US Energy Demand Will Sustain Bakken Throughput Into New Horizons

Hess Midstream's analyst price target has been lowered by nearly $3, from approximately $44.17 to $41.29 per share, as analysts reset growth expectations in response to reduced rig activity in the Bakken and a less certain outlook following Chevron's acquisition of Hess Corp.

Analyst Commentary

Following the recent developments affecting Hess Midstream, analysts have delivered a mix of optimistic and cautious insights regarding the company’s future valuation, growth prospects, and capital allocation potential.

• Strong contracts are viewed as a stabilizing factor, helping to limit downside risk in the near term despite shifting market conditions.
• The company's low capital expenditure requirements are seen as supporting continued strong capital returns, including dividend growth and potential share buybacks.
• Some analysts highlight that Hess Midstream's capital return potential remains compelling, even as growth expectations are reset.
• A possible corporate buyout is cited as a scenario that could provide additional upside for shareholders.

• Growth expectations have been notably reset, with reduced rig activity in the Bakken leading to muted EBITDA growth outlooks.
• Cautious voices note that the consensus for future performance may still be too optimistic given a softer oil market and Chevron’s operational adjustments.
• The pace of dividend growth and buybacks is likely to slow, as lowered EBITDA projections translate into tighter capital returns moving forward.
• The company's future growth is now more directly tied to Chevron's Bakken development plans. These plans remain uncertain and introduce new risks to execution.

What's in the News

• Chevron cut 575 jobs in Houston following the completion of its $55 billion merger with Hess, with layoffs effective September 26 (Reuters).
• Hess Midstream revised its 2025 earnings guidance, now expecting third quarter net income at the lower end and full year net income within the lower half of its prior guidance range.
• The company updated its 2025 production guidance due to adverse weather and lower expected volumes. It now anticipates gas gathering volumes of 455 to 465 million cubic feet per day and gas processing volumes of 440 to 450 million cubic feet per day.
• Leadership transitions were announced. Jonathan C. Stein was appointed as Chief Executive Officer, and Michael J. Chadwick as Chief Financial Officer, following the Hess and Chevron merger.
• Hess Midstream’s Board authorized a share repurchase program and entered into an agreement to buy back up to $70 million of Class A shares, to be funded through its revolving credit facility.

Valuation Changes

• Consensus Analyst Price Target has decreased by nearly $3, from $44.17 to $41.29 per share.
• Discount Rate has decreased slightly, moving from 7.57% to 7.46%.
• Revenue Growth expectations have fallen notably, from 9.47% to 6.78%.
• Net Profit Margin has narrowed, declining from 37.33% to 34.94%.
• Future P/E has increased modestly from 11.44x to 12.27x, reflecting updated earnings projections.