Hess Midstream LP

Good day, ladies and gentlemen, and welcome to the first quarter 2022 HES Midstream Conference Call. My name is Livia, and I will be your operator for today. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session. If at any time you require operator 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, Olivia. Good afternoon, everyone, and thank you for participating in our first quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hessmidstream.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 first quarter 2022 conference call. Today, Jonathan and I will review the highlights from our recent transactions as we continue to execute our financial strategy to return additional capital to shareholders. I will also discuss our operating performance, progress of our capital program, and review HES Corporation's results and outlook for the Bakken. Jonathan will then review our financial results and guidance. We recently delivered several positive announcements for HES Midstream. In early April, we completed a $400 million unit repurchase from our sponsors. The repurchase provided significant and immediate accretion to our shareholders while optimizing our capital structure to a conservative three times adjusted EBITDA leverage target on a full year 2022 basis. In addition, earlier this week, we announced a 5% increase in our distribution per share level relative to the previous target, using our financial flexibility to return free cash flow to shareholders on an ongoing basis while maintaining a conservative distribution coverage ratio of at least 1.5 times in 2022. With the announcements, we again demonstrate our financial strength and commitment to consistent and ongoing return of capital to our shareholders. Now turning to HES Midstream Operations. In the first quarter, throughput volumes averaged 316 million cubic foot per day for gas processing, 108,000 barrels of oil per day for crude terminaling, and 72,000 barrels of water per day for water gathering, reflecting impacts from severe winter weather. As physical volumes were expected to be at or below MVC levels, there was no material impact to our first quarter financial results. Now turning to HESS upstream highlights. Earlier today, HESS reported first quarter results with Bakken net production averaging 152,000 barrels of oil equipment per day, reflecting impacts of severe winter weather. Poor weather conditions, which continued into April, are transitory, and HESS expects to recover and resume normal operations over the balance of the second quarter. Reflecting weather impacts, HESS forecasts Bakken net production will average between 140 and 145,000 barrels of oil equipment per day in the second quarter, and they expect to come in near the low end of their full year 2022 guidance range of 160 to 165,000 barrels of oil equipment per day. HESS's well results remain strong, with IP180s and EURs largely in line or better than expected, and HESS anticipates production to build in the second half of the year. reaching an average of between 175 and 180,000 barrels of oil equipment per day in the fourth quarter. HESS is currently operating a three-rig program in the Bakken and is giving strong consideration to adding a fourth rig later this year. A four-rig program would accelerate HESS's production ramp to approximately 200,000 barrels of oil equipment per day and drive material growth through HESS midstream infrastructure. Turning to HESS midstream guidance, which was included in this morning's earnings release and is available on our website. We're reaffirming our previously announced throughput guidance for full year 2022, despite the severe weather that impacted basin operations over the last two weeks. We expect second quarter gas, oil, and water volumes to be approximately 5% lower compared to first quarter. In the second half of 2022, we anticipate significant organic volume growth on our systems as HESS plans to bring 54 new wells online compared to 31 wells in the first half. For full year 2022, we expect gas processing volumes to average between 330 and 345 million cubic foot per day. Additionally, we expect crude terminaling volumes to average between 110 and 115,000 barrels of oil per day and water gathering volumes to average between 70 and 75,000 barrels of water per day. We expect physical volumes to remain at or below MVC levels in 2022, providing approximately 95 percent revenue protection to our forecast, giving a high degree of confidence to our financial guidance, which continues to project adjusted EBITDA in the range of $970 million to $1 billion. Looking beyond 2022, we expect physical volumes to rise above MVCs in 2023 and continue to grow into 2024. Turning to HESS Midstream's 2022 capital program, we're making excellent progress on executing our capital plans with activities primarily focused on expanding our gas capture capacity and supporting HESS's development in the basin. In the first quarter, we brought online the first of two new compressor stations planned this year. The project was completed ahead of schedule and below budget. Construction is progressing well on the second station, which we expect to bring online in the third quarter. 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. As previously announced, we expect to initiate construction on a third compressor station in 2022, which is expected to provide an additional 65 million cubic foot per day of installed capacity in 2023. further enhancing our gas capture capability and supporting HES's pace of development. Full year 2022 capital expenditures remain unchanged and are expected to total $235 million, comprised of $225 million of expansion activity and $10 million of maintenance activity. Leveraging our unique integrated development planning process with HES and a phased infrastructure execution approach, we are well positioned to accommodate an acceleration of HESA's development activity. The infrastructure is already considered in our plan and supports the volume projections implied in our 2024 MVCs. And finally, we're proud to have achieved a significant milestone in the first quarter with the publication of our inaugural 2020 sustainability report detailing our environmental, social, and governance strategy and performance. Sustainable and Responsible operations are the foundation of our business and creates value for the benefit of all stakeholders, shareholders, business partners, and the communities where we operate. HESS Midstream is aligned and supports HESS Corporation's aim to help the world's growing energy needs while reducing emissions. We support HESS's greenhouse gas emissions reduction efforts by providing the infrastructure to move natural gas to market and reduce total flaring. and equally important, take action to reduce HESS Midstream's GHG emissions, which are included in HESS's overall emissions footprint. In summary, we continue to execute our strategy, making focused, low-risk infrastructure investments to meet 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.