Good day, ladies and gentlemen and welcome to the Fourth Quarter 2017 Hess Midstream Partners Conference Call. My name is Ashley and I'll 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. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Jennifer Gordon, Director of Investor Relations. Please proceed.

Thank you, Ashley. Good afternoon, everyone and thank you for participating in our fourth quarter earnings conference call. Our earnings release was issued this afternoon 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, 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 fourth quarter conference call. I will review our operating performance and discuss some of the highlights and milestones we achieved in the fourth quarter and since our IPO last April. I will also discuss Hess's latest results and outlook for the Bakken where they hold an industry leading acreage position with more than 500,000 net acres in the core of the play and have announced the capacity to grow production to approximately 175,000 barrels of oil equivalent per day by 2021. Jonathan Stein will then review our financial results. As we close out 2017 and look to the year ahead we're building on a solid track record of project execution and strong operating performance. During 2017 we brought on line key strategic projects including the safe and successful start up of the Hawkeye Gas Facility, the Johnson's Corner Header System, and most recently the Hawkeye Oil Facility. These projects have increased our throughputs, customer optionality, and system connectivity. We've also recently executed a strategic gas processing joint venture with Targa Resources that will help support Hess's volume ramp and satisfy strong demand we see coming from the basin as production grows and operators comply with tighter flaring restrictions. We've also expanded our third party volumes from key producers and midstream providers. Approximately 30% of our gas volume come from third parties and 15% for oil which is up from 10% less than a year ago. This operating momentum is visible both near term in our 2018 throughput guidance where we're projecting double-digit percent increases compared to 2017 for all of our assets and longer-term with our updated minimum volume commitments. As demonstrated by our 2018 capital program we're committed to growing our asset base by supporting Hess's accelerated development program…

Thanks John and good afternoon everyone. As you heard from John we have built a strong foundation grounded in project execution and organic volume growth. Together with our disciplined financial strategy we can be confident in our ability to deliver our targeted annual 15% distribution per unit growth quarter-on-quarter not only in the short-term but on a long-term and consistent basis. Since our IPO we have delivered a disciplined and clear financial strategy that includes the following highlights. We have self funded our organic growth leaving our $300 million revolver undrawn to provide liquidity for future growth. We have delivered 15% annualized growth for two quarters with a coverage ratio of approximately 1.2 times. And we have demonstrated how our contract structures support stable and growing cash flows through our minimum volume commitments or MVCs that provides downside protection during periods of commodity price uncertainty. Looking forward our financial strategy will continue to support our growth targets and provide clear line of sight to our targeted 15% DPU growth. Our 2018 guidance including the result of the annual tariff redetermination process implies a 15% to 22% growth in consolidated EBITDA compared to 2017 highlighting the ability of our contracts to capture growth during a period of commodity price recovery and increasing rig activity. Under our current plan we expect that we will be able to deliver this growth organically with dropdowns complementing our growth beyond 2020 and primarily self funded including additional investments related to the new LM4 gas processing plant. Our contract structure is foundational to this growth and we are incorporating this strong venture -- this strong structure into our new ventures. The new gas processing joint venture with Targa is expected to be fully integrated into our existing contract structure including annual fee recalculations and MVCs. Structuring…

[Operator Instructions]. Our first question comes from Richard Roberts of Scotia. Your line is open.

Hey, good afternoon folks. I just want to start on the drop so I understand we shouldn't expecting any drops to Hess Midstream in the next year or two but what about asset sales from Hess Corp down to HIP, just I guess any thoughts there on potential timing or size of a transaction there and then if something were to occur there at the HIP level, just how you think about financing that Jonathan?

Okay, so we are actively as John mentioned and as I mentioned we're actively working on carve out and putting together businesses from Hess Midstream assets that's still up at Hess that includes of course the water gathering assets what we call well infrastructure as well as potentially Gulf of Mexico. We're actively working on all those and as we complete carving them out and working on value they would be brought down into HIP or into the Hess Midstream broadly. The simplest way for those assets to come into the Midstream family or structure would be to come into HIP. And then there would be some expectation that potentially that could lead to a drop down for Hess Midstream overtime. But of course there are multiple ways, that's the simplest way for assets to make their way but it will depend on the size of the asset and the like. We have of course multiple ways of capital structure both of HIP and at the Hess Midstream level to be able to fund those acquisitions.

