Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2024 Hess Midstream Conference Call. My name is Gigi, and I'll be your operator for today. At this all participants are in a listen-only mode. After speakers’ presentation there will be question-and-answer session. [Operator Instructions] 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 fourth 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 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 fourth quarter 2024 conference call. Today, I'll review our 2024 performance and highlights, provide an overview of our '25 plans and longer-term outlook through 2027 and give an update of Hess Corporation's results and outlook for the Bakken. Jonathan will then review our financial results. 2024 was a year of continued strong performance execution for Hess Midstream. We delivered significant volume growth, including 14% year-over-year growth in gas processing throughputs. Additionally, we made excellent progress on key multiyear projects to strategically grow our gas gathering system, while advancing our planned gas processing expansion. Today, we issued our guidance release, extending our MVCs and growth profile through 2027, with gas volumes expected to grow by more than 25% from 2024. Our long-term growth remains driven by Hess' planned development activity and increasing third-party volumes, reinforcing the need for additional gas processing capacity. Now turning to Hess Upstream highlights. In the fourth quarter, Bakken net production averaged 208,000 barrels of oil equivalent per day, including 20,000 barrels of oil equivalent per day from percentage of proceeds contracts which do not impact Hess Midstream throughputs. For full year 2024, Bakken net production averaged 204,000 barrels of oil equivalent per day, marking a 12% year-over-year increase. Hess reaffirmed its plan to maintain a four-rig drilling program in 2025 and projected first quarter 2025 net production to be in the range of 195,000 to 200,000 barrels of oil equivalent per day. The decrease from the fourth quarter 2024 is primarily attributed to severe winter weather in January. Now turning to Hess Midstream results. In the fourth quarter, we delivered strong operational performance, with gas processing volumes averaging 447 million cubic foot per day, crude terminaling volumes averaging 127,000 barrels of oil per day and water…

Thanks, John, and good afternoon, everyone. Today, I will summarize our financial highlights in 2024, discussed our recently completed nomination process with Hess and provide details on our 2025 guidance and outlook through 2027, including our continued prioritization of ongoing and incremental return of capital to shareholders. For 2024, we delivered strong results, with full year net income of $659 million and adjusted EBITDA of $1.136 billion. This adjusted EBITDA represents a growth of approximately 12% from 2023. Looking forward, we have line of sight to greater than 10% growth in net income, adjusted EBITDA and adjusted free cash flow in each of 2025 and 2026, followed by greater than 5% growth in 2027, supported by growing oil and gas throughput volumes. Gas volumes, which make up 75% of our revenues, are expected to grow by approximately 10% in each of 2025 and 2026, followed by approximately 5% in 2027. We continue to execute a financial strategy that prioritizes return of capital to shareholders with a demonstrated track record of differentiated shareholder returns. Since the beginning of 2021, we have returned $1.95 billion to shareholders through accretive repurchases. In addition, through the combination of our 5% targeted annual distribution growth and 10 distribution level increases following each repurchase, we have increased our distribution per Class A share by approximately 55% since 2021 and by over 10% in 2024. As a result, our total shareholder return yield is one of the highest of our midstream peers. Furthermore, our leverage of approximately 3.1 times adjusted EBITDA is one of the lowest among our peers, highlighting our differentiated ability to deliver significant shareholder returns while also maintaining balance sheet strength. Earlier this month, we completed our first unit repurchase transaction in 2025 of $100 million that was accretive on both an adjusted free…

Thank you. [Operator Instructions] Our first question comes from the line of Naomi Marfatia from UBS.

Hi, good afternoon. Thanks for taking my questions. My first question is on your multiyear growth outlook. So HESM established its '27 MVCs and slightly increased '25 and '26 MVCs, and you all have alluded to 10% EBITDA growth in 2026. So just kind of curious on how you think about -- like is this -- is this growth based off MVCs and could we potentially see an upside to your EBITDA growth target?

