HESM - Earnings call transcript Q3 2021

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

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2021 Hess Midstream Conference Call. My name is Michelle, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. to of conference Investor like Gordon, to now President Vice Relations. would turn over the Jennifer I Please proceed.

Jennifer Gordon

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

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

John Gatling

highlights continue execute discuss latest the Good quarter will outlook performance Midstream's results I’ll Bakken. and our third XXXX we Hess review afternoon, conference financial to to and Today, Jennifer. and everyone, our review results. Hess strategy, then Corporation’s for Thanks, call. operating Jonathan our welcome and as

We're than COVID-XX proud anchored outstanding keep safe. safe for team more plant the workforce Extensive by We their in of continue successful third challenging the of gas deliver execution performance and turnaround. XXX were the Tioga implemented protocols execution strong under quarter, of the people our conditions. operational to to

the attention of up day ramp available year-end, cubic well. completion of Following tie-in. the underway their foot TGP, concurrent and is the to quick commissioning of capacity is which be additional expected has WBI progressing team at turned and expansion, the safe The residue the with XXX per the million to export

volumes third our quickly on than gas Focusing performance, following exceeded ramped the anticipated processing throughputs as expectations quarter turnaround. more

quarter and gas averaged levels. day, remained volume as Third below million processing cubic XXX MVC per foot expected

of gathering terminaling XXX,XXX of XX,XXX averaged volumes barrels per quarter volumes and Third averaged water barrels day. water crude per oil day,

Hess The strategy oil September, to strategic turnaround. accelerate volume midstream. Hess Bakken production additional of to Hess with Midstream grow per gas leverage to rig primarily three in turning by rig Upstream A for barrels today of XXX,XXX allows of and highlights, positions Now earlier infrastructure, production reported equivalent Hess operations high that barrels averaging TGP their for growth. growth return aggressive allowing of execution Hess strong the the production the per guidance a third of confirmed of driven XXX,XXX versus quarter commenced results oil the equivalent day, rig third day, locations. net with drilling inventory our our Hess incremental strong well driving program combined organic the capture the development

day. approximately For barrels XXX,XXX oil expects net to full XXXX, Hess average year production Bakken of per equivalent

successful by expect approximately volumes operations. modestly guidance, average TGP upon higher our XXXX, we now to XXX to per the strong processing driven fiscal of for the gas million primarily turnaround resuming than up day, cubic foot turning and execution Now previous guidance, year ramp

per day, gathering approximately per of XXX,XXX of terminaling XX,XXX oil to volumes volumes to approximately barrels day. barrels crude We expect full year water water average and XXXX average

our of anticipate that to approximately XX% full of oil throughput our continues Our XX% guidance parties contribute gas year and third volumes. will

expected million increasing for to the our higher adjusted XXXX gas midpoint. volumes EBITDA $XXX full guidance reason Our at primary the is year

and on financial operational available full release included guidance Our is and in our website. our earnings is

program, on of XXXX the to our gas to to continue capital The turning development and of good accelerated commissioning compression ensures program. progress that we capital make TGP buildout Hess' focus our meet we're system well-positioned Now our expansion pace.

TGP quarter is which series tie-ins completed third a the plant During we being expansion, commissioned. turnaround, of now for the

WBI completed pace. us final we up to Hess to startup. XXXX, total Taking organic the this our cubic per gas in development expect be day, expected end to our customers million tie-ins volumes. the enabling meet substantial year, growth concurrent XXX In accelerated Midstream’s at processing export of residue capacity We with system processing foot anticipate

generally or Although, higher at guidance. approximately remain MVC physical XX% we volume volumes are which XXXX levels, compared physical below to to our expect

