Hess Midstream Partners LP Reports Estimated Results for the First Quarter of 2019

Highlights:

  • Acquired crude oil and gas gathering assets of Summit Midstream
    Partners’ Tioga Gathering System.
  • Announced plans to expand natural gas processing capacity at the
    Tioga Gas Plant to 400 million cubic feet per day (MMcf/d), expected
    to be in service in mid-2021.
  • Net income was $95.3 million. Net cash provided by operating
    activities was $126.1 million.
  • Adjusted EBITDA1 was
    $128.3 million, of which $25.0 million was attributable to Hess
    Midstream Partners LP.
  • DCF1 of Hess Midstream
    Partners LP was $24.7 million resulting in 1.13x DCF coverage of
    distributions for the period.
  • Increased quarterly cash distribution to $0.3833 per unit, an
    increase of 15% compared to the prior-year quarter.
  • Compared with the prior-year quarter, throughput volumes
    increased 40% for crude oil gathering, 33% for crude oil terminaling,
    11% for gas processing, and 7% for gas gathering driven by Hess
    Corporation’s growing production, capturing additional third-party
    customer volumes, and continued strong operating performance of our
    assets.
  • Hess Midstream reaffirms its previously announced guidance for
    full year 2019.

HOUSTON–(BUSINESS WIRE)–Hess Midstream Partners LP (NYSE: HESM) (“Hess Midstream”) today
reported first quarter 2019 net income of $95.3 million compared with
net income of $89.0 million for the first quarter of 2018. After
deduction for noncontrolling interests, net income attributable to Hess
Midstream was $18.1 million, or $0.32 per common unit. Hess Midstream
generated Adjusted EBITDA of $25.0 million and DCF of $24.7 million for
the first quarter of 2019.

Commenting on the first quarter 2019 results, John Gatling, Chief
Operating Officer of Hess Midstream said, “Hess Midstream Partners is
off to a strong start in the first quarter of 2019, achieving
significant milestones including completing the acquisition of Summit
Midstream’s Tioga crude oil and gas gathering assets, increasing our
total compression and gas gathering capacity and announcing plans for a
major gas processing expansion. We continue to capitalize on
opportunities to create optionality throughout our system. We are
positioned well for significant growth in the second half of 2019 and in
the long-term.”

Financial Results

Hess Midstream’s results included in this release are consolidated to
include the noncontrolling interests in Hess Midstream’s assets retained
by Hess Infrastructure Partners LP (“Hess Infrastructure Partners”). We
refer to certain results as “attributable to Hess Midstream
Partners LP,” which excludes the noncontrolling interests in Hess
Midstream’s assets retained by Hess Infrastructure Partners.

Revenues and other income in the first quarter of 2019 were
$174.2 million, including $2.8 million of shortfall fees. Revenues were
up from $157.0 million in the prior-year quarter primarily attributable
to higher throughput volumes and tariff rates. Total costs and expenses
in the first quarter of 2019 were $78.5 million up from $67.7 million in
the prior-year quarter primarily attributable to higher depreciation
driven by new gathering assets placed in service, and a combination of
higher maintenance, third-party rail transportation and overhead costs.
Net income for the first quarter of 2019 was $95.3 million and net cash
provided by operating activities was $126.1 million.

Adjusted EBITDA was $128.3 million, of which $25.0 million is
attributable to Hess Midstream. DCF of $24.7 million resulted in a
1.13x DCF coverage ratio relative to distributions.

Operational Highlights

Today, on April 25, 2019, Hess Midstream announced plans to expand
natural gas processing capacity at the Tioga Gas Plant by 150 MMcf/d for
total processing capacity of 400 MMcf/d. Capital expenditures for the
expansion are expected to be approximately $150 million gross, or $30
million net attributable to Hess Midstream Partners LP, and the
expansion is expected to be in service by mid-2021.

On March 22, 2019, Hess Midstream completed the previously announced
acquisition of crude oil and gas gathering assets of Summit Midstream
Partners’ Tioga Gathering System for cash consideration of $61.0 million
gross, or $12.2 million net to Hess Midstream, with the potential for an
additional $6.8 million of gross contingent payments in future periods
subject to certain future performance metrics.