This is Jonathan. I'm going to start. Maybe I'll just walk through kind of the math of how we set the MVCs and what those mean in terms of the volume growth. I'll turn it over to John to talk about underpinning that growth from a business point of view. So as we said, I'm going to use gas processing. As we have said in the past, gas is 75% of our revenues. So focusing on that, we provided guidance of 10% growth in 2026 and 5% growth in 2027. So if you look at our MVCs, you can see they provide visibility to the volumes that underpin that growth. So if you take, for example, 2026, our MVC grossed up at 80%. That's 495 million cubic feet per day. Compared with the midpoint of our 2025 guidance, that implies more than 7.5% growth. As we look at 2027, our MVC growth up there, that's 505 million cubic feet per day. You need to add back the 10 million cubic feet per day maintenance impact that John mentioned for the TGP maintenance. That gets you to the 550 million cubic feet per day, which is about a 4% annual growth rate. On top of that, in additional third-party volumes and that gets you to the growth rate, with the Hess volumes really being the primary driver of our growth through the period. So with that, now I will turn it over to John. He can give you the background on kind of what's driving that growth.

Sure. Thanks, Jonathan. Yes, I mean it's a good question. We continue to be focused on the four-rig development plan. And as productivity and efficiency improves, drilling longer laterals, improved cycle time, overall productivity of the wells, overall Hess' program is continuing to generate growth, both on the oil side and on the gas side. And as Jonathan mentioned, we've got oils growing 10% from '24 to '25, 5% from '25 to '26 and 5% from '26 to '27. In addition, our gas is outpacing oil a little bit as expected. The GORs in the basin are continuing to increase. As the wells mature, GOR naturally increases over time, so it's playing out exactly as we expected. And so from our perspective, the growth trajectory supports the additional infrastructure that we'll need both from a field gathering perspective, but also from additional processing. So there is good line of sight between now and 2027 and actually even beyond that, showing the growth trajectory based on the MVCs that we've set and the guidance we've given in the earnings call.

That's helpful. And then my second question is on your long-term outlook in Bakken. I know there has been quite some activity in Bakken recently. Can you help us understand on how HESM is thinking about growing in Bakken either organically or via M&A? And if HESM is thinking of expanding beyond Bakken at any point in the future?

Sure. Well, maybe I'll hit the last part of your question first. I mean at this point, no. There's no plans to expand outside of the Bakken. I think we are really, really happy with the position we've got. Our strategic footprint is -- sits right on top of some of the best rock in the basin. We obviously have the support of Hess, as a sponsor and then a significant partner for us to work with. From our perspective, the growth trajectory is really underpinned by Hess production. There is additional third-party opportunities out there and we're going to continue to leverage our infrastructure to capture those third-party volumes, and we do anticipate third-parties will grow about at the same pace that Hess is growing. But it really is underpinned -- the organic growth is really underpinned by Hess. To your question on organic versus M&A activity, we continue to look at opportunities in the basin. We're always interested in looking at bolt-on opportunities. But from our perspective, with the growth built-in, the bar is extremely high. Our disciplined approach is really kind of the thing that's stabilized us over the years. As I mentioned, we're in the process of building our own gas plant. It is rightsized at 125 million cubic foot per day, it plays right in naturally with the growth trajectory that we've got planned through the end of the decade and even beyond that. So from our perspective, we are really happy with the infrastructure, but we're always interested to look at bolt-on opportunities that make sense and integrate nicely into our strategic footprint.

Great. I'll do my best. Have a great rest of the day.

Okay. Thank you so much.

[Operator Instructions] Our next question comes from the line of Doug Irwin from Citi.

Hi, thanks for the question. Maybe one on CapEx to start. Just wondering if you could maybe provide a little bit more color on just what's driving the CapEx budget higher near term, both the '25 guide moving higher, and I think you came in a little above budget on '24. And then just curious to get your view on what longer-term growth CapEx might look like once some of these projects come online. Is it fair to assume that you see a pretty meaningful step down beyond '27 as you come out of a relatively higher growth phase with the processing build-out?

Yes. Maybe I'll start and then hand it over to Jonathan for a little bit of the longer term CapEx view. From our perspective, the main component of CapEx in both '24 and '25 has really been activity phasing. Hess has really done a great job from an overall efficiency perspective. They are drilling faster wells, bringing the wells on sooner. We are also seeing good productivity from the wells, drilling longer laterals. So that's -- we're really just trying to maintain the pace with Hess on the growth side. And third parties are generally following that same trajectory as well. So that's a little bit of the acceleration into 2024. And then '25 kind of represents the same. I mean as we start to kick-off construction and fabrication of our gas plant expansion, we'll be doing some spending in 2025 for that. We think that approximately $300 million in 2025 is about right. We do anticipate through '27 spending to be an approximate $250 million to $300 million range, and then after that, we do expect the bulk of our growth infrastructure to be in place that will actually be able to support the growth trajectory through the end of the decade with that infrastructure. There will be some opportunity for additional compression as Hess decides where it's going to drill and how it's going to operationalize the opportunity it has ahead of it, but we would expect, post 2027, to see a step down in CapEx activity after that. Jonathan, is there anything you wanted to add to that?

