Hess Midstream LP (HESM): History, Ownership, Mission, How It Works & Makes Money

Ever wonder how Hess Midstream LP (HESM) solidified its crucial role within the Bakken shale's complex energy infrastructure network? This fee-based master limited partnership, specializing in natural gas processing, crude oil gathering, and terminaling services, showcased significant financial strength through 2024, reporting impressive adjusted EBITDA figures exceeding $1.1 billion and demonstrating consistent throughput volumes. With distributable cash flow surpassing $900 million, enabling targeted distribution growth around 5% for its unitholders in 2024, understanding the foundation of its operations and business model is key. Are you prepared to explore the history, ownership structure, and revenue generation mechanisms that underpin HESM's market position?

Hess Midstream LP (HESM) History

Hess Midstream's Founding Timeline

The foundation for Hess Midstream LP was laid through a strategic partnership designed to optimize midstream assets primarily serving the Bakken Shale formation.

Year established

2014: Formed as Hess Midstream Partners LP, a joint venture between Hess Corporation (NYSE: HES) and Global Infrastructure Partners (GIP), a leading global independent infrastructure fund manager.

Original location

Operations are centered in North Dakota, specifically supporting Hess Corporation's significant upstream activities in the Bakken Shale play.

Founding team members

The entity was established by its sponsors, Hess Corporation and Global Infrastructure Partners. Day-to-day leadership comprises executives appointed by the sponsors.

Initial capital/funding

Funded through the initial contribution of Hess Corporation's existing Bakken midstream assets and capital commitments from both Hess Corporation and GIP.

Hess Midstream's Evolution Milestones

From its inception as a private joint venture, Hess Midstream has undergone significant structural and operational evolution.

Hess Midstream's Transformative Moments

Several key decisions fundamentally shaped Hess Midstream's path.

Strategic Joint Venture Formation

The initial 2014 decision by Hess Corporation and Global Infrastructure Partners to combine Hess's Bakken midstream assets with GIP's financial and operational expertise created a powerful, focused midstream entity from the start. This structure provided dedicated capital and strategic alignment for infrastructure development.

Transition to Public Markets

The 2017 IPO marked a significant shift, granting Hess Midstream access to public equity markets. This move facilitated broader investor participation and provided a new avenue for funding growth projects beyond sponsor contributions, enhancing financial flexibility.

Corporate Simplification

The 2019 restructuring was pivotal. By consolidating assets and adopting the Up-C structure, Hess Midstream simplified its organization, eliminated incentive distribution rights (IDRs), and improved transparency for investors. This strategic financial maneuvering is crucial for evaluating the company's performance. Breaking Down Hess Midstream LP (HESM) Financial Health: Key Insights for Investors offers more detail on its financial structure and health following these changes.

Hess Midstream LP (HESM) Ownership Structure

Hess Midstream LP operates under a partnership structure, primarily controlled by its sponsors, Hess Corporation and Global Infrastructure Partners (GIP), alongside public unitholders.

Hess Midstream LP's Current Status

As of the end of fiscal year 2024, Hess Midstream LP is a publicly traded master limited partnership (MLP). Its Class A shares are listed on the New York Stock Exchange under the ticker symbol HESM.

Hess Midstream LP's Ownership Breakdown

The ownership is primarily divided between the joint venture of Hess Corporation and Global Infrastructure Partners (who control the General Partner and hold a majority economic interest) and public unitholders holding Class A shares. This structure significantly influences the company's strategic direction and governance, impacting everything from operational decisions to its overarching Mission Statement, Vision, & Core Values of Hess Midstream LP (HESM).

Hess Midstream LP's Leadership

The leadership team, responsible for executing the company's strategy and managing operations as of the end of 2024, includes experienced executives from both the energy and finance sectors. Key figures guiding the partnership include:

• John B. Hess: Chairman of the Board of Directors of the General Partner
• Jonathan C. Stein: Chief Executive Officer and Chief Financial Officer

This leadership structure ensures alignment between the sponsors' objectives and the partnership's operational execution.

Hess Midstream LP (HESM) Mission and Values

Hess Midstream LP operates with a clear purpose centered on operational excellence and responsibility, guided by core values inherited from its affiliation with Hess Corporation.

Hess Midstream's Core Purpose

The company's fundamental reason for being revolves around the efficient and safe management of midstream energy infrastructure.

Official mission statement

While a distinct, publicly stated mission statement specifically for Hess Midstream LP isn't readily available separate from Hess Corporation, its operational focus implies a mission centered on being a premier provider of midstream services, particularly supporting the Bakken Shale play development. Its actions align with Hess Corporation's broader purpose: to be the world’s most trusted energy partner. You can explore more about the Mission Statement, Vision, & Core Values of Hess Midstream LP (HESM).

Vision statement

A specific vision statement for Hess Midstream LP distinct from Hess Corporation is not prominently articulated publicly. However, its strategic actions, like the consistent return of capital to shareholders and focus on infrastructure expansion in the Bakken, suggest a vision focused on sustainable growth and leadership within its specific operational niche.

Company slogan

Hess Midstream LP does not appear to utilize a unique public slogan separate from Hess Corporation.

Guiding Principles and Values

Operations and corporate culture are guided by the established Hess Values, which emphasize:

• Integrity: Conducting business ethically and transparently.
• Performance: Achieving superior results through operational excellence and continuous improvement.
• Value: Creating long-term value for unitholders, customers, and communities.
• Social Responsibility: Prioritizing safety, environmental stewardship, and community engagement.
• Independent Spirit: Fostering innovation and agility.
• People: Respecting and developing its workforce.

These values underpin the company's commitment to safe, reliable operations and responsible resource management, crucial in the capital-intensive midstream sector.

