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HESM

Hess Midstream NYSE:HESM Stock Report

Last Price

US$25.05

Market Cap

US$6.0b

7D

-8.8%

1Y

-9.5%

Updated

24 Sep, 2022

Data

Company Financials +
HESM fundamental analysis
Snowflake Score
Valuation4/6
Future Growth2/6
Past Performance3/6
Financial Health3/6
Dividends2/6

HESM Stock Overview

Hess Midstream LP owns, develops, operates, and acquires midstream assets.

Hess Midstream LP Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Hess Midstream
Historical stock prices
Current Share PriceUS$25.05
52 Week HighUS$35.71
52 Week LowUS$23.35
Beta1.66
1 Month Change-17.79%
3 Month Change-10.82%
1 Year Change-9.50%
3 Year Change28.13%
5 Year Change14.02%
Change since IPO-2.15%

Recent News & Updates

Sep 19
Why We Like The Returns At Hess Midstream (NYSE:HESM)

Why We Like The Returns At Hess Midstream (NYSE:HESM)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a...

Sep 17

Hess Midstream: Financing Moves Rule

Summary The backers keep raising the distribution while cashing out at appreciating unit prices. Common Unit repurchases aid the cash-out process. The debt ratio levels remain conservative. The distribution increases every quarter and has now roughly doubled since going public. This is that rare case where the parent company needed cash and public holders are benefitting as a result. (Note: This article was in the newsletter on July 30, 2022, and was updated as needed.) Hess Midstream (HESM) has made some very astute financial moves since going public. The result is that the backers of the midstream company are raking in a lot of proceeds while the public benefits as well. Having been through more than a few "take-unders" in the midstream sector, this has been an unexpected very pleasant surprise. Since going public, these common units have appreciated in a very un-midstream-like manner. That is likely to continue because debt levels are still conservative for a midstream company. Hess Midstream Common Price History And Key Valuation Measures (Seeking Alpha Website September 16, 2022.) HESM stock originally began trading in the middle $20s in late 2015. Since then, the common units have appreciated to the current price. That makes this one of very few issues selling at a higher price than was the case back in the 2016 to 2018 period. Given the share repurchases that have been announced from time to time, these common units are unlikely to retreat to previous levels unless there is a major long-term depression. That is highly unlikely. The distribution has now roughly doubled since the midstream units went public. That distribution has been raised every single quarter since going public. The trend appears likely to continue. Hess Corporation (HES) has long had ambitious plans for the Bakken where this midstream company is located. The currently strong commodity price environment only encourages more ambitious plans which is good news for potential continuing distribution increases. The way that the finances are being handled has allowed the sponsors to "cash out" holdings at ever higher prices while the public shareholders benefit from the price appreciation. In the meantime, the debt ratio remains in very conservative territory. Hess Presentation Of Midstream Benefits To Hess Corporation (Hess Corporation Presentation At J.P. Morgan Energy Power and Renewables Conference June 23, 2022.) As shown above, Hess Corporation has generated a fair amount of cash that was used to finance the Guyana Partnership that Exxon Mobil (XOM) operates. The currently strong commodity price environment mitigates the need for cash to finance the partnership (as does the ramp-up of the second FPSO). But proper management of the midstream will allow for more cash to be generated in the future should the need arise. Apparently, the founders of the partnership are well aware of the situation. The ability to increase the distribution every single quarter is something Mr. Market has come to love enough to keep the yield lower than is the case for some of the larger conservative partnerships like Enterprise Products Partners (EPD). In effect, these founders have found a way to cash out at decent prices while much of the industry is still in the market doghouse. Most of us have been through more than a few "take-unders" to be wary of a situation where the parent company needs cash from time to time. But the difference here is this parent company has a decent debt rating with a need to finance a very profitable production expansion partnership. Most of the past (other investment) unfavorable results came from companies facing a "cash-crunch" in a fairly hostile industry environment where the parent company badly needed the midstream cash flow. Some other unfavorable outcomes happened when perfectly good midstream company units fell to the point that made going private became a viable option. Then the value of the midstream units went straight to the private company owner(s) instead of the public participation that is expected elsewhere in the marketplace. The generous and relatively predictable midstream cash flows are what made this outcome possible. Investors learned that they could not count on a midstream recovery to recoup investment losses in a cyclical downturn because going private at market bottoms became an option. Hess midstream, in contrast has been a very pleasant investment experience so far. It also appears a fair amount of good news is on the horizon because Hess has consistently backed growth plans for its Bakken holdings. Hess Midstream Operational And Financial Summary And Guidance (Hess Midstream August 2022, Investor Presentation) The weather has had a big impact upon Hess production so far (and that impact is way less than positive). Anything approaching a normal situation is likely to see a material production jump from a lack of shut-ins and other weather-related issues. Now the midstream company is protected with minimum payment commitments. So, the weather effect was limited to reporting volumes affected. That means that the EBITDA growth shown above will likely be represented by volume in the future rather than minimum commitments under the contract. Another consideration is the fairly low expansion and maintenance budget when compared to guided adjusted EBITDA. That amount of available EBITDA backs-up the excellent distribution coverage to allow for distribution growth in the future while long-term debt gets paid down to lower levels. The low leverage shown above means that the midstream has room to finance more common unit buybacks in the future.

