Q4 2023 Hess Midstream LP Earnings Call

January 31, 2024

Operator: The Ultimate Parody Site! Good day, ladies and gentlemen, and welcome to the fourth quarter 2023 Hess Midstream conference call. My name is Jonathan, and I will be your operator for today. At this time, all participants are in a listen only mode.

Okay.

Jonathan: Good day, ladies and gentlemen, and welcome to the fourth quarter 2023, Hess Midstream Conference call. My name is Jonathan and I will be your operator for today at this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during this session.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Jonathan: You'll need to press star one on your telephone.

Jonathan: We'll then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.

Operator: To ask your question, please press star 1-1 again. Please be advised that today's conference is being recorded for replay purposes. I would now like to turn the conference over to Jennifer Gordon, Vice President of Investor Relations. Thank you, Jonathan. Good afternoon, everyone.

Jonathan: Please be advised that today's conference is being recorded for replay purposes I would now like to turn the conference over to Jennifer Gordon Vice President of Investor Relations. Please proceed.

Yeah.

Thank you Jonathan and good afternoon, everyone and thank you for participating in our fourth quarter earnings Conference call. Our earnings release was issued this morning and appears on our website Www Dot Hess midstream Dot com.

Jennifer Gordon: And thank you for participating in our fourth quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hessmidstream.com. Today's conference call contains projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements.

Jennifer Gordon: Today's conference call contains projections and other forward looking statements within the meaning of the federal Securities laws.

Jennifer Gordon: These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements. These risks include those set forth in the risk factors section of Hess midstream filings with the SEC.

Jennifer Gordon: These risks include those set forth in the risk factors section of Hess Midstream's filings with the SEC. Also, on today's conference call, we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the earnings release.

Jennifer Gordon: Also on today's conference call, we may discuss certain non-GAAP financial measures.

Jennifer Gordon: Reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the earnings release.

Jennifer Gordon: With me today are John Gatling, President and Chief Operating Officer, and Jonathan Stein, Chief Financial Officer. I'll now turn the call over to John Gatling. Thanks, Jennifer.

Jennifer Gordon: With me today are John Gatling, President and Chief operating Officer, and Jonathan Stein, Chief Financial Officer, I will now turn the call over to John Gatling.

John Gatling: Thanks, Jennifer good afternoon, everyone and welcome to Hess Midstream fourth quarter 2023 conference call today I'll review, our 2023 operating performance and highlights provide details regarding Hess midstream is 2024 plans and outlook through 2026.

John A. Gatling: Good afternoon everyone and welcome to Hess Midstream's fourth quarter 2023 conference call. Today I'll review our 2023 operating performance and highlights, provide details regarding Hess Midstream's 2024 plans and outlook through 2026, and Jonathan will then review our financial results. 2023 was a year of continued strong performance and execution for Hess Midstream. We delivered significant volume and capacity growth, including 15% year-over-year growth in gas processing volumes and an expansion of our compression capacity by approximately 100 million cubic feet per day, further enhancing our gas capture capability.

Jonathan Stein: Jonathan will then review our financial results.

John Gatling: 2023 was a year of continued strong performance and execution for Hess midstream.

John Gatling: We delivered significant volume and capacity growth, including 15% year over year growth in gas processing volumes and.

John Gatling: And expansion of our compression capacity by approximately 100 million cubic foot per day further enhancing our gas capture capability.

John A. Gatling: As discussed in our guidance release, we've established our 2026 minimum volume commitments, which implies approximately 35% growth in gas volumes from 2023 through 2026. In addition, we've revised our 2025 MVCs upward by an average of approximately 5% across our oil and gas systems, reflecting strong well performance and delivery by Hess and continued gas capture success. Now turning to Hess Upstream Highlights from their earnings release issued this morning. Bakken net production averaged 194,000 barrels of oil equivalent per day in the fourth quarter, which includes 19,000 barrels of oil equivalent per day from percent of proceeds volumes, which don't impact Hess midstream throughput.

John Gatling: As discussed in our guidance release, we've established our 2026 minimum volume commitments, which implies approximately 35% growth in gas volumes from 2023 through 2026.

John Gatling: In addition, we've revised our 2025 nbc's upwards by an average of approximately 5% across our oil and gas systems, reflecting strong well performance and delivery by Hess and continued gas capture success.

John Gatling: Now turning to Hess upstream highlights from the earnings release issued this morning.

Bakken net production averaged 194000 barrels of oil per day in the fourth quarter, which includes 19000 barrels of oil equivalent per day from percent of proceeds volumes, which don't impact Hess midstream throughput.

John A. Gatling: Full year 2023, BAC and net production averaged 182,000 barrels of Oliquin per day, which was an increase of 18% year over year. BAC has also reiterated their plans to continue to operate a four-rig drilling program in 2024. Now focusing on Hess Midstream's fourth quarter 2023 results, gas processing volumes averaged 387 million cubic feet per day.

John Gatling: For full year 2023, Bakken net production averaged 182000 barrels of oil per day.

John Gatling: Which was an increase of 18% year over year.

John Gatling: Also reiterated their plans to continue to operate a four rig drilling program in 2024.

John Gatling: Now focusing on Hess midstream fourth quarter 2023 results.

John Gatling: Gas processing volumes averaged 387 million cubic foot per day.

John A. Gatling: Crude Terminaling Volumes Average 120,000 Barrels of Oil Per Day, and Water Gathering Volumes averaged 113,000 barrels of water per day. During the fourth quarter, Hess volumes continued to grow, while third parties declined, primarily driven by delays in new production coming in line in the fourth quarter. Third parties remained approximately 10% of our fourth quarter, and we continue to expect them to make up approximately 10% of our volumes in the future. Also, in the fourth quarter with unseasonably good weather, we proactively took the opportunity to accelerate maintenance projects, including routine inspection and recertification of our rail cars and construction projects primarily associated with future WellConnect. For the full year 2023, Hess Midstream's gas processing volumes averaged 367 cubic feet per day.

John Gatling: Crude terminalling volumes average 120000 barrels of oil per day, and water gathering volumes averaged 113000 barrels of water per day.

John Gatling: During the fourth quarter Hess volumes continued to grow while third parties declined primarily driven by delays in new production coming online in the fourth quarter.

John Gatling: Third parties remain approximately 10% in our fourth quarter and.

John Gatling: And we continue to expect them to make up approximately 10% of our volumes in the future.

John Gatling: Also in the fourth quarter with unseasonably good weather.

John Gatling: We proactively took the opportunity to accelerate maintenance projects, including routine inspection recertification of our railcars and construction projects primarily associated with future well connects.

John Gatling: For full year, 2023, Hess midstream gas processing volumes averaged 367 million cubic foot per day.

John A. Gatling: Crude Tourmaline Volumes Average 115,000 Barrels of Oil per Day, and Water Gathering Volumes averaged 95,000 barrels of water per day, resulting in full year adjusted EBITDA of $1,022,000,000. Now, turning to Hess Midstream's guidance. In the first quarter of 2024, we expect volumes to be flat with the fourth quarter, reflecting the impact of extreme cold weather, including wind chill temperatures below minus 60 degrees Fahrenheit that we experienced in January, and to reflect that a significant part of winter is still ahead of us. For the full year 2024, we expect volumes across our oil and gas systems to grow approximately 10% compared to 2023, primarily driven by HES's development activities. We anticipate full year 2024 gas processing volumes to average between 395 and 405 million cubic feet per day, crude terminaling volumes to average between 120 and 130,000 barrels of oil per day, and water gathering volumes to average between 105 and 115,000 barrels of water per day.

Crude terminalling volumes averaged 115000 barrels of oil per day.

John Gatling: And water gathering volumes averaged 95000 barrels of water per day, resulting in full year adjusted EBITDA of $1.022 billion.

John Gatling: Turning to Hess midstream guidance in the first quarter 2024, we expect volumes to be flat with the fourth quarter, reflecting the impact of extreme cold weather, including windshield temperatures below minus 60 degrees Fahrenheit that we experienced in January.

John Gatling: And to reflect that a significant part of winter is still ahead of us.

John Gatling: For full year 2024, we expect volumes across our oil and gas systems to grow approximately 10% compared to 2023, primarily driven by Hess is development activity.

John Gatling: We anticipate full year 2020 for gas processing volumes to average between 395, and 405 million cubic foot per day crude terminalling volumes to average between 120 and 130000 barrels of oil per day and water gathering volumes to average between 105 and 115000 barrels of water per day.

John Gatling: We project adjusted EBITDA for 2024 in the range of $1 billion $125 million to $1 billion $175 million, an increase of 12, 5% at the midpoint compared to full year 2023.

John A. Gatling: We project adjusted EBITDA for 2024 in the range of $1,125,000,000 to $1,175,000,000, an increase of 12.5% at the midpoint compared to full year 2023. The adjusted EBITDA increase is primarily driven by physical volume growth from HES's development activity. Turning to Hess Midstream's 2024 Capital Program For full year 2024, capital expenditures are expected to total between $250 and $275 million. Approximately $125 million is allocated to ongoing capital expenditures for the gathering system, well connects, and maintenance, while approximately $125 to $150 million is allocated to project-based capital expenditures, including gas gathering pipeline and compression expansion.

John Gatling: The adjusted EBITDA increase is primarily driven by physical volume growth from Hess is development activity.

John Gatling: Turning to Hess Midstream is 2024 capital program.

John Gatling: For full year 2024 capital expenditures are expected to total between 250 and $275 million.

Approximately $125 million is allocated to ongoing capital expenditures for gathering system, well connects and maintenance.

John Gatling: While approximately $125 million to $150 million is allocated to project based capital expenditures, including gas gathering pipeline and compression expansions.

The activity is focused on construction of multi year projects, including approximately 40 miles of Greenfield high pressure gas gathering pipelines and.

John Gatling: And two new compressor stations, which are expected to initially provide in aggregate an additional 85 million cubic foot per day of gas compression capacity when brought online in 2025 and expandable to approximately 140 million cubic foot per day.

John Gatling: Longer term, we anticipate keeping capital expenditures stable at approximately $250 million to $275 million through 2026.

John A. Gatling: The activity is focused on construction of multi-year projects, including approximately 40 miles of green-filled high-pressure gas-gathering pipelines and two new compressor stations, which are expected to initially provide, in aggregate, an additional 85 million cubic feet per day of gas compression capacity when brought online in 2025 and expandable to approximately 140 million cubic feet per day. Longer term, we anticipate keeping capital expenditures stable at approximately $250 to $275 million through 2026. This amount includes our planned investment to add gas processing capacity of approximately 125 million cubic feet per day, with the construction expected to start in 2025 and come online by mid-2027. The additional processing capacity is a disciplined investment that is underpinned by new MVCs showing it will be at capacity in 2026 and supports expected long-term growth for Hess Midstream from increasing Hess and third-party volumes in the pipeline.

John Gatling: Amount includes our planned investment to add gas processing capacity of approximately 125 million cubic foot per day with the construction expected to start in 2025 and come online by mid 2027.

The additional processing capacity as a disciplined investment that is underpinned by new MVC showing will be at capacity in 2026 and supports expected long term growth for Hess midstream from increasing Hess and third party volumes in the Bakken.

John Gatling: In summary, we're continuing to execute our strategy of making focused low risk investments to meet basin demands.

John Gatling: Delivering reliable operating performance and strong financial results, we are well positioned for substantial growth as implied by our guided 2026, and vcs, which are underpinned by Hess as planned development activity and our continued focus on gas capture.

John Gatling: Resulting in expected sustainable cash flow generation and the potential to continue to return additional capital to our shareholders.

John Gatling: Now I'll turn the call over to Jonathan to review, our financial results and guidance.

Thanks, John and good afternoon, everyone.

Jonathan Stein: Today, I will summarize our financial highlights on slide 23, and discuss our recently completed nomination process with Hess.

John A. Gatling: In summary, we're continuing to execute our strategy of making focused, low-risk investments to meet basin demands, delivering reliable operating performance and strong financial results. We are well-positioned for substantial growth, as implied by our guided 2026 MVCs, which are underpinned by HESA's planned development activity and our continued focus on gas capture, resulting in expected sustainable cash flow generation and the potential to continue to return additional capital to our shareholders. I'll now turn the call over to Jonathan to read our financial results and guidance. Thanks, John, and good afternoon, everyone.

Jonathan Stein: Details on our 2020 for our guidance and outlook through 2026.

Jonathan Stein: Including our continued prioritization of ongoing and incremental return of capital to shareholders.

Jonathan Stein: For 2023, we delivered strong results with full year net income of $608 million in it.

Jonathan Stein: Adjusted EBITDA of $1.022 billion looking.

Jonathan Stein: Looking forward, we have line of sight to at least 10% annual growth in net income adjusted EBITDA and adjusted free cash flow through 2026.

Jonathan Stein: Driven by growth in the Bakken and underpinned by Mvc's through 2026 that provide visibility to annualized growth and gas throughput volumes of approximately 10% from 2024 through 2026 and continued growth in oil throughput volumes of approximately 10% growth in 2025 and approximately 5%.

Jonathan C. Stein: Today, I will summarize our financial highlights from 2023, discuss our recently completed nomination process with Hess, and provide details on our 2024 guidance and outlook through 2026, including our continued prioritization of ongoing and incremental return of capital to shareholder including our continued prioritization of ongoing and incremental return of capital to shareholder, For 2023, we delivered strong results with full year net income of $608 million and adjusted EBITDA of $1,022,000,000. Looking forward, we have line of sight to at least 10% annual growth in net income, adjusted EBITDA, and adjusted free cash flow through 2026, driven by Hess's growth in the Bakken and underpinned by our MVCs through 2026 that provide visibility to annualized growth in gas throughput volumes of approximately 10 percent from 2024 through 2026 and continued growth in oil throughput volumes of approximately 10 percent growth in 2025 and approximately 5 percent growth in 2026.

