Hess Midstream Partners LP Reports Estimated Results for the First Quarter of 2018
First Quarter Highlights:
-
Net income was $89.0 million. Net cash provided by operating
activities was $110.5 million. -
Adjusted EBITDA1 was
$119.3 million, of which $23.3 million was attributable to Hess
Midstream Partners LP. -
DCF1 of Hess Midstream
Partners LP was $23.2 million resulting in 1.25x DCF coverage of
distributions for the period. -
Increased quarterly cash distribution to $0.3333 per unit, an
increase of 3.6% compared with the prior quarter or 15% on an
annualized basis, consistent with targeted long-term annual
distribution growth per unit. -
Executed strategic 50/50 joint venture with Targa Resources
Corp. to build a new gas processing plant located south of the
Missouri River near Watford City, North Dakota. -
Compared with the prior-year quarter, throughput volumes
increased 27% for each of gas gathering, crude oil gathering and gas
processing, respectively, and 70% for crude oil terminaling, driven by
strong operating performance of our assets and completion of key
gathering and terminaling projects during the second half of 2017. -
Revolver remains undrawn with capacity of $300 million available
to fund future growth.
HOUSTON–(BUSINESS WIRE)–Hess Midstream Partners LP (NYSE:HESM) (ÔÇ£Hess MidstreamÔÇØ) today reported
first quarter 2018 net income of $89.0 million compared with net income
of $63.1 million for the first quarter of 2017. After deduction for
noncontrolling interests, net income attributable to Hess Midstream was
$17.0 million, or $0.30 per common unit. Hess Midstream generated
Adjusted EBITDA of $23.3 million and DCF of $23.2 million for the first
quarter of 2018.
John Gatling, Chief Operating Officer of Hess Midstream said, ÔÇ£In the
first quarter, we delivered another consistent distribution increase,
grew our volumes organically, and announced our first strategic joint
venture, while maintaining a strong balance sheet and over
1.2x distribution coverage. We are well positioned to capture Basin
growth, as Hess and third parties increase drilling activity. Based on
the strength of our financial results and continued execution of our
capital infrastructure plan, Hess Midstream has a sustainable and clear
long-term growth trajectory.ÔÇØ
Financial Results
Unless otherwise noted herein, all results included in this release
reflect the results of our predecessor for accounting purposes, for
periods prior to the closing of our IPO on April 10, 2017, as well as
the results of Hess Midstream Partners LP, for the periods subsequent to
the closing of the IPO. We refer to certain results as ÔÇ£attributable to
Hess Midstream Partners LP,ÔÇØ which excludes the noncontrolling interests
in Hess MidstreamÔÇÖs assets retained by Hess Infrastructure Partners LP
(ÔÇ£Hess Infrastructure PartnersÔÇØ).
Revenues and other income in the first quarter of 2018 were
$157.0 million, including $16.6 million of shortfall fees. Revenues were
up from $130.3 million in the prior-year quarter primarily attributable
to higher throughput volumes and tariff rates. Total costs and expenses
in the first quarter of 2018 were $67.7 million, slightly up from
$67.2 million in the prior-year quarter. Net income for the
first quarter of 2018 was $89.0 million and net cash provided by
operating activities was $110.5 million.
Adjusted EBITDA was $119.3 million, of which $23.3 million is
attributable to Hess Midstream. DCF of $23.2 million resulted in a
1.25x DCF coverage ratio relative to distributions.
At the end of the first quarter 2018, Hess MidstreamÔÇÖs $300.0 million
revolving credit facility remained undrawn and available to fund organic
growth projects or acquisitions from Hess Corporation, Hess
Infrastructure Partners or third parties.
Operational Highlights
Hess Midstream continued to demonstrate organic growth resulting from
the execution of key infrastructure projects. First quarter 2018
throughput volumes increased 27% for each of gas gathering, crude oil
gathering and gas processing, respectively, and 70% for crude
terminaling, compared to the prior-year quarter, driven by strong
operating performance of our assets, including the Hawkeye Gas Facility,
the Tioga Gas Plant and the JohnsonÔÇÖs Corner Header System. First
quarter 2018 gas processing volumes were modestly impacted by weather
related disruptions. We continued a safe ramp up of the Hawkeye Oil
Facility, which commenced operations in the fourth quarter of 2017.
