Hess Midstream LP 10-K

Item 5. Market for Registrant’s Common Equity, Related SHAREholder Matters and Issuer Purchases of Equity Securities Stock Market Information Our Class A Shares are listed on the New York Stock Exchange and are traded under the symbol “HESM”. Holders As of December 31, 2022, there were 5 shareholders of record who owned a total of 44,002,846 of our Class A Shares, one of which is Hess Midstream GP LP. The number of holders does not include the holders for whom shares are held in a “nominee” or “street” name. In addition, as of December 31, 2022, Hess Midstream GP LP owned an aggregate of 195,847,606 Class B Shares. Hess and GIP indirectly own the Class A Shares and Class B Shares owned by Hess Midstream GP LP. Securities Authorized for Issuance Under Equity Compensation Plans In 2017, the Partnership adopted the Hess Midstream Partners LP 2017 Long-Term Incentive Plan. Pursuant to the Restructuring, the Company assumed the Hess Midstream Partners LP 2017 Long-Term Incentive Plan and all obligations with respect to outstanding awards thereunder. The Company amended and restated the Hess Midstream Partners LP 2017 Long-Term Incentive Plan to, among other things, change the plan’s name to the Hess Midstream LP 2017 Long-Term Incentive Plan (the “LTIP”) and to reflect the Company’s assumption of the plan. The LTIP limits the number of shares that may be delivered pursuant to vested awards to 3,000,000 Class A Shares. Equity Compensation Plan Information The following table summarizes information about our equity compensation plan as of December 31, 2022: Number of securities to be Weighted-average Number of securities issued upon exercise of exercise price of remaining available for outstanding options, outstanding options future issuance under Plan category warrants, and rights warrants, and rights equity compensation plans Equity compensation plans not approved by security holders (1) - - - Hess Midstream LP 2017 Long Term Incentive Plan 145,701 (2) $ - 2,506,453 Total 145,701 $ - 2,506,453 (1) The general partner of our predecessor adopted the Long-Term Incentive Plan in connection with the IPO. (2) The amount includes 145,701 phantom unit awards that vest ratably over a three-year period for officers and employees, and vest after one year for directors following the date of grant. Upon vesting, each phantom unit is paid in the form of a Class A Share in us, or an equivalent amount of cash, subject to applicable tax withholdings. See Note 9 , Equity‑Based Compensation in Notes to Consolidated Financial Statements for further discussion of our equity compensation plans. Distributions of Available Cash General Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to shareholders of record on the applicable record date. 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. 43 Table of Contents 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 Share (1) March 31, 2020 $ 0.4310 June 30, 2020 $ 0.4363 September 30, 2020 $ 0.4417 December 31, 2020 $ 0.4471 March 31, 2021 $ 0.4526 June 30, 2021 (2) $ 0.5042 September 30, 2021 $ 0.5104 December 31, 2021 $ 0.5167 March 31, 2022 (3) $ 0.5492 June 30, 2022 $ 0.5559 September 30, 2022 $ 0.5627 December 31, 2022 $ 0.5696 (1) Represents a cash distribution attributable to the quarter-end pursuant to our partnership agreement. See definition of Available Cash below. (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 Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter: • less , the amount of cash reserves established by our general partner to: • provide for the proper conduct of our business (including reserves for our future capital expenditures and anticipated future debt service requirements); • comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which any group member is a party or by which it is bound or its assets are subject; • provide funds for distributions to our shareholders for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent us from distributing the minimum quarterly distribution on all Class A Shares for the current quarter); • plus , if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter or available to be borrowed as a working capital borrowing as of the date of determination of available cash. The purpose and effect of the last bullet point above is to allow our general partner, if it so decides, to use cash from working capital borrowings made after the end of the quarter but on or before the date of determination of available cash for that quarter to pay distributions to shareholders. Under our partnership agreement, working capital borrowings are generally borrowings that are made under a credit facility, commercial paper facility or similar financing arrangement, and in all cases are used solely for working capital purposes or to pay distributions to partners and with the intent of the borrower to repay such borrowings within twelve months with funds other than from additional working capital borrowings. Intent to Distribute the Minimum Quarterly Distribution Under our current cash distribution policy, we intend to make a minimum quarterly distribution to the holders of our Class A Shares of $0.30 per share, or $1.20 per share on an annualized basis, to the extent we have sufficient available cash after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner. However, there is no guarantee that we will pay the minimum quarterly distribution on our Class A Shares in any quarter. The amount of distributions paid under our cash distribution policy and the decision to make any distribution will be determined by our general partner, taking into consideration the terms of our partnership agreement. General Partner Interest Our general partner owns a non-economic general partner interest in us and, as of December 31, 2022, 898,000 Class A Shares and 195,847,606 Class B Shares. Our general partner, in its capacity as a shareholder, is entitled to share in cash distributions on our Class A Shares, but is not otherwise entitled to receive cash distributions with respect to its general partner interest in us or its Class B Shares. However, our general partner may in the future own other equity interests in us and may be entitled to receive distributions on any such interests. 44 Table of Contents Adjustment of the Minimum Quarterly Distribution If we combine our shares or other interests in us (“Company Interests”) into fewer shares or Company Interests (commonly referred to as a “reverse split”) or subdivide our shares or Company Interests into a greater number of shares or Company Interests (commonly referred to as a “split”), we will proportionately adjust the minimum quarterly distribution. For example, if a two-for-one split of Class A Shares should occur, the minimum quarterly distribution would be reduced to 50% of its initial level. We will not make any adjustment by reason of the issuance of additional shares or Company Interests for cash or property (including additional Class A Shares issued under any compensation or benefit plans). ITEM 6. [RESERVED] 45 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of this Annual Report on Form 10‑K. Unless otherwise stated or the context otherwise indicates, references in this report to “Hess Midstream Operations LP,” “the Partnership,” “us,” “we” or similar terms, when referring to periods between the IPO date on April 10, 2017 and December 16, 2019, refer to Hess Midstream Operations LP (formerly known as Hess Midstream Partners LP, the predecessor registrant to Hess Midstream LP), including its consolidated subsidiaries. All references to “Hess Midstream LP,” “the Company,” “us,” “our,” “we” or similar terms, when referring to periods subsequent to December 16, 2019, refer to Hess Midstream LP, including its consolidated subsidiaries. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this report. Overview We are a fee-based, growth-oriented, limited partnership formed by Hess Infrastructure Partners GP LLC (“HIP GP LLC”) 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. We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner. 