| 37.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Gathering |
| Processing and Storage |
| Terminaling and Export |
| Interest and Other |
| Consolidated |
|
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated |
| ||||||||||||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
For the Three Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
For the Three Months Ended March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Revenues and other income |
| $ | 142.9 |
|
| $ | 90.2 |
|
| $ | 31.7 |
|
| $ | - |
|
| $ | 264.8 |
|
| $ | 152.7 |
|
| $ | 103.5 |
|
| $ | 32.6 |
|
| $ | - |
|
| $ | 288.8 |
|
Net income (loss) |
|
| 72.4 |
|
|
| 50.7 |
|
|
| 18.0 |
|
|
| (25.3 | ) |
|
| 115.8 |
|
|
| 92.4 |
|
|
| 70.9 |
|
|
| 24.0 |
|
|
| (27.7 | ) |
|
| 159.6 |
|
Net income (loss) attributable to |
|
| 4.5 |
|
|
| 3.2 |
|
|
| 1.1 |
|
|
| (3.2 | ) |
|
| 5.6 |
|
|
| 6.4 |
|
|
| 4.8 |
|
|
| 1.6 |
|
|
| (4.2 | ) |
|
| 8.6 |
|
Depreciation expense |
|
| 24.2 |
|
|
| 11.2 |
|
|
| 4.1 |
|
|
| - |
|
|
| 39.5 |
|
|
| 24.9 |
|
|
| 11.2 |
|
|
| 4.1 |
|
|
| - |
|
|
| 40.2 |
|
Proportional share of equity affiliates' depreciation |
|
| - |
|
|
| 1.3 |
|
|
| - |
|
|
| - |
|
|
| 1.3 |
|
|
| - |
|
|
| 1.3 |
|
|
| - |
|
|
| - |
|
|
| 1.3 |
|
Income from equity investments |
|
| - |
|
|
| 3.6 |
|
|
| - |
|
|
| - |
|
|
| 3.6 |
|
|
| - |
|
|
| 2.7 |
|
|
| - |
|
|
| - |
|
|
| 2.7 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 23.2 |
|
|
| 23.2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 23.1 |
|
|
| 23.1 |
|
Income tax expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1.8 |
|
|
| 1.8 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2.5 |
|
|
| 2.5 |
|
Adjusted EBITDA |
|
| 96.6 |
|
|
| 63.2 |
|
|
| 22.1 |
|
|
| (0.3 | ) |
|
| 181.6 |
|
|
| 117.3 |
|
|
| 83.4 |
|
|
| 28.1 |
|
|
| (2.1 | ) |
|
| 226.7 |
|
Capital expenditures* |
|
| 30.2 |
|
|
| 36.1 |
|
|
| 0.1 |
|
|
| - |
|
|
| 66.4 |
|
|
| 19.4 |
|
|
| 3.7 |
|
|
| - |
|
|
| - |
|
|
| 23.1 |
|
16
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated |
| |||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
For the Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenues and other income |
| $ | 464.6 |
|
| $ | 319.9 |
|
| $ | 103.0 |
|
| $ | - |
|
| $ | 887.5 |
|
Net income (loss) |
|
| 276.5 |
|
|
| 187.5 |
|
|
| 77.0 |
|
|
| (88.3 | ) |
|
| 452.7 |
|
Net income (loss) attributable to |
|
| 23.2 |
|
|
| 15.6 |
|
|
| 6.5 |
|
|
| (15.8 | ) |
|
| 29.5 |
|
Depreciation expense |
|
| 75.5 |
|
|
| 34.4 |
|
|
| 12.2 |
|
|
| - |
|
|
| 122.1 |
|
Proportional share of equity affiliates' depreciation |
|
| - |
|
|
| 3.9 |
|
|
| - |
|
|
| - |
|
|
| 3.9 |
|
Income from equity investments |
|
| - |
|
|
| 8.6 |
|
|
| - |
|
|
| - |
|
|
| 8.6 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 74.0 |
|
|
| 74.0 |
|
Income tax expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9.2 |
|
|
| 9.2 |
|
Adjusted EBITDA |
|
| 352.0 |
|
|
| 225.8 |
|
|
| 89.2 |
|
|
| (5.1 | ) |
|
| 661.9 |
|
Capital expenditures* |
|
| 103.0 |
|
|
| 25.5 |
|
|
| 0.1 |
|
|
| - |
|
|
| 128.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated |
| |||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
For the Nine Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenues and other income |
| $ | 420.9 |
|
| $ | 274.0 |
|
| $ | 130.5 |
|
| $ | - |
|
| $ | 825.4 |
|
Net income (loss) |
|
| 220.0 |
|
|
| 159.2 |
|
|
| 54.6 |
|
|
| (81.2 | ) |
|
| 352.6 |
|
Net income (loss) attributable to |
|
| 13.9 |
|
|
| 10.0 |
|
|
| 3.4 |
|
|
| (9.9 | ) |
|
| 17.4 |
|
Depreciation expense |
|
| 71.2 |
|
|
| 33.6 |
|
|
| 12.1 |
|
|
| - |
|
|
| 116.9 |
|
Proportional share of equity affiliates' depreciation |
|
| - |
|
|
| 3.8 |
|
|
| - |
|
|
| - |
|
|
| 3.8 |
|
Income from equity investments |
|
| - |
|
|
| 7.2 |
|
|
| - |
|
|
| - |
|
|
| 7.2 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 71.3 |
|
|
| 71.3 |
|
Income tax expense (benefit) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5.2 |
|
|
| 5.2 |
|
Gain on sale of property, plant and equipment |
|
| 0.1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.1 |
|
Adjusted EBITDA |
|
| 291.1 |
|
|
| 196.6 |
|
|
| 66.7 |
|
|
| (4.7 | ) |
|
| 549.7 |
|
Capital expenditures* |
|
| 71.9 |
|
|
| 129.9 |
|
|
| 0.4 |
|
|
| - |
|
|
| 202.2 |
|
*Includes acquisition, expansion and maintenance capital expenditures, as applicable.
Total assets for the reportable segments are as follows:
|
|
|
| |||||
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
(in millions) |
|
|
|
|
|
| ||
Gathering |
| $ | 1,902.6 |
|
| $ | 1,856.2 |
|
Processing and Storage(1) |
|
| 1,171.9 |
|
|
| 1,170.3 |
|
Terminaling and Export |
|
| 287.8 |
|
|
| 292.3 |
|
Interest and Other |
|
| 93.5 |
|
|
| 55.7 |
|
Total assets |
| $ | 3,455.8 |
|
| $ | 3,374.5 |
|
(1) Includes investment in equity investees of $102.4 million as of September 30, 2021 and $108.4 million as of December 31, 2020.
1713
PART I – FINANCIAL INFORMATION (CONT’D)
HESS MIDSTREAM LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Total assets for the reportable segments are as follows:
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
(in millions) |
|
|
|
|
|
| ||
Gathering |
| $ | 1,941.3 |
|
| $ | 1,927.0 |
|
Processing and Storage(1) |
|
| 1,138.6 |
|
|
| 1,149.5 |
|
Terminaling and Export |
|
| 279.9 |
|
|
| 281.4 |
|
Interest and Other |
|
| 122.7 |
|
|
| 127.7 |
|
Total assets |
| $ | 3,482.5 |
|
| $ | 3,485.6 |
|
(1) Includes investment in equity investees of $97.3 million as of March 31, 2022 and $101.6 million as of December 31, 2021.
Note 14. Subsequent Events
On October 8, 2021,April 4, 2022, the Sponsors completedsold an underwritten public equity offeringaggregate of 8,625,00010,235,000 of our Class A shares, inclusive of the underwriters’ option to purchase up to 1,125,0001,335,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $26.0029.50 per Class A share, less underwriting discounts. The Sponsors received net proceeds from the offering of approximately $216.6291.7 million, after deducting underwriting discounts; wediscounts. The Company did 0t receive any proceeds in the offering. The offering was conducted pursuant to a registration rights agreement among us and the Sponsors. The Class A Shares sold in
On March 29, 2022, the offering were obtained byCompany, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership purchased directly from the Sponsors by exchanging to us 8,625,00013,559,322 of their Class B Unitsunits representing limited partner interests in the Partnership together withfor an aggregate purchase price of $400.0 million. The purchase price per Class B unit was $29.50, which is equal to the public offering price per Class A share in the secondary offering described above. Pursuant to the terms of the repurchase agreement, immediately following the purchase of the Class B units from the Sponsors, the Partnership cancelled those units, and the Company cancelled, for no consideration, an equal number of our Class B Shares. shares representing limited partner interests in the Company held by the Company’s general partner. The repurchase transaction closed on April 4, 2022 and was funded using borrowings under the Partnership’s revolving credit facility, which were subsequently repaid with proceeds from a senior unsecured notes offering described below.
