- Earnings call transcript Q3 2022

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2022 Hess Midstream Conference Call. My name is Shannon, 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.

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 Shannon. for third you Good quarter afternoon, everyone, earnings conference and thank participating

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

John Gatling

anticipates XXX,XXX our performance the financial and Corporation's progress results XXX,XXX our and their our call. of review first July, weather and drilling today approximately day, range guidance conditions long-term XXX,XXX oil welcome strong in XXXX the we're drives in barrels and barrels high fourth Today, and the review operations reflecting of challenging of will capital per was oil of commenced XXX,XXX quarter with day oil Hess' to per review Bakken. equivalent in of results barrels Good Hess be Bakken operating production year. range production above which planned in and to program, day Hess day, Upstream's production of discuss Hess guidance XXX,XXX then net Midstream's of conference per ramp net at XXX,XXX oil approximately the the to Thanks, rig of equivalent barrels XXX,XXX half the XXX,XXX executing Hess to supporting of day, oil fourth guidance. Hess' for quarter for Hess which equivalent Midstream. Jennifer. equivalent making barrels to strategy, range on results, production and outlook Jonathan net quarter execution of third Bakken XXXX, XXXX following reported of which Hess' is year barrels Bakken average previous day. afternoon, growth I'll per to of everyone, oil volume XXX,XXX per Hess to equivalent recovery per third equivalent Beginning Bakken end full

to planned systems of end by in XXXX, by MVC and driven our primarily production XXXX. be XXXX expect Looking Hess' flaring the ahead, of above goal all we routine zero its levels achieving growth and

Hess to Turning results. Midstream

XX% quarter on the throughput recovered growing third strongly, volumes quarter. approximately Our average second from

flat volumes oil from activities to day, Reflecting quarter third planned of day water water foot quarter. gathering. third be crude per maintenance strong third $XXX fourth to quarter above by million, was deferred which relatively compared volumes anticipate capture, gas adjusted averaging per the up gas, levels, and gas range. for end MVC day quarter the cubic per top of for contributing terminalling guidance XX,XXX quarter, We barrels XXX EBITDA, XXX,XXX million third volumes to exceeded processing and of our oil water Third averaged driven quarter barrels

average our XXX,XXX XXX which updated to per and foot volumes full volumes guidance, Hess XX,XXX terminaling to our was reflect year earnings million day, cubic per oil on available is moving release now performance water volumes gathering processing of day average Midstream XXXX to barrels average our water of crude in We've gas barrels third volume approximately expect to quarter and website. included approximately and per approximately Now, day. guidance to

aggregate, on of of capacity In XXX flare excellent gathering this additional infrastructure. expanded continued two foot day of continue year. program, to our on can the up activities be an September, XX primarily progress provide make to capital new per In million we online expansion the million stations foot our reduction cubic We second compressor future. with gas XXXX due focused cubic and the two in stations day planned the per to brought

of a and completed the were the Additionally, design. proud ahead demonstrating stations budget, below safely months our outstanding amid of for compression cost challenging environment. team our several lean execution, We're approach schedule to standardized of inflationary benefits

As an million to would compressor capacity XX previously quarter, in further Hess growth. support cubic to and on third provide additional the which expect per announced, foot initiate construction fourth XXXX in we third-party a of production station day

our preserving philosophy, throughput, to to and our to million through call results. closing, $XX sustainably lean-driven build capital expect flow design $XXX In million cost I'll execute return maintenance our well We capital system to million gathering strategy, allowing continue shareholders. focus and year safe discipline efficiently approximately we to and now $XXX of in the activity. connects and to efficient million, operations, compression full expansion, XXXX Jonathan comprised total on grow us in $XXX review expenditures our financial of cash turn approximately generate over standard

Jonathan Stein

everyone. afternoon, good and John, Thanks,

we our return As Beginning with strategy, of to Hess' Bakken, consistent on John support and deliver making and our progress executing in to capital are ongoing in are to results. continuing while good excited we our described, of the development our strategy shareholders.