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. Significant Activities 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 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. • On October 8, 2021, the Sponsors sold an aggregate of 8,625,000 of our Class A Shares, inclusive of the underwriters’ 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. • 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. • 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. See Item 8. Financial Statements and Supplementary Data. Note 3, Equity Transactions, Note 7, Debt and Interest Expense, and Note 8, Partners' Capital and Distributions for additional details. 46 Table of Contents 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 Our principal business objective is to grow our business and distributable cash flow supported by fee-based contracts and disciplined financial strategy. We expect to achieve this objective through the following business strategies: • Focus on Cash Flow Stability and Growth Supported by Long-Term, Fee-Based Contracts and a Disciplined Financial Strategy . We seek to grow our distributable cash flow to be able to fund our expansion capital and provide consistent and ongoing return of capital to shareholders while maintaining balance sheet strength. Our commercial agreements include dedications covering substantially all of Hess’ existing and future owned or controlled production in the Bakken, minimum volume commitments, inflation escalators and fee recalculation mechanisms, all of which are intended to provide us with cash flow stability and downside risk protection. • Capitalize on Hess’ Bakken Production Growth. Our midstream infrastructure footprint services Hess’ leading acreage position in the Bakken. We believe our volumes and investment opportunities will continue to expand as Hess drills new wells in the Bakken. 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 to reduce flaring from upstream production operations. • Leverage Core Asset Base to Attract Additional Third‑Party Business. We currently handle volumes from third‑party producers and midstream companies under our commercial agreements with Hess, and we are pursuing both additional projects and strategic relationships with third‑party customers with operations in the Bakken in order to maximize our utilization rates. • Grow Through Accretive Acquisitions from Our Sponsors and 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 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. We are focused on identifying GHG reduction opportunities, evaluating and implementing technologies as appropriate and evaluating capital and infrastructure requirements. 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 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 and assess carbon capture; • Implementing operational improvements in our facilities to reduce energy consumption. Segments Our assets and operations are organized into the following three reportable segments: (i) gathering, (ii) processing and storage and (iii) terminaling and export. 47 Table of Contents Gathering Our gathering segment includes Hess North Dakota Pipeline Operations LP, or Gathering Opco, and Hess Water Services Holdings LLC, which own the following assets: • Natural Gas Gathering and Compression . A natural gas gathering and compression system located primarily in McKenzie, Williams and Mountrail Counties, North Dakota connecting Hess and third‑party owned or operated wells to the Tioga Gas Plant, Little Missouri 4 (“LM4”) gas processing plant and third‑party pipeline facilities. The system also includes the Hawkeye Gas Facility. • Crude Oil Gathering. A crude oil gathering system located primarily in McKenzie, Williams and Mountrail Counties, North Dakota, connecting Hess and third-party owned or operated wells to the Ramberg Terminal Facility, the Tioga Rail Terminal and the Johnson’s Corner Header System. The system also includes the Hawkeye Oil Facility. • Produced Water Gathering and Disposal . A produced water gathering system and disposal facilities located primarily in Williams and Mountrail counties, North Dakota. Processing and Storage Our processing and storage segment includes Hess TGP Operations LP, or HTGP Opco, and Hess Mentor Storage Holdings LLC, or Mentor Holdings, which own the following assets, respectively: • Tioga Gas Plant . A natural gas processing and fractionation plant located in Tioga, North Dakota. • Equity Investment in LM4 Joint Venture. A 50% equity method investment in LM4 joint venture that owns a natural gas processing plant located in McKenzie County, North Dakota, that was placed in service in the third quarter of 2019. Targa Resources Corp. is the operator of the plant. • Mentor Storage Terminal . A propane storage cavern and rail and truck loading and unloading facility located in Mentor, Minnesota. Terminaling and Export Our terminaling and export segment includes Hess North Dakota Export Logistics Operations LP, or Logistics Opco, which owns each of the following assets: • Ramberg Terminal Facility . A crude oil pipeline and truck receipt terminal located in Williams County, North Dakota that is capable of delivering crude oil into an interconnecting pipeline for transportation to the Tioga Rail Terminal and to multiple third‑party pipelines and storage facilities. • Tioga Rail Terminal. A crude oil and NGL rail loading terminal in Tioga, North Dakota that is connected to the Tioga Gas Plant, the Ramberg Terminal Facility and our crude oil gathering system. • Crude Oil Rail Cars. A total of 550 crude oil rail cars, constructed to DOT‑117 safety standards, which we operate as unit trains consisting of approximately 100 to 110 crude oil rail cars. • Johnson’s Corner Header System. An approximately six‑mile crude oil pipeline header system located in McKenzie County, North Dakota that receives crude oil by pipeline from Hess and third parties and delivers crude oil to third‑party interstate pipeline systems. Significant 2022 Financial and Operating Results Significant financial and operating results for the year ended December 31, 2022 include: • Completed the repurchase of an aggregate of 13,559,322 Class B Units of the Partnership from the Sponsors for $400 million. • Consolidated net income of $620.6 million. • Net income attributable to Hess Midstream LP after deduction for noncontrolling interest of $83.9 million, or $2.03 basic earnings per Class A Share. • Net cash provided by operating activities of $861.1 million. • Adjusted EBITDA of $982.9 million. • Distributable cash flow of $835.2 million. • Paid cash distributions of $1.6678 per Class A share in total for the first three quarters of 2022 and declared a cash distribution of $0.5696 per Class A share for the fourth quarter of 2022, which was paid in February 2023. 48 Table of Contents 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 $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 “ Results of Operations ” below. For additional information regarding Adjusted EBITDA and distributable cash flow, our non‑GAAP financial measures, see “ How We Evaluate Our Operations ” and “ Reconciliation of Non‑GAAP Financial Measures ” below. 