Highlights:
Completed previously announced acquisition of Hess Infrastructure Partners LP, incentive distribution rights simplification and conversion to an Up-C corporate structure.
Net income was $75.1 million, or $0.28 per Class A share after deduction for noncontrolling interests. Net cash provided by operating activities was $136.3 million.
Adjusted EBITDA1 was $158.4 million, excluding impacts from transaction costs of $26.2 million. DCF1 was $140.1 million.
Increased quarterly cash distribution to $0.4258 per Class A share, an increase of 15% compared to the prior-year quarter and a 1.2x coverage ratio relative to distributions.
Completed the ramp-up of processing volumes through the Little Missouri 4 gas processing plant.
Compared with the prior‑year quarter, throughput volumes increased 29% for gas processing, 28% for gas gathering, 25% for crude oil gathering, 22% for crude oil terminaling and 72% for water gathering driven by Hess Corporation’s growing production and ramp-up of the Little Missouri 4 gas processing plant.
Completed annual tariff rate redetermination process and established minimum volume commitments for 2022.
Hess Midstream LP reaffirms its previously announced guidance for full year 2020 with net income and Adjusted EBITDA expected to increase more than 25% year over year.
Hess Midstream LP today reported fourth quarter 2019 net income of $75.1 million compared with net income of $78.9 million for the fourth quarter of 2018, as recast for the acquisition of Hess Infrastructure Partners LP (“HIP”) by Hess Midstream Partners LP. After deduction for noncontrolling interests, net income attributable to Hess Midstream was $16.1 million, or $0.28 per Class A share. Hess Midstream generated Adjusted EBITDA of $158.4 million, including contributions from produced water handling business of $4.0 million and excluding impacts from transaction costs of $26.2 million. DCF for the fourth quarter of 2019 was $140.1 million.
Commenting on the fourth quarter 2019 results, John Gatling, President and Chief Operating Officer of Hess Midstream said, “2019 was an impressive year for Hess Midstream as we delivered significant growth, completed the acquisition of Hess Infrastructure Partners, eliminated IDR payments and converted to an Up-C corporate structure. We enter 2020 as a large-scale, full service midstream company positioned well for significant future growth in both Adjusted EBITDA and free cash flow, underscored by rising volumes from both Hess and third parties and underpinned by our unique contract structure.”
On December 16, 2019, Hess Midstream Partners LP completed its previously announced acquisition of HIP, incentive distribution rights simplification and conversion from a master limited partnership into an “Up-C” structure by merging with Hess Midstream, an entity taxed as a corporation for U.S. federal income tax purposes (collectively, the “Transaction”). At the effective time of the Transaction, each common unit held by public unitholders of Hess Midstream Partners LP converted on a one-for-one basis into a newly issued Class A share representing a limited partner interest in Hess Midstream. As part of the Transaction, Hess Midstream Partners LP changed its name to “Hess Midstream Operations LP” and will continue as a consolidated subsidiary of Hess Midstream, the new publicly listed entity. Hess Midstream Partners LP common units ceased trading on the New York Stock Exchange (“NYSE”) and the Class A shares began trading on the NYSE under the ticker symbol “HESM” on December 17, 2019.
Hess Midstream’s results contained in this release include the historical results of HIP for all periods prior to the closing of the Transaction on December 16, 2019, as the Transaction was accounted for as a business combination of entities under common control. We refer to certain results as “attributable to Hess Midstream LP,” which exclude (i) the noncontrolling interests in Hess Midstream Operations LP retained by affiliates of Hess Corporation (“Hess”) and Global Infrastructure Partners, (ii) the noncontrolling interests in the historical operating subsidiaries of Hess Midstream Partners LP, and (iii) historical activity of HIP prior to its acquisition by Hess Midstream, which is included in “net parent investment.”
Financial Results
Revenues and other income in the fourth quarter of 2019 were $253.5 million, including $1.4 million of shortfall fee payments related to minimum volume commitments (“MVC”). Revenues were up from $185.9 million in the prior‑year quarter, primarily attributable to higher throughput volumes and tariff rates. Total costs and expenses in the fourth quarter of 2019 were $163.2 million up from $93.8 million in the prior-year quarter, primarily attributable to costs related to the Transaction, higher maintenance on expanded infrastructure and pass-through rail transportation and produced water trucking and disposal costs. Net income for the fourth quarter of 2019 was $75.1 million and net cash provided by operating activities was $136.3 million.
Adjusted EBITDA for the fourth quarter of 2019 was $158.4 million, including contributions from produced water handling business of $4.0 million and excluding impacts from costs related to the Transaction of $26.2 million. Relative to distributions, DCF for the fourth quarter of 2019 of $140.1 million resulted in an approximately 1.2x distribution coverage ratio.
Operational Highlights
Throughput volumes were up in all segments in the fourth quarter of 2019 compared to the fourth quarter of 2018. In the gathering segment, throughput volumes increased 28% for gas gathering, 25% for crude oil gathering and 72% for water gathering compared to the prior-year quarter, driven by growing Hess production. In the crude oil terminaling segment, throughput volumes increased 22% compared to the prior-year quarter, also driven by growing Hess production. In the gas processing segment, throughput volumes increased 29% compared to the prior-year quarter, driven by completion of the ramp-up of processing volumes through the Little Missouri 4 (“LM4”) gas processing plant and backfilling of the Tioga Gas Plant with growing Hess production and third-party volumes, which is expected to continue through the second quarter of 2020.
Capital Expenditures
Capital expenditures for the fourth quarter of 2019 totaled $108.2 million, including $106.5 million of expansion capital expenditures and $1.7 million of maintenance capital expenditures. Capital expenditures in the prior-year quarter were $66.9 million, including $64.9 million of expansion capital expenditures and $2.0 million of maintenance capital expenditures. The increase in expansion capital expenditures was primarily attributable to expansion of our gathering system and compression capacity, and civil construction and fabrication activities for the planned expansion of the Tioga Gas Plant.
Quarterly Cash Distributions
On January 27, 2020, our general partner’s board of directors declared a cash distribution of $0.4258 per Class A share for the fourth quarter of 2019, an increase of 3.6% over the distribution on the Hess Midstream Partners LP common units for the prior quarter and 15% compared to the distribution on the Hess Midstream Partners LP common units for the fourth quarter of 2018. The distribution is expected to be paid on February 14, 2020 to shareholders of record as of the close of business on February 6, 2020. Holders of Class A shares will receive a Form 1099 with respect to distributions received on Class A shares.
Guidance
Hess Midstream is targeting 15% annual distribution per share growth through 2021, with a targeted distribution coverage ratio of 1.2x.
Full story