Aug 17
Hess Midstream (NYSE:HESM) Has A Pretty Healthy Balance Sheet

Hess Midstream (NYSE:HESM) Has A Pretty Healthy Balance Sheet

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of...

Aug 08

Hess Corporation: The Massive Stabroek Block Is A Good Stimulus

Hess' revenues increased to $2,988 million in the second quarter of 2022 from $1,598 million in the same quarter a year ago. HES produced 322K net Boep/d in 2Q22 (including Libya). It was down 1.8% from the same quarter a year ago, with contributions from resources in the Bakken of 140K Boep/d. I suggest buying HES at or below $91 with possible lower support at $89. Introduction U.S.-based independent oil and gas producer Hess Corporation (HES) released its second-quarter 2022 results on July 27, 2022. Important note: This article is an update of my article published on July 5, 2022. I have followed HES on Seeking Alpha since 2017, with 18 articles published and counting. 1 - 2Q22 results Snapshot HES reported an adjusted second-quarter 2022 earnings per share of $2.15, beating again analysts' expectations this quarter. The quarterly revenues rose to $2,988 million from $1,598 million last year. Production including Libya was 322K Boep/d in 2Q21. HES 2Q22 highlights (Hess Corp) HES should be considered an excellent long-term play in oil, mainly due to the potential for growth from the Stabroek block in Guyana. 2 - Stock Performance HES is doing quite well on a one-year basis despite correcting significantly in June 2021. The stock is now up 41% on a one-year basis. HES and HESM are underperforming their peers, as we can see below: Data by YCharts Hess Corp. 2Q22 Balance Sheet and Trend - The Raw Numbers Hess Energy 2Q21 3Q21 4Q21 1Q22 2Q22 Total Revenues and other in $ Billion 1.60 1.81 2.26 2.37 2.99 Net income available to common in $ Million -73 115 265 417 667 EBITDA $ Million 647 804 1,087 1,162 1,594 EPS diluted in $/share -0.24 0.37 0.85 1.34 2.14 Cash from operations in $ Million 785 615 899 -156 1,509 Quarterly CapEx in $ Million 355 498 509 546 663 Free Cash Flow in $ Million 430 117 390 -702 846 Cash and cash equivalent $ Billion 2.43 2.42 2.71 1.37 2.16 Long-term debt (consolidated) in $ Billion 8.22 8.51 8.46 7.96 8.33* Dividend per share in $ 0.25 0.25 0.25 0.375 0.375 Shares outstanding (diluted) in Million 307.5 308.1 308.3 308.9 311.26 Oil Production 2Q21 3Q21 4Q21 1Q22 2Q22 Oil Equivalent Production in K Boep/d (incl. Libya) 328 284 316 297 322 Global liquids price ($/b) 59.79 63.17 71.04 86.75 99.16 Global Natural gas price ($/M Btu) 4.05 4.71 4.77 5.28 6.45 Source: Company material * The Midstream segment had cash and cash equivalents of $3 million and total debt of $2.9 billion on June 30, 2022. Analysis: Revenues, Generic Free Cash Flow, and Oil and Gas Production Worldwide 1 - Quarterly total revenues were $2,988 million in 2Q22 HES Quarterly Revenues history (Fun Trading) Hess' revenues increased to $2,988 million in the second quarter of 2022 from $1,598 million in the same quarter a year ago. The quarterly income was $2.14 per diluted share or $667 million, compared to a loss of $0.24 per diluted share in 2Q21. The adjusted net income was $667 million or $2.15 per share compared with an adjusted net income of $74 million in the prior-year quarter. The midstream business generated adjusted net earnings of $65 million, down from $76 million a year ago. 2 - Free cash flow (not including divestiture) and net debt HES Quarterly Free cash flow history (Fun Trading) Note: The generic free cash flow is the cash flow from operation minus the CapEx. HES's trailing 12-month free cash flow jumped to $651 million, with a free cash flow of $846 million in 2Q22, contrasting with the preceding loss of $702 million in 1Q22. The company declared a quarterly dividend of $0.375 per share this quarter. The consolidated net debt (including the midstream) went slightly down to $5.395 billion this quarter. HES Quarterly Cash versus Debt history (Fun Trading) As of June 30, 2022, the company had $2,159 million in cash & cash equivalents, up significantly from $1,370 million in the previous quarter. Its long-term debt (consolidated) was $8,333 million, up sequentially from $7,956 million. HES had no current maturity of the long-term debt this quarter. The Midstream segment had cash and cash equivalents of $3 million and total debt of $2.9 billion on June 30, 2022. The Corporation’s debt to capitalization ratio as defined in its debt covenants was 37.9% on June 30, 2022, from 42.3% on December 31, 2021. E&P debt to adjusted EBITDA is down to 1.2x. The debt profile is improving but not fast enough, and I believe the company should focus more on cutting the debt while the oil market is hot. 3 - Quarterly production analysis 3.1 - Oil equivalent Production HES Quarterly Oil equivalent production history (Fun Trading) HES produced 322K net Boep/d in 2Q22 (including Libya). It was down 1.8% from the same quarter a year ago, with contributions from resources in the Bakken of 140K Boep/d this quarter. It was good progress from the preceding quarter. As we can see below, production was weaker sequentially. HES Quarterly oil equivalent by Basin in 2Q22 (Fun Trading) The Bakken production is by far the primary production for the company and will support the business while ramping up Guyana, which will take many years and a significant CapEx. Crude oil represents 55.3% of the total output. HES Quarterly oil equivalent production Oil, NGL, NG (Fun Trading) Crude oil output was 178K Bop/d in the second quarter of 2022. Further, natural gas liquids production totaled 49K Bbls/d, and natural gas output was 97K Boep/d. I expect an increase in crude oil ratio with Guyana growing steadily. 3.1.1 - Bakken: Net production from the Bakken was 140k boep/d, which remained within our guidance range for the second quarter. However, production was low due to unplanned production shut-ins caused by severe weather in April and May. 3.1.2 - Gulf of Mexico: Net production from the Gulf of Mexico was 29k boep/d, compared with 52k boep/d in the prior-year quarter, primarily due to field decline and unplanned downtime at the Stampede and Penn State fields. 3.1.3 - Guyana - A massive potential long-term. The Stabroek Block is operated by Exxon Mobil’s subsidiary Esso Exploration and Production Guyana ("EEPGL") with 45% interest. Hess Guyana Exploration and CNOOC Petroleum Guyana are the other partners in the block, with interests of 30% and 25%. At the Stabroek Block, net production totaled 67k bop/d in the second quarter of 2022 compared with 26k bop/d in the prior-year quarter. Output from the Liza Destiny FPSO reached its new production capacity of more than 140k gross bop/d in the second quarter of 2022 following the completion of production optimization work initiated in March. Net production from the Liza Unity FPSO, which commenced in February, was 35k bop/d in the second quarter of 2022 and reached its production capacity of 220k gross bop/d in July. Net production guidance for Guyana for the full year 2022 is expected to be approximately 75k bop/d, which includes about 6k bop/d of tax barrels. Net production guidance for the third quarter of 2022 is expected to be 90k bop/d to 95k bop/d, which includes approximately 7k bop/d of tax barrels. Payara's third development will utilize the Prosperity FPSO with an expected capacity of 220k gross bop/d, with the first production expected in late 2023. Exxon Mobil now believe they have discovered massive reserves of at least 11 billion BOE, up from the previous estimate of more than 10 billion BOE. CEO John Hess said in the conference call: Key to our strategy is Guyana, the industry's largest oil province discovered in the last decade. On the Stabroek Block in Guyana, where Hess has a 30% interest and ExxonMobil is the operator, we continue to see the potential for at least 6 floating production storage and offloading vessels, or FPSOs, in 2027 with a gross production capacity of more than 1 million barrels of oil per day and up to 10 FPSOs to develop the discovered resources on the block. 3.1.4 - Southeast Asia:

Jul 29
Hess Midstream (NYSE:HESM) Has Announced That It Will Be Increasing Its Dividend To $0.5559

Hess Midstream (NYSE:HESM) Has Announced That It Will Be Increasing Its Dividend To $0.5559

Hess Midstream LP ( NYSE:HESM ) has announced that it will be increasing its dividend from last year's comparable...

Shareholder Returns

HESMUS Oil and GasUS Market
7D-8.8%-9.3%-5.2%
1Y-9.5%36.4%-23.1%

Return vs Industry: HESM underperformed the US Oil and Gas industry which returned 36.4% over the past year.

Return vs Market: HESM exceeded the US Market which returned -23.1% over the past year.

Price Volatility

Is HESM's price volatile compared to industry and market?
HESM volatility
HESM Average Weekly Movement4.9%
Oil and Gas Industry Average Movement7.8%
Market Average Movement6.9%
10% most volatile stocks in US Market15.9%
10% least volatile stocks in US Market2.8%

Stable Share Price: HESM is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: HESM's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
2014n/aJohn Hesshttps://www.hessmidstream.com

Hess Midstream LP owns, develops, operates, and acquires midstream assets. The company operates through three segments: Gathering; Processing and Storage; and Terminaling and Export. The Gathering segment owns natural gas gathering and compression; crude oil gathering systems; and produced water gathering and disposal facilities.

Hess Midstream LP Fundamentals Summary

How do Hess Midstream's earnings and revenue compare to its market cap?
HESM fundamental statistics
Market CapUS$6.01b
Earnings (TTM)US$65.70m
Revenue (TTM)US$1.25b

16.8x

P/E Ratio

0.9x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
HESM income statement (TTM)
RevenueUS$1.25b
Cost of RevenueUS$299.20m
Gross ProfitUS$946.80m
Other ExpensesUS$881.10m
EarningsUS$65.70m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)1.49
Gross Margin75.99%
Net Profit Margin5.27%
Debt/Equity Ratio602.5%

How did HESM perform over the long term?

See historical performance and comparison

Dividends

8.9%

Current Dividend Yield

110%

Payout Ratio