our XXXX, We in gas online and XX% capital in guidance online. is activities be to Construction XX% We're unchanged compression of new approximately executing our also plan. with XXXX, commenced the plan guidance. million. when with oil, gas bring expect meet by physical Hess’ at related the currently the above accelerated volumes expand $XXX expenditure have will expected MVCs capacity development XXXX. for Full in connect which expenditures the year we two water and set previous XXXX, our new greenfield to stations, line stations for Approximately compressor incurred stations on in balance is program and infrastructure to XXXX well complete construction

capital for approximately million $XXX compression continuing summary, which and gathering to safe Jonathan, reliable In to strategy, review to guidance. of I'll including the our comprised We infrastructure for and to needs for of growth the we're incremental future performance financial and and advantage results, focused our of be return million delivering million. capital our approximately now opportunities, to $XX customers, call strong interconnects, expand expected potential million, execute and expect meet well processing. accretive to capital making flexibility to $XX is expansion operating our $XX provides million the of investments to projects, to low be results pressure $XX Maintenance financial take is which turn over gas shareholders.

Jonathan Stein

and afternoon, John, Thanks, good everyone.

the our on in cash level, increase increased execute flow including increase the paid quarter XX, addition Hess to quarter, financial compared a to October per Midstream’s capital we During quarterly we distributions our XX% of with capital provide optimizes utilizes On that distribution our in a growth strategy consistent to quarter first distribution, A second XXXX, our Class to targeted in X% to generation shareholders. and the share. annual continue structure third

of immediate, and Hess on least $XXX Class XXXX actions coverage to target to Midstream basis. capital our annual return meaningful leverage adjusted our delivered we accretive August, of full Together, Hess a optimizing XXXX, million per share During repurchase shareholders. structure, completed to a growth distribution and A with year units distribution these of capital bringing X our through times EBITDA X% least sponsors, also from at of at X.X approximately Midstream continues times.

In adjusted significant shareholders. expected for opportunities, leverage target future addition, and ongoing EBITDA X in including declining after to are including XXXX, we financial maintained align flow of times return flexibility, below free cash capital distribution potential incremental accretive

income but lower $X below Total depreciation processing as to $XXX quarter, were the throughputs related the primarily third The and revenue relative compared excluding Gas the MVC revenue, the second the for for through compared our following. second quarter Turning for the excluding G&A, $XXX third million driven third quarter Adjusted quarter levels the the by results, second million, to million, for in to adjusted Tioga expenses, our quarter. $X change including by by to $X attributable through of our of million, was EBITDA approximately strong at million. top processing ramp quarter. at approximately of costs EBITDA gas net driven higher million TGP third the was guidance, operating by was of than Tioga for $XXX $XXX adjusted plant. by approximately higher, turnaround. $XXX to was including turnaround pass and pass million, the to million, in quarter generally operating were million, amortization planned proportional gas EBITDA million, gas and Tioga of of from decreasing fallowing the earnings million, the approximately end maintenance, operating adjusted lower gas other and $XX seasonal and revenues turnover specifically the data resulting seasonal the primarily in gathering higher plant EBITDA decreased share expected adjusted at $X fees, volume the XXXX approximately maintenance expenses EBITDA LMX $XX higher of depreciation, G&A activity plant

on $XX quarter a billion, covering quarter Third adjusted and costs for debt were XX-month excluding our $XXX capital times. was of was basis. the approximately $X third that EBITDA result times net was quarter, million, The amortization expenditures maintenance million. capital in X.X by million. deferred approximately expenditures interest distributable quarter-end, At $XX flow of X approximately $X.X cash Expansion were million third representing were leverage distribution approximately trailing financing approximately the

strong to has gas performance Turning enabled our guidance. increase to guidance, capture John as us once year full financial again described,

full We to in million in to growth the million, year to distribution at than total range of flow Maintenance of range times. the greater of XXXX for of in $XXX EBITDA resulting the income million. million, expect $XXX million to midpoint the $XXX distributable be be million expected $XXX to million be is $XXX expected compared representing interest results. range net in to cash is year $XXX expected Adjusted XX% to to full approximately XXXX. and projected $XXX And capital are the coverage cash X.X

and in EBITDA the At to increasing and be our XX% million, results, TGP distribution adjusted volumes revenues guidance, than quarter activity. significantly to the income times, implied quarter with anticipate approximately of we the adjusted completion XXXX fourth supported protected X.X approximately higher we midpoint quarter full of by with to are third third maintenance As higher results, costs fourth quarter or net be our and year $XXX seasonal MVCs. that coverage with compared approximately by XX% expect operating low guidance, turnaround, lower of EBITDA

