What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-02-27 compared with 2022-03-01 · 216 added, 406 removed, 1291 unchanged (33% of the section changed)

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Except for splits and combinations as contemplated by our partnership agreement, no distribution shall be made under any circumstances in respect of any Class B Shares or our general partner interest.

The following table sets forth the cash distributions per unit or share declared on the common units or Class A Shares, as applicable, for the three most recent years through December 31, 2021:

The following table sets forth the cash distributions per share declared on the Class A Shares, for the three most recent years through December 31, 2022:

Quarterly Cash

Three most recent years

Distribution per Unit/Share (1)

Distribution per Share (1)

March 31, 2020

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(2) The distribution represents an approximate 11% increase compared to the distribution for the quarter ended March 31, 2021, consisting of a 10% announced increase in addition to a quarterly increase consistent with the Company’s targeted 5% growth in annual distributions per Class A share.

(3) The distribution represents an approximate 6.3% increase compared to the distribution for the quarter ended December 31, 2021, consisting of a 5% announced increase in addition to a quarterly increase consistent with the Company's targeted 5% growth in annual distributions per Class A share.

Definition of Available Cash

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Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken.

Our Ongoing Response to Global Pandemic and Market Conditions

The coronavirus (“COVID-19”) global pandemic continues to have a profound impact on society and industry.

The Company and Hess have implemented a variety of health and safety measures including enhanced cleaning procedures and modified work practices such as travel restrictions, health screenings, vaccination policies, reduced personnel at work sites wherever this can be done safely, and remote working arrangements for office workers.

In addition, we implemented extensive COVID-19 protocols to keep the workforce safe during th e planned maintenance turnaround at the Tioga Gas Plant, which was executed safely and successfully in the third quarter of 2021.

In addition to the global health concerns of COVID-19, the pandemic severely impacted demand for oil.

In 2020, worldwide crude oil prices declined significantly due in part to reduced global demand stemming from COVID-19.

As a result of the sharp decline in crude oil prices, Hess reduced its rig count from 6 rigs to 1 rig in the Bakken in 2020.

Third parties in the Bakken also curtailed production and reduced their drilling activity.

While economic conditions improved in 2021 and Hess increased its rig count to 3 rigs in September 2021, we continued to see lower oil throughput volumes in our systems throughout this period due to reduced drilling activity.

Our contract structure largely offset the impact of the reduction in volumes on our revenues in 2021 and 2020 and is expected to continue to offset such impact through the Initial Term of our commercial agreements, as our minimum volume commitments provide minimum levels of cash flows and the fee recalculation mechanisms under our agreements support our cash flow stability.

Other Factors Expected to Significantly Affect Our Future Results.

Significant Activities

In 2020, we completed construction of a 150 MMcf/d natural gas processing capacity expansion at our Tioga Gas Plant (“TGP”).

In the third quarter of 2021, we safely and successfully completed the planned maintenance turnaround at TGP, during which a series of plant tie-ins for the TGP expansion were also completed.

The expansion was placed in service in October 2021.

Total processing capacity of 400 MMcf/d became available concurrent with the completion of a third-party residue export expansion in February 2022.

In 2022, we brought online two new greenfield compressor stations that, in aggregate, provide an additional 85 MMcf/d of installed capacity and can be expanded up to 130 MMcf/d in the future.

In 2023, we plan to complete two more greenfield compressor stations that are expected to provide, in aggregate, an additional 100 MMcf/d of gas compression capacity when brought online.

2021 - 2022 Equity Transactions

On March 15, 2021, the Sponsors sold an aggregate of 6,900,000 of our Class A Shares, inclusive of the underwriters’

During 2021 and 2022, the Company, the Partnership and the Sponsors completed the following equity transactions:

On March 15, 2021, the Sponsors sold an aggregate of 6,900,000 of our Class A shares representing limited partner interests (“Class A Shares”), inclusive of the underwriters’

option to purchase up to 900,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $21.00 per Class A share, less underwriting discounts.

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option to purchase up to 1,125,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $26.00 per Class A share, less underwriting discounts.

The Sponsors received net proceeds from the two offerings of approximately $356.5 million in total, after deducting underwriting discounts.

On April 4, 2022, the Sponsors sold an aggregate of 10,235,000 of our Class A Shares, inclusive of the underwriters’

option to purchase up to 1,335,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $29.50 per Class A Share, less underwriting discounts.

In 2022, the Sponsors received net proceeds from the offerings of approximately $291.7 million (2021:

$356.5 million), after deducting underwriting discounts.

The Company did not receive any proceeds in the offerings.

Additionally, on August 10, 2021, the Partnership repurchased an aggregate of 31,250,000 of its Class B Units from the Sponsors at a purchase price of $24.00 per Class B unit, for total consideration of $750.0 million.

The Repurchase Transaction was funded through issuance by the Partnership of $750.0 million aggregate principal amount of 4.25% senior unsecured notes due 2030.

As a result of the 2021 Equity Transactions, our public ownership increased from 6.0% at December 31, 2020 to 12.9% at December 31, 2021 on a consolidated basis.

We also utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through a 10% increase in our quarterly distribution levels.

On August 10, 2021, the Partnership repurchased an aggregate of 31,250,000 Class B units representing limited partner interests in the Partnership (“Class B Units”) from the Sponsors at a purchase price of $24.00 per Class B unit, for total consideration of $750.0 million, which was funded through issuance by the Partnership of $750.0 million aggregate principal amount of 4.25% senior unsecured notes due 2030.

On April 4, 2022, the Partnership repurchased an aggregate of 13,559,322 Class B Units from the Sponsors at a purchase price of $29.50 per Class B unit, for total consideration of $400.0 million, which was funded using borrowings under the Partnership’s revolving credit facility, which were subsequently repaid with proceeds from an issuance by the Partnership of $400.0 million aggregate principal amount of 5.50% senior unsecured notes due 2030.

Financial Statements and Supplementary Data.

Note 3, Equity Transactions, Note 8, Debt and Interest Expense, Note 9, Partners' Capital and Distributions and Note 16, Subsequent Events for additional details.

2019 Restructuring

On December 16, 2019, the Company and the Partnership completed the transactions (the “Restructuring”) contemplated by the Partnership Restructuring Agreement, dated October 3, 2019, by and among the Company, the Partnership and the other parties thereto.

As a result of the Restructuring, the Company was delegated control of the Partnership and replaced the Partnership as its publicly traded successor.

Prior to the Restructuring, the Partnership was indirectly controlled by HIP GP LLC, the general partner of Hess Infrastructure Partners LP (“HIP”).

HIP was originally formed as a joint venture between Hess and GIP and owned an 80% economic interest in certain of the Partnership’s existing assets (the “Joint Interest Assets”), a 100% interest in certain other businesses, including Hess’

Bakken water services business (“Hess Water Services”) and a 100% interest in Hess Midstream Partners GP LP (“MLP GP LP”), which held all of the Partnership’s outstanding incentive distribution rights and the general partner interest in the Partnership, and controlled the Partnership.

Pursuant to the Restructuring, the Partnership acquired HIP, including HIP’s 80% interest in the Joint Interest Assets, 100% interest in Hess Water Services and the outstanding economic general partner interest and incentive distribution rights in the Partnership.

The Partnership’s organizational structure converted from a master limited partnership into an “Up-C”

structure in which the Partnership’s public unitholders received newly issued Class A Shares in Hess Midstream LP in a one-for-one exchange.

The Partnership changed its name to “Hess Midstream Operations LP”

and became a consolidated subsidiary of the Company.

After consummation of the Restructuring, the Sponsors and their affiliates received an aggregate of 898,000 Class A Shares in the Company, all of the Class B Units representing noncontrolling limited partner interests in the Partnership and received aggregate cash consideration of $601.8 million.

The Sponsors own 100% interest in the general partner of the Company and, through their ownership of the general partner, continue to have the right to elect the entire board of directors.

The acquisition of HIP by the Partnership, including its 80% economic interest in the Joint Interest Assets and 100% interest in Hess Water Services, was accounted for as an acquisition of a business under common control.

Accordingly, our results for the year ended December 31, 2019 are presented as if the acquisition occurred at the beginning of the year.

2019 Acquisitions

On March 1, 2019, HIP acquired 100% of the membership interest in Hess Water Services for cash consideration of $225.0 million.

On March 22, 2019, we acquired the crude oil, gas and water gathering assets of Summit Midstream Partners’

Tioga Gathering System for cash consideration of $89.2 million, with the potential for additional contingent payments in future periods subject to certain future performance metrics.

As of December 31, 2021, the contingent liability w as $2.9 millio n.

Note 3, Equity Transactions, Note 7, Debt and Interest Expense, and Note 8, Partners' Capital and Distributions for additional details.

At December 31, 2022:

the Company held an 18.3% controlling interest in the Partnership and the Sponsors held an 81.7% noncontrolling economic interest in the Partnership;

public limited partners held an 18.0% voting interest and a 98.0% economic interest in the Company, which represents an indirect 18.0% economic interest in the Partnership;

the Sponsors and their respective affiliates held an 82.0% voting interest and a 2.0% economic interest in the Company, which, taken with their direct limited partnership interest in the Partnership, represents an indirect 82.0% economic interest in the Partnership.

See Organizational Structure.

Business Strategies

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We intend to invest additional capital to continue extending and expanding our strategically positioned infrastructure, including additional gas capture capabilities, to meet Hess’

current and future production growth and enable Hess to continue to meet or exceed North Dakota’s wellhead gas capture targets in the short-term and achieve zero routine flaring from its operations in the Bakken by end of 2025.

current and future production growth and to reduce flaring from upstream production operations.

Leverage Core Asset Base to Attract Additional Third‑Party Business.

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Grow Through Accretive Acquisitions from Our Sponsors and Third Parties.

We plan to pursue acquisitions of complementary midstream assets from our Sponsors as well as from third parties.

We evaluate potential acquisitions of complementary midstream assets from our Sponsors as well as from third parties.