49 Table of Contents How We Generate Revenues We generate substantially all of our revenues by charging fees for gathering, compressing and processing natural gas and fractionating NGLs; gathering, terminaling, loading and transporting crude oil and NGLs; storing and terminaling propane; and gathering and disposing of produced water. We have entered into long-term, fee-based commercial agreements with Hess dated effective January 1, 2014, for oil and gas services agreements, and effective January 1, 2019, for water services agreements. Except for the water services agreements and except for a certain gathering sub-system, as described below, each of our commercial agreements with Hess has an initial 10-year term and we have the unilateral right to renew each of these agreements for one additional 10-year term. In September 2018, we amended our gas gathering and gas processing and fractionation agreements to enable us to provide certain services to Hess in respect of volumes to be delivered to and processed at the LM4 plant. The amended and restated gas gathering agreement also extends the initial term of the gathering agreement with respect to a certain gathering sub-system by five years to provide for a 15-year initial term and decreases the secondary term for that gathering sub-system by five years to provide for a five-year secondary term. Initial term for the water services agreements is 14 years and the secondary term is 10 years. On December 30, 2020, we exercised our renewal options to extend the terms of certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess for the Secondary Term through December 31, 2033. There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining water gathering and disposal agreements as well as the remaining gas gathering agreement, we have the sole option to renew these agreements for an additional term that is exercisable at a later date. These agreements include dedications covering substantially all of Hess’ existing and future owned or controlled production in the Bakken, minimum volume commitments, inflation escalators and fee recalculation mechanisms, all of which are intended to provide us with cash flow stability and growth, as well as downside risk protection. In particular, Hess’ minimum volume commitments under our commercial agreements provide minimum levels of cash flows and the fee recalculation mechanisms under the agreements allow fees to be adjusted annually to provide us with cash flow stability during the initial term of the agreements. During the secondary term of the agreements, the fee recalculation model will be replaced by an inflation-based fee structure. See Item 8. Financial Statements and Supplementary Data. Note 4, Related Party Transactions for additional description of our commercial agreements. 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, 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. How We Evaluate Our Operations Our management uses a variety of financial and operating metrics to analyze our operating results and profitability. These metrics include (i) volumes, (ii) operating and maintenance expenses, (iii) Adjusted EBITDA, and (iv) distributable cash flow. Volumes . The amount of revenues we generate primarily depends on the volumes of crude oil, natural gas, NGLs and produced water that we handle at our gathering, processing, terminaling, storage and disposal facilities. These volumes are affected primarily by the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets, including changes in crude oil prices, which may further affect volumes delivered by Hess. Although Hess has committed to minimum volumes under our commercial agreements described above, our results of operations will be impacted by our ability to: • utilize the remaining uncommitted capacity on, or add additional capacity to, our existing assets, and optimize our existing assets; • identify and execute expansion projects, and capture incremental throughput volumes from Hess and third parties for these expanded facilities; • increase throughput volumes at our Ramberg Terminal Facility, Tioga Rail Terminal and the Johnson’s Corner Header System by interconnecting with new or existing third‑party gathering pipelines; and • increase gas processing throughput volumes by interconnecting with new or existing third‑party gathering pipelines. 50 Table of Contents Operating and Maintenance Expenses. Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses are comprised primarily of costs charged to us under our omnibus agreement and employee secondment agreement, third‑party contractor costs, utility costs, insurance premiums, third‑party service provider costs, related property taxes and other non‑income taxes and maintenance expenses, such as expenditures to repair, refurbish and replace storage facilities and to maintain equipment reliability, integrity and safety. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of substantial expenses, such as gas plant turnarounds. We seek to manage our maintenance expenditures by scheduling periodic maintenance on our assets in order to minimize significant variability in these expenditures and minimize their impact on our cash flow. 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 and 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. Distributable cash flow does not reflect changes in working capital balances. We use Adjusted EBITDA and distributable cash flow to analyze our performance and liquidity. Adjusted EBITDA and distributable cash flow are non‑GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: • our operating performance as compared to other publicly traded companies in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods; • the ability of our assets to generate sufficient cash flow to make distributions to our shareholders; • our ability to incur and service debt and fund capital expenditures; and • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. We believe that the presentation of Adjusted EBITDA and distributable cash flow provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net income (loss) and net cash provided by (used in) operating activities. Adjusted EBITDA and distributable cash flow should not be considered as alternatives to GAAP net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA and distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definition of these measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. 51 Table of Contents Results of Operations The following tables summarize our consolidated results of operations for the years ended December 31, 2022, 2021 and 2020. The results of operations are discussed in further detail following this overview (in millions, unless otherwise noted). For the Year Ended December 31, 2022 Gathering Processing and Storage Terminaling and Export Interest and Other Consolidated Hess Midstream LP Revenues Affiliate services $ 677.9 $ 470.8 $ 124.5 $ - $ 1,273.2 Other income - - 2.0 - 2.0 Total revenues 677.9 470.8 126.5 - 1,275.2 Costs and expenses Operating and maintenance expenses (exclusive of depreciation shown separately below) 170.2 85.0 24.4 - 279.6 Depreciation expense 107.4 57.7 16.2 - 181.3 General and administrative expenses 10.7 4.3 0.9 7.2 23.1 Total operating costs and expenses 288.3 147.0 41.5 7.2 484.0 Income (loss) from operations 389.6 323.8 85.0 (7.2 ) 791.2 Income from equity investments - 5.3 - - 5.3 Interest expense, net - - - 149.3 149.3 Income (loss) before income tax expense (benefit) 389.6 329.1 85.0 (156.5 ) 647.2 Income tax expense (benefit) - - - 26.6 26.6 Net income (loss) 389.6 329.1 85.0 (183.1 ) 620.6 Less: Net income (loss) attributable to noncontrolling interest 323.2 272.5 70.6 (129.6 ) 536.7 Net income (loss) attributable to Hess Midstream LP $ 66.4 $ 56.6 $ 14.4 $ (53.5 ) $ 83.9 Throughput volumes Gas gathering (MMcf/d) 333 333 Crude oil gathering (MBbl/d) 96 96 Gas processing (MMcf/d) 319 319 Crude oil terminaling (MBbl/d) 103 103 NGL loading (MBbl/d) 11 11 Water gathering (MBbl/d) 74 74 52 Table of Contents For the Year Ended December 31, 2021 Gathering Processing and Storage Terminaling and Export Interest and Other Consolidated Hess Midstream LP Revenues Affiliate services $ 630.6 $ 435.7 $ 137.5 $ - $ 1,203.8 Total revenues 630.6 435.7 137.5 - 1,203.8 Costs and expenses Operating and maintenance expenses (exclusive of depreciation shown separately below) 143.1 128.4 16.8 - 288.3 Depreciation expense 101.0 48.4 16.2 - 165.6 General and administrative expenses 8.9 5.7 0.8 7.3 22.7 Total operating costs and expenses 253.0 182.5 33.8 7.3 476.6 Income (loss) from operations 377.6 253.2 103.7 (7.3 ) 727.2 Income from equity investments - 10.6 - - 10.6 Interest expense, net - - - 105.4 105.4 Income (loss) before income tax expense (benefit) 377.6 263.8 103.7 (112.7 ) 632.4 Income tax expense (benefit) - - - 14.6 14.6 Net Income (loss) 377.6 263.8 103.7 (127.3 ) 617.8 Less: Net income (loss) attributable to noncontrolling interest 341.3 238.3 93.6 (101.8 ) 571.4 Net income (loss) attributable to Hess Midstream LP $ 36.3 $ 25.5 $ 10.1 $ (25.5 ) $ 46.4 Throughput volumes Gas gathering (MMcf/d) 324 324 Crude oil gathering (MBbl/d) 