primarily segment compared share by until incurred the $X million of million to quarter increased the earnings, the amortization, was EBITDA that quarter $XXX as pass-through resulting follows. throughput second in than gathering EBITDA for quarter billion, adjusted the approximately to increased the third $XXX expenses, depreciation second expenses, our compared by produced of LMX of costs deferral attributable of resulting Remediation of Adjusted above for total excluding was and adjusted to million, volumes second and $X was and by was MVCs in fourth gas quarter. in and The million, Total and driven one revenue the proportional million, of of our of and net million seasonally in gathering our date relative subsystems, $XXX following. in EBITDA, million for estimated to release million. compared higher to and of a gas-gathering $XX both guidance range. the as $XXX anticipated million, quarter segment maintenance revenue a third revenues, quarter, end that exceeded a the An million and combination of lower top approximately revenues, excluding costs our to of future pass-through $X Total of some expenses and as quarter, processing activities, quarter. operating for approximately result maintenance actual higher the change the inclusive approximately primarily costs in higher $X For approximately our increase $XX an third the activity of net income second for the $XXX processing water increase MVC revenue changes follows.

EBITDA operating margin at Our leverage. was approximately gross quarter our continued adjusted third for strong the maintained XX%, highlighting

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

announced target of below framework, this EBITDA flexibility shareholders. week, with decline the to increasing third XXXX, on expect increase an earlier incremental XXXX, a this year. third X% that quarter for in compared quarter capital capital level We annualized increased to XX% to of Consistent basis earlier distribution this and represents the we return including our return increase our of our providing adjusted with distribution

times. total lower third results, the fourth net our at EBITDA the remediation revenues the $XXX expected expect activity distribution million strong to OpEx maintenance throughput systems representing reflecting we approximately to gathering to Turning to an quarter, midpoint deferred We the compared with adjusted quarter cash approximately income system of year guidance from approximately to anticipate Reflecting quarter guidance. to full greater fourth our majority of operating the of year interest capital and for million, coverage EBITDA quarter levels, our downtime the Stable the for flat fourth flow raised and in Maintenance our throughput adjusted and the than that approximately total these expected growth the to XXXX quarter X% $XXX below is be $XXX MVCs year approximately results, $XXX was revenues net produced following. driving have financial third third are projected above MVC planned relative expectations distributable compared X.X XXXX, higher results. cash guidance, of and of quarter lower our in combination we and from full income million and and our gas quarter. million, full now expected updated prior in water be expenses with third volumes to resulting be and

leverage three to We our at year the target. with adjusted expect times leverage EBITDA conservative end

will guidance MVCs. January, including and XXXX operational financial Looking forward, in we our release XXXX

growth to revenue this MVCs adjusted strategy visibility by to gathering continued We as execute throughput, driving supported processing increasing in of continued our clear current our organic above MVCs to revenues have gas growth comprised the XXXX years excluding approximately and revenues visibility growth expected Emphasizing XX% affiliate growth, revenues. reflect adjusted XXXX expect XXXX. organic in pass-through financial XXXX EBITDA in and we in total that to coming gas over continue and and EBITDA,

a operational my answer metrics remarks. any and This financial with We'll return questions. ongoing forward unique strategy, in business to capital. visible concludes the a of over and and trajectory call our our return I a to with consistent adjusted to turn the in that of will happy focus we of As on cash allowing underpins differentiated look growth very be and progress our financial now for flow, free CapEx growing making In adjusted pleased EBITDA closing, flexibility and anticipate financial strategy. continued we incremental shareholders, to sufficient stable growing our and are capital are with distribution expect our we consistent growing financial to result, and the support operator. continued

Operator

from Goldman [Operator Lapides first line Instructions] Michael question the Your comes of with Sachs.

Your line is now open.

Michael Lapides

have longer Thanks, and more Actually, of kind Thanks, one one everyone. Jonathan, John taking term. for questions. a Hi. few, near-term, I lot my

the used XXXX, that when CapEx expansion that On term, little near levels, Jonathan, a growth looks than may or year's? should the going of amount lot even XXXX future referring to be forward. or stable CapEx new thinking, future we Does the a like compression this CapEx that you or in CapEx lower be imply bit you CapEx given word added

