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DATE

Wednesday, Aug. 5, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

  • Vice President of Investor Relations - Jennifer Gordon
  • Chief Executive Officer - Jonathan Stein
  • Chief Financial Officer - Michael Chadwick

TAKEAWAYS

  • Net Income -- $173.7 million for Hess Midstream LP (HESM +2.06%), representing a decrease from $179.7 million in the prior-year quarter due to lower throughput volumes.
  • Adjusted EBITDA -- $313.7 million, reflecting lower operating expenses due to the shifting of maintenance activity into the second half of the year and general and administrative savings.
  • Total Revenues -- $399.0 million, which included $29.6 million of pass-through electricity, produced water trucking, and disposal costs.
  • Basic Earnings Per Class A Share -- $0.75, compared with $0.74 in the second quarter of 2025.
  • Adjusted Free Cash Flow -- $231.6 million, used to support shareholder returns and a decrease in the revolving credit facility balance.
  • Quarterly Distribution -- $0.7888 per Class A share, reflecting a 1.2% increase compared to the first quarter of 2026.
  • Capital Expenditures -- $30.6 million, a 56% decrease from $70.0 million in the prior-year quarter following the completion of gas compression capacity expansions.
  • Gas Processing Throughput -- 433 million cubic feet per day, down 4% year over year due to planned maintenance at the Tioga Gas Plant.
  • Crude Terminaling Throughput -- 117,000 barrels of oil per day, representing a 15% year-over-year decrease driven by lower new-well activity.
  • Water Gathering Throughput -- 121,000 barrels of water per day, reflecting a 12% decline versus the second quarter of 2025.
  • Gas Gathering Throughput -- 445 million cubic feet per day, compared to 464 million cubic feet per day in the prior-year quarter.
  • Crude Oil Gathering Throughput -- 103,000 barrels of oil per day, down from 127,000 barrels of oil per day in the second quarter of 2025.
  • Gross Adjusted EBITDA Margin -- 85%, exceeding the long-term target of 75% due to strong operating leverage.
  • Revolving Credit Facility Balance -- $256.0 million, reflecting a repayment of $87.0 million during the quarter.
  • 2026 Net Income Guidance -- $650 million to $700 million, reaffirmed by management for the full year.
  • 2026 Adjusted EBITDA Guidance -- $1.225 billion to $1.275 billion, maintaining a roughly flat outlook at the midpoint compared to 2025.
  • 2026 Adjusted Free Cash Flow Guidance -- $910 million to $960 million, representing a 20% year-over-year increase at the midpoint.
  • Excess Adjusted Free Cash Flow -- $280 million, expected for the full year 2026 after funding targeted distributions.
  • Q3 2026 Net Income Guidance -- $165 million to $175 million, projected to include higher revenues and volumes offset by increased operating expenses.
  • Q3 2026 Adjusted EBITDA Guidance -- $310 million to $320 million, anticipated to be approximately flat at the midpoint relative to the second quarter.
  • Long-Term Leverage Target -- 2.5x by 2028, down from the current 3x level through EBITDA growth and targeted debt repayment.
  • Volume Growth Outlook -- 5% growth into the second half of 2026, driven by drilling program optimization and increased lateral productivity.
  • Projected Excess Cash Flow -- $1 billion through 2028, expected to be available for incremental shareholder returns and debt reduction.

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RISKS

  • Chadwick stated, "If we get interrupted with weather or any of our maintenance costs become higher, that's going to be on the downside," indicating that execution and environmental conditions remain variables for achieving the high end of the financial guidance range.

SUMMARY

Management reported a focus on capital efficiency and operational execution following the completion of planned maintenance at the Tioga Gas Plant. The company stated that financial results were supported by operating leverage and the capture of additional third-party natural gas volumes. Strategic priorities remain centered on delivering a 5% annual distribution growth through 2026 while utilizing excess cash flow for debt reduction and incremental share repurchases. Management noted that the integration of Hess into Chevron continues to provide operational synergies and the ability to maintain production levels through improved drilling efficiencies.

  • CEO Stein noted that while rig counts have decreased, the company is "seeing the ability to maintain that production even at lower rig counts" as Chevron optimizes operations.
  • Management attributed the 85% gross margin partly to "some smaller adjustments that were recorded as credits this quarter" and the phasing of operating expenses into the second half of the year.
  • The company completed maintenance at the Tioga Gas Plant on time and under budget, with plans for maintenance at the Little Missouri 4 plant scheduled for the third quarter.
  • CFO Chadwick indicated that the board evaluates the mix of debt paydown and shareholder returns throughout the year, citing the $60 million share repurchase in March and the $87 million revolver paydown this quarter as examples.
  • Management confirmed that Chevron's use of longer laterals in the Bakken provides capital efficiency for the midstream side by requiring fewer wells to achieve similar volume throughput.
  • The company anticipates that revenues will increase quarter over quarter through the remainder of 2026 due to projected volume growth and inflation escalation.