110 110 Gas processing (MMcf/d) 305 305 Crude oil terminaling (MBbl/d) 116 116 NGL loading (MBbl/d) 13 13 Water gathering (MBbl/d) 73 73 53 Table of Contents For the Year Ended December 31, 2020 Gathering Processing and Storage Terminaling and Export Interest and Other Consolidated Hess Midstream LP Revenues Affiliate services $ 561.9 $ 370.3 $ 159.4 $ - $ 1,091.6 Other income - 0.3 - - 0.3 Total revenues 561.9 370.6 159.4 - 1,091.9 Costs and expenses Operating and maintenance expenses (exclusive of depreciation shown separately below) 157.4 110.9 69.1 - 337.4 Depreciation expense 96.0 44.8 16.1 - 156.9 General and administrative expenses 7.9 6.5 0.7 6.0 21.1 Total operating costs and expenses 261.3 162.2 85.9 6.0 515.4 Income (loss) from operations 300.6 208.4 73.5 (6.0 ) 576.5 Income from equity investments - 10.3 - - 10.3 Interest expense, net - - - 94.7 94.7 Gain on sale of property, plant and equipment 0.1 - - - 0.1 Income (loss) before income tax expense (benefit) 300.7 218.7 73.5 (100.7 ) 492.2 Income tax expense (benefit) - - - 7.3 7.3 Net income (loss) 300.7 218.7 73.5 (108.0 ) 484.9 Less: Net income (loss) attributable to noncontrolling interest 281.5 205.0 68.8 (94.4 ) 460.9 Net income (loss) attributable to Hess Midstream LP $ 19.2 $ 13.7 $ 4.7 $ (13.6 ) $ 24.0 Throughput volumes Gas gathering (MMcf/d) 323 323 Crude oil gathering (MBbl/d) 140 140 Gas processing (MMcf/d) 306 306 Crude oil terminaling (MBbl/d) 145 145 NGL loading (MBbl/d) 14 14 Water gathering (MBbl/d) 70 70 54 Table of Contents Year ended December 31, 2022 Compared to Year Ended December 31, 2021 Gathering 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 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 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 Gathering 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. This increase is partially offset by $15.7 million lower pass-through revenues primarily attributable to lower third-party produced water trucking and disposal due to more water gathered by pipe and more operated water disposal facilities coming on-line and being utilized. In addition, $2.8 million is attributable to lower crude oil gathering volumes driven by reduced drilling activity, partially offset by MVC shortfall fees. 55 Table of Contents Operating and maintenance expenses decreased $14.3 million, of which $15.7 million is attributable to lower pass-through costs primarily related to lower third-party produced water trucking and disposal costs and $3.9 million is attributable to lower project-based maintenance activity. This decrease is partially offset by $5.3 million higher employee costs allocated to us under our omnibus and employee secondment agreements. Depreciation expense increased $5.0 million due to new compressors, produced water disposal facilities and other new gathering assets being brought into service. General and administrative expenses increased $1.0 million primarily attributable to higher charges from Hess under our omnibus and employee secondment agreements. Processing and Storage Revenues and other income increased $65.1 million in 2021 compared to 2020, of which $52.2 million is attributable to higher tariff rates, $7.1 million is attributable to higher pass-through revenue, including electricity and other fees related to temporary gas offloads during the TGP turnaround and $6.1 million is attributable to higher MVC levels. This increase was partially offset by $0.3 million lower other income. Operating and maintenance expenses increased $17.5 million, of which $10.4 million is attributable to higher TGP turnaround activity, $7.1 million is attributable to higher pass-through costs, including electricity and other fees related to temporary gas offloads during the TGP turnaround, and $4.7 million is attributable to higher third-party processing fees. This increase is partially offset by $4.7 million attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements. Depreciation expense increased $3.6 million primarily due to the TGP expansion and turnaround assets being placed in service. Terminaling and Export Revenues and other income de creased $21.9 million in 2021 compared to 2020, of which $50.6 million is attributable to lower rail transportation pass‑through revenues. This decrease is partially offset by $19.1 million attributable to higher tariff rates and $9.6 million attributable to higher MVC levels. Operating and maintenance expenses decreased $52.3 million, of which $50.6 million is attributable to lower rail transportation pass-through costs and $1.7 million is attributable to lower other rail services costs due to lower rail usage and certain rail transportation fees being paid directly by end customers. Interest and Other General and administrative expenses increased $1.3 million in 2021 compared to 2020 primarily due to higher professional fees. 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 2021 repurchase transaction. 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. Other Factors Expected to Significantly Affect Our Future Results We currently generate substantially all of our revenues under fee‑based commercial agreements with Hess, including third parties contracted with affiliates of Hess. These contracts provide cash flow stability and minimize our direct exposure to commodity price fluctuations, since we generally do not own any of the crude oil, natural gas, or NGLs that we handle and do not engage in the trading of crude oil, natural gas, or NGLs. However, commodity price fluctuations indirectly influence our activities and results of operations over the long-term, since they can affect production rates and investments by Hess and third parties in the development of new crude oil and natural gas reserves. The markets for oil and natural gas are volatile and will likely continue to be volatile in the future. In the second quarter of 2020, as a result of the sharp decline in crude oil prices, Hess reduced its rig count from six rigs to one rig in the Bakken. In addition, third parties in the Bakken also curtailed production and reduced drilling activity. 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, 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. 56 Table of Contents 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’ exploration and production margins. Exploration and production margins depend on the price of crude oil, natural gas, and NGLs. These prices are volatile and influenced by numerous factors beyond our or Hess’ control, including the domestic and global supply of and demand for crude oil, natural gas and NGLs. During the first quarter of 2020, worldwide crude oil prices declined significantly due in part to reduced global demand stemming from the COVID-19 global pandemic. Sustained periods of low prices for oil and natural gas could materially and adversely affect the quantities of oil and natural gas that Hess can economically produce. 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. 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. Reconciliation of Non‑GAAP Financial Measures The following table presents a reconciliation of Adjusted EBITDA and distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated. Year Ended December 31, (in millions) 2022 2021 2020 Reconciliation of Adjusted EBITDA and Distributable Cash Flow to net income: Net income $ 620.6 $ 617.8 $ 484.9 Plus: Depreciation expense 181.3 165.6 156.9 Proportional share of equity affiliates' depreciation 5.1 5.1 5.1 Interest expense, net 149.3 105.4 94.7 Income tax expense (benefit) 26.6 14.6 7.3 Loss (gain) on sale of property, plant and equipment - - (0.1 ) Adjusted EBITDA $ 982.9 $ 908.5 $ 748.8 Less: Interest, net (1) 140.5 98.1 $ 88.4 Maintenance capital expenditures 7.2 11.8 7.1 Distributable cash flow $ 835.2 $ 798.6 $ 653.3 Reconciliation of Adjusted EBITDA and Distributable Cash Flow to net cash provided by operating activities: Net cash provided by operating activities $ 861.1 $ 795.5 $ 641.7 Changes in assets and liabilities (14.5 ) 18.0 14.3 Amortization of deferred financing costs (8.8 ) (7.3 ) (6.5 ) Proportional share of equity affiliates' depreciation 5.1 5.1 5.1 Interest expense, net 149.3 105.4 94.7 Distribution from equity investments (13.0 ) (17.4 ) (9.7 ) Earnings from equity investments 5.3 10.6 10.3 Other (1.6 ) (1.4 ) (1.1 ) Adjusted EBITDA $ 982.9 $ 908.5 $ 748.8 Less: Interest, net (1) 140.5 98.1 88.4 Maintenance capital expenditures 7.2 11.8 7.1 Distributable cash flow $ 835.2 $ 798.6 $ 653.3 (1) Excludes amortization of deferred financing costs. 