Climate Change and Energy Transition

We are aligned with Hess in its aim to help meet the world's growing energy needs while reducing its greenhouse gas (“GHG”) emissions.

In 2021, Hess announced new five-year GHG reduction targets for 2025, which are to reduce operated Scope 1 and 2 GHG emissions intensity by approximately 44% and methane emissions intensity by approximately 52% from 2017.

Hess also announced in January 2022 its commitment to achieve zero routine flaring from its operations by end of 2025.

We play an important part in Hess' emissions reduction efforts by providing the infrastructure to move oil, natural gas liquids and natural gas to market and reduce wellhead flaring as well as through actions to reduce our own GHG emissions, which are included in Hess’

We are aligned with Hess in its aim to help meet the world's growing energy needs while working towards reducing its greenhouse gas (“GHG”) emissions.

We play an important part in Hess' emissions reduction efforts by providing the infrastructure to move oil, natural gas liquids and natural gas to market and reduce wellhead flaring as well as through efforts to reduce our own GHG emissions, which are included in Hess’

overall emissions footprint.

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In collaboration with Hess, we have prioritized the following emissions reduction initiatives:

Continuing to optimize field development and infrastructure plans for our Bakken operations through the following:

Tioga Gas Plant expansion and debottlenecking to provide an additional 150 MMcf/d in processing capacity, which was completed and placed in service in October 2021;

Installing additional compression capacity in 2022, with more planned for the future;

Utilizing advanced modeling tools to maximize the capabilities of our infrastructure.

Continuing to optimize field development and infrastructure plans for our Bakken operations through installing additional compression capacity in 2023, with more planned for the future;

Examining and implementing alternatives to flaring, such as utilizing natural gas that would have been flared for onsite power generation or conversion to liquified natural gas;

Pursuing studies to improve energy efficiency.

Examining potential power purchase agreement arrangements to address Hess’

and our electricity needs through renewable energy, thereby offsetting or eliminating our collective Scope 2 GHG emissions.

Pursuing studies to improve energy efficiency and assess carbon capture;

Implementing operational improvements in our facilities to reduce energy consumption.

Our assets and operations are organized into the following three reportable segments:

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Significant financial and operating results for the year ended December 31, 2022 include:

Safely and successfully completed the planned TGP maintenance turnaround.

Completed the repurchase of an aggregate of 13,559,322 Class B Units of the Partnership from the Sponsors for $400 million.

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Revenues and other income in 2022 were $1,275.2 million compared with $1,203.8 million in 2021.

Current year revenues and other income were up $111.9 million compared with the prior year primarily due to higher tariff rates and MVC levels of $171.1 million, partially offset by lower pass-through revenues, including electricity, produced water trucking and disposal costs, rail transportation and certain other fees of $59.2 million.

Total costs and expenses in 2021 were $476.6 million, down from $515.4 million in the prior year.

The decrease was attributable to lower pass-through costs, including electricity, produced water trucking and disposal costs, rail transportation and certain other fees of $59.2 million, partially offset by higher other operating and maintenance expenses of $10.1 million primarily attributable to the TGP turnaround, higher depreciation of $8.7 million and higher general and administrative expenses of $1.6 million.

Interest expense, net of interest income, increased $10.7 million primarily attributable to the $750.0 million 4.25% fixed-rate senior notes issued in connection with the Repurchase Transaction.

Income tax expense increased $7.3 million driven by higher income before income tax expense and increased ownership of the Partnership by Hess Midstream LP following the 2021 Equity Transactions.

As a result, consolidated net income increased $132.9 million and Adjusted EBITDA increased $159.7 million during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Throughput volumes for gas processing and gas gathering in 2021 compared with 2020 remained flat primarily due to the TGP turnaround.

Throughput volumes decreased 21% for crude oil gathering and 20% for crude oil terminaling in 2021 compared with 2020 due to reduced drilling activity.

The impact of the reduction in physical volumes in 2021 compared with 2020 was offset by higher tariff rates and MVC shortfall fee payments.

Water gathering volumes increased 4% compared with the prior year.

Current year revenues and other income were up $71.4 million compared with the prior year, of which $77.4 million is primarily due to slightly higher tariff rates and generally higher MVC levels in gas gathering and processing, partially offset by generally lower MVC levels in oil gathering and terminaling.

This increase is partially offset by lower pass-through revenues, including electricity, produced water trucking and disposal costs, rail transportation and certain other fees of $6.0 million.

Total operating costs and expenses in 2022 were $484.0 million, up from $476.6 million in the prior year.

The increase was attributable to higher depreciation of $15.7 million and slightly higher general and administrative expenses of $0.4 million, partially offset by lower operating and maintenance expenses of $8.7 million primarily attributable to the TGP turnaround in 2021 and lower pass-through costs, for which we recognize revenues in the same amount, as described above.

Interest expense, net of interest income, increased $43.9 million primarily attributable to the $750.0 million 4.25% fixed-rate senior notes issued in August 2021, the $400.0 million 5.50% fixed-rate senior notes issued in April 2022 and higher interest rates on the Term Loan A credit facility.

Income tax expense in 2022 was $26.6 million, up from $14.6 million in 2021, which was primarily driven by increased ownership of the Partnership by Hess Midstream LP following the equity offering and unit repurchase transactions in 2021 and 2022.

As a result, consolidated net income increased $2.8 million and Adjusted EBITDA increased $74.4 million during the year ended December 31, 2022 compared with the year ended December 31, 2021.

Throughput volumes increased 5% for gas processing and 3% for gas gathering in 2022 compared with 2021 primarily due to higher gas capture in the current year despite weather challenges and downtime due to the TGP turnaround in the prior year.

Throughput volumes decreased 13% for crude oil gathering and 11% for crude oil terminaling in 2022 compared with 2021 primarily due to severe weather and lower gross production volumes from Hess and third parties.

The impact of the reduction in crude oil physical volumes in 2022 compared with 2021 was partially offset by slightly higher tariff rates and MVC shortfall fee payments.

For additional discussion of the results of operations at the segment level, see “

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Our revenues also include revenues from third-party volumes contracted with Hess and delivered to us under these commercial agreements with Hess, as well as pass-through third-party rail transportation costs, third-party produced water trucking and disposal costs, electricity fees and certain other third-party fees, for which we recognize revenues in an amount equal to the costs.

For the year ended December 31, 2021, our gas revenues comprised approximately 75% of total affiliate revenues, excluding passthrough revenues.

For the year ended December 31, 2022, our gas gathering and gas processing revenues comprised approximately 75% of total affiliate revenues, excluding passthrough revenues.

Together with Hess, we are pursuing strategic relationships with third-party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.

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Adjusted EBITDA and Distributable Cash Flow .

We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and our proportional share of depreciation of our equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non‑cash, non‑recurring items, if applicable.

We define distributable cash flow as Adjusted EBITDA less net interest, excluding amortization of deferred financing costs, cash paid for federal and state income taxes and maintenance capital expenditures.

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General and administrative expenses

Total costs and expenses

Total operating costs and expenses

Income (loss) from operations

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General and administrative expenses

Total costs and expenses

Total operating costs and expenses

Income (loss) from operations

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Interest expense, net

Gain on sale of property, plant and equipment

Income (loss) before income tax expense (benefit)

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General and administrative expenses

Total costs and expenses

Total operating costs and expenses

Income (loss) from operations

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Interest expense, net

Gain on sale of property, plant and equipment

Income (loss) before income tax expense (benefit)

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Net income (loss) attributable to

net parent investment

Net income (loss) attributable to

noncontrolling interest

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Year ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenues increased $47.3 million in 2022 compared to 2021, of which $58.7 million is attributable to higher gas gathering MVC levels and physical gas gathering volumes due to higher gas capture and $13.4 million is attributable to higher tariff rates.

This increase is partially offset by $13.6 million attributable to lower crude oil gathering MVC levels and $9.1 million attributable to lower water gathering and disposal MVC levels in 2022 when compared to 2021.

The remaining decrease of $2.1 million is attributable to lower pass-through revenues.

Operating and maintenance expenses increased $27.1 million, of which $13.6 million is attributable to higher maintenance activity on our expanding gathering infrastructure, $8.0 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements and $7.6 million is attributable to higher remediation expenses, including the produced water release in August 2022.

The Company is working with the North Dakota regulatory agencies and affected landowners to remediate impacts of the release.

This increase is partially offset by $2.1 million lower pass-through costs.

Depreciation expense increased $6.4 million due to new compressors and other new gathering assets being brought into service.

General and administrative expenses increased $1.8 million primarily attributable to higher charges from Hess under our omnibus and employee secondment agreements.

Processing and Storage

Revenues and other income increased $35.1 million in 2022 compared to 2021, of which $47.0 million is attributable to higher MVC levels and higher physical volumes due to higher gas capture.

This increase was partially offset by $7.3 million attributable to lower pass-through revenue, including electricity and other fees related to temporary gas offloads during the TGP turnaround in 2021, and $4.6 million attributable to lower tariff rates.

Operating and maintenance expenses decreased $43.4 million, of which $21.0 million is attributable to the TGP turnaround in 2021 and $7.3 million is attributable to lower pass-through costs, including electricity and other fees related to temporary offloads during the TGP turnaround in 2021.

In addition, $7.2 million is attributable to lower third-party processing fees due to lower volumes processed at the LM4 plant, $ 4.3 million is attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements and $3.6 million is attributable to lower other operating costs.

Depreciation expense increased $9.3 million primarily due to the TGP expansion and turnaround assets placed in service in 2021.

General and administrative expenses decreased $1.4 million attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements.

Income from equity investments decreased $5.3 million in 2022 compared to 2021 primarily due to lower volumes processed and higher maintenance expenses at the LM4 plant.

Terminaling and Export

Revenues and other income de creased $11.0 million in 2022 compared to 2021, of which $14.2 million is attributable to lower MVC levels and $2.2 million is attributable to lower tariff rates.

This decrease was partially offset by $3.4 million attributable to higher rail transportation pass-through revenues and $2.0 million attributable to other income.