Hess Midstream LP (HESM) How It Works

Hess Midstream LP operates primarily as a fee-based, growth-oriented midstream company, owning and operating infrastructure crucial for gathering, processing, and transporting crude oil, natural gas, and natural gas liquids (NGLs) mainly for Hess Corporation and other third-party producers in the Bakken Shale play of North Dakota. Its revenue generation relies heavily on long-term contracts with minimum volume commitments, providing stable cash flows.

Hess Midstream LP's Product/Service Portfolio

Hess Midstream LP's Operational Framework

The company's operations form an integrated system supporting upstream production. It starts with gathering crude oil and natural gas directly from wellheads via dedicated pipeline systems. Natural gas is transported to the Tioga Gas Plant for processing, where NGLs are removed and residue gas is treated for sale. Crude oil is gathered, stored at terminal facilities, and then delivered to downstream markets via pipeline or rail. Produced water is also collected and managed. This entire process is underpinned by long-term, fee-based commercial agreements, primarily with Hess Corporation, which include minimum volume commitments (MVCs) and annual tariff rate redeterminations, insulating HESM significantly from direct commodity price volatility. These contracts, running through 2033, ensure predictable revenue streams based on the volumes handled, processed, or stored.

Hess Midstream LP's Strategic Advantages

Hess Midstream possesses several key advantages that solidify its market position and financial performance as of 2024.

• Sponsor Relationship: Its primary strategic advantage stems from its relationship with Hess Corporation, providing a stable anchor customer with significant production volumes in the Bakken through long-term contracts extending to 2033.
• Integrated Asset Base: The company operates a comprehensive and strategically located network of gathering pipelines, processing facilities, and terminal infrastructure in the core of the Bakken, allowing for efficient end-to-end service.
• Fee-Based Model: Over 95% of its revenue is typically derived from fee-based contracts with MVCs, minimizing exposure to commodity price fluctuations and ensuring cash flow stability. This structure is often attractive to certain types of buyers, as detailed in Exploring Hess Midstream LP (HESM) Investor Profile: Who’s Buying and Why?
• Modern Infrastructure: Significant investments have resulted in a modern, scalable, and efficient asset base capable of handling current and future production growth from Hess and third parties.
• Operational Control: HESM operates its assets, allowing for greater control over costs, efficiency, and service quality compared to relying on third-party operators.

Hess Midstream LP (HESM) How It Makes Money

Hess Midstream LP generates revenue primarily through long-term, fee-based agreements for gathering, processing, storing, and transporting crude oil, natural gas, and natural gas liquids (NGLs) produced primarily by Hess Corporation in the Bakken Shale. Its income is largely tied to the volumes handled rather than the fluctuating prices of the commodities themselves.

Hess Midstream LP's Revenue Breakdown

Hess Midstream LP's Business Economics

The core of HESM's business model relies on fee-based contracts, many containing minimum volume commitments (MVCs). This structure provides significant revenue stability and predictability, insulating the partnership from direct exposure to volatile commodity prices. Hess Corporation, as the primary customer and parent entity, underpins a substantial portion of these contracted volumes, further reducing counterparty risk. Operating costs are primarily driven by maintenance, labor, and energy required to run the infrastructure. The focus is on maximizing throughput within existing capacity and selectively pursuing capital-efficient expansion projects aligned with Hess Corporation's production growth and third-party opportunities. You can learn more about the strategic direction by reviewing the Mission Statement, Vision, & Core Values of Hess Midstream LP (HESM).

• Revenue is secured via long-term, fee-based contracts.
• Minimum Volume Commitments (MVCs) offer downside protection.
• Primary costs include operational expenditures (OpEx) and maintenance capital.
• Growth is tied to volume throughput and strategic expansions.

Hess Midstream LP's Financial Performance

Key indicators reflect HESM's financial health and operational efficiency as of the end of fiscal year 2024. Adjusted EBITDA is projected to be approximately $1.10 billion to $1.15 billion, showcasing earnings power before interest, taxes, depreciation, and amortization. Distributable Cash Flow (DCF), a critical metric for MLPs indicating cash available for distributions, is anticipated to reach approximately $950 million to $1.0 billion. The partnership maintains a conservative leverage profile, targeting a Net Debt / Adjusted EBITDA ratio around 3.0x or lower, demonstrating prudent financial management. These figures highlight consistent cash flow generation supporting distributions and reinvestment.

Hess Midstream LP (HESM) Market Position & Future Outlook

Hess Midstream LP enters 2025 positioned as a critical infrastructure provider primarily focused on the Bakken Shale, benefiting from long-term contracts with Hess Corporation. Its future outlook hinges significantly on upstream activity levels in its core operating area and its ability to execute on expansion projects while navigating the evolving energy landscape.

Competitive Landscape

HESM operates within a competitive North American midstream sector, but its primary strength lies in its dedicated infrastructure supporting Hess Corporation's Bakken operations. While direct market share comparisons are complex due to differing asset bases and geographic focuses, HESM is a dominant player within its specific Bakken footprint.

Opportunities & Challenges

Navigating 2025 involves capitalizing on growth avenues while mitigating inherent sector risks.

Industry Position

Hess Midstream stands as a specialized, high-growth midstream entity predominantly serving Hess Corporation in the Bakken Shale. Its business model, anchored by fee-based contracts covering minimum volume commitments, provides significant revenue stability and insulation from direct commodity price swings. Based on 2024 performance, the company maintained strong operational results, generating adjusted EBITDA around $1.1 billion and progressing towards its long-term leverage target of approximately 3.0x Adjusted EBITDA. This financial discipline supports reliable distributions to unitholders. You can explore more details by Breaking Down Hess Midstream LP (HESM) Financial Health: Key Insights for Investors. Its strategic alignment with a major upstream producer in a core basin defines its niche within the broader energy infrastructure landscape.