57 Table of Contents Capital Resources and Liquidity We expect our ongoing sources of liquidity to include: • cash on hand; • cash generated from operations; • borrowings under our revolving credit facility; • issuances of additional debt securities; and • issuances of additional equity securities. We believe that cash generated from these sources will be sufficient to meet our operating requirements, our planned capital expenditures, debt service requirements, our quarterly cash distribution requirements, future internal growth projects or potential acquisitions. Our partnership agreement requires that we distribute all of our available cash to shareholders. During the year ended December 31, 2022, we made distributions of $91.0 million, to the holders of our equity securities representing limited partner interests in us. In addition, the Partnership made distributions of $440.2 million to the Sponsors as holders of the Class B Units of the Partnership. 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 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 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 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 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; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00. As of December 31, 2022, we were in compliance with all debt covenants under the indentures. 58 Table of Contents In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indentures, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company. Credit Facilities 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 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). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. At December 31, 2022, borrowings of $18.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $400.0 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility. 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 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, 2022, we were in compliance with these financial covenants. Cash Flows The following table sets forth a summary of our cash flows (in millions): Year Ended December 31, 2022 2021 2020 Cash flows from operating activities $ 861.1 $ 795.5 $ 641.7 Cash flows from (used in) investing activities (238.2 ) (163.2 ) (301.0 ) Cash flows from (used in) financing activities (622.0 ) (632.7 ) (341.4 ) Net increase (decrease) in cash and cash equivalents $ 0.9 $ (0.4 ) $ (0.7 ) Operating Activities. 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 $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 $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. 59 Table of Contents 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. In 2021, we issued $750.0 million aggregate principal amount of unsecured senior notes that we used to fund the $750 million Class B unit repurchase transaction. In 2021, we also had lower borrowings under our credit facilities of $252.3 million, net of any changes in financing costs, higher distributions to shareholders and noncontrolling interest of $35.3 million, and $2.1 million of transaction costs related to the 2021 repurchase transaction compared to the same period last year. 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. Capital Expenditures Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations. Our partnership agreement requires that we distinguish between maintenance capital expenditures and expansion capital expenditures. Maintenance capital expenditures are capital expenditures made to maintain, over the long term, our operating capacity, operating income or revenue. Examples of maintenance capital expenditures are expenditures to repair, refurbish or replace existing assets, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations. In contrast, expansion capital expenditures are expenditures incurred for acquisitions or capital improvements that we expect will increase our operating capacity, operating income or revenue over the long term. Examples of expansion capital expenditures include the acquisition of equipment, construction, development or acquisition of additional capacity, or expenditures for connecting additional wells to our gathering systems, to the extent such capital expenditures are expected to expand our long‑term operating capacity, operating income or revenue. The following table sets forth a summary of maintenance and expansion capital expenditures and reconciles capital expenditures on an accrual basis to additions to property, plant and equipment on a cash basis: Year Ended December 31, 2022 2021 2020 (in millions) Expansion capital expenditures $ 224.6 $ 171.2 $ 245.9 Maintenance capital expenditures 7.2 11.8 7.1 Total capital expenditures 231.8 183.0 253.0 (Increase) decrease in accrued capital expenditures 2.4 (12.9 ) 21.1 (Increase) decrease in capital expenditures included in accounts payable - affiliate 4.0 (6.9 ) 27.0 Additions to property, plant and equipment $ 238.2 $ 163.2 $ 301.1 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. In 2020, we completed construction and preservation activities for the 150 MMcf/d TGP expansion, which was brought in service in the fourth quarter of 2021. Capital expenditures in 2020 also relate to continued expansion of our compression capacity and gas capture capabilities. 60 Table of Contents Cash Requirements Our cash requirements within the next twelve months include accounts payables, accrued liabilities, the current portion of long-term debt, interest, purchase obligations, which include a portion of our planned capital expenditure program in 2023, and other liabilities. Our long-term contractual obligations and commitments include: • Debt and interest: See Item 8. Financial Statements and Supplementary Data. Note 7 , Debt and Interest Expense. • Purchase obligations: See Item 8. Financial Statements and Supplementary Data. Note 12, Commitments and Contingencies. Off-Balance Sheet Arrangements We have not entered into any transactions, agreements or other contractual arrangements that would result in off‑balance sheet liabilities. Critical Accounting Estimates Accounting policies and estimates affect the recognition of assets and liabilities in our consolidated balance sheets and revenues and expenses in our consolidated statements of operations. The accounting methods used can affect net income, partners’ capital and various financial statement ratios. However, the accounting methods generally do not change cash flows or liquidity. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our financial condition and results of operations. Property, Plant and Equipment Property, plant and equipment are stated at the lower of historical cost less accumulated depreciation, subject to the results of impairment testing. We capitalize all construction-related direct labor and material costs, as well as indirect construction costs. Indirect construction costs include general engineering, taxes and the cost of funds used during construction of material projects. Costs, including complete asset replacements and enhancements or upgrades that increase the original efficiency, productivity or capacity of property, plant and equipment, are also capitalized. The costs of repairs, minor replacements and other projects, which do not increase the original efficiency, productivity or capacity of property, plant and equipment, are expensed as incurred. The determination of cost componentization and related estimated useful lives is a significant element in arriving at the results of operations. The estimates affect depreciation expense in our accompanying consolidated statements of operations and balance sheets, as described below. Depreciation Expense We calculate depreciation using the straight‑line method