Throughput volumes were up across all segments in the first quarter of
2019 compared to the first quarter of 2018. In the gathering segment,
throughput volumes increased 40% for crude oil gathering and 7% for gas
gathering compared to the prior-year quarter, driven by growing Hess
production and higher third-party volumes. In the crude oil terminaling
segment, throughput volumes increased 33% compared to the prior-year
quarter, also driven by growing Hess production and higher third-party
volumes. In the gas processing segment, throughput volumes increased 11%
compared to the prior-year quarter driven by increased utilization of
available capacity at the Tioga Gas Plant. Construction of the Little
Missouri 4 (“LM4”) gas processing plant is well advanced and is now
estimated by the operator, Targa Resources Corp., to be completed in the
third quarter of 2019, after adverse weather impacted construction in
the first quarter.

Capital Expenditures

Gross capital expenditures for the first quarter of 2019 totaled
$101.6 million, including $67.8 million associated with the acquisition
of Summit Midstream Partners’ Tioga Gathering System, $25.9 million of
expansion capital expenditures, $7.0 million of equity investments
associated with the LM4 gas processing plant, and $0.9 million of
maintenance capital expenditures. The capitalized expenditures
associated with the acquisition of the Tioga Gathering System include
$6.8 million contingently payable in future periods. Under the
contribution agreement we entered into with Hess Infrastructure Partners
in connection with our initial public offering (“IPO”), Hess
Infrastructure Partners reimbursed $0.4 million of the $0.9 million
gross maintenance capital expenditures incurred during the first quarter
of 2019. Capital expenditures in the prior-year quarter were
$60.9 million, including $35.4 million of expansion capital
expenditures, $24.3 million of equity investments associated with the
LM4 gas processing plant, and $1.2 million of maintenance capital
expenditures. The increase in expansion capital expenditures, excluding
acquisitions and equity investments, was primarily attributable to
expansion of our gathering system and compression capacity to support
Hess and third-party growth. Net capital expenditures attributable to
Hess Midstream Partners LP in the first quarter of 2019 totaled
$20.3 million, including $13.5 million associated with the acquisition
of Summit Midstream Partners’ Tioga Gathering System, $5.2 million of
expansion capital expenditures, $1.4 million of equity investments
associated with the LM4 gas processing plant and $0.2 million of
maintenance capital expenditures.

Quarterly Cash Distributions

On April 23, 2019, our general partner’s board of directors declared a
cash distribution of $0.3833 per unit for the first quarter of 2019, an
increase of 3.6% over the distribution for the prior quarter and 15%
compared to the first quarter of 2018. The distribution is expected to
be paid on May 14, 2019 to unitholders of record as of the close of
business on May 3, 2019.

Guidance

Hess Midstream is targeting long-term 15% annual distribution growth per
unit with at least a 1.1x distribution coverage ratio. Hess Midstream
anticipates a distribution coverage ratio closer to its 1.1x long-term
target through the third quarter of 2019, followed by higher coverage in
the fourth quarter of 2019, in line with the expected volume ramp-up of
the LM4 gas processing plant.

Hess Midstream reaffirms its previously announced guidance for full year
2019 as follows:

     
Year Ending
December 31, 2019
(Unaudited)
Financials (millions)
Consolidated Adjusted EBITDA $ 550 – 575
Adjusted EBITDA attributable to Hess Midstream Partners LP $ 108 – 113
DCF of Hess Midstream Partners LP $ 103 – 108
Expansion capital, net $ 53 – 57
Maintenance capital, net $ 2 – 3
 
     

Year Ending
December 31, 2019

Guidance
(Unaudited)
Throughput volumes (thousands)
Gas gathering – Mcf of natural gas per day 280 – 290
Crude oil gathering – bopd 105 – 115
Gas processing – Mcf of natural gas per day 265 – 275
Crude oil terminaling – bopd 120 – 130
 

Investor Webcast

Hess Midstream will review first quarter financial and operating results
and other matters on a webcast today at 12:00 p.m. Eastern Time. The
live audio webcast is accessible on the Investor page of our website www.hessmidstream.com.
Conference call numbers for participation are 866-395-9624, or
213-660-0871 for international callers. The passcode number is 5478698.
A replay of the conference call will be available at the same location
following the event.