Jonathan Stein

right. All

be more give don't where and to direction overview. Maybe, a kind I’ll talk start and a Look, the in said over why and John I little -- guidance it that below compression. So, CapEx, I turn on is said, expect on down, be going really general but it of XXXX will at we've of as just John bit I'll terms can levels give to think well to Gatling stable, of detail. or we year. just for Gatling that to break this we connected continue CapEx specifically,

growing also flexibility remember, growth. stable that that EBITDA, expect in MVCs, have next we'll our that significant we'll can through MVC talked of stable leverage. about that to you current our of including expect year my MVCs, with visibility in and remarks, course, capital, the show and we'll capital have see that demonstrate growing So visibly financial XXXX of I that we But with those as our update EBITDA then continued and terms we means

already. As I mentioned, target we're X at times our

our at flexibility we year with as financial we'll we EBITDA, million growing free move cash that into next so, mentioned our us $XX excess next revolvers, into growing expect decline. also be on so giving to now, above just I as program we And generating capital And for as return year, well. our distributions, flow move incremental

generally XXXX more that's we the So But are including is, kind kind of I in where think our that's January, said. contour headed. we'll of things the of MVC, direction broad give as information broad

to just give CapEx. John, if to want turn you more any Let the over on me

John Gatling

Hess's Jonathan. production Sure. working towards oil to XXX,XXX per We've barrels been equivalent in Thanks, growth XXXX. day of

basin. that XXXX implied the in we of have and CapEx a mentioned, a kind total But a XXXX is processing towards and focus capacity focus from be as we see million we the compression. compression. the been that Hess and growth, We've as are Jonathan its are and below from I So we'll from But growth it XXX volumes compression continue to to and production capacity on you that of we've to on grows at continue say continuing would or spend -- perspective, MVCs level. can going been and again, targeting our XXXX perspective going expecting XXXX that in in the in grow well the gathering. spend connects to to day

Michael Lapides

And years you? current zero one some longer goal. of about question term several really we to has how -- kind should that growth needs what flaring out, flaring like kind getting was zero then the the Outside for kind think it. production volume, flaring incremental achieved it of of Got its of

John Gatling

end mean from actually the for definitely very we Hess' currently. Zero of Zero XXXX. It's by we Flaring well -- catalyst Hess doing the to very, see commitment as Routine above I Flaring is XX% Routine growth They positive. end commitment I We're a by Flaring towards the definitely see the capture mean, of on Yes, gas track Zero Routine made well. support they're a XXXX. the midstream. Hess to

basin. as that. improve sustainability we're I committed help grow we're in its demonstrated the And continuing support think think emissions I to -- has well-positioned Hess report, and it's activities to to reduction in

MVC MVCs, that and and the in I -- a volumes, Zero January, mentioned, we'll Routine guidance XXXX, commitment of Flaring capture XXXX So, plan built at XXXX perspective and from and the as into forecasts. those gas that is implied give component

support good So, a feel growth reduction Hess' objectives we and about Again, our to here underpinning it's it. from and emissions we're perspective. climate

Michael Lapides

rates? should And for it. this and in one, means for may then Jonathan. things mechanism incremental like capital including the a Got B, what you, broader one tool interest And, the revolver. costs think debt process? move doing three financing one of, we more about be last A, How for years, in using kind using shareholders' issuance as thinking a of of the to But two or to kind that return

Jonathan Stein

Sure.

question. So, great

Let's just start.

currently renewed are In only recently terms bank of where really just rest we fixed. our we interest facilities, XXXX and is our debt exposed floating sit right The of through now, to which rates.

So our floating. that leaves of XX% just with is debt us

the $X our really $XX revolver the only at XXXX have million I on As -- point. mentioned until And of we debt extension revolver, have billion with drawn. facilities, maturities no bank this we

as free capital. now flexibility significant that, talked flow distribution pay be terms beyond program view revolver about year of growing So we're go of we to balance but repurchase point going with we generating to to execute leverage delevering, as the we cash next a in from ongoing means any excess have, really our also, our without just down on working into also

that So, overall additional fixed above of looking very program. just our good to our at there. cash flow internal On, X%, fund cost basis, creates weighted debt, the capital average an

spot. or in any We any great a pressures in really we're of short-term terms maturities So, don't there. have pressures

support a well terms that cash We the our to be flow using leverage in revolver and of optimize as lot able for as we necessary have repurchases. of to a flexibility have will

anything we in see capital going don't good interest to execute able us -- to obstacle a that continue being an terms of We in terms in don't on environment, program. the really is we're rate as that of to our see spot. So, return

Michael Lapides

it. Thanks guys. Got

of sorry the And Much beginning to hog the up appreciated. call.

