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Hess Midstream Partners (HESM)
NYSE:HESM
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Hess Midstream Partners
(NYSE:HESM)
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Rating:79Outperform
Price Target:
$41.00
▲(17.24% Upside)
The score is driven mainly by strong operating profitability and cash flow, supported by favorable guidance pointing to materially lower capex and higher free cash flow. Valuation is also supportive due to the moderate P/E and high dividend yield. The key risk tempering the score is high leverage, with technicals constructive but not decisively bullish versus the 200-day trend.
Positive Factors
High Operating Margins
Sustained, very high adjusted EBITDA margins (~83% Q4; 75% target) indicate durable operating leverage in midstream services. High margins support strong cash conversion, fund distributions and deleveraging plans, and cushion earnings against commodity price or volume variability.
Robust Free Cash Flow Outlook
A large, recurring adjusted free cash flow run‑rate ($850–$900M guidance for 2026) plus planned substantial capex cuts creates durable internal funding. This structurally improves ability to pay distributions, buy back shares, and repay debt without reliance on external capital markets.
High Revenue Protection via MVCs
Very high MVC coverage (~95% in 2026, stepping to 90%/80%) and long‑term fee contracts provide structural downside revenue protection. This contractual cash flow stability reduces commodity exposure and underpins predictable cash generation and distribution coverage over the medium term.
Negative Factors
High Leverage
Very high leverage (debt/equity ~5.85 and a drawn revolver) materially constrains financial flexibility. In a prolonged downturn or delayed capex reductions, servicing high debt could force deferred distributions or asset sales despite strong EBITDA, raising structural refinancing and liquidity risk.
Slowing Revenue Growth
Modest TTM revenue growth (~2.8%) and a slowing trend limit organic upside and increase reliance on margin expansion or capital returns to drive investor returns. If production or interruptible third‑party volumes decline, revenue upside is structurally constrained absent new long‑term contracts.
Customer/Governance Concentration
Close governance ties to large producers and reliance on major partners (Hess and indirectly Chevron) imply customer and strategic concentration. While providing stable volumes, this concentration can limit bargaining flexibility, expose cash flows to specific producers' capital plans, and create governance conflicts.
Hess Midstream Partners (HESM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$7.37B
Dividend Yield8.45%
Average Volume (3M)1.21M
Price to Earnings (P/E)12.4
Beta (1Y)0.49
Revenue Growth10.78%
EPS Growth19.10%
CountryUS
Employees176
SectorEnergy
Sector Strength52
IndustryOil & Gas Midstream
Share Statistics
EPS (TTM)0.72
Shares Outstanding129,392,380
10 Day Avg. Volume1,526,202
30 Day Avg. Volume1,205,565
Financial Highlights & Ratios
PEG Ratio0.78
Price to Book (P/B)6.21
Price to Sales (P/S)2.21
P/FCF Ratio5.20
Enterprise Value/Market Cap1.53
Enterprise Value/Revenue6.98
Enterprise Value/Gross Profit8.64
Enterprise Value/Ebitda9.16
Forecast
1Y Price Target
$38.50Price Target Upside10.09% Upside
Rating ConsensusHold
Number of Analyst Covering3
EPS Forecast (FY)2.83
Revenue Forecast (FY)$1.63B
Hess Midstream Partners Business Overview & Revenue Model
Company DescriptionHess Midstream LP owns, develops, operates, and acquires midstream assets. The company operates through three segments: Gathering; Processing and Storage; and Terminaling and Export. The Gathering segment owns natural gas gathering and compression; crude oil gathering systems; and produced water gathering and disposal facilities. Its gathering systems consists of approximately 1,350 miles of high and low pressure natural gas and natural gas liquids gathering pipelines with capacity of approximately 450 million cubic feet per day; and crude oil gathering system comprises approximately 550 miles of crude oil gathering pipelines. The Processing and Storage segment comprises Tioga Gas Plant, a natural gas processing and fractionation plant located in Tioga, North Dakota; a 50% interest in the Little Missouri 4 gas processing plant located in south of the Missouri River in McKenzie County, North Dakota; and Mentor Storage Terminal, a propane storage cavern and rail, and truck loading and unloading facility located in Mentor, Minnesota. The Terminaling and Export segment owns Ramberg terminal facility; Tioga rail terminal; and crude oil rail cars, as well as Johnson's Corner Header System, a crude oil pipeline header system. Hess Midstream LP was founded in 2014 and is based in Houston, Texas.
