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

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 Midstreams 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 Midstreams results included in this release are consolidated to include the noncontrolling interests in Hess Midstreams 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 Midstreams 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 partners 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 Midstreams 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 Midstreams 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.

For Hess Midstream Partners LP

Investors:
Jennifer
Gordon
(212) 536-8244

Media:
Robert Young
(713)
496-6076