X are expect MVCs. expect leverage approximately XX% adjusted XXXX, times to in end leverage we year increasing growth, that protected the revenues organic with to In at by target. EBITDA conservative higher addition our We generally

physical XXXX, to higher our We expect MVCs production gas Hess continue this as capture. continued revenue above and growth from in increase volumes increase in

EBITDA have in future including and incremental will take my potential expect cash a we to and below concludes distributions, conservative adjusted opportunities, XXXX target of XXXX advantage free operational to to flow times X in we result, growth and including XXXX, financial visibility of As MVCs. after flexibility to adjusted release adjusted generation continued continuing capital our leverage January, our delever accretive remarks. shareholders. providing In This growth guidance, EBITDA,

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

Operator

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

ahead. is open. go Please Your line

Brian Reynolds

forward. going you off, your To afternoon, of opportunities start everyone. in capital remarks return Hi, about on good incremental prepared allocation talked an capital about

Given step we and distribution of XXXX a can return given similar free have XXXX capital of terms all as an that offering with buyback look and flow up, and scenario has potentially solid cash into the a Thanks. ahead XXXX? profile, secondary again we above

Jonathan Stein

strategy EBITDA. structure times Thanks. leverage financial Yeah, mean, our so includes optimized I at with targeted our X capital our maintaining

this both, to mentioned, financial year repurchase strategy free basis increase XXXX million the level that at accomplish and on and cash utilizing you leverage did back the EBITDA that flow. As by our we distribution XX% $XXX X the times increase a share distribution our bringing

we And times will be free flow to adjusted after mentioned, we're to in as forward, X So look EBITDA distribution. decline that below positive target continue I as going leverage XXXX. our cash

our utilize flexibility. can point, that and capital certainly continue So a that expect therefore, of allocation you dividends strategy to part buybacks financial to will from increase allocation be capital

Brian Reynolds

thanks the Great, color. super helpful. was That for

tie Mexico Could those to if come Hess U.S., Hess assets? As to the upstream be M event, to XXXX and of this money perspective, of back on Mexico? an of the in spend from Thanks. around CapEx a backs see about a activity what restart call continues to Hess Gulf follow-up, does and positive conversations increased From the need exploration on its well. on capital a Hess Gulf Gulf on results spend Mexico for cycle on long about spend talked M the

John Gatling

definitely we transaction Gulf focus continued our We're the for the did the the for for opportunity. Gulf Overall, remains the in for an Hess. of looking depends We're us immediate timing It future. when The Bakken. kind that's continuing Brian. future at asset, priority Midstream just in business something mean the looking the or active. question, around building isn't to of the for that available it's right the the is Thanks for on us work at out strategy on I Mexico that.

the the on look development we're an of the So we're Gulf now. point, our plans long-term, there's on remains right at horizon. definitely there asset immediate but to in, the in opportunity at going isn't interested this anything But, that in nothing that's it Mexico. on again, continuing And

Brian Reynolds

you day. Great. good for That's a Have have me all Bye. today.

John Gatling

Brian. Thanks,

Operator

from Tonet Thank Jeremy you. line comes of Morgan. the And our next question with JP

line ahead. is Your Please go open.