How the Company Makes MoneyHess Midstream Partners generates revenue primarily through fee-based contracts for its midstream services, which include gathering, processing, and transporting crude oil and natural gas. The company's revenue model is largely dependent on long-term, take-or-pay contracts with its customers, which ensure a steady cash flow regardless of commodity price fluctuations. Key revenue streams include fees from the transportation of crude oil and natural gas, processing fees from natural gas and NGLs, and storage fees for hydrocarbons. Additionally, partnerships with major energy producers, such as Hess Corporation, provide a stable customer base and contribute significantly to HESM's earnings. The company's strategic asset base and operational efficiency further enhance its profitability.
Hess Midstream Partners Earnings Call Summary
Earnings Call Date:Feb 02, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 29, 2026
Earnings Call Sentiment Positive
The call conveyed a predominantly positive outlook: management reported solid 2025 results (adjusted EBITDA +9% YoY), strong margins (~83%), completion of major infrastructure projects on time and on budget, and a clear path to materially lower capital spending that supports significant free cash flow growth (2026 FCF +12% at midpoint). Lowlights were largely transitory and weather-driven (Q4 and near-term volume pressure, ~$19M revenue decline in Q4, and some maintenance/interruptible volume weakness). High MVC coverage (≈95% in 2026) and explicit capital allocation plans for distributions, share repurchases, and debt paydown materially mitigate downside risk. Overall, positive operational and financial drivers outweigh near-term weather-related challenges.Q4-2025 Updates
Positive Updates
Full-Year Financial Performance
2025 adjusted EBITDA of $1.238 billion, representing approximately +9% growth versus 2024; full-year net income of approximately $685 million.
Strong Free Cash Flow Outlook
Projected adjusted free cash flow for 2026 of $850–$900 million, implying ~12% growth at the midpoint versus 2025; excess adjusted free cash flow of ~ $210 million after funding targeted 5% distribution growth.
Significant Capital Expenditure Reduction
2026 capital spending expected at ~$150 million, a 40% reduction relative to 2025; 2027–2028 capex expected to be < $75 million, implying ~70% reduction versus 2025, enabling higher free cash flow generation.
High Revenue Protection via MVCs
Approximately 95% of 2026 revenues are covered by minimum volume commitments (MVCs), providing strong downside protection (90% MVC coverage in 2027 and 80% in 2028).
Strong Operating Margin
Fourth-quarter gross adjusted EBITDA margin of ~83%, well above the company target of ~75%, demonstrating continued operating leverage and efficiency.
Completion of Multiyear Build-Out
Multiyear gathering and compression projects completed on time and on budget, enabling the move to a lower capital intensity model and higher free cash flow conversion.
Capital Allocation Priorities
Management expects to use increased free cash flow to fund: targeted 5% per-share distribution growth through 2028, potential incremental share repurchases, and debt repayment; guidance expects natural deleveraging below ~3x as EBITDA grows.
Volume and Throughput Metrics (2025 & Q4)
Full-year 2025 average volumes: gas processing ~445 MMcf/d, crude terminaling ~129k bbl/d, water gathering ~131k bbl/d. Q4 averages: gas ~444 MMcf/d, crude terminaling ~122k bbl/d, water gathering ~124k bbl/d.
Negative Updates
Severe Winter Weather Impact
Severe winter weather through December (continuing into January/February) drove lower volumes versus the prior quarter and suppressed revenues and throughput in Q4 and early 1Q26; management expects lower volumes in the first half of 2026 with seasonal recovery thereafter.
Quarter-over-Quarter Declines
Q4 net income of $168 million down from $176 million in Q3; Q4 adjusted EBITDA of $309 million versus ~$321 million in Q3, reflecting weather-related disruptions and slower recovery.
Revenue Reduction and Segment Impacts
Total revenues (ex pass-through) decreased by approximately $19 million in Q4; segment impacts included Gathering ≈ -$11 million, Processing ≈ -$6 million, Terminaling ≈ -$2 million.
