Financial Data and Key Metrics Changes - For the full year 2025, the company reported a net income of approximately $685 million and adjusted EBITDA of $1,238 million, representing a growth of approximately 9% from 2024 [10] - In the fourth quarter, net income was $168 million compared to approximately $176 million in the third quarter, and adjusted EBITDA was $309 million compared with approximately $321 million in the third quarter, primarily due to lower revenues from severe winter weather [10][11] - The gross adjusted EBITDA margin for the fourth quarter was maintained at approximately 83%, above the target of 75% [11] Business Line Data and Key Metrics Changes - Fourth quarter gas processing volumes averaged 444 million cubic feet per day, crude terminaling volumes averaged 122,000 barrels of oil per day, and water gathering volumes averaged 124,000 barrels of water per day [5] - For the full year 2025, gas processing volumes averaged 445 million cubic feet per day, crude terminaling volumes averaged 129,000 barrels of oil per day, and water gathering volumes averaged 131,000 barrels of water per day [6] Market Data and Key Metrics Changes - The company expects lower volumes across its systems for the first quarter of 2026 due to severe winter weather, but anticipates growth in volumes throughout the rest of the year consistent with historical seasonal expectations [7][8] Company Strategy and Development Direction - The company plans to reduce capital spending significantly, expecting to spend approximately $150 million in 2026, a 40% reduction from 2025, and further decrease to less than $75 million per year in 2027 and 2028 [4][9] - The strategy includes leveraging historical investments to drive significant free cash flow generation, supporting a targeted 5% distribution growth per Class A share through 2028, along with potential share repurchases and debt repayment [5][9] Management's Comments on Operating Environment and Future Outlook - Management reiterated that approximately 95% of revenues are protected by minimum volume commitments (MVCs) for 2026, which provides a safety net against production fluctuations [8][14] - The company expects annualized net income and adjusted EBITDA growth of 5% and approximately 10% annualized adjusted free cash flow growth through 2028, supported by gas volume growth and lower operating and capital expenditures [8][15] Other Important Information - The company had a drawn balance of $338 million on its revolving credit facility at year-end [12] - Adjusted free cash flow for the first quarter of 2026 is expected to increase relative to the fourth quarter of 2025, as capital expenditures are projected to be lower [12] Q&A Session Summary Question: Balance sheet and debt repayment priorities - Management plans to use a portion of free cash flow after distributions to pay down debt, expecting to naturally deliver below 3x leverage in the next few years as EBITDA grows without increasing absolute debt levels [18][19] Question: Third-party outlook and Chevron's production target - Management expects no change to the third-party outlook, maintaining an average of 10% across oil and gas, and confirmed Chevron's target of 200,000 barrels of oil equivalent per day remains intact [21][23] Question: Growth drivers and cost-cutting contributions - Future EBITDA growth is driven by inflation escalators and gas growth, with free cash flow growth resulting from reduced capital expenditures as the infrastructure buildout is completed [27][29] Question: CapEx flexibility - The company expects capital expenditures to be lower than the previous year, with guidance of $150 million for 2026 and potentially less than $75 million in 2027 and 2028 [31][35] Question: Weather impact on production - Management noted that while severe cold weather has impacted production, they expect a recovery as weather improves, with a typical seasonal increase in volumes anticipated in the second and third quarters [40][41]