And maybe just to build on that just for a second, just the assets we're talking about at Hess we're in the process of developing real businesses, new segments for us in the Midstream business. So when we think about the water business that's something that's new to what we're in -- we do now. We do oil and gas gathering, processing, terminaling, export, NGLs. We're talking about expanding to the water business. We're talking about expanding into the well facilities business which would be an extension of our gathering system and then Gulf of Mexico. So it's a matter of packaging and preparing it financially but it's also around setting up the business strategy around those segments of the business to make sure when they do go to have some structure partners and ultimately to have some that they're ready to kind of create that value for the unit holders.

Got it, thanks John. And then let me just switch over to the JV with Targa, can you talk a little bit about just how that JV came about? And then two when you talk about -- when you talk about it being integrated into your existing contract structure just to confirm that means long-term contracts, MVCs, annual fee redeterminations, etcetera?

Yeah, why don't I start with the first part of the -- the second part of your question first and then jump back to how the structure kind of came about. Yes, to answer your question the simple answer is yes, everything you said it would be integrated in with our existing contract structure and would benefit from all of the advantages that are our contract structure has in place. So it's a very strong support system just like we have with our existing contracts. As far as the relationship and how we actually develop the opportunity, I mean it was a matter of us looking at the basin, looking at what our footprint structure is, looking at where we believe the volume growth to be, and looking at partners that could potentially help us extend our system. And as we looked at the complementary assets that Targa Resources has available both on their gathering side and on the processing side it was just a natural fit for us. That's just the assets alone and then there's the kind of I guess the soft side as well around the quality of operator, the quality of designing and building gas processing, the capabilities that Targa brings it just felt like it was a good partnership between Hess Midstream and Targa Resources. We also see potential opportunities to look for other relationships with them as well. So, it's an exciting first opportunity for us and we look forward to working with them on bringing LM4 forward and also looking potentially at other opportunities as well.

If I could just add one thing on the context structure just for clarity because it's so new to us, so we will have -- there is really a single processing fee now. It will be very similar to what we have on the terminal side where we took all the capital and the volumes associated with the new plant and they went into the single calculation that we did for the tariff calculation for processing. And then we will receive that tariff whether it gets delivered north of TGP or south at LM4. So that means for example the MVCs that we put out include all the volumes associated with both the delivery to TGP as well as to LM4 in the future and then there will be a single fee associated with that and it will come to our revenues just like TGP will on an integrated basis.

And I guess just -- that's the contractual piece, that's actually a really good point but there's also the actual physical connection and it is very similar to the crude system. And that when you think about processing capacity in the basin this is an integrated system. So when we talk about TGP all the way down to Watford City in Little Missouri area where this gas plant is going to be located it is going to be essentially hydraulically all connected. And so when you start thinking about molecules flowing north and south it provides a tremendous amount of flexibility for us to deliver volumes to the north, to the south. It allows us as potentially we get to capacities in certain areas where they would be in the north and south that we have a way to actually send volumes to two other areas. So it gives us a lot of system flexibility so contractually, I think contractually it's almost exactly set up the way the physical assets will be connected as well.

Appreciate all the extra color there, thanks guys.

Our next question comes from Jeremy Tonet of J.P. Morgan. Your line is open.

Good afternoon. I just needed to touch base a little bit maybe on the cadence of how the year could progress here. Seems like in the Hess call Bakken production was noted to be 105,000 barrels a day and 115,000 to 120,000 barrels for 2018 average. So I'm just wondering is that kind of like -- should we look for a linear progression across the year or is there going to be any kind of lumpy the movements around the quarter, just trying to get a better feel for how that could all fall out?

Sure, I would say that generally speaking we were not anticipating any kind of major volatility from quarter-to-quarter. What I would say is and the thing that everybody has to be a little bit careful with when you're looking at Hess volumes, you are looking at Hess volumes, generally speaking it's their net volumes and their BOE. And as you know we have a substantial portion of our volumes that come into our system, our third party volumes. And we're also most concerned about gross volume so when we think about Hess we're thinking about Hess on a gross basis, Hess operated well on a gross basis. But we're also thinking about the total third party volumes that are coming into the system. So again we're not expecting any major volatility but depending on if there's operational offsets with third parties or what have you there could be a little bit of upswings but again I would say nothing that would -- nothing to material from that perspective.