Jonathan Stein: Growth in 2026.

We continued to exit a unique and differentiated financial strategy prioritizing consistent and ongoing return of capital to shareholders.

Jonathan Stein: In November we completed our fourth unit repurchase transaction in 2023 of $100 million that was accretive to distributable cash flow per class a share basis, and then earnings per class a share basis.

Jonathan Stein: Following the unit repurchase transaction public ownership of Hess midstream on a consolidated basis has now increased to approximately 30%.

Supported by the repurchase we recently announced a further return of capital to our shareholders through an immediate one 5% increase in our quarterly distribution level. In addition to our targeted 5% annual distribution per class a share increase.

As we have done in the past with the reduced share count following the repurchase this distribution level increase maintains our distributed cash flow at approximately the same amount as before the repurchase.

Jonathan Stein: Since the beginning of 2021, we have returned $155 billion to shareholders through accretive repurchases that have reduced our total unit count by approximately 20%. In addition to the combination of our targeted 5% annual distribution growth and six distributional level increases falling each repurchase.

Jonathan Stein: We have increased our distribution per class a share by approximately 40% over this period.

Jonathan Stein: As a result, our total shareholder return the yield continues to be one of the highest of our midstream peers. Furthermore, our leverage at year end of approximately three two times adjusted EBITDA is one of the lowest among our peers highlighting our differentiated ability to deliver significant shareholder returns while also maintaining balance sheet.

Jonathan C. Stein: We continue to execute a unique and differentiated financial strategy, prioritizing consistent and ongoing return of capital to shareholders. In November, we completed our fourth unit repurchase transaction in 2023 of $100 million that was accretive on both a distributable cash flow per class A share basis and an earnings per class A share basis. Following the unit repurchase transaction, public ownership of Hess Midstream on a consolidated basis has now increased to approximately 30%.

Jonathan Stein: <unk> strength.

Jonathan Stein: As announced in our guidance release. This morning, we are continuing to prioritize shareholder returns and a strong balance sheet. We have extended our annual distribution per class a share growth target of at least 5% through 2026 and are expecting greater than one point to $5 billion of financial flexibility through 2026 for capital allocation.

Jonathan Stein: Includes prioritization of potential unit repurchases on an ongoing basis, while maintaining our long term leverage target of three times adjusted EBITDA.

Jonathan C. Stein: Supported by the repurchase, we recently announced a further return on capital to our shareholders through an immediate 1.5% increase in our quarterly distribution level, in addition to our targeted 5% annual distribution per Class A share increase. As we have done in the past with the reduced share count following the repurchase, this distribution level increase maintains our distributed cash flow at approximately the same amount as before the repurchase. Since the beginning of 2021, we have returned $1.55 billion to shareholders through accretive repurchases that have reduced our total unit count by approximately 20%. Additionally, with the combination of our targeted 5% annual distribution growth and six distribution level increases following each repurchase, we have increased our distribution per class A share by approximately 40% over this period. As a result, our total shareholder return yield continues to be one of the highest of our midstream peers. Furthermore, our leverage at year-end of approximately 3.2 times adjusted EBITDA is one of the lowest among our peers, highlighting our differentiated ability to deliver significant shareholder returns while also maintaining balance sheet growth strength.

Jonathan Stein: Turning to our results for the fourth quarter net income was $153 million compared to $165 billion for the third quarter.

Jonathan Stein: Adjusted EBITDA for the fourth quarter was $264 million compared to $271 million for the third quarter.

Jonathan Stein: The change in adjusted EBITDA relative to the third quarter was primarily attributable to the following.

Jonathan Stein: Total revenues excluding pass through revenues decreased by approximately $3 million, primarily driven by lower third party throughput volumes offsetting higher Hess volumes as John described resulting in segment revenue changes this fall gathering.

Jonathan Stein: Gathering revenues decreased by approximately $1 million.

<unk> revenues decreased by approximately $1 million and Terminalling revenues decreased by approximately $1 million.

Jonathan Stein: Total costs and expenses, excluding depreciation and amortization pass through costs and net of our proportional share of Alan for earnings increased by approximately $4 million as follows higher operating expenses of approximately $2 million, primarily from increased maintenance activity taking advantage of it.

Jonathan Stein: Seasonally favorable weather.

Jonathan Stein: And higher G&A expenses of approximately $2 million, primarily from higher allocations under our omnibus agreement.

Jonathan Stein: Resulting in adjusted EBITDA for the fourth quarter of 2023 of $264 million.

Jonathan C. Stein: As announced in our guidance release this morning, we are continuing to prioritize shareholder returns and a strong balance. We have extended our annual distribution per Class A shared growth target of at least 5% through 2026 and are expecting greater than $1.25 billion of financial flexibility through 2026 for capital allocation that includes prioritization of potential unit repurchases on an ongoing basis while maintaining our long-term leverage target of three times adjusted EBITDA. Turning to our results, for the fourth quarter, net income was $153 million, compared to $165 million for the third quarter.

Jonathan Stein: Our gross adjusted EBITDA margin for the fourth quarter was maintained at approximately 80% highlighting our continued strong operating leverage.

Jonathan Stein: Fourth quarter capital expenditures were approximately $72 million and net interest excluding amortization of deferred finance costs was approximately $45 million, resulting in adjusted free cash flow of approximately $147 million, we had a drawn balance of $340 million on our revolving credit.

Facility at year end.

Jonathan Stein: In the fourth quarter of 2023 hats enough that it entered into a definitive agreement to be acquired by Chevron Corporation.

Jonathan Stein: <unk> midstream expects upon consummation of the proposed transaction Chevron will acquire houses 37, 8% ownership it has midstream.

Jonathan Stein: It is right to appoint four directors to the board of Hess Midstream.

Jonathan Stein: Has met James contract structure remains in place.

Jonathan Stein: Turning to our annual nomination process.

Jonathan Stein: As a reminder, try in 'twenty three it was the final year of the annual rate Redetermination process for the majority of our systems that represent approximately 85% of our revenues.

Jonathan C. Stein: Adjusted EBITDA for the fourth quarter was $264 million, compared to $271 million for the third quarter. The change in adjusted EBITDA relative to the third quarter was primarily attributable to the following. Total revenues, excluding pass-through revenues, decreased by approximately $3 million, primarily driven by lower third-party throughput volumes offsetting higher Hess volumes, as John described, resulting in segment revenue changes as follows. Gathering revenues decreased by approximately $1 million. Processing revenues decreased by approximately $1 million.

Jonathan Stein: The base rate for 'twenty 'twenty four with that based on the average of the tariff rate from the year 2021 through 2023 adjusted for inflation.

Jonathan Stein: <unk> will then be increased each year based on the inflation escalator capped at 3%, resulting in steadily increasing rates through 2033.

Jonathan Stein: So our terminalling and water gathering systems that represent approximately 15% of our revenues, we will continue to reset our rates through our annual rate redetermination process through 2033.

Jonathan Stein: Across all systems, the 'twenty 'twenty four tariff rates on average were higher than 2023 rates.

Jonathan C. Stein: And terminaling revenues decreased by approximately $1 million. However, total costs and expenses, excluding depreciation, amortization, pass-through costs, and net of our proportional share of LM4 earnings, increased by approximately $4 million, as follows. Higher operating expenses of approximately $2 million, primarily from increased maintenance activity taking advantage of unseasonably favorable weather, and higher G&A expenses of approximately $2 million, primarily from higher allocations under our Omnibus Agreement, resulting in adjusted EBITDA for the fourth quarter of 2023 of $264 million. Our gross adjusted EBITDA margin for the fourth quarter was maintained at approximately 80 percent, highlighting our continued strong operating leverage. The fourth quarter capital expenditures were approximately $72 million, and net interest excluding amortization of deferred finance costs was approximately $45 million, resulting in an adjusted free cash flow of approximately $147 million. Additionally, we had a drawn balance of $340 million on a revolving credit facility at ERS.

Jonathan Stein: For all of our systems MVC has continued to be set at 80% of dominated volumes set three years in advance providing downside protection through 2033.

Jonathan Stein: Guidance released this morning, we provided envisaged for the year 2024 through 2026.

Jonathan Stein: Part of the nomination process N V sees the 'twenty 'twenty, four and 'twenty twenty-five were reviewed and where required.

Jonathan Stein: Well everything you said 2026 with newly established based on 80% of the dominate volumes each system in that year.

Jonathan Stein: In 2024 are N V series are expected to provide approximately 90% revenue coverage for oil at approximately 85% revenue coverage for gas.

Jonathan Stein: Our 2025 every seat for oil and gas have been increase as part of the nomination process and therefore provide 80% revenue coverage.

Jonathan Stein: Our MVC as a 2026 provides a line of sight to long term growth and system system throughput for example, looking at gas processing. The 'twenty 'twenty six N V C 396 million cubic feet per day.

Jonathan Stein: At 80% of the nomination level of has as expected volumes of 495 million cubic feet per day.

Jonathan Stein: Approximately 35% growth in physical natural gas volumes from 'twenty to 'twenty three levels and utilization of our full processing capacity of 500 billion cubic feet per day.

Jonathan Stein: The need for potential continued investment in gas processing as John described.

Jonathan C. Stein: In the fourth quarter of 2023, Hess announced that it entered into a definitive agreement to be acquired by Chevron Corporation. Hess Midstream expects, upon consummation of the proposed transaction, Chevron will acquire Hess' 37.8% ownership in Hess Midstream, including its right to appoint four directors to the board of Hess Midstream. Hess Midstream's contract structure remains in place. Turning to our annual nomination process, As a reminder, 2023 was the final year of the annual rate redetermination process for the majority of our systems that represent approximately 85% of our revenue. The base rate for 2024 was set based on the average of the tariff rates from the years 2021 through 2023, adjusted for inflation.

Jonathan Stein: Turning to guidance for 'twenty 'twenty four for the full year 2024, we expect net income of $670 million to $720 million and adjusted EBITDA of $1 billion 125 to $1.175 billion.

Jonathan Stein: This adjusted EBITDA growth of approximately 12, 5% at the midpoint of our range is supported by a continued growing revenues from physical volumes growth across all gas oil and water systems as John described as well as stable operating costs, even as our system continues to expand highlighting our strong operating leverage we can.

Jonathan Stein: Continue to target a gross adjusted EBITDA margin of approximately 75% in 2024.

Jonathan Stein: For 'twenty 'twenty four with total expected capital expenditures of between 250 and $275 million, we expect to generate adjusted free cash flow of between 685 and $735 million at.

Jonathan Stein: And excess adjusted free cash flow of approximately $115 million after fully funding our targeted growing distributions.

Jonathan C. Stein: Rates will then be increased each year based on the inflation escalator, capped at 3%, resulting in steadily increasing rates through 2033 for our Tourmaline and Watering and Gathering Systems, which represent approximately 15% of our revenue. We will continue to reset our rates through our annual rate redetermination process through 2033. Across all systems, the 2024 TAF rates were, on average, higher than the 2023 rates.

Jonathan Stein: With increasing adjusted EBITDA, we expect our leverage for 2020 for it to be below our three times adjusted EBIT target on a full year basis.

Jonathan Stein: For the first quarter of 'twenty 'twenty four we expect net income to be approximately $150 million to $160 million and adjusted EBITDA to be approximately $260 million to $270 million, including the impacts of extreme cold weather that we've experienced in January.

Jonathan C. Stein: For all of our systems, MVCs continue to be set at 80% of nominated volumes set three years in advance, providing downside protection through 2033. In our guidance released this morning, we provide MVCs for the years 2024 through 2026. As part of the nomination process, MVCs for 2024 and 2025 were reviewed and, where required, increased, while MVCs for 2026 were newly established based on 80% of the nominated volumes for each system in that year.

Jonathan Stein: For the remainder of 'twenty 'twenty four we expect growing adjusted EBITDA, consistent with increasing volumes across oil gas and water systems with seasonally higher operating expenses in the second and third quarters of the year.

Jonathan Stein: Looking beyond 2024, we have clear visibility to volume adjusted EBITDA and adjusted free cash flow growth that supports our financial strategy at <unk>.

Jonathan Stein: Described our MVC provide visibility to growth in oil throughput volumes of approximately 10% in 2025 and up.

Jonathan Stein: So 85% in 2020 six.

Jonathan Stein: As well as annualized gas throughput volumes growth of approximately 10% from 2024 through 2020 six that represent approximately 75% of our expected revenues.

Jonathan C. Stein: In 2024, our MVCs are expected to provide approximately 90 percent revenue coverage for oil and approximately 85 percent revenue coverage for gas. Our 2025 MVCs for oil and gas have been increased as part of the nomination process and therefore provide 80% revenue coverage; our MVCs for 2026 provide the line of sight to long-term growth in system throughputs. For example, looking at gas processing, the 2026 MVC of 396 million cubic feet per day set at 80 percent of the nomination level of HES's expected volumes of 495 million cubic feet per day implies approximately 35 percent growth in physical natural gas volumes from 2023 levels and utilization of our full processing capacity of 500 million cubic feet per day, supporting the need for potential continued investment in gas processing as John described. Turning to guidance for 2024, For the full year 2024, we expect net income of $670 to $720 million and adjusted EBITDA of $1,125,000,000 to $1,175,000,000.

Jonathan Stein: Driven by these growing volumes together with feeds are steadily increasing based on our annual inflation escalator and maintaining a targeted growth adjusted EBITDA margin of approximately 75%, we expect growth in adjusted EBITDA of greater than 10% per year and about 2025 and 2026.

Jonathan Stein: With growing adjusted EBITDA and capital expenditures are expected to remain stable with 2024 levels, we expect annual growth and adjusted free cash flow of greater than 10% through 2020 six.

