Hess Midstream Partners LP (HESM) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the s ...

Hess Midstream Stock Gets RS Rating Lift | Investor's Business Daily BREAKING: Futures Rise, Oil Prices Fall On Iran Deal Hopes In a welcome move, Hess Midstream (HESM) stock saw its Relative Strength Ratingrise from 70 to 76 on Monday. X Reading Between The Lines: How To Watch For Market Turns Through News Coverage See All Videos Hess Midstream stock holds the No. 12 rank among its peers in the Oil & Gas-Transportation/Pipeline industry group. DHT Holdings (DHT), Golar LNG (GLNG) and Kinder Morgan (KMI) ar ...

Core Viewpoint - Hess Midstream is transitioning from a capital expenditure phase to a free cash flow generation phase, with significant reductions in capital spending expected in the coming years, leading to substantial free cash flow and shareholder returns [3][6][11]. Capital Expenditure - In 2026, Hess Midstream plans to reduce capital spending by 40% to approximately $150 million, with further declines anticipated to under $75 million annually in 2027 and 2028 [3][6]. - The company has completed its multiyear infrastructure buildout, allowing for a focus on free cash flow generation rather than growth spending [3][11]. Free Cash Flow and Shareholder Returns - Adjusted free cash flow is forecasted to be between $850 million and $900 million in 2026, representing a 12% increase over 2025 [6][10]. - The free cash flow will support a targeted 5% annual distribution growth per Class A share through 2028, alongside a $260 million share repurchase program [6][7]. Revenue Stability - Approximately 95% of 2026 revenues are secured by minimum volume commitments, providing a revenue floor despite potential fluctuations in throughput due to weather conditions [8]. - The company expects to maintain adjusted EBITDA guidance for 2026 at $1.225 billion to $1.275 billion, which is roughly flat compared to 2025 [10]. Weather Impact - Q4 throughput experienced declines due to severe winter conditions, with oil terminaling down 4%, gas processing down 1%, and water gathering down 5% [9]. - The CEO anticipates a recovery in the second half of 2026, consistent with historical seasonal patterns [9]. Strategic Integration - The integration with Chevron, which became Hess Midstream's sponsor in July 2025, allows for coordinated planning that minimizes overbuilding and enhances economic efficiency [8]. - The focus on longer laterals in drilling operations is expected to reduce capital requirements while maintaining throughput levels [8].

Quick Read Hess Midstream (HESM) executed a $60 million equity repurchase in March and carries a 7.49% dividend yield backed by nine consecutive years of uninterrupted quarterly distributions, though its payout ratio sits at a concerning 105% with 2026 EPS forecast declining to $2.56 from $2.86 in 2025. Chevron (CVX) reduced its Bakken rig count from 4 to 3 starting Q4 2025, targeting a 200,000 barrels per day plateau, which prompted UBS to cut HESM’s price target from $36 to $34 due to anticipated volum ...

Core Viewpoint - Hess Midstream's capital return program, including a recent $60 million equity repurchase, raises questions about its sustainability amid declining earnings forecasts and capital spending cuts [1][4]. Financial Performance - Hess Midstream executed a $60 million equity repurchase in March 2026 and offers a 7.49% dividend yield, supported by nine consecutive years of quarterly distributions [1][7]. - The dividend payout ratio is concerning at 105%, with a forecasted EPS decline from $2.86 in 2025 to $2.56 in 2026 [1][8]. - The most recent quarterly payout was $0.7641 per Class A share, an increase from $0.2703 since inception in August 2017 [7]. Capital Expenditure and Cash Flow - Capital spending is projected to collapse by 40% to $150 million in 2026, with further reductions to below $75 million annually in 2027-2028 [2][12]. - Approximately 95% of 2026 revenues are protected by minimum volume commitments, providing a stable revenue base despite reduced capital expenditures [2][12]. - Free cash flow coverage is at 36%, although total shareholder returns of $750.2 million consumed 96% of the $728.2 million in free cash flow generated in 2025 [8]. Market Response and Analyst Opinions - Chevron's reduction of its Bakken rig count from 4 to 3 starting Q4 2025 has led UBS to lower Hess Midstream's price target from $36 to $34 due to anticipated volume declines [1][11]. - The stock has increased by 16.88% year-to-date, indicating some market confidence despite the challenges [13]. Buyback Mechanics - The March 2026 repurchase included an $18 million buyback of Class B units from a Chevron affiliate and a $42 million accelerated share repurchase with JPMorgan Chase Bank [10]. - Chevron's ownership in Hess Midstream now stands at 37.6% following prior repurchases [10].

