Hess Midstream LP(US:HESM)2021-10-27 20:29Financial Data and Key Metrics Changes - For Q3 2021, net income was $131 million, down from $162 million in Q2 2021. Adjusted EBITDA for Q3 was $205 million, compared to $230 million in Q2 2021, primarily due to lower gas processing revenue and higher operating expenses [28][29][30] - The company expects full year 2021 adjusted EBITDA to be in the range of $895 million to $905 million, representing a 20% growth compared to full year 2020 results [34] Business Line Data and Key Metrics Changes - Gas processing volumes averaged 285 million cubic feet per day in Q3, below minimum volume commitment (MVC) levels. Crude terminaling volumes averaged 111,000 barrels of oil per day, and water gathering volumes averaged 75,000 barrels of water per day [11] - The company anticipates gas processing volumes to average approximately 300 million cubic feet per day for the full year 2021, and crude terminaling volumes to average approximately 120,000 barrels of oil per day [14] Market Data and Key Metrics Changes - Hess Corporation reported Bakken net production averaging 148,000 barrels of oil equivalent per day, exceeding guidance of 145,000 barrels per day, driven by the successful execution of the Tioga gas plant turnaround [12] - The company expects Bakken net production to average approximately 155,000 barrels of oil equivalent per day for the full year 2021 [13] Company Strategy and Development Direction - The company continues to execute its strategy by expanding infrastructure to meet customer needs and delivering strong operational performance [21] - The focus remains on the Bakken region, with plans to grow production and leverage strategic infrastructure to drive incremental volume growth [12][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance and the ability to meet customer needs, with expectations for substantial organic growth in gas processing volumes in 2022 [18][38] - The company anticipates continued growth in adjusted EBITDA and free cash flow generation, with leverage expected to decline below the conservative target of 3 times adjusted EBITDA in 2022 [27][38] Other Important Information - The company completed a $750 million unit repurchase from sponsors, optimizing its capital structure and bringing leverage to approximately 3 times adjusted EBITDA [26] - The company maintained a distribution coverage of at least 1.4 times and targets annual distribution per Class A share growth of at least 5% through 2023 [27] Q&A Session Summary Question: Capital allocation and return of capital opportunities for 2022 - Management indicated that the financial strategy includes maintaining an optimized capital structure and utilizing free cash flow for buybacks and increased dividends [42][43] Question: Upstream activity and Gulf of Mexico long cycle assets - Management stated that the Gulf transaction is not an immediate priority, focusing instead on building out the business in the Bakken [45][46] Question: Midstream consolidation and M&A opportunities - The company is primarily focused on bolt-on opportunities in the Bakken to strengthen its infrastructure, rather than active M&A [51][52] Question: Expansion capital expenditures for 2022 - Management expects capital expenditures to increase slightly in 2022, primarily to support Hess's development plan [66][68] Question: Ethane recovery outlook in the Bakken - Management expressed confidence in their ability to take advantage of ethane prices due to the high-quality asset at the Tioga gas plant [77][78] Question: Future processing capacity needs in the basin - Management believes there will be a need for more processing capacity in the future, depending on Hess's plans and third-party activity [85][87]