Jonathan Stein: In addition, we are continuing to prioritize shareholder returns with a return of capital framework first we are continuing to grow our base distribution by extending our targeted distribution growth of at least 5% annually per class a share through 2020 six.

Jonathan Stein: We have financial flexibility for potential significant incremental shareholder returns beyond our growing base distribution.

Jonathan Stein: With expected adjusted EBITDA, and adjusted free cash flow growth of greater than 10% annually in excess of our targeted annual distribution growth of at least 5%, we expect to generate excess adjusted free cash flow beyond our distribution and our leverage is expected to decline below two and a half times adjusted EBITDA by the end of 2025.

Jonathan Stein: And to continue to be below this level through 2026, providing leverage capacity relative to our long term three times adjusted EBITDA leverage target.

Jonathan Stein: As a result, with a growing cash balance and significant leverage capacity, we expect to have greater than one point to $5 billion and financial flexibility through 2020 six for capital allocation that includes the potential for multiple unit repurchases per year through this period and the potential for incremental distribution level increases associated.

Jonathan C. Stein: This adjusted EBITDA growth of approximately 12.5% at the midpoint of our range is supported by continued revenues from physical volumes, growth across all gas, oil, and water systems, as John described, as well as stable operating costs, even as our system continues to expand, highlighting our strong operating leverage. We continue to target a gross adjusted EBITDA margin of approximately 75% in 2024. For 2024, with total expected capital expenditures of between $250 and $275 million, we expect to generate adjusted free cash flow of between $685 and $735 million and XS Adjusted Fee Cash Flow of approximately $115 million after fully funding our targeted growing distribution. With increasing adjusted EBITDA, we expect our leverage for 2024 to be below our three times adjusted EBITDA target on a full year basis. For the first quarter of 2024, we expect net income to be approximately $150 to $160 million and adjusted EBITDA to be approximately $260 to $270 million, including the impacts of the extreme cold weather that we experienced in January.

Jonathan Stein: With these repurchases beyond our targeted at least 5% annual distribution per class a share growth.

Jonathan Stein: In summary, we are pleased to have delivered a strong 2023 and look forward to a visible trajectory of growth in our operational and financial metrics that underpin our unique and differentiated financial strategy with a focus on consistent and ongoing return of capital to our shareholders. This concludes my remarks, we'll be happy to answer any questions I will now turn.

Speaker Change: The call over to the operator.

Speaker Change: Certainly thank you one moment for our first question.

Speaker Change: And our first question comes from the line of Jeremy Tonet from Jpmorgan. Your question. Please.

Jeremy Bryan Tonet: Hi, good afternoon.

Hey, Jeremy.

Jeremy Bryan Tonet: Just wanted to start off if I could with the storm impact that you guys touched on where the cold weather impact I should say for <unk>, if you might be able to provide a little bit more color. There on the impact is it was it more on the gas or crude oil side and I guess, how do you see the.

Jeremy Bryan Tonet: Basin recovering or your volumes recovering over the course of the quarter given.

Jeremy Bryan Tonet: The extreme temperatures there.

Jeremy Bryan Tonet: Sure.

Jeremy Bryan Tonet: You know when we have weather impacts like we did in January it really impacts the entire system. So when you when you have to bring the wells down you're impacting oil gas and water coming off the pads.

With the extreme cold temperatures there were situations, where it just wasn't safety personnel on the road. So as an example, if you have to have trucking to get say water off of a pad as an example.

Jeremy Bryan Tonet: You have a situation where the trucks aren't running because it's not safe for the trucking companies to be out there in that in those conditions and for safe operations. You have to just go ahead and shut the shut the wells in and then along with that you also have freezing situations, where you just have some liquids in the system.

Jonathan C. Stein: For the remainder of 2024, we expect growing adjusted EBITDA consistent with increasing volumes across oil, gas, and water systems, with seasonally higher operating expenses in the second and third quarters of the year. Looking beyond 2024, we have clear visibility to volume adjusted EBITDA and adjusted free cash flow growth that supports our financial strategy. As described, our MVCs provide visibility to growth in oil throughput volumes of approximately 10% in 2025 and approximately 5% in 2026, as well as annualized gas throughput volumes growth of approximately 10% from 2024 through 2026, which represents approximately 75% of our expected revenue. Driven by these growing volumes, together with fees that are steadily increasing based on our annual inflation escalator, and maintaining a targeted growth-adjusted EBIT With growing adjusted EBITDA, and capital expenditures expected to remain stable with 2024 levels, we expect annual growth and adjusted free cash flow of greater than 10% through 2026. In addition, we are continuing to prioritize shareholder returns with our Return of Capital Framework.

Jeremy Bryan Tonet: That gets that gets frozen win when temperatures get as cold as it does we do a lot of winter renovation as part of our preparation.

Jeremy Bryan Tonet: Preparation for winter activities I mean, as we all know it gets cold every year and North Dakota, It snows and we plan for that I would say the the issue with the January whether it was it was extreme it was very extreme temperatures.

Jeremy Bryan Tonet: Well below our ambience were well below 30 minus 30 degrees with wind chills of lower than minus 60.

Jeremy Bryan Tonet: So again, what we've seen is from the Hess side, we've seen a resilient system both on the upstream and midstream side and recovery has been has been good I can't really speak to the broader basin I think Lynn Helms and Justin Grinstead are talking a little bit about what the broader impacts are across the.

Jeremy Bryan Tonet: Based on as there were maybe looking at other operators.

But from our perspective, we feel like that the recovery has been good having said that and as I mentioned in my in.

Jeremy Bryan Tonet: My remarks in my script.

Uh huh.

Jeremy Bryan Tonet: We are we still have a further winter ahead of us. So we're trying to be a bit cautious there weather has gotten good in north Dakota, it's warmed up quite a lot.

Jeremy Bryan Tonet: And we're recovering from the from the winter storms, but what we also have several months of.

Jeremy Bryan Tonet: Winter ahead of us that we're still well well still need to manage properly.

Speaker Change: Got it that's very helpful. There so would you say that your.

Speaker Change: <unk> midstream is back to pre storm levels or how do you see that unfolding at this point absent further weather event.

Speaker Change: I would say that we're close to being back to pre storm levels I would say that that again the recovery on the upstream and midstream side has been has been very strong.

Jonathan C. Stein: First, we are continuing to grow our base distribution by extending our targeted distribution growth of at least 5% annually per Class A share through 2026. Second, we have financial flexibility for potential significant incremental shareholder returns beyond our growing base distribution. With expected adjusted EBITDA and adjusted free cash flow growth of greater than 10% annually in excess of our targeted annual distribution growth of at least 5%, we expect to generate excess adjusted free cash flow beyond our distribution, and leverage is expected to decline below 2.5 times adjusted EBITDA by the end of 2025 and to continue below this level through 2026, providing leverage capacity relative to a long-term 3 times adjusted EBITDA leverage target. As a result, with a growing cash balance and significant leverage capacity, we expect to have greater than $1.25 billion in financial flexibility through 2026 for capital allocation, which includes the potential for multiple unit repurchases per year through this period and the potential for incremental distribution level increases associated with these repurchases beyond our targeted at least 5% annual distribution per Class A share growth. Thank you.

Speaker Change: There's a bit of a lagging effect to take in our system down like that where you may have additional well work as a result of of a storm like that but but overall I would say the resiliency of the system has been has been outstanding so both the upstream and midstream teams have been working very closely with one another and.

Speaker Change: The recovery has been strong.

Speaker Change: Got it that's that's very helpful. There and then just as far as the longer dated outlook through 'twenty six quite a robust volume growth as you put out there maybe ahead of what some some people were expecting for the basin. Overall do you see this kind of Hess midstream.

Are you taking market share from others or just kind of specific to two you're surfing has.

Speaker Change: And their plans there, especially on the crude oil side, 5% growth through 2026, So curious about that and then also I guess.

Speaker Change: <unk> from the basin. It seems like N V P L as kind of a pretty full physically there. So wondering I guess.

Speaker Change: How you think about gas egress risks and the impact to your forecast there.

Speaker Change: Yeah, So I'll address those in two parts. So the first part was kind of what's the what's the primary source of the of the growth you know.

Speaker Change: As we've said we.

Speaker Change: 90% of our volume comes from has 10% of our volume comes from third parties, we expect that ratio to stay about the same over the long term. So the bulk of the growth is coming from house and you know obviously, we have quite a lot of site quite a lot of line of sight.

Speaker Change: To the to the growth trajectory, there and our NBC is kind of demonstrate that a 35% growth in gas over the three years, 10% annualized growth in volumes through the system through the gas system.

Operator: In summary, we are pleased to have delivered a strong 2023 and look forward to a visible trajectory of growth in our operational and financial metrics that underpin our unique and differentiated financial strategy with a focus on consistent and ongoing return of capital to our shareholders. This concludes my remarks. We'll be happy to answer any questions. I will now turn the call over to the operator.

Speaker Change: So we feel we feel like we've got a good plan. It supports the outlook and we're continuing to execute against that so again I would say that that from our perspective is planning to run four rigs in 2024, we're going to continue to to support that and as I mentioned.

Speaker Change: That's including.

Speaker Change: Expanding our processing capacity going beyond 2000, 22025 and into 2027 when that capacity would become available and.

Speaker Change: We feel like that that's that's necessary to support the development activity as far as the export goes as our philosophy has been over the long term, it's always been ensuring that we have flow assurance and again I can't really speak to the basin egress, but from <unk> perspective, we're always looking to carefully manage the flow of.

Operator: One moment for our first question. And our first question comes from the line of Jeremy Tonet from J.P. Morgan. Your question, please. Hi, good afternoon. Hey, Jeremy.

Jeremy Bryan Tonet: Just want to start off, if I could, with the storm impact that you guys touched on, or the cold weather impact, I should say, for 1Q. If you might be able to provide a little bit more color there on the impact. Was it more on the gas or crude oil side? And, I guess, how do you see the basin recovering or your volumes recovering over the course of the quarter, given the extreme temperatures? Sure.

Speaker Change: <unk> from that so I would say that both on the crude and natural gas side, we're very focused on maintaining the ability to get the hydrocarbons out of the basin.

Speaker Change: And Jeremy you know I think just the underlying point that you made in your question, which is robust robust growth through 2026, and I think as John and I both pointed out.

Speaker Change: N V C's, implying gas at 495 million cubic feet per day really right at our capacity in 2026, and then you add a 125 million cubic feet a day of incremental processing that really implies that we really see robust growth not only through 2026, but really whatever your assumption is on volume growth after that really through the rest.

John A. Gatling: When we have weather impacts like we did in January, it really impacts the entire system. So when you have to bring the wells down, you're impacting oil, gas, and water coming off the pads. With the extreme cold temperatures, there were situations where it just wasn't safe to have personnel on the road.

Speaker Change: With a decade and that means that we're not only going to be able to continue the EBITDA growth in the volume growth in our free cash flow growth that we see it through 'twenty, six but really have visibility to really that continuing well beyond 2026, they really through the rest of the decade. So really just a robust plan based on all the factors that John said.

John A. Gatling: So as an example, if you have to have trucking to get, say, water off of a pad, as an example, you have a situation where the trucks aren't running because it's not safe for the trucking companies to be out there in those conditions. And for safe operations, you have to just go ahead and shut down the wells. And then along with that, you also have freezing situations where you just have some liquids in the system that get frozen when temperatures get as cold as they do.

Speaker Change: Yeah.

Speaker Change: Got it that's very helpful. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yeah.

Speaker Change: And our next question comes from the line of Brian Reynolds from UBS. Your question. Please.

Brian Reynolds: Hi, good afternoon, everyone.

Brian Reynolds: I appreciate the prepared remarks about the evolving situation at Hess midstream sponsor level with the potential change of ownership to Chevron and also a VIP to Blackstone well I know, it's a little little too early to probably assume broad assumptions of what the sponsors may or may not do kind of just curious if you could talk about the implications to the board around the change of sponsor controlling than perhaps.

John A. Gatling: We do a lot of winterization as part of our preparation for winter activities. I mean, as we all know, it gets cold every year in North Dakota. It snows, and we plan for that. I would say the issue with the January weather was that it was extreme. It was very extreme temperatures.

John A. Gatling: Well below, ambient temperatures were well below minus 30 degrees with wind chills of lower than minus 60. So, again, from the Hess side, we've seen a resilient system, both on the upstream and the midstream side, and recovery has been good. I can't really speak to the broader basin, but I think Lynn Helms and Justin Kronstad are talking a little bit about what the broader impacts are across the basin as they're maybe looking at other operators. But from our perspective, we feel that the recovery has been good. Having said that, and as I mentioned in my remarks in my script, we still have further winter ahead of us, so we're trying to be a bit cautious there. The weather has gotten good in North Dakota. It's warmed up quite a lot, and we're recovering from the winter storms, but we also have several months of winter ahead of us that we'll still need to manage properly. You got it.

Brian Reynolds: Apps through the lens of Hess midstream financial flexibility as outlined in our long term outlook could you perhaps talk about the opportunity set to buyback from sponsors going forward as these deals close.

Or if we should be thinking about anything outside of that in terms of M&A as it relates to financial flexibility as well. Thanks.

Speaker Change: Thanks, I think in terms of the with regard to the Chevron pending merger, we don't have any additional information to share on the merger other than what I already said in my script, which is that has will have has its 37, 8% ownership and the right to appoint therefore board seats. As a reminder, the total board is forecast to be.

Speaker Change: On three G IP and three independent directors and as we said has those contracts remain in place as well as the dedication on the G&P side. There is no change to the fund that holds that midstream investment. There is also no changes expected to jp's investment operating approach or even to the investment team involved with Hess midstream so not expecting any change.

