Hess Midstream LP(US:HESM)2023-01-25 21:20Financial Data and Key Metrics Changes - For the full year 2022, the company reported net income of $621 million and adjusted EBITDA of $983 million, representing an 8% increase compared to the prior year [48] - Fourth quarter net income was $150 million, down from $159 million in the third quarter, while adjusted EBITDA for the fourth quarter was $245 million, compared to $254 million in the third quarter [51] - The gross adjusted EBITDA margin for the fourth quarter was maintained at approximately 80%, indicating strong operating leverage [54] Business Line Data and Key Metrics Changes - Gas processing volumes averaged 312 million cubic feet per day in the fourth quarter, reflecting the impact of severe winter weather [28] - For full year 2023, gas processing volumes are expected to average between 350 million and 360 million cubic feet per day, representing growth of approximately 11% compared to 2022 [29] - Crude terminaling volumes for 2023 are anticipated to average between 105,000 and 115,000 barrels of oil per day, while water gathering volumes are expected to average between 85,000 and 95,000 barrels of water per day [30] Market Data and Key Metrics Changes - Bakken net production averaged 158,000 barrels of oil equivalent per day in the fourth quarter, with a forecast for 2023 to average between 165,000 and 170,000 barrels of oil equivalent per day, a 9% increase compared to 2022 [11][12] - The company expects Bakken net production to grow to an average of approximately 200,000 barrels of oil equivalent per day in 2025 [27] Company Strategy and Development Direction - The company plans to operate a four-rig drilling program, expecting to bring approximately 110 wells online per year in 2023 and 2024, which will support production growth [9] - The capital program prioritizes the expansion of the gas gathering system to support gas throughput volumes increasing by more than 30% in 2025 compared to 2022 [9] - The company aims to achieve zero routine flaring by the end of 2025, enhancing its gas capture capability [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering financial guidance and potential incremental shareholder returns, with revenues being 80% to 90% covered by minimum volume commitments (MVCs) through 2025 [10] - The management acknowledged the challenges posed by severe winter weather in 2022 but emphasized the integrated team's ability to manage and stabilize operations [19][21] - The company expects to maintain a long-term leverage target of three times adjusted EBITDA while generating excess adjusted free cash flow beyond distributions [73] Other Important Information - The company completed $1.15 billion of unit repurchases over the past two years and increased distributions by approximately 27% on a per-share basis [50] - For 2023, the company expects adjusted EBITDA in the range of $990 million to $1,030 million, representing a 3% increase at the midpoint compared to 2022 [30][68] Q&A Session Summary Question: How is the company thinking about the cadence of the potential $1 billion in returns? - Management indicated that the $1 billion is targeted for potential share repurchases and does not include dividend increases, with multiple opportunities expected through 2025 [40][46] Question: Can you discuss the willingness to deploy the $1 billion in returns? - Management emphasized that the focus is on maintaining financial strength while prioritizing return on capital, with decisions made based on market conditions and board approval [61][62] Question: How does the company factor third-party volume mix into the 2023 volume guidance? - The company maintains a consistent assumption of about 10% for third-party volumes, which is expected to continue into the future [56]