Core Insights - Midstream energy companies typically offer stable distributions or dividends with yields exceeding 5% [1] - Most midstream companies are structured as limited partnerships, distributing the majority of profits to unit holders [1] Company Analysis - The analysis is primarily based on company fundamentals, industry-specific data, and broader economic trends [1] - Company quarterly presentations are reviewed, but the content is not directly copied, as these presentations are designed to present data favorably within SEC regulations [1] Market Context - There is a noted absence of company presentations advising investors to sell, indicating a generally positive outlook from companies [1]

Core Viewpoint - Hess Midstream LP has filed its annual report on Form 10-K for the fiscal year ended December 31, 2025, with the SEC, highlighting its financial performance and operational updates [1]. Group 1: Company Overview - Hess Midstream is a fee-based, growth-oriented midstream company that owns, operates, develops, and acquires a diverse set of midstream assets [2]. - The company provides services primarily to Chevron and its subsidiaries, as well as third-party customers [2]. - Hess Midstream's assets include oil, gas, and produced water handling facilities, mainly located in the Bakken and Three Forks Shale plays in the Williston Basin area of North Dakota [2]. Group 2: Financial Reporting - The annual report on Form 10-K includes complete audited financial statements of Hess Midstream [1]. - Shareholders can request printed copies of the annual report free of charge by contacting Investor Relations [1].

Processing Capacity and Infrastructure - The company has a total processing capacity of 400 MMcf/d at the Tioga Gas Plant, making it one of the largest natural gas processing plants in North Dakota[47]. - The natural gas gathering system consists of approximately 1,430 miles of pipelines with a current capacity of up to approximately 685 MMcf/d[40]. - The crude oil gathering system has a capacity of approximately 290 MBbl/d, with 615 miles of pipelines connecting to various terminals[41]. - The produced water gathering system has a combined permitted disposal capacity of 185 MBbl/d across 13 facilities[43]. - The Ramberg Terminal Facility has a combined pipeline and truck receipt capability of approximately 200 MBbl/d and a redelivery capability of up to approximately 285 MBbl/d[58]. - The Mentor Storage Terminal has an aggregate working storage capacity of approximately 330 MBbls, consisting of an underground cavern and above-ground tanks[52]. - The LM4 gas processing plant has a processing capacity of 200 MMcf/d, with the company entitled to 100 MMcf/d of that capacity[51]. - The Tioga Gas Plant has a total NGL production capability of approximately 80 MBbl/d, with various export options available[50]. - The Tioga Rail Terminal has a crude oil loading capacity of approximately 140 MBbl/d and NGL loading capacity of 30 MBbl/d[61]. - The Ramberg Terminal Facility has a throughput capacity of 285 MBbl/d and a storage capacity of 40 MBbls[69]. - The Johnson's Corner Header System has a delivery capacity of approximately 100 MBbl/d of crude oil[67]. - The company owns 550 crude oil rail cars, with an effective working capacity of approximately 32 MBbl/d based on an average round-trip duration of 11 days[66][71]. Financial Performance - Total revenues for the year ended December 31, 2025, reached $1,621.3 million, up from $1,495.5 million in 2024, reflecting a growth of 8.4%[370]. - Net income attributable to Hess Midstream LP for 2025 was $352.9 million, a significant increase of 58.0% compared to $223.1 million in 2024[370]. - Basic earnings per Class A share increased to $2.87 in 2025, up from $2.51 in 2024, representing a growth of 14.3%[370]. - The company's total assets as of December 31, 2025, were $4,388.3 million, compared to $4,151.0 million in 2024, indicating an increase of 5.7%[368]. - Total liabilities increased to $3,950.4 million in 2025 from $3,685.7 million in 2024, reflecting a rise of 7.2%[368]. - Operating and maintenance expenses for 2025 were $370.6 million, up from $347.3 million in 2024, marking an increase of 6.7%[370]. - The company reported income from operations of $1,008.1 million for 2025, compared to $919.0 million in 2024, which is an increase of 9.7%[370]. - Interest expense for the year was $225.6 million, an increase from $202.2 million in 2024, reflecting a rise of 11.7%[370]. - Cash flows from operating activities for 2025 were $983.8 million, compared to $940.3 million in 2024 and $866.4 million in 2023, indicating strong operational performance[376]. - The company recognized a deferred tax asset of $305.0 million in 2025, up from $329.8 million in 2024 and $185.1 million in 2023, showing a positive trend in tax asset management[376]. Revenue Sources and Agreements - For the year ended December 31, 2025, 97% of the company's revenues were attributable to fee-based commercial agreements with Chevron[81]. - The company has long-term fee-based commercial agreements with Chevron, which include minimum volume commitments equal to 80% of Chevron's nominations[74]. - Revenue is primarily generated from fees for gathering, compressing, and processing natural gas, with no ownership of the volumes handled[401]. - Approximately 97% of revenues in 2025 were attributable to fee-based commercial agreements with Chevron, with plans to increase services to third-party customers[435]. Environmental and Regulatory Compliance - The company may incur substantial expenses related to the release of hydrocarbons or hazardous substances, including cleanup costs and compliance with laws, which could adversely impact its financial position and liquidity[83]. - Compliance with the Clean Air Act and other regulations may require significant future capital expenditures, particularly affecting Chevron's Bakken operations, which generate most of the company's revenues[86]. - Legislative measures addressing greenhouse gas emissions could lead to increased operational costs, including the installation of new emission controls and compliance costs, potentially affecting the company's financial condition[87]. - The company is subject to various environmental regulations, including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), which imposes liability for hazardous substance releases, potentially leading to significant cleanup costs[92]. - Changes in regulations under the Resource Conservation and Recovery Act (RCRA) could increase capital expenditures and operating expenses related to hazardous waste disposal[93]. - The company maintains Spill Prevention Control and Countermeasure (SPCC) plans and discharge permits under the Clean Water Act, which impose regulatory burdens on its operations[95]. - The Federal Energy Regulatory Commission (FERC) has regulatory authority over interstate transportation of oil and natural gas, which could affect the company's operations and revenue if regulations change[100]. - The company has received waivers from certain FERC regulations for its natural gas and crude oil pipelines, but future changes in policy could subject these pipelines to additional regulation, impacting revenue and costs[103]. - The company is subject to civil penalties of up to $1,584,648 per violation per day for violations of the Natural Gas Act, which could significantly affect its financial position[103]. - The company faces potential increased compliance costs and operational restrictions due to evolving state and federal regulations regarding greenhouse gas emissions and environmental protection[90]. Debt and Capital Management - As of December 31, 2025, the total debt of the company was $3,772.0 million, with a fair value of approximately $3,832.6 million[343]. - A 15% increase or decrease in interest rates would affect the fair value of fixed-rate debt by approximately $68.2 million or $55.2 million, respectively[343]. - The company made share and unit repurchases totaling $400.0 million in 2025, compared to $300.0 million in 2024 and $400.0 million in 2023, demonstrating active capital management[376]. - The Partnership issued $800.0 million of 5.875% fixed-rate senior unsecured notes due 2028 in February 2025, using proceeds to redeem $800.0 million of 5.625% notes due 2026[448]. - The Partnership's total borrowings as of December 31, 2025, amounted to $3,800.5 million, compared to $3,500.0 million in 2024, indicating a 8.6% increase[447]. Operational and Employee Insights - The company has approximately 195 full-time employee equivalents supporting operations as of December 31, 2025[119]. - The company carries insurance policies for business interruption and certain property damage, which are deemed reasonable and prudent under current circumstances[118]. - The company has implemented a cybersecurity risk management program to mitigate risks from potential cyber-attacks[112]. - The company has prepared effective security plans for its facilities to address increased risks from potential terrorist attacks[111]. - The company is subject to ongoing assessments of pipeline integrity and must comply with PHMSA regulations, which may require increased costs for future projects[110]. Shareholder Returns and Equity Transactions - Total distributions per share increased from $2.3733 in 2023 to $2.6382 in 2024, and further to $2.9028 in 2025, reflecting a commitment to returning value to shareholders[373]. - The balance of partners' capital increased from $529.0 million at the end of 2022 to $363.2 million at the end of 2023, and further to $437.9 million at the end of 2025, indicating a strengthening financial position[373]. - Class B Unit repurchases totaled 3,619,254 units at an aggregate purchase price of $100.0 million in March 2023, with subsequent repurchases in June, September, and November 2023, averaging around $29.85 to $30.29 per unit[418]. - For the year ended December 31, 2025, accelerated share repurchase transactions included 267,532 shares repurchased for $10.0 million at an average price of $37.38 per share[421].