John A. Gatling: That's very helpful there. So would you say that you're... Hess Midstream is back to pre-storm levels, or how do you see that unfolding at this point, absent further weather? Yeah, I would say that we're close to being back to pre-storm levels. I would say that, again, the recovery on the upstream and the midstream side has been very strong. You know, there's a bit of a lag effect to taking a system down like that, where you may have additional well work as a result of a storm like that.

Speaker Change: Is there as well.

Speaker Change: Yeah.

Speaker Change: Great. Thanks.

Speaker Change: And then maybe just to follow up on kind of the long term outlook in the Bakken with the cost of service arrangements moving to fixed fee largely going forward.

Speaker Change: And <unk> being much more of a stand alone midstream company relative to its inception.

Speaker Change: Talk about how <unk> is thinking about anything strategically different than in the past is whether it's pursuing third party volumes I think you alluded to the third party.

John A. Gatling: But overall, I would say the resiliency of the system has been outstanding. So both the upstream and midstream teams have been working very closely with one another. And, you know, the recovery has been strong.

Speaker Change: Party volume mix should stay roughly the same you know could that change over time and then when you approach. These processing expansions you know how do you approach them a little bit differently. You know in 2027 in the past or are you still getting kind of guaranteed nbc's.

John A. Gatling: That's a, that's very helpful there. And then just as far as the longer-dated outlook, you know, through 26, quite robust volume growth, as you put out there, maybe ahead of what some people were expecting for the base and overall, do you see this kind of Hess Midstream taking market share from others or just kind of specific to, "You're serving Hess, you know, and their plans there, especially on the crude oil side, you know, 5% growth through 2026." So, I am so curious about that.

Speaker Change: To support those volumes anything there in terms of.

Speaker Change: Future capital investment will be helpful. Thanks.

Speaker Change: Sure I would say that from an overall operational perspective, we really our strategy remains unchanged I mean, I think we're our primary customer is Hess and we're staying focused on that priority for sure.

Speaker Change: We're always looking to pick up additional incremental third party volumes to fill any older. Gen. Our systems, we're going to continue to operate under under those that kind of strategic direction.

John A. Gatling: And then also, I guess, egress from the basin. It seems like NBPL is kind of a pretty full physical location there. So wondering, I guess, how you think about gas and egress risks and the impact on your forecast? Yeah, I'll address those in two parts. So the first part was kind of what's the primary source of the growth. You know, as we've said, we get approximately 90% of our volume from Hess; 10% of our volume comes from third parties. We expect that ratio to stay about the same over the long term. So the bulk of the growth is coming from Hess. And you know, obviously, we have quite a lot of site, quite a lot of line of sight to the growth trajectory there. And our MVCs kind of demonstrate that 35% growth in gas over the three years, 10% annualized growth in volumes through the system. So, you know, we feel like we've got a good plan; it supports the outlook. And, you know, we're continuing to execute against that.

Speaker Change: As we add additional processing capacity, we are looking at what.

Speaker Change: Additional third party volumes are available in the area as.

Speaker Change: As you know, especially north of the river so north of the Missouri River is kind of our stronghold and Thats, where Hess has significant development remaining we usually we as we've done in the past we're going to continue to build out kind of a standard modular philosophy tightly integrated with our system.

Speaker Change: A lot of the future development is in that kind of north of the river West area and we have a really good understanding of that area and are well positioned to support Hess and third parties.

Speaker Change: Third parties that are first so from a from an overall strategic perspective really transitioning from cost of service to the fixed fee period, nothing really really changes strategically from our perspective.

Speaker Change: But and I think you know as I really had highlighted there are the question before I think the business model that we have in our financial strategy that we have is really.

Speaker Change: Unchanged and really unique and differentiate that as we go forward in the sense that we have the volume growth that we've talked about which is visible to MVC is as we've talked about even beyond that and all of that growth really being captured with stable capital levels. In the 50 to 75 level that includes the necessary investment to capture that growth so that means with growing EBITDA and stable <unk>.

Speaker Change: That means we're continuing to grow our free cash flow and that free cash flow is growing greater than our targeted distribution level, which means. We're also building free cash flow after distributions as well as leverage capacity relative to our long term target all of that is supporting just theyre trying to dissect the $1 billion to $5 billion that we talked about which gives us capacity for potential.

Speaker Change: Ongoing multiple repurchases pretty after that period and on a longer term basis, you can see really how that model really has the potential to just really continue with the existing investments that we're making really driving growth on stable capital, but with continued volume growth could your EBIT growth and therefore continued free cash flow growth.

John A. Gatling: And again, I can't really speak to the basin egress, but from Hess's perspective, we're always looking to to carefully manage the flow assurance from that. So I would say that both on the crude and natural gas side, we're very focused on on maintaining the ability to get the hydrocarbons out of the basin. And Jeremy, you know, I think just to underline a point that you made in your question, which is robust growth through 2026, and I think as John and I both pointed out, with the MVCs implying gas at 495 million cubic feet per day, really right at our capacity in 2026, and then you add 125 million cubic feet per day of incremental processing, that really implies that we really see robust growth, not only through 2026, but really whatever your assumption is on volume growth after that, really through the rest of the decade.

Speaker Change: And Brian just to build on that a little bit and you know Justin Grinstead has talked about this several times.

Speaker Change: North Dakota pipeline authority, there, they're forecasting gas growth somewhere from the three and a half bcf growing up to a near six Bcf by mid 2030, So as Jonathan mentioned in the prior response to the earlier question from Jeremy and then also kind of adding into this there definitely is.

Speaker Change: Going to be opportunity for further growth and that will support the infrastructure, but also as Jonathan mentioned sets us up strong from a from a financial perspective as well.

Speaker Change: Yeah.

Speaker Change: Great. Thanks, I'll leave it there enjoy the rest of your day.

Speaker Change: Thanks, Brian.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question.

John A. Gatling: And that means that we're not only going to be able to continue the EBITDA growth and the volume growth and the free cash flow growth that we see through 2026, but really have visibility to that continuing well beyond 2026 and really through the rest of the decade. So really just a robust plan based on all the factors that John said.

Speaker Change: Comes from the line of Doug <unk> from Citi. Your question. Please.

Speaker Change: Yes.

Doug: Hi, Thanks for the question.

Doug: First one just on capital allocation, we assume a similar size and cadence of the buybacks moving forward even with the.

The increased financial flexibility guidance, you've given today and I'm just curious if there's a point where it might make sense within your strategy to look at other potential uses of capital whether that's more organic growth like some of the projects you just talked about or maybe even some potential M&A opportunities.

Jeremy Bryan Tonet: That's very helpful. Thank you. Thank you. One moment for our next question. And our next question comes from the line of Brian Reynolds from UBS. Your question, please. Hi, good afternoon, everyone.

Doug: Sure.

Speaker Change: Well in terms of the repurchase program.

Really as we did this past year, we expect a can't do multiple purchases per year.

Speaker Change: As you know so I put it in 2024 through 2020 six so don't expect a change in that program utilizing the capacity both the free cash flow after distributions. So the building cash balance as well as the leverage capacity that we have.

Brian Patrick Reynolds: I appreciate the prepared remarks about the evolving situation at Hess Midstream's sponsor level with the potential change of ownership to Chevron and also a GIP to Blackstone. Well, I know it's a little too early to probably assume, you know, broad assumptions of what the sponsors may or may not do. Kind of just curious if you could talk about the implications for the board around the change in sponsor control, and then perhaps, you know, through the lens of Hess Midstream's financial flexibility as outlined in the long-term outlook, could you perhaps talk about the opportunity set to buy back from sponsors, you know, going forward as these deals close, or if we should be thinking about anything outside of that in terms of, you know, M&A as it Thanks.

Speaker Change: And so with those as we've done in the past we would also expect the opportunity to increase our dividend level as well to be able to maintain the same distributed cash flow that we had prior to each of the repurchases. So no expected change in that as we go forward I think one of the things in terms of the use of our capital allocation, obviously part of our France.

Speaker Change: Strategy as we said is continued prioritization of shareholder returns, including the 5% growth, but also incremental we try and such as the repurchases and associated dividend distribution level increases, but I think we're in such a great position as we just talked about that with the existing investment that we have and really stable capital.

Jonathan C. Stein: I think in terms of the, with regard to the Hess Chevron pending merger, we don't have any additional information to share on the merger other than what I already said in my script, which is that Hess will have 37.8% ownership and the right to appoint their four board seats. As a reminder, the total board is four Hess directors, should be Chevron, three GIP, and three independent directors. And as we said, Hess's contracts remain in place as well as the dedication. On the GIP side, there's no change to the fund that holds the Hess Midstream investment. There are also no changes expected to GIP's investment operating approach or even to the investment team involved with Hess Midstream, so we're not expecting any changes there as well. Great, thanks.

We can really drive just through 2022nd as we've talked about 10% growth in volumes more than 10% growth in EBIT, including 12% growth in 2024 alone and then on that stable capital really driving a more than 10% growth in free cash flow. So of course, we'll continue to evaluate it particularly assets and the like as we've done in the past but.

Speaker Change: The bar is very high because our existing plan already drives growth it doesn't require a six.

Speaker Change: Different capital investment really stable capital to really capture that growth.

Speaker Change: Got it thanks and my second question is just around the contract structure.

Speaker Change: We're into the second term here, which has some more years on it.

Speaker Change: When you change the.

Speaker Change: The sponsor level and the board.

Brian Patrick Reynolds: And then maybe just to follow up on kind of the long-term outlook for the BAC and, you know, with the cost of service arrangement moving, you know, to a fixed fee largely going forward, and Hessdream being much more of a standalone midstream company relative to its inception, can you talk about how HessM is thinking about anything strategically different than in the past, such as whether it's pursuing third-party volumes, I And then when you approach these processing expansions, you know, how do you approach them a little bit differently in 2027 than in the past? Are you still getting any kind of guaranteed MVCs to support those volumes?

Speaker Change: I'm, just wondering how youre thinking about the potential for the contract terms to change that.

Speaker Change: <unk>.

Speaker Change: Something we receive questions on a lot. So really just looking to better understand how you think about your contracted position moving forward.

Speaker Change: Yeah, there's really nothing really to say because as I said before.

Speaker Change: There's no change in the contract or is there a mechanism to change the contracts that we don't expect any change in the contract going forward.

Speaker Change: Got it thanks for the question.

Speaker Change: Yeah.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yeah.

Speaker Change: And our next question comes from the line of John <unk> from Goldman Sachs. Your question. Please.

John Gatling: Hey, everyone. Thanks for the time I wanted to get back to the growth outlook again, and maybe put it.

Take it from another angle or are you guys expecting any higher.

John Gatling: Underlying oil outlook, then done kind of last time, you gave an update or.

John A. Gatling: Anything there in terms of, you know, future capital investment will be helpful. Sure, I would say that from an overall operational perspective, our strategy really remains unchanged. I mean, I think our primary customer is Hess, and we're staying focused on that priority for sure. We're always looking to pick up additional incremental third-party volumes to fill any olage in our systems.

John Gatling: Is this really just hey, you're getting a better sense of what the rising G O ours look like and that's what's driving most of this and then on a related note.

John Gatling: The underlying assumption of 200000.

John Gatling: Oil barrels of oil equivalent for your sponsor still kind of the driving.

John Gatling: Driving bogey there.

Speaker Change: Yes, so just on the oil versus the gas question overall.

John A. Gatling: We're going to continue to operate under that kind of strategic direction. You know, as we add additional processing capacity, we are looking at what additional third-party volumes are available in the area. As you know, especially north of the river. North of the Missouri River is kind of our stronghold, and that's where Hess has significant development remaining.

Speaker Change: Overall, I would say the the wells continue to perform very very strongly and I would say that it's not necessarily a new set from an oil perspective. Its just that continued growth in gas and as I mentioned you can you can see it across the basin that that gas does tend to outperform.

Speaker Change: On a on a slight basis outpace oil and we're just we're kind of looking at that longer term and we're building that infrastructure that we feel like we need to kind of to set that up so from an overall development perspective.

John A. Gatling: As we've done in the past, we're going to continue to build out kind of a standard modular philosophy tightly integrated with our system. A lot of the future development is in that kind of north of the river, west area, and we have a really good understanding of that area and are well positioned to support Hess and third parties third parties there. So from a from an overall strategic perspective, really transitioning from cost of service to the fixed fee period, nothing really, really changes strategically from our perspective. And I think, you know, as I really had highlighted there in the question before, I think, you know, the business model that we have and the financial strategy model that we have is really unchanged and really unique and differentiated as we go forward in the sense that we have the volume growth that we've talked about, which is visible to MVCs, as we talked about even beyond that, and all that growth really being captured with stable capital levels in the 250, 275 level that includes the necessary investment to capture that growth.

Speaker Change: The gas is coming as it relates to hesse's plans, where we're close to us on a net basis is close to 200000 barrels a day now so I think as we think about the four rigs for the balance of this year.

Speaker Change: We're really kind of knocking on that door already so from our perspective.

Speaker Change: And to set ourselves up we talked about the gas growth of 35% between approximately 35% between now and in 2026, 10% annualized growth and then as Jonathan mentioned.

Speaker Change: Our <unk> are showing 495 million cubic foot a day on an implied production basis. Our capacity is 500, adding the 125 million a day of additional processing capacity kind of gives you an indication of the longer term outlook from a from a gas growth perspective, so again.

Speaker Change: It's.

Speaker Change: We see robust production coming from the wells.

Speaker Change: We do see a gas outpacing oil a little bit and that's that's driving a lot of the infrastructure that we're talking about.

Alright, thanks for that and maybe just.

Speaker Change: Just thinking about that processing plant and kind of.

Speaker Change: Uh huh.

Speaker Change: Cadence of decisions from here.

