HESM - Earnings call transcript Q1 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2021 Hess Midstream Conference Call. My name is Andrew, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Jennifer Gordon, Vice President of Investor Relations. Please proceed.

Jennifer Gordon

Andrew. you, Thank and quarter everyone, for in participating Good conference thank call. first earnings our afternoon, you

of and President non-GAAP COVID-XX, With we us. speaker's remotely, Officer; earnings John Chief with remarks each bear are Factors transcripts the following Our the directly was result projections such call, actual may website, forth these found federal known on differ case www.hessmidstream.com. can protocols distancing www.hessmidstream.com Gatling, comparable release. statements earnings to and from Risk on the securities presentations. and of results Today's measures appears compliance Stein, between Financial the release within financial and I'll are as conference issued laws. in These John this set GAAP and posting be unknown financial include the those the today's discuss or are filings in their These call those Midstream's of most subject turn non-GAAP call of conducting Officer. financial risks on differences statements. In implied Also risks Chief cause over the A contains meaning there be please issues, In and so with audio prepared call of statements we now with Gatling. in forward-looking social and we Jonathan are Operating other section Hess the morning me to SEC. our reconciliation today will measures. that certain expressed uncertainties the may a conference measures to

John Gatling

growth latest as First visible the and about we're and Conference welcome Thanks, the strategy, review Today, stable for continue strategy Hess deliver XXXX Jennifer. Quarter and our we're will highlights We're on to excited and Jonathan of results. the progress our Corporation's discuss us. Call. executing ahead making operating outlook and Good pleased financial earnings to Hess results review Bakken. I'll then everyone, our Midstream's with performance we our afternoon, and

Midstream effort to a and went new expanding strategic past the meaningfully construction This increase stations, expect expand greenfield by we of our will XX gas capacity months, Hess compressor capability XX%. Over X online in our another has by year, gas progress compression processing capture undertaken gas capacity. to our XXXX, compression which

to Hess tightening we final the as Plant Gas the capacity expansion addition, targets. processing In our customers Tioga us will flare tie-ins and reduction capture Dakota's North volumes support of and solidly meet increase third-party incremental position

strategic our and year challenges by quarter underpinned resilience base our asset first protection. demonstrated we stability further XXXX delivered results is the EBITDA our despite supports provides guidance, complements and and as which in adjusted to of revenue the by the contract strong Our financial XX% the performance, financial last

Hess Now resulting second performance. pushing line Midstream's adverse operating quarter XXXX though February first some activities turning first in quarter weather quarter. were in into Throughputs with impact operations to and did maintenance the the results planned in in expectations,

volumes were terminaling First barrels averaged day water volumes crude XXX and XXX,XXX water per day. of gathering processing quarter barrels averaged oil cubic volumes foot of per million gas day, per XX,XXX

quarter volumes XX% the XX% oil line with and our contributed first and guidance. gas quarter, in Third-parties the our consistent our approximately of with fourth of in

the oil today, reported equivalent barrels Bakken, Hess production turning day. production Earlier first to per highlights. quarter of averaged Upstream Hess In Now XXX,XXX results.

Hess February. the added drilling a announced, in rig previously As operated to second Bakken

acreage. POP by Hess barrels sale or proceeds day, XXX,XXX received the the For primarily net barrels Bakken processing equivalent production and and day, XXXX, and to contracts to of impact not NGL Bakken or reduced of production has under in directly previous Midstream. of announced the Hess second XXX,XXX average volumes per volumes Midstream's XXX,XXX equivalent to throughputs. oil year between Hess lower previously net build Hess the by from acreage by forecasts planned the expects relate received per XXXX XXX,XXX full POP, day. guidance driven half oil Hess per being Bakken of XXX,XXX of sell, oil percentage by not nonstrategic to agreed recovery exit year of of does barrels nonoperated Hess Furthermore, between of is to fees and be gathered and equivalent

was morning's Midstream on our reaffirming release guidance. our and We're earnings is operational included to year which website. Hess this and full financial Turning guidance, available in

cubic million full For per XXX expect we XXX day. to million foot between average and year XXXX, volumes gas processing

announced Our and incorporates is gathering processing our planned the XX approximately the which third cubic commence by in to turnaround XX-day Tioga day. reducing at maintenance gas volumes annual previously million the processing per foot guidance Gas Plant, quarter,

