Hess Midstream LP

Previous wording

On February 8, 2024, GIP sold an aggregate of 11,500,000 of our Class A Shares representing limited partner interests in the Company (“Class A Shares”), inclusive of the underwriters’ option to purchase up to 1,500,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $33.10 per Class A Share, less underwriting discounts. GIP received net proceeds from the offering of approximately $377.5 million, after deducting underwriting discounts. The Company did not receive any proceeds from the offering transaction. The offering transaction was conducted pursuant to a registration rights agreement among us and the Sponsors.

Current wording

On February 8, 2024, GIP sold an aggregate of 11,500,000 of our Class A Shares representing limited partner interests in the Company (“Class A Shares”), inclusive of the underwriter’s option to purchase up to 1,500,000 of additional shares, which was fully exercised, in an underwritten public offering at a price to the underwriter of $32.83 per Class A Share. GIP received net proceeds from the offering of approximately $377.5 million. On May 31, 2024, GIP sold an aggregate of 10,000,000 of our Class A Shares in an underwritten public offering at a price to the underwriter of $34.025 per Class A Share. GIP also granted the underwriter an option to purchase up to an additional 1,500,000 Class A shares at the same price per Class A share, which was exercised in full on June 3, 2024. GIP received net proceeds from the offering of approximately $391.3 million. The Company did not receive any proceeds from the offering transaction. The offering transaction was conducted pursuant to a registration rights agreement among us and the Sponsors.

Previous wording

On March 14, 2024, the Partnership purchased directly from the Sponsors 2,816,901 Class B units representing limited partner interests in the Partnership (“Class B Units”) for an aggregate purchase price of approximately $100 million. The purchase price per Class B Unit was $35.50, the closing price of the Class A shares on March 11, 2024. The repurchase transaction was funded using borrowings under the Partnership’s existing revolving credit facility.

Current wording

On March 14, 2024, the Partnership purchased directly from the Sponsors 2,816,901 Class B units representing limited partner interests in the Partnership (“Class B Units”) for an aggregate purchase price of approximately $100 million. The purchase price per Class B Unit was $35.50, the closing price of the Class A shares on March 11, 2024. On June 26, 2024, the Partnership, purchased directly from the Sponsors 2,724,052 Class B Units for an aggregate purchase price of approximately $100.0 million. The purchase price per Class B Unit was $36.71, the closing price of the Class A Shares on June 24, 2024. The repurchase transactions were funded using borrowings under the Partnership’s existing revolving credit facility and cash on hand.

Previous wording

As a result of the equity offering and unit repurchase transactions described above, our public ownership increased from approximately 29.8% at December 31, 2023, to approximately 35.3% at March 31, 2024, on a consolidated basis.

Current wording

As a result of the equity offerings and unit repurchase transactions described above, our public ownership increased from approximately 29.8% at December 31, 2023, to approximately 41.0% at June 30, 2024, on a consolidated basis.

Previous wording

We utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through an immediate 1.5% increase in our quarterly distribution level per Class A Share in the first quarter of 2024 in addition to the quarterly 1.2% increase per Class A Share consistent with our target of at least 5% growth in annual distributions per Class A Share.

Current wording

We utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through an immediate increase in our quarterly distribution level per Class A Share in each of the first two quarters of 2024, which, on an annualized basis, is significantly above our target of at least 5% growth in annual distributions per Class A Share through 2026.

Previous wording

Significant financial and operating highlights for the first quarter of 2024 included:

Current wording

Significant financial and operating highlights for the second quarter of 2024 included:

Previous wording

Consolidated net income of $161.9 million;

Current wording

Consolidated net income of $160.3 million;

Previous wording

Net income attributable to Hess Midstream LP after deduction for noncontrolling interest of $44.6 million, or $0.60 basic earnings per Class A Share;

Current wording

Net income attributable to Hess Midstream LP after deduction for noncontrolling interest of $49.5 million, or $0.59 basic earnings per Class A Share;

Previous wording

Cash distribution of $0.6516 per Class A Share declared on April 22, 2024, an approximate 2.7% increase in the quarterly distribution per Class A Share for the first quarter of 2024 as compared with the fourth quarter of 2023. The increase consists of an approximate 1.5% increase in the Company’s distribution level per Class A Share in addition to the quarterly 1.2% increase per Class A Share consistent with its target of at least 5% growth in annual distributions per Class A Share.

Current wording

Cash distribution of $0.6677 per Class A Share declared on July 29, 2024, an increase of $0.0161 per Class A Share for the second quarter of 2024 as compared with the first quarter of 2024.

