Hess Midstream LP

Good day, ladies and gentlemen, and welcome to the second quarter 2023 HESS Midstream Conference Call. My name is Gigi, and I'll be your operator for today. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's 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, Gigi. Good afternoon, everyone, and thank you for participating in our second 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 HESS 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. I'll now turn the call over to John Gatling.

Thanks, Jennifer. Good afternoon, everyone, and welcome to HESS Midstream's second quarter 2023 conference call. Today I'll discuss our second quarter performance, demonstrating continued focus on the safe execution of our operational strategy and our financial priorities, including returning capital to our shareholders. I will also review HESS Corporation's results and outlook for the Bakken. Jonathan will then review our financial results and guidance. In the second quarter, we continued to grow our business in a safe, efficient, and cost-effective manner, which has enabled us to increase our 2023 gas processing and gathering throughput volume to guidance. Additionally, in the second quarter, we executed another accretive share buyback and increased our distribution level for the second time this year. We remain focused on executing our strategy, which positions us for further anticipated growth in throughput volumes, net income, and adjusted EBITDA through 2025. Now turning to HESS Midstream's operations. In the second quarter, throughput volumes averaged 358 million cubic foot per day for gas processing, 108,000 barrels of oil per day for crude terminaling, and 87,000 barrels of water per day for water gathering. Gas processing throughputs increased by 6% from the first quarter, mainly driven by the number of wells brought online by HESS, and continued increase in gas capture. Now turning to HESS upstream highlights. Earlier today, HESS reported strong second quarter results with the Bakken net production averaging 181,000 barrels of oil equipment per day, which was above their guidance range of 165 to 170,000 barrels of oil equipment per day. Approximately half of the increase was due to the strong operational and development performance and the remainder from higher production entitlements under HESS's percentage of proceeds or POP contracts. As a reminder, POP volumes do not impact HESS Midstream's throughput volumes or revenues. HESS anticipates Bakken net production will increase to approximately 185,000 barrels of oil equipment per day in the third quarter, and as a result of expected continued strong performance, raise their full year 2023 Bakken net production guidance by 10,000 barrels of oil equipment per day to 175 to 180,000 barrels of oil equipment per day. HESS plans to continue to operate a four-rig drilling program and bring approximately 110 wells online in 2023. Furthermore, HESS continues to forecast Bakken net production to grow to an average of approximately 200,000 barrels of oil equipment per day in 2025, which implies approximately 10% annualized growth rate in throughput volumes across all HESS midstream systems from 2023 to 2025. Additionally, HESS expects to hold production at approximately 200,000 barrels of olecum per day for nearly a decade. Turning to HESS midstream guidance, which was included in our earnings release this morning. With HESS's Bakken production guidance increase and our continued gas capture success, we're raising our gas processing and gathering throughput volume guidance for full year 2023. which implies approximately 8% growth at the midpoint for the second half of the year. Now turning to our 2023 capital program. We continue to make excellent progress on our 2023 capital plans and are focused on supporting HESS and third-party development in the basin. We have an active maintenance program in the third quarter, including seasonally scheduled maintenance at several of our compressor stations. In addition, construction continues to progress on schedule for two new compressor stations and associated infrastructure that when brought online later this year will increase our gas gathering and throughput capacity by approximately 100 million cubic foot per day. For full year 2023, capital expenditures remain unchanged and are expected to total $225 million, which is comprised of $210 million of expansion activity and $15 million of maintenance activity. In summary, we remain focused on safe, reliable, and efficient operating performance and project delivery that continues to drive increased volumes through our systems, which in turn has enabled us to increase our 2023 volumes guidance. Additionally, we continue to anticipate substantial throughput volume growth through 2025, which is expected to result in sustainable excess cash flow generation and potential to return additional capital to our shareholders. I'll now turn the call over to Jonathan to review our financial results and guidance.