No, that was good. I think as we've highlighted of our growth -- of our capital budget, $125 million is ongoing capital. So that's kind of capital that we'll have ongoing through '27 and beyond. And then as John said, it is really the project capital. There'll be some phasing over the next couple of years, but in general, expect that to decline as some of these projects come online. And then while there may be some additional kind of growth capital beyond '27, it certainly would be declining relative to where we are right now. And I think that's really -- just to highlight, I think that's one of the exciting things that we are talking about today is not only that we can talk about visibility through 2027, both on the volume side and on the financial side, but really, we can talk about now really visibility through the rest of the decade. And really there, we've talked about continued gas growth with the new plant coming online that supports growth for the rest of the decade. We just talked about capital, busy over the next couple of years, but then declining. So with growing EBITDA through the rest of the decade and declining capital, that means that we'll have growing free cash flow, really not just through 2027, as we've talked about, but really visibly now for the rest of the decade. And that will really provide the opportunity for us to continue to fund distribution growth, to continue to fund potential incremental return of capital, not only through the 2027 as we've extended that today, but really visibility through the rest of the decade. So it is really an exciting time in our journey, really exciting time where we are right now that we can give the visibility not just through 2027, which is already differentiated, but now we really have clear line of sight to our volume and financial metric growth through the rest of the decade.

Okay. That's really helpful. Thanks. And my second question, I guess I just wanted to get your latest thoughts around the capital allocation program that you've extended into '27. And I guess in the context of all the potential changes that could happen at the sponsor level this year, I'm just curious how heavily sponsor actions might factor into your decisions moving forward. And specifically, I'm just wondering if buybacks potentially become less attractive relative to other uses of cash down the line if you are eventually having to repurchase from the public rather than directly from the sponsors.

Sure. Yes. No, we are really proud of our return of capital framework with our two parts, really, our 5% annual distribution growth. That, we can achieve even at MVC levels, so that is really -- we're highly confident in our ability to deliver that. And then our incremental return of capital through repurchases. And then I think what we've done, and we've gotten a lot of very positive feedback on this, is matching off those repurchases with dividend increases that are really funded by the lower share count and maintaining our total distributed cash at the same level. So it is allowed us that even though we've targeted at least 5% distribution growth, really since 2021, since we've started this program, our average distribution growth per year has really been approximately 10%, really almost double what we have just had in our base. So now looking forward, we talked about $1.25 billion at least of financial flexibility, expect to utilize that for certainly unit repurchases going forward and multiple times per year, as we've done in the past, and then matching those with distribution level increases as I've described. I think in terms of how does that change potentially as our shareholder ownings change, really I think no real change to that. I think is there a potential in the future that we would incorporate the public? I mean, certainly as the sponsor kind of percentages change over time, that's certainly something that we would consider. In the past, we didn't include the public in the repurchases really because we were building up our -- the liquidity of the public float and the size. At this point, we are at the public being 48% of the ownership, and certainly as we go forward, that becomes less of a concern. So certainly, there's an opportunity to bring the public into the repurchase program, something we would certainly consider. Not something we are taking a step right now, but certainly something that we'd consider particularly as ownership would continue to change. But really, it's something, in terms of the program, no real change to the program. May adjust, as I described, depending on ownership changes, but really continuing to execute the program and deliver the -- really, as I talked about, one of the highest total shareholder yields in the sector.

Got it. That’s all from me. Thank you John.

Thank you. One moment for our next question. Our next question comes from the line of Jackie Koletas from Goldman Sachs.

Hi, thank you for taking my question. First, I just want to start, given your expectations to reach below 2.5 times in '26, how do you think about the use of leverage going forward as you get below that target?

