Earnings call transcript Q2 2023

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

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2023 Hess Midstream Conference Call. My name is Gigi, and I'll be your operator for today. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that purposes. for advised be conference recorded is replay Please

would the of Vice proceed. turn like Investor over Please I to Gordon, conference now to Jennifer Relations. President

Jennifer Gordon

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

was morning and release www.hessmidstream.com. our appears this issued earnings on website, Our

the to in unknown other Also between measures financial cause Today's the laws. of on section discuss subject in are These and these within from Hess most risks SEC. call, and uncertainties meaning may forward-looking differ and GAAP that and conference financial release. earnings directly conference results or found with include call of we be may such contains the of expressed the actual statements measures. the measures These differences to statements statements. Risk projections those today's implied the the securities financial those known can federal certain non-GAAP forth Midstream’s set Factors non-GAAP in comparable filings reconciliation A risks

today Financial With Chief Operating and Chief Officer; Gatling, and President Stein, John Jonathan Officer. are me

I'll now Gatling. to, over turn call the John

John A. Gatling

capital guidance. our Bakken. demonstrating I’ll Thanks, our and second Jonathan, quarter Today afternoon, Hess the for second to Midstream of our Jennifer. strategy conference the call. quarter everyone, review review priorities, shareholders. Good financial XXXX results returning results safe and on and outlook welcome continued performance and execution Hess operational to focus will including financial I Corporation's discuss will also our then our

gas effective to to enabled manner, guidance. throughput safe, quarter, in and second increase processing cost a volumes gathering us continued we to business has our and the In our XXXX grow which efficient

on buyback our and throughput executed anticipated our net the second executing through growth further adjusted another level Additionally, focused in strategy, year. this accretive we for in We positions which EBITDA for and remain XXXX. quarter, us increased share second time volumes, distribution the income,

gathering. quarter, crude day throughput cubic volumes for In barrels XXX,XXX per the XX,XXX per continued by first of water and to wells and the by for day processing, online Midstream's in Hess Hess second by capture. quarter water brought gas for gas foot number per million terminaling, processing averaged from day increase oil turning Now X% of throughputs mainly the operations. Gas XXX driven of barrels increased

was operational upstream with of per barrels above entitlements increase to to production was and the results today, XXX,XXX the to averaging or turning proceeds equivalent Now half barrels the oil strong from quarter Hess of range of remainder the equivalent percentage highlights. development strong oil performance, second under guidance contracts. Bakken XXX,XXX of reported net Earlier day, due XXX,XXX per Hess and POP which production day. Approximately of Hess' higher their

equivalent revenues. throughput or Hess day the a Hess As Bakken do approximately increase barrels per impact of day production third oil result as XXXX per to not continued POP Midstream's volumes will and year volumes day. net performance, anticipates equivalent to per full in their quarter, oil barrels production raised net XXX,XXX a expected equivalent barrels XXX,XXX reminder, oil XXX,XXX guidance XX,XXX by to strong of of Bakken of

XXXX. day production barrels Hess of XXX average rate XX% implies Midstream approximately XXXX. to equivalent approximately a bring in in in systems annualized to program Furthermore, plans continue an which online across Bakken Hess Hess forecast XXXX approximately XXX,XXX drilling to growth of XXXX, operate four-rig from volumes wells and net continues grow throughput to oil all to per to

hold production XXX,XXX Additionally, barrels expects day per equivalent of to decade. at approximately oil for a Hess nearly

which guidance guidance With raising increase, our success, the continued half implies Bakken the processing volume midpoint our year gathering growth second release production earnings approximately which the Hess' morning. of Turning X% Midstream and we're gas year. XXXX, gas guidance, for throughput to in Hess our was and at included this for capture full

Now program. capital XXXX turning our to

our excellent XXXX and to the progress focused are make in continue capital We and on plans, basin. on third-party supporting development Hess

program maintenance stations. the an at third including in our active seasonally compressor of scheduled quarter, several We maintenance have

for cubic construction will compressor continues progress our addition, stations later online in when gathering day. by infrastructure gas In to per approximately capacity that on associated this two XXX schedule new brought year and increase throughput million foot

of total year For million maintenance and $XX expected are million to of remain $XXX full capital is $XXX unchanged of and activity. million XXXX, comprised expansion which expenditures activity

remain turn our and to through drive In focused enabled operating continues guidance. which project that to on our safe, XXXX reliable summary, us we volumes in has systems, delivery volumes increased efficient performance increase and

to Additionally, result XXXX, in substantial generation sustainable capital potential expected which throughput to we shareholders. to growth to flow cash through return is continue our excess additional anticipate and volume

the to financial and turn now call I'll to review over our Jonathan, guidance. results

