Hess Midstream's Q2 call drew analysts from Goldman Sachs and Citigroup. The focus was Bakken volumes and gas capture. The outlook sets the tone for the midstream sector.
Hess Midstream LP (HESM) held its second-quarter earnings call Monday. The session drew analysts from Goldman Sachs and Citigroup. CEO Jonathan Stein and CFO Mike Chadwick presented the results.
The company's assets are tied directly to Hess Corp. production in the Bakken basin. Any slowdown in drilling activity in North Dakota hits throughput. Gas capture is a second risk. State flaring rules are strict. Hess Midstream needs steady investment in gathering and processing to stay compliant.
The second half of the year brings a catalyst: the resolution of contract rollovers with Hess Corp. The fee structure and volume dedications, analysts said, are the key variables. Fee-based contracts provide a floor. Volume risk is the primary variable.
The broader commodity backdrop supports the basin. crude oil profile prices near $70 support Bakken economics. A sustained drop below $65 a barrel would test the basin's drill-bit returns, the analysts said.
The company's earnings release spelled out the second-quarter numbers. The call itself focused on the outlook for the rest of the year. commodities analysis from the sector shows midstream companies are valued on free cash flow yield.
The sell-side questions tracked volume growth and capital spending. The capital return plan is a central part of the investment thesis. For the analysts covering the name, the payout ratio and distribution growth are the key metrics.
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