As a result of the exchange,public equity offering and the total number of Class A and Class B shares did not change, but Hess Midstream LP’sunit repurchase transaction described above, the Company’s consolidated ownership in the Partnership increased fromto approximately 9.918.3% at September 30, 2021 toApril 4, 2022 from approximately 13.3% at March 31, 2022, and the noncontrolling interest decreased to 81.7% from 86.7%, respectively.
On April 8, 2022, the Partnership issued $400.0 million aggregate principal amount of 5.500% fixed-rate senior unsecured notes due 2030 to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on April 15 and October 8, 2021.15, commencing October 15, 2022. The Partnership used the proceeds to repay the borrowings under its revolving credit facility used to finance the repurchase of 13,559,322 Class B units from the Sponsors described above.
On OctoberApril 25, 20212022, the board of directors of our general partner declared a quarterly cash distribution of $0.51040.5492 per Class A share for the quarter ended September 30, 2021, aMarch 31, 2022, an approximate 1.26.3% increase compared to the distribution on the Class A shares for the quarter ended June 30, 2021, which equals a targeted 5% growth in annual distributions per Class A share.December 31, 2021. The distribution will be payable on November 12, 2021May 13, 2022, to shareholders of record as of the close of business on November 4, 2021May 5, 2022. Simultaneously, the Partnership will make a distribution of $0.51040.5492 per Class B unit of the Partnership to the Sponsors as holders of an aggregate of 219,641,928 Class B units of the Partnership following the October 8, 2021, equity offering.Sponsors.
1814
PART I – FINANCIAL INFORMATION (CONT’D)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited financial statements and accompanying footnotes included under Item 1. Financial Statements and in conjunction with the audited consolidated financial statements and accompanying footnotes in our Annual Report on Form 10‑K for the year ended December 31, 20202021 (our “2020“2021 Annual Report”).
Unless otherwise stated or the context otherwise indicates, references in this report to “Hess Midstream LP,” “the Company,” “us,” “our,” “we” or similar terms refer to Hess Midstream LP, including its consolidated subsidiaries.
This discussion contains forward‑looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in our 20202021 Annual Report.
Overview
We are a fee-based, growth-oriented, limited partnership that owns, operates, develops and acquires a diverse set of midstream assets and provideprovides fee-based services to Hess Corporation (“Hess”) and third-party customers. We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner that is owned 50/50 by Hess and GIP II Blue Holding, L.P. (“GIP” and together with Hess, the “Sponsors”). Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken.
In March 2022, we brought online one of two new greenfield compressor stations planned for 2022. In aggregate, the new stations are expected to provide an additional 85 MMcf/d of installed capacity in 2022 and can be expanded up to 130 MMcf/d in the future.
On March 15, 2021,April 4, 2022, the Sponsors completedsold an underwritten public equity offeringaggregate of 6,900,00010,235,000 of our Class A shares, inclusive of the underwriters’ option to purchase up to 900,0001,335,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $21.00$29.50 per Class A share, less underwriting discounts. The Sponsors received net proceeds from the offering of approximately $139.9$291.7 million, after deducting underwriting discounts; thediscounts. The Company did not receive any proceeds in the offering. The offering was conducted pursuant to a registration rights agreement among us and the Sponsors.
On August 10, 2021, we repurchased an aggregate of 31,250,000March 29, 2022, the Company, Hess Midstream Operations LP (the “Partnership”) and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership purchased directly from the Sponsors 13,559,322 Class B units ofrepresenting limited partner interests in the Partnership from our Sponsors at afor an aggregate purchase price of $24.00$400.0 million. The purchase price per Class B unit was $29.50, which is equal to the public offering price per Class A share in the secondary offering described above. Pursuant to the terms of the repurchase agreement, immediately following the purchase of the Class B units from the Sponsors, the Partnership cancelled those units, and the Company cancelled, for totalno consideration, an equal number of $750.0 million (the "Repurchase Transaction").Class B shares representing limited partner interests in the Company held by the Company’s general partner. The Repurchase Transactionrepurchase transaction closed on April 4, 2022 and was funded through issuance byusing borrowings under the Partnership’s revolving credit facility, which were subsequently repaid with proceeds from a senior unsecured notes offering described below.
As a result of the public equity offering and the unit repurchase transaction described above, the Company’s consolidated ownership in the Partnership of $750.0increased to approximately 18.3% at April 4, 2022 from approximately 13.3% at March 31, 2022, and the noncontrolling interest decreased to 81.7% from 86.7%, respectively.
On April 8, 2022, the Partnership issued $400.0 million aggregate principal amount of 4.25%5.500% fixed-rate senior unsecured notes due 2030.2030 to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on April 15 and October 15, commencing October 15, 2022. The Partnership used the proceeds to repay the borrowings under its revolving credit facility used to finance the repurchase of 13,559,322 Class B units from the Sponsors described above.
DuringIn addition, we utilized the third quarterexcess free cash flow beyond our growing distributions to provide increased return of 2021, we safely and successfully completed the planned maintenance turnaround at the Tioga Gas Plant ("TGP"). Ascapital to our shareholders through a result,5% increase in our quarterly distribution level. See Note 14, Subsequent Events in the third quarter of 2021, we incurred operating expenses of approximately $16.0 million and maintenance capital expenditures of approximately $6.8 million related specifically to the turnaround. The 150 MMcf/d TGP expansion tie-in was also completed and placed in service in October 2021 with theaccompanying consolidated financial statements for additional capacity expected to be available concurrent with the completion of the WBI residue export tie-in.
On October 8, 2021, the Sponsors completed an underwritten public equity offering of 8,625,000 of our Class A shares, inclusive of the underwriters’ option to purchase up to 1,125,000 of additional shares which was fully exercised, at a price of $26.00 per Class A share, less underwriting discounts. The Sponsors received net proceeds from the offering of approximately $216.6 million, after deducting underwriting discounts; the Company did not receive any proceeds in the offering.information.
Our assets and operations are organized into the following three reportable segments: (1) gathering (2) processing and storage and (3) terminaling and export.
1915
PART I – FINANCIAL INFORMATION (CONT’D)
ThirdFirst Quarter Results
Significant financial and operating highlights for the thirdfirst quarter of 20212022 included:
Revenues and other income in the thirdfirst quarter of 20212022 were $303.9$312.4 million compared with $264.8$288.8 million in the prior-year quarter. ThirdFirst quarter 20212022 revenues and other income were up $39.1$23.6 million compared to the prior-year quarter primarily due to higher minimum volume commitment (“MVC”) levels and slightly higher tariff rates of $39.7$19.7 million, partially offset by loweras well as higher pass-through revenues, including electricity, produced water trucking and disposal costs, rail transportation and certain other fees of $0.6$3.9 million. Total costs and expenses in the thirdfirst quarter of 20212022 were $144.7$116.9 million, up from $127.6$106.3 million in the prior-year quarter. The increase was primarily attributable to higher depreciation expense for additional assets placed in service of $4.2 million, higher pass-through expenses of $3.9 million, for which we recognize revenues in the same amount, as described above, and higher operating and maintenanceother expenses primarily related to our expanding gathering infrastructure of $14.2$2.5 million. Interest expense increased $8.2 million including $13.7 millionprimarily attributable to the TGP turnaround, higher depreciation$750.0 million 4.25% fixed-rate senior notes issued in August of $2.02021. Income tax expense increased $2.5 million driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and higher general and administrative expenses of $0.9unit repurchase transactions in 2021. Income from equity investments decreased $2.3 million. As a result, consolidated net income increased $15.3 million andremained flat but Adjusted EBITDA increased $23.4 million.$14.9 million for the first quarter of 2022 compared with the first quarter of 2021.
Throughput volumes decreased 4%increased 5% for gas processing and 2%3% for gas gathering in the thirdfirst quarter of 2022 compared with the first quarter of 2021, compared with the third quarter of 2020driven primarily related to the TGP turnaround.by higher gas capture. Throughput volumes increased 3% for water gathering. Throughput volumes decreased 23%14% for crude oil gathering and 21% for crude oil terminaling in the thirdfirst quarter of 2022 compared with the first quarter of 2021 compared with the third quarter of 2020 due to reduced drilling activity.lower production. The impact of the reduction in physical oil volumes in the thirdfirst quarter of 2022 compared to the first quarter of 2021 compared to the third quarter of 2020 was partially offset by MVC shortfall fee payments related to minimum volume commitments and higher tariff rates. Water gathering volumes decreased 4% compared with the year-ago quarter.
