Hess Midstream LP(US:HESM)2023-07-26 20:49Financial Data and Key Metrics Changes - For Q2 2023, net income was $148 million, an increase from $142 million in Q1 2023 [23] - Adjusted EBITDA for Q2 2023 was $248 million, up from $239 million in Q1 2023 [23] - Total revenues excluding pass-through revenues increased by approximately $18 million, driven by higher throughput volumes [24] - Distributable cash flow was approximately $202 million for Q2 2023, covering distributions by 1.4x [26] - The gross adjusted EBITDA margin for Q2 was maintained at approximately 80% [26] Business Line Data and Key Metrics Changes - In Q2 2023, throughput volumes averaged 358 million cubic feet per day for gas processing, 108,000 barrels per day for crude terminaling, and 87,000 barrels per day for water gathering [12] - Gas processing throughput increased by 6% from Q1 2023, mainly due to the number of wells brought online [12] - Gathering revenues increased by approximately $9 million, processing revenues by approximately $8 million, and terminaling revenues by approximately $1 million [24] Market Data and Key Metrics Changes - Hess Corporation's Bakken net production averaged 181,000 barrels of oil equivalent per day in Q2 2023, exceeding guidance [6] - Bakken net production is expected to grow to approximately 200,000 barrels of oil equivalent per day by 2025, implying a 10% annualized growth rate in throughput volumes [7] Company Strategy and Development Direction - The company executed an accretive share buyback and increased distribution levels for the second time in 2023, focusing on returning capital to shareholders [5] - The strategy includes maintaining a four-rig drilling program and bringing approximately 110 wells online in 2023 [7] - The company anticipates substantial throughput volume growth through 2025, leading to sustainable excess cash flow generation [8] Management's Comments on Operating Environment and Future Outlook - Management highlighted strong operational performance and increased guidance for Bakken net production due to higher gas capture [13] - The company expects net income for 2023 to be between $595 million and $625 million, with adjusted EBITDA guidance updated to $1 billion to $1.03 billion [28] - Management noted that while operating costs are expected to rise in Q3 due to maintenance, EBITDA is still anticipated to grow in Q4 [30][71] Other Important Information - The company plans to maintain capital expenditures at $225 million for 2023, with $210 million allocated for expansion and $15 million for maintenance [15] - The company has returned $1.35 billion to shareholders since the beginning of 2021 through unit repurchases [18] - Public ownership of Hess Midstream has increased to approximately 24% following a secondary offering [22] Q&A Session Summary Question: Guidance update and well connect cadence - Management noted strong performance on the gas side and expects increasing revenues despite higher operating expenses in Q3, with a consistent pace of new wells coming online [36][39] Question: Rig count and its implications - Management confirmed that Hess plans to run four rigs and does not anticipate a material slowdown in activity despite a drop in basin rig count [41][42] Question: Financial flexibility and buybacks - Management indicated that over $1 billion of financial flexibility remains, with plans for multiple buybacks per year through 2025 [49][56] Question: Tax implications from buybacks and ownership changes - Management explained that while there is an expected increase in tax expense due to ownership changes, they do not anticipate paying material cash taxes in the next couple of years [58] Question: Differentiation between buybacks and M&A - Management clarified that they are not interested in large-scale M&A but are open to smaller bolt-on acquisitions, prioritizing return of capital through buybacks [61][62]