About Hess Midstream

Hess Midstream Partners LP is a fee-based, growth oriented traditional
master limited partnership that was formed to own, operate, develop and
acquire a diverse set of midstream assets to provide services to Hess
Corporation and third-party customers. Hess Midstream’s assets 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.

Reconciliation of U.S. GAAP to Non-GAAP Measures

In addition to our financial information presented in accordance with
U.S. generally accepted accounting principles (GAAP), management
utilizes additional non-GAAP measures to facilitate comparisons of past
performance and future periods. We use two non-GAAP financial measures
in this earnings release. “Adjusted EBITDA” presented in this release is
defined as reported net income (loss) before net interest expense,
income tax expense and depreciation and amortization, as further
adjusted to eliminate the impact of certain items that we do not
consider indicative of our ongoing operating performance, such as other
income and other non-cash, non-recurring items, if applicable. We define
Adjusted EBITDA attributable to Hess Midstream Partners LP as Adjusted
EBITDA less Adjusted EBITDA attributable to Hess Infrastructure
Partners’ retained interests in our joint interest assets.
“Distributable Cash Flow” (“DCF”) is defined as Adjusted EBITDA
attributable to Hess Midstream Partners LP less cash paid for interest
and maintenance capital expenditures. Distributable cash flow does not
reflect changes in working capital balances. We believe that investors’
understanding of our performance is enhanced by disclosing these
measures as they may assist in assessing our operating performance as
compared to other publicly traded partnerships in the midstream energy
industry, without regard to historical cost basis or, in the case of
Adjusted EBITDA, financing methods, and assessing the ability of our
assets to generate sufficient cash flow to make distributions to our
unitholders. These measures are not, and should not be viewed as, a
substitute for U.S. GAAP net income or cash flow from operating
activities and should not be considered in isolation. Reconciliations of
both reported net income attributable to Hess Midstream Partners LP
(GAAP) to Adjusted EBITDA and net cash provided by operating activities
(GAAP) to Distributable Cash Flow, are provided below.

     
First Quarter
(unaudited)
2019     2018
 
(in millions, except ratio and per-unit data)

Reconciliation of Adjusted EBITDA attributable to Hess
Midstream Partners LP

and Distributable Cash Flow attributable to Hess Midstream
Partners LP

to net income:

Net income $ 95.3 $ 89.0
Plus:
Depreciation expense 32.6 30.0
Interest expense, net   0.4   0.3
Adjusted EBITDA 128.3 119.3
Less:
Adjusted EBITDA attributable to noncontrolling interest(a)   103.3   96.0
Adjusted EBITDA attributable to Hess Midstream Partners LP $ 25.0 $ 23.3
Less:
Cash interest paid, net 0.2 0.1
Maintenance capital expenditures   0.1  
Distributable cash flow attributable to Hess Midstream Partners LP $ 24.7 $ 23.2
 

Reconciliation of Adjusted EBITDA attributable to Hess
Midstream Partners LP

and Distributable Cash Flow attributable to Hess Midstream
Partners LP

to net cash provided by operating activities:

Net cash provided by operating activities $ 126.1 $ 110.5
Changes in assets and liabilities 2.4 8.9
Amortization of deferred financing costs (0.3 ) (0.3 )
Unit-based compensation (0.3 ) (0.1 )
Interest expense, net   0.4   0.3
Adjusted EBITDA $ 128.3 $ 119.3
Less:
Adjusted EBITDA attributable to noncontrolling interest(a)   103.3   96.0
Adjusted EBITDA attributable to Hess Midstream Partners LP $ 25.0 $ 23.3
Less:
Cash interest paid, net 0.2 0.1
Maintenance capital expenditures   0.1  
Distributable cash flow attributable to Hess Midstream Partners LP $ 24.7 $ 23.2
Distributed cash flow 21.8 18.6
Distribution coverage ratio 1.13 x 1.25 x
Distribution per unit $ 0.3833 $ 0.3333
 

(a)

 

Reflects Hess Infrastructure Partners’ 80% noncontrolling
economic interest in Hess North Dakota Pipelines Operations LP,
Hess TGP Operations LP and Hess North Dakota Export Logistics LP.

