Net Income: $161 million for Q1 2025, down from $172 million in Q4 2024. Adjusted EBITDA: $292 million for Q1 2025, compared to $298 million in Q4 2024. Total Revenues: Decreased by approximately $13 million due to lower throughput volumes. Processing Revenues: Decreased by approximately $7 million. Gathering Revenues: Decreased by approximately $6 million. Gross Adjusted EBITDA Margin: Approximately 80% for Q1 2025. Capital Expenditures: Approximately $50 million for Q1 2025. Adjusted Free Cash Flow: Approximately $191 million for Q1 2025. Revolving Credit Facility Balance: $128 million at quarter end. Q2 2025 Guidance - Net Income: Expected to be $170 million to $180 million. Q2 2025 Guidance - Adjusted EBITDA: Expected to be $300 million to $310 million. Full Year 2025 Guidance - Net Income: Expected to be $715 million to $765 million. Full Year 2025 Guidance - Adjusted EBITDA: Expected to be $1,235 million to $1,285 million. Full Year 2025 Guidance - Capital Expenditures: Approximately $300 million. Full Year 2025 Guidance - Adjusted Free Cash Flow: Expected to be $735 million to $785 million. Distribution Growth: Targeted annual growth of at least 5% per Class A share through 2027.

Warning! GuruFocus has detected 5 Warning Signs with HESM.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hess Midstream LP (NYSE:HESM) delivered strong operating and financial performance despite challenging weather conditions in the first quarter. The company reaffirmed its full-year 2025 financial and throughput guidance, indicating confidence in its operational stability. Hess Midstream LP (NYSE:HESM) has a low leverage ratio of approximately 3.1 times adjusted EBITDA, which is one of the lowest among its peers. The company has returned $1.95 billion to shareholders since 2021 through accretive repurchases, demonstrating a strong commitment to shareholder returns. Hess Midstream LP (NYSE:HESM) expects to generate greater than $1.25 billion of financial flexibility through 2027 for incremental shareholder returns, including potential multiple unit repurchases per year.

Negative Points

Throughput volumes were down compared to the fourth quarter due to severe winter weather, impacting production from Hess. Net income for the first quarter of 2025 was $161 million, a decrease from $172 million in the fourth quarter of 2024. Adjusted EBITDA for the first quarter of 2025 was $292 million, down from $298 million in the fourth quarter of 2024. Total revenues, excluding pass-through revenues, decreased by approximately $13 million due to lower throughput volumes from severe winter weather. The company anticipates higher seasonal maintenance activity in the second quarter, which may offset some volume growth.

Story Continues

Q & A Highlights

Q: Can you discuss the Bakken outlook in light of ongoing macroeconomic volatility and how MVCs play a role? A: John Gatling, President and COO, explained that the activity in the Bakken is operator-dependent, with Hess maintaining a 4-rig program. MVCs provide protection through 2027, and there has been no significant change in activity levels. Jonathan Stein, CFO, added that Hess Midstream's contracts have no direct commodity price exposure, ensuring stability even in volatile periods.

Q: How are volumes performing against MVCs, and what is the split between Hess and third-party volumes? A: John Gatling noted that MVCs are set at approximately 80% of nominations, with current volumes closer to nominations. Third-party volumes are expected to represent about 10% of total volume, with Hess and third parties both remaining active.

Q: What are your thoughts on the basin rig count and potential rig reductions given the current macro environment? A: John Gatling stated that Hess looks past short-term volatility, maintaining a 4-rig program. The Bakken is seen as a premier basin, and activity levels are expected to remain stable. Jonathan Stein reaffirmed guidance for 2025 and beyond, supported by MVCs.

Q: Can you provide an update on buybacks and secondaries, especially with GIP's reduced stake in Hess? A: Jonathan Stein mentioned that there are no specific plans for secondaries, which are investor demand-driven. Hess Midstream expects to conduct multiple repurchases per year, with no change in guidance.

Q: How have gas processing volumes recovered after weather challenges in Q1? A: John Gatling reported a strong recovery in volumes post-March, aligning with reaffirmed guidance for 2025. The team in North Dakota has managed well, and the trajectory into Q2 looks positive.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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