INDUSTRY GLOSSARY

  • Bakken: A major shale formation in the Williston Basin known for high-quality crude oil and natural gas production.
  • Fractionation: The process of separating a mixture of hydrocarbons into individual components, such as propane, butane, and natural gas liquids.
  • Little Missouri 4 (LM4): A natural gas processing plant in North Dakota in which Hess Midstream holds a 50% ownership interest.
  • Minimum Volume Commitment (MVC): A contractual obligation where a customer agrees to pay for a specific minimum volume of service regardless of whether that volume is used.
  • NGL (Natural Gas Liquids): Components of natural gas that are separated from the gas state in the form of liquids, including ethane, propane, and butane.
  • Throughput: The amount of material or items passing through a system or process, such as oil or gas moving through a pipeline network.
  • Tioga Gas Plant (TGP): A key processing facility in Tioga, North Dakota, providing natural gas processing and fractionation services.
  • Williston Basin: A large sedimentary basin in the United States and Canada that contains significant deposits of oil and natural gas.

Full Conference Call Transcript

Operator: Good day, ladies and gentlemen, and welcome to the Second Quarter 2026 Hess Midstream Conference Call. My name is Kevin, and I'll be your operator for today. [Operator Instructions] 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: Thank you, Kevin. Good morning, everyone, and thank you for participating in our second 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 laws. 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: Thanks, Jennifer. Welcome, everyone, to our second quarter 2026 earnings call. Today, I will discuss our second 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 second quarter, we continued to execute our operational priorities and deliver our financial strategies. We completed planned maintenance at TGP on time and under budget. Our plans for the third quarter includes maintenance at LM4 and completing maintenance work that has now shifted to the second half of the year. Complementing our operational execution, we continue to find efficiencies across our assets on both synergies and improved performance.

During the quarter, we also delivered on our financial strategy by strengthening our balance sheet and increasing our distribution in line with our continued prioritization of shareholder returns. Hess Midstream remains a leader in shareholder returns, and we reiterate our 2026 adjusted free cash flow guidance of $910 million to $960 million or a 20% increase year-over-year at the midpoint. Turning to our results. During the quarter, throughput volumes averaged 433 million cubic feet per day for gas processing, 117,000 barrels of oil per day for crude terminaling and 121,000 barrels of water per day for water gathering.

Compared to the first quarter, throughput volumes were flat to lower on oil, but higher in gas as the maintenance of TGP was offset by the capture of additional third-party volume. Consistent with our annual guidance, we continue to expect volumes to grow in the second half of the year. Turning to Hess Midstream's capital program. In the second quarter, capital expenditures were $31 million as we continue to execute our program, including completion of greenfield high-pressure gathering pipeline infrastructure. We expect our capital spend to be higher in the third quarter, in line with planned activity.

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 uniquely 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 and second quarter and guidance.

Michael Chadwick: Thanks, Jonathan, and good morning, everyone. Today, I will discuss our financial results for the second quarter of 2026 and provide an update on our third quarter financial guidance and outlook for 2026. Turning to our results. For the second quarter of 2026, net income was $174 million, compared to approximately $158 million in the first quarter. Adjusted EBITDA for the second quarter of 2026 was $314 million compared with $300 million in the first quarter. The increase was primarily due to lower operating expenses with some activity shifting into the second half of the year as well as G&A savings from lower allocations during the quarter.

Total revenues, excluding pass-through revenues, increased by approximately $10 million, resulting in segment revenue changes as follows: Gathering revenues increased by approximately $7 million, and processing revenues increased by approximately $3 million. Total cost and expenses, excluding depreciation and amortization, pass-through costs and net of our proportional share of LM4 earnings decreased by approximately $4 million, primarily due to lower operating expenses with some activity shifting into the second half of the year as well as G&A savings from lower allocations during the quarter, resulting in adjusted EBITDA for the second quarter of 2026 of $314 million.

Our gross adjusted EBITDA margin for the second quarter of 2026 was maintained at approximately 85%, above our 75% target, highlighting our continued strong operating leverage. Second quarter of 2026 capital expenditures were approximately $31 million, in line with quarterly activity. Net interest, excluding amortization of deferred finance costs, was approximately $51 million, resulting in adjusted free cash flow of approximately $232 million, a decrease of approximately 2% from the first quarter of 2026. We had a drawn balance of $256 million on our revolving credit facility at the end of the second quarter of 2026, a decrease of approximately $87 million from the first quarter of 2026.

For the third quarter of 2026, we expect net income to be approximately $165 million to $175 million and adjusted EBITDA to be approximately flat at the midpoint with the second quarter at $310 million to $320 million as expected, higher revenues and volumes are offset by higher OpEx. We expect adjusted free cash flow in the third quarter of 2026 to decrease relative to the second quarter of 2026 as capital expenditures in the third quarter are projected to be higher than the second quarter, reflecting increased activity. We continue to expect second half volumes to be higher than the first half of the year.

For the full year of 2026, we continue to expect net income of between $650 million and $700 million and adjusted EBITDA of between $1.225 billion and $1.275 billion in 2026, approximately flat at the midpoint compared with 2025. As Jonathan mentioned, our cash position is strong and notable among our peer set. We expect to generate adjusted free cash flow of between $910 million and $960 million and excess adjusted free cash flow of approximately $280 million after fully funding our targeted 5% annual distribution growth, which we expect to continue to use for incremental shareholder returns and debt repayment. This concludes my remarks. We will be happy to answer any questions.

I will now turn the call over to the operator.

Operator: [Operator Instructions] Our first question comes from Jeremy Tonet with JPMorgan.

Vrathan Reddy: It's Vrathan Reddy on for Jeremy. I appreciate the comments in the prepared remarks and the full year guide, but maybe curious if you could talk to some of the puts and takes that could drive the high end versus low end? And then on the cost side, how you see OpEx and maintenance timing throughout the balance of the year?

Michael Chadwick: Yes. Thanks for the question. I can take that one. So what it's going to take to get to some of the puts and takes on our EBITDA guidance range. It's going to be pretty much about weather and execution in the second half of the year. So the high end of the range would probably require continued strong execution of our maintenance plan and favorable weather conditions to ensure we have fewer interruptions in our operations. And on the downside, that would be the opposite. If we get interrupted with weather or any of our maintenance costs become higher, that's going to be on the downside.

With regards to phasing, as you heard in our prepared remarks, Jonathan and I both mentioned that we've got a bit of a phasing shift in OpEx, some of the maintenance programs that we were expecting to carry out in Q2 shifted to later in the year. and we expect to pick that up in Q3. Typically, when we get to Q4, it's a bit of a lower phasing on OpEx as weather takes an impact, but we also expect to see possibly some volatility on the actualization of G&A allocations from the sponsor typically around Q4 as well. And that's the reason why we've kept our EBITDA guidance in the same range as the previous quarter.

We've kept it flat for the full year.

Vrathan Reddy: Got it. And then could you maybe just dive a little bit deeper on the second half volume growth drivers? I understand is an absence of kind of weather and maintenance-related headwinds, but curious if there's anything else specifically given a little bit of a stronger third-party volumes that we've seen on gas in particular?

Jonathan Stein: It's Jonathan. Yes, I think in terms of the phasing of volume, as we've -- we had always said that we expected the second half of the year to be higher. Some of that is just, as Chevron sets up its own drilling program and optimize, you can have normal phasing in terms of you have wells online. Addition, of course, Chevron has talked about on the laterals, increased productivity. So all of that will continue to come through in the second half of the year. But really, the volume growth that we had was really planned and just part of normal to phasing.

As Mike said, the way you can kind of think about the year is really continued volume growth quarter-on-quarter from this point forward, at least 5% growth into the second half of the year. That will drive revenues quarter-on-quarter up into the third quarter. As Mike said, OpEx is going to be, they expect to kind of basically increase as we defer from maintenance, things like the end of the third quarter. So that gets into kind of EBITDA flat with higher revenues and higher OpEx.

And then in the fourth quarter, that we'll have higher revenue and expect OpEx to be at least flat or lower, so driving higher EBITDA into the fourth quarter and then keeping our full year guidance. So just really phasing on the volume side, nothing -- of course, we had good third-party volumes this quarter on gas side, opportunities like that continue to exist. So that would all be upside.

Operator: Our next question comes from John Mackay with Goldman Sachs.

John Mackay: Jonathan, you touched on this a little bit, but Chevron also made a point of bringing it up on their call just in terms of the efficiency gains they are seeing in the basin. Anything you can kind of walk us through what you're seeing on the ground and to the extent that you're starting to see kind of initial results maybe any commentary you can share about how to frame up the production growth outlook from here?

