Hess Midstream (HESM -2.38%), a key provider of oil and gas infrastructure in the Bakken region, reported its second quarter 2025 results on July 30, 2025. The company delivered GAAP earnings per share of $0.74, surpassing the analyst consensus of $0.65 for Q2 2025. Revenue (GAAP) reached $414.2 million, beating expectations of $405.1 million and representing 13.3% growth compared with Q2 2024. Hess Midstream also announced a quarterly dividend of $0.7370 per share, up $0.0272 per share from Q1 2025, demonstrating continued resilience and steady performance for the quarter.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $0.74 | $0.65 | $0.59 | 25.4% |
| Revenue (GAAP) | $414.2 million | $405.13 million | $365.5 million | 13.3% |
| Adjusted EBITDA | $316.0 million | $276.5 million | 14.3% | |
| Net Cash Provided by Operating Activities | $276.9 million | $271.6 million | 2.0% | |
| Adjusted Free Cash Flow | $193.8 million | $156.4 million | 24.0% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About the Business and Strategic Focus
Hess Midstream operates energy infrastructure systems for oil, natural gas, and water gathering, processing, storage, and export. Its assets are concentrated in North Dakota’s Bakken and Three Forks shale plays, which are top crude oil-producing areas. The company builds and operates pipelines, compressor stations, gas processing plants, oil terminals, and related infrastructure to serve crude and natural gas producers.
The business depends on long-term, fee-based contracts, mostly with Hess Corporation (now part of Chevron). These agreements provide revenue stability and ensure consistent system utilization. Key growth drivers include expanding system throughput, keeping costs under control, maintaining strong operational safety, and leveraging the strategic location to attract both Hess and third-party volumes. Staying compliant with regulatory and environmental requirements, and managing the impacts of the recent Chevron merger, are also critical areas of focus.
Quarterly Review: Financial and Operational Highlights
The company delivered a clear beat on both GAAP earnings and revenue for Q2 2025. with net income attributable to Hess Midstream LP (GAAP) rising 82.4% compared with Q2 2024. Revenue (GAAP) topped $414.2 million, reflecting higher volumes and increased tariffs. Cost of operations increased to $154.0 million from $143.2 million in Q2 2024 mainly due to higher pass-through costs like electricity and water trucking, as well as an uptick in wages and depreciation tied to new assets coming online. Interest expenses climbed 11.5% compared with Q2 2024, mostly linked to a $600 million debt issuance in May 2024.
Growth was evident across key product and service lines compared with Q2 2024. Gas processing throughput grew 7% to 449 million cubic feet per day. Oil terminaling volumes increased by 9% compared with Q2 2024. and water gathering rose by 11% year over year. Gathering segment revenue climbed to $222.4 million while processing and storage revenue reached $157.9 million and terminaling/export revenue rose to $33.9 million.
Profitability expanded as higher revenues contributed to a gross margin of 63%, up from 61% in Q2 2024. Adjusted EBITDA, which reflects earnings before interest, taxes, depreciation, and amortization, reached $316.0 million, up 14.3% compared with Q2 2024. Adjusted free cash flow (non-GAAP) rose 24% to $193.8 million compared with Q2 2024, supported by greater volumes and disciplined capital spending. Net cash from operating activities also improved, increasing to $276.9 million for the quarter.
Capital allocation remained a highlight. Hess Midstream completed $190.0 million in Class B unit repurchases and $10.0 million in Class A share buybacks, reducing total outstanding shares and units. This action supported a $0.7370 per share quarterly distribution, up $0.0272 per share from the prior quarter. Management reaffirmed plans to grow distributions at least 5% annually through 2027, emphasizing excess cash flow as a source of these returns. The company’s credit rating was upgraded to investment grade (BBB-) by S&P in July 2025, further strengthening its financial profile.
Business Model, Strategic Position, and Chevron Merger Impact
The company remains highly dependent on Hess Corporation, now a part of Chevron. About 98% of its FY2024 revenue comes from contracts with this parent, supported by minimum volume commitments that ensure a base level of cash flow. There have been no changes to contract structures or volume obligations as a result of Chevron’s acquisition, but management cautions that strategic decisions by Chevron could shape future business priorities.
Looking at its footprint, Hess Midstream’s core advantage is the strategic placement of its infrastructure in the heart of the Bakken and Three Forks. Location enables it to connect efficiently to Hess-operated and third-party wells, supporting consistent throughput growth across gas gathering, oil terminaling, and water gathering systems. Customer concentration continues as a key risk factor. However, organic throughput growth, system expansions, and ongoing third-party opportunities were all cited as positive trends.
Cost control and compliance are also ongoing focus areas. The company noted increased pass-through costs tied to power and water, which are beyond its control but are largely recoverable through its fee framework. Regulatory and environmental compliance was noted as an ever-present challenge, but no material incidents were reported this period. The company continues to invest in expansion projects, including additional gas compression and pipeline capacity, to position itself for sustained growth in the coming years.
The merger between Hess Corporation and Chevron closed on July 18, 2025, after the end of the quarter. While operations during the quarter were unaffected, an increase in expected income tax expense relating to ownership changes has now been incorporated into full-year 2025 forward guidance.
Outlook and What to Watch
Hess Midstream reaffirmed its full-year 2025 guidance, projecting adjusted EBITDA (non-GAAP) between $1,235 million and $1,285 million, capital expenditures of $300 million, and adjusted free cash flow (non-GAAP) from $725 million to $775 million for the year ending December 31, 2025. Full-year net income (GAAP) guidance for calendar year 2025 was slightly lowered due to expected higher interest and income tax expenses associated with the new debt and ownership changes following the GIP secondary equity offering and Class B unit repurchase transactions. The outlook still includes at least 5% annualized growth in per-share distributions through 2027, supported by visible cash flow from long-term contracts.
The company continues to focus on expanding throughput volumes. For full-year 2025, it targets gas gathering in the range of 475–485 million cubic feet per day and crude oil terminal volumes of 130–140 thousand barrels per day. Management also pointed to ongoing financial flexibility, planning to return more than $1.25 billion to shareholders by 2027 via repurchases and dividends. With Chevron now holding a larger stake in the business, investors should monitor any potential change in upstream drilling plans, volume commitments, or strategic direction that might influence future results.
The quarterly dividend was raised by $0.0272 to $0.7370 per share for Q2 2025.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