Core Insights - High Yield Investor is celebrating its fifth anniversary by offering a 30-day money-back guarantee, encouraging new memberships and the release of their Top Picks for 2026 [1] - The strategy focuses on high-yielding dividend stocks that possess strong balance sheets, growth potential, and favorable macroeconomic conditions, which are currently underappreciated by the market [1] Company Overview - Samuel Smith, the lead analyst and Vice President, has extensive experience in dividend stock research and has a background in engineering and project management [1] - The investment group includes Samuel Smith, Jussi Askola, and Paul R. Drake, who aim to balance safety, growth, yield, and value in their investment approach [1] Service Features - High Yield Investor provides various portfolio options including core, retirement, and international portfolios, along with regular trade alerts and educational content [1] - An active chat room is available for investors to engage and share insights [1]

Core Viewpoint - Investors in Hess Midstream LP (HESM) should closely monitor the stock due to significant movements in the options market, particularly the high implied volatility of the Feb. 2, 2026 $43 Put option [1] Group 1: Implied Volatility - Implied volatility indicates the market's expectations for future price movements, with high levels suggesting anticipation of significant price changes or upcoming events that could lead to a rally or sell-off [2] - Options traders often seek high implied volatility options to sell premium, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected [4] Group 2: Analyst Sentiment - Hess Midstream currently holds a Zacks Rank 3 (Hold) in the Energy and Pipeline - Master Limited Partnerships industry, which is in the top 39% of the Zacks Industry Rank [3] - Over the past 60 days, two analysts have raised their earnings estimates for the current quarter, while none have lowered them, resulting in a slight decrease in the Zacks Consensus Estimate from 68 cents to 65 cents per share [3]