Right. So what we've said is, if you think about the $1.25 billion of capacity that we have, that's really funded by two elements. First is leverage capacity, and then excess free cash flow after distributions. If you kind of do the math with the EBITDA growth that we've given, assume about half a turn, let's say, at least what you'll come up with is about half of that comes from leverage capacity, meaning half of the $1.25 billion. The other half is really as our free cash flow exceeds growth, exceeds our 5% target distribution, that gives you about the other half of that $1.25 billion. Certainly, we are in a great position to be able to -- primary objective is continue to focus on return of capital. That's a priority. As I said in my comments. John talked about, of course, we'll continue to look at bolt-on opportunities. For us, we are very fortunate. It's a bit of an and, not an or, but continuing -- our priority will be continue to evaluate opportunities, but the bar is high. We have significant organic growth, and so there's not a need to do anything. And then absent that, of course, we'll continue to focus on shareholder returns as we've done through incremental returns through repurchases and dividend increases.

Thanks. Appreciate the color there. And just following up, the first quarter guidance is adjusted for those weather impacts in January. What does that guidance assume beyond what has already occurred in the quarter? And how do you expect the basin to recover for the rest of the months we have left?

Yes. So I think for January, the weather has been kind of bouncing around a little bit just from an overall temperature perspective, and wind also contributing to some operational challenges as well. Generally speaking, the first quarter tends to be a little bit more unpredictable from a weather perspective. So again, we've obviously seen the impact, and I think the basin, order of magnitude, is down about 10%. Hess is down less than that. I’d say, overall recovery has been strong. We expect volumes to get back online, but we still have two more -- at least two more months of weather ahead of us. So we're just trying to be thoughtful and maybe a little bit conservative on our approach to the first quarter, but just trying to manage expectations going into first quarter. So overall, I think we feel like it's a -- our first quarter numbers are deliverable, and we are just kind of focused on supporting Hess as best we can as that volume recovers in the basin.

One thing I just would add is if you look at our full year EBITDA guidance and then take our first quarter guidance, that really implies that on average, right, EBITDA Q2 through Q4 is going to be up 11% on average. So really significant growth. I would expect that growth to be phased, as Jonathan described, volume growth throughout the rest of the year. So expect that EBITDA to continue to grow. But certainly, once we get past the weather and all the things that John just described, it is certainly a significant step-up and continued growth for the rest of the year.

Great. Thank you so much for the time. That’s it for me.

Thank you. One moment for our next question. Our next question comes from the line of Noah Katz from JPMorgan Chase.

Hi, thanks for the question. First, it would be helpful if you could provide a walk of expectations for EBITDA and costs throughout each quarter of 2025. How should we think about the business seasonally compared to '24? Thanks.

Yes. I think the way to think about this is, generally, the seasonality that we have, particularly in North Dakota, let's say, that will start on the cost side. Really Q1, typically a bit lower than other quarters. Q2 and Q3 are really the quarters where we have the highest amount of activity. And then what I would say in Q4 is we've had different types of quarters. If the weather is good, the team has really worked to optimize, our credit to the team, to really take advantage of getting work done in Q4 before you get back into Q1 and really potential for severe winter weather. So it is a bit milder. We have had years we'll be able to do a bit more in Q4. So that's always kind of a bit of a variable. Also in Q4, as you saw this year, allocations kind of finalize in Q4, so that always provides a little bit of variability. On the volume side, expect really just steady growth quarter-on-quarter. Obviously, that will vary depending on wells online and all that type of thing. But in general, steady growth throughout the year. As we continue to bring more wells online, we continue to see growth in oil, and then growth with that in associated gas as well.

Thanks a lot. And then as a quick follow-up, just looking at the trend of around $100 million in repurchases every quarter, do you think you could exceed this threshold in 2025? Or should we expect for this to stay relatively consistent? Thanks.

Sure. Yes. What I would say is, look, we -- consistent with what we've been doing, expect multiple repurchases per year. We have, as you saw in 2024, before that, we've been doing about $100 million, but that's not a [set in stone] (ph), I would say, amount. Certainly I would say that we did do $100 million already at the beginning here of the quarter. But that was really -- think of that more as a Q4, just as we kind of got into the Q4 holidays and all of that, we didn't want to kind of execute it right at year-end. So that was more of a kind of catch-up for Q4, so I would kind of think of it that way. And then the pace, we will set throughout the year, but certainly expect multiple repurchases per quarter, similar to year, similar to what we've done in the past.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.