Hess Midstream Partners Q4 Earnings Call Highlights

Core Insights - Hess Midstream reported a decrease in costs and expenses by approximately $7 million, attributed to lower allocations and seasonal maintenance activity, while the gross adjusted EBITDA margin remained strong at around 83% [1] - The company experienced a decline in total revenues by about $19 million, primarily due to severe winter weather and lower third-party volumes [1] - For full-year 2025, net income was approximately $685 million, with adjusted EBITDA increasing by about 9% from 2024 [2] Financial Performance - In Q4 2025, net income was $168 million, down from approximately $176 million in Q3, while adjusted EBITDA was $309 million compared to approximately $321 million in Q3 [2] - Full-year 2025 adjusted EBITDA was reported at $1,238 million, with average volumes for gas processing at 445 million cubic feet per day, crude terminaling at 129,000 barrels per day, and water gathering at 131,000 barrels per day [3] Capital Expenditures - The company is entering a period of significantly lower capital spending, with 2026 capital expenditures expected to be around $150 million, a reduction of approximately 40% compared to 2025 [5] - Q4 2025 capital expenditures were approximately $47 million, reflecting lower activity and completion of the compression buildout [6] - Future capital spending is projected to decline further to less than $75 million per year in 2027 and 2028 [7] Volume and Revenue Guidance - Management expects first-quarter 2026 volumes to be lower due to ongoing severe winter weather, but anticipates seasonal volume growth throughout the year [9] - For full-year 2026, net income guidance is set at $650 million to $700 million, with adjusted EBITDA expected to be flat at the midpoint compared to 2025 [11] - Approximately 95% of 2026 revenues are covered by minimum volume commitments (MVCs), providing significant revenue protection [11] Free Cash Flow and Shareholder Returns - The company targets a gross adjusted EBITDA margin of approximately 75% in 2026 and expects to generate adjusted free cash flow of $850 million to $900 million [12] - After funding a targeted 5% annual distribution growth, the company anticipates excess adjusted free cash flow of about $210 million for shareholder returns and debt repayment [12] - Long-term projections through 2028 indicate a 5% annualized growth in net income and adjusted EBITDA, supported by gas volume growth and lower operating costs [13] Operational Efficiency - Integration with Chevron has optimized midstream and upstream investments, reducing the need for overbuilding and capital expenditures [8] - The company is focused on maintaining a leverage ratio below 3x as EBITDA grows, with a conservative approach to funding shareholder returns from free cash flow [15]