Previous wording

Revenues and other income in the first quarter of 2024 were $355.6 million compared with $305.0 million in the prior-year quarter. First quarter 2024 revenues and other income were up $50.6 million compared to the prior-year quarter primarily due to higher physical volumes, partially offset by lower shortfall fees due to the 2023 transition to actual physical volumes that are at or above MVCs. Total operating costs and expenses in the first quarter of 2024 were $133.6 million, compared with $116.3 million in the prior-year quarter. The increase was primarily attributable to higher maintenance expenses, pass-through expenses and higher depreciation expense for additional assets placed in service. Interest expense in the first quarter of 2024 was $48.5 million, up from $41.6 million in the prior-year quarter, primarily attributable to higher interest rates on our credit facilities and higher borrowings on our revolving credit facility. Income tax expense increased $7.8 million resulting from ownership changes following secondary equity offering transactions and Class B Unit repurchases. As a result, consolidated net income increased $19.7 million and Adjusted EBITDA increased $36.8 million for the first quarter of 2024 compared with the first quarter of 2023.

Current wording

Revenues and other income in the second quarter of 2024 were $365.5 million compared with $324.0 million in the prior‑year quarter. Second quarter 2024 revenues and other income were up $41.5 million compared with the prior-year quarter primarily due to higher physical volumes. The second quarter 2024 results also included a one-time $8.0 million reduction in revenues related to setting the 2024 tariff rates for certain subsystems. Total operating costs and expenses in the second quarter of 2024 were $143.2 million, compared with $125.9 million in the prior-year quarter. The increase was primarily attributable to higher maintenance expenses, pass-through expenses and higher depreciation expense for additional assets placed in service. Interest expense in the second quarter of 2024 was $49.7 million, up from $43.8 million in the prior-year quarter, primarily attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued in May 2024, higher interest rates on our credit facilities and higher borrowings on our revolving credit facility. Income tax expense increased $7.9 million resulting from ownership changes following secondary equity offering and Class B Unit repurchase transactions. As a result, consolidated net income increased $12.4 million and Adjusted EBITDA increased $29.7 million for the second quarter of 2024 compared with the second quarter of 2023.

Previous wording

Throughput volumes increased 16% for gas gathering and gas processing in the first quarter of 2024 compared with the first quarter of 2023, primarily due to higher production, including third-party volumes, and higher gas capture. Throughput volumes increased 14% for crude oil gathering and 13% for terminaling in the first quarter of 2024 compared with the first quarter of 2023, primarily due to higher production and higher third-party volumes. Water gathering volumes increased 47%, reflecting higher crude oil production and increased utilization of our water gathering infrastructure.

Current wording

Throughput volumes increased 19% for gas gathering and 17% for gas processing in the second quarter of 2024 compared with the second quarter of 2023, primarily due to higher production and higher gas capture. Throughput volumes increased 23% for crude oil gathering and 17% for terminaling in the second quarter of 2024 compared with the second quarter of 2023, primarily due to higher production. Water gathering volumes increased 43%, reflecting higher crude oil production and increased utilization of our water gathering infrastructure.

Previous wording

Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and our proportional share of depreciation of our equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non‑cash and non‑recurring items, if applicable. We use Adjusted EBITDA to analyze our performance and liquidity.

Current wording

Adjusted EBITDA. We previously reported the non-GAAP measure of “Adjusted EBITDA,” which we defined as reported net income (loss) before net interest expense, income tax expense, depreciation and amortization and our proportional share of depreciation of our equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non-cash and non-recurring items, if applicable. As this definition varied from other definitions of Adjusted EBITDA, we determined it was appropriate to discontinue reporting Adjusted EBITDA as previously defined. Beginning with the second quarter of 2024, and as presented in this report, “Adjusted EBITDA” is defined as reported net income (loss) before net interest expense, income tax expense (benefit), 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 transaction costs, other income and other non‑cash and non‑recurring items, if applicable. Prior period calculations of Adjusted EBITDA have been recast to conform to the new presentation, as applicable. We use Adjusted EBITDA to analyze our performance and liquidity.

Previous wording

Operating and maintenance expenses increased $7.9 million, of which $4.0 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees, $2.9 million is attributable to compressor stations overhauls and other maintenance activities, and $1.0 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements. Depreciation expense increased $2.0 million due to new compressors and other new gathering assets brought into service.

Current wording

Operating and maintenance expenses increased $7.0 million, of which $3.4 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees, $2.3 million is attributable to compressor stations overhauls and other maintenance activities, and $1.3 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements. Depreciation expense increased $3.3 million due to new compressors and other new gathering assets brought into service.

Previous wording

Operating and maintenance expenses increased $5.0 million, of which $2.6 million is attributable to higher maintenance activity, $1.8 million is attributable to higher third-party processing fees, and $0.6 million is attributable to all other costs.