Great, thanks for that. And then you mentioned a few times here as far as different businesses that could make their way down into the JV into the partnership overtime and just wondering what the appetite is or kind of expanding your value chain further downstream be it kind of more fractionation with the JV or basin takeaway on either NGLs or what have you. How far downstream could Hess then be as we look into the future?

Right, I mean I guess again we benefit from an extremely strong asset base. We benefit from an extremely strong growth profile both from our sponsor and also our third party, customers as well. So it allows us to be extremely selective in the investment opportunities we have but I mean as you say all of those opportunities are available to us and they're all things that we're looking at and considering. But again we can be highly selective on the opportunities that we bring forward and bring into the portfolio. So they have to make economic sense, they have to create value for Hess unit holders and they have to be strategically connected to our business strategy. I mean that's one thing I can't under emphasize is the importance of having a clear focused strategy and executing on that strategy and that's what we're solely focused on. But that also creates opportunity for us to do exactly what you described whether it be further options in the basin. We're looking at that takeaway capability. I mean there has been some announced growth potential there in NGL takeaway or [indiscernible] take away from the basin. Those are all things that are things that we're looking at but again we've been fit from having a good extremely strong business and don't have to be. We're not chasing growth so we're able to bring growth as we need it.

That makes sense, appreciate the color. That's it for me.

Our next question comes from Jerren Holder of Goldman Sachs. Your line is open.

Thanks, good afternoon. Can you confirm I guess the expected returns from LM4 from your perspective, is that based on just the 100 million cubic feet per day of firm commitments from Hess or how should we think about the upside I guess as that plant pulls up?

Yeah, so maybe let me just touch on and I can turn it over to Jonathan for more of the kind of contractual stuff. But just remember what the plan -- so it's set up as an economic JV which derisks both sides so we get to each take advantage of volume, deliver it to the plant both from a cost perspective and a revenue perspective. We have firm capacity of 100 million which means we can deliver and have space available for 100 million a day. As space is available beyond a 100 million we can actually deliver more volume to the plant that creates a lot of value for us. And so from an overall value generation perspective and again I mean as Jonathan mentioned I'll let him kind of add to this because of the way the contract structure is established and the way this investment is being integrated as part of that contract structure and kind of again creating that one basin wide processing structure similar to what we have with the crude export, what we would see from a return perspective is there is going to be something very similar to the other investments that we have in our portfolio. So Jonathan I don't know if you want to add anything to that.

Yeah, no I think what we're guiding people to think about is five to six times EBITDA build multiple with the low-end of that being on a full capacity basis. And that's very similar to where -- how we think about -- we don't give out the specific return on our contract but if you think about how our business is run at enterprise level. Last year we were at $3 billion of invested capital and approximately $400 million of EBITDA so it's about 7.5. Now on a forward basis our new capital for this year we're at 3.3 approximately billion dollars invested capital and then we'll have about $472 million consolidated EBITDA so that is now under 7. So you can see as we begin to fill up that capacity we will be moving down towards a similar EBITDA build multiple that we're talking about that we see in the plant. So since it is all integrated together we were really expecting that same capital efficiency that we see at the enterprise level on an individual project basis.

And I mean I think you can look at -- I think you can look at other processing investments in the basin as well and you can see on a per unit basis how efficient this partnership is. I mean that's another really key component to the investment is just the capital efficiency associated with it. So you can translate that into, as Jonathan mentioned, you can translate that into lower capital cost, more efficiency, revenue generation for less investment. It definitely has an accretive value for Hess Midstream shareholders -- unit holders.

And I guess as a follow up to that on the capital efficiency point how do we think about the potential for let's say a Little Missouri 5 versus expanding Tioga in the future?