Jonathan C. Stein

everyone. good Thanks, afternoon, John, and

In to we June, and execute announced strategy, recently of and unit unique capital record We level which returns. of a return increase, consistent another another continue completed continues differentiated track and financial prioritizing distribution shareholder shareholders. our repurchase to ongoing

to returned XX%. repurchases of the by $X.XX we Since XXXX, that shareholders unit have approximately accretive beginning count reduced through billion have our total

increased the level X% A share XX% addition, our approximately four over distribution to of and combination targeted period. our annual distribution increases following In repurchase, we by per each growth distribution this have Class

one of our peers. to midstream be yield of the a result, our highest total As continues shareholder return

potential lowest of approximately while strength. financial this basis. this $X of Class on cash per deliver year, sheet $XXX of flexibility to leverage X.Xx Class our year both a to distributable ability unit basis execute our our share balance announced A our adjusted highlighting per EBITDA also in this flow transaction we is shareholder greater incremental million significant that and expect that differentiated second Earlier share capacity, we one than Furthermore, among repurchase billion peers, XXXX accretive was A maintaining returns, earnings repurchases. we Utilizing for of generate through the

capital level our quarterly X% targeted of a return per to distribution the share annual by growth. our through increase Class our repurchase, X.X% Supported immediate further shareholders beyond distribution announced A an we in recently

we our at past distributable as maintains following distribution count the As flow level approximately with the amount increase in done the reduced before same cash repurchase. the have this share repurchase, new we annual least this XXXX with level, higher annual coverage X% From at through least target to growth at expected share of distribution Class distribution will distribution A per X.Xx. continue

times repurchase, that the have repurchases completed expect more Following to be flexibility $X over per financial recently of future executed still year unit potential we through this for billion period. unit XXXX can multiple than

offering In supported our completed an year, Class A sponsors approximate secondary million of addition, continued that in this underwritten May liquidity in public shares. of shares our $XXX increasing

offering public ownership Hess increased now Midstream secondary approximately and repurchase consolidated basis on of to a unit transaction, the Following has XX%.

Turning to our results.

Adjusted first quarter, compared in $XXX was EBITDA compared the income second net The relative the primarily the to EBITDA the for million for following. $XXX million for the change adjusted $XXX to $XXX million the quarter to quarter. second attributable For quarter million first was first quarter. was to

continued as million. Total revenues increased million and come by by excluding With we primarily growth follows: through resulting throughput revenues XXXX. expect wells approximately increased gas in in continued volumes pass-through of $X by $X million, revenues Gathering approximately by segment including revenues by capture, increased revenues rest more $XX driven $X million. revenues the approximately increased physical online, volumes, growing terminaling Processing revenue approximately increased higher changes as

at a approximately expenses Total depreciation, earnings $XXX Higher and other quarter net million the amortization, for operating activity by of LMX million G&A, and maintenance of in of second million increased taxes proportional seasonal $X property resulting as of pass-through costs $X follows: of million. XXXX share of approximately excluding costs approximately guidance. end $X and the of costs our adjusted EBITDA Higher high

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

and interest Expansion expenditures of X.Xx. a for resulting the costs a balance million were were in $XXX second million capital distributable was $XXX quarter $XX in excluding by amortization facility capital $X with cash $XX of approximately second the flow maintenance drawn million, covering credit quarter approximately at The $XXX were financing of result free quarter, quarter net revolving end. approximately cash million approximately was million, Second approximately expenditures million. flow our adjusted that on distribution deferred

to Turning guidance.