Current wording

Operating and maintenance expenses increased $3.5 million, of which $3.0 million is attributable to higher third-party processing fees and $1.0 million is attributable to higher maintenance activity, slightly offset by $0.5 million attributable to lower pass-through costs.

Previous wording

Income from equity investments increased $1.1 million in the first quarter of 2024 compared to the first quarter of 2023 primarily due to higher volumes processed at the LM4 plant.

Current wording

Income from equity investments increased $2.0 million in the second quarter of 2024 compared to the second quarter of 2023 primarily due to higher volumes processed at the LM4 plant.

Previous wording

Revenues and other income increased $2.5 million in the first quarter of 2024 compared to the first quarter of 2023, of which $2.1 million is attributable to higher crude oil terminaling volumes that were above MVCs in the first quarter of 2024 and above MVC levels of the first quarter of 2023, and $2.1 million is primarily attributable to pass-through revenue. These revenue increases were partially offset by $1.7 million attributable to lower tariff rates.

Current wording

Revenues and other income increased $3.8 million in the second quarter of 2024 compared to the second quarter of 2023, of which $3.5 million is attributable to higher crude oil terminaling volumes that were above MVCs in the second quarter of 2024 and above MVC levels of the second quarter of 2023, $1.6 million is attributable to pass-through revenue, and $0.4 million is attributable to other income. These revenue increases were partially offset by $1.7 million attributable to lower tariff rates.

Previous wording

Operating and maintenance expenses increased $2.7 million in the first quarter of 2024 compared to the first quarter of 2023, of which $1.8 million is attributable to rail transportation pass-through costs and $0.9 million is attributable to other maintenance expenses.

Current wording

Operating and maintenance expenses increased $3.9 million in the second quarter of 2024 compared to the second quarter of 2023, of which $2.3 million is primarily attributable to the rail car recertification program and $1.6 million is attributable to rail transportation pass-through costs.

Previous wording

Revenues and other income increased $23.4 million in the first quarter of 2024 compared to the first quarter of 2023, of which $14.2 million is attributable to higher gas gathering volumes that were above MVCs in the first quarter of 2024 and 2023, $6.0 million is attributable to higher water gathering and disposal revenue, $4.0 million is attributable to higher pass‑through revenue, and $2.5 million is attributable to higher crude oil gathering volumes that were above MVCs in the first quarter of 2024 and above MVC levels of the first quarter of 2023. Additionally, $1.2 million of the increase is attributable to services provided directly to third parties. These revenue increases were partially offset by $4.5 million attributable to lower crude oil tariff rates.

Current wording

Revenues and other income increased $44.4 million in the first six months of 2024 compared to the first six months of 2023, of which $31.6 million is attributable to higher gas gathering volumes that were above MVCs in the first six months of 2024 and 2023, $12.2 million is attributable to higher water gathering and disposal revenue, $7.4 million is attributable to higher crude oil gathering volumes that were above MVCs in the first six months of 2024 and above MVC levels of the first six months of 2023, and another $7.4 million is attributable to higher pass‑through revenue. Additionally, $2.6 million of the increase is attributable to services provided directly to third parties. These revenue increases were partially offset by $16.8 million primarily attributable to lower crude oil tariff rates.

Previous wording

Revenues and other income increased $24.7 million in the first quarter of 2024 compared to the first quarter of 2023, of which $14.3 million is attributable to higher gas processing volumes that were above MVCs in the first quarter of 2024 and 2023, $7.4 million is attributable to higher tariff rates, and $3.0 million is primarily attributable to services provided directly to third parties.

Current wording

Revenues and other income increased $41.4 million in the first six months of 2024 compared to the first six months of 2023, of which $29.4 million is attributable to higher gas processing volumes that were above MVCs in the first six months of 2024 and 2023, $6.4 million is attributable to higher tariff rates, and $6.2 million is attributable to services provided directly to third parties, slightly offset by $0.6 million lower pass-through revenue.

Previous wording

Interest expense, net of interest income, increased $6.9 million in the first quarter of 2024 compared to the first quarter of 2023, primarily attributable to higher interest rates on our credit facilities and higher borrowings on our revolving credit facility. Income tax expense increased $7.8 million in the same period driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2023 and 2024.

Current wording

Interest expense, net of interest income, increased $12.8 million in the first six months of 2024 compared to the first six months of 2023, of which $8.7 million is attributable to higher interest rates on our credit facilities and higher borrowings on our revolving credit facility and $4.9 million is attributable to the new $600.0 million 6.500% fixed-rate senior unsecured notes issued during the second quarter of 2024, partially offset by $0.8 million interest income. Income tax expense increased $15.7 million in the same period driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2023 and 2024.