based on the estimated useful lives after considering salvage values of our assets. When assets are placed into service, we make estimates with respect to their useful lives that we believe are reasonable. Depreciation lives related to our significant assets primarily range between 12 to 35 years. However, factors such as maintenance levels, economic conditions impacting the demand for these assets, and regulatory or environmental requirements are inherently uncertain and could cause us to change our estimates, and impact our future calculation of depreciation. The determination of estimated useful lives is a significant element in arriving at depreciation expense. The estimates affect depreciation expense and cost componentization in our accompanying consolidated statements of operations and balance sheets. These estimates and assumptions have not changed during the periods included in the accompanying consolidated financial statements. Impairment of Long‑Lived Assets We review long-lived assets for impairment whenever events or changes in business circumstances indicate the net book values of the assets may not be recoverable. Factors that indicate potential impairment include a significant decrease in the market value of the asset, operating or cash flow losses associated with the use of the asset, and a significant change in the asset’s physical condition or use. Impairment is indicated when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ net book value. Undiscounted cash flows are based on identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. If impairment occurs, a loss is recognized for the difference between fair value and net book value. Such fair value is generally determined by discounting anticipated future net cash flows, an income valuation approach, or by a market-based valuation approach, which are Level 3 fair value measurements. Assumptions and estimates about future cash flows and fair values are complex and subject to significant uncertainty. These assumptions and estimates can be affected by a variety of factors, including external factors such as industry and economic trends that are outside of our control and internal factors such as changes in our business strategy and our internal forecasts. No impairments of long-lived assets were recorded during the periods included in the accompanying consolidated financial statements. The determination of impairments could be a significant element in arriving at the results of operations. Impairment charges would impact total operating costs and expenses and net Property, Plant & Equipment in our accompanying consolidated statements of operations and balance sheets. 61 Table of Contents Contingencies In the ordinary course of business, we may become party to lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters, the outcomes of which are inherently uncertain. Damages or penalties may be sought from us in some matters for which the likelihood of loss may be probable or possible but the amount of loss is not currently estimable. Costs that relate to an existing condition caused by past operations are expensed. Contingent liabilities are recorded when probable and reasonably estimable, the determination of which requires significant judgement and is subject to inherent uncertainty. 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. See Item 8. 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. ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices. We generally do not take ownership of the crude oil, natural gas or NGLs that we currently gather, process, terminal, store or transport for our customers. Because we generate substantially all of our revenues by charging fees under long-term commercial agreements with Hess with minimum volume commitments, Hess bears the risks associated with fluctuating commodity prices and we have minimal direct exposure to commodity prices. In the normal course of our business, we are exposed to market risks related to changes in interest rates. Our financial risk management activities may include transactions designed to reduce risk by reducing our exposure to interest rate movements. Interest rate swaps may be used to convert interest payments on certain long‑term debt. At December 31, 2022, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates. At December 31, 2022, our total debt had a carrying value of $2,885.6 million and a fair value of approximately $2,720.7 million, based on Level 2 inputs in the fair value measurement hierarchy. A 15% increase or decrease in interest rates would decrease or increase the fair value of our fixed rate debt by approximately $103.6 million or $110.4 million, respectively. The carrying value of the amounts under our Term Loan A facility and revolving credit facility at the year-end approximated their fair value. 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. 62 Table of Contents ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA HESS MIDSTREAM LP INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) 64 Consolidated Balance Sheets as of December 31, 2022 and 2021 67 Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020 68 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020 69 Consolidated Statements of Changes in Partners’ Capital for the Years Ended December 31, 2022, 2021 and 2020 70 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 71 Notes to Consolidated Financial Statements 72 Note 1 Description of Business 72 Note 2 Summary of Significant Accounting Policies and Basis of Presentation 73 Note 3 Equity Transactions 76 Note 4 Related Party Transactions 77 Note 5 Property, Plant and Equipment 80 Note 6 Accrued Liabilities and Other Current Liabilities 80 Note 7 Debt and Interest Expense 80 Note 8 Partners' Capital and Distributions 83 Note 9 Equity-Based Compensation 84 Note 10 Earnings per Share 84 Note 11 Concentration of Credit Risk 85 Note 12 Commitments and Contingencies 85 Note 13 Segments 86 Note 14 Income Taxes 88 Note 15 Subsequent Events 89 63 Table of Contents R eport of Independent Registered Public Accounting Firm To the Board of Directors of Hess Midstream GP LLC and Shareholders of Hess Midstream LP Opinion on Internal Control over Financial Reporting 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, 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, 2022, and the related notes and our report dated February 27, 2023 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Houston, Texas February 27, 2023 64 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors of Hess Midstream GP LLC and Shareholders of Hess Midstream LP Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Hess Midstream LP (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, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. 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, 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 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. 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 with Hess Corporation Description of the Matter 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’ involvement in many aspects of the Company’s business, including the revenue earned from providing various services under long-term, fee-based contracts, and the direct and allocated expenses charged from Hess for services provided under commercial agreements and employee secondment and omnibus agreements. 