John A. Gatling: So that means with growing EBITDA and stable capital, that means we'll continue to grow our free cash flow, and that free cash flow is growing greater than our target distribution level, which means we're also building free cash flow after distribution, as well as leverage capacity relative to our long-term target. All that is supporting, just through 2026, the $1.25 billion that we talked about, which gives us capacity for potential ongoing multiple repurchases per year for that period. And on a longer-term basis, you can really see how that model really has improved.

You will you have your 2027 N V C's.

Speaker Change: Kind of Lockdown signed up before you need to make the call on <unk>.

Speaker Change: Trying to invest in that plant.

Speaker Change: Yes. So essentially this year is primarily engineering in 2025 will be when we start a long lead purchases and some early construction activity.

Speaker Change: So as we go through our normal annual process, we'd be setting new nbc's through this upcoming planned cycle that'll that'll get walk down going into early next year. So I think the timing of this will set us up where that kind of three year rolling MVC.

Brian Patrick Reynolds: And, you know, Brian, just to build on that a little bit, and Justin Crinstead has talked about this several times from the North Dakota Pipeline Authority, they're forecasting gas growth somewhere from the three and a half BCF growing up to near six BCF by mid 2030. So, as Jonathan mentioned in the prior response to the earlier question from Jeremy, and then also kind of adding into this, there definitely is going to be an opportunity for further growth. And, you know, that will support the infrastructure but also, as Jonathan mentioned, set us up strong from a financial perspective. Great, thanks. I'll leave it be. Enjoy the rest of your day.

Speaker Change: We will give us a chance to talk to lock that in from a from a growth perspective.

Speaker Change: Alright.

Speaker Change: That makes sense that's it for me appreciate the time I appreciate it.

Speaker Change: Thank you and thank you ladies and gentlemen for your participation in today's conference. This concludes the question and answer session as well as today's program everyone have a great day.

Speaker Change: Okay.

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Operator: Thanks, Brian. Thank you. One moment for our next question. And our next question comes from the line of Doug Irwin from Citi. Your question, please. Thanks for the questions.

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Douglas Baker Irwin: My first question is just on capital allocation. We assume a similar size and cadence to the buybacks moving forward, even with the increased financial flexibility guidance you've given today. And I'm just curious if there's a point where it might make sense within your strategy to look at other potential uses of capital, whether that's more organic growth, like some of the projects you've just talked about, or maybe even some potential ordinary opportunities. Well, in terms of the repurchase program, you know, really, as we did this past year, we expect to continue to do multiple repurchases per year, including 2024 through And so with those, as we've done in the past, we would also expect the opportunity to increase our dividend level as well, to be able to maintain the same distributed cash flow that we had prior to each of the repurchases. So, no expected change in that.

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Jonathan C. Stein: As we go forward, I think one of the things in terms of the use of our capital allocation, obviously, part of our financial strategy, as we said, is continued prioritization of shareholder returns, including the ongoing 5% growth, but also incremental returns, such as repurchases and associated dividend distribution level increases. But I think we're in such a great position, as we just talked about, that with the existing investment that we have and really stable capital, we can really drive just through 2026, as we've talked about, 10% growth in volumes, more than 10% growth in EBITDA, including 12.5% growth in 2024 alone. And then on that stable capital, really driving more than 10% growth in free cash flow. So, of course, we'll continue to evaluate, particularly assets and the like, as we've done in the past, but the bar is very high because our existing plan already drives growth and doesn't require significant capital investment, really stable capital to really capture that growth. I got it.

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Douglas Baker Irwin: Thanks. And my second question is just around the contract structure. We're into the second term here, which has 10 more years on it, but there's potentially some new changes coming up at the sponsor level on the board. I'm just wondering how you're thinking about the potential for the contract terms to change or be renegotiated, something we receive questions on a lot.

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Jonathan C. Stein: So really just looking to better understand how you think about your contract position moving forward. Yeah, there's really nothing really to say because, as I said before, there's no change in the contract and no mechanism to change the contract. So we don't expect any change in the contract going forward. Got it.

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Operator: Thanks for the question. Thank you. One moment for our next question, and the next question comes from the line of John Mackay from Goldman Sachs. Your question, please. Hey everyone, thanks for the time. I want to get back to the growth outlook again and maybe put it in another angle. Are you guys expecting any higher underlying oil outlook than the last time you gave an update, or, you know, is this really just, hey, getting a better sense of what the rising GORs look like? And that's what's driving most of this.

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John Ross Mackay: And then on a related note, you know, is the underlying assumption of 200,000 barrels of oil equivalent for your sponsor, still kind of the driving bogeyman there. Yeah, so just on the oil versus gas question, overall, I would say the wells continue to perform very, very strongly. And I would say that it's not necessarily a new set from an oil perspective.

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John A. Gatling: It's just that continued growth in gas. And as I mentioned, you can see it across the basin that gas does tend to outpace, on a slight basis, oil. And we're just, we're kind of looking at that longer term. And we're building that infrastructure that we feel like we need to kind of set that up.

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John A. Gatling: So from an overall development perspective, you know, the graph, the gas is coming. As it relates to Hess's plans, you know, we're close to, I mean, Hess on a net BOE basis is close to 200,000 barrels a day now. So I think as we think about the four rigs for the balance of this year, you know, we're really kind of knocking on that door already.

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John A. Gatling: So from our perspective, you know, we're continuing to set ourselves up. We talked about gas growth of 35% between approximately 35% between now and 2026, 10% annualized growth. And then, as Jonathan mentioned, you know, our MVCs are showing 495 million cubic feet of gas a day on an implied production basis, our capacity is 500, and adding the 125 million a day of additional processing capacity kind of gives you an indication of the longer term outlook from a gas growth perspective. So again, we see robust production coming from the wells. We do see gas outpacing oil a little bit, and that's driving a lot of the infrastructure that we're talking about. Thanks for that!

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John Ross Mackay: And maybe just thinking about that processing plant and the kind of cadence of decisions from here. Will you have your 2027 MVCs kind of locked down and signed up before you need to make the call on starting to invest in that plant? Yes, so essentially, this year is primarily engineering, and 2025 will be when we start long-lead purchases and some early construction activity. So as we go through our normal annual process, you know, we'd be setting new MVCs through this upcoming plan cycle that'll get locked down going into early next year. So I think the timing of this will set us up where that kind of three-year rolling MVC will give us a chance to lock that in from a growth perspective. All right. That makes sense. That's it for me.

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John A. Gatling: I appreciate the time. Okay. I appreciate it. Thank you. And thank you, ladies and gentlemen, for your participation in today's conference. This concludes the question and answer session as well as today's program. Everyone have a great day.

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Operator: John Gatling, John Mackay, Brian Reynolds, Praneeth Satish, Hess Midstream Partners LP John Gatling, John Mackay, Brian Reynolds, Praneeth Satish, Hess Midstream Partners LP, ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth Big Mouth ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good day, ladies and gentlemen, and welcome to the fourth quarter 2023 Hess Midstream Conference Call. My name is Jonathan and I will be your operator for today. At this time, all participants are in a listen only mode.

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Jennifer Gordon: Please be advised that today's conference is being recorded for replay purposes. I would now like to turn the conference over to Jennifer Gordon, Vice President of Investor Relations. Thank you, Jonathan. Good afternoon, everyone.

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Jennifer Gordon: With me today are John Gatling, President and Chief Operating Officer, and Jonathan Stein, Chief Financial Officer. I'll now turn the call over to John Gatling. Thanks, Jennifer.

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John A. Gatling: Good afternoon everyone, and welcome to Hess Midstream's fourth quarter 2023 conference call. Today I'll review our 2023 operating performance and highlights, provide details regarding Hess Midstream's 2024 plans, and outlook through 2026. Jonathan will then review our financial results.

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John A. Gatling: 2023 was a year of continued strong performance and execution for Hess Midstream. We delivered significant volume and capacity growth, including 15% year-over-year growth in gas processing volumes and an expansion of our compression capacity by approximately 100 million cubic feet per day, further enhancing our gas capture capability. As discussed in our guidance release, we've established our 2026 minimum volume commitments, which implies approximately 35% growth in gas volumes from 2023 through 2026. In addition, we've revised our 2025 MVCs upward by an average of approximately 5% across our oil and gas systems, reflecting strong well performance and delivery by Hess and continued gas capture success. Now turning to Hess Upstream Highlights from their earnings release issued this morning. Bakken net production averaged 194,000 barrels of oil equivalent per day in the fourth quarter, which includes 19,000 barrels of oil equivalent per day from percent of proceeds volumes, which don't impact Hess midstream throughput.

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John A. Gatling: Full year 2023, BAC and net production averaged 182,000 barrels of Oliquin per day, which was an increase of 18% year over year. Hess also reiterated their plans to continue to operate a four-rig drilling program in 2024, now focusing on Hess Midstream's fourth quarter 2023 results. Gas processing volumes averaged 387 million cubic feet per day.

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John A. Gatling: Crude Terminaling Volumes Average 115,000 Barrels of Oil per Day, and Water Gathering Volumes averaged 95,000 barrels of water per day, resulting in full year adjusted EBITDA of $1,022,000,000. Now, turning to Hess Midstream's guidance. In the first quarter of 2024, we expect volumes to be flat with the fourth quarter, reflecting the impact of extreme cold weather, including wind chill temperatures below minus 60 degrees Fahrenheit that we experienced in January, and to reflect that a significant part of winter is still ahead of us. For full year 2024, we expect volumes across our oil and gas systems to grow approximately 10% compared to 2023, primarily driven by HES's Development Act. We anticipate full year 2024 gas processing volumes to average between 395 and 405 million cubic feet per day, crude terminaling volumes to average between 120 and 130,000 barrels of oil per day, and water gathering volumes to average between 105 and 115,000 barrels of water per day.

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Speaker Change: Good day, ladies and gentlemen, and welcome to the fourth quarter 2023, Hess Midstream conference.

Jonathan Stein: Call My name is Jonathan and I will be your operator for today at this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Jonathan Stein: We'll then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.

Jonathan Stein: Please be advised that today's conference is being recorded for replay purposes I would now like to turn the conference over to Jennifer Gordon Vice President of Investor Relations. Please proceed.

Yeah.

Jennifer Gordon: Thank you Jonathan good afternoon, everyone and thank you for participating in our fourth quarter earnings Conference call. Our earnings release was issued this morning and appears on our website Www Dot Hess midstream Dot com.

John A. Gatling: The activity is focused on construction of multi-year projects, including approximately 40 miles of green-filled, high-pressure gas-gathering pipelines and two new compressor stations, which are expected to initially provide, in aggregate, an additional 85 million cubic feet per day of gas compression capacity when brought online in 2025 and expandable to approximately 140 million cubic feet per day. Longer term, we anticipate keeping capital expenditures stable at approximately $250 to $275 million through 2026. [inaudible] The additional processing capacity is a disciplined investment that is underpinned by new MVCs showing that they will be at capacity in 2026 and supports expected long-term growth for Hess Midstream from increasing Hess and third-party volumes in the box. In summary, we're continuing to execute our strategy of making focused, low-risk investments to meet base and demand, delivering reliable operating performance and strong financial results.

Jennifer Gordon: Today's conference call contains projections and other forward looking statements within the meaning of the federal Securities laws.

Jennifer Gordon: Also on today's conference call, we may discuss certain non-GAAP financial measures.

Jennifer Gordon: Reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the earnings release.

Jennifer Gordon: With me today are John Gatling, President and Chief operating Officer, and Jonathan Stein, Chief Financial Officer, I will now turn the call over to John Gatling.

John Gatling: Thanks, Jennifer and good afternoon, everyone and welcome to Hess Midstream fourth quarter 2023 conference call today I'll review, our 2023 operating performance and highlights provide details regarding Hess midstream is 2024 plans and outlook through 2026.

John A. Gatling: We're well positioned for substantial growth, as implied by our guided 2026 MVCs, which are underpinned by HES's planned development activity and our continued focus on gas capture, resulting in expected sustainable cash flow generation and the potential to continue to return additional capital to our shareholders. I'll now turn the call over to Jonathan to review our financial results and guidance. Thanks, John, and good afternoon, everyone.

Jonathan Stein: Jonathan will then review our financial results.

John Gatling: 2023 was a year of continued strong performance and execution for Hess midstream.

John Gatling: We delivered significant volume and capacity growth, including 15% year over year growth in gas processing volumes and.

John Gatling: And expansion of our compression capacity by approximately 100 million cubic foot per day further enhancing our gas capture capability.

John Gatling: As discussed in our guidance release, we've established our 2026 minimum volume commitments, which implies approximately 35% growth in gas volumes from 2023 through 2026.

Jonathan C. Stein: Today, I will summarize our financial highlights from 2023, discuss our recently completed nomination process with Hess, and provide details on our 2024 guidance and outlook through 2026, including our continued prioritization of ongoing and incremental return of capital to shareholders. For 2023, we delivered strong results with full year net income of $608 million and adjusted EBITDA of $1,022,000,000. Looking forward, we have line of sight to at least 10% annual growth in net income, adjusted EBITDA, and adjusted free cash flow through 2026, driven by Hess's growth in the Bakken and underpinned by our MVCs through 2026 that provide visibility to annualized growth in gas throughput volumes of approximately 10 percent from 2024 through 2026 and continued growth in oil throughput volumes of approximately 10 percent growth in 2025 and approximately 5 percent growth in 2026.

John Gatling: Now turning to Hess upstream highlights from the earnings release issued this morning.

John Gatling: Bakken net production averaged 194000 barrels of oil per day in the fourth quarter, which includes 19000 barrels of oil equivalent per day from percent of proceeds volumes, which don't impact Hess midstream throughput.

John Gatling: For full year 2023, Bakken net production averaged 182000 barrels of oil per day.

