Last Update 16 Dec 25

HESM: Bakken Rig Cuts Will Shape Future EBITDA And Capital Returns

Analysts have trimmed their average price target for Hess Midstream to about $37. This reflects reduced long term revenue growth expectations amid anticipated Chevron rig cuts in the Bakken and more modest, though still resilient, EBITDA and capital return trajectories.

Analyst Commentary

Street research points to a more balanced risk and reward profile for Hess Midstream, with the stock viewed as fairly valued after factoring in a softer oil backdrop, Chevron's planned Bakken rig reductions, and moderated growth assumptions.

Bullish Takeaways

Bullish analysts highlight that contractual protections and fee-based revenues help limit near term downside to cash flows, supporting valuation despite slower growth.
Lower capital expenditure needs are seen as a key positive, enabling continued dividend growth of more than 5 percent annually alongside ongoing share repurchases.
Some see the capital return profile as compelling for income focused investors, with a relatively visible path to sustained payouts even under flatter EBITDA scenarios.
The ongoing strategic review by Chevron in the Bakken is viewed as a potential upside catalyst if activity levels or development plans prove more supportive than currently modeled.

Bearish Takeaways

Bearish analysts argue that the stock now embeds more muted long term growth, with expected EBITDA reduced by around 10 to 12 percent and projected to be flat by 2026. This is seen as limiting the potential for a valuation re rating.
Several highlight that consensus estimates may still be too optimistic relative to the updated rig outlook, raising the risk of future estimate cuts and multiple compression.
Slower Bakken development is expected to weigh on throughput driven upside, which in turn tempers the pace of future capital returns versus prior cycles.
While a potential buyout remains a theoretical support, some caution that on a standalone basis the risk adjusted return profile now looks less compelling at current valuation levels.

What's in the News

Issued 2026 guidance calling for net income between $650 million and $700 million, supported by targeted gas and crude gathering, processing, terminal, and water volumes across its Bakken system (Key Developments).
Provided unaudited guidance for fourth quarter 2025 net income of $170 million to $180 million and full year 2025 net income of $685 million to $695 million, indicating a flatter near term earnings trajectory (Key Developments).
Updated 2025 gas throughput guidance lower, citing adverse weather, maintenance, and weaker third party volumes, with gas gathering now expected at 455 to 465 MMcf per day and gas processing at 440 to 450 MMcf per day (Key Developments).
Revised third quarter and full year 2025 earnings outlook toward the lower end of prior ranges, indicating softer profitability versus earlier expectations (Key Developments).
Completed a $70 million share repurchase tranche, buying back 1,706,118 shares, or about 1.3 percent of shares, indicating its capital return commitment (Key Developments).

Valuation Changes

Fair Value, unchanged at approximately $36.86 per share, indicating no shift in the model's intrinsic value estimate despite updated assumptions.
Discount Rate, edged down slightly from about 7.15 percent to roughly 7.12 percent, modestly lowering the implied cost of equity.
Revenue Growth, reduced meaningfully from around 2.41 percent to about 1.78 percent, reflecting more conservative long term volume and pricing expectations.
Net Profit Margin, ticked down marginally from roughly 30.24 percent to about 30.13 percent, implying a slightly less favorable long run profitability outlook.
Future P/E, increased modestly from about 13.67x to roughly 13.97x, suggesting a somewhat higher valuation multiple applied to forward earnings.

The company benefits from stable, fee-based revenues and strong growth potential due to essential infrastructure and long-term contracts in key U.S. energy markets.
Conservative financial management and ongoing investments support rising dividends, robust cash flow, and increased shareholder returns even under inflationary pressures.
Heavy reliance on Bakken production and Chevron activity, limited diversification, and rising ESG pressures heighten operational, financial, and strategic risks for long-term stability.

Catalysts

About Hess Midstream

Owns, operates, develops, and acquires midstream assets and provide fee-based services to Hess and third-party customers in the United States.What are the underlying business or industry changes driving this perspective?

Anticipated sustained strong throughput growth driven by robust upstream production and ongoing U.S. energy export demand, positioning the company to benefit from elevated utilization rates and higher revenues across gas processing, oil terminaling, and water gathering through at least 2027.
Multi-year minimum volume contracts with Hess Corp (now under Chevron), providing highly predictable, inflation-resistant fee-based revenue streams through the late 2030s, which supports stable adjusted EBITDA and consistent dividend/distribution growth.
Large, strategic, and largely irreplaceable infrastructure footprint in the core Bakken shale combined with ongoing investments (like compressor stations and the Capa gas plant) enables Hess Midstream to capture incremental volume growth as domestic and export energy needs remain high, further supporting margin and EBITDA expansion.
Conservative leverage and investment-grade balance sheet (recent BBB
upgrade) create additional financial flexibility for continued buybacks and rising distributions, directly supporting EPS and total shareholder return, with $1.25B in planned repurchases/distributions through 2027.
Long-term focus on disciplined, low-risk growth investments and high-operating leverage (80% EBITDA margin) ensures the company can convert volume and pricing tailwinds into higher free cash flow and net income, further enhancing returns even amid inflation and cost pressures.

Hess Midstream Earnings and Revenue Growth

Hess Midstream Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Hess Midstream's revenue will grow by 9.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 18.5% today to 37.0% in 3 years time.
Analysts expect earnings to reach $769.1 million (and earnings per share of $3.26) by about September 2028, up from $290.9 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, up from 18.3x today. This future PE is greater than the current PE for the US Oil and Gas industry at 12.6x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.53%, as per the Simply Wall St company report.

Hess Midstream Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company's revenues and cash flow are heavily reliant on sustained production growth from Hess Corporation (now under Chevron), and any reduction in drilling activity, changes to Chevron's capital allocation, or shifts in Bakken development strategy could materially reduce throughput volumes, impacting both revenue and EBITDA.
Limited geographic diversification exposes Hess Midstream to regional risks (such as local environmental regulations, basin-specific production declines, or adverse market dynamics in the Bakken), which could put downward pressure on margins and overall earnings stability during periods of basin or operational challenges.
As the Bakken matures, flat or declining long-term oil production and slower-than-expected gas growth could lead to excess midstream capacity and underutilization of pipeline and gathering assets, reducing throughput, revenue, and ultimately compressing net margins.
The exit of a major independent shareholder (GIP) removes a layer of governance independence; despite new board mechanisms, increased sponsor influence could lead to capital allocation decisions or strategic shifts that are less favorable for public shareholders, potentially affecting valuation and the consistency of shareholder-focused returns.
The ongoing global energy transition and stricter environmental policies raise long-term structural risks; expanding ESG-driven investor scrutiny and regulation could increase Hess Midstream's cost of capital and operating expenses, while gradual displacement by renewables may limit growth opportunities and put future revenue and earnings at risk.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $46.167 for Hess Midstream based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $769.1 million, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 7.5%.
Given the current share price of $40.7, the analyst price target of $46.17 is 11.8% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

HESM: Dividend Growth And Buybacks Will Offset Bakken Development Uncertainty