Interruptible Third-Party Volumes and Maintenance
Lower interruptible third-party volumes and annual maintenance at LM4 contributed to lower revenues and activity in Q4; third-party volumes are expected to average ~10% of volumes but can be variable quarter-to-quarter.
Near-Term Guidance Compression
First-quarter 2026 guidance implies lower near-term earnings: projected net income of ~$150–$160 million and adjusted EBITDA of ~$295–$305 million, reflecting continued weather risk and seasonality.
Revolver Drawn and Debt Considerations
Year-end drawn balance on the revolving credit facility was ~$338 million; while management plans to use excess free cash flow for debt repayment and expects natural deleveraging, no firm long-term leverage target was set beyond an expectation to move below ~3x over time.
Company Guidance
The company reiterated guidance calling for 2026 capital expenditures of about $150 million (a ~40% reduction vs. 2025) and run‑rate CapEx of less than $75 million/year in 2027–2028, targeted 5% annual Class A distribution growth through 2028, and the use of excess free cash flow for incremental buybacks/shareholder returns and debt repayment; they expect 2026 adjusted free cash flow of $850–$900 million (≈12% growth vs. 2025 at the midpoint) with roughly $210 million of excess adjusted FCF after funding the 5% distribution, full‑year 2026 net income of $650–$700 million and adjusted EBITDA of $1.225–$1.275 billion (Q1 2026 net income ~$150–$160 million and adj. EBITDA ~$295–$305 million), a gross adjusted EBITDA margin target of ~75% in 2026 (Q4 was ~83%), MVC coverage of ~95% of revenues in 2026 (90% in 2027, 80% in 2028), ~85% of revenues on fixed‑fee contracts with inflation escalators capped at 3% (≈15% subject to annual redeterminations through 2033), expected annualized adjusted FCF growth of ~10% through 2028 (providing roughly $1 billion of financial flexibility), and an expectation to naturally delever below ~3x as EBITDA grows while not increasing absolute debt.Hess Midstream Partners Financial Statement Overview
Summary
Strong profitability and cash generation (high margins; operating cash flow well above net income; positive free cash flow growth) support a solid score, but the balance sheet is constrained by very high leverage (debt-to-equity 5.85), which limits flexibility.Income Statement
Hess Midstream Partners demonstrates strong profitability with a high gross profit margin of 86.85% and a solid net profit margin of 18.56% in the TTM period. Revenue growth is steady at 2.76%, indicating consistent performance. The EBIT and EBITDA margins are robust, reflecting efficient operations. However, the revenue growth rate has slowed compared to previous years, which could be a concern if it continues.85
Very Positive
Balance Sheet
The company has a high debt-to-equity ratio of 5.85, indicating significant leverage, which poses a risk if market conditions change. However, the return on equity is impressive at 50.64%, suggesting effective use of equity to generate profits. The balance sheet shows a strong asset base, but the high leverage could limit financial flexibility.70
Positive
Cash Flow
Operating cash flow is strong, covering net income comfortably with a ratio of 4.51. Free cash flow growth is positive at 6.95%, indicating good cash generation. The free cash flow to net income ratio of 0.69 suggests efficient cash conversion. However, the company's high leverage could impact future cash flow stability.78
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.61B | 1.49B | 1.35B | 1.27B | 1.20B | 1.09B |
| Gross Profit | 1.30B | 1.29B | 1.15B | 1.09B | 1.04B | 934.70M |
| EBITDA | 1.23B | 1.14B | 1.02B | 977.80M | 903.40M | 743.60M |
| Net Income | 330.00M | 223.10M | 118.60M | 83.90M | 46.40M | 24.00M |
Balance Sheet | ||||||
| Total Assets | 4.44B | 4.15B | 3.79B | 3.59B | 3.49B | 3.37B |
| Cash, Cash Equivalents and Short-Term Investments | 5.50M | 4.30M | 5.40M | 3.10M | 2.20M | 2.60M |
| Total Debt | 3.79B | 3.47B | 3.21B | 2.89B | 2.56B | 1.91B |
| Total Liabilities | 4.01B | 3.69B | 3.43B | 3.06B | 2.73B | 2.05B |
| Stockholders Equity | 572.50M | 530.70M | 340.20M | 245.10M | 204.10M | 125.00M |
Cash Flow | ||||||
| Free Cash Flow | 712.70M | 634.20M | 642.90M | 622.90M | 632.30M | 340.60M |
| Operating Cash Flow | 996.70M | 940.30M | 866.40M | 861.10M | 795.50M | 641.70M |
| Investing Cash Flow | -284.00M | -306.10M | -223.50M | -238.20M | -163.20M | -301.00M |
| Financing Cash Flow | -717.50M | -635.30M | -640.60M | -622.00M | -632.70M | -341.40M |
Hess Midstream Partners Technical Analysis
Neutral
34.97
Price Trends
34.23
Positive
34.05
Positive
35.92
Negative
Market Momentum
0.38
Negative
52.26
Neutral
51.67
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HESM, the sentiment is Neutral. The current price of 34.97 is above the 20-day moving average (MA) of 34.71, above the 50-day MA of 34.23, and below the 200-day MA of 35.92, indicating a neutral trend. The MACD of 0.38 indicates Negative momentum. The RSI at 52.26 is Neutral, neither overbought nor oversold. The STOCH value of 51.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for HESM.
