Good day, ladies and gentlemen, and welcome to the Second Quarter 2019 Hess Midstream Partners Conference Call. My name is Kevin, 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 call 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, Kevin. 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 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 second quarter 2019 conference call. Today, I'll review our operating performance and recent highlights as we continue to execute our strategy and look forward to an exciting second half of 2019 for Hess Midstream. I'll also discuss Hess Corporation's latest results and outlook for the Bakken. Jonathan will then review our financial results. As we reached the halfway point in the year, we're poised for significant volume growth through the balance of 2019. Target resources have completed construction of the Little Missouri 4 gas processing plant. The startup process for LM4 has been initiated with the introduction of first gas into the plant. We expect to begin delivering Hess' volume to LM4 in the next several days. The startup of LM4 is an important milestone for Hess Midstream adding 200 million cubic foot per day of gross processing capacity of which Hess Midstream has at least 100 million cubic foot per day of committed capacity to meet basin demand. With LM4 online, Hess Midstream’s North Dakota gas processing nameplate capacity increases to 350 million cubic foot per day. We plan to further expand or increase our capacity to 500 million cubic foot per day in mid 2021 with the 150 million cubic foot per day expansion of the Tioga Gas Plant. Turning to the near-term, I'd like to discuss how we're planning to increase gas throughputs for the balance of 2019 as a startup of LM4 provides visibility to a robust growth trajectory. To date in 2019, we continue to operate TGP close to its nameplate capacity. In the second quarter, gas processing volumes were negatively impacted by extended third-party export pipeline maintenance and an unseasonably wet April and May. Going forward, we expect to use LM4 capacity primarily to…

Thanks, John, and good afternoon everyone. As you heard from John, the startup of LM4 is an operational milestone for Hess Midstream and is also a financial catalyst as the expected ramp up in gas volumes for the rest of the year will drive continued growth in our revenues, EBITDA and coverage. As a result, we are reiterating our full year 2019 guidance including net income guidance of $415 million to $440 million, consolidated adjusted EBITDA of $550 million to $575 million and adjusted EBITDA attributable to Hess Midstream in the range of $108 million to $113 million. With maintenance capital and cash interest attributable to Hess Midstream projected to total approximately $5 million for the full year, our distributable cash flow guidance for 2019 also remains unchanged as expected to be in the range of $103 million to $108 million. Highlighting our expected strong growth on an annual basis in 2019 we expect to deliver 15% distribution growth with at least a 1.1 times coverage with revenues that are 85% protected by MVCs and a competitive EBITDA margin consistent with our historical margin of greater than 75%. Completing our full year guidance, we anticipate expansion capital attributable to Hess Midstream for 2019 including equity investments related to the LM4 gas plant and excluding acquisition capital to be approximately $53 million to $57 million, again unchanged from prior guidance. Turning to second quarter result, I'll compare results on the second quarter to the first quarter. For the second quarter 2019, consolidated net income was $91 million compared to $95 million for the first quarter. Consolidated adjusted EBITDA for the second quarter was $126 million compared to $128 million for the first quarter. The change in consolidated adjusted EBITDA relative to the first quarter was primarily attributable to the following. Revenues…

[Operator Instructions] Our first question comes from Jeremy Tonet with JPMorgan.

Hi, good afternoon here. Just wanted to touch base on the Bakken as far as gas takeaway is concerned in general. I'm just seeing – if you could share your thoughts as far as how tight the market is right now? And could that kind of impede basin growth or affect any of your plans in anyway?

Thanks for the question, Jeremy. Thanks for the question, Jeremy. From our perspective, no, we've got the planned export sorted out, and we're managing through that both from a crude, NGL and residue takeaway perspective. I mean, as you're aware, Oneok is in the process of completing its Elk Creek system. The southern portion of that system is now complete. The portion from the Bakken down to that southern connection point is still in progress and is expected to be completed in the fourth quarter. So from our perspective, as we ramp up our processing capacity, we've got interim solutions in place to manage the volume as LM4 ramps up. And in the longer term, when Elk Creek comes on later this year, we're well positioned to manage the additional processing capacity coming out of LM4, but also as we look longer term towards the expansion of TGP as well.

That’s helpful, thanks. And also on the natural gas takeaway side, is there any concerns about constraints there beyond the NGL picture?

No. We're feeling good about the residue gas takeaway as well.

Great. And then just wondering, might have missed it in the remarks there, but as far as third-party business mix, how that shook out this quarter versus the last quarter. What opportunities do you see there?

Sure. We've continued to see a lot of opportunity on the third-party side. So third parties were down slightly in the second quarter as a result of gathering more Hess volume as you heard. Hess' production continued to increase. It was primarily driven by additional gas capture in the basin as we brought on infrastructure and have been able to redirect that gas to the Tioga Gas Plant. And we're operating at near nameplate capacity at TGP, so as a result of that, we did have to push some of those uncommitted, unfirm contract volumes out of TGP as a result of bringing the Hess volumes in. But we have – and we've continued to work with our third parties, and they're obviously anxious to get back in the system and kind of manage through that. So we're feeling really good for the long term. And then just to – again, to reiterate our long-term view of third-party from a gas perspective, we continue to see that in that kind of 30% range. So again, there's a lot of opportunity out there for us and we feel really good about the long term, but things are continuing to progress very well in the basin.