John Gatling: Which was an increase of 18% year over year.

John Gatling: Has also reiterated their plans to continue to operate a four rig drilling program in 2024.

John Gatling: Now focusing on Hess midstream fourth quarter 2023 results gas processing volumes averaged 387 million cubic foot per day.

John Gatling: Terminalling volumes averaged 120000 barrels of oil per day, and water gathering volumes averaged 113000 barrels of water per day.

John Gatling: During the fourth quarter Hess volumes continued to grow while third parties declined primarily driven by delays in new production coming online in the fourth quarter.

John Gatling: Third parties remain approximately 10% in our fourth quarter and we continue to expect them to make up approximately 10% of our volumes in the future.

Also in the fourth quarter with unseasonably good weather.

John Gatling: For full year, 2023, Hess midstream gas processing volumes averaged 367 million cubic foot per day.

Jonathan C. Stein: Supported by the repurchase, we recently announced a further return on capital to our shareholders through an immediate 1.5% increase in our quarterly distribution level, in addition to our targeted 5% annual distribution per Class A share increase. As we have done in the past with the reduced share count following the repurchase, this distribution level increase maintains our distributed cash flow at approximately the same amount as before the repurchase. Since the beginning of 2021, we have returned $1.55 billion to shareholders through accretive repurchases that have reduced our total unit count by approximately 20%. Additionally, with the combination of our targeted 5% annual distribution growth and six distribution level increases following each repurchase, we have increased our distribution per Class A share by approximately 40% over this period. As a result, our total shareholder return yield continues to be one of the highest of our midstream peers. Furthermore, our leverage at year end of approximately 3.2 times adjusted EBITDA is one of the lowest among our peers, highlighting our differentiated ability to deliver significant shareholder returns while also maintaining balance sheet growth strength.

John Gatling: Crude terminalling volumes averaged 115000 barrels of oil per day and.

John Gatling: And water gathering volumes averaged 95000 barrels of water per day, resulting in full year adjusted EBITDA of $1.022 billion.

John Gatling: Turning to Hess midstream guidance in the first quarter 2024, we expect volumes to be flat with the fourth quarter, reflecting the impact of extreme cold weather, including winchell temperatures below minus 60 degrees Fahrenheit that we experienced in January.

John Gatling: And to reflect that a significant part of winter is still ahead of us.

John Gatling: For full year 2024, we expect volumes across our oil and gas systems to grow approximately 10% compared to 2023, primarily driven by Hess is development activity.

John Gatling: We anticipate full year 2020 for gas processing volumes to average between 395, and 405 million cubic foot per day crude terminalling volumes to average between 120, and 130000 barrels of oil per day and water gathering volumes to average between $105 and 115000 barrels of water per day.

John Gatling: We project adjusted EBITDA for 2024 in the range of $1 billion $125 million to $1 billion $175 million, an increase of 12, 5% at the midpoint compared to full year 2023.

John Gatling: The adjusted EBIT increase is primarily driven by physical volume growth from Hess is development activity.

John Gatling: Turning to Hess Midstream is 2024 capital program for.

John Gatling: For full year 2024 capital expenditures are expected to total between 250 and $275 million approximately.

John Gatling: <unk> $125 million is allocated to ongoing capital expenditures for gathering system, well connects and maintenance.

John Gatling: While approximately $125 million to $150 million is allocated to project based capital expenditures, including gas gathering pipeline and compression expansions.

The activity is focused on construction of multi year projects, including approximately 40 miles of Greenfield high pressure gas gathering pipelines.

John Gatling: Longer term, we anticipate keeping capital expenditures stable at approximately $250 million to $275 million through 2026.

John Gatling: This amount includes our planned investment to add gas processing capacity of approximately 125 million cubic foot per day with the construction expected to start in 2025 and come online by mid 2027.

John Gatling: The additional processing capacity is a disciplined investment that is underpinned by new MVC showing will be at capacity in 2026 and supports expected long term growth for Hess midstream from increasing Hess and third party volumes in the Bakken.

Jonathan C. Stein: And terminaling revenues decreased by approximately $1 million. However, total costs and expenses, excluding depreciation, amortization, pass-through costs, and net of our proportional share of LM4 earnings, increased by approximately $4 million, as follows. Higher operating expenses of approximately $2 million, primarily from increased maintenance activity taking advantage of unseasonably favorable weather, and higher GNN expenses of approximately $2 million, primarily from higher allocations under an omnibus agreement, resulting in adjusted EBITDA for the fourth quarter of 2023 of $264 million. Our gross adjusted EBITDA margin for the fourth quarter was maintained at approximately 80%, highlighting our continued strong operating leverage. The fourth-quarter capital expenditures were approximately $72 million, and net interest, excluding amortization of deferred finance costs, was approximately $45 million, resulting in an adjusted free cash flow of approximately $147 million.

John Gatling: In summary, we're continuing to execute our strategy of making focused low risk investments to meet basin demands deliver.

John Gatling: Delivering reliable operating performance and strong financial results, we are well positioned for substantial growth as implied by our guided 2026 N V. CS which are underpinned by Hess as planned development activity and our continued focus on gas capture.

John Gatling: Resulting in expected sustainable cash flow generation and the potential to continue to return additional capital to our shareholders.

I'll now turn the call over to Jonathan to review, our financial results and guidance.

Jonathan Stein: Thanks, John and good afternoon, everyone.

Jonathan Stein: Today, I will summarize our financial highlights on slide 23 discuss our recently completed nomination process with Hess and.

Jonathan Stein: Details on our 2020 for guidance and outlook through 2026.

Jonathan Stein: Including our continued prioritization of ongoing and incremental return of capital to shareholders.

Jonathan C. Stein: We had a drawn balance of $340 million on a revolving credit facility at ERS. In the fourth quarter of 2023, Hess announced that it had entered into a definitive agreement to be acquired by Chevron Corporation. Hess Midstream expects that upon consummation of the proposed transaction, Chevron will acquire Hess' 37.8% ownership in Hess Midstream, including its right to appoint four directors to the board of Hess Midstream. However, its contract structure remains in place. Turning to our annual nomination process. As a reminder, 2023 was the final year of the annual rate redetermination process for the majority of our systems, which represent approximately 85% of our revenue. The base rate for 2024 was set based on the average of the tariff rate from the years 2021 through 2023, adjusted for inflation.

Jonathan Stein: For 2023, we delivered strong results with full year net income of $608 million and adjusted EBITDA of $1.022 billion looking.

Jonathan Stein: Looking forward, we have line of sight to at least 10% annual growth in net income adjusted EBITDA and adjusted free cash flow through 2026.

Jonathan Stein: Driven by <unk> growth in the Bakken and underpinned by our MVC through 2026 that provide visibility to annualized growth and gas throughput volumes of approximately 10% from 2024 through 2026 and continued growth in oil throughput volumes of approximately 10% growth in 2025 and approximately 5%.

Jonathan Stein: Growth in 2026.

Jonathan Stein: We continued to exit a unique and differentiated financial strategy prioritizing consistent and ongoing return of capital to shareholders.

Jonathan Stein: In November we completed our fourth unit repurchase transaction in 2023 of $100 million.

Jonathan Stein: That was accretive about the distributable cash flow per class a share basis, and then earnings per class a share basis.

Jonathan Stein: On the unit repurchase transaction public ownership of Hess midstream on a consolidated basis has now increased to approximately 30%.

Jonathan Stein: Supported by the repurchase we recently announced a further return of capital to our shareholders through the immediate one 5% increase in our quarterly distribution level in it.

Jonathan Stein: And to our targeted 5% annual distribution per class a share increase.

Jonathan Stein: As we have done in the past with the reduced share count following the repurchase this distribution level increase maintains our distributed cash flow at approximately the same amount as before the repurchase.

Jonathan Stein: Since the beginning of 2021, we have returned $1 $5 5 billion to shareholders through accretive repurchases that have reduced our total unit count by approximately 20%. In addition to the combination of our targeted 5% annual distribution growth and sixth distribution level increases following each repurchase.

Jonathan Stein: We have increased our distribution per class a share by approximately 40% over this period as a result, our total shareholder return the yield continues to be one of the highest of our midstream peers. Furthermore, our leverage at year end of approximately three two times adjusted EBITDA as one of the lowest among our peers.

Jonathan Stein: Highlighting our differentiated ability to deliver significant shareholder returns, while also maintaining balance sheet strength.

Jonathan Stein: As announced in our guidance release. This morning, we are continuing to prioritize shareholder returns and a strong balance sheet. We have extended our annual distribution per class a share growth target of at least 5% through 2026 and are expecting greater than 125 billion that financial flexibility through 2026 for capital allocation.

Jonathan Stein: Includes prioritization of potential unit repurchases on an ongoing basis, while maintaining our long term leverage target of three times adjusted EBITDA.

Jonathan Stein: Turning to our results for the fourth quarter net income was $153 million compared.

Jonathan Stein: Compared to 165 billion for the third quarter adjusted.

Jonathan Stein: Adjusted EBITDA for the fourth quarter was $264 million compared.

Jonathan Stein: Compared to $271 million for the third quarter.

Jonathan Stein: The change in adjusted EBITDA relative to the third quarter was primarily attributable to the following.

Jonathan Stein: Total revenues, excluding pass through revenues decreased by approximately $3 million.

Jonathan Stein: Driven by lower third party throughput volumes offsetting higher Hess volumes as John described resulting in segment revenue changes this fall gathering.

Jonathan Stein: Gathering revenues decreased by approximately $1 million.

Jonathan C. Stein: This adjusted EBITDA growth of approximately 12.5% at the midpoint of our range is supported by continued revenues from physical volumes, growth across all gas, oil, and water systems, as John described, as well as stable operating costs, even as our system continues to expand, highlighting our strong operating leverage. This adjusted EBITDA growth of approximately 12.5% at the midpoint of our range is supported by continued growing leverage, as well as our system continues to expand, highlighting our strong operating leverage. We continue to target a gross adjusted EBITDA margin of approximately 75% in 2024. For 2024, with total expected capital expenditures of between $250 and $275 million, we expect to generate adjusted free cash flow of between $685 and $735 million and XS Adjusted Fee Cash Flow of approximately $115 million after fully funding our targeted growing distribution.

Jonathan Stein: <unk> revenues decreased by approximately $1 million and Terminalling revenues decreased by approximately $1 million.

Jonathan Stein: Total costs and expenses, excluding depreciation and amortization pass through costs and net of our proportional share of <unk> earnings increased by approximately $4 million as follows higher operating expenses of approximately $2 million per.

Jonathan Stein: Primarily from increased maintenance activity, taking advantage of the unseasonably favorable weather.

Jonathan Stein: And higher G&A expenses of approximately $2 million, primarily from higher allocations under our omnibus agreement.

Jonathan Stein: Resulting in adjusted EBITDA for the fourth quarter of 2023 of $264 million.

Jonathan Stein: Our gross adjusted EBIT margin for the fourth quarter was maintained at approximately 80% highlighting our continued strong operating leverage.

Jonathan Stein: Fourth quarter capital expenditures were approximately $72 million and net interest excluding amortization of deferred finance costs was approximately $45 million.

Jonathan Stein: Resulting in adjusted free cash flow of approximately $147 million, we had a drawn balance of $340 million on our revolving credit facility at year end.

Jonathan Stein: In the fourth quarter of 2023 has enough that it entered into a definitive agreement to be acquired by Chevron Corporation.

Jonathan Stein: Hess midstream expects upon consummation of the proposed transaction Chevron will acquire Hess is 37, 8% ownership it has midstream, including its right to appoint four directors to the board of Hess Midstream.

Jonathan C. Stein: With increasing adjusted EBITDA, we expect our leverage for 2024 to be below our three times adjusted EBITDA target on a full year basis. For the first quarter of 2024, we expect net income to be approximately $150 to $160 million and adjusted EBITDA to be approximately $260 to $270 million, including the impacts of the extreme cold weather that we experienced in January.

Jonathan Stein: Has met James contract structure remains in place.

Jonathan Stein: Turning to our annual nomination process.

Jonathan Stein: As a reminder, 2023 was the final year of the annual rate Redetermination process for the majority of our systems that represent approximately 85% of our revenues.

Jonathan Stein: The base rate for 2024 was set based on the average of the tariff rate from the year 2021 through 2023 adjusted for inflation.

Jonathan C. Stein: For the remainder of 2024, we expect growing adjusted EBITDA consistent with increasing volumes across oil, gas, and water systems, with seasonally higher operating expenses in the second and third quarters of the year. Looking beyond 2024, we have clear visibility to volume adjusted EBITDA and adjusted free cash flow growth that supports our financial strategy. As described, our MVCs provide visibility to growth in oil throughput volumes of approximately 10% in 2025 and approximately 5% in 2026, as well as analyzed gas throughput volumes growth of approximately 10% from 2024 through 2026, which represents approximately 75% of our expected revenue. Driven by these growing volumes, together with fees that are steadily increasing based on our annual inflation escalator, and maintaining a targeted gross adjusted EBITDA margin of approximately 7 With growing adjusted EBITDA, and capital expenditures expected to remain stable with 2024 levels, we expect annual growth and adjusted free cash flow of greater than 10% through 2026. In addition, we are continuing to prioritize shareholder returns with our Return of Capital Framework.

Jonathan Stein: <unk> will then be increased each year based on the inflation escalator capped at 3%, resulting in a steadily increasing rates through 2033.

Jonathan Stein: Our terminalling and water gathering systems that represent approximately 15% of our revenues, we will continue to reset our rates through our annual rate redetermination process through 2033.

Across all systems. The 2020 forward cap rates on average were higher than 2023 right.

Jonathan Stein: So all of our systems MVC has continued to be set at 80% of dominated volumes set three years in advance providing downside protection through 2033.