Hess Midstream Partners Peers Comparison
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $7.37B | 12.40 | 59.81% | 8.45% | 10.78% | 19.10% | |
79 Outperform | $12.81B | 31.95 | 9.04% | 2.70% | 20.39% | -3.85% | |
79 Outperform | $13.57B | 15.60 | 9.78% | 8.54% | -7.53% | 9.74% | |
78 Outperform | $16.92B | 12.27 | 40.29% | 9.13% | 5.81% | -13.58% | |
74 Outperform | $8.96B | 19.29 | 22.52% | 4.98% | 8.70% | 21.42% | |
65 Neutral | $15.17B | 7.61 | 4.09% | 5.20% | 3.87% | -62.32% | |
52 Neutral | $6.61B | 100.84 | ― | 8.77% | 15.00% | -84.96% |
* Energy Sector Average
HESM
Hess Midstream Partners
34.97
-3.37
-8.79%
PAA
Plains All American
19.20
0.95
5.21%
WES
Western Midstream Partners
40.12
3.14
8.50%
AM
Antero Midstream
18.50
3.17
20.65%
KNTK
Kinetik
40.13
-20.59
-33.91%
DTM
DT Midstream
124.31
25.75
26.13%
Hess Midstream Partners Corporate Events
Business Operations and StrategyRegulatory Filings and Compliance
Hess Midstream Partners Updates Principal Office and Governance Filings
Neutral
Jan 30, 2026
Effective January 26, 2026, Hess Midstream LP, its general partner Hess Midstream GP LP, and operating subsidiary Hess Midstream Operations LP changed their principal office address to 1400 Smith Street in Houston, Texas, and shifted their Delaware registered agent to Corporation Service Company with a new registered office in Wilmington. To formalize these administrative moves, the general partners executed amendments and an amended and restated certificate of limited partnership, which were filed with the Delaware Secretary of State on January 27, 2026, updating partnership agreements and partner address schedules without altering economic rights or adversely affecting limited partners, underscoring that the changes are organizational and governance-related rather than strategic or operational in nature.
The most recent analyst rating on (HESM) stock is a Hold with a $38.00 price target. To see the full list of analyst forecasts on Hess Midstream Partners stock, see the HESM Stock Forecast page.
Executive/Board Changes
Hess Midstream Partners Announces Board Changes
Neutral
Dec 9, 2025
On December 4, 2025, Hess Midstream Partners, a company managed by Hess Midstream GP LLC, announced changes in its Board of Directors. Andrew B. Walz resigned from the Board following his appointment as an executive officer at Chevron Corporation. His resignation was not due to any disagreements with the company. Kristi H. McCarthy was designated as the new Chairman of the Board, and Barbara F. Harrison, a vice president at Chevron U.S.A. Inc., was appointed as a new board member. Harrison’s appointment aligns with Chevron’s influence over the board, as Chevron indirectly owns the entities controlling Hess Midstream Partners.
The most recent analyst rating on (HESM) stock is a Buy with a $38.00 price target. To see the full list of analyst forecasts on Hess Midstream Partners stock, see the HESM Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.