Furthermore, as previously announced, in the first quarter of 2018, Hess
Midstream executed a strategic 50/50 joint venture with Targa Resources
Corp. to build a new 200 MMcf/d gas processing plant, Little Missouri 4
(ÔÇ£LM4ÔÇØ), located south of the Missouri River near Watford City, North
Dakota. Construction activities are underway and expected to be
completed by the end of 2018 providing Hess Midstream an additional
100 MMcf/d of processing capacity and export optionality north and south
of the Missouri River and beginning to ramp up in 2019.
Capital Expenditures
Gross capital expenditures for the first quarter of 2018 totaled
$60.9 million, including $35.4 million of expansion capital
expenditures, $24.3 million of equity investments associated with the
LM4 gas processing plant, and $1.2 million of maintenance capital
expenditures. Capital expenditures in the prior-year quarter were
$27.0 million, including $25.3 million expansion capital expenditures
and $1.7 million of maintenance capital expenditures. The increase in
expansion capital expenditures was primarily attributable to engineering
and procurement work related to our planned gas compression expansion
projects and key system build outs, including connecting wells to our
expanding gathering system. Net capital expenditures attributable to
Hess Midstream Partners LP in the first quarter of 2018 totaled
$12.2 million, including $7.1 million expansion capital expenditures,
$4.9 million of equity investments associated with the LM4 gas
processing plant, and $0.2 million of maintenance capital expenditures.
Under the contribution agreement we entered into with Hess
Infrastructure Partners in connection with the IPO, Hess Infrastructure
Partners reimbursed the full cost of maintenance capital expenditures
incurred during the first quarter of 2018.
Quarterly Cash Distributions
On April 24, 2018, our general partnerÔÇÖs board of directors declared a
cash distribution of $0.3333 per unit for the first quarter of 2018, an
increase of 3.6% over the distribution for the fourth quarter of 2017.
The distribution is expected to be paid on May 14, 2018 to unitholders
of record as of the close of business on May 4, 2018.
Hess Midstream is targeting long-term 15% annual distribution growth per
unit with at least a 1.1x distribution coverage ratio.
Guidance
Hess Midstream reaffirms its previously announced guidance for full year
2018 as follows:
| Year Ending | ||
| December 31, 2018 | ||
| (Unaudited) | ||
| Financials (millions) | ||
| Net income | $ | 335 – 360 |
| Consolidated Adjusted EBITDA | $ | 460 – 485 |
| Adjusted EBITDA attributable to Hess Midstream Partners LP | $ | 90 – 95 |
| DCF of Hess Midstream Partners LP | $ | 87 – 92 |
| Expansion capital, net to Hess Midstream Partners LP | $ | 64 |
| Maintenance capital, net to Hess Midstream Partners LP | $ | 2 |
| Year Ending | |
| December 31, 2018 | |
| (Unaudited) | |
| Throughput volumes (thousands) | |
| Gas gathering – Mcf of natural gas per day | 240 – 250 |
| Crude oil gathering – bopd | 75 – 85 |
| Gas processing – Mcf of natural gas per day | 225 – 235 |
| Crude terminals – bopd | 85 – 95 |
Investor Webcast
Hess Midstream will review first quarter financial and operating results
and other matters on a webcast today at 12:30 p.m. Eastern Daylight
Time. The live audio webcast is accessible on the Investor page of our
website www.hessmidstream.com.
Conference call numbers for participation are 866-395-9624, or
213-660-0871 for international callers. The passcode number is 3648367.
A replay of the conference call will be available at the same location
following the event.
