Hess Midstream LP

Hess Midstream LP (NYSE: HESM) is a fee-based midstream company, which owns, operates, develops and acquires a diverse set of midstream assets to provide services to Hess and third-party customers. The Company owns oil, gas and produced water handling assets that are primarily located in the Bakken and Three Forks Shale plays in the Williston Basin area of North Dakota.

Recent Business Highlights

• Third Quarter 2023 Achievements and Financial Highlights: In the third quarter of 2023, Hess Midstream LP experienced notable achievements and financial highlights. A significant event was the successful completion of a USD 100 million repurchase of Class B units of Hess Midstream Operations LP in September, marking the third repurchase transaction during the year. Additionally, a 2.7% increase in the quarterly cash distribution per Class A share for the third quarter compared to the second quarter of 2023 was achieved. This increase included a 1.5% rise in the distribution level per Class A share and a quarterly 1.2% increase per Class A share, aligning with the goal of achieving at least 5% annual growth in distributions per Class A share through 2025.
• Robust Financial Performance in Q3 2023: The financial performance for the third quarter demonstrated strength, with net income reaching USD 164.8 million and net cash provided by operating activities totaling USD 215.5 million. Net income attributable to Hess Midstream LP was USD 35.3 million, reflecting USD 0.57 basic earnings per Class A share after accounting for noncontrolling interests. Key financial metrics, including Adjusted EBITDA, Distributable Cash Flow, and Adjusted Free Cash Flow, showed positive results, reaching values of USD 271.0 million, USD 224.1 million, and USD 162.7 million, respectively.
• Operational Growth Metrics: Operational metrics indicated growth, with throughput volumes experiencing increases in gas gathering (9%), gas processing (9%), terminaling (17%), and water gathering (19%) compared to the previous year's quarter. These improvements were attributed to increased Hess drilling activity, higher gas capture, and elevated third-party volumes.
• Updated Guidance and Future Focus: Looking ahead, Hess Midstream LP adjusted its full-year 2023 guidance for gas gathering and gas processing throughput volumes, raising expectations based on strong year-to-date operational performance. The updated guidance for net income and Adjusted EBITDA for the full year 2023 is approximately USD 615 million and USD 1,030 million, respectively. The company remains committed to achieving at least 5% annual distribution growth per Class A share through 2025, supported by established minimum volume commitments (MVCs). Hess Midstream LP also maintains a focus on financial strength, targeting a long-term leverage of 3x Adjusted EBITDA.
• Future Expectations and Financial Flexibility: In terms of future expectations, Hess Midstream LP anticipates organic throughput volume growth across all systems for 2024 and 2025 relative to the 2023 volume guidance. The company emphasizes its financial flexibility, expecting to maintain over USD 1 billion of financial flexibility through 2025 to support its return of capital framework.
• Chevron Acquisition Announcement: A recent significant development is the announcement of an acquisition agreement with Chevron Corporation. Upon completion of the proposed transaction, Chevron will acquire Hess' 37.8% ownership in Hess Midstream, including the right to appoint four directors to the Board of Hess Midstream. Despite this acquisition, Hess Midstream's contract structure will remain unchanged. The company plans to set its MVCs and rates in January 2024, based on Hess' current 4-rig program in the Bakken, consistent with prior practices.

Technical Observation (on the daily chart)

Presently, the stock has given a return of approximately 17.62% since reaching its lowest point in the past 52 weeks, which occurred on May 31, 2023. The Relative Strength Index (RSI) over a 14-day period stands at 53.13, indicating a state of potential consolidation. The price is currently near its 52-week high price of USD 33.32, with an expectation of a breakout above and decent momentum if the high is broken. Additionally, the stock's current positioning is above both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term support levels. A breakout in any direction from the consolidation range of USD 30.00-USD 33.00, will decide the further trend’s direction in the medium ter

As per the above-mentioned price action, momentum in the stock over the last month, and technical indicators analysis, a ‘WATCH’ rating has been given to Hess Midstream LP (NYSE: HESM) at the current market price of USD 31.60 as of January 05, 2024, at 07:10 am PST. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is January 05, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’