Yeah, sure, no, those are great questions. They are both available to us. I mean that's the beauty of this. I mean the structure that we've got established with Targa allows us to further grow processing capacity in the south if we want. We each have the option to participate in further expansion of processing but we also have the expansion of the Tioga gas plant in the north as well. And as you think about the systems and the customers that we ultimately support whether we're talking about north of River south of River all of these options remain available to us. So again similar to the question that Jeremy asked earlier, it allows us to really look at and be highly selective of where we want to place that investment and making sure that we're getting the best capital efficiency we possibly can from the investment opportunities that exist out there for us. So we're excited and we think it's -- we think both could actually happen at some point in the future and it's really exciting.

And last one from me, obviously we have the minimum volume commitments, we are just wondering if there's any adjustment to the fees given the cost of service structure as we kind of transition from 2017 to 2018?

Yes, so essentially we went through the nomination process like I described in my remarks and essentially the fee structure, what happened on the fees side was we had higher volumes relative to last with the new growth plan for Hess as well as the additional third party and as well as the addition of LM4. So that put downward pressure if you will on the rates. At the same time we had accelerated new capital to support that growth which increased the fee and those essentially were essentially offsetting. So in terms of the fee we had a very similar consistency to last year although we do also have an escalation in there, so consistent but then with an escalator applied. And then you take that fee and now we are applying it to a much steeper volume profile and so the result of that is really the increased revenues that we expect which really drives the 15% to 22% increase in EBITDA that we see going from 2017 to 2018.

Alright, thank you very much.

Our next question comes from our Mirek Zak of Citigroup. Your line is open.

Hi, good afternoon everyone. Regarding your Hess Corp's forecast volumes through 2021, how do you guys expect your third party volumes to develop from the 15% there today through that same time period?

When you say 15% I assume you're talking about crude oil volumes.

Yes.

Yeah, so again we see -- I mean as we talked about on the gas side we continue to see approximately 30% of our gas coming from third parties. On the oil side there is still a potential growth opportunity there. We have kind of stayed in that range of approximately 15%. Again with Hess's growth profile we would be in a good situation to grow the overall basin and support of other third parties at about the same rate. So we're kind of anticipating that that the rates will stay approximately the same. There could be a little bit additional growth on the oil side but again I think that kind of the 15% number is a good place to start.

Okay, and regarding future expansions you mentioned you'd potentially look to do additional JVs in the Bakken and maybe with Targa or maybe with others that are channeling the volumes via that Hess Corp contracts, sort of a requirement that you need to expand further in the basin?

I wouldn't say that it's an absolute requirement but it's definitely a strong bias, right. I mean we have outstanding contracts, we really like the contracts, it provides a lot of visibility and downside protection in our business. And I think we would -- that would have absolutely been our baseline. Now having said that is it an absolute must have, no it's not but it would be an extremely strong bias on our part to do something similar to that.

Okay and then just finally, are there any thoughts or discussions around Hess Corp potentially increasing the public flow to Hess Midstream or maybe something coordinated between Hess and GIP or how are they thinking about that?

Yes, so as we mentioned in terms of our capital market it was very fortunate that we have a combination of both organic growth as well as dropdowns. And so as a result we have highly visible organic growth for the next number of years and with the MVCs you can see that through 2020 so therefore dropdowns really at this point we expect to be compliment the growth beyond 2020 and therefore equity goes with that in terms of need to grow. And then the flow we are definitely hearing that a lot. We're happy to hear that that people would like us to increase the flow. I think that's very positive in terms of demand to become investors at the same time we are not chasing liquidity for liquidity sake. We want to make sure that we have accretive opportunities for all of our investors and as John mentioned there's a number of opportunities that we're pursuing. And as accretive opportunities come up we are certainly looking to utilize capital markets to the extent that we can in an accretive way to be able to fund those opportunities if we can do it accretively.

Okay, alright, thank you, that's all for me.

Our next question comes from Tom Abrams of Morgan Stanley. Your line is open.

Thanks a lot, a lot of good questions and answers. I had a couple more on the Targa things you might do with them in the future, will they all be in the Bakken you think and is there any chance that you would actually take operatorship of any of those assets?

I think we would start again where our strategic footprint is and so the Bakken is kind of where we're anchored right now. I wouldn't say that it's the only opportunity that we have available to us but it's definitely a strong position and someplace we would start to continue to look for opportunities for other relationships. So I wouldn't -- similar to the previous question I don't think it's a limiter but at the same time I think it's a natural place for us to be and expand.

That applies to -- as well.