Turning to assets. our oil crude

we terminaling full For crude per oil year day. XXX,XXX XXXX, to of average between barrels and expect volumes XXX,XXX

with and consistent year volumes, full that our in Our our XX% first of that volumes quarter will achieved guidance oil continues contribute of XXXX. crude anticipate the gas third-parties approximately we levels of XX% to

our deliver year MVC on in compared approximately volumes EBITDA physical revenue to midpoint or adjusted are systems our As XX% guidance most XX% approximately at the the of an range protected of $XXX is levels, million forecast and full at to increase $XXX XXXX. of below million, expected to

from production quarter each as second activities. wells compared to first be gas, increasing maintenance is water and weather quarter declines oil recovery and online to offset planned expect modestly winter volumes and We lower by

capital activities executing XXXX with Midstream's our gathering excellent disposal capital strengthening making capture XXXX We're Hess our progress program program. water focused on on gas and primarily capacity. to Turning and

approximately XXXX, to lower the completion needs total at capital following expenditures capital Plant. XXXX, ongoing reflecting of activities than XX% construction the Tioga expansion lower Gas year year full full expected million, $XXX For are

and of and capital $XXX $XX future build we approximately out strategy XX% approximately and protection. low our now I'll our adjusted expansion sustainable to call and as the maintenance and growth. In forecast Jonathan our With financial XXXX, for turn advance through EBITDA, infrastructure to review continue of to continue guidance. We capital million protection prepare summary, organic to deliver million. adjusted revenue over we and and with flow expect cash growing we contract are leverage to results free uniquely distributions positioned

Jonathan Stein

good afternoon, everyone. and John, Thanks,

As contract pleased how John our are to progress good to strong that another structure demonstrates our quarter to both make continued and financial XXXX have delivered business in executing described, differentiate strategy we start model. and strength our

by $XX was segment of the higher EBITDA tariff the to increase first in primarily our XXXX, to XXXX. driven costs to in and of in adjusted maintenance EBITDA million, million of expenses quarter million, terminaling XXXX million Total our activities Total of but million guidance, conditions increase income modestly process, activity approximately to $XXX equity related fourth certain net by quarter G&A in changes resulting excluding adjusted first processing revenues the fourth John operating the being of quarter planned follows: $X quarter quarter of an maintenance our annual for in throughput For XXXX as to of processing first of to of lower for above $XXX in approximately from operating was of compared for for weather offering, The million by quarter quarter, second $X increasing an $XX increased redetermination XXXX million. million, due by million, segment pass-through approximately $XXX approximately in including amortization compared attributable primarily change Adjusted were offset primarily by increase volume relative the $X of depreciation lower, the $XXX offset as revenues to the gathering lower $XXX $X EBITDA following. higher XXXX. resulted of revenues the expenses, costs and resulting as EBITDA deferred in seasonal approximately revenue million, million partially primarily adverse resulting revenues adjusted partially million, lower the and our $X rates described. was rate approximately including G&A, fourth

$X on quarter end, approximately maintenance XXXX, our approximately for million. On were of finance of target. quarter approximately representing was adjusted X.Xx capital excluding an Xx our $XX that million that was flow April distribution, net $XXX cash XXth by a interest, XX, amortization adjusted IPO. consecutive first expenditures XX-month was Expansion First since first was costs, leverage deferred XXXX approximately X.Xx. covering Result on announced distribution capital the we our $X.X million. X% And quarter expenditures distribution quarter EBITDA approximately billion, million. approximately distributable representing increased $XX EBITDA quarterly in basis our and our quarter trailing first of annualized conservative At debt basis, increase the below were

guidance. to Turning

deferrals higher approximately from to the the due $XXX primarily million, be For first the driven million, approximately first $XXX relative seasonal XXXX, to activity $XXX EBITDA operating midpoint quarter the quarter. to million modestly and and net we $XXX to maintenance lower by expect of at million to XXXX, weather costs second to be winter income of quarter in adjusted

generally to the revenues As second below compared MVC physical we first to remain volumes on quarter. expect levels, our stable be systems relatively quarter

quarter midpoint net of in deferred Second million the capital flow $XXX to million be costs, million, interest, distributable maintenance expenditures excluding approximately distribution of amortization resulting with at and expected expected of approximately to $XXX $XX approximately finance cash coverage of the X.Xx. range

For the third quarter, we turnaround maintenance anticipate commencing at a TGP.

