Good day, ladies and gentlemen and welcome to the First Quarter 2018 Hess Midstream Partners Conference Call. My name is Sabrina 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, Sabrina. Good afternoon, everyone and thank you for participating in our first 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 first quarter conference call. I will review our operating performance and outlook for 2018 and discuss some of our first quarter highlights, which include delivering another quarter of solid distribution per unit growth, a continued trend in throughput growth and announcing our for strategic joint venture, which enhances Hess midstream's organic growth outlook and our optionality South of Missouri River. We're adding scale in the right way at the right time as Hess and third parties gear up for growth in the Bakken. Additionally, our results were achieved with no debt and a solid balance sheet that provides us with significant flexibility and ample liquidity. I'll also discuss Hess's latest upstream results and outlook for the Bakken where Hess plans to add a fifth rig in the third quarter and a sixth rig during the fourth quarter and also expects to add a third fracked crew by yearend. Hess continues to expect net production to grow to approximately 175,000 barrels of oil equivalent per day by 2021. After my remarks, Jonathan Stein will then review our financial results. Now turning to Hess Upstream highlights, today Hess reported first quarter net production from the Bakken of 111,000 barrels of oil equivalent per day, which represented an increase of more than 12% from a year ago quarter. Hess also announced that their 60 stage 8.4 million pound profit completions continue to show a 15% to 20% uplift in both IP 180s and expected ultimate recovery or EUR over the previous 70 – 50-stage 3.5 million pound completion standard. Because Hess was reaching the practical limits of the sliding sleeve system in terms of stage count, last year they began piloting limited entry plug-and-perf completions, which has shown encouraging initial results. This new…

Thanks John and good afternoon, everyone. Our performance and results in the first quarter demonstrates continued execution of our financial strategy of delivering stable and growing cash flows, consistent distribution growth and maintaining financial flexibility. In the year since our IPO, Hess Midstream has demonstrated our significant financial strength. First, our MLP provides cash flow stability and growth. Our contracts provide downside protection and the ability to capture the upside through commodity price cycle 90% of our projected 2018 revenues are protected by MVCs and as none of our pipelines are FERC regulated, there is no impact to our tariff rate calculation from recent policy announcement. Second, we continue to fund our organic growth and have the ability to maintain our strong balance sheet, even with additional investments, including those announced for 2018, such as additional compression and the LM4 gas processing plant. Third, as you heard John say, we are on a growth trajectory as traffic accelerated activity in the Bakken, we are consistently delivering distribution per unit growth of 15% on an annualized basis including a 1.25 times coverage ratio for our recently announced first quarter distribution. Uniquely, we have a clear line of sight to our ability to grow organically and meet our growth targets, without the need for the equity markets. Our 2018 guidance, which we reaffirm today implies a 15% to 22% growth in consolidated EBITDA compared to 2017, highlighting the ability of our contracts to capture growth during their period of commodity price recovery and increasing rig activity. In terms of distributable cash flow, the bottom end of our 2018 guidance generates our targeted annualized 15% DPU growth rate with at least 1.1 times coverage. Looking forward, our throughputs continue to increase above our MVCs and we have clear visibility to organic growth through…

[Operator Instructions] Your first question comes from line of Jeremy Tonet with JPMorgan. Your line is now open.

Hi good afternoon. Just want to start off given kind of the commodity price environment and the higher activity levels we're seeing in the Bakken, I was just wondering if you could share with us your thoughts as far as the third party opportunity set and how that's kind of progressed over time and how much more opportunity you see now versus last year I guess and maybe just on the LM4 plant, given what you're seeing out there, how quickly do you think that could fill up?

Sure Jeremy. Thanks for the question. So I think in general, we're seeing the overall basin is increasing is there is more activity across all of the producers. I mean as Hess announced, going to fifth rig in Q3 and a sixth rig in Q4 adding a completion crew by year-end, we're seeing a lot of activity and I think Hess' increases with a proxy for third parties as well as well. So we definitely see growth potential in the third-party area and we're working towards establishing those relationships and trying to position ourselves to actually capture those volumes with our strategic infrastructure and our backbone from the North River to the South River, which we believe is very unique having that kind of full complement of infrastructure, both solidly founded in the North and also in the South that we're well-positioned to capture additional third-party volumes. As far as the second part of your question regarding LM4, its early days. We're in early engineering and procurement activities now. Construction is going to be starting here shortly. We anticipate the plant to be available by year-end and volumes will ramp in 2019 and so we're going to be capturing and going after third-party volumes. We're also capturing Hess volumes as Hess grows and brings on the additional rigs. We'll have to just see how the plant ramps, but we're definitely encouraged by the activity and we think that there's a lot of opportunity to fill the capacity over time.

That’s helpful, thanks and then turning to your 2018 guide here and comparing that to first quarter numbers, would it be fair to assume kind of a strong exit rate on the processing side relative to what you have in the first quarter and then on the crude side, especially on the terminaling, it looks like you're tracking towards the top end of the guidance there and appreciate that's early in the year, but any thoughts as far as that trajectory over the course of the year at this point.

Sure. I think it's a great question and I think it's an obvious question. Its early days right, I mean it's still -- we're still very early in the year, but I think we've and I think we emphasized it in both my opening remarks and also Jonathan's around reemphasizing our guidance and I think if you do the math, between the first quarter delivery and the balance of the year, there definitely is growth built into that. So we feel good about where the volumes are heading, but again it is -- it is still early days, but we are very encouraged with our opportunity ahead of us in 2018 and beyond on our way to -- on Hess' way to 175,000 barrels a day by 2021.

Great. Thanks for taking my questions. That's it for me.

Sure.

Thank you. And the next question will come from the line of Richard Roberts with Scotia Howard and Weil. Your line is now open.

Hi, good afternoon, folks. Couple of questions if I could around the drop down of the water assets that Hess' plans dropped the JV at some point this year. I guess to start, if I just look at the midstream EBITDA at the Hess level and then at the HESM level, that $4 million difference for 1Q, that should be much be the water EBITDA. Is that correct?

Yeah, that difference is primarily driven by water and on an annualized basis, you can think of that as a starting point, but there is really significant growth in that business and we do expect that over time that will really grow to be a more significant layer of EBITDA to the midstream. While we are on that, I'll turn over to John. He can give a little bit of some context on that growth.

Sure, thanks Jonathan and Richard great question. So yeah, the growth is we have a good foundation in water, but it represents a pretty small volume and EBITDA level currently. We fully anticipate and expect as volumes increase, both through the drilling activity, but also as we continue to connect more wells that that profile is going to -- is to be pretty, pretty dramatic. So there -- it's an underserved offering in the basin. We think there's a lot of opportunity in water, both capturing Hess volumes, but also capturing adjacent DSUs for third parties as well. Our primary focus is going to be connecting Hess and that will definitely drive the EBITDA and ultimately the volume forecast up substantially.

Okay. Thank you for that and then I guess from a financial perspective I know HIP has plenty of liquidity, but I guess from a multiple perspective, how should we think about that just sort of in line with historical dropdown multiples call it eight or nine times?

Well, depending on how we have as you know with the capital structure that we have, both at Hess Midstream and at HIP, we have a lot of flexibility, certainly an asset being dropped into HIP is different than asset coming from HIP down into Hess Midstream. So there is slightly a different basis there. Certainly for assets that come from HIP down into Hess Midstream as we said in the past, we don't have dropdowns as we said until beyond 2020 expected, but when they do a credit, it would be at market rates for dropdowns into MLPs. Initially the dropdown to HIP which has of course owns the GP has a slightly different economic model and therefore may come in as slightly different.

Got it, thanks for that Jonathan. Thanks John.

Thank you. And the next question will come from the line of Jerren Holder with Goldman Sachs. Your line is now open.

Thanks. Good afternoon. I guess maybe a clarification just going back to the potential drop and so we're talking about the water assets in the Bakken primarily being dropped from Hess Corp down into HIP maybe just start there.

Yeah I mean again there is flexibility in our capital structure for multiple, but the simplest way for that asset to come is for that asset to filled from Hess Corp. down into HIP and then that will become part of or extend our dropdown runway. So a number of water, when we're talking about our four times MLP EBITDA dropdown runway water and other assets that Hess has not included in that. So that would come down into HIP and then HIP would presumably offer to Hess Midstream Partners a willful on that asset.

Thanks. And can you remind us where are there are some other assets at the Hess level that potentially could go into HIP structure sometime in the future?

Yes, so there is really three assets that we've talked about. Of course there is the water gathering business. We also have what we call well facilities, which is also in the Bakken, that's really extending the gathering system back towards the lot of the pick-up, midstream infrastructure like central process units and other types of infrastructure that's on the well pad that's midstream related. And then outside of the Bakken, we also have Gulf of Mexico assets that Hess has, which would be potential or sale into, potential for sale into the midstream. As we look at all of these assets, I think it's important to highlight that one of the things that's important to us and we demonstrated that commitment I think in the JV, recent JV investment is maintaining the character of the MLP and that particularly means through the contract structure that we have. But we're not going to say it's going to be exactly the same contract structure and certainly the ideas of maintaining downside protection and the ability to maintain some type of rate reset are important elements of any type of asset that we bring in, whether they be additional Bakken assets or the Gulf of Mexico asset in the future.

Thanks. And then maybe last one for me recognizing that there is organic growth and a clear visibility to achieving the 15% distribution growth rate with the 1.1 plus coverage but how do you guys think about maybe accelerating the dropdowns in order to maybe operate at higher coverage, just given that that's a bit of a theme that's in the sector right now, companies with higher coverage self funding that kind of model.

Yes sure. So I think for us, we've said that our goal is to maintain 1.1 times coverage at least at our 15% DPU growth. For 2018, I mentioned that our lower end of our DCF guidance achieves that goal. We think on a long-term basis, 1.1 times coverage is appropriate for us given our contract structure that has significant downside protection, the visibility that you mentioned in terms of our organic growth, the fact that we're currently self funding our growth and are able to do that for their foreseeable future with no equity needs to achieve our growth targets. So that means for us that 1.1 feels comfortable in terms of our ability at this point as a lower end of our coverage guidance. Now certainly on a quarter-to-quarter basis as we had in this quarter, we will have coverage higher than that. So we had 1.25 times coverage in this quarter and when we do then we will use that additional coverage to help us self fund or continue to self fund our expansion capital program and our growth in the future.

All right. Great. Thank you.

Thank you. And the next question comes from the line of Mirek Zak with Citigroup. Your line is now open.

Hi, good afternoon, everyone. On the plug-and-perf process at Hess Corp. I know production improvements and timing are more of a Hess Corp. question, but if and when they shifted that process, how do you see this potentially impacting your future capital needs relative to today, so perhaps if Hess Corp. seems to be comfortable in a six rig level into 2019 onward, am I suggest a volume upside to them and you and additional infrastructure needs from your end or you could potentially see that as Hess Corp. pulling back rig and still hitting their 2021 targets and maybe suggesting fewer well connect and may be requiring less in capital for infrastructure from your end. Just curious how you are looking at that?

Well you had a lot, there is lot boiled into that question. So let me, I think let me just start with, I think it was a very positive announcement today on where Hess is heading and the performance, the initial performance they're seeing on both moving to the 60 stage high intensity completions and then also then moving from that to potentially more plug-and-perf, the 8.4 million pound plug-and-perf options. And I mean they're talking about somewhere between 15% and 20% improvements in initial production rates, EURs and ultimately value, which I think it bodes very well for us. Fortunately for us, this is part of the reason why we've been kind expanding our system over the last couple years, both tying in Johnson's corner down in the South for crude, so that we have key terminals in the South. We have key terminals in the North and Ramberg and then also on the processing side both at the Tioga Gas plant and the Little Missouri 4 complex down in the south, we have full flexibility to capture volumes as Hess and third parties continue to grow. So we've really been looking towards optionality and the ability to handle additional volumes over the long-term. As far as Hess's plans with whether they're going to go lower than six rigs, I think they’ve made it pretty clear that their plans for the next several years to get to 175 includes a six rig program. We're hopeful that there is -- there's upside there and I think that we're well positioned from an infrastructure perspective to both support their existing growth plan, but also upside potential there that could come from these good performing wells. And I think that holds true for third parties as well right. I mean something that translates into an opportunity for Hess in all likelihood will translate to opportunity for third parties as well and I think we're well-positioned to capture that as well.

Okay and that sort of leads into my last question is on your crude and gas gathering business, in general have you been seeing for the past few quarters the third-party volumes been ranting sort of as you had expected relative to Hess or have you seen one maybe lighting the other especially during I suppose this quarter when Hess outperformed its guidance, but in general have you been seeing that balance ramp?

Yeah I mean I think we would just reiterate our kind of mix, our mix between third parties on the gas side and the oil side. So we've been saying about 30% gas and about 15% for oil. You have to be really careful about looking at individual quarters because there is a lot of fluctuations can happen in that especially in the terminaling side, where the marketers can be out there transacting business a little bit differently that that can create kind of some unusual fluctuations from quarter to quarter. But I think and our principle has been that we expect to see as Hess continues to grow their third parties will grow as well and we're still very comfortable with the kind of the 30% 15% range that we've been talking about and I think we're positioned to support Hess's growth and third-party growth consistent with that.

All right, excellent. Thank you for the time.

Sure. Thanks.

Thank you. And the next question comes from the line of [indiscernible]. Your line is now open.

Hey guys just kind of a quick question, moving back to the water business, how much growth is sort of baked in there, is it going to be at a rate you think similar to what you're looking at on Hess assets in HESM today when it does become involved and then I guess also what, are there any other things you can be doing today to sort of push out further and accelerate your growth rate in the Bakken as we're seeing better crude pricing?

Sure. I think that's a great question. So again, the water business is an underserved segment in the Bakken and we think we're well-positioned to capture that underserved segment both from Hess and for third parties. So we do see a pretty solid growth rate there and again because it's underserved and the infrastructure assets are lagging behind say the oil and gas assets there is definitely an opportunity to pull some of that forward and I think that's part of the value proposition to moving those assets into Hess Infrastructure Partners HIP, is that we will actually be able to invest in that infrastructure and allow the upstream to focus on developing the wells and really bringing on the volumes. Because we'll ultimately be in a position to be evaluating the economics of the difference between piping water off of well pad and trucking water off of oil pad and there is obviously a lot of benefits to piping water for well pad, which also includes production availability and particular in the wintertime, when it can be tough to get trucks on location. In addition the other benefit to that obviously is taken trucks off the road, which is something that the community is very supportive of as well. So we see a lot of opportunity to grow that business, that's going to create a pretty, that's going to create a nice growth profile for us going forward.

Thank you.

Sure.

Thank you. And the next question will come from the line of Mark [ph] with Morgan Stanley. Your line is now open.

Thank you. Just in terms of the Tioga turnaround, what sort of processing utilization would you be looking for to move forward with something like that?

Well I mean I think as we look at Hess's development plan to 175 and as we look at third-party opportunities, we'll evaluate when it's time to actually progress the project to debottleneck TGP. Remember current nameplate capacity is 250 million cubic foot per day at Tioga Gas plant. There's room for optimizations within that. So we think there's actually some upside within our existing base capacities and then we're going to be bringing on 100 million cubic foot a day. So a 50% increase in our and over approximately a 50% increase in our overall throughput volumes going through the system. So we're going up to 350 million cubic foot per day again with optimizations at Tioga. There may be some additional upside potential there and then we always have in our option of investments is to expand the Tioga Gas plant by another 50 million a day. So again I think as we see what happens with commodity prices and we look at where Hess and third party goes, that will allow us to decide when it's the right time to actually make the decision to invest in expanding and debottlenecking in TGP.

Great, thanks for that. In terms of just the [indiscernible] assets, is there is a way to think to quantify the magnitude of those assets or when we might be able to expect just more color on that?

Yeah no, it's too early I think to give any guidance on that. I think as we continue to work on the Carwell [ph] process, we will begin to move those assets into the midstream segment and then they will be able to see Hess's, will Hess will be able to move into midstream segment and then you'll be able to see some addition in transparency, but at this point it's too early to give any guidance on that.

Got it. Appreciate it.

Thank you very much. This concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.