That's very helpful. Thanks, and one last one, with LM4, just wondering if you could provide a bit more color on how quickly you see that plant being able to ramp there?

Yes. So the plan right now is that the ramp will primarily happen in the third quarter. So again, I mean, the startup has just begun. Gas has been introduced into the plant, it's still very early days. We're very optimistic around getting the plant up and growing, but we are planning to ramp in the third quarter. And then the plan would be is towards fourth quarter is when we would start to see getting towards our – near our total capacity of the 350 million in total processing.

And Jeremy, just I think we can't emphasize enough how much, not only operationally but also I think financially, what an inflection point this is with LM4 starting up. It's just – as we went through in the comments, the 10% increase in Q3 processing volumes will expect to drive an 8.5% increase in EBITDA at the midpoint, a 40% increase relative to Q2. In Q4, we expect to have coverage of at least 1.2 times and that’s really just 2018. As we look beyond, as you know, all of our systems have more than 15% volume growth and you can see that through our MVCs through 2021. And then with the TGP expansion coming on in mid-2021, that really even – sets the stage for long-term organic growth even beyond that. So really, this is an exciting milestone, as John highlighted. The transparency that we have towards the ramp up that John described in his comments and just now really gives us confidence not only in our ability to achieve our financial metric this year but even beyond.

And I would say – let me just add to that, too, I think that's a great point from Jonathan, is the volume that is being delivered into our system is available now. It's essentially behind pipe, it's connected, it's contracted. We're ready to introduce that additional gas into system as soon as the processing is available to us. So again, we've – we're really excited to get the plant online, see it run. And we'll obviously bring that gas in as quickly as we possibly can.

Great. That’s very helpful Thank you.

Thank you.

Our next question comes from Spiro Dounis with Credit Suisse.

Hey, good afternoon gentlemen. Just looking for some updated thoughts around the appetite to maybe get more involved in Bakken takeaway pipelines as an equity owner. I think we had a few announcements here since the last call just around the crude side of things. So just curious if Hess or HESM can bring anything to the table to maybe help you acquire an interest somewhere?

Sure. I mean, our relationship both on that Hess side and the Hess Midstream side is very strong with the export capacity that's coming out of the basin. We continue to talk to those providers and we're – as we've said before, and our strategy has not changed at all, where investments make sense, we're definitely interested in it. So we're continuing to evaluate those opportunities, and when they make themselves available to us, we're definitely working through that. So I think that takeaway out of the Bakken is definitely something that Hess Midstream would be interested in participating it. But again, it's got to be the right opportunity and it's got to tie into our system properly and just kind of meet all of the objectives we've outlined previously.

Got it. That’s fair. And then just on the potential for third-party acquisitions, seems to be a fair amount of assets for sale out there, especially with some E&Ps looking to maybe monetize their midstream assets. So are those asset packages coming your way? And can you guys make the math work? Especially when you think about capital needing to compete with your current return on capital program, which is obviously pretty healthy, and when you think about where some M&A would sit, is at the HIP level or could you do it through HESM?

Yes. No, I think it's another really good question. And again just to reiterate, I mean, we're definitely evaluating all of the opportunities available to us in the basin and even some outside of the basin. There are assets that are natural integrations into our existing infrastructure that we would be – we'd really like to have. But again, it's got to be the right price. Just if – and I know you know this, but in the contract structure we have in place and the way our system is set up, we're really – we're not chasing growth. Growth is built into our existing plan. But where we can acquire those assets and where we can integrate them into our strategic footprint, we're absolutely evaluating those and looking at those. And yes, we do get opportunities presented to us. We also are actively looking at opportunities as well outside of even formal presentations to us. So we continue to evaluate that. But again, it's got to make sense. It’s got to integrate in with our system. And it – and our preference, as we talked about before, that it would integrate into our contract structure and have the same sort of stability that we've got in our existing plan.

And then I guess the second half to your question in terms of funding HIP or by HESM, I think as we've demonstrated actually over the past year, as we've done, executed different types of acquisitions and JVs, the great thing about our capital structure is that we have the ability to do that in different ways. So for example, water was acquired at the HIP level. But if you look at, for example Summit, that was done at the operating level and therefore was split 20% by Hess Midstream partners and 80% by HIP. So we have a lot of flexibility in the capital structure, and I think that's one of the advantages that we bring to the table.

Yes, very helpful. Thanks John. Thanks Jonathan.

Thank you.

Our next question comes from Mirek Zak with Citigroup.

Hi, good morning guys. Just a quick one for me. So the downtime on the Alliance Pipeline late in the quarter, is that an issue that's now resolved? Or is that, in your view, a sign of a potential longer downtime for maintenance maybe in the second half of the year? Or it's something that you would need to compensate for?

No. From our perspective, it was part of a planned maintenance activity. And once they started getting into that maintenance, there were additional things that needed to be addressed. There was some weather. They also had some weather challenges as well that ended up extending it. We don't anticipate any issues long term as a result of that. They were able to complete the maintenance activities and we're back flowing, no problems.

Okay. Great. That’s helpful for me.

Okay. Thank you.

Ladies and gentlemen, this does conclude the Q&A portion of today's conference call. Thank you very much for your participation. This concludes today’s conference. You may all disconnect and have a great day.