 
     
Guidance
Year Ending
December 31, 2019
(Unaudited)
(in millions)  

Reconciliation of Adjusted EBITDA attributable to Hess

Midstream Partners LP and Distributable Cash Flow

attributable to Hess Midstream Partners LP to

net income:

Net income $ 415 – 440
Plus:
Depreciation expense 132
Interest expense, net     3
Adjusted EBITDA 550 – 575
Less:
Adjusted EBITDA attributable to noncontrolling interest(a)   442 – 462
Adjusted EBITDA attributable to Hess Midstream Partners LP 108 – 113
Less:
Cash interest paid, net and maintenance capital expenditures     5
Distributable cash flow attributable to Hess Midstream Partners LP $ 103 – 108
 

(a)

 

Reflects Hess Infrastructure Partners’ 80% noncontrolling
economic interest in Hess North Dakota Pipelines Operations LP,
Hess TGP Operations LP and Hess North Dakota Export Logistics LP.

 

Forward-looking Statements

This press release may include forward-looking statements within the
meaning of the federal securities laws. Generally, the words
“anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,”
“may,” “should,” “believe,” “intend,” “project,” “plan,” “predict,”
“will” and similar expressions identify forward-looking statements,
which generally are not historical in nature. Forward-looking statements
are subject to certain risks and uncertainties that could cause actual
results to differ materially from historical results and current
projections or expectations. When considering these forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements in the Hess Midstream’s annual report on Form 10-K
for the year ended December 31, 2018, and in other reports we file with
the Securities and Exchange Commission. Hess Midstream undertakes no
obligation and does not intend to update these forward-looking
statements to reflect events or circumstances occurring after this press
release. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release.

             

HESS MIDSTREAM PARTNERS LP

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS, EXCEPT PER-UNIT DATA)

 
First First Fourth
Quarter Quarter Quarter
2019 2018 2018

Statement of operations

Revenues
Affiliate services $ 174.0 $ 156.8 $ 171.1
Other income   0.2   0.2   0.1
Total revenues   174.2   157.0   171.2
Costs and expenses
Operating and maintenance expenses

(exclusive of depreciation shown separately below)

41.9 34.6 43.2
Depreciation expense 32.6 30.0 32.2
General and administrative expenses   4.0   3.1   3.6
Total costs and expenses   78.5   67.7   79.0
Income from operations 95.7 89.3 92.2
Interest expense, net   0.4   0.3   0.3
Net income $ 95.3 $ 89.0 $ 91.9
Less: Net income attributable to noncontrolling

interest

  77.2   72.0   74.7
Net income attributable to Hess Midstream Partners LP   18.1   17.0   17.2
Less: General partner interest in net income attributable

to Hess Midstream Partners LP

  0.8   0.3   0.5
Limited partners’ interest in net income attributable

to Hess Midstream Partners LP

$ 17.3 $ 16.7 $ 16.7
Net income per limited partner unit (basic and diluted):
Common $ 0.32 $ 0.30 $ 0.31
Subordinated $ 0.32 $ 0.30 $ 0.31
Weighted average limited partner units outstanding:
Basic:
Common 27.3 27.3 27.3
Subordinated 27.3 27.3 27.3
Diluted:
Common 27.4 27.3 27.4
Subordinated 27.3 27.3 27.3
 
     
First Quarter 2019
Gathering      

Processing
and
Storage

     

Terminaling
and Export

     

Interest
and Other

    Total

Statement of operations

Revenues
Affiliate services $ 79.0 $ 66.3 $ 28.7 $ $ 174.0
Other income     0.2       0.2
Total revenues   79.0   66.5   28.7     174.2
Costs and expenses