65 Table of Contents 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 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2014. Houston, Texas February 27, 2023 66 Table of Contents HESS M IDSTREAM LP CONSOLIDATED BALANCE SHEETS December 31, December 31, 2022 2021 (in millions, except share amounts) Assets Cash and cash equivalents $ 3.1 $ 2.2 Accounts receivable—affiliate: From contracts with customers 123.0 120.3 Other current assets 6.2 10.6 Total current assets 132.3 133.1 Equity investments 93.9 101.6 Property, plant and equipment, net 3,172.8 3,125.0 Long-term receivable—affiliate 0.7 0.8 Deferred tax asset 177.2 117.3 Other noncurrent assets 11.3 7.8 Total assets $ 3,588.2 $ 3,485.6 Liabilities Accounts payable—trade $ 35.0 $ 26.9 Accounts payable—affiliate 27.7 37.6 Accrued liabilities 82.9 76.2 Current maturities of long-term debt 2.5 20.0 Other current liabilities 11.4 10.2 Total current liabilities 159.5 170.9 Long-term debt 2,883.1 2,543.5 Deferred tax liability 0.5 0.4 Other noncurrent liabilities 16.1 17.7 Total liabilities 3,059.2 2,732.5 Partners' capital Class A shares ( 44,002,846 shares issued and outstanding as of December 31, 2022; 33,672,068 shares issued and outstanding as of December 31, 2021) 245.1 204.1 Class B shares ( 195,847,606 shares issued and outstanding as of December 31, 2022; 219,641,928 shares issued and outstanding as of December 31, 2021) - - Total Class A and Class B partners' capital 245.1 204.1 Noncontrolling interest 283.9 549.0 Total partners' capital 529.0 753.1 Total liabilities and partners' capital $ 3,588.2 $ 3,485.6 See accompanying notes to consolidated financial statements. 67 Table of Contents HESS MIDS TREAM LP CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2022 2021 2020 (in millions, except per share data) Revenues Affiliate services $ 1,273.2 $ 1,203.8 $ 1,091.6 Other income 2.0 - 0.3 Total revenues 1,275.2 1,203.8 1,091.9 Costs and expenses Operating and maintenance expenses (exclusive of depreciation shown separately below) 279.6 288.3 337.4 Depreciation expense 181.3 165.6 156.9 General and administrative expenses 23.1 22.7 21.1 Total operating costs and expenses 484.0 476.6 515.4 Income from operations 791.2 727.2 576.5 Income from equity investments 5.3 10.6 10.3 Interest expense, net 149.3 105.4 94.7 Gain on sale of property, plant and equipment - - 0.1 Income before income tax expense 647.2 632.4 492.2 Income tax expense 26.6 14.6 7.3 Net income 620.6 617.8 484.9 Less: Net income attributable to noncontrolling interest 536.7 571.4 460.9 Net income attributable to Hess Midstream LP $ 83.9 $ 46.4 $ 24.0 Net income attributable to Hess Midstream LP per Class A share: Basic $ 2.03 $ 1.81 $ 1.33 Diluted $ 2.01 $ 1.76 $ 1.31 Weighted average Class A shares outstanding Basic 41.3 25.6 18.0 Diluted 41.4 25.7 18.1 See accompanying notes to consolidated financial statements. 68 Table of Contents HESS MIDSTREAM LP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2022 2021 2020 (in millions) Net income $ 620.6 $ 617.8 $ 484.9 Other comprehensive income Effect of hedge (gains) losses reclassified to income - - ( 0.4 ) Total other comprehensive income - - ( 0.4 ) Comprehensive income 620.6 617.8 484.5 Less: Comprehensive income (loss) attributable to noncontrolling interest 536.7 571.4 460.5 Comprehensive income attributable to Hess Midstream LP $ 83.9 $ 46.4 $ 24.0 See accompanying notes to consolidated financial statements. 69 Table of Contents HESS MIDSTREAM LP CONSOLIDATED STATEMENTS OF CHA NGES IN PARTNERS’ CAPITAL Partners' Capital Class A Shares Class B Shares Noncontrolling Interest Accumulated Other Comprehensive Income Total (in millions) Balance at December 31, 2019 $ 131.1 $ - $ 1,200.6 $ 0.4 $ 1,332.1 Net income 24.0 - 460.9 - 484.9 Equity-based compensation 1.5 - - - 1.5 Distributions - $ 1.7348 per share ( 31.6 ) - ( 462.1 ) - ( 493.7 ) Other comprehensive income (loss) - - - ( 0.4 ) ( 0.4 ) Hess Water Services acquisition final settlement - - 1.6 - 1.6 Balance at December 31, 2020 $ 125.0 $ - $ 1,201.0 $ - $ 1,326.0 Net income 46.4 - 571.4 - 617.8 Equity-based compensation 1.4 - - - 1.4 Distributions - $ 1.9143 per share ( 49.4 ) - ( 479.6 ) - ( 529.0 ) Recognition of deferred tax asset 89.0 - - - 89.0 Sale of shares held by Sponsors 52.4 - ( 52.4 ) - - Class B unit repurchase ( 60.4 ) - ( 689.6 ) - ( 750.0 ) Transaction costs ( 0.3 ) - ( 1.8 ) - ( 2.1 ) Balance at December 31, 2021 $ 204.1 $ - $ 549.0 $ - $ 753.1 Net income 83.9 - 536.7 - 620.6 Equity-based compensation 1.6 - - - 1.6 Distributions - $ 2.1845 per share ( 91.0 ) - ( 440.2 ) - ( 531.2 ) Recognition of deferred tax asset 86.4 - - - 86.4 Sale of shares held by Sponsors 27.0 - ( 27.0 ) - - Class B unit repurchase ( 66.6 ) - ( 333.4 ) - ( 400.0 ) Transaction costs ( 0.3 ) ( 1.2 ) ( 1.5 ) Balance at December 31, 2022 $ 245.1 $ - $ 283.9 $ - $ 529.0 See accompanying notes to consolidated financial statements. 70 Table of Contents HESS MIDST REAM LP CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2022 2021 2020 (in millions) Cash flows from operating activities Net income $ 620.6 $ 617.8 $ 484.9 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation expense 181.3 165.6 156.9 (Gain) loss on sale of property, plant and equipment - - ( 0.1 ) (Gain) loss on interest rate swaps - - ( 0.4 ) (Income) loss from equity investments ( 5.3 ) ( 10.6 ) ( 10.3 ) Distributions from equity investments 13.0 17.4 9.7 Amortization of deferred financing costs 8.8 7.3 6.5 Equity-based compensation expense 1.6 1.4 1.5 Deferred income tax expense (benefit) 26.6 14.6 7.3 Changes in assets and liabilities: Accounts receivable – affiliate ( 2.6 ) ( 27.0 ) ( 5.0 ) Other current and noncurrent assets 3.5 ( 5.1 ) ( 0.7 ) Accounts payable – trade 8.1 ( 3.1 ) ( 0.6 ) Accounts payable – affiliate ( 5.8 ) 9.7 0.1 Accrued liabilities 9.1 9.2 ( 11.4 ) Other current and noncurrent liabilities 2.2 ( 1.7 ) 3.3 Net cash provided by (used in) operating activities 861.1 795.5 641.7 Cash flows from investing activities Additions to property, plant and equipment ( 238.2 ) ( 163.2 ) ( 301.1 ) Proceeds from sale of property, plant and equipment - - 0.1 Net cash provided by (used in) investing activities ( 238.2 ) ( 163.2 ) ( 301.0 ) Cash flows from financing activities Net proceeds from (repayments of) bank borrowings with maturities of 90 days or less ( 86.0 ) ( 80.0 ) 152.0 Bank borrowings with maturities of greater than 90 days Borrowings 20.0 - - Repayments ( 10.0 ) ( 10.0 ) - Proceeds from issuance of senior notes 400.0 750.0 - Financing costs ( 13.3 ) ( 11.6 ) ( 1.3 ) Transaction costs ( 1.5 ) ( 2.1 ) - Class B unit repurchase ( 400.0 ) ( 750.0 ) - Distributions to shareholders ( 91.0 ) ( 49.4 ) ( 31.6 ) Distributions to noncontrolling interest ( 440.2 ) ( 479.6 ) ( 462.1 ) Capital contributions (distributions) to Hess associated with acquisitions - - 1.6 Net cash provided by (used in) financing activities ( 622.0 ) ( 632.7 ) ( 341.4 ) Increase (decrease) in cash and cash equivalents 0.9 ( 0.4 ) ( 0.7 ) Cash and cash equivalents, beginning of period 2.2 2.6 3.3 Cash and cash equivalents, end of period $ 3.1 $ 2.2 $ 2.6 Supplemental disclosure of non-cash investing and financing activities: (Increase) decrease in accrued capital expenditures and related liabilities $ 6.5 $ ( 19.8 ) $ 48.1 Recognition of deferred tax asset $ 86.4 $ 89.0 $ - Tioga System Acquisition contingent liability adjustment $ ( 2.9 ) $ ( 4.1 ) $ ( 3.0 ) See accompanying notes to consolidated financial statements. 71 Table of Contents HESS MIDSTREAM LP NOTES TO CONSOLIDATED FI NANCIAL STATEMENTS Unless the context otherwise requires, references in this report to the “Company,” “we,” “our,” “us” or like terms, refer to Hess Midstream LP and its subsidiaries. The “Partnership” refers to Hess Midstream Operations LP (formerly Hess Midstream Partners LP), a consolidated subsidiary of the Company. Our “general partner” refers to Hess Midstream GP LP. “Hess” refers collectively to Hess Corporation and its subsidiaries, other than us. Note 1. Descr iption of Business Description of Business. 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. 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. 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. Our assets and operations are organized into the following three segments: (i) gathering, (ii) processing and storage and (iii) terminaling and export (see Note 13 , Segments ). 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”). 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. LM4 Joint Venture. On January 25, 2018, we entered into a 50 / 50 joint venture with Targa Resources Corp. (“Targa”) to construct a new 200 MMcf/d gas processing plant called Little Missouri 4 (“LM4”). LM4 was placed in service in the third quarter of 2019. Targa is the operator of the plant. See Note 4 , Related Party Transactions . 