Hess Midstream (NYSE:HESM) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
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Access the full call at https://edge.media-server.com/mmc/p/ozzfui9j/
Summary
Hess Midstream reported solid operational performance and achieved its guidance despite severe winter weather impacting the first quarter of 2026.
The company completed a $60 million share and unit repurchase and increased its distribution by 2% for Class A shares.
Throughput volumes were lower due to winter weather but are expected to grow for the rest of the year, with a minor impact from planned maintenance in Q2.
Capital expenditures were reduced by a third to approximately $100 million for 2026, with adjusted free cash flow guidance increased to $910-$960 million.
Net income for Q1 2026 was $158 million, with adjusted EBITDA at $300 million, slightly down from Q4 2025 due to weather-related lower revenues.
The company remains focused on safe, reliable operations and leveraging infrastructure for significant free cash flow, supporting shareholder returns and debt reduction.
Hess Midstream expects to maintain its financial strategy with conservative leverage targets and a focus on incremental shareholder returns and debt repayment.
The company reported a strong performance in terminaling revenues due to tariff adjustments, expecting stability for the remainder of the year.
Management emphasized ongoing operational collaboration with Chevron and a strategic focus on optimizing efficiencies and productivity in the Bakken.
Full Transcript
OPERATOR
Good day ladies and gentlemen and welcome to the first quarter 2026 Hess midstream conference call. My name is Kevin. I’ll 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 the session, you’ll need to press star 11 on your telephone. You will then hear an automated message device and your hand is raised to withdraw your question. Please press star 11 again. Please be advised 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.
Jennifer Gordon (Vice President of Investor Relations)
Thank you Kevin. Good morning everyone and thank you for participating in our first 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 law. 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’s filings with the SEC. Also on today’s conference call, we may discuss certain 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. With me today are Jonathan Stein, Chief Executive Officer and Mike Chadwick, Chief Financial Officer. I’ll now turn the call over to Jonathan Stein.
Jonathan Stein (Chief Executive Officer)
Thanks Jennifer. Welcome everyone to our first quarter 2026 earnings call. Today I will discuss our first quarter performance and outlook for the remainder of the year and then I’ll hand the call over to Mike to review our financials. In the first quarter, we continued to execute our operational priorities and deliver our financial strategy. We delivered solid operational performance and achieved our guidance which included the impact of severe winter weather in January and February. In March we completed an accretive $60 million share and unit repurchase on the public, our sponsor, and last week we increased our distribution 2% or approximately 8% on an annualized basis for Class A shares. This increase included our targeted 5% annual increase for Class A shares and a distribution level increase following our repurchase that maintains our total distributed cash on a lower share and unit count. Turning to our results, during the quarter, throughput volumes averaged 430 million cubic feet per day for gas processing, 119,000 barrels of oil per day for crude terminaling and 115,000 barrels of water per day for water gathering. In line with our guidance, throughput volumes were down compared to the fourth quarter, primarily due to severe winter weather in January and February, partially offset by recovery in March as well as capture of additional third party gas volumes. Consistent with our annual guidance, we continue to expect volumes to grow the rest of the year, excluding the impact of planned maintenance at Tioga Gas Plant in the second quarter. That is expected to reduce volumes by 5 to 10 million cubic feet per day for the quarter. Turning to Hess Midstream’s capital program in the first quarter, we safely brought online the second of two new compressor stations after completing it in the fourth quarter of 2025. In the first quarter, capital expenditures were $10 million seasonally lower than the fourth quarter of 2025 as severe winter weather restricted activity levels. We expect our capital spend to be seasonally higher in the second and third quarters as we continue to execute our program, including completion of greenfield high pressure gathering pipeline infrastructure that we started in 2025. However, with the second compressor station online and reflecting Chevron’s strategy to adopt longer laterals which reduces well connect CapEx for Hess Midstream, we have now reduced our 2026 estimated capital expenditure by a third to approximately $100 million. As a result of this reduction and together with the deferral of cash taxes, we are increasing our 2026 adjusted free cash flow guidance to 910 to $960 million, reflecting a 20% increase year over year. At the midpoint, Hess Midstream remains a leader in shareholder cash returns with one of the highest free cash flow yields across our peer set. In summary, we remain focused on executing safe and reliable operations while leveraging our historical investment in existing infrastructure to continue generating significant adjusted free cash flow, allowing us to equally provide returns to our shareholders through growing distributions and incremental share repurchases while simultaneously continuing to reduce our debt leverage. With that, I’ll hand the call over to Mike to review our financial performance for the first quarter and guidance.
Mike Chadwick (Chief Financial Officer)
Thanks Jonathan and good morning everyone. Today I’ll discuss our financial results for the first quarter of 2026 and provide an update on our second quarter financial guidance and outlook for 2026. Turning to our results for the first quarter of 2026, net income was $158 million compared to approximately $168 million in the fourth quarter of 2025. Adjusted EBITDA for the first quarter of 2026 was $300 million compared with $309 million in the fourth quarter. The decrease was primarily due to lower revenues primarily caused by severe winter weather in January and February, total revenues, including pass through revenues decreased by approximately 15 million, resulting in segment revenue changes as follows. Gathering revenues decreased by approximately 14 million. Processing revenues decreased by approximately 6 million, while terminalling revenues increased by approximately 5 million. Total cost and expenses excluding depreciation and amortization. Pass through costs and net of our proportional share of LM4 earnings decreased by approximately $6 million, primarily from lower seasonal maintenance and lower third party offloads, resulting in adjusted EBITDA for the first quarter of 2026 of $300 million. Our gross adjusted EBITDA margin for the first quarter of 2026 was maintained at approximately 83% above our 75% target, highlighting our continued strong operating leverage. First quarter of 2026 capital expenditures were approximately $10 million, significantly lower than in the fourth quarter of 2025 as severe winter weather limited activity. Net interest excluding amortization of deferred finance costs was approximately $53 million, resulting in adjusted free cash flow of approximately $237 million, an increase of 14% from the fourth quarter of 2025. We had a drawn balance of 343 million on our revolving credit facility at the end of the first quarter of 2026. For the second quarter of 2026, we expect net income to be approximately $150 million to $160 million and adjusted EBITDA to be approximately flat with the first …
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