For additional discussion of the results of operations at the segment level, see “Results of Operations” below. For additional information regarding Adjusted EBITDA and distributable cash flow, our non‑GAAP financial measures, see “How“How We Evaluate Our Operations”Operations” and “Reconciliation“Reconciliation of Non‑GAAP Financial Measures”Measures” below.
2016
PART I – FINANCIAL INFORMATION (CONT’D)
How We Generate Revenues
We generate substantially all of our revenues by charging fees for gathering, compressing and processing natural gas and fractionating NGLs; gathering, terminaling, loading and transporting crude oil and NGLs; storing and terminaling propane; and gathering and disposing of produced water. We have entered into long‑term, fee‑based commercial agreements with Hess effective January 1, 2014, for oil and gas services agreements, and effective January 1, 2019, for water services agreements.
Except for the water services agreements and except for a certain gathering sub-system, as described below, each of our commercial agreements with Hess has an initial 10-year term (“Initial Term”) and we have the unilateral right to renew each of these agreements for one additional 10-year term.term (“Secondary Term”). In September 2018, we amended our gas gathering and gas processing and fractionation agreements to enable us to provide certain services to Hess in respect of volumes to be delivered to and processed at the LM4 plant. The amended and restated gas gathering agreement also extends the initial termInitial Term of the gathering agreement with respect to a certain gathering sub-system by 5 years to provide for a 15-year initial termInitial Term and decreases the secondary term for that gathering sub-system by 5 years to provide for a 5-year secondary term.Secondary Term. Initial termTerm for the water services agreements is 14 years and the secondary termSecondary Term is 10 years. On December 30, 2020, we exercised our renewal options to extend the terms of certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess for the secondary termSecondary Term through December 31, 2033. There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining water gathering and disposal agreements as well as the remaining gas gathering agreement, we have the sole option to renew these agreements for an additional term that is exercisable at a later date.
These agreements include dedications covering substantially all of Hess’ existing and future owned or controlled production in the Bakken, minimum volume commitments, inflation escalators and fee recalculation mechanisms, all of which are intended to provide us with cash flow stability and growth, as well as downside risk protection. In particular, Hess’ minimum volume commitments under our commercial agreements provide minimum levels of cash flows and the fee recalculation mechanisms under the agreements allow fees to be adjusted annually to provide us with cash flow stability during the initial term of the agreements. During the secondary termSecondary Term of the agreements, the fee recalculation model will be replaced by an inflation-based fee structure. See Note 4, Related Party Transactions for additional description of our commercial agreements.
Our revenues also include revenues from third-party volumes contracted with Hess and delivered to us under these commercial agreements with Hess, as well as pass-through third-party rail transportation costs, third-party produced water trucking and disposal costs, electricity fees and certain other third-party fees, for which we recognize revenues in an amount equal to the costs. Together with Hess, we are pursuing strategic relationships with third-party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.
21
PART I – FINANCIAL INFORMATION (CONT’D)
How We Evaluate Our Operations
Our management uses a variety of financial and operating metrics to analyze our operating results and profitability. These metrics include (i) volumes, (ii) operating and maintenance expenses, (iii) Adjusted EBITDA, and (iv) distributable cash flow.
Volumes. The amount of revenues we generate primarily depends on the volumes of crude oil, natural gas, NGLs and produced water that we handle at our gathering, processing, terminaling, storage facilities and disposal facilities. These volumes are affected primarily by the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets, including changes in crude oil prices, which may further affect volumes delivered by Hess. Although Hess has committed to minimum volumes under our commercial agreements described above, our results of operations will be impacted by our ability to:
17
PART I – FINANCIAL INFORMATION (CONT’D)
Operating and Maintenance Expenses. Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses are comprised primarily of costs charged to us under our omnibus agreement and employee secondment agreement, third‑party contractor costs, utility costs, insurance premiums, third‑party service provider costs, related property taxes and other non‑income taxes and maintenance expenses, such as expenditures to repair, refurbish and replace storage facilities and to maintain equipment reliability, integrity and safety. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of substantial expenses, such as gas plant turnarounds. We seek to manage our maintenance expenditures by scheduling periodic maintenance on our assets in order to minimize significant variability in these expenditures and minimize their impact on our cash flow.
Adjusted EBITDA and Distributable Cash Flow. We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and our proportional share of depreciation of our equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non‑cash, non‑recurring items, if applicable. We define distributable cash flow as Adjusted EBITDA less net interest, excluding amortization of deferred financing costs, cash paid for federal and state income taxes and maintenance capital expenditures. Distributable cash flow does not reflect changes in working capital balances. We use Adjusted EBITDA and distributable cash flow to analyze our liquidity and performance.
Adjusted EBITDA and distributable cash flow are non‑GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
22
PART I – FINANCIAL INFORMATION (CONT’D)
We believe that the presentation of Adjusted EBITDA and distributable cash flow provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net income (loss) and net cash provided by (used in) operating activities. Adjusted EBITDA and distributable cash flow should not be considered as alternatives to GAAP net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
18
PART I – FINANCIAL INFORMATION (CONT’D)
Results of Operations
Three Months Ended September 30, 2021March 31, 2022 Compared to Three Months Ended September 30, 2020March 31, 2021
Results of operations for the three months ended September 30,March 31, 2022 and 2021 and 2020 are presented below (in millions, unless otherwise noted).
For the Three Months Ended September 30, 2021 |
| Gathering |
| Processing and Storage |
| Terminaling and Export |
| Interest and Other |
| Consolidated Hess Midstream LP |
| |||||||||||||||||||||||||||||
For the Three Months Ended March 31, 2022 |
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated Hess Midstream LP |
| |||||||||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Affiliate services |
| $ | 157.3 |
|
| $ | 111.1 |
|
| $ | 35.5 |
|
| $ | - |
|
| $ | 303.9 |
|
| $ | 163.6 |
|
| $ | 113.8 |
|
| $ | 34.7 |
|
| $ | - |
|
| $ | 312.1 |
|
Other income |
|
| - |
|
|
| - |
|
|
| 0.3 |
|
|
| - |
|
|
