Hess Midstream Partners LP (HESM)HESM

Hess Midstream Partners LP: A Comprehensive Overview

Company Profile

History and Background

Hess Midstream Partners LP (HESM) is a publicly traded master limited partnership (MLP) formed by Hess Corporation in 2012. It owns, operates, develops, and acquires midstream infrastructure primarily located in the Bakken shale formation in North Dakota.

Core Business Areas

• Gathering, processing, and transportation of crude oil, natural gas liquids (NGLs), and natural gas.
• Storage and terminalling of crude oil and NGLs.
• Marketing and transportation of Bakken crude oil.

Leadership and Corporate Structure

• General Partner: HMLP Holdings LLC (a wholly owned subsidiary of Hess Corporation)
• CEO: John R. Hess
• President and COO: Greg P. Hill
• CFO: Joseph W. Kasprzyk
• Board of Directors: Comprises experienced individuals with expertise in the energy and finance sectors.

Top Products and Market Share

• Crude Oil and NGL Gathering and Transportation: HESM gathers crude oil and NGLs from Bakken producers and transports it to refineries and NGL fractionation facilities. Its market share is estimated to be around 5% in the Bakken region.
• Crude Oil and NGL Storage and Terminalling: The company operates crude oil and NGL storage facilities in North Dakota with a combined capacity of approximately 3 million barrels. Its market share in this segment is approximately 3% of Bakken crude oil storage.
• Crude Oil Marketing and Transportation: HESM markets Bakken crude oil to refineries and other end-users through its marketing and transportation affiliate, Hess Marketing LLC.

Total Addressable Market

The total addressable market for midstream infrastructure services is estimated to be worth over $300 billion globally. The Bakken shale play, where HESM operates, is one of the most prolific oil and gas producing regions in the US, contributing significantly to the market size.

Financial Performance

Recent Financial Statements

• Revenue: $1.45 billion (2022)
• Net Income: $226 million (2022)
• Profit Margin: 15.5% (2022)
• Earnings per Share (EPS): $2.04 (2022)

Year-over-Year Comparison:

• Revenue grew by 32% compared to 2021, driven by higher commodity prices and volumes.
• Net income increased by 45% due to improved margins and stronger operational performance.

Cash Flow and Balance Sheet:

• The company generated strong operating cash flow of $355 million in 2022.
• Its balance sheet remains healthy with low debt levels.

Dividends and Shareholder Returns

Dividend History:

HESM has consistently paid quarterly distributions. In 2023, the annualized distribution rate is $1.92 per unit, resulting in a yield of around 6.5%.

Shareholder Returns:

Total shareholder returns have been positive in recent years. Over the past three years, HESM has delivered over 20% returns to its investors.

Growth Trajectory

Historical Growth:

HESM has experienced consistent growth in its volumes and revenue. Over the past five years, its revenue has grown at a compound annual growth rate (CAGR) of approximately 12%.

Future Projections:

Industry experts project continued growth in the Bakken region. HESM's strategic investments in infrastructure and expansion projects should position it for further growth.

Recent Initiatives:

The company is investing in expanding its gas processing and transportation capabilities to capitalize on increasing natural gas production in the Bakken.

Market Dynamics

Industry Overview

The midstream energy sector is characterized by steady demand, predictable cash flows, and limited competition. However, it faces challenges like commodity price volatility and regulatory uncertainty.

HESM's Positioning:

HESM benefits from its strategic location in the Bakken shale, its diversified business model, and strong financial profile. It is well-positioned to adapt to market changes and maintain its competitive edge.

Competitors

• Key Competitors:
  • ONEOK (OKE)
  • MPLX (MPLX)
  • Energy Transfer LP (ET)
  • Phillips 66 Partners LP (PSXP)
  • DCP Midstream LP (DCP)
• Market Share:
  • The Bakken midstream market is fragmented with no single player holding a dominant market share.
• Competitive Advantages:
  • HESM's large infrastructure footprint in the Bakken gives it economies of scale.
  • The company's long-term contracts with major producers provide stable revenue streams.
  • Its affiliation with Hess Corporation grants access to technical expertise and financial resources.
  • Its strong track record in operational efficiency and cost management contributes to competitive pricing.
  • Its commitment to sustainable operations attracts environmentally conscious partners and investors.

Potential Challenges and Opportunities

Challenges:

• Volatile commodity prices can impact revenue and cash flow.
• Competition in the midstream market could intensify with new entrants.
• Regulatory changes can increase operating costs or restrict operations.

Opportunities:

• Growing production in the Bakken region provides opportunities for increased volumes.
• Expansion into new service segments like natural gas processing or renewable energy offers growth potential.
• Strategic acquisitions can enhance market share and capabilities.

Recent Acquisitions (2020-2023)

• Acquisition of M3 Midstream in 2023: This strategic acquisition expanded HESM's gathering and processing infrastructure in North Dakota and contributed to increased natural gas processing capacity.

• Acquisition of Hess Bakken Midstream II in 2020: This acquisition strengthened HESM's crude oil and NGL gathering network, aligning with the company's growth strategy in the Bakken.

AI-Based Fundamental Rating

Based on an analysis of various financial, market, and growth factors, an AI-powered system rates Hess Midstream Partners LP at 8.5 out of 10. This rating considers the company's strong financial performance, competitive positioning, and potential for future growth.

Sources and Disclaimers

Sources:

• Hess Midstream Partners LP Investor Relations Website: https://investors.hmlp.com/
• U.S. Energy Information Administration (EIA): https://www.eia.gov/
• S&P Global Market Intelligence: https://www.spglobal.com/marketintelligence
• Bloomberg Terminal

Disclaimer:

This analysis is based on publicly available information and does not constitute financial advice. Individual investors should consult with financial professionals and conduct their own due diligence before making investment decisions.