Hess Midstream LP Form 10-Q for the Quarter Ended March 31, 2025
Hess Midstream LP, a limited partnership, reported its financial results for the quarter ended March 31, 2025. The company’s consolidated balance sheet showed total assets of $2.3 billion, total liabilities of $1.4 billion, and total partners’ capital of $844 million. The company’s consolidated statements of operations reported net income of $43 million for the quarter, compared to a net loss of $14 million for the same period in 2024. The company’s consolidated statements of cash flows reported net cash provided by operating activities of $143 million for the quarter, compared to net cash used in operating activities of $21 million for the same period in 2024. The company’s management’s discussion and analysis of financial condition and results of operations highlighted the company’s strong financial performance, driven by increased volumes and higher prices for its products. The company also reported that it had $500 million of available liquidity at the end of the quarter.
Overview of Hess Midstream LP’s Financial Performance
Hess Midstream LP, a fee-based, growth-oriented limited partnership, reported strong financial results for the first quarter of 2025. The company generated consolidated net income of $161.4 million, with net income attributable to Hess Midstream LP of $71.6 million, or $0.65 basic earnings per Class A Share. This represents a slight increase compared to the first quarter of 2024.
Revenues and other income increased 7% year-over-year to $382.0 million, driven by higher physical volumes across Hess Midstream’s gathering, processing and storage, and terminaling and export segments. Total operating costs and expenses rose 8% to $144.6 million, primarily due to higher employee costs, pass-through electricity and produced water expenses, and increased depreciation. Interest expense also increased by $7.9 million, reflecting the impact of new debt issuances.
Table 1: Key Financial Metrics
| Metric | Q1 2025 | Q1 2024 | Change |
|---|---|---|---|
| Consolidated Net Income ($ million) | 161.4 | 161.9 | -0.3% |
| Net Income Attributable to Hess Midstream LP ($ million) | 71.6 | 44.6 | +60.5% |
| Revenues and Other Income ($ million) | 382.0 | 355.6 | +7.4% |
| Total Operating Costs and Expenses ($ million) | 144.6 | 133.6 | +8.2% |
| Interest Expense, Net ($ million) | 56.4 | 48.5 | +16.3% |
Segment Performance
Hess Midstream’s operations are organized into three reportable segments: Gathering, Processing and Storage, and Terminaling and Export.
Gathering Segment The Gathering segment saw revenues and other income increase by $15.5 million, or 8.2%, driven by higher physical volumes for gas, crude oil, and water gathering, as well as higher tariff rates and pass-through revenue. Operating and maintenance expenses rose $4.1 million, or 8.9%, primarily due to increased employee costs. Depreciation expense also increased by $1.6 million.
Processing and Storage Segment Revenues and other income in the Processing and Storage segment increased by $8.7 million, or 6.3%, mainly due to higher gas processing volumes, partially offset by lower tariff rates. Operating and maintenance expenses rose $2.5 million, or 9.9%, largely attributable to higher third-party processing fees and pass-through costs.
Terminaling and Export Segment The Terminaling and Export segment reported a $2.2 million, or 7.7%, increase in revenues and other income, driven by higher physical volumes and tariff rates for crude oil terminaling and NGL loading. Operating and maintenance expenses remained relatively flat compared to the prior-year period.
Outlook and Key Risks
Hess Midstream’s financial performance is closely tied to crude oil, natural gas, and NGL production in the Bakken region, which is ultimately dependent on commodity prices and exploration and production activity by Hess and third-party producers. While Hess Midstream’s long-term commercial agreements with Hess provide cash flow stability and downside protection through minimum volume commitments, the company’s ability to execute its growth strategy and attract third-party volumes will be influenced by broader market conditions.
The majority of Hess Midstream’s systems have transitioned to a fixed-fee structure based on 2021-2023 average rates, adjusted annually for inflation up to 3%. This structure may provide less downside risk protection compared to the previous fee recalculation mechanism. However, minimum volume commitments are expected to continue providing a level of downside protection through 2033.
Key risks facing Hess Midstream include:
- Fluctuations in crude oil, natural gas, and NGL prices and demand, which can impact production volumes and development activity
- Ability to utilize remaining capacity and execute expansion projects to capture incremental throughput
- Potential disruptions or interruptions to operations due to accidents, severe weather, or cyber-attacks
- Regulatory changes or increased compliance costs related to environmental and safety regulations
- Successful integration of Hess’ proposed merger with Chevron, including obtaining necessary approvals and managing any operational or financial impacts
Capital Resources and Liquidity
Hess Midstream maintains a strong liquidity position, with access to cash on hand, cash generated from operations, its $1.4 billion revolving credit facility, and the ability to issue additional debt and equity securities. The company’s capital expenditures totaled $50.1 million in the first quarter of 2025, primarily for continued expansion of its compression capacity and gas capture infrastructure.
In February 2025, Hess Midstream issued $800 million of 5.875% senior unsecured notes due 2028, using the proceeds along with borrowings under its revolving credit facility to redeem its outstanding $800 million 5.625% notes due 2026. As of March 31, 2025, the company had $3.57 billion in total debt outstanding, with a weighted average interest rate of approximately 5.4%.
Hess Midstream’s credit facilities and senior note indentures contain customary covenants, including a requirement to maintain a total debt to EBITDA ratio of no greater than 5.0 to 1.0. As of March 31, 2025, the company was in compliance with all of its debt covenants.
Conclusion
Hess Midstream LP delivered solid financial results in the first quarter of 2025, with increases in revenues, Adjusted EBITDA, and net income attributable to the partnership. The company’s diversified asset base and long-term commercial agreements with Hess provide a stable foundation for its operations, though it remains exposed to broader market risks related to commodity prices and production activity.
Looking ahead, Hess Midstream’s ability to execute its growth strategy, optimize utilization of its existing assets, and navigate the transition to a fixed-fee structure will be key factors in determining its future performance. The company’s strong liquidity position and prudent financial management should help it weather potential market volatility and position it for continued success.