Financial Data and Key Metrics Changes - For the full year 2025, the company reported a net income of approximately $685 million and adjusted EBITDA of $1,238 million, representing a growth of approximately 9% from 2024 [10] - In Q4 2025, net income was $168 million, down from approximately $176 million in Q3 2025, while adjusted EBITDA was $309 million compared to approximately $321 million in Q3 2025 [10][11] - The company expects adjusted free cash flow in Q1 2026 to increase relative to Q4 2025, with projected capital expenditures lower than in the previous quarter [12] Business Line Data and Key Metrics Changes - Gas processing volumes for 2025 averaged 445 million cubic feet per day, crude terminaling volumes averaged 129,000 barrels of oil per day, and water gathering volumes averaged 131,000 barrels of water per day [6] - In Q4 2025, gas processing volumes averaged 444 million cubic feet per day, crude terminaling volumes averaged 122,000 barrels of oil per day, and water gathering volumes averaged 124,000 barrels of water per day [5] Market Data and Key Metrics Changes - The company anticipates lower volumes across its systems in Q1 2026 due to severe winter weather, but expects growth in volumes throughout the rest of 2026 consistent with historical seasonal expectations [6][12] - Approximately 95% of the company's revenues are protected by minimum volume commitments (MVCs) for the full year 2026, providing a stable revenue base [7][13] Company Strategy and Development Direction - The company plans to reduce capital spending significantly, expecting to spend approximately $150 million in 2026, a 40% reduction from 2025, and further decrease to less than $75 million per year in 2027 and 2028 [4][14] - The strategy includes a targeted 5% distribution growth per Class A share through 2028, supported by significant free cash flow generation and debt repayment [5][9] Management's Comments on Operating Environment and Future Outlook - Management highlighted that the severe winter weather impacted Q4 2025 performance but expects a recovery in production as weather conditions improve [40] - The company reiterated its long-term growth outlook, expecting approximately 10% annualized adjusted free cash flow growth through 2028, driven by gas volume growth and lower operating and capital expenditures [8][29] Other Important Information - The gross adjusted EBITDA margin for Q4 2025 was maintained at approximately 83%, above the target of 75%, indicating strong operating leverage [11] - The company had a drawn balance of $338 million on its revolving credit facility at year-end [12] Q&A Session Summary Question: Balance Sheet and Debt Repayment Strategy - Management confirmed plans to use a portion of free cash flow after distributions for debt repayment, expecting to naturally deliver below 3x leverage in the coming years as EBITDA grows [18][19] Question: Third-Party Outlook and Chevron's Production Target - Management indicated no change to the third-party outlook, expecting an average of 10% across oil and gas, and reaffirmed Chevron's target of 200,000 barrels of oil equivalent per day [21][23] Question: Growth Drivers and Cost-Cutting Impact - Management stated that growth in EBITDA is driven by inflation escalators and gas volume growth, with free cash flow growth supported by reduced capital expenditures [27][29] Question: Capital Expenditures Flexibility - Management expects capital expenditures to be lower than $150 million in 2026, with potential for further reductions in 2027 and 2028 [32][35] Question: Weather Impact on Production - Management noted that while severe weather has impacted production, they expect a recovery as conditions improve, with 95% of revenues protected by MVCs [40][41] Question: Long-Term Leverage Target - Management indicated there is no specific leverage target, but expects natural deleveraging as EBITDA grows and debt levels remain stable [43][44]

Core Insights - The company is reiterating its volume guidance for 2026, expecting growth in volumes consistent with historical seasonal expectations, with revenues approximately 95% protected by minimum volume commitments (MVCs) [1][13] - For 2026, the company anticipates lower volumes due to severe winter weather and normal contingencies, but expects adjusted EBITDA growth of 12% over 2025 at the midpoint [2][6] - The capital expenditure is projected to decrease significantly, with a target of approximately $150 million for 2026, a 40% reduction from 2025 [4][31] Financial Performance - In 2025, the company reported a net income of approximately $685 million and adjusted EBITDA of $1.238 billion, reflecting a 9% growth from 2024 [7] - For the fourth quarter of 2025, net income was $168 million, and adjusted EBITDA was $309 million, showing a decrease from the previous quarter due to severe winter weather [8][10] - The company expects net income for 2026 to be between $150 million and $160 million, with adjusted EBITDA projected at approximately $295 million to $305 million [11][13] Capital Expenditure and Cash Flow - The company plans to reduce capital spending further in 2027 and 2028 to less than $75 million per year, leveraging historical investments to drive significant free cash flow generation [3][5] - Adjusted free cash flow for 2026 is expected to be between $850 million and $900 million, with excess cash flow projected at approximately $210 million after funding targeted distribution growth [14][6] - The company aims for a gross adjusted EBITDA margin of approximately 75% in 2026, with total expected capital expenditures of around $150 million [13][14] Revenue and Rate Structure - Approximately 85% of the company's revenues are fixed fee, with rates increasing annually based on an inflation escalator capped at 3% [12] - The company continues to reset rates through an annual rate redetermination process, with expectations for higher tariff rates in 2026 compared to 2025 [12][13] - The company maintains a strong MVC position, with 95% revenue protection in 2026 and 90% in 2027, providing a buffer against volume fluctuations [40][29]