and operating maintenance additional $XX million, turnaround. approximately described, approximately the related to million specifically to expect John we capital of expenses of As incur $XX

receive As turnaround. a during MVC will reminder, Midstream payments the Hess

and we and As higher including to expected quarter second quarter. the a support turnaround, adjusted MVC EBITDA the second with expect be relative distribution quarter coverage net third in to revenues, costs, income, operating lower the result, than stable relatively the

relative first the XX% income financial year our and we turnaround financial financial the MVCs, for our annual of year increased activity. to approximately lower of from our second provide and EBITDA by with year XXXX, supported approximately reaffirming rate the lower growth quarter, to change Highlighting of we and the all MVC no costs expected full operating seasonal and This revenues expect guidance addition, net primarily financial protection at XXXX our in EBITDA EBITDA including income third represents adjusted the fourth XXXX TGP XXXX and adjusted In results adjusted in $XXX full redetermination to revenue. and million. protected and strength. guidance, completion are full net year increasing $XXX lower million which quarters guidance the full midpoint, annual With of quarter, XX%

below of We approximately approximately XXXX. in with adjusted on basis expected free is potential flexibility of adjusted capital this shareholders. be a distributions that including together to expect for adjusted significant maintain Xx target, full $XXX distribution, leverage EBITDA after million to of excess flow conservative Xx return by we capital allocation, flow EBITDA financial accretive cash free adjusted With in our positive cash year

XX% In protected this increasing With by to expected are in we revenues flow. contract my spending, cash have we continued visibility MVCs continue free expected growth metrics financial EBITDA ongoing This visible the higher physical across with asset and XXXX, to have our as structure, and above unique proposition generally increasing revenue XXXX revenues adjusted a strategic MVCs. summary, we capital midstream continued adjusted concludes volumes and Our and base, value expect be differentiated remarks. be in to lower sector.

happy be over answer now to turn the will questions. to We I call operator. any the will

Operator

question Our of from [Operator comes line first Instructions] with Reynolds the Brian UBS.

Brian Reynolds

start we of that the should X% and think times? term? about comments medium stated of of a to below any over X-point off Could thinking or return provide to cash around given color Are should little allocation bit about target just growth distribution be return near we other the the target of leverage capital uses just on how Just you cash more capital shareholders. on next there

Jonathan Stein

Sure.

a flexibility, comments, could fortunate So capital. opportunity I in in financial like in accretive for my mentioned we opportunities the terms -- of on as include where have position which, return we're significant

buybacks after leverage free positive leverage distribution. our We some now, potential including form. inflection free since a target. IPO, cash so of relative turning distribution real available after us, our our that their to multiple these quarter, starting have point. options just of conservative from And This and to have Xx flow dividends we're strength. the first is actually, point sponsors just We're options positive increased certainly Each cash at have EBITDA we're declining we're to our flow

our continue to potential on for and continue provide options financial we'll to will our to strategy flexibility, we build disciplined in as opportunities that and be continue protecting our And in So evaluate of we'll these balance terms that, capital. sheet. return

Brian Reynolds

the I Great. appreciate feedback.

provide relates more Bakken. so, GPM as your to on Second question whether focused it it's you forward? flaring bit just whether color little the reduced from and a going And today in seeing or footprint you is gassier here nature? higher on Are could the are wells if getting operational more

John Gatling

Yes.

question. So Brian, This I'll is take John. that

wells, We're a gas oil just over not well. producing and really into very and of flaring really And stable, rates. gas more gas several of really a higher side. of on changing definitely opened the the seeing gas capture lot gas. seeing the and up to of compression capture. the continuing wells the substantially really strong more It's at it's Hess we're years, last function reduce yes, kind installed and So help both primarily a it We've The function that's are pipe. of capacity processing to GOR get

Brian Reynolds

any just issue quick content Great. solve border. And long high to any Should Hess, on how incremental around looks concerns? as term? northern ethane the relationship commentary on your a due And we recovery the follow-up just expect BTU Hess-some footprint to

John Gatling

Yes, sure.

participating is any in and is strategic and great for Tioga. point system work that, kind gas all So of close and our Hess-some us, on again, of Canada really integrated. our Nova. through through obviously, We're the to an actually one the in Tioga provided that Hess Gas our has mean the and together decision-making pipeline we full ethane, and it's been development extraction advantages to And Plant. very our It unique ethane Overall, that fully at ethane is partner. processes upstream for outlet much outstanding. up with the pretty has plant and capacity capability, we I relationship Vantage deliver ethane your to

into So any constraints our really from border. we don't see perspective, going northern

some gas the In higher able in fact, our blend our in content northern content BTU basin. content border BTU in, use gas residue of gas got of to our they've BTU is lower with the to going

very actually Hess. positioned we're overall, to So well support

Operator

of Your the line from next question JPMorgan. with comes Jeremy Tonet

Vinay Chitteti

on XXXX EBITDA [indiscernible] there. is Jeremy. bit This just Hess Vinay I for to a on guidance especially wanted clarify

So understand step just to how if [indiscernible] the you can But [indiscernible]. maybe want down volume.