strong updating based year full we on performance. XXXX, operational the For are year-to-date our guidance

distributable Class interest the Class fund transactions income free from B $X to the in expense incremental completed of net flow net incremental an million repurchase cash include repurchases impact unit guidance following used guidance are transaction. unit equity expense of XXXX. cash The adjusted updated also on the in borrowings offering an income, and tax to secondary includes flow facilities and recent million previously ownership We B under these $XX the updating changes credit our income impact resulting of

expected well of as of first EBITDA the million $XXX guidance million, Supported and we across expected year, guidance. the we representing growth revenue lower net to systems, to of an operating $X,XXX million. now in billion continued half than volume updating the expect of half As by as a in our together result, growth at all first to increase throughput strong costs $XXX with are midpoint our income the our $X adjusted

distribution adjusted higher to As at midpoint in per we distributions Class half least to approximately of from X% With funding expected midpoint million, capital anticipate the fully targeted expect approximately cash generate implied the at new guidance, for distributions higher to of after of this in updated annually EBITDA year at cash the free level, to XXXX. expenditures we be half. relative X% first expect flow free adjusted the flow to $XXX $XXX the total With the million. A we second grow share positive

to $XXX to seasonally costs, reflecting that million, offset schedule we several volumes expect at of the to EBITDA For the our higher $XXX stations million, net compressor and adjusted be XXXX, John, earlier. income approximately million be to quarter operating discussed of higher approximately including third by $XXX maintenance million active $XXX

approximately X.Xx. than of quarter, net interest deferred capital million, growth higher of be to amortization and cash distributable costs, $XXX resulting expected In expected excluding fourth volumes EBITDA Third million, in the quarter, quarter to third of seasonal expect coverage we approximately lower OpEx. to $XXX maintenance on expected the expenditures delivering flow $XX approximately continued relative are distribution million finance adjusted

differentiated In delivered financial pleased Hess on return unique that a capital. trajectory on forward to of in and look shareholders operational additional metrics to and are summary, to focus visible our a on have ongoing underpins consistent return and with very strategy and Midstream we incremental our financial growth capital

questions. will now remarks. the over answer This concludes happy We'll be I operator. to call to my any the turn

Operator

Instructions]. [Operator you. Thank

question first from from Reynolds line of Our comes Brian the UBS.

Brian Reynolds

the versus the you Hi, specifically, just on around lower good curious guidance end given connect you comment the rate just more if original some could And in range could touch to Maybe second versus if provide update, on bit well a the year-to-date cadence morning, guidance half whole additional expectations. everyone. thoughts performance? little

talked you think connects XXX I well in the the year Thanks. Bakken. for about a

Jonathan C. Stein

maybe talk to John, So, to the just financial, talk turn the I'll bit connect. about about John, then a well over I'll little

talk about can rest more particularly terms talked gas has of higher the terms expect John, expect come the to do we the together And the QX. had third the in see guidance guidance, year, OpEx the extremely In talked quarter gas about the compared some and growth we side We about to have and and more seasonally for of wells through with and year, strong have as QX the that quarter, the that third of do as raising rest in the online. performance on strong. he and of the to seasonality therefore, we second of particularly that, we've year. capture been We the in rest

quarter, In that third a we quarter stations as second of the even to John to relative be higher result expect the described. it maintenance compressor the

by EBITDA. still third really OpEx. see quarter still EBITDA on going go we quarter, then revenues even have expect the seasonal more be expect And we going offset fourth as be up OpEx, more quarter will the the from increasing volume from the increasing in is to that but we the lower what but So, to revenues, capture increasing side, here really as third increasing

to is, relative in account that the terms up that of expected end still lower a taken moving of as into up half, that. the -- look the taking, really and midpoint of the bringing guidance -- our said, so lowering that was result I really first range. That increase guidance represents, the just of as X% really at of all Really way to midpoint our we're

the about over me let to it So, turn to talk John, well connect.

John A. Gatling

Yes.

quarter well the level some we relatively balance of quarter, into in ended challenges connects, year. from the weather to through of XXXX. That On we be the seen part that early the carried out well year and we've second count and flatten was of the with it resolved first expect the flat

the the be expect pace the consistent wells balance to coming online So, for of of year. new we

Brian Reynolds

rig Great. count its we seen early Thanks we maybe decline for base where follow-up, count talking pickup. cadence, the a a has reaffirmed year, as just the have but low-XXs in basin in from that. since on see And rigs seasonal typically the rig four mid-XXs the

So about perhaps risk this of any reduction just ‘XX to rig and we could how for kind if has curious And at should has contemplated and are midstreams Thanks. outlook? discuss levels point? of rig think how you a ’XX

John A. Gatling

Sure.

your part and count. rig overall basin first go question then second address back your I'll to of maybe So I'll the

run your rigs The been for question, four future. the first of part has planning they're saying to foreseeable Hess consistently

Hess' on Our with plan is consistent builds actually and that plan.

