Hess Midstream (HESM) Q2 EPS Jumps 25%

Core Viewpoint - Hess Midstream reported strong Q2 2025 results, exceeding analyst expectations in both earnings and revenue, while also increasing its quarterly dividend, indicating robust operational performance and financial health [1][5][8]. Financial Performance - GAAP earnings per share (EPS) for Q2 2025 were $0.74, surpassing the estimate of $0.65 and up 25.4% from $0.59 in Q2 2024 [2][5]. - Revenue reached $414.2 million, exceeding expectations of $405.1 million and reflecting a 13.3% increase from $365.5 million in Q2 2024 [2][5]. - Adjusted EBITDA was $316.0 million, a 14.3% increase from $276.5 million in Q2 2024 [2][7]. - Net cash provided by operating activities was $276.9 million, up 2.0% from $271.6 million in Q2 2024 [2][7]. - Adjusted free cash flow rose 24% to $193.8 million compared to $156.4 million in Q2 2024 [2][7]. Business Overview - Hess Midstream operates energy infrastructure systems for oil, natural gas, and water in the Bakken and Three Forks shale plays, focusing on pipelines, compressor stations, and gas processing plants [3][4]. - The company relies on long-term, fee-based contracts, primarily with Hess Corporation, ensuring revenue stability [4][9]. Operational Highlights - Gas processing throughput increased by 7% to 449 million cubic feet per day, while oil terminaling volumes rose by 9% and water gathering increased by 11% year over year [6]. - The gross margin improved to 63%, up from 61% in Q2 2024, indicating enhanced profitability [7]. Capital Allocation and Shareholder Returns - The company repurchased $190.0 million in Class B units and $10.0 million in Class A shares, supporting a quarterly distribution increase to $0.7370 per share [8]. - Management aims to grow distributions by at least 5% annually through 2027, backed by excess cash flow [8][13]. Strategic Focus and Future Outlook - The company reaffirmed its full-year 2025 guidance, projecting adjusted EBITDA between $1,235 million and $1,285 million, with capital expenditures of $300 million [13]. - Hess Midstream targets gas gathering of 475–485 million cubic feet per day and crude oil terminal volumes of 130–140 thousand barrels per day for 2025 [14]. - The recent merger with Chevron is expected to influence future business priorities, although current operations remain stable [9][12].