Hess Midstream LP(HESM)2025-02-27 21:15Operational Segments - The company operates through three segments: gathering, processing and storage, and terminaling and export[33]. - The natural gas gathering system has a capacity of approximately 675 MMcf/d and includes 1,415 miles of pipelines, with an added compression capacity of 50 MMcf/d in 2024[39]. - The crude oil gathering system consists of approximately 590 miles of pipelines with a capacity of up to 290 MBbl/d[40]. - The Tioga Gas Plant has a total processing capacity of 400 MMcf/d, making it one of the largest in North Dakota, with a recent de-bottlenecking project completed in 2021[46][47]. - The LM4 gas processing plant has a processing capacity of 200 MMcf/d, with the company entitled to 100 MMcf/d of that capacity[50]. - The produced water gathering system has a combined permitted disposal capacity of 180 MBbl/d across 12 facilities[42]. - The Hawkeye Oil Facility has a total receipt capacity of approximately 75 MBbl/d and can be filled through the crude oil gathering system or truck unloading bays[41]. - The Ramberg Terminal Facility has a combined pipeline and truck receipt capability of approximately 200 MBbl/d, with 130 MBbl/d from the crude oil gathering system and 70 MBbl/d from truck unloading bays[58]. - The facility's redelivery capability is up to approximately 285 MBbl/d, supported by various pipeline connections[59]. - The Tioga Rail Terminal has a crude oil loading capacity of 140 MBbl/d and NGL loading capacity of 30 MBbl/d, with a total storage capacity of approximately 290 MBbls[60][61]. - 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[65][70]. - The Johnson's Corner Header System has a delivery capacity of approximately 100 MBbl/d and entered into service in 2017[66]. Revenue Sources - The company has long-term fee-based commercial agreements with Hess, ensuring stable cash flows and minimum volume commitments (MVCs) for crude oil gathering and terminaling services[72][78]. - For 2024, Hess's MVCs for crude oil gathering are set at 103 MBbl/d, increasing to 112 MBbl/d by 2027[78]. - In 2023, 98% of the company's revenues were derived from fee-based commercial agreements with Hess, with gas gathering and processing revenues comprising 77% of total affiliate revenues[80]. - The company expects to continue deriving substantially all revenues in the near term under multiple commercial agreements with Hess[132]. - Approximately 100% of the company's revenues for the years ended December 31, 2024, 2023, and 2022 were derived from fee-based commercial agreements with Hess[149]. Environmental Regulations and Compliance - The company is subject to extensive and frequently-changing federal, state, and local environmental regulations, which increase overall business costs, including capital expenditures and net income[81]. - Compliance with the Clean Air Act and other regulations may require significant future capital expenditures, particularly affecting the company's Bakken operations, which generate substantially all revenues[85]. - Legislative measures addressing greenhouse gas emissions are under discussion, with potential requirements for the company to report emissions and reduce greenhouse gas outputs, impacting operational costs[86]. - The Inflation Reduction Act of 2022 provides funding and incentives for low-carbon energy production and includes a methane emissions reduction program, which may impose additional costs on the company[86]. - The company may face substantial expenses related to the release of hydrocarbons or hazardous substances, including cleanup costs and claims for damages, which could adversely affect financial position and liquidity[82]. - The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) imposes liability for hazardous substance releases, potentially leading to significant cleanup costs for the company[90]. - The Resource Conservation and Recovery Act (RCRA) regulates the disposal of hazardous wastes, and any changes in regulations could increase capital expenditures and operating expenses for the company[91]. - The company maintains Spill Prevention Control and Countermeasure (SPCC) plans and discharge permits under the Clean Water Act, which impose regulatory burdens on operations[95]. - The company acknowledges the potential for future regulatory changes that could impact operations and financial performance, particularly in light of evolving climate change legislation[88]. - The company is monitoring international climate agreements, such as the Paris Agreement, which may influence domestic regulatory frameworks and operational costs[87]. - The company has implemented emergency oil response plans and SPCC plans for facilities covered by OPA-90 to manage risks associated with hazardous substance releases[96]. - Regulatory requirements for wetlands may delay pipeline projects and increase costs, impacting project timelines and budgets[97]. - The company is subject to OSHA regulations and has established safety protocols to protect employee health and safety[98]. - The Endangered Species Act may impose additional costs or operational restrictions if new endangered species are identified in operational areas[99]. Financial Performance and Risks - The company may face reduced revenues if Hess' production volumes decrease due to competition or market conditions[117]. - The company is significantly dependent on Hess for its operations, and any adverse developments in Hess could materially affect its financial condition[162]. - The company may not be able to significantly increase third-party revenues due to competition and other factors, which could limit growth and extend dependence on Hess[144]. - Any decrease in the volumes of natural gas or crude oil handled could adversely affect the company's business and operating results[138]. - The company is subject to risks related to the Chevron merger with Hess, which could adversely affect its business and financial condition[128]. - The company has limited control over the level of drilling activity in its areas of operation, which may impact throughput levels and cash flows[139]. - The company may face challenges in attracting new unaffiliated customers due to its relationship with Hess and the preference for fee-based contracts[145]. - The company’s ability to service its indebtedness will depend on future financial performance, which may be affected by economic conditions and other factors beyond its control[176]. - The company’s credit facilities contain various operating and financial restrictions that could limit its ability to finance future operations or capital needs[172]. - The company may incur significant costs and liabilities due to pipeline integrity management program testing and related repairs, with compliance costs not expected to materially affect overall financial results[190]. - The maximum administrative civil penalties for violations of pipeline safety laws will increase to 0.30 per Class A Share, equating to 65.4 million in available cash per quarter[219]. - The company must handle fluctuations in cash generation based on volumes of crude oil, natural gas, NGLs, and produced water processed, as well as competition in the midstream energy market[219].