| 0.3 |
| ||||||||||||||||||||
Total revenues |
|
| 157.3 |
|
|
| 111.1 |
|
|
| 35.5 |
|
|
| - |
|
|
| 303.9 |
|
|
| 163.6 |
|
|
| 113.8 |
|
|
| 35.0 |
|
|
| - |
|
|
| 312.4 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Operating and maintenance expenses |
|
| 38.1 |
|
|
| 55.7 |
|
|
| 4.3 |
|
|
| - |
|
|
| 98.1 |
|
|
| 37.0 |
|
|
| 20.7 |
|
|
| 8.8 |
|
|
| - |
|
|
| 66.5 |
|
Depreciation expense |
|
| 25.4 |
|
|
| 12.0 |
|
|
| 4.1 |
|
|
| - |
|
|
| 41.5 |
|
|
| 25.9 |
|
|
| 14.4 |
|
|
| 4.1 |
|
|
| - |
|
|
| 44.4 |
|
General and administrative expenses |
|
| 2.1 |
|
|
| 1.4 |
|
|
| 0.2 |
|
|
| 1.4 |
|
|
| 5.1 |
|
|
| 2.5 |
|
|
| 1.0 |
|
|
| 0.2 |
|
|
| 2.3 |
|
|
| 6.0 |
|
Total costs and expenses |
|
| 65.6 |
|
|
| 69.1 |
|
|
| 8.6 |
|
|
| 1.4 |
|
|
| 144.7 |
|
|
| 65.4 |
|
|
| 36.1 |
|
|
| 13.1 |
|
|
| 2.3 |
|
|
| 116.9 |
|
Income (loss) from operations |
|
| 91.7 |
|
|
| 42.0 |
|
|
| 26.9 |
|
|
| (1.4 | ) |
|
| 159.2 |
|
|
| 98.2 |
|
|
| 77.7 |
|
|
| 21.9 |
|
|
| (2.3 | ) |
|
| 195.5 |
|
Income from equity investments |
|
| - |
|
|
| 3.0 |
|
|
| - |
|
|
| - |
|
|
| 3.0 |
|
|
| - |
|
|
| 0.4 |
|
|
| - |
|
|
| - |
|
|
| 0.4 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 28.0 |
|
|
| 28.0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 31.3 |
|
|
| 31.3 |
|
Income (loss) before income tax expense |
|
| 91.7 |
|
|
| 45.0 |
|
|
| 26.9 |
|
|
| (29.4 | ) |
|
| 134.2 |
|
|
| 98.2 |
|
|
| 78.1 |
|
|
| 21.9 |
|
|
| (33.6 | ) |
|
| 164.6 |
|
Income tax expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3.1 |
|
|
| 3.1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5.0 |
|
|
| 5.0 |
|
Net income (loss) |
|
| 91.7 |
|
|
| 45.0 |
|
|
| 26.9 |
|
|
| (32.5 | ) |
|
| 131.1 |
|
|
| 98.2 |
|
|
| 78.1 |
|
|
| 21.9 |
|
|
| (38.6 | ) |
|
| 159.6 |
|
Less: Net income (loss) attributable to |
|
| 83.0 |
|
|
| 40.5 |
|
|
| 24.4 |
|
|
| (26.7 | ) |
|
| 121.2 |
|
|
| 85.2 |
|
|
| 67.7 |
|
|
| 19.0 |
|
|
| (29.2 | ) |
|
| 142.7 |
|
Net income (loss) attributable to |
| $ | 8.7 |
|
| $ | 4.5 |
|
| $ | 2.5 |
|
| $ | (5.8 | ) |
| $ | 9.9 |
|
| $ | 13.0 |
|
| $ | 10.4 |
|
| $ | 2.9 |
|
| $ | (9.4 | ) |
| $ | 16.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Gas gathering (MMcf/d)(1) |
|
| 309 |
|
|
|
|
|
|
|
|
|
|
|
| 309 |
|
|
| 326 |
|
|
|
|
|
|
|
|
|
|
|
| 326 |
| ||||||
Crude oil gathering (MBbl/d)(2) |
|
| 106 |
|
|
|
|
|
|
|
|
|
|
|
| 106 |
|
|
| 101 |
|
|
|
|
|
|
|
|
|
|
|
| 101 |
| ||||||
Gas processing (MMcf/d)(1) |
|
|
|
|
| 285 |
|
|
|
|
|
|
|
|
| 285 |
|
|
|
|
|
| 316 |
|
|
|
|
|
|
|
|
| 316 |
| ||||||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
| 111 |
|
|
|
|
|
| 111 |
|
|
|
|
|
|
|
|
| 108 |
|
|
|
|
|
| 108 |
| ||||||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
| 8 |
|
|
|
|
|
| 8 |
|
|
|
|
|
|
|
|
| 14 |
|
|
|
|
|
| 14 |
| ||||||
Water gathering (MBbl/d)(2) |
|
| 75 |
|
|
|
|
|
|
|
|
|
|
|
| 75 |
|
|
| 72 |
|
|
|
|
|
|
|
|
|
|
|
| 72 |
|
(1) Million cubic feet per day |
(2) Thousand barrels per day |
2319
PART I – FINANCIAL INFORMATION (CONT’D)
For the Three Months Ended September 30, 2020 |
| Gathering |
| Processing and Storage |
| Terminaling and Export |
| Interest and Other |
| Consolidated Hess Midstream LP |
| |||||||||||||||||||||||||||||
For the Three Months Ended March 31, 2021 |
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated Hess Midstream LP |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Affiliate services |
| $ | 142.9 |
|
| $ | 90.1 |
|
| $ | 31.7 |
|
| $ | - |
|
| $ | 264.7 |
|
| $ | 152.7 |
|
| $ | 103.5 |
|
| $ | 32.6 |
|
| $ | - |
|
| $ | 288.8 |
|
Other income |
|
| - |
|
|
| 0.1 |
|
|
| - |
|
|
| - |
|
|
| 0.1 |
| ||||||||||||||||||||
Total revenues |
|
| 142.9 |
|
|
| 90.2 |
|
|
| 31.7 |
|
|
| - |
|
|
| 264.8 |
|
|
| 152.7 |
|
|
| 103.5 |
|
|
| 32.6 |
|
|
| - |
|
|
| 288.8 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating and maintenance expenses |
|
| 44.1 |
|
|
| 30.4 |
|
|
| 9.4 |
|
|
| - |
|
|
| 83.9 |
|
|
| 33.0 |
|
|
| 22.5 |
|
|
| 4.3 |
|
|
| - |
|
|
| 59.8 |
|
Depreciation expense |
|
| 24.2 |
|
|
| 11.2 |
|
|
| 4.1 |
|
|
| - |
|
|
| 39.5 |
|
|
| 24.9 |
|
|
| 11.2 |
|
|
| 4.1 |
|
|
| - |
|
|
| 40.2 |
|
General and administrative expenses |
|
| 2.2 |
|
|
| 1.5 |
|
|
| 0.2 |
|
|
| 0.3 |
|
|
| 4.2 |
|
|
| 2.4 |
|
|
| 1.6 |
|
|
| 0.2 |
|
|
| 2.1 |
|
|
| 6.3 |
|
Total costs and expenses |
|
| 70.5 |
|
|
| 43.1 |
|
|
| 13.7 |
|
|
| 0.3 |
|
|
| 127.6 |
|
|
| 60.3 |
|
|
| 35.3 |
|
|
| 8.6 |
|
|
| 2.1 |
|
|
| 106.3 |
|
Income (loss) from operations |
|
| 72.4 |
|
|
| 47.1 |
|
|
| 18.0 |
|
|
| (0.3 | ) |
|
| 137.2 |
|
|
| 92.4 |
|
|
| 68.2 |
|
|
| 24.0 |
|
|
| (2.1 | ) |
|
| 182.5 |
|
Income from equity investments |
|
| - |
|
|
| 3.6 |
|
|
| - |
|
|
| - |
|
|
| 3.6 |
|
|
| - |
|
|
| 2.7 |
|
|
| - |
|
|
| - |
|
|
| 2.7 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 23.2 |
|
|
| 23.2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 23.1 |
|
|
| 23.1 |
|
Income (loss) before income tax expense |
|
| 72.4 |
|
|
| 50.7 |
|
|
| 18.0 |
|
|
| (23.5 | ) |
|
| 117.6 |
|
|
| 92.4 |
|
|
| 70.9 |
|
|
| 24.0 |
|
|
| (25.2 | ) |
|
| 162.1 |
|
Income tax expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1.8 |
|
|
| 1.8 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2.5 |
|
|
| 2.5 |
|
Net Income (loss) |
|
| 72.4 |
|
|
| 50.7 |
|
|
| 18.0 |
|
|
| (25.3 | ) |
|
| 115.8 |
|
|
| 92.4 |
|
|
| 70.9 |
|
|
| 24.0 |
|
|
| (27.7 | ) |
|
| 159.6 |
|
Less: Net income (loss) attributable to |
|
| 67.9 |
|
|
| 47.5 |
|
|
| 16.9 |
|
|
| (22.1 | ) |
|
| 110.2 |
|
|
| 86.0 |
|
|
| 66.1 |
|
|
| 22.4 |
|
|
| (23.5 | ) |
|
| 151.0 |
|
Net income (loss) attributable to |
| $ | 4.5 |
|
| $ | 3.2 |
|
| $ | 1.1 |
|
| $ | (3.2 | ) |
| $ | 5.6 |
|
| $ | 6.4 |
|
| $ | 4.8 |
|
| $ | 1.6 |
|
| $ | (4.2 | ) |
| $ | 8.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Gas gathering (MMcf/d)(1) |
|
| 316 |
|
|
|
|
|
|
|
|
|
|
| 316 |
|
|
| 316 |
|
|
|
|
|
|
|
|
|
|
| 316 |
| ||||||||
Crude oil gathering (MBbl/d)(2) |
|
| 138 |
|
|
|
|
|
|
|
|
|
|
| 138 |
|
|
| 117 |
|
|
|
|
|
|
|
|
|
|
| 117 |
| ||||||||
Gas processing (MMcf/d)(1) |
|
|
|
|
| 296 |
|
|
|
|
|
|
|
| 296 |
|
|
|
|
|
| 302 |
|
|
|
|
|
|
|
| 302 |
| ||||||||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
| 141 |
|
|
|
|
|
| 141 |
|
|
|
|
|
|
|
|
| 125 |
|
|
|
|
|
| 125 |
| ||||||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
| 12 |
|
|
|
|
|
| 12 |
|
|
|
|
|
|
|
|
| 13 |
|
|
|
|
|
| 13 |
| ||||||
Water gathering (MBbl/d)(2) |
|
| 78 |
|
|
|
|
|
|
|
|
|
|
| 78 |
|
|
| 70 |
|
|
|
|
|
|
|
|
|
|
| 70 |
|
(1) Million cubic feet per day |
(2) Thousand barrels per day |
Gathering
Revenues and other income increased $14.4$10.9 million in the thirdfirst quarter of 2022 compared to the first quarter of 2021, compared to the third quarter of 2020, of which $14.1$15.2 million is attributable to higher gas gathering and compression volumes and higher MVC levels and $2.8 million is attributable to higher tariff rates, $2.8 million is attributable to higher water services revenue and $0.8 million is attributable to higher crude oil MVC levels.rates. This increase is partially offset by $2.4$4.2 million attributable to lower water services revenue and $2.3 million is attributable to lower crude oil gathering volumes driven by reduced drilling activity, partially offset by MVC shortfall fees. The remaining $0.6 million is attributable to lower pass-through revenues, including produced water trucking and disposal and electricity and other fees, and $0.9 million attributable to lower gas gathering and compression volumes due to the TGP turnaround, partially offset by MVC shortfall fees.