John Gatling

Yes.

breaking all. the could you Sorry to at understand up your again, Do We not mind but you you're here, please? bad. really question repeating question interrupt

Vinay Chitteti

XXXX? Sorry, to any help activity I in upside just [indiscernible] rig Hess adding new

John Gatling

I your question. Yes, Sure. think I understand

just asking you're upside of kind and rig on at good and we're of we're about -- rigs second reminder, our XXXX XXXX, MVC Hess for a So levels. So adding XXXX? the bringing additional a potentially and portion into

very that from it's So perspective, predictable.

there barrel XXX,XXX then on and of depending was a discussion oil fourth then XXX,XXX potential day. opportunity oil potentially Greg coming the XXXX the we're rig as and to wells in -- expecting some quarter rigs roll additional per on continues a as price, add third add equivalent cash And and company. As second February, leveraging focusing into so we going Hess the bring to in oil reminder, on, Hess generate brought to evaluate the that's that is rig additional they're a on later start earnings just exit really line to again, way this for mentioned call on later it And as on And the depending Bakken the in to Hess price. be rigs kind of to see the engine is rate the earlier, additional of out year. the and to as between rig cash

reason systems Hess from gas growth. water positioned we're capture of That's support Hess' perspective, as forward and investment help we're the to further part to the growing. making in why to well it and gathering So disposal looks our

bring But we're a support from second the potentially We additional third and again, stabilize to rig up, fully And see upstream So some the working we'll coming opportunity a to them activity. well integrated see with with increased on continue positioned hopefully, fourth development and growth. to rig. continue on prices activity and the and on. the we're

Vinay Chitteti

Got you.

insurance third-party they business Have here. gained the shutdown? [indiscernible] [indiscernible] for DAPL question in [indiscernible] one any Just

John Gatling

again? DAPL. repeat you question the heard about third-party something you Sorry. and Can I say

Vinay Chitteti

is understand if the there [indiscernible] Sorry. given My around so is incremental activity [indiscernible]? just want question any to just

John Gatling

you but third-party previously, a to we're to we still comment about again, asking third-parties. similar make activities trouble hearing about third-party additional general And will piped-up activity. think I'm having Okay. you, those talked about I I Hess' we've were seeing And some are support just that from as activities. perspective, third-parties

we be be to of oil we we're As XX% throughput saw quarter expecting as XX%. total of and approximately at to first in our XXXX, and forecast about volumes the gas built

general to opportunity our from our look And everybody about DAPL there's that's again, we just to or third-parties, has for throughout downturn. well reminder, DAPL but kind And crude environment then is continued evaluate get -- as place DAPL. as just positioned a no down. well. question we and operate terminal, support on in terminal well we the our you and to -- access NGL I'll as have access even that's make that's on we're call. rail on can an but as I comment both operating Hess oil the Overall, a asked will also Hess forecast duration is where can long-term then think shut terminal to what for pipe, another contracts to constrained have also upside third-parties it well. Now the get growth And needs. get but Hess for on. based We what of in the at access Hess It's there of us rail terminal our whatever long-term continue problem can we and

Operator

Spiro comes line question with Crédit from Suisse. next of Your the Dounis

Doug Irwin

on Irwin Spiro. Doug for It's

Just secondary from to sponsors. the me. wanted about one ask for the recent I

forward sponsors. there's of curious could indication potential And A you shares? if Class broader directly the for the from of a liquidity some we that -- to adding be some been then from where see buybacks Just the moving additional any part mentioned maybe strategy offerings,

when offering was was announced? curious Just that if that something was this discussed

Jonathan Stein

XXXX. in Hess mean very Sure. kind the offering, secondary Yes. is GIP since disciplined. first I any This been IPO have and the offering

by were them, public I the XX%. about long-term the in Really offerings, Certainly, Hess As and but increase you float. that by see the terms small was that, disciplined objective and the to public would say, beyond value and the for of proceeds investors we GIP Hess float did know, remains Hess of increasing relative GIP really relatively Midstream. to

would In we've based which proposition for a terms it's, only, similar is buybacks, do That say, seeing sponsors would and again, what in that Hess buyback value GIP I that that. talked the of of would, on and from be course, sense, we about.

Operator

much. very Thank you conference. Thank today's participation. for you This your concludes

day. You may great a Have disconnect. now

Hess Midstream (HESM) 28 Apr 212021 Q1 Earnings call transcript