Jeremy Tonet

Hi, some how M&A pickup to the on good in wanted Hess I here in buybacks see consolidation, versus share We just on how earlier and did can market you any especially what capital is the you Permian allocation Bakken. on is follow-up Can opportunities? the afternoon. evaluating right thoughts the discussion Any priority. thoughts, now? on currently share Midstream

John Gatling

first, a the kind just And about little bit of can take of strategy. I'll financial of then about Maybe last our and talk your talk question part side it. the Jonathan overall

position our will at the in relates to our infrastructure and Bakken look third the relates assets in supporting parties. it strategic Bakken, to Hess currently connected as particular, strengthen continuing that bolt-on it as in our we're to things opportunities, footprint and So,

really right reminder, and that's executing things incremental the focus primary guidance plan. provided. that our to the already to as is just are of we've plan all just now, And those So the activities our Bakken current a

strategically opportunities, represent assets So we're looking quality with that our upside infrastructure. always in but fit again, those all for

that's focus an from perspective. our M&A So

the So Jonathan, it I'll for question. hand over the to part first of

Jonathan Stein

Yeah, focus bolt-on really M&A, we just capital. below active be flexibility we three our flow have our flexibility that said think really, utilized for really financial cash primarily that and on John well, and we can XXXX, as not and EBITDA times into looking with potential opportunities. means at on really That our I move target, Like today positive. bolt-ons again, will would free be it mentioned, I be return

the capital of execute we that before allows to So, of really, dividends But as on increases or capital, strategy. in in allocation, terms talked continue that our for buybacks we will really financial appropriate. terms return

very clean with visible story have We growth. a

continue we'll so that, as on And focus to described. John

Jeremy Tonet

on picking Got up the buybacks it. comment there. Maybe just

see did this was few year. early -- executed announce So a there then months buyback we you -- sale sponsored did back, and strong guys another

assets into So float what with or mean years, thoughts respect is share they any want if with itself? but any discussions to increase I are exit planned going next do Midstream to are But sponsors? over in public understand, have on you GIP Hess maybe very on integrated just Hess, could a the positive. few well

Jonathan Stein

terms secondary but a and think little Okay. It's I understand, plans, we did sponsor hard and to that the the relative in you're buyback to asking of earlier.

of think I look, each we they past look objectives. you different So, if at the did had types transactions two year, this

secondaries focused The they obstacles a see technical that ownership, the relative really floating gotten that to from investors were we've liquidity. that on feedback

doubled. our at transaction, issue. addressing offerings has those targeted were average that our trading daily So really March more than Since volume

transaction, our liquidity objective, again, it but in float. in days value still and increasing So March, of of difficulty], our on transaction that terms that on certainly and towards recent that early increasing in the focused focus focus on And been targeted ‘XX. since was achieving that [technical offered accretion, it's

terms no Hess with they're EBITDA. of Going demand really in structure, the our specific in secondaries. and plan leverage, are our very investors are recognized that different before, X Hess disciplined The there's at maintaining our optimized liquidity, for really -- continued of forward, additional particularly buybacks in long-term Midstream. there's as see a I strategy to also at who regard but terms Those GIP financial capital geared said targeted times value float again, objective.

that flexibility of forward investors capital relative to in continue about, we particular. year buybacks dividends increase buyback, appropriate. of transactions positive financial there, as we through that certainly, earlier did certainly going continue lot as in we've of strategy a the structure will to and I be terms our feedback talked our And part So got from to the this and optimize

are really, relative GIP. Hess secondary, certainly different sponsors. amounts, towards towards Midstream, the I So Hess small that geared two of geared and terms really those objectives, all in mean, the relatively to

been capital having we of do terms how the to shareholders. focus has float using we capital our returning financial strategy optimized liquidity really, in flexibility an and execute to that financial do So and for continue and structure, improve how on

Jeremy Tonet

helpful. That's was That Thanks. it. Got for me.