Operating and maintenance expenses increased $7.6 million, of which $4.0 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements, $3.4 million is attributable to higher rail transportation pass-through costs and $0.2 million is attributable to other maintenance activity.

Interest and Other

Income tax expense increased $12.0 million primarily driven by increased ownership of the Partnership by Hess Midstream LP following the equity offering and unit repurchase transactions in 2021 and 2022.

Year ended December 31, 2021 Compared to Year Ended December 31, 2020

Revenues increased $68.7 million in 2021 compared to 2020, of which $59.6 million is attributable to higher tariff rates, $16.4 million is attributable to higher water services revenue and $11.2 million is attributable to higher gas gathering and compression volumes and MVC levels.

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Income tax expense increased $7.3 million driven by higher income before income tax expense and increased ownership of the Partnership by the Company following the 2021 equity transactions.

Year ended December 31, 2020 Compared to Year Ended December 31, 2019

Revenues increased $139.0 million in 2020 compared to 2019, of which $56.1 million is attributable to higher gas gathering and compression volumes and $16.1 million is attributable to higher crude oil gathering volumes driven by higher Hess production, higher gas capture and increasing MVC levels.

In addition, $44.8 million of the increase in revenues is attributable to higher tariff rates, $17.1 million is attributable to higher operated water services revenue and $4.9 million is attributable to higher pass-through electricity fees and produced water trucking and disposal revenue.

Operating and maintenance expenses increased $12.0 million, of which $4.9 million is attributable to higher pass-through electricity and produced water pass-through trucking and disposal fees, $4.6 million is attributable to higher maintenance costs on our expanded infrastructure, and $2.5 million is attributable to higher insurance and property taxes due to additional assets placed in service.

Depreciation expense increased $14.4 million due to new compressors, produced water disposal facilities and other new gathering assets being brought into service, as well as due to gathering assets acquired from Summit Midstream Partners, LP at the end of the first quarter of 2019.

General and administrative expenses decreased $2.0 million primarily attributable to lower charges from Hess under our omnibus and employee secondment agreements.

Processing and Storage

Revenues and other income increased $75.3 million in 2020 compared to 2019, of which $46.2 million is attributable to higher volumes driven by higher Hess production, higher gas capture and LM4 being in service for the full year in 2020.

Additionally, $28.0 million of the increase in revenues is attributable to higher tariff rates and $1.1 million is attributable to higher pass-through electricity fees.

Operating and maintenance expenses increased $37.8 million, of which $19.3 million is attributable to LM4 processing fees, $8.8 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements, $7.1 million is attributable to higher maintenance activity due to TGP turnaround, $1.5 million is attributable to higher insurance and property tax and $1.1 million is attributable to higher pass-through electricity fees .

The increase in general and administrative expenses of $1.7 million is primarily attributable to higher charges from Hess under our omnibus and employee secondment agreements.

Terminaling and Export

Revenues and other income increased $29.3 million in 2020 compared to 2019, of which $10.5 million is attributable to higher rail transportation pass‑through revenues.

In addition, $9.9 million of the increase is attributable to higher tariff rates and $8.9 million of the increase is attributable to higher throughput volumes at our terminals driven by higher Hess production and increasing MVC levels.

Operating and maintenance expenses increased $10.8 million primarily attributable to higher rail transportation pass-through costs.

Interest and Other

General and administrative expenses decreased $30.9 million, primarily due to costs associated with the Restructuring .

Interest expense, net of interest income, increased $32.3 million primarily attributable to the $550 million 5.125% fixed-rate senior notes issued in connection with the Restructuring and higher borrowings under our credit facilities .

Income tax expense increased $7.4 million as a result of being a separate taxable entity for the full year in 2020.

Other Factors Expected to Significantly Affect Our Future Results

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Our contract structure has largely offset and is expected to continue to offset potential impact of the reduction in volumes on our financial performance metrics through the initial term of our commercial agreements, as our minimum volume commitments provide minimum levels of cash flows and the fee recalculation mechanisms under our agreements support our cash flow stability.

Subsequently, in the first quarter of 2021, Hess increased its rig count in the Bakken to two rigs and added a third operated rig in September 202 1, and we expect to be above minimum volume commitment levels in 2023 and 2024.

To the extent our plans include revenues for volumes, including third-party volumes contracted through Hess, above currently established MVC levels, such revenues could decline to the MVC levels as a result of market volatility.

Subsequently, Hess increased its rig count in the Bakken to three operated rigs in September 2021, and to four operated rigs in July 2022.

To the extent our plans include revenues for volumes above currently established MVC levels, such revenues could decline to the MVC levels as a result of market volatility.

For our oil gathering and terminaling revenues, we expect to be at or below MVC levels in 2023, and above currently established MVC levels in 2024 and 2025.

For our gas gathering and processing revenues, we expect to be above currently established MVC levels in 2023-2025.

The throughput volumes at our facilities depend primarily on the volumes of crude oil and natural gas produced by Hess in the Bakken, which, in turn, is ultimately dependent on Hess’

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The commodities trading markets, as well as global and regional supply and demand factors, may also influence the selling prices of crude oil, natural gas and NGLs.

While the second term of our commercial agreements includes continuing MVC, the fees change to an inflation-based fixed fee structure, which may provide less downside risk protection.

The Secondary Term of our commercial agreements includes continuing MVCs, while the fees change to a fixed fee structure based on the average fees paid by Hess during the last three years of the Initial Term of the commercial agreements adjusted annually for inflation up to 3% a year.

Such a fee structure may provide less downside risk protection in the future.

Furthermore, our ability to execute our growth strategy in the Bakken, including attracting third-party volumes, will depend on crude oil and natural gas production in that area, which is also affected by the supply of and demand for crude oil and natural gas.

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Loss (gain) on sale of property, plant and equipment

Transaction costs

Adjusted EBITDA

Adjusted EBITDA prior to Restructuring

Adjusted EBITDA attributable to noncontrolling

interest and net parent investment prior to Restructuring

Cash interest paid, net (1)

Maintenance capital expenditures, net

Distributable cash flow prior to Restructuring (2)

Adjusted EBITDA subsequent to Restructuring

Interest, net (1)

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Amortization of deferred financing costs

Capitalized interest

Proportional share of equity affiliates' depreciation

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Earnings from equity investments

Transaction costs

Adjusted EBITDA

Adjusted EBITDA prior to Restructuring

Adjusted EBITDA attributable to noncontrolling

interest and net parent investment prior to Restructuring

Cash interest paid, net (1)

Maintenance capital expenditures, net

Distributable cash flow prior to Restructuring (2)

Adjusted EBITDA subsequent to Restructuring

Interest, net (1)

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Distributable cash flow

(1) Represents cash interest paid, net, attributable to controlling interest prior to the Restructuring.

(2) Distributable cash flow prior to the Restructuring is calculated net of any amounts attributable to noncontrolling interest.

Distributable cash flow prior to the Restructuring for 2019 represents a period of nine months ended September 30, 2019, during which distributions were paid under the old structure.

Subsequent to the Restructuring, we make cash distributions to holders of Class A Shares, including to our general partner as holder of an aggregate of 898,000 Class A Shares, and the Partnership makes cash distributions to holders of units of the Partnership, including to the Sponsors as holders of all of the Class B Units, pro rata.

Therefore, distributable cash flow subsequent to the Restructuring includes amounts attributable to noncontrolling interest.

Distributable cash flow subsequent to the Restructuring for 2019 represents a period of three months ended December 31, 2019.

(1) Excludes amortization of deferred financing costs.

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On January 23, 2023, we declared a quarterly cash distribution of $0.5696 per Class A Share that was paid on February 13, 2023 to shareholders of record on February 2, 2023, and the Partnership made distributions of $0.5696 per Class B Unit of the Partnership to the Sponsors.

On August 10, 2021, the Partnership repurchased 31,250,000 of its Class B Units from the Sponsors for an aggregate purchase price of $750.0 million, which was funded through issuance by the Partnership of $750.0 million aggregate principal amount of 4.250% unsecured senior notes due 2030.

On August 16, 2022 the United States enacted the Inflation Reduction Act of 2022, which includes a 15% book-income alternative minimum tax on corporations with average adjusted financial statement income over $1 billion for any 3-year period ending with 2022 or later and a 1% excise tax on the fair market value of stock that is repurchased by publicly traded U.S.

corporations.

The alternative minimum tax and the excise tax are effective in taxable years beginning after December 31, 2022.

We continue to evaluate the effect of the new law and any additional guidance on our future cash flows and financial results, including if we become a taxpayer for the alternative minimum tax in the future.

Fixed‑Rate Senior Notes

In August 2021, the Partnership issued $750.0 million aggregate principal amount of 4.250% fixed‑rate senior notes due 2030 to qualified institutional investors.

The notes are guaranteed by certain subsidiaries of the Partnership.

In April 2022, the Partnership issued $400.0 million aggregate principal amount of 5.500% fixed-rate senior unsecured notes due 2030 to qualified institutional investors.

Interest is payable semi-annually on April 15 and October 15, commencing October 15, 2022.

The Partnership used the proceeds to repay the borrowings under its revolving credit facility used to finance the April 4, 2022, repurchase transaction.

In August 2021, the Partnership issued $750.0 million aggregate principal amount of 4.250% fixed‑rate senior unsecured notes due 2030 to qualified institutional investors.

Interest is payable semi‑annually on February 15 and August 15.

The Partnership used the proceeds to fund the Repurchase Transaction.

In December 2019, the Partnership issued $550.0 million aggregate principal amount of 5.125% fixed‑rate senior notes due 2028 to qualified institutional investors.

The notes are guaranteed by certain subsidiaries of the Partnership.

The Partnership used the proceeds to fund the August 10, 2021 repurchase transaction.

In December 2019, the Partnership issued $550.0 million aggregate principal amount of 5.125% fixed‑rate senior unsecured notes due 2028 to qualified institutional investors.

Interest is payable semi‑annually on June 15 and December 15.

The Partnership used the net proceeds to finance the acquisition of HIP, including to repay borrowings under HIP’s credit facilities, and pay related fees and expenses.