Operating and maintenance expenses decreased $6.0increased $4.0 million, of which $4.3$3.2 million is attributable to lower project-based maintenance activity, $2.4higher operating expenses on our expanding gathering infrastructure and $1.4 million is attributable to lower pass-through costs, including produced water trucking and disposal, electricity and other fees, partially offset by $0.7 million higher employee costs allocated to us under our omnibus and employee secondment agreements. This increase is partially offset by $0.6 million lower pass-through costs, including produced water trucking and disposal and electricity fees. Depreciation expense increased $1.2$1.0 million due to new compressors produced water disposal facilities and other new gathering assets being brought into service.
Processing and Storage
Revenues and other income increased $20.9$10.3 million in the thirdfirst quarter of 2022 compared to the first quarter of 2021, compared to the third quarter of 2020, of which $10.6$11.0 million is attributable to higher tariff ratesthroughput volumes and $6.8higher MVC levels and $0.3 million is attributable to higher electricity pass-through revenue, including electricity and other fees related to temporary gas offloads during the TGP turnaround. The remaining $3.6revenue. This increase is partially offset by $1.0 million is attributable to higher MVC levels and $0.1 million lower other income.tariff rates.
2420
PART I – FINANCIAL INFORMATION (CONT’D)
Operating and maintenance expenses increased $25.3decreased $1.8 million, of which $13.7$2.1 million is attributable to the TGP turnaround, $6.8 million is attributable to higher pass-through costs, including electricity and other fees related to temporary gas offloads during the TGP turnaround, $3.7 million is attributable to other maintenance activity and higher property taxes and $2.0 million is attributable to higherlower third-party processing fees This increaseand $1.0 million is partially offset by $0.9 million attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements. This decrease is partially offset by $1.0 million attributable to higher operating costs and higher property taxes and $0.3 million is attributable to higher electricity pass-through costs. Depreciation expense increased $3.2 million primarily due to the TGP expansion and turnaround assets placed in service.
Income from equity investments decreased $2.3 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to lower volumes processed and higher maintenance expenses at the LM4 plant.
Terminaling and Export
Revenues and other income increased $3.8$2.4 million in the thirdfirst quarter of 2022 compared to the first quarter of 2021, compared to the third quarter of 2020, of which $4.7$4.2 million is attributable to higher tariff ratesrail transportation pass‑through revenues and $4.1$0.3 million is attributable to higher MVC levels, partially offset by $5.0 million attributable to lower rail transportation pass‑through revenues. Operating and maintenance expenses decreased $5.1 million primarily attributable to lower rail transportation pass-through costs due to lower rail usage and certain rail transportation fees being paid directly by end customers.
Interest and Other
General and administrative expenses increased $1.1 million in the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher professional fees. Interest expense, net of interest income, increased $4.8 million primarily attributable to the $750.0 million 4.25% fixed-rate senior notes issued in connection with the Repurchase Transaction. Income tax expense increased $1.3 million driven by higher income before income tax expense and increased ownership of Hess Midstream Operations LP by Hess Midstream LP following the equity offering in theother income. The first quarter of 2021 and the Repurchase Transaction.
25
PART I – FINANCIAL INFORMATION (CONT’D)
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Results of operations for the nine months ended September 30, 2021 and 2020 are presented below (in millions, unless otherwise noted).
For the Nine Months Ended September 30, 2021 |
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated Hess Midstream LP |
| |||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Affiliate services |
| $ | 464.6 |
|
| $ | 319.9 |
|
| $ | 103.0 |
|
| $ | - |
|
| $ | 887.5 |
|
Total revenues |
|
| 464.6 |
|
|
| 319.9 |
|
|
| 103.0 |
|
|
| - |
|
|
| 887.5 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating and maintenance expenses (exclusive |
|
| 105.9 |
|
|
| 102.4 |
|
|
| 13.2 |
|
|
| - |
|
|
| 221.5 |
|
Depreciation expense |
|
| 75.5 |
|
|
| 34.4 |
|
|
| 12.2 |
|
|
| - |
|
|
| 122.1 |
|
General and administrative expenses |
|
| 6.7 |
|
|
| 4.2 |
|
|
| 0.6 |
|
|
| 5.1 |
|
|
| 16.6 |
|
Total costs and expenses |
|
| 188.1 |
|
|
| 141.0 |
|
|
| 26.0 |
|
|
| 5.1 |
|
|
| 360.2 |
|
Income (loss) from operations |
|
| 276.5 |
|
|
| 178.9 |
|
|
| 77.0 |
|
|
| (5.1 | ) |
|
| 527.3 |
|
Income from equity investments |
|
| - |
|
|
| 8.6 |
|
|
| - |
|
|
| - |
|
|
| 8.6 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 74.0 |
|
|
| 74.0 |
|
Income (loss) before income tax expense (benefit) |
|
| 276.5 |
|
|
| 187.5 |
|
|
| 77.0 |
|
|
| (79.1 | ) |
|
| 461.9 |
|
Income tax expense (benefit) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9.2 |
|
|
| 9.2 |
|
Net income (loss) |
|
| 276.5 |
|
|
| 187.5 |
|
|
| 77.0 |
|
|
| (88.3 | ) |
|
| 452.7 |
|
Less: Net income (loss) attributable to |
|
| 253.3 |
|
|
| 171.9 |
|
|
| 70.5 |
|
|
| (72.5 | ) |
|
| 423.2 |
|
Net income (loss) attributable to Hess Midstream LP |
| $ | 23.2 |
|
| $ | 15.6 |
|
| $ | 6.5 |
|
| $ | (15.8 | ) |
| $ | 29.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gas gathering (MMcf/d)(1) |
|
| 316 |
|
|
|
|
|
|
|
|
|
|
|
| 316 |
| |||
Crude oil gathering (MBbl/d)(2) |
|
| 111 |
|
|
|
|
|
|
|
|
|
|
|
| 111 |
| |||
Gas processing (MMcf/d)(1) |
|
|
|
|
| 297 |
|
|
|
|
|
|
|
|
| 297 |
| |||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
| 118 |
|
|
|
|
|
| 118 |
| |||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
| 13 |
|
|
|
|
|
| 13 |
| |||
Water gathering (MBbl/d)(2) |
|
| 73 |
|
|
|
|
|
|
|
|
|
|
|
| 73 |
|
|
|
26
PART I – FINANCIAL INFORMATION (CONT’D)
For the Nine Months Ended September 30, 2020 |
| Gathering |
|
| Processing and Storage |
|
| Terminaling and Export |
|
| Interest and Other |
|
| Consolidated Hess Midstream LP |
| |||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Affiliate services |
| $ | 420.9 |
|
| $ | 273.7 |
|
| $ | 130.5 |
|
| $ | - |
|
| $ | 825.1 |
|
Other income |
|
| - |
|
|
| 0.3 |
|
|
| - |
|
|
| - |
|
|
| 0.3 |
|
Total revenues |
|
| 420.9 |
|
|
| 274.0 |
|
|
| 130.5 |
|
|
| - |
|
|
| 825.4 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating and maintenance expenses (exclusive |
|
| 124.0 |
|
|
| 83.6 |
|
|
| 63.2 |
|
|
| - |
|
|
| 270.8 |
|
Depreciation expense |
|
| 71.2 |
|
|
| 33.6 |
|
|
| 12.1 |
|
|
| - |
|
|
| 116.9 |
|
General and administrative expenses |
|
| 5.8 |
|
|
| 4.8 |
|
|
| 0.6 |
|
|
| 4.7 |
|
|
| 15.9 |
|
Total costs and expenses |
|
| 201.0 |
|
|
| 122.0 |
|
|
| 75.9 |
|
|
| 4.7 |
|
|
| 403.6 |
|
Income (loss) from operations |
|
| 219.9 |
|
|
| 152.0 |
|
|
| 54.6 |
|
|
| (4.7 | ) |
|
| 421.8 |
|
Income from equity investments |
|
| - |
|
|
| 7.2 |
|
|
| - |
|
|
| - |
|
|
| 7.2 |
|
Interest expense, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 71.3 |
|
|
| 71.3 |
|
Gain on sale of property, plant and equipment |
|
| 0.1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.1 |
|
Income (loss) before income tax expense (benefit) |
|
| 220.0 |
|
|
| 159.2 |
|
|
| 54.6 |
|
|
| (76.0 | ) |
|
| 357.8 |
|
Income tax expense (benefit) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5.2 |
|
|
| 5.2 |
|
Net Income (loss) |
|
| 220.0 |
|
|
| 159.2 |
|
|
| 54.6 |
|
|
| (81.2 | ) |
|
| 352.6 |
|
Less: Net income (loss) attributable to |
|
| 206.1 |
|
|
| 149.2 |
|
|
| 51.2 |
|
|
| (71.3 | ) |
|
| 335.2 |
|
Net income (loss) attributable to Hess Midstream LP |
| $ | 13.9 |
|
| $ | 10.0 |
|
| $ | 3.4 |
|
| $ | (9.9 | ) |
| $ | 17.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Throughput volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gas gathering (MMcf/d)(1) |
