Hess Midstream LP(US:HESM)2022-01-26 20:30Financial Data and Key Metrics Changes - Full year adjusted EBITDA for 2021 was $909 million, a 21% increase compared to 2020 and 4% above the midpoint of the original 2021 guidance [10][24] - Fourth quarter net income was $165 million, compared to $131 million for the third quarter, and adjusted EBITDA for the fourth quarter was $247 million, compared to $205 million for the third quarter [27] - For 2022, adjusted EBITDA is projected to be in the range of $970 million to $1 billion, representing an approximate 8% increase at the midpoint compared to 2021 [39] Business Line Data and Key Metrics Changes - Gas processing volumes averaged 330 million cubic feet per day in Q4 2021, with crude terminaling and water gathering volumes averaging 113,000 barrels of oil per day and 72,000 barrels of water per day respectively [12] - For 2022, gas processing volumes are expected to average between 330 million and 345 million cubic feet per day, an 11% growth compared to 2021 [15] - Crude terminaling volumes for 2022 are anticipated to average between 110,000 and 115,000 barrels of oil per day, while water gathering volumes are expected to average between 70,000 and 75,000 barrels of water per day [16] Market Data and Key Metrics Changes - Bakken net production averaged 159,000 barrels of oil equivalent per day in Q4 2021, reflecting increased drilling activity and strong development performance [13] - For 2022, Bakken net production is forecasted to average between 165,000 and 170,000 barrels of oil equivalent per day, a 6% to 9% increase over 2021 [14] Company Strategy and Development Direction - The company is focused on low-risk system expansion to capture volume growth through mid-decade, with gas gathering and processing expected to comprise approximately 75% of revenues [11] - The capital program for 2022 includes $235 million in expenditures, with $225 million allocated for expansion activities [18] - The company aims to maintain a disciplined capital allocation strategy while prioritizing returns to shareholders through increased distributions and share repurchases [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational infrastructure and commercial execution to capture increasing gas volume growth, expecting volumes to rise above minimum volume commitments (MVCs) in 2023 [11] - The company reiterated its commitment to sustainability, endorsing the World Bank's zero routine flaring initiative by 2030 and setting targets to eliminate routine flaring by the end of 2025 [14] Other Important Information - The company completed its nomination process with Hess, updating tariff rates for 2022 and ensuring downside protection through 2033 [32] - The company expects to have significant financial flexibility for potential incremental returns of capital beyond targeted distributions, with leverage projected to decline to approximately 2.6x adjusted EBITDA in 2022 [39] Q&A Session Summary Question: Guidance for 2022 and factors affecting it - Management explained that Q1 EBITDA guidance is influenced by lower volumes due to weather and slightly lower MVCs, with expectations for increasing revenue throughout the year [44] Question: Capital expenditures related to compression projects - The majority of the $135 million capital expenditure is for the completion of two compressor stations, with some pre-construction spending for a third station [46] Question: Opportunities in the Gulf of Mexico - Management indicated that Gulf of Mexico transactions are not an immediate priority, focusing instead on supporting Hess's development in the Bakken [51] Question: Capital spending for 2023 and 2024 - Management confirmed that infrastructure is in place to support 2024 volume projections, with no significant increases in capital spending expected [60]