Operator

the next from question our up comes Doug And you. Credit Irwin Suisse. line Thank with

open. Your Please go ahead. is line

Doug Irwin

on the connect another could it CapEx top that. expansion some was we you should everyone, complete. sounds if wondering should of TGP for Hey, expect one remarks, spend help just the thanks question. now and million Maybe prepared and I the From then we what well next XXXX in the year $XX like is on CapEx. frame on compression expect that turnaround

should of be curious there? we about kind year-over-year thinking how Just that

John Gatling

over the as focused next then well think what or behind that's really primarily as rigs. increase potentially focus do with at But well plan be to Yeah, heading. I ramping you We we’ve XXXX directionally and is definitely where contained years four ramped It's of as support levels. development, planning say, mean, slightly of is expect the up then spend expansion to it on below and three up to trying indication we're give said the and rigs the to it's connects. Hess’ us, couple I we've supporting a to more some activity compression capital development capital to the and in

the our that's So primarily next year focus so. over or

Jonathan Stein

based increasing just that on John, in And grow I’d XXXX, of just to as MVCs growth and we physical the talked and line some based provide we've do expect reminder, a continue terms of continued to just That's said, to in as context. both for in add MVCs add with about XXXX And EBITDA we XXXX. XXXX. sight volume

that CapEx flow of positive and to higher about in the our to John be with below delever distributions, even and up X EBITDA talked I've after will continue times continue our target. just cash as XXXX, driving that terms free with mentioned So

Doug Irwin

it. have you Bakken. Then Okay, staying have out the recently from Thank with an got the more on been is appetite maybe how conversations from prices? the Have a or your everyone helpful. rig, party still a run third here just pretty but up level Obviously, seen increased going gone? how in parties Hess of That's conversations crude curious in producers, just disciplined you. third added just macro with

John Gatling

you're then is tone basin. some I Hess’ mean, probably are. think basin rig consistent I increases aware, overall the has I and and what plans in the increased Hess mean, been in with as Yeah, the fairly there's definitely activity

But think position overall are that activity producers are to maintain making So we I that trying disciplined, seeing flow free investments. the increases. and trying smart to stay cash of

we call, So, third Hess’ increased as in but are also prepared you seeing as both parties. some and obviously our you an activity, Hess also increased in from heard activity from remarks, seeing

some As in potential level with upside kind does the basin recover continues as crude there -- the prices. we to prepared gas at the oil well, both those as level. higher and see of my I XX% But in of is at XX% that remarks, mentioned the from represent

Doug Irwin

That's me. Thank Thanks. it. all you. for Got

John Gatling

you. Thank Okay.

Operator

And our you. next Morgan line from of Stanley. the Robert with question Thank Kad comes

is Your open. Please go line ahead.

Robert Kad

more in increase been Maybe Bakken. in high Certainly, a your of ask question thoughts much. could we've seen macro the processing recently. recovery so bit Thanks margins if was level here. ethane some for I a for outlook I wondering

to think more for thoughts that Thank really, your recovery ethane might you. just ‘XX? across of So you meaningful what the margins trending you how incentivize necessary sorts into on curious be see And basin?

John Gatling

to we to But, foot for other full we and full it's day, export million has that high plant think cubic capability up a difficult Yeah, XXX gas what that to basin. comment fractionation a Tioga the in quality I that send with have processes the reliable very on do fortunate ethane. mark going have per extraction, ethane in mean, to asset we're are me I

feel I the residue million my needs frack year XXX the prepared of overall have remarks, by be which perspective met As cubic availability. we we in end from foot, gas expanded like once will we've at also exports. plant and the mentioned an ethane additional an We available this

export we from fractionated So mix of a both nice and a got also liquids we've perspective. y-grade feel products like full

positioned to and across optimize products, on the providing we our third-party to different take to ability best overall, netbacks customers. for feel any prices the of very Hess So our advantage like well that and Hess we're and flex ultimately

Robert Kad

Great. you. Thank

John Gatling

Thank you.