to get in to production working the and any think and online, that market the the sure integration capture. the the without make we've the gas is of the together our is can infrastructure sure part and coming that's making place on well that midstream upstream I through holdup, activity, export and in plans the the that that development continued demonstrated wells So increase to that between get

have to, part far off, low-XXs to your count say drop oil you But rig -- down regarding the mid-XXs. we question basin continue from production see count said, the the of basin the as the the As we've first like to rig in continued grow. activity, your seen

different any function real that. don't the of material So, in for operators anticipated think I there's slowdown it's basin. I just in that driving think activity that's a timing

depending I sometimes think that how from the there. on it's rigs, is counted, can fluctuate shifting between rig of handful operators rig here count it rigs and

seen we've the is from activity think don't trajectory Dakota we North production that think where would change perspective anything in overall I again, for an going. So, in the basin

Brian Reynolds

Great. rest of Enjoy Appreciate the color. the your morning.

John A. Gatling

you. Thank Sure.

Operator

[Operator you. Instructions]. Perfect. Thank

Douglas question line comes the Citi. from Our next from of Irwin

Douglas Irwin

thanks $X year part buybacks, maybe guess and the of with still billion a flexibility over billion the the first, flexibility. Hi, some and to $X two of over We’ve for start of then framed kind question. guidance. around and I Maybe $XXX financial here. seen a and then just outlook started guiding with million we've buyback to it, of a since as you question you

improved just to outlook much if a kind if revolver you going bit of guess forward. there. flexibility I kind curious just could So first, that And that's then second, of of talk how of indication an maybe attributed capacity spare wondering an excess maybe flow is about versus free cash

Jonathan C. Stein

Okay, sure.

just So yes, let forward, in start terms $X plan there, and of right. the the going billion,

about we at growth, XX% than talked you flow billion, a XX%. As and think have really talk growth more said also than what had if the we've free $X we more EBITDA more and about about than cash of beginning,

in we as So, significant to have had per and we to year. ’XX flexibility historically, capacity one able done to financial be ’XX, large buyback execute, highlighted, we've

on XXXX using flexibility. ongoing year multiple per forward, buybacks basis an we that do to Now going intend through

more So, in million] continue a second those and a there. have in great the (ph) even $X to than [two $XXX buybacks we're first after billion really I spot quarter.

funded capacity flow funding cash debt as capacity And from really leverage $X least that In cash to below free leverage targeted with first would that funded relative the XX% said fall the highlight, be positive excess as that Xx about flow terms to we would our beginning, to forward, I we then we we our free distributions. our remainder and say after at be that target. and had of just highlight really expect explained of billion at when going

funded million that on on have financial have is will left terms capacity and no with that $XXX together really have we fact revolver the there million after be flow pressure revolver, we revolver, the So, of where of flexibility still we on with basically $XXX two and distribution that. the of funded free significant we cash capacity first the the have we in the the now XX% we've are

years, when we optionality revolver, the if look have certainly those As can that, revolver the and and years next flow we to borrowings capital past, all decide an significant that flexibility year at ongoing trim don’t to we of provides the XXXX. and generate will we the buybacks XX% capacity $XXX option the have per have done again out the sense excess that, flexibility over I at financial own together whether do and of continue in on two million basis million now, $XXX to return with our we half for and on we least the on have is the structure. capital we through of significant in $X our it be whether terms makes relative think cash a with execute us program billion at that market, three the multiple on to But to that it free right

Douglas Irwin

you tax all how an taxes, around then the That's going quarter. when of to it. helpful. Got could implications and be expect the buybacks question cash guidance tax And just this payer? us forward? walk profile you of just just impact impact you A might Can the remind net Then my the some ownership income through on quickly to the of increased which second seemed a have maybe kind Class

Jonathan C. Stein

sure. Yes,

did I in yes, as my the expectations higher a tax as the earnings as reflect secondaries, repurchase. the so the income our impact comments well to adjusted we net described as as have to primarily So of we net in described result an release, income,

things. two highlight I’d First,

taxes cash the is that's of I'll but to thing highlight partially we on shield on is based includes are it, per highlighted, the no I pay second EPS coming expect well on repurchases years do extremely as will material couple expense, tax First, call would only book a as in secondaries well. basis, we accretive really, as we DCF the And tax basis next have say do. that -- to from we the which on a we that then share as that have, not basis

In Midstream able corporation for it to then investor contribute we're tax provide, K-Xs federal is material tax of very purposes, of terms in in ownership a But secondaries that, tax treated But LP we our of of purposes than positive of entity, increasing allows as corporation that any mechanics Hess issue the has base. as do expect the of been secondaries treated again, which rather there. the us tax that what's is that since cash also that, those years. as a terms XXXXs to our I federal more next we owned terms be in as it's that couple shield happening, and means for the expense said, taxes not impacts to paying

Douglas Irwin

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

Operator

Thank you. [Operator Instructions].

question line from comes Wells next of Praneeth Our the from Satish Fargo.