Jonathan Stein: Guidance released this morning, we provide MVC for the 2024 through 2026.

Jonathan Stein: Part of the nomination process MVC is by 2024, and 2025 were reviewed and where required increased while MVC is that 2026 with newly established based on 80% of the dominate volumes for each system in that year.

Jonathan Stein: In 2024, Alright, MVC is expected to provide a possibly 90% revenue coverage for oil at approximately 85% revenue coverage for gas or.

Jonathan Stein: Our 2025 <unk> for oil and gas have been increase as part of the nomination process and therefore provide 80% revenue coverage.

Jonathan Stein: Our MVC as a 2026 provide line of sight to long term growth and system system throughput for example, looking at gas processing. The 2026 MVC of 396 billion cubic feet per day.

Jonathan Stein: At 80% of the nomination level of Hesse's expected volumes.

Jonathan Stein: 95 million cubic feet per day.

Approximately 35% growth in physical natural gas volumes from 'twenty to 'twenty three levels and utilization of our full processing capacity of 500 million cubic feet per day.

Jonathan C. Stein: First, we are continuing to grow our base distribution by extending our targeted distribution growth of at least 5% annually per Class A share through 2026. Second, we have financial flexibility for potential significant incremental shareholder returns beyond our growing base distribution. With expected adjusted EBITDA and adjusted free cash flow growth of greater than 10% annually in excess of our targeted annual distribution growth of at least 5%, we expect to generate excess adjusted free cash flow beyond our distribution, and leverage is expected to decline below two and a half times adjusted EBITDA by the end of 2025 and to continue below this level through 2026, providing leverage capacity relative to a long-term three times adjusted EBITDA leverage target. As a result That includes the potential for multiple unit repurchases per year through this period and the potential for incremental distribution level increases associated with these repurchases beyond our targeted at least 5% annual distribution per class A share growth.

Jonathan Stein: The need for potential continued investment in gas processing as John described.

Jonathan Stein: Turning to guidance for 2024 for the full year 2024, we expect net income of $670 million to $720 million and adjusted EBITDA of $1 billion $125 billion to $1 billion $175 million.

Jonathan Stein: Continue to target a gross adjusted EBIT margin of approximately 75% in 2024.

Jonathan Stein: Slide 24, with total expected capital expenditures of between 250 and $275 million, we expect to generate adjusted free cash flow of between 685 and $735 million at.

Jonathan Stein: In excess of adjusted free cash flow of approximately $115 million after fully funding our targeted growing distributions.

Jonathan Stein: With increasing adjusted EBITDA, we expect our leverage for 2020 for it to be below our three times adjusted EBIT target on a full year basis.

Jonathan Stein: For the first quarter of 2024, we expect net income to be approximately $150 million to $160 million and adjusted EBIT to be approximately $260 million to $270 million, including.

Jonathan Stein: Including the impacts of extreme cold weather that we've experienced in January.

Jonathan Stein: For the remainder of 2024, we expect growing adjusted EBITDA, consistent with increasing volumes across oil gas and water systems with seasonally higher operating expenses in the second and third quarters of the year.

Jonathan C. Stein: In summary, we are pleased to have delivered a strong 2023. I look forward to a visible trajectory of growth in our operational and financial metrics that underpin our unique and differentiated financial strategy with a focus on consistent and ongoing return of capital to our shareholders. This concludes my remarks. We'll be happy to answer any questions. I will now turn the call over to the operator.

Jonathan Stein: Looking beyond 2024, we have clear visibility to volume adjusted EBITDA and adjusted free cash flow growth that supports our financial strategy.

Described our MVC provide visibility to growth in oil throughput volumes of approximately 10% in 2025 and approximately 5% in 2026.

As well as annualized gas throughput volumes growth of approximately 10% from 2024 through 2026 that represent approximately 75% of our expected revenues.

Operator: One moment for our first question. And our first question comes from the line of Jeremy Tonet from JP Morgan. Your question, please. Hi, good afternoon. Hey, Jeremy.

Jonathan Stein: Driven by these growing volumes together with feeds are steadily increasing based on our annual inflation escalator and maintaining a targeted growth. The adjusted EBIT margin of approximately 75%, we expect growth in adjusted EBITDA of greater than 10% per year in both 2025 and 2026.

Jonathan Stein: With <unk> adjusted EBITDA and capital expenditures are expected to remain stable with 2024 levels, we expect annual growth and adjusted free cash flow of greater than 10% through 2026.

Jonathan Stein: In addition, we are continuing to prioritize shareholder returns with a return of capital framework.

Jonathan Stein: We are continuing to grow our base distribution by extending our targeted distribution growth of at least 5% annually per class a share through 2026.

John A. Gatling: You know, when we have weather impacts like we did in January, it really impacts the entire system. So, when you have to bring the wells down, you're impacting oil, gas, and water coming off the pads. With the extreme cold temperatures, there were situations where it just wasn't safe to have personnel on the road.

Jonathan Stein: We have financial flexibility for potential significant incremental shareholder returns beyond our growing base distribution with.

Jonathan Stein: With expected adjusted EBITDA, and adjusted free cash flow growth of greater than 10% annually in excess of our targeted annual distribution growth of at least 5%, we expect to generate excess adjusted free cash flow beyond the distribution and the leverage is expected to decline below two five times adjusted EBITDA by the end of 2025.

John A. Gatling: So, as an example, if you have to have trucking to get, say, water off of a pad, as an example, you have a situation where the trucks aren't running because it's not safe for the trucking companies to be out there in those conditions. And, you know, for safe operations, you have to just go ahead and shut down the wells. And then, along with that, you also have freezing situations where you just have some liquids in the system that get frozen when temperatures get as cold as they do.

Jonathan Stein: And to continue below this level through 2026, providing leverage capacity relative to our long term three times adjusted EBITDA leverage target.

Jonathan Stein: As a result, with a growing cash balance and significant leverage capacity, we expect to have greater than 125 billion.

Jonathan Stein: Financial flexibility through 2026 for capital allocation that includes the potential for multiple unit repurchases per year through this period and the potential for incremental distribution level increases associated with these repurchases beyond our targeted at least 5% annual distribution per class a share growth.

John A. Gatling: Well below, ambient temperatures were well below minus 30 degrees with wind chills of lower than minus 60. So again, from the Hess side, we've seen a resilient system, both on the upstream and the midstream side, and recovery has been good. I can't really speak to the broader basin, but I think Lynn Helms and Justin Kronstad are talking a little bit about what the broader impacts are across the basin as they're maybe looking at other operators. But from our perspective, we feel that the recovery has been good. Having said that, and as I mentioned in my remarks in my script, we still have further winter ahead of us, so we're trying to be a bit cautious there. The weather has gotten good in North Dakota.

Speaker Change: The call over to the operator.

Speaker Change: Thirdly, Thank you one moment for our first question.

Speaker Change: And our first question comes from the line of Jeremy Tonet from Jpmorgan. Your question. Please.

Jeremy Bryan Tonet: Hi, good afternoon.

Jeremy Bryan Tonet: Hey, Jeremy.

Jeremy Bryan Tonet: Just wanted to start off if I could with the storm impact that you guys touched on.

Jeremy Bryan Tonet: Where the cold weather impact I should say for <unk>, if you might be able to provide a little bit more color. There on the impact is it was it more on the gas or crude oil side and I guess, how do you see that.

Jeremy Bryan Tonet: Basin recovering or your volumes recovering over the course of the quarter given.

Jeremy Bryan Tonet: The extreme temperatures there.

Jeremy Bryan Tonet: Sure.

Jeremy Bryan Tonet: When we have weather impacts like we did in January it really impacts the entire system. So when you when you have to bring the wells down you're impacting oil gas and water coming off the pads.

John A. Gatling: It's warmed up quite a lot, and we're recovering from the winter storms, but we also have several months of winter ahead of us that we'll still need to manage properly. Got it. That's very helpful there. So would you say that Hess Midstream is back to pre-storm levels, or how do you see that unfolding at this point, absent further weather? Yeah, I would say that we're close to being back to pre-storm levels. I would say that, again, the recovery on the upstream and the midstream side has been very strong. You know, there's a bit of a lag time to taking a system down like that, where you may have additional well work as a result of a storm like that.

Jeremy Bryan Tonet: With the extreme cold temperatures there were situations, where it just wasn't saved out personnel on the road. So as an example, if you have to have trucking to get say water off of a pad as an example.

Jeremy Bryan Tonet: You have a situation where the trucks aren't running because it's not safe for the trucking companies to be out there in that in those conditions and for safe operations. You have to just go ahead and shut shut the wells in and then along with that you also have freezing situations, where you just have some liquids in the system.

Jeremy Bryan Tonet: That gets that gets frozen win when temperatures get as cold as it does we do a lot of winter renovation as part of our <unk>.

Jeremy Bryan Tonet: Preparation for winter activities I mean, as we all know it gets cold every year and North Dakota, It snows and we plan for that I would say that the issue with the January whether it was it was extreme it was very extreme temperatures.

John A. Gatling: That's, uh, that's very helpful there. And then just as far as the longer-dated outlook, you know, through 26, quite a robust volume growth as you put out there, maybe ahead of what, um, some people are expecting for the base and overall, do you see this kind of Hess Midstream taking market share from others, or just kind of specific to... You're serving Hess, you know, and their plans there, especially on the crude oil side, 5% growth through 2026. So I am so curious about that.

Jeremy Bryan Tonet: Well below ambience, where we're well below 30% minus 30 degrees with wind chills of lower than minus 60.

Jeremy Bryan Tonet: So again, what we've seen is from the Hess side, we've seen a resilient system both on the upstream and midstream side and recovery has been has been good.

I can't really speak to the broader basin I think.

Jeremy Bryan Tonet: Lynn Helms and Justin Grinstead are talking a little bit about what the broader impacts are across the basin is there may be looking at other operators.

Jeremy Bryan Tonet: But from our perspective, we felt like that the recovery has been good having said that and as I mentioned in my environment.

John A. Gatling: And then also, I guess, egress from the basin. It seems like NBPL is kind of pretty full physically there. So wondering, I guess, how you think about gas and egress risks and the impact on your forecast? Yeah, I'll address those in two parts. So the first part was kind of what's the primary source of the growth.

Jeremy Bryan Tonet: My remarks in my script.

Jeremy Bryan Tonet: We are we still have further winter ahead of us. So we're trying to be a bit cautious there weather has gotten good in north Dakota, it's warmed up quite a lot.

Jeremy Bryan Tonet: And we are recovering from the from the winter storms, but what we also have several months of winter ahead of us that we're still we'll still need to manage properly.

Speaker Change: Got it that's very helpful. There. So would you say that you are.

John A. Gatling: You know, as we've said, we get approximately 90% of our volume from Hess; 10% of our volume comes from third parties. We expect that ratio to stay about the same over the long term. So the bulk of the growth is coming from Hess. And you know, obviously, we have quite a lot of site, quite a lot of line of sight to the growth trajectory there. And our MVCs kind of demonstrate that 35% growth in gas over the three years, 10% annualized growth in volumes through the system. So, you know, we feel like we've got a good plan; it supports the outlook. And, you know, we're continuing to execute against that.

Speaker Change: Hess midstream is back to pre storm levels or how do you see that unfolding at this point absent further weather event.

Speaker Change: Yes, I would say that we're close to being back to pre storm levels I would say that again the recovery on the upstream and the midstream side has been has been very strong.

Speaker Change: There is a there's a bit of a lagging effect to take in our system down like that where you may have additional well work as a result of of a storm like that but overall I would say the resiliency of the system has been has been outstanding so both the upstream and midstream teams have been working very closely with one another.

Speaker Change: The recovery has been strong.

Speaker Change: Okay.

Speaker Change: Got it that's that's very helpful. There and then just as far as the longer dated outlook through 2006.

John A. Gatling: So again, I would say that, from our perspective, Hess is planning to run the four rigs in 2024, and we're going to continue to support that. And as I mentioned, that includes expanding our processing capacity, going beyond 2020, 2025, and into 2027, when that capacity would become available. And we feel that that it's necessary to support the development activity. As far as the export goes, you know, as our philosophy has been over the long term, it's always been ensuring that we have flow assurance. And again, I can't really speak to the basin egress, but from Hess's perspective, we're always looking to carefully manage the flow assurance from that. So I would say that both on the crude and natural gas sides, we're very focused on maintaining the ability to get the hydrocarbons out of the basin.

Speaker Change: Robust volume growth as you put out there maybe ahead of wet.

Speaker Change: Some people were expecting for the basin overall do you see this kind of.

Speaker Change: Midstream taking market share from others or just kind of specific to two you're surfing Hess.

Speaker Change: And their plans there, especially on the crude oil side, 5% growth through 2026th So curious about that and then also I guess.

Speaker Change: From the basin it seems like <unk> kind of a pretty full physically there. So I'm wondering I guess, how you think about gas egress risks and the impact to your forecast there.

Speaker Change: Yes.

Speaker Change: I'll address kind of those in two parts. So the first part was kind of what's the what's the primary source of the growth.

Speaker Change: We've said we.

Speaker Change: Approximately 90% of our volume comes from has 10% of our volume comes from third parties, we expect that ratio to stay about the same over the long term. So the bulk of the growth is coming from <unk> and you know obviously, we have quite a lot of site quite a lot of line of sight.

Speaker Change: To the to the growth trajectory, there and our nbc's kind of demonstrate that a 35% growth in gas over the three years, 10% annualized growth in volumes through the system through the gas system.