Operating and maintenance expenses (exclusive of

depreciation shown separately below)

17.1 13.1 11.7 41.9
Depreciation expense 17.4 11.2 4.0 32.6
General and administrative expenses   1.5   1.1   0.2   1.2   4.0
Total costs and expenses   36.0   25.4   15.9   1.2   78.5
Income (loss) from operations 43.0 41.1 12.8 (1.2 ) 95.7
Interest expense, net         0.4   0.4
Net income (loss) 43.0 41.1 12.8 (1.6 ) 95.3

Less: Net income (loss) attributable to

noncontrolling interest

  34.4   32.5   10.3     77.2

Net income (loss) attributable to Hess Midstream

Partners LP

$ 8.6 $ 8.6 $ 2.5 $ (1.6 ) $ 18.1
 
     
First Quarter 2018
Gathering      

Processing
and
Storage

     

Terminaling
and Export

     

Interest
and Other

    Total

Statement of operations

Revenues
Affiliate $ 78.5 $ 58.3 $ 20.0 $ $ 156.8
Other income       0.2     0.2
Total revenues   78.5   58.3   20.2     157.0
Costs and expenses

Operating and maintenance expenses (exclusive of

depreciation shown separately below)

13.2 13.3 8.1 34.6
Depreciation expense 15.2 10.9 3.9 30.0
General and administrative expenses   0.9   0.9   0.1   1.2   3.1
Total costs and expenses   29.3   25.1   12.1   1.2   67.7
Income (loss) from operations 49.2 33.2 8.1 (1.2 ) 89.3
Interest expense, net         0.3   0.3
Net income (loss) 49.2 33.2 8.1 (1.5 ) 89.0

Less: Net income (loss) attributable to

noncontrolling interest

  39.2   26.2   6.6     72.0

Net income (loss) attributable to Hess Midstream

Partners LP

$ 10.0 $ 7.0 $ 1.5 $ (1.5 ) $ 17.0
 
     
Fourth Quarter 2018
                     
Gathering

Processing
and
Storage

Terminaling
and Export

Interest
and Other

Total

Statement of operations

Revenues
Affiliate services $ 81.9 $ 65.0 $ 24.2 $ $ 171.1
Other income       0.1     0.1
Total revenues   81.9   65.0   24.3     171.2
Costs and expenses

Operating and maintenance expenses (exclusive of

depreciation shown separately below)

18.9 15.4 8.9 43.2
Depreciation expense 17.1 11.1 4.0 32.2
General and administrative expenses   1.5   0.7   0.1   1.3   3.6
Total costs and expenses   37.5   27.2   13.0   1.3   79.0
Income (loss) from operations 44.4 37.8 11.3 (1.3 ) 92.2
Interest expense, net         0.3   0.3
Net income (loss) 44.4 37.8 11.3 (1.6 ) 91.9

Less: Net income (loss) attributable to

noncontrolling interest

  35.8   29.9   9.0     74.7

Net income (loss) attributable to Hess Midstream

Partners LP

$ 8.6 $ 7.9 $ 2.3 $ (1.6 ) $ 17.2
 
             

HESS MIDSTREAM PARTNERS LP

SUPPLEMENTAL OPERATING DATA (UNAUDITED)

 
First First Fourth
Quarter Quarter Quarter
2019 2018 2018
     

Throughput volumes (thousands)

Gas gathering – Mcf of natural gas per day 249 233 253
Crude oil gathering – bopd 112 80 106
Gas processing – Mcf of natural gas per day 237 214 238
Crude terminals – bopd 122 92 121
NGL loading – blpd 14 11 15
 

______________________________
1 Adjusted EBITDA and DCF
are non-GAAP measures. Definitions and reconciliations of these non-GAAP
measures to GAAP reporting measures appear in the following pages of
this release.

Contacts

For Hess Midstream Partners LP

Investors:
Jennifer
Gordon
(212) 536-8244

Media:
Robert Young
(713)
496-6076

error: Content is protected !!