Yes, absolutely because when you think about this, this would be kind of part of -- part and parcel of that whole integrated structure. So yes, absolutely that would be part of it. And then Tom sorry, what was the second part of your question.

Operatorship.

Oh operatorship yeah, it really kind of depends on the opportunity I would say with the gas processing that we have in place. Again because of the high capital efficiency from this relationship and this deal that we put together, the JV plant down at LM4, it's part of an integrated processing complex that Targa has down there. So us to take that over would be very unusual and kind of an extreme situation. So I would say that generally speaking they would be the operator here. Now again, I mean as there was a previous question on whether we would expand further, whether that expansion happens in the North or the South obviously we have a foothold -- a strong foothold, operating foothold with Tioga Gas Plant in the North. I would say anything in the North we would clearly be in a strong position to be the operator. If it's at the Little Missouri facility or the Little Missouri complex I think Targa is positioned for that but it really kind of depends on the opportunity where we enjoy and like operatorship and I think we would continue to look to create additional operatorship opportunities but it's not a must have. Again the focus for us is about capital efficiency and focused on the actual what's in the best interest of the asset and ultimately Hess Midstream. And again just to kind of reinforce that we sit here in a very, very fortunate position and that we could be highly selective in those opportunities and we can go and invest where it makes sense and then kind of operatorship just falls depending on the opportunity for us.

And then as a follow-up your growth CAPEX is elevated because of the projects but what should we be thinking about just as kind of a run rate, should we go back down to kind of an IPO guidance level or you think you'd be creating these kinds of opportunities each year?

Yeah, I mean I think that the level that we talked about and the IPO is a good long-term level. But again I think as we think about the opportunities ahead of us if more opportunities come up we're definitely going to look to invest in them. So we're going to be actively pursuing things but we do kind of see a more steady state and level of kind of what we talked about.

And another thing I would just add is if you think about how we broke up the guidance we gave out this year, we broke into three buckets. We had the plant which is obviously called a standalone investment although it has associated infrastructure with it. We have the compression projects, think of that as kind of regional quality ball knocking that can go on for a year or two or so, not something that's a long term but certainly something needs to be done in the call it the short-term. And then we have that $75 million growth of ongoing capital. We are thinking of that as kind of ongoing capital base if you will that includes both interconnect with the Hess as well as the third parties. Obviously we hope that number continues to increase as we bring on additional third parties but it's a good run rate. You can think of that 75 also relatively at $94 million of expansion CAPEX last year. So kind of in that same $75 million to $100 million range is what we see as ongoing capital but of course it is really dependent on our ability to continue to bring in third parties so it could flex up depending on if we have additional opportunities there.

Alright, thanks a lot.

And our last question comes from David Wasky [ph] of MUFG. Your line is now open.

Hey guys, just a couple of quick ones, first sort of where do you -- what are you looking at as a target over the longer-term of third party volumes for Hess Midstream?

Again I mean I think what we talked about earlier on the gas side we think a nice mix, long-term nice mix for gas is up at approximately 30%. It can be up or down a few percentages here and there depending on the opportunity. And on the oil side again I think you're kind of in the 15% range, maybe 20%. It really depends again on the opportunity. And I think that where we see opportunities to expand our strategic footprint to satisfy customer demand in the basin whether it be Hess demand or third party demand well we're going to go after it. So as long as it makes sense from an investment perspective and is accretive to the midstream we're going to aggressively target third parties. But again I think from a long-term perspective those are the percentages that we've kind of been talking about, I think still hold.

Okay, one other one that is one of the things we've seen a lot of in the last couple years is a very active private equity market and private group cruise private equity players in the midstream space. Is there a chance GIP goes out here and buys something that becomes a drop in for HIP and then eventually comes down to Hess Midstream?

Yeah, I mean it's great to have two outstanding sponsors Hess and GIP are excellent sponsors. So if they're able to attract an opportunity that is a fit for us I think that would be an outstanding opportunity. But I can't really speak to what they're going to do but I think ultimately if something was to happen it would be exciting, it be something we'd really be looking forward to so, yeah.

Okay, thank you.

And there are no further questions. Thank you very much. This concludes today's conference. Thank you for your participation, you may now disconnect. Have a great day.