|
| 320 |
|
|
|
|
|
|
|
|
|
|
|
| 320 |
| |||
Crude oil gathering (MBbl/d)(2) |
|
| 143 |
|
|
|
|
|
|
|
|
|
|
|
| 143 |
| |||
Gas processing (MMcf/d)(1) |
|
|
|
|
| 302 |
|
|
|
|
|
|
|
|
| 302 |
| |||
Crude oil terminaling (MBbl/d)(2) |
|
|
|
|
|
|
|
| 149 |
|
|
|
|
|
| 149 |
| |||
NGL loading (MBbl/d)(2) |
|
|
|
|
|
|
|
| 14 |
|
|
|
|
|
| 14 |
| |||
Water gathering (MBbl/d)(2) |
|
| 66 |
|
|
|
|
|
|
|
|
|
|
|
| 66 |
|
|
|
Gathering
Revenues and other income increased $43.7 million in the first nine months of 2021 compared to the first nine months of 2020, of which $43.9 million is attributable to higher tariff rates, $14.0 million is attributable to higher water services revenue and $6.5 million is attributable to higher gas gathering and compression volumes and higher MVC levels. This increase is partially offset2022 results were also impacted by $16.2$1.7 million lower pass-through revenues primarily attributable to lower third-party produced water trucking and disposal due to more operated water disposal facilities coming on-line and being utilized. In addition, $4.5 million is attributable to lower crude oil gathering volumes, driven by reduced drilling activity, partially offset by MVC shortfall fees.
Operatingfees, and maintenance expenses decreased $18.1 million, of which $16.2 million is attributable to lower pass-through costs primarily related to lower third-party produced water trucking and disposal costs and $8.1 million is attributable to lower project-based maintenance activity. This decrease is partially offset by $4.1 million higher employee costs allocated to us under our omnibus and employee secondment agreements and $2.1 million higher insurance and property tax. Depreciation expense increased $4.3 million due to new compressors, produced water disposal facilities and other new gathering assets being brought into service.
27
PART I – FINANCIAL INFORMATION (CONT’D)
Processing and Storage
Revenues and other income increased $45.9 million in the first nine months of 2021 compared to the first nine months of 2020, of which $37.5 million is attributable to higher tariff rates, $6.9 million is attributable to higher pass-through revenue, including electricity and other fees related to temporary gas offloads during the TGP turnaround and $1.8 million is attributable to higher MVC levels. This increase was partially offset by $0.3$0.4 million lower other income.tariff rates.
Operating and maintenance expenses increased $18.8 million, of which $9.5 million is attributable to higher TGP turnaround activity compared to the same period last year, $6.9 million is attributable to higher pass-through costs, including electricity and other fees related to temporary gas offloads during the TGP turnaround, $5.5 million is attributable to higher third-party processing fees and $0.5 million is attributable to other maintenance activity, property tax and insurance. This increase is partially offset by $3.6 million attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements.
Terminaling and Export
Revenues and other income decreased $27.5 million in the first nine months of 2021 compared to the first nine months of 2020, of which $49.2 million is attributable to lower rail transportation pass‑through revenues. This decrease is partially offset by $14.4 million attributable to higher tariff rates and $7.3$4.5 million primarily attributable to higher MVC levels. Operating and maintenance expenses decreased $50.0 million primarily attributable to lower rail transportation pass-through costs due to lower rail usage and certain rail transportation fees being paid directly by end customers.costs.
Interest and Other
Interest expense, net of interest income, increased $2.7$8.2 million in the first nine monthsquarter of 20212022 compared to the first nine monthsquarter of 20202021 primarily attributable to the $750.0 million 4.25% fixed-rate senior notes issued in connection with the Repurchase Transaction.August 2021. Income tax expense increased $4.0$2.5 million in the same periods driven by higher income before income tax expense and increased ownership of Hess Midstream Operations LPthe Partnership by Hess Midstream LP following the equity offering and unit repurchase transactions in the first quarter of 2021 and the Repurchase Transaction.2021.
Other Factors Expected to Significantly Affect Our Future Results
We currently generate substantially all of our revenues under fee‑based commercial agreements with Hess, including third parties contracted with affiliates of Hess. These contracts provide cash flow stability and minimize our direct exposure to commodity price fluctuations, since we generally do not own any of the crude oil, natural gas, or NGLs that we handle and do not engage in the trading of crude oil, natural gas, or NGLs. However, commodity price fluctuations indirectly influence our activities and results of operations over the long-term, since they can affect production rates and investments by Hess and third parties in the development of new crude oil and natural gas reserves. The markets for oil and natural gas are volatile and will likely continue to be volatile in the future. In the second quarter of 2020, as a result of the sharp decline in crude oil prices, Hess reduced its rig count from 6six rigs to 1one rig in the Bakken. In addition, third parties in the Bakken have also curtailed production and reduced drilling activity. Our contract structure has largely offset and is expected to largelycontinue to offset thepotential impact of the reduction in volumes on our financial performance metrics through the Initial Term of our commercial agreements, as our minimum volume commitments provide minimum levels of cash flows and the fee recalculation mechanisms under our agreements support our cash flow stability. To the extent our previous plans included revenues for volumes, including third-party volumes contracted through Hess, above currently established minimum volume commitment levels, such revenues could decline to the minimum volume commitment levels. Subsequently, in the first quarter of 2021, Hess increased its rig count in the Bakken to 2two rigs and added a third operated rig in September 2021.202
281, and we expect to be above minimum volume commitment levels in 2023 and 2024.
PART I – FINANCIAL INFORMATION (CONT’D)
The throughput volumes at our facilities depend primarily on the volumes of crude oil and natural gas produced by Hess in the Bakken, which, in turn, is ultimately dependent on Hess’ exploration and production margins. Exploration and production margins depend on the price of crude oil, natural gas, and NGLs. These prices are volatile and influenced by numerous factors beyond our or Hess’ control, including the domestic and global supply of and demand for crude oil, natural gas and NGLs. During the first quarter of 2020, worldwide crude oil prices declined significantly due in part to reduced global demand stemming from the COVID-19 global pandemic. Sustained periods of low prices for oil and natural gas could materially and adversely affect the quantities of oil and natural gas that Hess can economically produce. The commodities trading markets, as well as global and regional supply and demand factors, may also influence the selling prices of crude oil, natural gas and NGLs. While the initial termThe Secondary Term of our commercial agreements provides for an annual fee recalculation mechanismincludes continuing MVCs while the fees change to target a return on capital deployed, the secondary term of our commercial agreements changes to an inflation-based fixed fee structure with minimum volume commitments continuing throughbased on the second term, whichaverage fees paid by Hess during the last three years of the Initial Term of the commercial agreements adjusted annually for inflation up to 3% a year. Such a fee structure may provide greater exposure to price volatility.less downside risk protection in the future. Furthermore, our ability to execute our growth strategy in the Bakken, including attracting third-party volumes, will depend on crude oil and natural gas production in that area, which is also affected by the supply of and demand for crude oil and natural gas.