Operator

next Lipsitz Thank question you. line And Michael with from the of Goldman comes our Sachs.

ahead. line go open. Your Please is

Michael Lipsitz

on micro. Hey, bit macro question. little an guys, last months. A for then of thank you taking couple one my questions exciting and congrats of And

want side, the your -- On macro at TGP for basin, when do I and you expanded when the basing curious just may growth basin, outlook you my know there'll question. I more you even think a so understand CapEx be the do a look micro. I second But you here. the make premature My just sure for are given processing when I think is capacity? my more little be XXXX. need on second That's two just for first the to

You to January, or pointing guidance expect CapEx be at in slightly? when you give of on January, the ‘XX you at allocation to update capital give time? then the And up roughly an end same also growth with in line-ish finally, are

John Gatling

sure. Yeah,

capital basin let the first, I'll just CapEx. guidance then into it and allocation Jonathan ‘XX then anything about address the I And of also talk and up the kind to hand question, piece. miss I'll mop moving to So on me then over the processing

depends. side, really So it processing on the

have our Hess, anchored And also and infrastructure and obviously, our parties. good visibility development We plans very into our is are. third Hess’ by what

uniquely other really currently producers connected strong relationship that I our and with and we Hess understanding a subsurface think that have contracted with we're positioned the of we're with.

reason like Midstream advantage to our positioned in the perspective, done. of to part we we're in going from we've That's be of XXXX. Hess already So investing more expansion the take why feel compression uniquely is

well meet positioned we're our the like customers. needs to of So we feel

broader of towards upward looks trend If an like end for definitely the coming the the out of some decade. at there continues it you that basin, forecasts the look is

need for processing where basin. that the you mean, I processing. available in may seen in have some depending cumulative the curves be I I've on the So exceeded are basin, additional mean, there

looking And that Hess think for definitely buildout. that and we as well, say more need. at needs we as processing third-party there's think I would are us, our customers horizon opportunity our for and about further long-term I So what

So to We again, of increase here kind capital piece. up I us. capital allocation expect anything focus going to first a into micro mop let question, be do that's then XXXX I'll talk continues comparison the a your To for and miss and Jonathan as ‘XX. about

we the we as at, that expect long-term at XXXX, or do to level. However, expect look and say back below we be

So put Hess ’XX. we're a on range what development increase third-party. to The of talking we're trying from pace kind that from about is we're as by into we the move and driven really seeing

a really still answers, of perspective. prior that's of EBITDA bit continue substantial on kind we growth. are on So, then, focused one a to substantial volume we that's little of we from gave the what in as mentioned organic we Jonathan And indication of focused we're where see are and to still we see why EBITDA, continue compression growth,

and volume that talking above we're things we're about to as are XXXX, ultimately XXXX. from expected levels we physical that that MVCs MVC in investments EBITDA to in above MVCs, talking going the growth So support the about, transition

I'll for that, with over So, hand Jonathan, cleanup. any it

Jonathan Stein

nothing on have add I that. to

certainly as continue allocation, into change XXXX including move your primarily there, dividends. to our financial certainly, and on that capital will be last allocation, give our be to I and for will as of in capital guidance, terms I flexibility, mean, buybacks said, we financial our question we no increased strategy, which Just and on utilize

flow be, cash specific you'll have our a in we see that what have progression will certainly we on will year get leverage a can target. being give our after our for, free and CapEx, guidance you through free of based feel be in after times in obviously, will that distributions, move positive below of We better a which on XXXX, X our what feel mean have terms also number on distributions based terms guidance, cash you with flow our will will the

optimized to strategy, to that. of financial of no part which return more maintain of specific shareholders information our So, change but capital in continues and that, capital to to structure terms as utilize certainly

Michael Lipsitz

Much Got appreciated. it. Thank guys. you

John Gatling

you. Thank

Operator

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

day. disconnect. You a great have Everyone, may now

Hess Midstream (HESM) 27 Oct 212021 Q3 Earnings call transcript