Jeremy Bryan Tonet: And Jeremy, you know, I think just to underline a point that you made in your question, which is robust growth through 2026. And I think, as John and I both pointed out, with the MVCs implying gas at 495 million cubic feet per day, really right at our capacity in 2026, and then you add 125 million cubic feet per day of incremental processing, that really implies that we really see robust growth not only through 2026, And that means that we're not only going to be able to continue the EBITDA growth and the volume growth and the free cash flow growth that we see through 2026, but we really have visibility to that continuing well beyond 2026 and really through the rest of the decade. So, really, just a robust plan based on all the factors that John said. I got it.

Speaker Change: So we feel we feel like we've got a good plan that supports the outlook and we're continuing to execute against that so again I would say that from our perspective <unk> is planning to run four rigs in 2024, we're going to continue to to support that and as I mentioned.

Speaker Change: Including <unk>.

Speaker Change: Expanding our processing capacity going beyond 2000, 22025, and enter 2027 when that capacity would become available.

Speaker Change: Can't really speak to the basin egress, but from <unk> perspective, we're always looking to carefully manage the flow assurance from that so I would say that both on the crude and natural gas side, we're very focused on maintaining the ability to get the hydrocarbons out of the basin.

Speaker Change: And Jeremy I think just the underlying point that you made in your question, which is the robust robust growth through 2026, and I think as John and I both pointed out.

Jeremy Bryan Tonet: That's very helpful. Thank you. Thank you.

The MVC is implying gas at 495 million cubic feet per day really right at our capacity in 2026, and then you add.

Operator: One moment for our next question. And our next question comes from the line of Brian Reynolds from UBS. Your question, please. Hi, good afternoon, everyone.

Speaker Change: 125 million cubic feet a day of it.

Speaker Change: Incremental processing that really implies that we really see robust growth not only through 2026, but really.

Speaker Change: Your assumption is on volume growth after that really through the rest of the decade and that means that we're not only going to be able to continue the EBIT growth in the volume growth in our free cash flow growth that we see through 'twenty, six but really have visibility to really that continuing well beyond 2026, I'm really through the rest of the decade. So really just a robust plan based on all the factors that John said.

Speaker Change: Yeah.

Speaker Change: Got it that's very helpful. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Brian Reynolds from UBS. Your question. Please.

Speaker Change: Yes.

Brian Reynolds: Hi, good afternoon, everyone.

Brian Reynolds: Apps through the lens of Hess midstream financial flexibility as outlined in our long term outlook could you perhaps talk about the opportunity set to buy back from sponsors going forward as these deals close.

Or if we should be thinking about anything outside of that in terms of M&A as it relates to financial flexibility as well. Thanks.

Speaker Change: Thanks, I think in terms of the with regard to the Chevron pending merger, we don't have any additional information to share on the merger what I already said in my script, which is that well have.

Speaker Change: <unk> has 37, 8% ownership and the right to appoint therefore board seats. As a reminder, the total board is forecast to be Chevron <unk> IP and three independent directors and as we said has those contracts remain in place as well as the dedication on the G&P side. There is no change to the fund that holds that Hess midstream investment.

Speaker Change: Also no changes expected to Jp's investment operating approach or even to the investment team involved with Hess midstream. So don't expect any changes there as well.

Speaker Change: Okay.

Speaker Change: Great. Thanks, and then maybe just to follow up on kind of the long term outlook in the Bakken with the cost of service arrangements moving to fixed fee largely going forward.

Brian Patrick Reynolds: And then maybe just to follow up on kind of the long-term outlook for the Bakken, you know, with the cost of service arrangement moving, you know, to a fixed fee largely going forward, and Hess Stream being much more of a standalone midstream company relative to its inception, can you talk about how Hess M is thinking about anything strategically different than in the past, such as whether it's pursuing third-party volumes, I And then when you approach these processing expansions, you know, how do you approach them a little bit differently? You know, in 2027, in the past, are you still getting any kind of guaranteed MVCs to support those volumes? Anything there on terms of, you know, future capital investment will be helpful. Sure.

Speaker Change: And <unk> being much more of a stand alone midstream company relative to its inception can you just talk about how <unk> is thinking about anything strategically different than in the past is whether it's pursuing third party volumes I think you alluded to the third party.

Speaker Change: Party volume mix should stay roughly the same could that change over time and then when you approach. These processing expansions, how do you approach them a little bit differently in 2027 in the past or are you still getting kind of guaranteed nbc's.

To support those volumes anything there in terms of.

Speaker Change: Future capital investment will be helpful. Thanks.

John A. Gatling: I would say that from an overall operational perspective, we really, our strategy remains unchanged. I mean, I think we're, our primary customer is Hess, and we're staying focused on that priority for sure. We're always looking to pick up additional incremental third-party volumes to fill any olage in our systems. We're going to continue to operate under that kind of strategic direction. You know, as we add additional processing capacity, we are looking at what additional third-party volumes are available in the area. As you know, especially north of the river. North of the Missouri River is kind of our stronghold, and that's where Hess has significant development remaining. We usually, as we've done in the past, we're going to continue to build out kind of a standard modular philosophy tightly integrated with our system.

Speaker Change: We're always looking to pick up additional incremental third party volumes to fill any OLED on our systems, we're going to continue to operate under under those that kind of strategic direction.

Speaker Change: As we add additional processing capacity, we are looking at what.

Additional third party volumes are available in the area as.

Speaker Change: As you know, especially north of the river so north of the Missouri River is kind of our stronghold and Thats, where Hess has significant development remaining.

We as we've done in the past, we're going to continue to build out kind of a standard modular philosophy tightly integrated with our system.

John A. Gatling: A lot of the future development is in that kind of north of the river, west area, and we have a really good understanding of that area and are well positioned to support Hess and third parties there. So from an overall strategic perspective, really transitioning from cost of service to the fixed fee period, nothing really, really changes strategically from our perspective.

Jonathan C. Stein: And I think, you know, as I really had highlighted in the question before, the business model that we have and the financial strategy model that we have is really unchanged and really unique and differentiated as we go forward, in the sense that we have the volume growth that we've talked about, which is visible to our MVCs, as we talked about even beyond that, and all that growth really being captured with stable capital levels in the 250-275 level that includes the necessary investment So that means with growing EBITDA and stable capital, that means we'll continue to grow our free cash flow, and that free cash flow is growing greater than our target distribution level, which means we're also building free cash flow after distribution, as well as leverage capacity relative to our long-term target.

Speaker Change: And I think.

Speaker Change: <unk> really had highlighted there on that question before I think the business model that we have the financial strategy model that we have is really.

Speaker Change: Unchanged really unique and differentiated as we go forward in the sense that we have the volume growth that we've talked about which is visible to MVC is as we've talked about even beyond that and all of that growth really being captured with stable capital levels. In the 250 to 75 level that includes the necessary investment to capture that growth so that means with growing EBITDA and stable cap.

Speaker Change: That means we're continuing to grow our free cash flow and that free cash flow is growing greater than our targeted distribution level, which means. We're also building free cash flow after distributions as well as leverage capacity relative to our long term target all of that is supporting just through 2026, the $1 billion to $5 billion that we talked about which gives us capacity for potential.

Jonathan C. Stein: All that is supporting, just through 2026, the $1.25 billion that we talked about, which gives us capacity for potential ongoing multiple repurchases per year for that period. And on a longer-term basis, you can see how that model really has the potential to just really continue with the existing investments that we're making, really driving growth on stable capital but with continued volume growth, continued EBITDA growth, and therefore continued free cash flow growth. And, you know, Brian, just to build on that a little bit.

Speaker Change: Going multiple repurchases through that period and on a longer term basis, you can see really how that model really has the potential to just really continue with the existing investments that we're making really driving growth on stable capital, but with continued volume growth could your EBIT growth and therefore continued free cash flow growth.

Speaker Change: And Brian just to build on that a little bit and you know Justin Grinstead has talked about this several times from the North Dakota pipeline authority.

John A. Gatling: And, you know, Justin Crinstead has talked about this several times from the North Dakota Pipeline Authority. You know, they're they're forecasting gas growth somewhere from the three and a half B.C.F. growing up to near six B.C.F. by mid 2030. So as Jonathan mentioned in the in the prior response to the to the earlier question from Jeremy.

Speaker Change: They are forecasting gas growth.

Speaker Change: Somewhere from the three five Bcf growing up to a near six Bcf by mid 2030, So as Jonathan mentioned in the prior response to the to the earlier question from Jeremy.

Speaker Change: And then also kind of adding into this there are definitely is going to be opportunity for further growth and that will support the infrastructure, but also as Jonathan mentioned sets us up strong from a from a financial perspective as well.

Speaker Change: Great. Thanks, I'll leave it there enjoy the rest of your day. Thanks.

Speaker Change: Thanks, Brian.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question.

Speaker Change: Comes from the line of Doug <unk> from Citi. Your question. Please.

Speaker Change: Yeah.

Doug: Hi, Thanks for the questions. My first one just on capital allocation.

Doug: Similar size and cadence of the buybacks moving forward.

Doug: The increased financial flexibility guidance you've given.

Today and I'm, just curious if there's a point where it might make sense within your strategy.

Doug: Looking at other potential uses of capital I mean, thats more organic growth like some of the projects you just talked about or maybe even some potential M&A opportunities.

Doug: Well in terms of the repurchase program.

Doug: Early as we did this past year, we expect to can't do multiple purchases per year.

Doug: Oh, sorry, including 2024 through 2020 six so don't expect.

Doug: A change in that program utilizing the capacity both the free cash flow after distributions. So the building cash balance as well as the leverage capacity that we have.

Doug: And so with those as we've done in the past we would also expect the opportunity to increase our dividend level as well to be able to maintain the same distributed cash flow that we had prior to each of the repurchases. So no expected change in that as we go forward I think one of the things in terms of the use of our capital allocation, obviously part of our France.

Doug: <unk> strategy as we said is continued prioritization of shareholder returns, including the 5% growth, but also incremental returns such as the repurchases and associated dividend distribution level increases, but I think we are in such a great position as we just talked about that with the existing investment that we have and really stable capital.

We can really drive just through 2026, as we've talked about 10% growth in volumes more than 10% growth in EBIT, including 12% growth in 2024 alone and then that stable capital really driving more than 10% growth in free cash flow. So of course, we will continue to evaluate particularly assets and the like as we've done in the past but.

Doug: The bar is very high because our existing plan already drives growth and does it require.

Doug: Different capital investment really stable capital to really capture that growth.

Doug: Okay.

Speaker Change: Got it thanks, and my second question is around the contract structure.

Speaker Change: The second term here, which has some more years on it.

Speaker Change: Potential changes coming at the sponsor level and the board.

Speaker Change: Wondering how youre thinking about the potential for the contract terms to change that.

Speaker Change: Negotiated.

Speaker Change: Sometimes we receive questions on a lot. So really just looking to better understand how you think about your contracted position moving forward.

Speaker Change: Yes, Theres really nothing really to say because as I said before.

Speaker Change: There's no change in the contracting mechanism to change the contracts that we don't expect any change in the contract going forward.

Speaker Change: Got it thanks for the question.

Speaker Change: Yeah.

Speaker Change: Thank you one moment for our next question.

Yeah.

And our next question comes from the line of John <unk> from Goldman Sachs. Your question. Please.

John Gatling: Hey, everyone. Thanks for the time I wanted to go back to the growth outlook again, and maybe put it.

John Gatling: Take it from another angle or are you guys expecting any higher.

John Gatling: Underlying oil outlook, then done kind of last time, you gave an update or.

John Gatling: Is this really just getting a better sense of what the rising <unk> looked like and Thats whats driving most of this and then on a related note.

John Gatling: Is the underlying assumption.

Of 200000.

John Gatling: Oil barrels of oil equivalent for your sponsor still kind of the driving.

John Gatling: Driving bogey there.

Yes, so just on the oil versus the gas question overall.

John Gatling: Overall, I would say the wells continue to perform very very strongly and I would say that it's not necessarily a new set from an oil perspective. Its just that continued growth in gas and as I mentioned you can you can see it across the basin that that gas does tend to outperform.

On a on a slight basis outpace oil and we're just we're kind of looking at that longer term and we're building that infrastructure that we feel like we need to kind of to set that up so from an overall development perspective.

The gas is coming as it relates to <unk> plans.

John Gatling: We're close to us on a net basis is close to 200000 barrels a day now so I think as we think about the four rigs for the balance of this year.

We're really kind of knocking on that door already so from our perspective.

John Gatling: Continuing to set ourselves up we talked about the gas growth of 35% between approximately 35% between now and 2026, 10% annualized growth and then as Jonathan mentioned.

John Gatling: <unk> are showing 495 million cubic foot a day on an implied production basis. Our capacity is 500, adding the 125 million a day of additional prostate capacity kind of gives you an indication of the longer term outlook from a from a gas growth perspective, so again.

John Gatling: Yes.

John Gatling: We see robust production coming from the wells.

John Gatling: We do see gas outpacing oil a little bit and that's driving a lot of the infrastructure that we're talking about.

Speaker Change: Alright, thanks for that and maybe.

Speaker Change: Just thinking about that processing plant and kind of.

Speaker Change: Cadence of decisions from here.

Speaker Change: You will will you have your 2027 mvc's.

Speaker Change: Kind of Lockdown signed up before you need to make the call on are starting.

Speaker Change: Starting to invest in that plant.

Speaker Change: Yes. So essentially this year is primarily engineering in 2025 will be when we start a long lead purchases and some early construction activity. So as we go through our normal annual process, we'd be setting new nbc's through this upcoming planned cycle that'll that'll get.

Speaker Change: Walk down going into early next year. So I think the timing of this will set us up where that kind of three year Rolling MVC will.

Speaker Change: We will give us a chance to to lock that in from a from a growth perspective.

Speaker Change: Alright.

Speaker Change: That makes sense that's it from me I appreciate the time I appreciate it.

Q4 2023 Hess Midstream LP Earnings Call

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