21
PART I – FINANCIAL INFORMATION (CONT’D)
Reconciliation of Non‑GAAP Financial Measures
The following table presents a reconciliation of Adjusted EBITDA and distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| March 31, |
| |||||||||||||||
(in millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Reconciliation of Adjusted EBITDA and Distributable |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income |
| $ | 131.1 |
|
| $ | 115.8 |
|
| $ | 452.7 |
|
| $ | 352.6 |
|
| $ | 159.6 |
|
| $ | 159.6 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Depreciation expense |
|
| 41.5 |
|
|
| 39.5 |
|
|
| 122.1 |
|
|
| 116.9 |
|
|
| 44.4 |
|
|
| 40.2 |
|
Proportional share of equity affiliates' depreciation |
|
| 1.3 |
|
|
| 1.3 |
|
|
| 3.9 |
|
|
| 3.8 |
|
|
| 1.3 |
|
|
| 1.3 |
|
Interest expense, net |
|
| 28.0 |
|
|
| 23.2 |
|
|
| 74.0 |
|
|
| 71.3 |
|
|
| 31.3 |
|
|
| 23.1 |
|
Income tax expense (benefit) |
|
| 3.1 |
|
|
| 1.8 |
|
|
| 9.2 |
|
|
| 5.2 |
|
|
| 5.0 |
|
|
| 2.5 |
|
Loss (gain) on sale of property, plant and equipment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (0.1 | ) | ||||||||
Adjusted EBITDA |
| $ | 205.0 |
|
| $ | 181.6 |
|
| $ | 661.9 |
|
| $ | 549.7 |
|
| $ | 241.6 |
|
| $ | 226.7 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest, net(1) |
|
| 26.1 |
|
|
| 21.6 |
|
|
| 68.7 |
|
| $ | 66.7 |
|
|
| 29.3 |
|
|
| 21.4 |
|
Maintenance capital expenditures |
|
| 7.4 |
|
|
| 3.8 |
|
|
| 9.6 |
|
|
| 6.5 |
|
|
| 0.7 |
|
|
| 0.7 |
|
Distributable cash flow |
| $ | 171.5 |
|
| $ | 156.2 |
|
| $ | 583.6 |
|
| $ | 476.5 |
|
| $ | 211.6 |
|
| $ | 204.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Reconciliation of Adjusted EBITDA and Distributable |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net cash provided by operating activities |
| $ | 182.0 |
|
| $ | 149.6 |
|
| $ | 572.0 |
|
| $ | 467.2 |
|
| $ | 190.6 |
|
| $ | 165.4 |
|
Changes in assets and liabilities |
|
| (3.9 | ) |
|
| 8.9 |
|
|
| 24.4 |
|
|
| 12.9 |
|
|
| 25.2 |
|
|
| 43.8 |
|
Amortization of deferred financing costs |
|
| (1.9 | ) |
|
| (1.6 | ) |
|
| (5.3 | ) |
|
| (5.1 | ) |
|
| (2.0 | ) |
|
| (1.7 | ) |
Proportional share of equity affiliates' depreciation |
|
| 1.3 |
|
|
| 1.3 |
|
|
| 3.9 |
|
|
| 3.8 |
|
|
| 1.3 |
|
|
| 1.3 |
|
Interest expense, net |
|
| 28.0 |
|
|
| 23.2 |
|
|
| 74.0 |
|
|
| 71.3 |
|
|
| 31.3 |
|
|
| 23.1 |
|
Distribution from equity investments |
|
| (3.1 | ) |
|
| (3.0 | ) |
|
| (14.6 | ) |
|
| (6.8 | ) |
|
| (4.7 | ) |
|
| (7.5 | ) |
Earnings from equity investments |
|
| 3.0 |
|
|
| 3.6 |
|
|
| 8.6 |
|
|
| 7.2 |
|
|
| 0.4 |
|
|
| 2.7 |
|
Other |
|
| (0.4 | ) |
|
| (0.4 | ) |
|
| (1.1 | ) |
|
| (0.8 | ) |
|
| (0.5 | ) |
|
| (0.4 | ) |
Adjusted EBITDA |
| $ | 205.0 |
|
| $ | 181.6 |
|
| $ | 661.9 |
|
| $ | 549.7 |
|
| $ | 241.6 |
|
| $ | 226.7 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest, net(1) |
|
| 26.1 |
|
|
| 21.6 |
|
|
| 68.7 |
|
|
| 66.7 |
|
|
| 29.3 |
|
|
| 21.4 |
|
Maintenance capital expenditures |
|
| 7.4 |
|
|
| 3.8 |
|
|
| 9.6 |
|
|
| 6.5 |
|
|
| 0.7 |
|
|
| 0.7 |
|
Distributable cash flow |
| $ | 171.5 |
|
| $ | 156.2 |
|
| $ | 583.6 |
|
| $ | 476.5 |
|
| $ | 211.6 |
|
| $ | 204.6 |
|
29
22
PART I – FINANCIAL INFORMATION (CONT’D)
Capital Resources and Liquidity
We expect our ongoing sources of liquidity to include:
We believe that cash generated from these sources will be sufficient to meet our operating requirements, our planned short‑term capital expenditures, debt service requirements, our quarterly cash distribution requirements, future internal growth projects or potential acquisitions.
Our partnership agreement requires that we distribute all of our available cash, as defined in the agreement, to our shareholders. On OctoberApril 25, 2021,2022, we declared a quarterly cash distribution of $0.5104$0.5492 per Class A share, to be paid on November 12, 2021May 13, 2022 to shareholders of record on November 4, 2021.May 5, 2022. Simultaneously, the Partnership will make a distribution of $0.5104$0.5492 per Class B unit of the Partnership to the Sponsors.
On August 10, 2021,April 4, 2022, we repurchased 31,250,00013,559,322 Class B units of the Partnership from our Sponsors for an aggregate purchase price of $750.0$400.0 million, which was funded through issuance byusing borrowings under the Partnership of $750.0Partnership’s revolving credit facility, which were subsequently repaid with proceeds from $400.0 million aggregate principal amount of 4.250%5.500% unsecured senior notes due 2030.2030 issued on April 8, 2022.
Fixed‑Rate Senior Notes
On August 5, 2021,As of March 31, 2022, the Partnership issuedhad $750.0 million aggregate principal amount of 4.250% fixed‑rate senior notes due 2030 that were issued to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on February 15 and August 15. The Partnership used the proceeds to fund the Repurchase Transaction.
As of September 30, 2021,March 31, 2022, the Partnership also had $550.0 million aggregate principal amount of 5.125% fixed‑rate senior notes due 2028 that were issued to qualified institutional investors. Interest is payable semi‑annually on June 15 and December 15.
In addition, as of March 31, 2022, the Partnership had $800.0 million aggregate principal amount of 5.625% fixed‑rate senior notes due 2026 that were issued to qualified institutional investors. The notes are guaranteed by certain of our subsidiaries. Interest is payable semi‑annually on February 15 and August 15.
In addition, as of September 30, 2021, the Partnership had $550.0 million aggregate principal amount of 5.125% fixed‑rate seniorThe notes due 2028 that were issued to qualified institutional investors. The notesdescribed above are guaranteed by certain subsidiaries of our subsidiaries. Interest is payable semi‑annually on June 15 and December 15.
the Partnership. Each of the indentures for the senior notes described above contains customary covenants that restrict our ability and the ability of our restricted subsidiaries to (i) declare or pay any dividend or make any other restricted payments; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00. As of September 30, 2021,March 31, 2022, we were in compliance with all debt covenants under the indentures.
In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company.
30See Note 14, Subsequent Events in the accompanying consolidated financial statements for a description of senior unsecured notes issued in April 2022.
23
PART I – FINANCIAL INFORMATION (CONT’D)
Credit Facilities
As of September 30, 2021,March 31, 2022, we had senior secured syndicated credit facilities (the “Credit Facilities”) consisting of a $1,000.0 million 5-year revolving credit facility and a fully drawn $400.0 million 5-year Term Loan A facility, which was initially fully drawn, maturing in 2024. Facility fees accrue on the total capacity of the revolving credit facility. Borrowings under the 5-year Term Loan A facility will generally bear interest at LIBOR plus an applicable margin ranging from 1.55% to 2.50%, while the applicable margin for the 5-year syndicated revolving credit facility ranges from 1.275% to 2.000%. Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. At September 30, 2021,March 31, 2022, borrowings of $152.0$105.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $392.5$385.0 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.