Praneeth Satish

you Good versus between on multiple differentiate XXx and I staying morning. doing just assets buy it guess, more Thanks. Maybe that. we can a than M&A. do look at at much the EBITDA you doing how If buybacks. stock, at lower buybacks generally, trades

and So compare the just $X your billion when looking at contrast you two how curious flexibility? of

Jonathan C. Stein

Right.

in think So, capital I things. your terms allocation, of two

done, system a in -- to scale like change as view terms our think past, both would fit John side, would M&A risk from profile. dramatically things done within is, not physically bar risk have of and as on certainly that to the any have in We've or our within we've they as large our in not that, well have our We're a those point things myself been bolt-on are high of First corporate clear. but interested to we're the open M&A. I and

come financial our we've with of in been, that bought therefore, financial XX% another past with our as return towards the all that $X dividend as a two allocated financial our total increase really talked which has just to that about about So strategy, And in capital, approximately the of dividends together back flexibility of potentially that really prioritizing really our if therefore through and being that talked be $X billion result over comments, been increases, that, was XX% to my share and XX% buybacks, I includes count. our would half shares related flexibility to with buybacks, have and years. billion, a XX% have

focus. So our really, that's

about, much well have than cash clean forward differentiated flow very give, than We greater visible as as think, story. greater growth. visibility XX% a we've to growth free I as able XX% XX%, EBITDA towards talked growth

that, therefore, going so, stay we're to within as certainly on and capital therefore focused return priority a strategy. And to financial our

Praneeth Satish

looking your implications of a know then constraints at plants, up just at they've in or whether have don't ethane And on I'm just, any wondering the here you've any from bit other it. And if more there's but come July. you seen kind exposure, recovery I this? prices, Got ethane that side kind any any of quite price

John A. Gatling

No, our And to venture the I full to we've that optimize capability. our the cut ethane for think customers. we're plant. Gas capability we're with got at of Targa our plant Missouri at extraction south River with Tioga continue deep look Plant look It's uniquely to at Resources that positioned running down south, joint going to

So don't ethane from really recovery. perspective, on we constraints any see our

Praneeth Satish

you. Got it. Thank

John A. Gatling

Thank you.

Operator

you. Instructions]. Thank [Operator

next Our Tonet line the from comes JPMorgan LLC. of Securities question Jeremy from

Jeremy Tonet

afternoon. good Hi,

John A. Gatling

afternoon. good Hi,

Jeremy Tonet

does about year. could guidance wondering versus Just the down wanted us to a break the for implies this that being strength front come to higher with as other the kind how or half. is how factors trajectory maybe X% much portend talked you uplift, midpoint of or EBITDA the the previously I much half affected? to, of you of back if EBITDA regards than And back a second XXXX half to I for bit that And guess, seasonality little guess of bit growth

Jonathan C. Stein

growth continued up consistent is that's into the slight a we've that -- of to relatively four step operating. QX Again, therefore for QX. rigs more think year we're like the guidance said, Well, continued be about I given even so should and with gas really capture have going the to way I the really rest think revenue in implies that

to to of be going going QX EBITDA this going higher up the seasonally QX. kind OpEx, in and which to really with it's seasonality then down OpEx is coming then create in really So

will that EBITDA. more create some So also

through XXXX, an net In great lot January, income give and XX% continue to there. this for XXXX, we'll of will continued change said, which we've of more apply Obviously, There's MVC than no coming what and EBITDA year. really our terms we growth momentum to in growth certainly what that in through a also is XXXX. have is expected

really the So, great are side that have onto and XXXX, rest looking ‘XX. through to no to continue there to change continue the some year for and of just and ‘XX revenue momentum then go into on the

Jeremy Tonet

it. Got leave helpful. Thanks. That's I'll there. it

Operator

today's concludes participating. This Thank you. call. for Thank you conference

now You may disconnect.

Hess Midstream (HESM) 26 Jul 232023 Q2 Earnings call transcript