John Gatling

Mike. Thanks

Operator

you. Thank

Your JPMorgan. question line comes next Stephen from of with McGee the

Your line is open. now

Stephen McGee

for flow this is year you all through Good there. you next or starting with above kind Hi. And do an average? all Does see with of for four MVCs guys? out this? of that, is And systems then just more afternoon. guess with that quarters, increase the that volume then into XXXX I

John Gatling

Yes. question, the to hand then Why Jonathan. the and I hit volume don't I'll over can question MVC

volumes, into from oil barrels equivalent built forecast. per of volume Again, we'll So, day we've to Hess’ and the XXX,XXX into as our by XXXX, on MVCs. perspective the going guidance far growing that as update the XXXX January

going XXXX So we and looking that'll volumes based give XXXX. and good the you volumes MVC Jonathan where definitely more an XXXX in MVC definitely a be little implied implied we're over and bit indication see nomination perspective from hand detail. the from into growth for Hess, are shape, I'll on XXXX But from heading. the our And to to from going perspective, an of but at it

Jonathan Stein

Yes.

is just in So MVCs, of is as I a in just reminder, terms think MVC three advance.

called So XXXX which really reduced of current be as above And MVCs to number more the to XXXX, -- XXXX we plan. we're prior rigs. are downturn, really going these the on move and is what last into the based from has MVC the set are

at just really that, as we XXX,XXX towards is continuing said, talked the above net of and terms XXXX set then and plan moving in And see goal, expect continued XXXX John give And there. how we What new we're growth result, just show the to majority us going routine production as of MVCs, our to to that about for this MVC. as well above say, think will to think we day Hess then volumes, growth year, XXX,XXX we'll the be current see growth systems our confidence goal, to expect is, we as XX% we as which in a As look, about were BOE John essentially, that MVC the of think flaring be as said, said, underpin well. in zero for be this I a with we're gives to I as that per XXXX. at said, we levels is we all way

MVCs throughput. set XX% those of at were expected So

this then and again be volume then next then So be basis from now going and I continue to year in volume for to on XXXX will year. will on year to in from level think above from and growth levels MVC is really physical to physical XXXX. MVC, of growth XXXX again growth the sustained year, And next into therefore, physical volumes being a XXXX this XXXX what is physical so

So really is this about we next next go MVCs this to levels, into to year physical level, go as year, our we growth really year's the to year's way next year. that's as think

Stephen McGee

there Got equivalent barrels that. you how per you oil XXX do one for And has if from on Hess system? it. How third-party you Thank is M interest what of their level then interest? do your the gauge And perspective? that determine hit day,

John Gatling

Yeah. primary any focus that be have at I outage focused system. have mean, we've be our always done third-party on in to been that's But volumes our any customer, we our to capturing area Hess can doing, and where the obviously, most fill as we're and successful is continue in going to of to going efforts. we we

this parties. a available attract well. We're our natural we parties. parties problem is and of as other it to that that. to we're have, is again, oil assumed kind gas So rock. continuing has for acreage look of look think at that our aggregator opportunities we capture by on We're volumes we've becomes looking that of And have it approximately fill position. top forecast for strategically top very surround to any continue -- more to available. again, There's capacity great perspective, continuing system a positioned those as of that. Again, which third on additional we're our we're XX% as to volumes on But we From to We'll system. and kind third good sitting volumes, capacity, us to third available

Stephen McGee

Understood. And could. then I one more, if

basin see in Just how guess, the as now far kind you you're I rejection of that then seeing wanted to progressing, recovery see ethane and what right forward? going as

John Gatling

ethane is think I split. bit mean, a I Sure.

are market. got ethane that You've actually processors taking to it recovering some and

Some ethane are residue rejecting stream out the the the basin. including in and coming of

also on value capacities also market of it's kind think of and going to to on ultimately. going the export residue I NGLs for what ethane going it's -- and really is. to both It's depend depend ethane,

gas Hess' capability we've fortunate plant think that we're fractionation cubic another up to per at both XXX takeaway also I perspective, from perspective, got for foot our Y-grade fully a at ethane NGLs, million the day fractionated So from We've million Tioga extremely Y-grade. plus residue, streams, -- three but full reliable XXX day and all NGLs got for gas plant. both of the capacity

optimize solved. I into from we've ethane do the economic export perspective, So end reject stream. to to residue and and the even it other got an on think recovery the export of between our NGLs work At becomes the We're question. continue going you an day, capacity how ultimately, and

Stephen McGee

it. guys. Got it. Thanks Appreciate

John Gatling

you. Thanks Yeah.

Operator

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

You disconnect, a day. may have now great and

Hess Midstream (HESM) 26 Oct 222022 Q3 Earnings call transcript