In December 2019, in connection with the Restructuring, the Partnership assumed $800.0 million aggregate principal amount of 5.625% outstanding fixed-rate senior notes of HIP in a par-for-par exchange for newly issued 5.625% senior notes due 2026 of the Partnership and paid approximately $2.0 million of exchange consent fees.

The notes are guaranteed by certain subsidiaries of the Partnership.

In December 2019, in connection with the Restructuring, the Partnership assumed $800.0 million aggregate principal amount of 5.625% outstanding fixed-rate senior unsecured notes of HIP in a par-for-par exchange for newly issued 5.625% senior notes due 2026 of the Partnership.

Interest is payable semi‑annually on February 15 and August 15.

The notes described above are guaranteed by certain subsidiaries of the Partnership.

Each of the indentures for the senior notes described above contains customary covenants that restrict our ability and the ability of our restricted subsidiaries to (i) declare or pay any dividend or make any other restricted payments;

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Credit Facilities

In December 2019, the Partnership entered into senior secured syndicated credit facilities (the “Credit Facilities”) consisting of a $1,000.0 million 5-year revolving credit facility and a fully drawn $400.0 million 5-year Term Loan A facility.

On July 14, 2022, the Partnership amended and restated its existing credit agreement for its senior secured credit facilities (the “Credit Facilities”) consisting of a $1,000.0 million 5-year revolving credit facility and a fully drawn $400.0 million 5-year Term Loan A facility, resulting in an incremental $20.0 million drawn on the term loan facility at closing.

The amended and restated Credit Facilities mature in July 2027.

Facility fees accrue on the total capacity of the revolving credit facility.

Borrowings under the 5-year Term Loan A facility generally bear interest at LIBOR plus an applicable margin ranging from 1.55% to 2.50%, while the applicable margin for the 5-year syndicated revolving credit facility ranges from 1.275% to 2.000%.

Borrowings under the 5-year Term Loan A facility generally bear interest at Secured Overnight Financing Rate (”SOFR”) plus the applicable margin ranging from 1.65% to 2.55%, while the applicable margin for the 5-year syndicated revolving credit facility ranges from 1.375% to 2.050%.

Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities).

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The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes.

The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the assets of the Partnership and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions.

The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the presently owned and after-acquired assets of the Partnership and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions.

The Credit Facilities contain representations and warranties, affirmative and negative covenants and events of default that the Partnership considers to be customary for an agreement of this type, including a covenant that requires the Partnership to maintain a ratio of total debt to EBITDA (as defined in the Credit Facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to the Partnership obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter.

As of December 31, 2021, the Partnership was in compliance with these financial covenants.

As of December 31, 2022, we were in compliance with these financial covenants.

The following table sets forth a summary of our cash flows (in millions):

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Cash flows provided by operating activities increased $65.6 million in 2022 compared to 2021.

The change in operating cash flows resulted from an increase in revenues and other income of $111.9 million, a decrease in expenses, other than depreciation, amortization, equity‑based compensation and other non-cash gains and losses of $37.9 million and an increase in distributions from equity investments of $7.7 million, partially offset by a decrease in cash provided by changes in working capital of $3.7 million.

The change in operating cash flows resulted from an increase in revenues and other income of $71.4 million, an increase in cash provided by changes in working capital of $32.5 million, partially offset by an increase in expenses, other than depreciation, amortization, equity-based compensation and other non-cash gains and losses of $33.9 million and a decrease in distributions received from equity investments of $4.4 million.

Cash flows provided by operating activities increased $153.8 million in 2021 compared to 2020.

The change in operating cash flows resulted from an increase in revenues and other income of $243.6 million and distributions from equity investments of $9.7 million, partially offset by an increase in expenses, other than depreciation, amortization, equity‑based compensation and other non-cash gains and losses of $55.7 million and a decrease in cash provided by changes in working capital of $26.6 million.

The change in operating cash flows resulted from an increase in revenues and other income of $111.9 million, a decrease in expenses, other than depreciation, amortization, equity-based compensation and other non-cash gains and losses of $37.9 million and an increase in distributions from equity investments of $7.7 million, partially offset by a decrease in cash provided by changes in working capital of $3.7 million.

Investing Activities.

Cash flows used in investing activities increased $75.0 million in 2022 compared to 2021 driven by higher payments for additions to property, plant, and equipment primarily related to our compression capacity expansion capital program.

Cash flows used in investing activities decreased $137.8 million in 2021 compared to 2020.

The decrease in investing cash outflows resulted from lower payments for capital expenditures of $137.9 million primarily due to completion of the TGP expansion, partially offset by lower proceeds from the sale of property, plant and equipment of $0.1 million.

Cash flows used in investing activities decreased $196.5 million in 2020 compared to 2019.

The decrease in investing cash outflows resulted from the acquisition of Summit Midstream Partners’

Tioga Gathering System in 2019 for $89.2 million, net of cash acquired, the acquisition of Hess Water Services in 2019 for $225 million, of which $68.9 million was included in cash outflows from investing activities, lower payments for our investment in LM4 of $33.0 million, lower payments for capital expenditures of $5.3 million, and proceeds from sale of property, plant and equipment of $0.1 million.

Financing Activities.

Cash flows used in financing activities decreased $10.7 million in 2022 compared to 2021.

In 2022, we issued $400.0 million aggregate principal amount of unsecured senior notes that we used to repay the borrowings under our revolving credit facility used to finance the 2022 repurchase transaction.

In 2022, we also had lower net repayments on our debt of $12.3 million, net of any changes in financing costs, and $0.6 million lower transaction costs related to unit repurchase transactions, partially offset by higher distributions to shareholders and noncontrolling interest of $2.2 million.

Cash flows used in financing activities increased $291.3 million in 2021 compared to 2020.

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The remaining change of $1.6 million represents a final settlement received from Hess in 2020 related to our previous acquisition of Hess Water Services.

Cash flows used in financing activities increased $262.2 million in 2020 compared to 2019 due to a decrease in borrowings of $613.4 million and an increase in distributions to shareholders and noncontrolling interest of $408.3 million.

The remaining change resulted from payments of cash consideration related to the Restructuring of $601.8 million and acquisition of Hess Water Services for $225 million, as described above, of which $156.1 million was included in the cash outflows from financing activities as a distribution to Hess in 2019, partially offset by the final settlement amount of $1.6 million received from Hess in 2020.

Capital Expenditures

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Additions to property, plant and equipment

Expansion capital expenditures in 2021 are primarily attributable to continued expansion of our compression capacity and gas capture capabilities to meet Hess’

and third parties’

current and future production growth and enable Hess to continue to meet or exceed North Dakota’s wellhead gas capture targets.

The activities focused on the construction of two new greenfield compressor stations and associated pipeline infrastructure, which are expected to provide an additional 85 MMcf/d of gas compression capacity when brought online in 2022.

Capital expenditures in 2022 are primarily attributable to continued expansion of our compression capacity and gas capture capabilities to meet Hess' and third parties' current and future production growth and gas capture targets.

The activities focused on the construction of two new greenfield compressor stations and associated pipeline infrastructure, which were placed in service in March and September 2022, respectively.

In aggregate, the new stations provide an additional 85 MMcf/d of installed capacity and can be expanded up to 130 MMcf/d in the future.

Expansion capital expenditures in 2021 are also attributable to continued expansion of our compression capacity and gas capture capabilities.

Maintenance capital expenditures in 2021 are primarily related to the TGP turnaround.

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Capital expenditures in 2020 also relate to continued expansion of our compression capacity and gas capture capabilities.

Capital expenditures in 2019 are primarily attributable to continued expansion of our gathering and compression capacity, as well as amounts attributable to engineering, procurement, civil construction and fabrication activities for the TGP expansion that began in 2019.

Additionally, in 2019, we acquired Hess Water Services for cash consideration of $225.0 million, of which $68.9 million was recognized as additions to property, plant, and equipment and $156.1 million was recognized as a distribution to Hess.

In 2019, we also acquired Summit Midstream Partners’

Tioga Gathering System for cash consideration of $89.2 million, with the potential for additional payments in future periods subject to certain future performance metrics.

Financial Statements and Supplementary Data.

Note 4, Acquisitions .

Cash Requirements

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The determination of impairments could be a significant element in arriving at the results of operations.

Impairment charges would impact total costs and expenses and net Property, Plant & Equipment in our accompanying consolidated statements of operations and balance sheets.

Impairment charges would impact total operating costs and expenses and net Property, Plant & Equipment in our accompanying consolidated statements of operations and balance sheets.

Contingencies

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Contingent liabilities are recorded when probable and reasonably estimable, the determination of which requires significant judgement and is subject to inherent uncertainty.

On the basis of existing information, we believe that the resolution of any such matters, individually or in the aggregate, will not have a material adverse effect on our financial position or results of operations.

On August, 12, 2022, the Company became aware of a produced water release from an underground pipeline located approximately 8 miles north of Ray, North Dakota.

At this time, it is estimated that approximately 34,000 barrels of produced water were released, causing impacts to soils, crops, and groundwater.

The Company has recorded reserves for the estimated future costs to investigate and remediate impacts of the release.

Financial Statements and Supplementary Data.

Note 12 , Commitments and Contingencies.

Estimates related to contingencies affect operating expenses in our accompanying consolidated statements of operations and liabilities in our balance sheets.

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Any changes in interest rates do not impact cash outflows associated with fixed rate interest payments or settlement of debt principal, unless a debt instrument is repurchased prior to maturity.

A hypothetical change of 100 basis points in the rate of our variable interest rate debt would impact annual interest expense by $4.2 million based on our December 31, 2022, debt balances.

FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA

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Note 3 Equity Transactions

Note 4 Acquisitions

Note 4 Related Party Transactions

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Note 9 Equity-Based Compensation

Note 11 Earnings per Share/Limited Partner Unit

Note 10 Earnings per Share

Note 11 Concentration of Credit Risk

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We have audited Hess Midstream LP’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Hess Midstream LP (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

In our opinion, Hess Midstream LP (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in partners’

capital, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated March 1, 2022 expressed an unqualified opinion thereon.

capital, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 27, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Houston, Texas

March 1, 2022

February 27, 2023

Report of Independent Registered Public Accounting Firm

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Presentation and Disclosure of Related Party Transactions

Presentation and Disclosure of Related Party Transactions with Hess Corporation

Description of the Matter

As described in Note 5 to the consolidated financial statements, the Company is part of the consolidated operations of Hess Corporation and its affiliates (“Hess”) and engages, in the normal course of business, in related party transactions.

As described in Note 4 to the consolidated financial statements, the Company is part of the consolidated operations of Hess Corporation and its affiliates (“Hess”) and engages, in the normal course of business, in related party transactions with Hess.

Auditing the presentation and disclosure of these related party transactions, including the completeness thereof, was challenging due to Hess’

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How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of identifying and disclosing related party transactions.

To test the completeness of related party transactions, we obtained a listing of all related party relationships and compared the listing to the Hess legal structure and evidence obtained from other audit procedures including, among others, inquiries of management and the audit committee, review of the board of directors and other committee meeting minutes, review of contracts, and testing of revenue and expense transactions.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of identifying and disclosing related party transactions with Hess.

To test the completeness of these related party transactions, we obtained a listing of the Company’s related party relationships and compared the listing to the Company’s legal structure and evidence obtained from other audit procedures including, among others, inquiries of management and the audit committee, review of the board of directors and other committee meeting minutes, review of contracts, and testing of revenue and expense transactions.

In addition, we tested transactions for appropriate classification as related-party or third-party transactions in revenue, expense and balance sheet accounts, and their compliance with the related terms of the agreements, by inspecting source documentation and evaluating the aggregation and presentation of related party financial statement line items.

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Houston, Texas

March 1, 2022

February 27, 2023

HESS M IDSTREAM LP

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December 31, 2021)

Total partners' capital

Total Class A and Class B partners' capital

Noncontrolling interest

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General and administrative expenses

Total costs and expenses

Total operating costs and expenses

Income from operations

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Income tax expense

Net income attributable to net parent investment

Net income attributable to noncontrolling interest

Net income attributable to Hess Midstream LP

General partners' interest in net income prior to the Restructuring

Limited partners' interest in net income

Net income attributable to Hess Midstream LP

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Weighted average Class A shares outstanding

Weighted average limited partner units outstanding

prior to the Restructuring

See accompanying notes to consolidated financial statements.

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Comprehensive income (loss) attributable

to net parent investment

Comprehensive income (loss) attributable

to noncontrolling interest

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HESS MIDSTREAM LP

CONSOLIDATED STATEMENTS OF CHANG ES IN PARTNERS’

Partners' Capital

Limited Partners

Noncontrolling

Other Comprehensive Income

(in millions)

Balance at December 31, 2018

Net income prior

to Restructuring

Equity-based compensation

prior to Restructuring

Distributions to unitholders

prior to Restructuring

- $ 1.5616 per unit

Distributions to general

partner prior to

Restructuring

Distributions to

noncontrolling

interest prior to

Restructuring

Contributions from

noncontrolling

interest prior to

Restructuring

Acquisition of Hess

Water Services

Equity exchange related

to Restructuring

Cash consideration

related to Restructuring

Recognition of

Deferred Tax Asset

Net income after

Restructuring

Equity-based compensation

after restructuring

Other comprehensive

income (loss)

Balance at December 31, 2019

See accompanying notes to consolidated financial statements.

HESS MIDSTREAM LP

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’

CONSOLIDATED STATEMENTS OF CHA NGES IN PARTNERS’

Partners' Capital

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Balance at December 31, 2021

Equity-based compensation

Distributions - $ 2.1845 per share

Recognition of deferred tax asset

Sale of shares held by Sponsors

Class B unit repurchase

Transaction costs

Balance at December 31, 2022

See accompanying notes to consolidated financial statements.

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Distributions from equity investments

(Increase) decrease in capitalized interest

Amortization of deferred financing costs

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Additions to property, plant and equipment

Acquisitions from third parties, net of cash acquired

Acquisitions from Hess

Payments for equity investments

Proceeds from sale of property, plant and equipment

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Distributions to noncontrolling interest

Cash consideration paid related to Restructuring

Capital contributions (distributions) to Hess associated with acquisitions

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Description of Business.

We are a fee-based, growth-oriented, Delaware limited partnership formed by Hess Infrastructure Partners GP LLC (“HIP GP LLC”) and our general partner in 2019 to own, operate, develop and acquire a diverse set of midstream assets and provide fee-based services to Hess and third-party customers.

We are a fee-based, growth-oriented, Delaware limited partnership formed by Hess Infrastructure Partners GP LLC, the general partner of Hess Infrastructure Partners LP ("HIP"), and our general partner to own, operate, develop and acquire a diverse set of midstream assets and provide fee-based services to Hess and third-party customers.

HIP was originally formed in 2015 as a 50 / 50 joint venture between Hess and Global Infrastructure Partners ("GIP" and, together with Hess, the "Sponsors").

We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner.

On April 10, 2017, we completed an initial public offering (“IPO”) as a master limited partnership, pursuant to which HIP contributed to the Partnership a 20 % controlling economic interest in each of (i) Hess North Dakota Pipelines Operations LP;

(ii) Hess TGP Operations LP;

and (iii) Hess North Dakota Export Logistics Operations LP (collectively, the “Joint Interest Assets”) and a 100 % interest in Hess Mentor Storage Holdings LLC.

HIP owned the remaining 80 % economic interest in the Joint Interest Assets, a 100 % interest in certain other businesses, including Hess’

Bakken water services business (“Hess Water Services”), which it acquired from Hess on March 1, 2019, and a 100 % interest in Hess Midstream Partners GP LP (“MLP GP LP”), which held all of the Partnership’s outstanding incentive distribution rights and the general partner interest in the Partnership, and controlled the Partnership.

Pursuant to the Restructuring, the Partnership acquired HIP, including HIP’s 80 % interest in the Joint Interest Assets, 100 % interest in Hess Water Services and the outstanding economic general partner interest and incentive distribution rights in the Partnership.

The Partnership’s organizational structure converted from a master limited partnership into an “Up-C”

structure in which the Partnership’s public unitholders received newly issued Class A Shares in the Company in a one-for-one exchange.

Class A Shares commenced trading on the New York Stock Exchange under the former symbol “HESM”

on December 17, 2019.

As a result of the Restructuring, the Company was delegated control of the Partnership and replaced the Partnership as its publicly traded successor.

The Partnership changed its name to “Hess Midstream Operations LP”

and became a consolidated subsidiary of the Company.

After consummation of the Restructuring, the Sponsors and their affiliates own an aggregate of 898,000 Class A shares in the Company, all of the Class B units representing noncontrolling limited partner interests in the Partnership, 100 % interest in the general par tner of the Company and, through their ownership of the general partner, continue to have the right to elect the entire board of directors.

Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken.

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Significant Activities.

In 2022, we brought online two new greenfield compressor stations.

In aggregate, the new stations provide an additional 85 MMcf/d of installed capacity and can be expanded up to 130 MMcf/d in the future.

In 2020, we completed construction of a 150 MMcf/d natural gas processing capacity expansion at our Tioga Gas Plant (“TGP”).

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Total processing capacity of 400 MMcf/d became available concurrent with the completion of a third-party residue export expansion in February 2022.

2019 Restructuring.

On December 16, 2019, the Company and the Partnership completed the transactions (the “Restructuring”) contemplated by the partnership restructuring agreement, dated October 3, 2019, by and among the Company, the Partnership and the other parties thereto.

As a result of the Restructuring, the Company was delegated control of the Partnership and replaced the Partnership as its publicly traded successor.

Prior to the Restructuring, the Company and the Partnership were indirectly controlled by HIP GP LLC, the general partner of Hess Infrastructure Partners LP (“HIP”).

HIP was originally formed in 2015 as a joint venture between Hess and GIP II Blue Holding, L.P.

(formerly GIP II Blue Holding Partnership, L.P., or “GIP”

and, together with Hess, the “Sponsors”).

Prior to the Restructuring:

HIP owned an 80 % noncontrolling economic interest in each of (i) Hess North Dakota Pipelines Operations LP (“Gathering Opco”), which owns crude oil and natural gas gathering pipelines and compressor stations in North Dakota;

(ii) Hess TGP Operations LP (“HTGP Opco”), which owns the Tioga Gas Plant, a natural gas processing and fractionation plant, including a residue gas pipeline in North Dakota;

and (iii) Hess North Dakota Export Logistics Operations LP (“Logistics Opco”), which owns a crude oil and natural gas liquids (“NGL”) rail loading facility, crude oil rail cars and crude oil pipeline and truck receipt terminal in North Dakota (the “Joint Interest Assets”), a 100 % interest in a produced water gathering and disposal business owned by Hess Water Services Holdings LLC (“Hess Water Services”) and a 100 % interest in Hess Midstream Partners GP LP (“MLP GP LP”), which held all of the Partnership’s outstanding incentive distribution rights (the “IDRs”) and the general partner interest in the Partnership (the “GP Interest”), and controlled the Partnership;

the Partnership, in connection with its initial public offering (“IPO”) on April 10, 2017, owned a 20 % controlling interest in the Joint Interest Assets and a 100 % interest in Hess Mentor Storage Holdings LLC (“Mentor Holdings”), which owns a propane storage cavern and related rail and truck loading and unloading and storage terminal in Minnesota;

the Sponsors directly owned HIP and an aggregate of 10,282,654 common units representing limited partner interests in the Partnership and 27,279,654 subordinated units representing limited partner interests in the Partnership.

Pursuant to the Restructuring, which was consummated on December 16, 2019, the Partnership acquired HIP, including HIP’s 80 % interest in the Joint Interest Assets, 100 % interest in Hess Water Services and the outstanding economic general partner interest and IDRs.

