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Hess Midstream LP Announces Distribution Per Share Level Increase

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Hess Midstream LP (NYSE: HESM) announced a 2.7% increase in the quarterly cash distribution per Class A share for the fourth quarter of 2023 compared to the third quarter. The company aims for at least 5% annual growth in distributions per Class A share through 2025. The Board of Directors prioritizes consistent return of capital to shareholders, utilizing excess adjusted free cash flow for further distribution level increases. The quarterly distribution of $0.6343 per Class A share will be payable on February 14, 2024, to shareholders of record as of February 8, 2024.
Positive
  • 2.7% increase in quarterly cash distribution per Class A share
  • Prioritizing consistent return of capital to shareholders
  • Utilization of excess adjusted free cash flow for distribution level increases
Negative
  • None.

The announcement by Hess Midstream LP regarding the increase in its quarterly cash distribution per Class A share is a notable event for investors and analysts. This move signals the company's confidence in its financial stability and its commitment to providing shareholder value. The distribution hike of approximately 2.7% for Q4 2023 relative to Q3 2023 is a strategic decision that aligns with the company's target of at least 5% annual growth in distributions through 2025.

From a financial perspective, the additional 1.5% increase in the distribution level suggests the company is generating sufficient adjusted free cash flow to not only maintain but also grow its payouts. This is a positive indicator of Hess Midstream's operational efficiency and its ability to manage capital effectively. Investors typically view such increases as a sign of a company's robust financial health and a potentially attractive yield proposition.

Furthermore, the assertion of over $1 billion in financial flexibility through 2025 implies that Hess Midstream is well-positioned to navigate market fluctuations and invest in opportunities that may arise. This financial cushion could be a critical factor in sustaining growth and returns in a sector known for its capital-intensive nature and susceptibility to commodity price volatility.

The energy sector, particularly midstream companies like Hess Midstream, operates within a complex economic environment. The decision to increase distributions is often influenced by broader economic conditions, including energy prices, demand and infrastructure development. The midstream sector is integral to the energy supply chain, handling transportation, storage and processing of hydrocarbons, which are subject to cyclical market trends.

The announcement is a microcosm of the current economic climate in the energy sector. A steady or increasing distribution can be viewed as a positive economic indicator, suggesting that the underlying commodity market is stable or growing and that the company is efficiently navigating operational challenges. The company's financial strategy and its aim to provide consistent returns could be seen as a stabilizing factor for investors, especially in an industry known for its volatility.

However, it's important to consider the potential risks associated with such financial strategies. While the increase in distributions and the stated financial flexibility are positive, they must be weighed against the backdrop of global energy markets, regulatory changes and potential economic downturns which could affect the company's performance and ability to maintain its distribution growth targets.

Examining the impact of Hess Midstream's increased distribution on the stock market requires an understanding of investor sentiment and market trends within the midstream sector. Increased distributions can make a stock more attractive to income-focused investors, potentially leading to a positive impact on the stock's price. It's a signal that management is confident in the company's ability to generate and allocate cash effectively.

Additionally, the company's strategy to grow annual distributions aligns with investor expectations for steady income generation, a particularly appealing trait for those looking for lower-risk investments in the energy sector. The commitment to a 5% growth target through 2025 could position Hess Midstream favorably against its peers, potentially leading to a re-rating of the stock by the market.

It is essential to monitor the company's ability to sustain these increases, especially in the context of the overall industry's performance. The market will also consider the utilization of the $1 billion financial flexibility, as strategic investments or unit repurchases could further influence the stock's performance. Investors will be keen to see how the company balances growth, returns and capital discipline moving forward.

HOUSTON--(BUSINESS WIRE)-- Hess Midstream LP (NYSE: HESM) (“Hess Midstream”), today announced that the Board of Directors of its general partner declared a quarterly cash distribution of $0.6343 per Class A share for the quarter ended December 31, 2023. The distribution represents an approximate 2.7% increase in the quarterly distribution per Class A share for the fourth quarter of 2023 as compared to the third quarter of 2023. This increase consists of an approximate 1.5% increase in Hess Midstream’s distribution level per Class A share in addition to the quarterly 1.2% increase per Class A share consistent with its target of at least 5% growth in annual distributions per Class A share through 2025.

“We continue to execute on our differentiated financial strategy, prioritizing consistent and ongoing return of capital to our shareholders,” said Jonathan Stein, Chief Financial Officer of Hess Midstream. “With today’s announcement, we have once again utilized our excess adjusted free cash flow beyond our growing distributions to provide a further return of capital to our shareholders through a 1.5% increase per Class A share in our quarterly distribution level in addition to the quarterly 1.2% increase per Class A share consistent with our target of at least 5% growth in annual distributions per Class A share through 2025. We expect to continue to have more than $1 billion of financial flexibility through 2025 that can be used to support our return of capital framework, including potential additional and ongoing unit repurchases that could support further distribution per share level increases.”

The quarterly distribution will be payable on February 14, 2024, to Class A shareholders of record as of the close of business on February 8, 2024.

About Hess Midstream

Hess Midstream LP is a fee-based, growth-oriented midstream company that owns, operates, develops and acquires a diverse set of midstream assets to provide services to Hess Corporation and third-party customers. Hess Midstream owns oil, gas and produced water handling assets that are primarily located in the Bakken and Three Forks Shale plays in the Williston Basin area of North Dakota. More information is available at www.hessmidstream.com.

Cautionary Note Regarding Forward-looking Information

This press release contains “forward-looking statements” within the meaning of U.S. federal securities laws. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results, including our ability to increase our distributions or achieve our targeted distribution growth rate; our business strategy and profitability; future economic and market conditions in the oil and gas industry; and our ability to execute future accretive opportunities, including incremental return of capital to shareholders and potential incremental unit repurchases.

Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements: the ability of Hess and other parties to satisfy their obligations to us, including Hess’ ability to meet its drilling and development plans on a timely basis or at all, its ability to deliver its nominated volumes to us, and the operation of joint ventures that we may not control; our ability to generate sufficient cash flow to pay current and expected levels of distributions; reductions in the volumes of crude oil, natural gas, natural gas liquids (“NGLs”) and produced water we gather, process, terminal or store; the actual volumes we gather, process, terminal and store for Hess in excess of our minimum volume commitments and relative to Hess’ nominations; fluctuations in the prices and demand for crude oil, natural gas and NGLs; changes in global economic conditions and the effects of a global economic downturn or inflation on our business and the business of our suppliers, customers, business partners and lenders; our ability to comply with government regulations or make capital expenditures required to maintain compliance, including our ability to obtain or maintain permits necessary for capital projects in a timely manner, if at all, or the revocation or modification of existing permits; our ability to successfully identify, evaluate and timely execute our capital projects, investment opportunities and growth strategies, whether through organic growth or acquisitions; costs or liabilities associated with federal, state and local laws, regulations and governmental actions applicable to our business, including legislation and regulatory initiatives relating to environmental protection and health and safety, such as spills, releases, pipeline integrity and measures to limit greenhouse gas emissions and climate change; our ability to comply with the terms of our credit facility, indebtedness and other financing arrangements, which, if accelerated, we may not be able to repay; reduced demand for our midstream services, including the impact of weather or the availability of the competing third-party midstream gathering, processing and transportation operations; potential disruption or interruption of our business due to catastrophic events, such as accidents, severe weather events, labor disputes, information technology failures, constraints or disruptions and cyber-attacks; any limitations on our ability to access debt or capital markets on terms that we deem acceptable, including as a result of weakness in the oil and gas industry or negative outcomes within commodity and financial markets; liability resulting from litigation; risks and uncertainties associated with Hess’ proposed merger with Chevron Corporation; and other factors described in Item 1A—Risk Factors in our Annual Report on Form 10-K and any additional risks described in our other filings with the Securities and Exchange Commission.

As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.

Investor Contact:

Jennifer Gordon

(212) 536-8244

Media Contact:

Lorrie Hecker

(212) 536-8250

Source: Hess Midstream LP

The quarterly cash distribution per Class A share for the fourth quarter of 2023 is $0.6343.

The quarterly distribution will be payable on February 14, 2024.

The ticker symbol for Hess Midstream LP is HESM.

The record date for Class A shareholders to receive the quarterly distribution is February 8, 2024.
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Pipeline Transportation of Crude Oil
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Energy Minerals, Integrated Oil, Transportation and Warehousing, Pipeline Transportation of Crude Oil

About HESM

hess midstream partners lp focuses on processing natural gas and fractionating natural gas liquids (ngls) in the united states. it also intends to engage in terminaling and loading crude oil and ngls; transporting crude oil through rail cars; and storing and terminaling propane. hess midstream partners gp llc is the general partner of the company. the company was founded in 2014 and is based in houston, texas