Previous wording

Our partnership agreement requires that we distribute all of our available cash, as defined in the agreement, to our shareholders. On April 22, 2024, we declared a quarterly cash distribution of $0.6516 per Class A Share, to be paid on May 14, 2024 to shareholders of record on May 2, 2024. Simultaneously, the Partnership will make a distribution of $0.6516 per Class B Unit of the Partnership to the Sponsors.

Current wording

Our partnership agreement requires that we distribute all of our available cash, as defined in the agreement, to our shareholders. On July 29, 2024, we declared a quarterly cash distribution of $0.6677 per Class A Share, to be paid on August 14, 2024 to shareholders of record on August 8, 2024. Simultaneously, the Partnership will make a distribution of $0.6677 per Class B Unit of the Partnership to the Sponsors.

Previous wording

As of March 31, 2024, the Partnership had $1.4 billion senior secured credit facilities (the “Credit Facilities”) consisting of a $1.0 billion 5-year revolving credit facility and a $400.0 million 5‑year Term Loan A facility. The Credit Facilities mature in July 2027. Facility fees accrue on the total capacity of the revolving credit facility. Borrowings under the 5-year Term Loan A facility generally bear interest at Secured Overnight Financing Rate (”SOFR”) plus the applicable margin ranging from 1.65% to 2.55%, while the applicable margin for the 5‑year syndicated revolving credit facility ranges from 1.375% to 2.050%. Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. As of March 31, 2024, borrowings of $455.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $395.0 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.

Current wording

As of June 30, 2024, the Partnership had $1.4 billion senior secured credit facilities (the “Credit Facilities”) consisting of a $1.0 billion 5-year revolving credit facility and a $400.0 million 5‑year Term Loan A facility. The Credit Facilities mature in July 2027. Facility fees accrue on the total capacity of the revolving credit facility. Borrowings under the 5-year Term Loan A facility generally bear interest at Secured Overnight Financing Rate (“SOFR”) plus the applicable margin ranging from 1.65% to 2.55%, while the applicable margin for the 5‑year syndicated revolving credit facility ranges from 1.375% to 2.050%. Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. As of June 30, 2024, there were no borrowings outstanding under the Partnership’s revolving credit facility, and borrowings of $392.5 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.

Previous wording

Operating Activities. Net cash provided by operating activities decreased $13.4 million for the three months ended March 31, 2024, compared to the same period in 2023. The change in operating cash flows resulted primarily from an increase in cash used by changes in working capital of $42.9 million, an increase in expenses, other than depreciation and other non-cash gains and losses of $22.0 million, partially offset by an increase in revenue and other income of $50.6 million and an increase in distributions received from equity investments of $0.9 million.

Current wording

Operating Activities. Net cash provided by operating activities increased $53.6 million for the six months ended June 30, 2024, compared to the same period in 2023. The change in operating cash flows resulted primarily from an increase in revenues and other income of $92.1 million, an increase in distributions received from equity investments of $3.0 million, a decrease in cash used by changes in working capital of $0.4 million, partially offset by an increase in expenses, other than depreciation, amortization, equity-based compensation and other non-cash gains and losses of $41.9 million.

Previous wording

Investing Activities. Net cash used in investing activities decreased $9.5 million for the three months ended March 31, 2024, compared to the same period in 2023 driven by lower payments for additions to property, plant, and equipment.

Current wording

Investing Activities. Net cash used in investing activities increased $11.4 million for the six months ended June 30, 2024, compared to the same period in 2023 driven by higher payments for additions to property, plant, and equipment primarily related to our compression capacity and related infrastructure expansion program.

Previous wording

Capital expenditures in 2024 are primarily attributable to continued expansion of our compression capacity and gas capture capabilities to meet Hess’ and third parties’ current and future production growth and gas capture targets. The activities focus on the construction of two new compressor stations and associated pipeline infrastructure, which are expected to be placed in service in 2025. Capital expenditures in 2023 were also attributable to continued expansion of our compression capacity.

Current wording

Capital expenditures in 2024 are primarily attributable to continued expansion of our compression capacity and gas capture capabilities and related infrastructure to meet Hess’ and third parties’ current and future production growth and gas capture targets. The activities focus on the construction of two new compressor stations and associated pipeline infrastructure, which are expected to be placed in service in 2025. Capital expenditures in 2023 were also attributable to continued expansion of our compression capacity and related infrastructure.

Previous wording

customer, shareholder, regulatory and other stakeholder approvals and support, or unexpected future capital expenditures;

Current wording

customer, regulatory and other stakeholder approvals and support, or unexpected future capital expenditures;