Financial Performance - Fourth quarter 2025 net income was $168.0 million, a decrease from $172.1 million in the fourth quarter of 2024, with net income attributable to Hess Midstream at $93.3 million or $0.72 per Class A share, compared to $0.68 per Class A share in the prior year [2][8]. - Adjusted EBITDA for the fourth quarter of 2025 was $309.1 million, up from $298.2 million in the fourth quarter of 2024, while Adjusted Free Cash Flow was $207.8 million, an increase from $164.3 million in the prior year [5][9]. - Full year 2025 net income was $684.6 million, with Adjusted EBITDA of $1,238.1 million, and total debt at approximately $3.8 billion, representing a leverage ratio of about 3.1x Adjusted EBITDA [9][23]. - Total revenues for the year ended December 31, 2025, were $1,621.3 million, an increase of 8.4% from $1,495.5 million in 2024 [34]. - Adjusted EBITDA for 2025 was $1,238.1 million, compared to $1,136.1 million in 2024, reflecting an increase of 9% [34]. - Net income attributable to Hess Midstream LP for 2025 was $352.9 million, a significant increase from $223.1 million in 2024, representing a growth of 58% [34]. - Basic net income per Class A share increased to $2.87 in 2025 from $2.51 in 2024, marking a rise of 14.3% [34]. - Total operating costs and expenses for 2025 were $613.2 million, up from $576.5 million in 2024, indicating a rise of 6.4% [34]. - Income from operations for 2025 was $1,008.1 million, compared to $919.0 million in 2024, reflecting an increase of 9.7% [34]. - The gross adjusted EBITDA margin improved to 82% in 2025, compared to 81% in 2024 [34]. - Income before income tax expense for 2025 was $798.4 million, an increase from $730.8 million in 2024 [34]. Revenue and Costs - Total revenues for the fourth quarter of 2025 were $404.2 million, compared to $395.9 million in the prior-year quarter, driven by higher tariff rates and third-party services [7][22]. - Total revenues for Q4 2025 reached $404.2 million, a 2.1% increase from $395.9 million in Q4 2024 [36]. - Total operating costs and expenses for Q4 2025 were $152.6 million, consistent with $152.9 million in Q4 2024 [36]. - Operating and maintenance expenses totaled $92.8 million in Q4 2025, compared to $92.7 million in Q4 2024, indicating stable cost management [36]. Operational Metrics - Throughput volumes decreased by 4% for oil terminaling, 1% for gas processing, and 5% for water gathering in the fourth quarter of 2025, primarily due to lower production caused by severe winter weather [5][10]. - Gas gathering throughput averaged 456 Mcf of natural gas per day in Q4 2025, slightly down from 463 Mcf per day in Q4 2024 [40]. - Crude oil gathering throughput was 118 bopd in Q4 2025, a decrease from 120 bopd in Q4 2024 [40]. - Hess Midstream LP's gas processing throughput averaged 444 Mcf of natural gas per day in Q4 2025, down from 447 Mcf per day in Q4 2024 [40]. Capital Expenditures and Investments - Capital expenditures decreased by 44% to $47.6 million in the fourth quarter of 2025, down from $84.3 million in the prior-year quarter, due to the completion of the gas compression capacity expansion [11][23]. - A new compressor station was placed in service in January 2026, providing approximately 50 MMcf/d of installed capacity, with potential for future expansion [10]. Shareholder Returns - Quarterly cash distribution increased to $0.7641 per Class A share for the fourth quarter of 2025, reflecting an increase of $0.0093 per share compared to the third quarter of 2025 [5][13]. Strategic Outlook - Hess Midstream is reaffirming its full year 2026 and long-term guidance issued on December 9, 2025 [5][14]. - The company plans to continue focusing on operational efficiency and cost management to enhance profitability in the upcoming quarters [36]. Mergers and Acquisitions - The merger with Chevron completed on July 18, 2025, resulted in Chevron indirectly owning approximately 37.9% of Hess Midstream [3].