The Partnership’s organizational structure converted from a master limited partnership into an “Up-C”

structure in which the Partnership’s public unitholders received newly issued Class A shares (“Class A Shares”) representing limited partner interest in Hess Midstream LP in a one -for-one exchange.

The Partnership changed its name to “Hess Midstream Operations LP”

and became a consolidated subsidiary of the Company.

After giving effect to the Restructuring and the 2021 equity transactions described in Note 3:

the Partnership owns 100 % of the Joint Interest Assets, Hess Water Services and MLP GP LP, which continues to hold all of the IDRs and the GP Interest;

the Sponsors (i) directly hold all of the Class B units (“Class B Units”) representing limited partner interests in the Partnership, (ii) indirectly own 100 % of the ownership interests in our general partner, which holds 898,000 Class A Shares (economic and voting) and all of the Class B shares (non-economic, voting only) representing limited partner interests in the Company (“Class B Shares”) and (iii) received $ 601.8 million in cash;

Class B Units of the Partnership together with the same number of Class B Shares of the Company are convertible to Class A Shares of the Company on a one -for-one basis;

the Class A Shares commenced trading on the New York Stock Exchange under the symbol “HESM”

on December 17, 2019;

at December 31, 2021, the Company held a 13.3 % controlling interest in the Partnership and the Sponsors held a 86.7 % noncontrolling economic interest in the Partnership ( 2020:

the Company held a 6.3 % controlling interest in the Partnership and the Sponsors held a 93.7 % noncontrolling economic interest in the Partnership);

at December 31, 2021, public limited partners held a 12.9 % voting interest and a 97.3 % economic interest in the Company, which represents an indirect 12.9 % economic interest in the Partnership (2020:

public limited partners held a 6.0 % voting interest and a 95.0 % economic interest in the Company, which represented an indirect 6.0 % economic interest in the Partnership) ;

at December 31, 2021, the Sponsors and their respective affiliates held an 87.1 % voting interest and a 2.7 % economic interest in the Company, which, taken with their direct limited partnership interest in the Partnership, represents an indirect 87.1 % economic interest in the Partnership ( 2020:

the Sponsors and their respective affiliates held a 94.0 % voting interest and a 5.0 % economic interest in the Company, which represented an indirect 94.0 % economic interest in the Partnership) ;

the Sponsors own 100 % interest in the general partner of the Company and, through their ownership of the general partner, continue to have the right to elect the entire board of directors.

The acquisition of HIP by the Partnership, including its 80 % economic interest in the Joint Interest Assets and 100 % interest in Hess Water Services, was accounted for as an acquisition of a business under common control.

Accordingly, our consolidated financial statements for the year ended December 31, 2019 are presented as if the acquisition occurred at the beginning of the year.

See Note 4 , Acquisitions .

LM4 Joint Venture.

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The consolidated financial statements include our accounts and the accounts of entities over which we have a controlling financial interest through our ownership or the majority voting interests of the entity.

We consolidate the activities of the Partnership, and prior to the Restructuring the activities of Gathering Opco, HTGP Opco and Logistics Opco, each as a variable interest entity (“VIE”) under U.S.

We consolidate the activities of the Partnership as a variable interest entity (“VIE”) under U.S.

Generally Accepted Accounting Principles (“GAAP”).

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At December 31, 2022, our noncontrolling interest represents the 81.7 % interest in the Partnership retained by Hess and GIP (2021:

Prior to the Restructuring, our noncontrolling interest represented the 80 % interest in the Joint Interest Assets retained by HIP.

All intercompany transactions and balances have been eliminated.

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Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates.

Common Control Transactions.

Assets and businesses acquired from Hess and its subsidiaries are accounted for as common control transactions whereby the net assets acquired are combined with net assets of the Company at Hess’

historical carrying value.

If any recognized consideration transferred in such a transaction exceeds the carrying value of the net assets acquired, the excess is treated as a capital distribution to Hess, similar to a dividend.

To the extent that such transactions require prior periods to be retrospectively adjusted, historical net equity amounts prior to the transaction date are reflected in “Net Parent Investment.”

Cash consideration up to the carrying value of net assets acquired is presented as an investing activity in our consolidated statement of cash flows.

Cash consideration in excess of the carrying value of net assets acquired is presented as a financing activity in our consolidated statement of cash flows.

Cash and Cash Equivalents.

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We account for our investment in LM4 under the equity method of accounting, as we do not control, but have a significant influence over, its operations.

During the year ended December 31, 2019, we capitalized $ 4.1 million of interest expense associated with our investment in LM4.

Difference in the basis of the investment and the underlying net asset value of the equity investee is amortized into net income over the remaining useful lives of the underlying assets.

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$ 11.0 million and $ 3.0 million, respectively).

Net Parent Investment.

Net parent investment represents HIP’s historical activity as well as Hess’

historical investment in Hess Water Services prior to its acquisition by HIP, the accumulated net operating results through the date when we obtained control of HIP, and the net effect of transactions between HIP and the Sponsors, and between Hess and Hess Water Services.

Retrospectively adjusted financial information from prior to the acquisition of HIP is included in Net parent investment.

Revenue Recognition—Contracts with Customers.

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If it is more likely than not that some or all of the deferred tax assets will not be realized, a valuation allowance is recorded to reduce the deferred tax assets to the amount expected to be realized.

Prior to the Restructuring on December 16, 2019, we were not a separate taxable entity for U.S.

federal and state income tax purposes;

therefore, we did not provide for income tax benefit or expense.

Each partner was subject to income taxes on its share of the Partnership’s earnings.

On March 1, 2019, HIP acquired Hess Water Services (see Note 4 , Acquisitions ).

For the periods prior to March 1, 2019, Hess Water Services was included in the consolidated income tax returns of Hess.

The provision for Hess Water Services’

income taxes and income tax assets and liabilities were determined as if it were a standalone taxpayer for all periods presented.

For the period from March 1, 2019 through the Restructuring date of December 16, 2019, Hess Water Services was not taxable itself and was not part of a separate taxable entity;

therefore, no income tax provision was recognized.

Net Income Per Limited Partner Unit.

Prior to the Restructuring, we identified the general partner interest and IDRs as participating securities and computed income per unit using the two‑class method under which net income per unit was calculated for common units and participating securities considering both distributions declared and participation rights in undistributed earnings as if all such earnings had been distributed during that period.

Net income per unit applicable to limited partners, including subordinated unitholders, was computed by dividing limited partners' interest in net income, after deducting the general partner's 2 % interest and IDRs, by the weighted‑average number of outstanding common and subordinated units.

Environmental and Legal Contingencies.

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In these activities, we may use futures, forwards, options and swaps, individually or in combination, to mitigate our exposure to fluctuations in interest rates.

All derivative instruments are recorded at fair value in our consolidated balance sheet.

Our policy for recognizing the changes in fair value of derivatives varies based on the designation of the derivative.

The changes in fair value of derivatives that are not designated as hedges are recognized in earnings.

Derivatives may be designated as hedges of expected future cash flows or forecasted transactions (cash flow hedges).

Changes in fair value of derivatives that are designated as cash flow hedges are recorded as a component of other comprehensive income (loss).

Amounts included in Accumulated other comprehensive income (loss) for cash flow hedges are reclassified into earnings in the same period that the hedged item is recognized in earnings.

New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform , as a new ASC Topic, ASC 848 and also issued subsequent amendments to the initial guidance (collectively, “ASC 848”).

The purpose of ASC 848 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates, such as London Interbank Offered Rate (“LIBOR”) to alternative reference rates.

ASC 848 applies only to contracts, hedging relationships, debt arrangements and other transactions that reference a benchmark reference rate expected to be discontinued because of reference rate reform.

ASC 848 contains optional expedients and exceptions for applying U.S.

GAAP to transactions affected by this reform.

The amendments in the ASU are effective for all entities through December 31, 2022.

Borrowing under our Credit Facilities bear interest at LIBOR plus an applicable margin (see Note 8, Debt and Interest Expense ).

Although our Credit Facilities mature in 2024, they include provisions for transition to an alternative reference rate without interruption in our ability to borrow under these Credit Facilities.

We do not expect our adoption of ASC 848 or transition to an alternative reference rate will have a material impact on our consolidated financial statements.

There were no derivatives outstanding at December 31, 2022 and 2021 and the impact of derivative hedging was immaterial to our 2020 consolidated financial statements.

Equity Transactions

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option to purchase up to 1,125,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $ 26.00 per Class A share, less underwriting discounts.

The Sponsors received net proceeds from the two offerings of approximately $ 356.5 million in total, after deducting underwriting discounts.

On April 4, 2022, the Sponsors sold an aggregate of 10,235,000 of our Class A Shares, inclusive of the underwriters’

option to purchase up to 1,335,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $ 29.50 per Class A Share, less underwriting discounts.

The Sponsors received net proceeds from the 2022 offering of approximately $ 291.7 million, after deducting underwriting discounts (2021:

$ 356.5 million in total, after deducting underwriting discounts) .

The Company did no t receive any proceeds in the offerings.

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The Company retained control in the Partnership based on the delegation of control provisions, as described in Note 2, Summary of Significant Accounting Policies and Basis of Presentation .

As a result of the equity offering transactions, we recognized an adjustment to the carrying amount of noncontrolling interest and Class A shareholders’

capital balance of $ 52.4 million to reflect the change in ownership interest.

We also recognized an additional deferred tax asset of $ 74.2 million related to the change in the temporary difference between carrying amount and tax basis of our investment in the Partnership.

The effect of recognizing the additional deferred tax asset was included in Class A shareholders’

equity balance in the accompanying consolidated statement of changes in partners’

capital due to the transaction being characterized as a transaction among or with shareholders.

Class B Unit Repurchase

On July 27, 2021, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership purchased from each Sponsor 15,625,000 Class B Units representing limited partner interests in the Partnership for an aggregate purchase price of $ 750.0 million (the “Repurchase Transaction”).

As a result of the equ ity offering transactions described above, we recognized adjustments increasing the amount of the Class A shareholders’

capital balance by $ 27.0 million (2021:

$ 52.4 million) and decreasing the carrying amount of noncontrolling interest by an equal amount to reflect the change in ownership interest.

