Benzinga | Jan 25, 2022 08:19AM EST

Hess Midstream Sees FY22 Capital Expenditures ~$235M

* 2022 net income of $630--$660 million, Adjusted EBITDA1 of $970--$1,000million and Distributable Cash Flow1 of $840--$870million.

* 2022 capital expenditures expected to be approximately $235 million, focused on expansion of gas compression capacity and gathering system well connects to meet Hess Corporation's accelerated pace of development in the Bakken.

* Hess Midstream LP expects to generate Adjusted Free Cash Flow1 of approximately $615--645 million in 2022, more than sufficient to fully fund targeted distributions. In addition, Hess Midstream LP expects leverage to be approximately 2.6x Adjusted EBITDA on a full-year basis, which is expected to provide capital allocation flexibility in 2022.

* Completed annual tariff rate redetermination process and established minimum volume commitments ("MVCs") for 2024. MVCs for 2024 reflect expected organic throughput volume growth across all systems relative to 2022 volume guidance. MVCs for 2023 were generally revised higher, providing visibility of expected volume and revenue growth relative to 2022 MVC levels. Hess Midstream LP expects approximately 95% MVC revenue protection in 2022.

* Hess Midstream LP is extending its annual distribution per share growth target of 5% through 2024 with expected annual distribution coverage greater than 1.4x.

* Hess Midstream LP is extending its previously announced expectation of continued growth in Adjusted EBITDA through 2024 and continued Adjusted Free Cash Flow generation sufficient to fully fund growing distributions and provide capital allocation flexibility.

HOUSTON--(BUSINESS WIRE)-- Hess Midstream LP (NYSE:HESM) ("Hess Midstream") today provided 2022 guidance and announced its 2022 capital budget.

"We are poised for continued volume and Adjusted EBITDA growth after a strong finish to 2021. The tie-in of our newly expanded Tioga Gas Plant gives us the capacity to capture further volume growth and drive free cash flow, creating an opportunity to return additional capital to our shareholders," said John Gatling, President and Chief Operating Officer of Hess Midstream. "We remain focused on operational and commercial execution to capture increasing gas volumes, which are expected to increase by more than 30% by 2024 relative to 2021 based on Hess' current nominations."

(1) Adjusted EBITDA, Distributable Cash Flow and Adjusted Free Cash Flow are nonGAAP measures. Definitions and reconciliations of these nonGAAP measures to GAAP reporting measures appear in the following pages of this release.

Full Year 2022 Guidance

Hess Midstream's financial guidance incorporates the outcomes of the year-end tariff rate recalculation and nomination process conducted with Hess Corporation ("Hess") under Hess Midstream's commercial agreements with Hess.

Hess Midstream expects full year 2022 net income of between $630 million and $660 million and Adjusted EBITDA of between $970 million and $1,000 million. Hess Midstream expects full year 2022 Distributable Cash Flow to range between $840 million and $870 million, resulting in a distribution coverage ratio of greater than 1.5x.

In 2022, Hess Midstream expects to generate Adjusted Free Cash Flow of between $615 million and $645 million and approximately $90 million after funding distributions that are targeted to grow 5% per annum on a distribution per share basis. In addition, Hess Midstream expects leverage to be approximately 2.6x Adjusted EBITDA on a full year basis, which is expected to provide capital allocation flexibility.

Full year 2022 financial guidance includes approximately 95% MVC revenue, as Hess Midstream's physical volumes are generally expected to be at or below MVC levels.

In 2022, full year gas gathering volumes are anticipated to average 350 to 365 million cubic feet ("MMcf") of natural gas per day and gas processing volumes are expected to average 330 to 345 MMcf of natural gas per day, reflecting Hess' announced three-rig program in the Bakken.

Crude oil gathering volumes are anticipated to average 100 to 105 thousand barrels ("MBbl") per day of crude oil in 2022, and crude oil terminaling volumes are expected to average 110 to 115 MBbl of crude oil per day.

Water gathering volumes are expected to average 70 to 75 MBbl of water per day for full year 2022.

Full Year 2022 Capital Guidance

Hess Midstream expects 2022 capital expenditures of approximately $235 million, reflecting increased activity to meet Hess' accelerated pace of development in the Bakken. Approximately $225 million is allocated to expansion capital expenditures, with an estimated $10 million allocated to maintenance capital expenditures.

Approximately $135 million of the 2022 capital budget is allocated to gas compression, with activities focused on the completion of two new greenfield compressor stations and associated pipeline infrastructure, which are expected to provide, in aggregate, an additional 85 MMcf per day of gas compression capacity when brought online during the year. In addition, Hess Midstream expects to initiate construction on a third greenfield compressor station, which is expected to provide an additional 65 MMcf per day of gas compression capacity when brought online in 2023, further enhancing gas capture capability and supporting Hess' development in the basin. Reflecting increasing drilling activity by Hess, approximately $90 million is allocated to gathering system well connects to service Hess and thirdparty customers.