The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes. The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the presently owned and after-acquired assets of the Partnership and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions. The Credit Facilities contain representations and warranties, affirmative and negative covenants and events of default that the Partnership considers to be customary for an agreement of this type, including a covenant that requires the Partnership to maintain a ratio of total debt to EBITDA (as defined in the Credit Facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to the Partnership obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter. As of September 30, 2021,March 31, 2022, we were in compliance with these financial covenants.
Cash Flows
Operating Activities. Net cash provided by operating activities increased $104.8$25.2 million for the ninethree months ended September 30, 2021March 31, 2022 compared to the same period in 2020.2021. The change in operating cash flows resulted primarily from an increase in revenues and other income of $62.1$23.6 million, a decreasean increase in cash provided by changes in working capital of $18.6 million, partially offset by an increase in cash operating expenses of $46.4$14.2 million and an increasea decrease in distributions received from equity investments of $7.8 million, partially offset by a use of cash of $11.5 million from changes in working capital.$2.8 million.
Investing Activities. Net cash used in investing activities decreased $125.9increased $28.1 million for the ninethree months ended September 30, 2021March 31, 2022 compared to the same period in 20202021 driven by lowerhigher payments for capital expenditures primarily dueadditions to completion of the Tioga Gas Plant expansion.property, plant, and equipment.
Financing Activities. Net cash used in financing activities increased $230.4decreased $4.8 million for the ninethree months ended September 30, 2021March 31, 2022 compared to the same period in 2020.2021. In the first ninethree months of 2021,2022, we issued $750.0 million aggregate principal amount of unsecured senior notes that we used to fund the Repurchase Transaction. In the first nine months of 2021, we also had lower borrowings underrepayments of our credit facilitiesdebt of $195.2$8.5 million, net of any changes in financing costs,partially offset by higher distributions to shareholders and noncontrolling interest of $31.8 million, and $1.8 million of transaction costs related to the Repurchase Transaction compared to the same period last year. The remaining change of $1.6 million represents a final settlement received from Hess in 2020 related to our previous acquisition of Hess Water Services.$3.7 million.
3124
PART I – FINANCIAL INFORMATION (CONT’D)
Capital Expenditures
Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations. Our partnership agreement requires that we distinguish between maintenance capital expenditures and expansion capital expenditures. Maintenance capital expenditures are capital expenditures made to maintain, over the long term, our operating capacity, operating income or revenue. Examples of maintenance capital expenditures are expenditures to repair, refurbish or replace existing assets, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations. In contrast, expansion capital expenditures are expenditures incurred for acquisitions or capital improvements that we expect will increase our operating capacity, operating income or revenue over the long term. Examples of expansion capital expenditures include the acquisition of equipment, construction, development or acquisition of additional capacity, or expenditures for connecting additional wells to our gathering systems, to the extent such capital expenditures are expected to expand our long‑term operating capacity, operating income or revenue.
The following table sets forth a summary of maintenance and expansion capital expenditures and reconciles capital expenditures on an accrual basis to additions to property, plant and equipment on a cash basis:
| Nine Months Ended September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
(in millions) |
|
|
|
|
| ||
Expansion capital expenditures | $ | 119.0 |
|
| $ | 195.7 |
|
Maintenance capital expenditures |
| 9.6 |
|
|
| 6.5 |
|
Total capital expenditures |
| 128.6 |
|
|
| 202.2 |
|
(Increase) decrease in accrued capital expenditures |
| (6.1 | ) |
|
| 16.2 |
|
(Increase) decrease in capital expenditures included |
| (2.5 | ) |
|
| 27.6 |
|
Additions to property, plant and equipment | $ | 120.0 |
|
| $ | 246.0 |
|
| Three Months Ended March 31, |
| |||||
| 2022 |
|
| 2021 |
| ||
(in millions) |
|
|
|
|
| ||
Expansion capital expenditures | $ | 36.4 |
|
| $ | 22.4 |
|
Maintenance capital expenditures |
| 0.7 |
|
|
| 0.7 |
|
Total capital expenditures |
| 37.1 |
|
|
| 23.1 |
|
(Increase) decrease in accrued capital expenditures |
| 10.1 |
|
|
| 3.1 |
|
(Increase) decrease in capital expenditures included |
| 7.6 |
|
|
| 0.5 |
|
Additions to property, plant and equipment | $ | 54.8 |
|
| $ | 26.7 |
|
Capital expenditures in 20212022 are primarily attributable to continued expansion of our gathering and compression capacity as well as maintenance capital expenditures relatedand gas capture capabilities to meet Hess’ and third parties’ current and future production growth and gas capture targets. The activities focus on the TGP turnaround.construction of two new greenfield compressor stations and associated pipeline infrastructure, one of which was placed in service in March 2022. In aggregate, the new stations are expected to provide an additional 85 MMcf/d of installed capacity in 2022 and can be expanded up to 130 MMcf/d in the future. Capital expenditures in the prior year2021 were primarilyalso attributable to construction and fabrication activities for the TGP expansion.continued expansion of our compression capacity.
3225
PART I – FINANCIAL INFORMATION (CONT’D)
Cautionary Note Regarding Forward-looking Information
This Quarterly Report on Form 10‑Q, including information incorporated by reference herein, contains “forward-looking statements” within the meaning of U.S. federal securities laws. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; our industry; our expected revenues; our future profitability; our maintenance or expansion projects; our projected budget and capital expenditures and the impact of such expenditures on our performance; and future economic and market conditions in the oil and gas industry.
Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements:
As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
3326
PART I – FINANCIAL INFORMATION (CONT’D)
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices. We generally do not take ownership of the crude oil, natural gas or NGLs that we currently gather, process, terminal, store or transport for our customers. Because we generate substantially all of our revenues by charging fees under long-term commercial agreements with Hess with minimum volume commitments, Hess bears the risks associated with fluctuating commodity prices and we have minimal direct exposure to commodity prices.
In the normal course of our business, we are exposed to market risks related to changes in interest rates. Our financial risk management activities may include transactions designed to reduce risk by reducing our exposure to interest rate movements. Interest rate swaps may be used to convert interest payments on certain long‑term debt. At September 30, 2021,March 31, 2022, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.
At September 30, 2021,March 31, 2022, our total debt had a carrying value of $2,612.6$2,560.9 million and a fair value of approximately $2,707.5$2,566.8 million, based on Level 2 inputs in the fair value measurement hierarchy. A 15% increase or decrease in interest rates would decrease or increase the fair value of our fixed rate debt by approximately $74.2$76.7 million or $57.8$62.2 million, respectively. The carrying value of the amounts under our Term Loan A facility and revolving credit facility at the quarter-end approximated their fair value. Any changes in interest rates do not impact cash outflows associated with fixed rate interest payments or settlement of debt principal, unless a debt instrument is repurchased prior to maturity.
Item 4. Controls and Procedures
Based upon their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) as of September 30, 2021,March 31, 2022, John B. Hess, Chief Executive Officer, and Jonathan C. Stein, Chief Financial Officer, concluded that these disclosure controls and procedures were effective as of September 30, 2021.March 31, 2022.
There was no change in internal control over financial reporting, as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act, in the quarter ended September 30, 2021March 31, 2022 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
3427
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is contained in Note 12, Commitments and Contingencies in the Notes to Consolidated Financial Statements and is incorporated herein by reference.
Item 1A. Risk Factors
Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 20202021 includes certain risk factors that could materially affect our business, financial condition, or future results. Those risk factors have not materially changed.
35
28
PART II – OTHER INFORMATION (CONT'D)
Item 6. Exhibits
a. |
| Exhibits |
|
|
|
| 4.1 |
| |
|
| 10.1 |
| |
|
| 31.1 |
| |
|
| 31.2 |
| |
|
| 32.1 |
| |
|
| 32.2 |
| |
|
| 101(INS) |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
| 101(SCH) |
| Inline XBRL Taxonomy Extension Schema Document |
|
| 101(CAL) |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
| 101(LAB) |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
|
| 101(PRE) |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
| 101(DEF) |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
| 104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
3629
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HESS MIDSTREAM LP (Registrant) | ||
|
| |
By: HESS MIDSTREAM GP LP, its General Partner | ||
|
| |
By: HESS MIDSTREAM GP LLC, its General Partner | ||
|
| |
By |
| /s/ John B. Hess |
|
| John B. Hess |
|
| Chairman of the Board of Directors and Chief Executive Officer |
|
| |
By |
| /s/ Jonathan C. Stein |
|
| Jonathan C. Stein |
|
| Chief Financial Officer |
Date: November 4, 2021May 5, 2022
3730