2017 Annual Report
Our Annual Report on Form 10-K for the fiscal year ended December 31,
2017 was filed with the Securities and Exchange Commission on March 13,
2018. The report is available on our website at www.hessmidstream.com.
Unitholders may request printed copies of the report, which contains our
complete audited financial statements, free of charge, by writing to:
Hess Midstream Partners LP, 1501 McKinney Street, Houston, TX 77010.
Attention: Investor Relations.
About Hess Midstream
Hess Midstream Partners LP is a fee-based, growth oriented traditional
master limited partnership that was formed to own, operate, develop and
acquire a diverse set of midstream assets to provide services to Hess
Corporation and third-party customers. Hess MidstreamÔÇÖs assets are
primarily located in the Bakken and Three Forks Shale plays in the
Williston Basin area of North Dakota. More information is available at www.hessmidstream.com.
Reconciliation of U.S. GAAP to Non-GAAP Measures
In addition to our financial information presented in accordance with
U.S. generally accepted accounting principles (GAAP), management
utilizes additional non-GAAP measures to facilitate comparisons of past
performance and future periods. Hess Midstream has used two non-GAAP
financial measures in this earnings release. ÔÇ£Adjusted EBITDAÔÇØ presented
in this release is defined as reported net income (loss) plus net
interest expense, income tax expense and depreciation and amortization,
as further adjusted to eliminate the impact of certain items that we do
not consider indicative of our ongoing operating performance, such as
other income and other non-cash, non-recurring items, if applicable. We
define Adjusted EBITDA attributable to Hess Midstream Partners LP as
Adjusted EBITDA less Adjusted EBITDA attributable to Hess Infrastructure
PartnersÔÇÖ retained interests in our join interest assets. ÔÇ£Distributable
Cash FlowÔÇØ (ÔÇ£DCFÔÇØ) is defined as Adjusted EBITDA attributable to Hess
Midstream Partners LP less cash paid for interest and maintenance
capital expenditures. Distributable cash flow does not reflect changes
in working capital balances. We believe that investorsÔÇÖ understanding of
our performance is enhanced by disclosing these measures as they may
assist in assessing our operating performance as compared to other
publicly traded partnerships in the midstream energy industry, without
regard to historical cost basis or, in the case of Adjusted EBITDA,
financing methods, and assessing the ability of our assets to generate
sufficient cash flow to make distributions to our unitholders. These
measures are not, and should not be viewed as, a substitute for U.S.
GAAP net income or cash flow from operating activities and should not be
considered in isolation. Reconciliations of both reported net income
attributable to Hess Midstream Partners LP (GAAP) to Adjusted EBITDA and
net cash provided by operating activities (GAAP) to Distributable Cash
Flow, are provided below.
| First Quarter | ||||
| (unaudited) | ||||
| 2018 | 2017 | |||
| Predecessor | ||||
| (in millions, except ratio and per-unit data) | ||||
|
Reconciliation of Adjusted EBITDA attributable to Hess Midstream Partners LP
and Distributable Cash Flow attributable to Hess Midstream to net income: |
||||
| Net income | $ | 89.0 | $ | 63.1 |
| Plus: | ||||
| Depreciation expense | 30.0 | 26.8 | ||
| Interest expense, net | 0.3 | – | ||
| Adjusted EBITDA | 119.3 | $ | 89.9 | |
| Less: Adjusted EBITDA attributable to noncontrolling interest(a) | 96.0 | |||
| Adjusted EBITDA attributable to Hess Midstream Partners LP | $ | 23.3 | ||
| Less: | ||||
| Cash interest paid, net | 0.1 | |||
| Maintenance capital expenditures(b) | – | |||
| Distributable cash flow attributable to Hess Midstream Partners LP | $ | 23.2 | ||
|
Reconciliation of Adjusted EBITDA attributable to Hess Midstream Partners LP
and Distributable Cash Flow attributable to Hess Midstream to net cash provided by operating activities: |
||||
| Net cash provided by operating activities | $ | 110.5 | ||
| Changes in assets and liabilities | 8.9 | |||
| Amortization of deferred financing costs | (0.3 | ) | ||
| Unit-based compensation | (0.1 | ) | ||
| Interest expense, net | 0.3 | |||
| Adjusted EBITDA | $ | 119.3 | ||
| Less: | ||||
| Adjusted EBITDA attributable to noncontrolling interest(a) | 96.0 | |||
| Adjusted EBITDA attributable to Hess Midstream Partners LP | $ | 23.3 | ||
| Less: | ||||
| Cash interest paid, net | 0.1 | |||
| Maintenance capital expenditures(b) | – | |||
| Distributable cash flow attributable to Hess Midstream Partners LP | $ | 23.2 | ||
| Distributed cash flow | 18.6 | |||
| Distribution coverage ratio | 1.25 | x | ||
| Distribution per unit | $ | 0.3333 | ||
| (a) |
Reflects Hess Infrastructure PartnersÔÇÖ 80% noncontrolling economic interest in the net income of Hess North Dakota Pipelines Operations LP, Hess TGP Operations LP and Hess North Dakota Export Logistics LP. |
| (b) |
Under our contribution agreement with Hess Infrastructure Partners, Hess Infrastructure Partners agreed to bear the full cost we incurred for maintenance capital expenditures during the periods presented. |
| Guidance | ||
| Year Ending | ||
| December 31, 2018 | ||
| (Unaudited) | ||
| (in millions) | ||
|
Reconciliation of Adjusted EBITDA attributable to Hess
Midstream Partners LP and Distributable Cash Flow attributable to Hess Midstream Partners LP to net income (loss): |
||
| Net income (loss) | $ | 335 – 360 |
| Plus: | ||
| Depreciation expense | 123 | |
| Interest expense | 2 | |
| Adjusted EBITDA | 460 – 485 | |
| Less: Adjusted EBITDA attributable to noncontrolling interest(a) | 370 – 390 | |
| Adjusted EBITDA attributable to Hess Midstream Partners LP | 90 – 95 | |
| Less: | ||
| Cash interest paid, net | 1 | |
| Maintenance capital expenditures | 2 | |
| Distributable cash flow attributable to Hess Midstream Partners LP | $ | 87 – 92 |
| (a) |
Reflects Hess Infrastructure PartnersÔÇÖ 80% noncontrolling economic interest in the net income of Hess North Dakota Pipelines Operations LP, Hess TGP Operations LP and Hess North Dakota Export Logistics LP. |
Forward-looking Statements
This press release may include forward-looking statements within the
meaning of the federal securities laws. Generally, the words
ÔÇ£anticipate,ÔÇØ ÔÇ£estimate,ÔÇØ ÔÇ£expect,ÔÇØ ÔÇ£forecast,ÔÇØ ÔÇ£guidance,ÔÇØ ÔÇ£could,ÔÇØ
ÔÇ£may,ÔÇØ ÔÇ£should,ÔÇØ ÔÇ£believe,ÔÇØ ÔÇ£intend,ÔÇØ ÔÇ£project,ÔÇØ ÔÇ£plan,ÔÇØ ÔÇ£predict,ÔÇØ
ÔÇ£willÔÇØ and similar expressions identify forward-looking statements,
which generally are not historical in nature. Forward-looking statements
are subject to certain risks and uncertainties that could cause actual
results to differ materially from historical results and current
projections or expectations. When considering these forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements in the Hess MidstreamÔÇÖs annual report on Form 10-K
for the year ended December 31, 2017, and in other reports we file with
the Securities and Exchange Commission. Hess Midstream undertakes no
obligation and does not intend to update these forward-looking
statements to reflect events or circumstances occurring after this press
release. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release.
HESS MIDSTREAM PARTNERS LP AND PREDECESSOR
SUPPLEMENTAL
FINANCIAL DATA (UNAUDITED)
(IN MILLIONS, EXCEPT PER-UNIT
DATA)
Factors Affecting Comparability
The following tables present revenues, expenses and net income of Hess
Midstream Partners LP for the three-month periods ended March 31, 2018
and December 31, 2017. The unaudited combined financial results of Hess
Midstream Partners LP Predecessor, our predecessor for accounting
purposes, are presented for periods prior to the closing of our IPO on
April 10, 2017. Differences in revenues and expenses for periods prior
to and after the IPO are detailed in the "Factors Affecting
Comparability of Financial Information" in the ManagementÔÇÖs Discussion
and Analysis of Financial Condition and Results of Operations section of
the annual report on Form 10-K for the year ended December 31, 2017.
| First | First | Fourth | ||||
| Quarter | Quarter | Quarter | ||||
| 2018 | 2017 | 2017 | ||||
| Predecessor | ||||||
|
Statement of operations |
||||||
| Revenues | ||||||
| Affiliate services | $ | 156.8 | $ | 130.3 | $ | 150.3 |
| Other income | 0.2 | – | 0.2 | |||
| Total revenues | 157.0 | 130.3 | 150.5 | |||
| Costs and expenses | ||||||
|
Operating and maintenance expenses
(exclusive of depreciation shown separately below) |
34.6 | 38.9 | 41.1 | |||
| Depreciation expense | 30.0 | 26.8 | 29.3 | |||
| General and administrative expenses | 3.1 | 1.5 | 2.5 | |||
| Total costs and expenses | 67.7 | 67.2 | 72.9 | |||
| Income from operations | 89.3 | 63.1 | 77.6 | |||
| Interest expense, net | 0.3 | – | 0.5 | |||
| Net income | $ | 89.0 | $ | 63.1 | $ | 77.1 |
|
Less: Net income attributable to noncontrolling
interest |
72.0 | 62.3 | ||||
| Net income attributable to Hess Midstream Partners LP | 17.0 | 14.8 | ||||
|
Less: General partner interest in net income attributable to
Hess Midstream Partners LP |
0.3 | 0.3 | ||||
|
Limited partners' interest in net income attributable to Hess
Midstream Partners LP |
$ | 16.7 | $ | 14.5 | ||
| Net income per limited partner unit (basic and diluted): | ||||||
| Common | $ | 0.30 | $ | 0.26 | ||
| Subordinated | $ | 0.30 | $ | 0.26 | ||
|
Weighted average limited partner units outstanding (basic and diluted) |
||||||
| Common | 27.3 | 27.3 | ||||
| Subordinated | 27.3 | 27.3 | ||||
| First Quarter 2018 | |||||||||||
| Gathering |
Processing and
Storage |
Terminaling and Export |
Interest
and Other |
Total | |||||||
|
Statement of operations |
|||||||||||
| Revenues | |||||||||||
| Affiliate services | $ | 78.5 | $ | 58.3 | $ | 20.0 | $ | – | $ | 156.8 | |
| Other income | – | – | 0.2 | – | 0.2 | ||||||
| Total revenues | 78.5 | 58.3 | 20.2 | – | 157.0 | ||||||
| Costs and expenses | |||||||||||
|
Operating and maintenance expenses (exclusive of
depreciation shown separately below) |
13.2 | 13.3 | 8.1 | – | 34.6 | ||||||
| Depreciation expense | 15.2 | 10.9 | 3.9 | – | 30.0 | ||||||
| General and administrative expenses | 0.9 | 0.9 | 0.1 | 1.2 | 3.1 | ||||||
| Total costs and expenses | 29.3 | 25.1 | 12.1 | 1.2 | 67.7 | ||||||
| Income (loss) from operations | 49.2 | 33.2 | 8.1 | (1.2 | ) | 89.3 | |||||
| Interest expense, net | – | – | – | 0.3 | 0.3 | ||||||
| Net income (loss) | 49.2 | 33.2 | 8.1 | (1.5 | ) | 89.0 | |||||
|
Less: Net income (loss) attributable to
noncontrolling interest |
39.2 | 26.2 | 6.6 | – | 72.0 | ||||||
|
Net income (loss) attributable to Hess Midstream
Partners LP |
$ | 10.0 | $ | 7.0 | $ | 1.5 | $ | (1.5 | ) | $ | 17.0 |
| First Quarter 2017 | ||||||||||
| Predecessor | ||||||||||
| Gathering |
Processing and
Storage |
Terminaling and Export |
Interest
and Other |
Total | ||||||
|
Statement of operations |
||||||||||
| Revenues | ||||||||||
| Affiliate | $ | 60.2 | $ | 53.2 | $ | 16.9 | $ | – | $ | 130.3 |
| Total revenues | 60.2 | 53.2 | 16.9 | – | 130.3 | |||||
| Costs and expenses | ||||||||||
|
Operating and maintenance expenses (exclusive of
depreciation shown separately below) |
14.9 | 13.5 | 10.5 | – | 38.9 | |||||
| Depreciation expense | 12.3 | 10.9 | 3.6 | – | 26.8 | |||||
| General and administrative expenses | 1.0 | 0.3 | 0.2 | – | 1.5 | |||||
| Total costs and expenses | 28.2 | 24.7 | 14.3 | – | 67.2 | |||||
| Net income (loss) | $ | 32.0 | $ | 28.5 | $ | 2.6 | $ | – | $ | 63.1 |
| Fourth Quarter 2017 | |||||||||||
| Gathering |
Processing and
Storage |
Terminaling and Export |
Interest
and Other |
Total | |||||||
|
Statement of operations |
|||||||||||
| Revenues | |||||||||||
| Affiliate services | $ | 72.8 | $ | 59.9 | $ | 17.6 | $ | – | $ | 150.3 | |
| Other income | – | – | – | 0.2 | 0.2 | ||||||
| Total revenues | 72.8 | 59.9 | 17.6 | 0.2 | 150.5 | ||||||
| Costs and expenses | |||||||||||
|
Operating and maintenance expenses (exclusive of
depreciation shown separately below) |
17.6 | 15.7 | 7.8 | – | 41.1 | ||||||
| Depreciation expense | 14.5 | 10.9 | 3.9 | – | 29.3 | ||||||
| General and administrative expenses | 1.2 | 0.4 | 0.2 | 0.7 | 2.5 | ||||||
| Total costs and expenses | 33.3 | 27.0 | 11.9 | 0.7 | 72.9 | ||||||
| Income (loss) from operations | 39.5 | 32.9 | 5.7 | (0.5 | ) | 77.6 | |||||
| Interest expense | – | – | – | 0.5 | 0.5 | ||||||
| Net income (loss) | 39.5 | 32.9 | 5.7 | (1.0 | ) | 77.1 | |||||
|
Less: Net income (loss) attributable to
noncontrolling interest |
31.4 | 26.2 | 4.7 | – | 62.3 | ||||||
|
Net income (loss) attributable to Hess Midstream
Partners LP |
$ | 8.1 | $ | 6.7 | $ | 1.0 | $ | (1.0 | ) | $ | 14.8 |
HESS MIDSTREAM PARTNERS LP AND PREDECESSOR
SUPPLEMENTAL
OPERATING DATA (UNAUDITED)
| First | First | Fourth | |
| Quarter | Quarter | Quarter | |
| 2018 | 2017 | 2017 | |
| Predecessor | |||
|
Throughput volumes (thousands) |
|||
| Gas gathering – Mcf of natural gas per day | 233 | 183 | 230 |
| Crude oil gathering – bopd | 80 | 63 | 69 |
| Gas processing – Mcf of natural gas per day | 214 | 169 | 219 |
| Crude terminals – bopd | 92 | 54 | 85 |
| NGL loading – blpd | 11 | 11 | 11 |
1 Adjusted EBITDA and DCF are non-GAAP measures. Definitions
and reconciliations of these non-GAAP measures to GAAP reporting
measures appear in the following pages of this release.
Contacts
For Hess Midstream Partners LP
Investors:
Jennifer
Gordon, 212-536-8244
or
Media:
Robert Young,
346-319-8783