Core Insights - The S&P 500's dividend yield is currently at 1.1%, nearing an all-time low, leading to fewer stocks offering attractive income streams. However, companies like Delek Logistics Partners, Hess Midstream, and Plains All American Pipeline provide yields up to 9% and have recently increased their payouts [1]. Delek Logistics Partners - Delek Logistics Partners declared a quarterly distribution payment of $1.125 per unit, reflecting a 0.4% increase from the previous quarter, extending its distribution growth streak to 52 consecutive quarters and raising its yield to 9% [2]. - The company generated enough cash to cover its distribution payment by over 1.3 times last year, allowing for reinvestment in expansion projects and maintaining financial flexibility [3]. - Delek's market cap is $2.7 billion, with a gross margin of 22.31% and a dividend yield of 8.86%. Recent investments include the completion of the Libby 2 gas processing plant and the acquisition of Gravity Water [5]. Hess Midstream - Hess Midstream announced a quarterly cash distribution payment of $0.7641 per share, a 1.2% increase from the prior quarter, resulting in a yield of 8.2%. The company has increased its dividend by 65% since 2021 [6]. - The company has 100% fee-based minimum-volume contracts, providing stability in cash flow through 2028, and expects to increase its dividend by at least 5% annually during this period while generating about $1 billion in excess free cash flow [9]. - Hess Midstream's market cap is $4.7 billion, with a gross margin of 63.94% and a dividend yield of 8.07% [7]. Plains All American Pipeline - Plains All American Pipeline announced a quarterly distribution payment of $0.4175 per unit, a 10% increase from the previous level, resulting in a yield of 8.5%. The company has grown its payout at a 21% compound annual rate over the last four years [10]. - The company is selling its Canadian natural gas liquids business for $3.8 billion, which will enhance its financial position and allow for reinvestment into its oil pipeline operations [12]. - Plains has the financial flexibility to invest in organic expansion projects and acquisitions, which will help grow its cash flow and continue increasing its high-yielding distribution [13]. Investment Opportunities - The energy midstream sector, represented by Delek Logistics Partners, Hess Midstream, and Plains All American Pipeline, offers attractive passive income investment opportunities with yields between 8% and 9%, and all three companies have a history of regularly raising their payments [14].

Core Insights - The midstream sector is demonstrating strong financial health at the start of 2026, with numerous companies announcing increases in distributions and dividends, reinforcing its position as a reliable income source for investors [1] Payout Growth Across Midstream - Williams (WMB) raised its quarterly cash dividend to $0.525 from $0.50, a 5% increase [1] - Plains All American (PAA/PAGP) increased its quarterly distribution to $0.4175 per unit, reflecting a 9.9% rise [1] - Enterprise Products Partners (EPD) raised its distribution to $0.55, nearly a 1% increase [1] - ONEOK (OKE) announced a 4% sequential increase to $1.07 per share [1] Broad Sector Momentum - Energy Transfer (ET) increased its quarterly distribution to $0.335, a 3.1% year-over-year rise from $0.325 [1] - Hess Midstream (HESM) raised its payout to $0.7641, marking a 9.0% year-over-year increase [1] - Sunoco LP (SUN) announced a distribution of $0.9317, a 5.1% year-over-year increase [1] - Genesis Energy (GEL) raised its distribution by $0.015 to $0.18 per unit, a 9.1% increase [1] - Kinetik (KNTK) raised its payout to $0.81, reflecting a 4% sequential increase [1] - Delek Logistics (DKL) increased its payout to $1.125, representing a 1.85% year-over-year rise [1] ETF Exposure - Energy Transfer, Enterprise, Hess Midstream, Genesis, Delek Logistics, Sunoco, and Plains are included in both the Alerian MLP ETF (AMLP) and the Alerian Energy Infrastructure ETF (ENFR) [1] - AMLP tracks the Alerian MLP Infrastructure Index (AMZI), while ENFR tracks the Alerian Midstream Energy Select Index (AMEI) [1] - Williams, ONEOK, and Kinetik operate as C-corps, with only ENFR holding them [1]