Class B Unit Repurchases

On July 2 7, 2021, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from each Sponsor 15,625,000 Class B Units representing limited partner interests in the Partnership for an aggregate purchase price of $ 750.0 million.

The purchase price per Class B Unit was $ 24.00 , representing an approximate 4 % discount to the 30-day volume weighted average trading price of Class A shares representing limited partner interests in the Company through July 27, 2021.

Pursuant to the terms of the repurchase agreement, immediately following the purchase of the Class B Units from the Sponsors, the Partnership cancelled those units, and the Company cancelled, for no consideration, an equal number of Class B Shares representing limited partner interests in the Company held by the Company’s general partner.

The Repurchase Transaction closed on August 10, 2021 and was funded through issuance of new $ 750.0 million senior unsecured notes (see Note 8, Debt and Interest Expense ).

The Repurchase Transaction was accounted for in accordance with ASC 810 whereby changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions.

The carrying amount of the noncontrolling interest was adjusted to reflect the change in the ownership interest with the difference between the amount of consideration paid and the amount by which the noncontrolling interest was adjusted recognized in equity attributable to Class A shareholders.

We incurred approximately $ 2.1 million of costs directly attributable to the Repurchase Transaction that were charged to equity.

We also recognized an additional deferred tax asset of approximately $ 14.8 million related to the change in the temporary difference between carrying amount and tax basis of our investment in the Partnership, the effect of which was included in Class A shareholders’

The repurchase transaction closed on August 10, 2021 and was funded through issuance by the Partnership of $ 750.0 million aggregate principal amount of senior unsecured notes (see Note 7, Debt and Interest Expense ).

On March 29, 2022, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors, subject to the secondary equity offering transaction described above, an aggregate number of Class B Units representing limited partner interests in the Partnership to be determined by dividing (a) $ 400.0 million by (b) the public offering price of the Class A Shares to be set in the secondary offering.

On April 4, 2022, the repurchase transaction closed, and the Partnership purchased directly from the Sponsors 13,559,322 Class B Units at a purchase price per Class B Unit of $ 29.50 , which is equal to the public offering price per Class A Share in the transaction described above.

The repurchase transaction was funded using borrowings under the Partnership’s revolving credit facility, which were subsequently repaid with proceeds from an issuance by the Partnership of $ 400.0 million senior unsecured notes (see Note 7, Debt and Interest Expense ).

The repurchase transactions were accounted for in accordance with ASC 810 whereby changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions.

The carrying amounts of the noncontrolling interest were adjusted to reflect the changes in the ownership interest with the difference between the amounts of consideration paid and the amounts by which the noncontrolling interest were adjusted recognized as a reduction in equity attributable to Class A shareholders.

We incurred approximately $ 1.5 million of costs directly attributable to the repurchase transaction (2021:

$ 2.1 million) that were charged to equity.

As a result of the equity offering transactions and the repurchase transactions described above, we also recognized an additional deferred tax asset of $ 86.4 million (2021:

$ 89.0 million) related to the change in the temporary difference between carrying amount and tax basis of our investment in the Partnership.

The effect of recognizing the additional deferred tax asset was included in Class A shareholders’

equity balance in the accompanying consolidated statement of changes in partners’

As a result of the equity offering transactions and the Repurchase Transaction described above, the Company’s consolidated ownership in the Partnership increased from 6.3 % at December 31, 2020 to 13.3 % at December 31, 2021.

Hess Water Services Acquisition

On March 1, 2019, HIP acquired 100 % of the membership interest in Hess Water Services that owns Hess’

existing Bakken water services business for $ 225.0 million in cash.

HIP funded the purchase price through a combination of cash on hand and borrowings under its revolving credit facility.

In connection with the Hess Water Services acquisition, HIP acquired the following:

(in millions)

Property, plant and equipment, net

Working capital

Asset retirement obligations

Net assets acquired

The transaction was accounted for as an acquisition of a business between entities under common control, and therefore, the related acquired assets and liabilities were transferred at Hess’

historical carrying value.

In 2019, we recognized $ 156.1 million of consideration in excess of the book value of net assets acquired as a capital distribution to Hess, which is reflected within Net parent investment in the accompanying consolidated statements of changes in partners’

In 2020, we received $ 1.6 million from Hess as part of the final settlement.

Hess Water Services is included in our gathering segment (see Note 14, Segments ).

Tioga System Acquisition

On March 22, 2019, we acquired 100 % of the membership interest in Tioga Midstream Partners LLC from Summit Midstream Partners, LP that owns oil, gas, and water gathering assets (the “Tioga System Acquisition”).

The transaction was accounted for as an asset acquisition.

The Tioga System, located in Williams County in western North Dakota, is complementary to our infrastructure, and is currently delivering volumes into our gathering system.

We paid $ 89.2 million in cash at closing, net of cash acquired, and recognized a contingent liability for additional potential payments in future periods subject to certain performance metrics.

The contingent liability is included in Other noncurrent liabilities on our accompanying consolidated balance sheet (202 1:

$ 2.9 million , 2020:

$ 7.0 million).

The contingent liability was partially reduced in 2021 due to no planned drilling in the dedicated acreage.

We funded the purchase price through a combination of cash on hand and borrowings under our revolving credit facility.

The acquired Tioga System is included in our gathering segment (see Note 14, Segments ).

Hess Infrastructure Partners LP Acquisition

On December 16, 2019, the Company and the Partnership completed the Restructuring, pursuant to which the Partnership acquired all of the partnership interests in HIP from the Sponsors, including HIP’s retained 80 % economic interest in the Joint Interest Assets, 100 % interest in Hess Water Services and the outstanding economic general partner and incentive distribution rights in the Partnership.

The Partnership’s organizational structure converted from a master limited partnership into an “Up-C”

structure in which the Partnership’s public unitholders received newly issued Class A Shares in Hess Midstream LP in a one-for-one exchange.

The Partnership changed its name to “Hess Midstream Operations LP”

and became a consolidated subsidiary of the Company.

As a consideration for the Restructuring, the Sponsors received 898,000 Class A Shares in the Company, 266,416,928 Class B Units representing noncontrolling limited partner interests in the Partnership and cash consideration of $ 601.8 million.

Class B Units of the Partnership together with the same number of Class B Shares of the Company are convertible to Class A Shares of the Company on a one -for-one basis (see Note 9, Partners’

Capital and Distributions ).

Our 2019 consolidated statement of operations includes $ 26.2 million of costs associated with the Restructuring reflected in general and administrative expenses.

capital due to the transaction being characterized as a transaction among or with shareholders.

Related Party Transactions

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Hess also provides substantial operational and administrative services to us in support of our assets and operations.

In addition, we had Class B unit repurchase transactions and distributions to the Sponsors, which are disclosed elsewhere in the Notes to consolidated financial statements.

Commercial Agreements

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Oil and gas gathering services

Processing and storage services

Terminaling and export services

Water gathering and disposal services

Processing and storage services

The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs.

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Other accruals

Other current liabilities at December 31, 2021, of $ 10.2 million (2020:

$ 9.9 million) represent payables for property and sales and use taxes.

Other current liabilities are as follows:

December 31, 2022

December 31, 2021

(in millions)

Property and sales and use tax payable

Other current liabilities

Debt and Interest Expense

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4.250 % due 2030

5.500 % due 2030

Total fixed-rate senior notes

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Fixed‑Rate Senior Notes

In August 2021, the Partnership issued $ 750.0 million aggregate principal amount of 4.250 % fixed‑rate senior notes due 2030 to qualified institutional investors.

The notes are guaranteed by certain subsidiaries of the Partnership.

In April 2022, the Partnership issued $ 400.0 million aggregate principal amount of 5.500 % fixed-rate senior unsecured notes due 2030 to qualified institutional investors.

Interest is payable semi‑annually on April 15 and October 15, commencing October 15, 2022.

The Partnership used the proceeds to repay the borrowings under its revolving credit facility used to finance the 2022 repurchase transaction (see Note 3, Equity Transactions ).

In August 2021, the Partnership issued $ 750.0 million aggregate principal amount of 4.250 % fixed‑rate senior unsecured notes due 2030 to qualified institutional investors.

Interest is payable semi‑annually on February 15 and August 15 .

The Partnership used the proceeds to fund the 2021 repurchase transaction (see Note 3 , Equity Transactions ).

In December 2019, the Partnership issued $ 550.0 million aggregate principal amount of 5.125 % fixed‑rate senior notes due 2028 to qualified institutional investors.

The notes are guaranteed by certain subsidiaries of the Partnership.

In December 2019, the Partnership issued $ 550.0 million aggregate principal amount of 5.125 % fixed‑rate senior unsecured notes due 2028 to qualified institutional investors.

Interest is payable semi‑annually on June 15 and December 15.

The Partnership used the net proceeds to finance the acquisition of HIP, including to repay borrowings under HIP’s credit facilities, and pay related fees and expenses (see Note 4 , Acquisitions ).

In December 2019, in connection with the Restructuring, the Partnership, assumed $ 800.0 million aggregate principal amount of 5.625 % outstanding fixed-rate senior notes of HIP in a par-for-par exchange for newly issued 5.625 % senior notes due 2026 of the Partnership and paid approximately $ 2.0 million of exchange consent fees.

The notes are guaranteed by certain subsidiaries of the Partnership.

The Partnership used the net proceeds to finance the acquisition of HIP, including to repay borrowings under HIP’s credit facilities, and pay related fees and expenses.

Interest is payable semi‑annually on February 15 and August 15.

The notes described above are guaranteed by certain subsidiaries of the Partnership.

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Credit Facilities

In December 2019, in connection with the Restructuring, both HIP and the Partnership retired their existing senior secured revolving credit facilities, HIP retired its senior secured Term Loan A facility and the Partnership entered into new senior secured credit facilities (the “Credit Facilities”) consisting of a $ 1,000.0 million 5 -year revolving credit facility and a fully drawn $ 400.0 million 5 -year Term Loan A facility, receiving cash of $ 210.0 million at closing.

