PART I—FINANCIAL INFORMATION Item 1. Financial Statements Hess Midstream LP's unaudited consolidated financial statements as of September 30, 2020, show increased total assets and improved Q3 and nine-month revenues and net income, retrospectively adjusted for the Hess Infrastructure Partners LP acquisition Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total current assets | $103.7 | $95.9 | | Property, plant and equipment, net | $3,103.3 | $3,010.1 | | Total assets | $3,371.7 | $3,277.7 | | Total current liabilities | $132.3 | $176.1 | | Long-term debt | $1,895.5 | $1,753.5 | | Total liabilities | $2,052.5 | $1,945.6 | | Total partners' capital | $1,319.2 | $1,332.1 | Consolidated Statements of Operations Consolidated Statement of Operations Highlights (in millions, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $264.8 | $214.9 | $825.4 | $594.8 | | Income from operations | $137.2 | $99.3 | $421.8 | $286.3 | | Net income | $115.8 | $87.4 | $352.6 | $242.6 | | Net income attributable to Hess Midstream LP | $5.6 | $19.1 | $17.4 | $54.0 | | Basic EPS (Class A Share) | $0.31 | N/A | $0.97 | N/A | Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows Highlights (in millions) | Cash Flow Activity | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $467.2 | $334.4 | | Net cash used in investing activities | ($245.9) | ($386.0) | | Net cash used in financing activities | ($221.6) | ($50.6) | | (Decrease) in cash and cash equivalents | ($0.3) | ($102.2) | Notes to Consolidated Financial Statements - The company is a fee-based midstream limited partnership with assets primarily in the Bakken shale plays, organized into three segments: gathering, processing and storage, and terminaling and export3132 - The acquisition of Hess Infrastructure Partners LP (HIP) in December 2019 was accounted for as a business combination of entities under common control, leading to the retrospective recasting of prior period financial statements to include HIP's results3547 - Approximately 100% of revenues for the three and nine months ended September 30, 2020 and 2019 were attributable to fee-based commercial agreements with Hess Corporation5682 Debt Structure as of Sep 30, 2020 (in millions) | Debt Instrument | Amount Outstanding | | :--- | :--- | | 5.625% Senior Notes due 2026 | $800.0 | | 5.125% Senior Notes due 2028 | $550.0 | | Revolving Credit Facility | $178.0 | | Term Loan A Facility | $400.0 | Quarterly Distributions per Share/Unit | Period | Distribution per Share/Unit | | :--- | :--- | | Q3 2020 | $0.4417 | | Q2 2020 | $0.4363 | | Q1 2020 | $0.4310 | | Q4 2019 | $0.4258 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q3 2020 performance to increased throughput and tariff rates, while proactively reducing capital programs and lowering distribution growth targets to 5% through 2022 in response to the COVID-19 pandemic Overview and COVID-19 Response - The company is advancing its Tioga Gas Plant (TGP) expansion project, which will increase processing capacity by 150 MMcf/d to a total of 400 MMcf/d, expected to be available in 202198 - In response to the COVID-19 pandemic and lower oil prices, the company reduced its 2020 expansion capital program by 20% and its 2021 program by 55%105 - The targeted annualized distribution growth rate per share was lowered from 15% to 5%, with this new target extended through 2022 to preserve long-term sustainability105 Third Quarter 2020 Results Q3 2020 Financial Highlights (in millions) | Metric | Q3 2020 | | :--- | :--- | | Consolidated net income | $115.8 | | Net income attributable to Hess Midstream LP | $5.6 | | Adjusted EBITDA | $181.6 | | Distributable cash flow | $156.2 | | Free cash flow | $115.2 | - Throughput volumes increased year-over-year, with gas processing up 14% and crude oil terminaling up 8%, driven by higher Hess production and increased gas capture109 Results of Operations - Q3 2020 vs Q3 2019: Gathering segment revenue increased by $37.0 million due to higher volumes and tariff rates; Processing and Storage revenue grew by $16.2 million, also from higher volumes and rates; Terminaling and Export revenue decreased by $3.3 million, as lower pass-through rail costs offset higher throughput volumes and tariffs130131135 - Nine Months 2020 vs Nine Months 2019: Gathering segment revenue increased by $122.9 million, and Processing and Storage revenue grew by $66.0 million, both driven by higher volumes from Hess production, gas capture, and increased tariff rates; Terminaling and Export revenue rose by $41.7 million, primarily due to higher pass-through rail revenues and increased throughput143147149 Throughput Volume Comparison (Q3 2020 vs Q3 2019) | Throughput Metric | Q3 2020 | Q3 2019 | % Change | | :--- | :--- | :--- | :--- | | Gas gathering (MMcf/d) | 316 | 270 | +17.0% | | Crude oil gathering (MBbl/d) | 138 | 119 | +16.0% | | Gas processing (MMcf/d) | 296 | 259 | +14.3% | | Crude oil terminaling (MBbl/d) | 141 | 130 | +8.5% | | Water gathering (MBbl/d) | 78 | 45 | +73.3% | Capital Resources and Liquidity - Ongoing sources of liquidity include cash from operations, borrowings under the revolving credit facility, and issuance of additional debt or equity securities162 Capital Expenditures (in millions) | Capital Expenditure Type | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Expansion | $195.7 | $205.6 | | Maintenance | $6.5 | $3.2 | | Total | $202.2 | $208.8 | - Capital expenditures in 2020 are primarily related to the expansion of the Tioga Gas Plant176 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure on its debt, with minimal direct commodity price risk due to fee-based agreements with Hess, and no derivative instruments in place as of September 30, 2020 - The company's main market risk exposure is to changes in interest rates; a hypothetical 15% increase or decrease in interest rates would change the fair value of its fixed-rate debt by approximately $54.5 million or $57.3 million, respectively185 Controls and Procedures The CEO and CFO concluded the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2020186 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls187 PART II—OTHER INFORMATION Legal Proceedings The company is involved in various ordinary course legal proceedings, with management assessing a remote likelihood of material adverse impact on financial condition or operations as of September 30, 2020 - As of September 30, 2020, the company did not have material accrued liabilities for legal contingencies86190 Risk Factors Risk factors have not materially changed from the 2019 Annual Report, except for those related to the COVID-19 global pandemic, as detailed in prior quarterly reports - Risk factors have not materially changed from the 2019 Annual Report, except for risks related to the COVID-19 global pandemic191 Exhibits This section lists the exhibits filed with the Form 10-Q, including required CEO and CFO certifications and Inline XBRL documents for financial reporting - The exhibits filed with the report include required CEO and CFO certifications and Inline XBRL data files194
Hess Midstream LP(HESM) - 2020 Q3 - Quarterly Report