Core Insights - The primary objective for investors focusing on income-oriented investments is to achieve the highest realistic yield available in the market [1] Group 1: Investment Strategy - The investment approach emphasizes uncovering mispriced assets that the market has overlooked, leveraging a fundamentals-first methodology [1] - The analyst has managed investments since 1999, gaining insights through various market cycles, which informs their investment decisions [1] - While acknowledging the importance of market sentiment and technical factors, the focus remains on fundamental analysis in the current algorithm-driven investment environment [1]

Core Viewpoint - Hess Midstream LP (NYSE:HESM) has been downgraded by Raymond James to Market Perform from Outperform, reflecting a shift in investor expectations towards execution and cash flow reliability in the midstream sector [2] Financial Performance - In Q3 2025, Hess Midstream reported a net income of $176 million, slightly down from $180 million in Q2 2025, while adjusted EBITDA increased to $321 million from $316 million in the previous quarter [3] - The company's gross adjusted EBITDA margin remained strong at approximately 80%, exceeding its target of 75%, indicating effective cost management and operational leverage [4] Distribution and Shareholder Returns - Hess Midstream continued to meet its distribution framework, achieving a targeted 5% annual growth per Class A share in Q3, alongside an additional boost from a $100 million share repurchase program [5] - The company provides midstream services including gathering, processing, storage, and transportation for crude oil, natural gas, and natural gas liquids [5]

Core Viewpoint - Hess Midstream LP (HESM) is identified as a potentially undervalued investment opportunity due to its fee-based midstream operations, stable cash flows, and appealing capital-return profile for income-focused investors [1]. Business Overview - Hess Midstream operates gathering, processing, storage, and export infrastructure primarily for Hess Corporation's Bakken operations, benefiting from long-term, take-or-pay contracts that protect cash flows from commodity price fluctuations [2]. Economic Structure - HESM's revenue is driven by volumes rather than oil prices, leading to stable revenues, predictable margins, and strong free cash flow conversion, which are often undervalued during commodity cycle-driven market sentiment [3]. Valuation Metrics - The Intrinsic Value to Price (IV/P) ratio of HESM is 1.20, indicating that its intrinsic value is approximately 20% higher than the current market price, providing a margin of safety for investors [4]. Supporting Metrics - Market Capitalization: approximately US$ 4.0–4.5 billion - Enterprise Value: approximately US$ 7.5–8.0 billion - Free Cash Flow (TTM): approximately US$ 710 million - Free Cash Flow Yield: approximately 9–10% on Enterprise Value - Acquirer's Multiple: 8, indicating HESM is in value territory despite its growth potential [5]. Revenue & Profitability - HESM reported TTM Revenue of approximately US$ 1.6 billion, Operating Income of approximately US$ 1.0 billion, and a Net Income of approximately US$ 330 million, with an Operating Margin exceeding 60% [6]. Balance Sheet & Cash Flow - Total Debt stands at approximately US$ 3.8 billion, with Net Debt at approximately US$ 3.7 billion. The Operating Cash Flow (TTM) is approximately US$ 1.0 billion, supporting a Free Cash Flow of approximately US$ 710 million after capital expenditures [7]. Capital Returns - The company prioritizes returning capital to unitholders through cash distributions, with dividends paid over the past year totaling approximately US$ 320–330 million, which are comfortably covered by free cash flow [8]. Undervaluation Factors - The market undervalues HESM alongside commodity-sensitive energy stocks, not fully reflecting its stable contracts, strong margins, and consistent free cash flow. The IV/P of 1.20 and Acquirer's Multiple of 8 suggest it is priced more like a utility than a growth-oriented infrastructure business [10]. Conclusion - With a solid IV/P of 1.20, an attractive Acquirer's Multiple of 8, and over US$ 700 million in annual free cash flow, HESM presents a compelling value-oriented income opportunity, characterized by predictable cash flows and a durable asset base [11].

Core Viewpoint - Hess Midstream (HESM) has underperformed in the past year, with a loss of 8% in value, particularly showing weakness in the last three months due to concerns over slower long-term growth and Chevron's influence [1] Company Performance - The company has experienced a decline of 8% in its stock value over the past year [1] - There has been notable weakness in the stock's performance over the last three months [1] Market Concerns - There are growing concerns regarding the long-term growth prospects of Hess Midstream [1] - The influence of Chevron is highlighted as a factor contributing to the company's challenges [1]