On July 14, 2022, the Partnership amended and restated its existing credit agreement for its senior secured credit facilities (the “Credit Facilities”) consisting of a $ 1,000.0 million 5 -year revolving credit facility and a fully drawn $ 400.0 million 5 ‑year Term Loan A facility, resulting in an incremental $ 20.0 million drawn on the term loan facility at closing.

The amended and restated Credit Facilities mature in July 2027 .

Facility fees accrue on the total capacity of the revolving credit facility.

Borrowings under the 5 -year Term Loan A facility generally bear interest at LIBOR plus the applicable margin ranging from 1.55 % to 2.50 %, while the applicable margin for the 5 -year syndicated revolving credit facility ranges from 1.275 % to 2.000 %.

Borrowings under the 5 -year Term Loan A facility generally bear interest at Secured Overnight Financing Rate (”SOFR”) plus the applicable margin ranging from 1.65 % to 2.55 %, while the applicable margin for the 5 ‑year syndicated revolving credit facility ranges from 1.375 % to 2.050 %.

Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities).

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Shares Outstanding

Prior to the Restructuring, our partners’

capital included common and subordinated units representing limited partner interests in the Partnership.

Pursuant to the Restructuring, 17,062,655 public common units of the Partnership outstanding as of December 16, 2019, were converted into Class A Shares of the Company (economic and voting) on a one -for-one basis, the Sponsors received 898,000 Class A Shares of the Company, 266,416,928 Class B Units representing noncontrolling limited partner interests in the Partnership and cash consideration of $ 601.8 million.

In addition, our general partner purchased 266,416,928 Class B Shares of the Company (non-economic voting only) for a cash amount equal to $ 0.0001 per Class B Share.

As of December 31, 2022, our Sponsors and their affiliates, including our general partner, collectively held 898,000 Class A Shares (economic and voting) and 195,847,606 Class B Shares (non-economic, voting only) representing limited partner interests in the Company, and 195,847,606 Cl ass B Units of the Partnership representing limited partner interests in the Partnership.

Class B Units of the Partnership together with the equal number of Class B Shares of the Company are convertible to Class A Shares of the Company on a one -for-one basis.

The changes in the number of shares outstanding from December 31, 2019 through December 31, 2021 are as follows:

The changes in the number of shares of the Company outstanding from December 31, 2019 through December 31, 2022 are as follows:

Class A Shares

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Balance, December 31, 2021

Equity-based compensation

Equity offering transaction -

Repurchase Transaction

Balance, December 31, 2022

Distributions

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As of December 31, 2022, $ 1.9 million of compensation cost related to our unvested restricted shares awarded under the LTIP remains to be recognized over an expected weighted‑average period of 1.8 years.

Earnings per Share/Limited Partner Unit

Earnings per limited partner unit prior to the Restructuring on December 16, 2019, were computed by dividing the respective limited partners’

interest in net income attributable to Hess Midstream Partners LP by the weighted average number of common and subordinated units outstanding.

Because we had more than one class of participating securities, we used the two‑class method when calculating earnings per limited partner unit.

The classes of participating securities included common units, subordinated units, general partner interest and incentive distribution rights.

Our net income includes earnings related to businesses acquired through transactions between entities under common control for periods prior to their acquisition by us.

We have allocated these pre-acquisition earnings to Net income attributable to net parent investment.

Subsequent to the Restructuring, we calculate earnings per Class A Share as we do not have any other participating securities.

Earnings per Share

We calculate earnings per Class A Share as we do not have any other participating securities.

Substantially all of income tax expense is attributed to earnings of Class A Shares reflective of our organizational structure.

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(in millions, except per share amounts)

Net income attributable to net parent investment

Net income attributable to noncontrolling interest

Net income attributable to Hess Midstream LP

General partners' interest in net income

prior to the Restructuring

Limited partners' interest in net income

Net income attributable to Hess Midstream LP

per Class A share/limited partner unit*:

per Class A share:

Weighted average Class A shares outstanding:

Weighted average limited partner units outstanding

prior to the Restructuring:

*Net income attributable to Hess Midstream LP per Class A Share/limited partner unit for 2019 was calculated by combining net income per limited partner unit (common and subordinated) for the period prior to the Restructuring on December 16, 2019, and net income per Class A Share for the period subsequent to the Restructuring.

For the year ended December 31, 2022, the weighted average number of Class A Shares outstanding included 70,795 dilutive restricted shares (2021:

88,013 shares).

For the year ended December 31, 2019, the weighted average number of common units outstanding included 135,712 dilutive restricted units.

In computing the dilutive effect, if any, of an exchange of Class B Units of the Partnership together with the equal number of Class B Shares of the Company to Class A Shares of the Company, net income attributable to Class A shareholders is adjusted, including for additional income tax expense, due to elimination of the noncontrolling interest associated with Class B Units of the Partnership.

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The Company is subject to federal, state and local laws and regulations relating to the environment.

As of December 31, 2021, our reserve for estimated remediation liabilities included in Accrued liabilities and Other noncurrent liabilities was $ 0.8 million and $ 3.1 million, respectively, compared with $ 0.9 million and $ 3.1 million, respectively, as of December 31, 2020.

On August, 12, 2022, the Company became aware of a produced water release from an underground pipeline located approximately 8 miles north of Ray, North Dakota.

At this time, it is estimated that approximately 34,000 barrels of produced water were released, causing impacts to soils, crops, and groundwater.

The Company has recorded reserves for the estimated future costs to investigate and remediate impacts of the release.

As of December 31, 2022 our reserves for all estimated remediation liabilities, inclusive of the produced water release above, in Accrued liabilities and Other noncurrent liabilities were $ 1.4 million and $ 4.3 million, respectively, compared with $ 0.8 million and $ 3.1 million, respectively, as of December 31, 2021.

Legal Proceedings

As of December 31, 2021 and 2020, we did no t have material accrued liabilities for any legal contingencies.

Based on currently available information, we believe it is remote that the outcome of known matters would have a material adverse impact on our financial condition, results of operations or cash flows.

In the ordinary course of business, the Company is from time to time party to various judicial and administrative proceedings.

We regularly assess the need for accounting recognition or disclosure of these contingencies.

In the case of a known contingency, we accrue a liability when the loss is probable and the amount is reasonably estimable.

If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.

The Company has not received any notice of litigation or regulatory enforcement in the connection with the produced water release described under Environmental Contingencies above.

Unless and until an enforcement action is started, the Company cannot fully predict the potential cost of such fines or penalties and what rights, claims, and defenses it may have.

Based on currently available information, we believe it is remote that the outcome of known matters, including the produced water release described above, would have a material adverse impact on our financial condition, results of operations or cash flows.

Accordingly, as of December 31, 2022 and December 31, 2021, we did no t have material accrued liabilities for legal contingencies.

Lease and Purchase Obligations

As of December 31, 2022 and 2021, we did no t have material lease obligations.

As of December 31 2021, we had unconditional purchase commitments of $ 11.9 million for the year ending December 31, 2022 and none for the years thereafter.

As of December 31 2022, we had unconditional purchase commitments of $ 45.7 million for the year ending December 31, 2023, primarily related to expansion of our compression capacity, and none for the years thereafter.

Our operations are located in the United States and are organized into three reportable segments:

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Income tax expense (benefit)

Gain on sale of property, plant and equipment

Adjusted EBITDA

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Income tax expense (benefit)

Transaction costs

Gain on sale of property, plant and equipment

Adjusted EBITDA

Capital expenditures*

* Includes acquisition, expansion, and maintenance capital expenditures.

* Includes expansion and maintenance capital expenditures.

Total assets for reportable segments are as follows:

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statutory rate

Non-taxable income from pre-Restructuring period

Noncontrolling interest in partnership

Effective rate

On March 1, 2019, HIP acquired Hess Water Services (see Note 4, Acquisitions ).

For the periods prior to March 1, 2019, Hess Water Services was included in the consolidated income tax returns of Hess.

The provision for Hess Water Services’

income taxes and income tax assets and liabilities were determined as if it were a standalone taxpayer for all periods presented.

Prior to the Restructuring on December 16, 2019, the Partnership was not a separate taxable entity for U.S.

federal and state income tax purposes;

therefore, we did not recognize income tax expense or benefit in those periods.

Each partner was subject to income taxes on its share of the Partnership’s earnings.

In connection with the Restructuring, we became a partial owner of the Partnership and recognize income tax expense or benefit on our allocable share of the Partnership’s income or loss subsequent to the Restructuring.

As part of the Restructuring, we recognized a deferred tax asset of $ 49.8 million for the temporary differences related to our investment in the Partnership.

The effect of recognizing the deferred tax asset was included in Class A shareholders’

equity balance in the accompanying consolidated statement of changes in partners’

capital due to the Restructuring being characterized as a transaction among or with shareholders.

In addition, as a result of the equity offering transactions on March 15, 2021 and October 8, 2021, as well as the Repurchase Transaction on August 10, 2021 (see Note 3, Equity Transactions ), we recognized an additional deferred tax asset in the total amount of $ 89.0 million related to the change in the temporary difference between carrying amount and tax basis of our investment in the Partnership.

A s a result of the equity offering and repurchase transactions (see Note 3, Equity Transactions ), we recognized an additional deferred tax asset in the total amount of $ 86.4 million (2021:

$ 89.0 million) related to the change in the temporary difference between carrying amount and tax basis of our investment in the Partnership.

The effect of recognizing the additional deferred tax asset was included in Class A shareholders’

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The distribution was paid on February 13, 2023 to shareholders of record as of the close of business on February 2, 2023 .

On February 14, 2022 , the Partnership also made a distribution of $ 0.5167 per Class B Unit of the Partnership to the Sponsors as holders of an aggregate of 219,641,928 Class B Units of the Partnership.

On February 13, 2023 , the Partnership also made a distribution of $ 0.5696 per Class B Unit of the Partnership to the Sponsors.

CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity