Good day ladies and gentlemen and welcome to the Third Quarter 2018, Hess Midstream Partners Conference Call. My name is Shannon 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. [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, Shannon. Good afternoon, everyone, and thank you for participating in our third 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 Factor 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 third quarter conference call. We are pleased to report another strong quarter of consistent growth, operational delivery and financial performance. We are continuing to advance organic projects that will increase system capacity and export optionality from our competitively advantaged infrastructure. We’ve consistently delivered growing and competitive distributions and we're confident in our ability to continue to meet our targeted 15% annualized growth rate into the future. Furthermore we have a strong upstream sponsor that's growing production now and over the long term with a premier Bakken acreage position and robust inventory of high return drilling locations. Now turning to Hess upstream highlight. Earlier today Hess Corporation reported third quarter net production from the Bakken of 118,000 barrels of oil equivalent per day, Hess also announced that their six operated Bakken rigs commenced operations in September and a third frac spread is now actively completing wells. Average IP180s for the year, which will be dominated by the 60 stage sliding sleeve completion design is expected to exceed 125,000 barrels of oil, an increase of approximately 15% from full year 2017. Hess continues to see encouraging results from the transition to limited entry plug-and-perf completions. Of the 100 gross operated wells Hess expects to bring online this year, approximately 30 are plug-and-perf. Hess will provide additional details regarding the high intensity completions at their December Investor Day. For full year 2018, Hess continues to forecast the Bakken net production all average be between 115,000 and 120,000 barrels of oil equivalent per day. Furthermore, Hess expects to generate net production growth in the Bakken of 15% to 20% per year through 2021. This production trajectory is a key driver to sustain volume growth through our advantage infrastructure position. Now turning to Hess Midstream…

Thanks John and good afternoon everyone. As you heard from John, we continue to execute our plan and in the third quarter we again delivered our targeted distribution per unit growth of 15% on an annualized basis, including a DCF coverage ratio of 1.25x. Three key drivers underpin our ability to consistently deliver our targeted distribution growth. First, strategically located and integrated infrastructure that allows us to capture highly visible organic growth for both Hess and third parties. Second, an advantage contract structure that supports stable growth with downside protection and an annual rate reset mechanism based on a targeted return on capital that generates incremental revenue for every dollar invested. And finally, a flexible financial strategy that includes primarily self-funding our growth without the need for the equity market for the foreseeable future. Consistent with this disciplined approach we have continued to self-fund our 2018 capital program and ended the third quarter with no debt and an undrawn $300 million revolver. With this foundation, we can be confident in our ability to consistently deliver our long term 15% distribution growth target with the DCF coverage ratio of at least 1.1x. Now turning to results, I will compare results of the third quarter of 2018 to the second quarter of 2018. For the third quarter consolidated net income was $97 million compared to $95 million for the second quarter. Consolidated EBITDA for the third quarter was $128 million compared to $125 million for the second quarter. The increase in consolidated adjusted EBITDA relative to the second quarter was primarily attributable to the following changes. Revenue for our processing and storage segment increased by approximately $2 million, primarily from higher gas volumes from Hess and third parties. Revenues for our terminaling segment increased by approximately $2 million, primarily from higher crude…

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

Good afternoon guys. This is Rahul on for Jeremy. Just a couple of quick questions. On the first one, just curious on what drove the debt in the gas gathering volumes in 3Q. Was it more of a third parity impact; and just to follow-up, how have the third party contributions this quarter faired on the gas on the crude side?

Sure. So overall we had a continued strong quarter and I would say that the volumes between quarters were relatively flat, coming in from the system. So I mean they were just marginally down on the gathering side, slightly up on the processing side and intended to follow Hess and third party gas availability. So there really is no systemic issue from a gathering and processing perspective and in fact as I mentioned in my scripts, we ran a performance test of the Tioga Gas Plant in the third quarter to really understand what the capability of the plant is to sustainably learn above nameplate capacity of 250 million cubic foot per day. So we're looking for ways to optimize our system both from a gathering perspective, but also a process to create additional capacity for Hess and third parties. Overall, I would say that on the gas side and the crude oil side we saw a strong performance both from Hess and third parties and continue to see growth opportunities in both systems.

Gord, is there an update for the mix of third parties this quarter specifically on the… [Cross Talk].

Sure, I mean as I mentioned in my script, so on the gas side we saw 38% of third party coming on the gas side, but I would just reiterate what we've been saying that our long term forecast, because again the basin is growing; we expect Hess volumes to grow; we expect third party volumes to grow proportionately, so we've said that on the gas side it's approximately 30% of the total gas gathered and processed volumes to be third parties and on the crude oil side we’ve said 10% to 15% and those assumptions have not changed for the long term.

That’s helpful, thank you. Then just stepping on to the GIP, are there any recent conversations following the recent involvement with a peer of yours on the simplification side. I know it's early for HESM, but just curious on how you would plan to approach for the idea side in the future, like I just scale up the operations or flip position for drop downs.

Yes, sure. So I think if you look at behind what's been happening in the MLP market in terms of whether it be idea, simplifications or restructuring, there is you know concerns about drop down assets and ownership of those assets consistency and IDRs and particularly their impact on cost of capital. For us we have a really unique business model that was strong in all of these areas, really independent of structure. So for example in terms of our drop down assets, all those four assets have already been sold down to HIP, which means that they are dedicated to Hess Midstream Partners, really independent of what happens at our sponsors. In terms of consistency, we've demonstrated that we can deliver our 15% targeted growth quarter-on-quarter, while self-funding and we have visibility as I described to be able to continue to do that. In addition we have a unique contact structure that we've demonstrated can protect the downside while also capture the upside, and in terms of our IDRs, they are currently less than 3% of our DCS and we expect them to remain a small percent of total cash flows for the foreseeable future given how early we are. So, you know all that said we’ll continue to monitor the sector, looking certainly at what other people are doing in terms of conversions, but we’re certainly not in a defensive position relative to these concerns and it's certainly not optimal to us exchanging our strategy and continuing to deliver value to our unit holders.

That's helpful, thank you. Thanks for the answers.

Thank you. Your next question comes from the line of [Inaudible] with Credit Suisse.

Hey John and Jonathan, how are you?

Doing good. How are you?

Doing well. So I just want to start off with some comments on your sponsor this morning, something maybe that could be a potential need for additional take away there out of the Bakken. I know that’s something you guys have talked about in the past, it’s something you considered but just maybe wasn't front burner right now. Curious if there's been any movement around that?

Sure. I mean there's definitely a lot of activity as far as the evaluations for export capability capacity coming out of the basement and you know as we've mentioned a number of times, you know if it's a strategic fit for our assets and makes sense from an valuation perspective, we're definitely interested in participating in those opportunities. So as our upstream, as Hess upstream and other third party upstreams evaluate take away capacity, we're also looking at it from an infrastructure perspective as well.

Got it. And then second one just around processing capacity at the Bakken output and they continue to surprise in those parts. They still come in really strong. Just curious you know with LM4 kind of coming soon, do you feel like there's already a need to add more capacity there, and when you think about maybe preferred options, do you go the JV route again? I guess alternative do you pull TGP development off the shelf and go about it that way.

Yeah, no it's a great question and yes, I think just to reiterate how strong the well’s performing. I mean you heard that from Hess today and a number of other producers also talking about very, very strong well performance which is a great thing for us. I mean it creates a ton of opportunity and with our asset structure you know, having the significant processing capability in the north and the south once LM4 comes on. We're well positioned to capture volumes in north and in the south. As far as your question regarding further expansion, I mean I think all of the options are on the table for us. You know additional JV’s, obviously TGP debottlenecking. As we've looked at the debottlenecking project itself, we've not really slowed anything down. We've continued to engineer it. We pulled it out of our plan as we talked about, because we were able to get $100 million a day of additional net processing capacity for LM4 which creates you know a head room for us from a growth perspective. But as the producers continued to show very, very strong results and as the basin outpaces its expectation, it's clearly something that we're looking at and evaluating. And so as you know, as Upstream mentioned this morning in their call, they've just completed the Bakken study. They're evaluating the data. From that obviously the plug-and-perfs are showing very good performance and the piloting is looking strong. So from our perspective it's definitely something that we’re evaluating and it'll be part of the upcoming nomination process with our sponsor and also with other producers in the basin. So it's definitely something we're interested in and continue to aggressively attack.

Got it. I appreciate the color. Thanks everyone.

Thank you.

Thank you. Your next question comes from the line of Jerren Holder with Goldman Sachs.

Good afternoon. Just given Hess’s comments this morning about increased CapEx and production guidance through 2021, should we expect to see higher CapEx and VC's and what not from Hess Midstream?

Sure. I would say that from an overall you know growth perspective, I mean as I just mentioned in my last answer, that we continue to see the basin overall. I mean obviously Hess is a key customer of ours, an anchor customer, and obviously our sponsor. So we’re highly integrated with what Hess’s plans are. We’re continuing to look at our infrastructure; we’re continuing to look at our capacity. We have because of our strong relationship with our upstream partners, we're definitely building those into our plans and as I mentioned before, we're in the process of the nomination cycle and budget cycle as Hess looks at expanding and continuing to invest more in the basin along with other producers, we’re also evaluating what capacity we need to support Hess and third parties, and so that one, we’ll continue to build on that and continue to add to the capacity as the demand continues to pick up.

And this is Jonathan. Just to give all the color, as we’re thinking about it, as John said we are going through the nomination, and just a little color on how we’re think about the elements of the couple program. As we said this year, we’ve broken up into three parts such as the LM4 gas plant really infrastructure, compression expansion ongoing. Well, the LM4 gas plant as John talked about is going to be coming on line next year, so it'll be some of that investment’s really going into next year. We’ve talked about compression being a two to three year projects and certainly expect that to continue going forward and then of course the ongoing expansion. Integrating Hess and third parties is really an ongoing capital that we expect to see.

Got it. And then in terms of the outlook for crude and NGL terminaling, how are you guys looking at that given the pick-up in real volumes recently and some of the pipe constraints that we're seeing out of the Bakken?

Yeah, I mean we’re feeling very, very good about it. I mean obviously from an infrastructure perspective we have the Tioga Gas Plant, we have the Tioga Well Terminal. Those two terminals are connected. Also the Tioga Well terminal is also connected to our Ramberg terminal which is a tight capacity. We have plenty of capacity and as you heard this morning on the call from Hess Corporation, there aren't any constraints and it's really an opportunity from our perspective to take advantage of our export flexibility. So we are seeing demands both with Hess and third parties pick up on the well side and that’s on the crude well, but also on NGLs and its really just taking advantage of the market and making sure that they have full access to pretty much any destination within the U.S. And just as a reminder, you know from a risk perspective or from a revenue perspective, once the crude gets delivered to our terminals, it pays one terminal fee regardless of the option they select or the destination that that product ultimately ends up. So if it goes to Ramberg, it's the same tariff that they pay that it goes to Tioga Well Terminal. So we have a ton of flexibility and can offer that optionality to our customers.

Got it, thank you.

Thank you.

Your next question comes from the line of Barrett Blaschke with MUFG Securities.

Hi, just a quick question on sort of capital use and growth. Is there a chance that we do see some acceleration in the dropdown timeline at all in the next 12 months or maybe some additional organic spend given that you guys still are sitting with no debt and just to sort of push the growth a little.

Right, so this is Jonathan. So in terms of the dropdown, our plan is we currently feel, don’t require dropdowns until beyond 2020. We have organic growth as we’ve talked about. That gives us visibility to data MBCs only through 2020. For example as we talked about gas processing, it has an 80% annualized growth rate through 2020. So certainly we see dropdowns complementing that organic growth on a long term basis, but we do expect significant organic growth even beyond 2020 of course with Hess as they talked about today on their call, their continued production growth and the like. So dropdowns are [inaudible] they will be there to complement on a long term basis. But in the short term we don’t need them to achieve our growth targets. In terms of additional capital, organically before that I think it fall. Well, we talked about it earlier which is the components of the program that we have are ongoing now which will continue as we described, and then as John described, you know there could be additional infrastructure required to meet, both Hess and third party needs as well.

Okay.

And your next question comes from a line [inaudible] with Citigroup your line is open.

Hi, good afternoon everyone. Just curious if you're seeing any impact from the current Bakken, kind of book differentials on your third party business, perhaps any interest third party is looking to move on your system to get liquids out of the basin since you’ve got the capacity on pipe and rail maybe temporarily or if that's creating any opportunities to maybe lock-in any longer term contracts with any new customers right now?

Sure. Yes, we are seeing additional demand on our system, both pipe and rail and again I think it's the unique offering that we've got. We've got the north export, both pipe and rail and we’ve got Southern export as well. So we offer a ton of flexibility and abilities sensually deliver any market. So we are seeing some pickup in demand on the third party side and it's actually, as we’ve talked about before, terminaling business ends up attracting more volume into our broader system. So it allows us to gather more volumes, but also our terminal and export additional volume. So yes we are seeing it pickup. As far as longer term demand, just a reminder of the contract structure and again it was set-up this way to really limit any risk, that mid-stream takes is the actual marketing contracts are between Hess corporation and third parties and we provide the gathering and terminaling services for all volumes coming through Hess. So it’s all contracted through Hess systems. So as far as long term contracts, long term commitments, Hess looks at those as opportunities but there really isn't anything that I can speak specifically to.

Okay and the increase in rail activity, where are you seeing those incremental balance going. Is it still mostly Gulf Coast, maybe by passing [inaudible] or are you seeing a little bit more of the west coast, east coast right now.

Yeah, actually I mean the bulk of the demand that we’re seeing, kind of the incremental demand that we’re seeing is both East Coast and West Coast. So we still obviously have access to the Gulf Coast, but there is – we have seen a demand increase both on the east and west coasts.

Okay, great thanks. That’s all from me.

Okay, thank you.

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