Jonathan Stein: Sure. Yes. Look, I think anything on production growth is really more a question for Chevron. What I can say from the midstream side, and certainly, those efficiencies are helping in terms of certainly maintaining production. Chevron did mention this even at a lower rig count table to maintain production. That volume kind of expectation of approximately 200,000 barrel of oil equivalent per day that underpins our guidance going forward. We've talked about in the past as they drill a lot our laterals that obviously you have less wells to be able to achieve similar volumes. And so that helps us in terms of our CapEx.

And as we've talked about -- we're highly capital efficient, leveraging our historical investment and now even more capital efficiency to be able to get the same volume throughput, if you will. And then as we said, looking forward, again, we're not expecting necessarily production growth per se, consistent with what Chevron has talked about on their side, really expecting, as we talked about our guidance, a lot of that is inflation escalation as you go forward. And so that's really kind of driver and some OpEx savings. We are continuing to see synergies that ever seen that acquisition, we're seeing that hemp-to as well, and that's certainly coming through in our OpEx.

That's part of what we're seeing in terms of OpEx savings as well. So I'd say, look, it's -- I think would say early days because we're still now a year into the merger acquisition of Hess into Chevron, but certainly from the midstream side, we're seeing the ability to maintain that production even at lower rig counts and seeing big comp becoming from our point of view, less important as Chevron can really maintain that production level going forward.

John Mackay: I appreciate that the real answer. I want to ask one follow-up, and I understand there's probably not a ton you can say here, but they also made a point of mentioning on the call, just a review of kind of their broader midstream strategy in the basin. Is there any kind of context or perspective that you guys are able to share at this point?

Jonathan Stein: Sure. No, I think, look, that one's really mentioned in the context of just Bakken and getting to know the Bakken and the production efficiencies and optimizing that we just talked about. Look, from our side, we're focused on execution of our plan, leveraging the sort of investment to drive free cash flow generation and really producing results like we saw in this quarter.

Operator: Our next question. Our next question comes from Doug Irwin with Citi.

Douglas Irwin: I wanted to start with the EBITDA margin this quarter. You hit 85%, which is well above your 75% target and realize there are probably some one-time cost benefits this quarter. But if I look back, it's been quite some time since you've even been below 80%, I think. So just wondering if that target is starting to look a bit conservative today or if there's maybe an expectation of converging back towards that over time.

Michael Chadwick: I'm glad you noticed the strong performance on our margin. It is extraordinary that we are managing to keep a very healthy margin at 85% this quarter. You're right, there are some smaller adjustments that were recorded as credits this quarter. They are relatively minor, but they did help the margin. But the main driver, as I mentioned in my earlier remarks, is phasing of OpEx that shifted across to Q3 and Q4. But while we continue a pretty strong trend of excess of 80%, we're comfortable in maintaining our 75% margin target. It is what we expect on the long term. But we'll enjoy the greater than 80% margins in the meantime.

But we're not intending to change our guidance just yet.

Douglas Irwin: Got it. And then maybe just a follow-up on capital allocation. You didn't do a buyback this quarter, and activity has been a little less ratable here despite the free cash flow outlook remaining pretty strong. So just curious kind of how you're thinking about buybacks versus debt paydown and if you kind of have an ultimate target of where you expect to trend relative to that 3x long-term leverage range you've talked about?

Michael Chadwick: Yes. No, thanks, Doug. There is no change to our guidance that we issued in December on our financial plan there. We will use some of the excess adjusted free cash flow to pay down debt as well as perform returns of capital to shareholders. And you saw that in March with the $60 million share repurchase from the public and our sponsor. And in this quarter, we paid down $87 million against the revolver. And we've guided $280 million of excess adjusted free cash flow for this year as a target. So we've got some capacity left to do further shareholder returns of capital or debt pay down.

But I'd say that the Board evaluates this mix of paydown and return of capital during the year and throughout the year, and that's part of their consideration when they evaluate this. And so while we do multiple share buybacks or returns of equity per year, it is ultimately a Board decision. With regards to our longer-term view on leverage, right now, we're at 3% -- I mean 3x leverage, and we expect that to go lower. We're not using any new debt to fund any share returns or share buybacks rather or debt is going to stay in absolute terms, the same.

But then as we've indicated, we'll use some of that adjusted free -- excess free cash flow to pay down some of that debt. So that will drift lower. And then we're guiding an increase in our EBITDA. So the trend will be that the debt ratio will go lower. By 2028, we're expecting to get down in the region of about 2.5x. That's what the guidance would indicate. We don't expect to go much lower than that. But there's no absolute level of debt that we're aiming to try and achieve, but it will -- we do expect it to go lower than 3x.

Operator: I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.