Hess Midstream LP

Good day, ladies and gentlemen, and welcome to the fourth quarter 2021 HESS Midstream conference call. My name is Michelle, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If at any time you require operator's assistance, please press star, followed by zero, and we will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Jennifer Gordon, Vice President of Investor Relations. Please proceed.

Thank you, Michelle. Good afternoon, everyone, and thank you for participating in our fourth quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hesmidstream.com. Today's conference call contains projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements. These risks include those set forth in the risk factors section of HES Midstream's filings with the SEC. Also on today's conference call, we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the earnings release. With me today are John Gatling, President and Chief Operating Officer, and Jonathan Stein, Chief Financial Officer. In case there are audio issues, we will be posting transcripts of each speaker's prepared remarks on www.hessmidstream.com following their presentation. I'll now turn the call over to John Gatling.

Thanks, Jennifer. Good afternoon, everyone, and welcome to HES Midstream's fourth quarter 2021 conference call. Today, I'll review our operating performance and highlights as we continue to execute our strategy, provide details regarding our 2022 plans, and discuss HES Corporation's latest results and outlook for the Bakken. Jonathan will then review our financial results. 2021 was a year of strong performance and strategic execution for HES Midstream. We're proud of our continued safe and reliable operating performance and project delivery, highlighted by the successful execution of the planned maintenance turnaround and tie-in of the gas processing expansion at the Tioga gas plant. Following the turnaround, stable and reliable operating performance in the fourth quarter enabled us to finish strong here with record gas gathering and processing volumes driving full-year adjusted EBITDA above guidance to $909 million. an increase of 21 percent compared to 2020, and 4 percent above the midpoint of our original 2021 adjusted EBITDA guidance. Looking forward, the continued investment in low-risk system expansion gives us the needed capacity to capture volume growth through mid-decade. We remain focused on operational, infrastructure, and commercial execution to capture increasing gas volume growth, which by 2024 is expected to increase by more than 30 percent relative to HESS's 2021 nomination. We expect gas gathering and processing volumes to continue to comprise approximately 75 percent of our revenues, and with a visible growth trajectory, we expect volumes to rise above MVCs in 2023 and continue to grow into 2024. Now focusing on HESS Midstream's fourth quarter 2021 throughput performance, gas processing volumes averaged 330 million cubic foot per day as our post turnaround ramp-up drove results above expectations. Fourth quarter crude terminaling and water gathering volumes averaged 113,000 barrels of oil per day and 72,000 barrels of water per day, respectively. Now turning to HESS upstream highlights. Earlier today, HESS reported fourth quarter results with Bakken net production averaging 159,000 barrels of oil equivalent per day, reflecting increased drilling activity, strong development performance, and continued focus on gas capture. For full year 2021, Bakken net production averaged 156,000 barrels of olecum per day in line with guidance. For 2022, Hess plans to operate a three-rig program and expects to drill approximately 90 gross operated wells and bringing on approximately 85 new wells, an increase of 67% compared to 2021. This leaves more than 2,000 future drilling locations beyond 2022, which generate attractive returns at $60 WTI per barrel and represents approximately 70 rig years of activity. In 2022, HESS forecasts Bakken net production to average between 165 and 170,000 barrels of oil equipment per day, a 6% to 9% increase over 2021, and expects production to steadily ramp over the year, and averaged between 175 and 180,000 barrels of oil a quim per day in the fourth quarter. Additionally, HEST reiterated its commitment to sustainability as a top priority, announced its endorsement of the World Bank's Zero Routine Flaring by 2030 initiative, and set company targets to eliminate zero routine flaring from its operations by the end of 2025. HEST Midstream is proud to partner with HEST to achieve its sustainability and climate goals. Turning to HESS midstream guidance, our complete financial and operational guidance was released yesterday and is available on our website. For full year 2022, we expect gas processing volumes to average between 330 and 345 million cubic foot per day, representing growth of approximately 11% compared to full year 2021, primarily driven by HESS's production growth and focused gas capture. Gas processing volumes are expected to remain generally at or below MVC levels in 2022, which are approximately 13% higher compared to 2021 physical volumes. For full year 2022, we anticipate crude terminaling volumes to average between 110 and 115,000 barrels of oil per day. Water gathering volumes to average between 70 and 75,000 barrels of water per day. As physical volumes on most of our systems are at or below MVC levels, our 2022 forecast is approximately 95% revenue protected, giving a high degree of confidence to our financial guidance, which projects adjusted EBITDA in the range of $970 million to $1 billion, an increase of approximately 8% at the midpoint compared to full year 2021. We expect first quarter physical gas, oil, and water volumes to each be approximately flat compared to fourth quarter 2021, reflecting severe winter weather in North Dakota. Turning to HES Midstream's 2022 capital program. Full year 2022 capital expenditures are expected to total $235 million, comprised of $225 million of expansion activity and $10 million of maintenance activity. Approximately $135 million of the 2022 capital expansion budget is focused on the completion of two new compressor stations and associated pipeline infrastructure. In aggregate, the new stations are expected to provide an additional 85 million cubic foot per day of installed capacity in 2022 and can be expanded up to 130 million cubic foot per day in the future. In addition, HESS Midstream expects to initiate construction on a third compressor station in 2022, which is expected to provide additional 65 million cubic foot per day of installed capacity in 2023, further enhancing our gas capture capability and supporting development in the basin. By the end of 2023, we will have more than doubled our compression capacity from a few years ago, growing it in line with HESS's drilling activity and our increased processing capacity. Reflecting increasing drilling activity by Hess, approximately $90 million is allocated to gathering system well connects. In summary, we're continuing to execute our strategy, making focused low-risk infrastructure investments to beat basin demands, delivering safe and reliable operating performance and strong financial results, which enables us to take advantage of future accretive growth opportunities, including potential incremental return of capital to our shareholders. I'll now turn the call over to Jonathan to review our financial results and guidance.