72 Table of Contents Note 2. Summary of Sign ificant Accounting Policies and Basis of Presentation Consolidation . 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 as a variable interest entity (“VIE”) under U.S. Generally Accepted Accounting Principles (“GAAP”). We have concluded that we are the primary beneficiary of the VIE, as defined in the accounting standards, since we have the power, through our ownership, to direct those activities that most significantly impact the economic performance of the Partnership. This conclusion was based on a qualitative analysis that considered the Partnership’s governance structure and the delegation of control provisions, which provide us the ability to control the operations of the Partnership. All financial statement activities associated with the VIE are captured within gathering, processing and storage, and terminaling and export segments (see Note 13 , Segments ). At December 31, 2022, our noncontrolling interest represents the 81.7 % interest in the Partnership retained by Hess and GIP (2021: 86.7 %) . All intercompany transactions and balances have been eliminated. Use of Estimates. We prepare our consolidated financial statements in conformity with the U.S. GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the years presented. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates. Cash and Cash Equivalents. Cash equivalents consist of highly liquid investments, which are readily convertible into cash and have maturities of three months or less when acquired. Accounts Receivable. We record affiliate accounts receivable upon performance of services to affiliated companies. Generally, we receive payments from affiliated companies on a monthly basis, shortly after performance of services. There were no doubtful accounts written off, nor have we provided an allowance for doubtful accounts, as of December 31, 2022 and 2021. Property, Plant and Equipment. Property, plant and equipment are stated at the lower of historical cost less accumulated depreciation subject to the results of impairment testing. We capitalize all construction-related direct labor and material costs, as well as indirect construction costs. Indirect construction costs include general engineering, taxes and the cost of funds used during construction. Costs, including complete asset replacements and enhancements or upgrades that increase the original efficiency, productivity or capacity of property, plant and equipment, are also capitalized. The costs of repairs, minor replacements and other projects, which do not increase the original efficiency, productivity or capacity of property, plant and equipment, are expensed as incurred. Capitalization of Interest. Interest charges from borrowings are capitalized on material projects using the weighted average cost of outstanding borrowings until the project is substantially complete and ready for its intended use. Capitalized interest is depreciated over the useful lives of the assets in the same manner as the depreciation of the underlying assets. Impairment of Long‑Lived Assets. We review long-lived assets for impairment whenever events or changes in business circumstances indicate the net book values of the assets may not be recoverable. Factors that indicate potential impairment include a significant decrease in the market value of the asset, operating or cash flow losses associated with the use of the asset, and a significant change in the asset’s physical condition or use. Impairment is indicated when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ net book value. Undiscounted cash flows are based on identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. If impairment occurs, a loss is recognized for the difference between the fair value and net book value. Such fair value is generally determined by discounting anticipated future net cash flows, an income valuation approach, or by a market-based valuation approach, which are Level 3 fair value measurements. No impairments of long‑lived assets were recorded during the years ended December 31, 2022, 2021 and 2020. Leases . We determine if an arrangement is a lease at inception. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease right-of-use asset includes any initial direct costs and excludes lease incentives received. The lease term used in measurement of our lease obligations may include periods covered by an option to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has elected not to recognize lease assets and lease liabilities for leases with a term of 12 months or less for all classes of underlying assets. Our lease agreements may include lease and non-lease components, which are generally accounted for separately. 73 Table of Contents Equity Investments. 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. 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. Earnings from equity investments represent our proportionate share of net income generated by the equity investee. We classify distributions received from equity method investees on the basis of the nature of the activity of the investee that generated the distribution as either a return on investment classified as cash inflows from operating activities or a return of investment classified as cash inflows from investing activities when such information is available to us. Deferred Financing Costs. We capitalize debt issuance costs and fees incurred related to the procurement of our credit facilities. We amortize such costs as additional interest expense over the life of the credit agreement using the straight-line method, which approximates the effective interest method. Unamortized deferred financing costs related to our revolving credit facility are presented in Other noncurrent assets (2022: $ 9.5 million, 2021: $ 6.9 million) and unamortized deferred financing costs and discounts related to our fixed-rate senior notes and our term loan are presented as a direct reduction to the Long-term debt (2022: $ 32.4 million, 2021: $ 30.5 million) in the accompanying consolidated balance sheets. Asset Retirement Obligations. We record legal obligations to remove and dismantle long-lived assets. We recognize a liability for the fair value of legally required asset retirement obligations associated with long-lived assets in the period in which the retirement obligations are incurred if the liability can be reasonably estimated. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived assets. Accretion expense is included in Depreciation expense in the consolidated statement of operations. At December 31, 2022, the asset retirement obligation balance included in Other noncurrent liabilities was $ 10.8 million and the current portion included in Accrued liabilities was $ 3.0 million (2021: $ 11.0 million and $ 3.0 million, respectively). Revenue Recognition—Contracts with Customers. We earn substantially all of our revenues by charging fees for gathering, compressing and processing natural gas and fractionating NGLs; gathering, terminaling, loading and transporting crude oil and NGLs, gathering and disposing produced water, and storing and terminaling propane. We do not own or take title to the volumes that we handle. Effective January 1, 2014, we entered into (i) gas gathering, (ii) crude oil gathering, (iii) gas processing and fractionation, (iv) storage services and (v) terminal and export services fee‑based commercial agreements with certain subsidiaries of Hess, and effective January 1, 2019, we entered into water gathering and disposal services fee-based agreements with a subsidiary of Hess. Our responsibilities to provide each of the above services for each year under each of the commercial agreements are considered separate, distinct performance obligations. We recognize revenues for each performance obligation under our commercial agreements over‑time as services are rendered using the output method, measured using the amount of volumes serviced during the period. The minimum volume commitments are subject to fluctuation based on nominations covering substantially all of Hess’ production and projected third-party volumes that will be purchased in the Bakken. As the minimum volume commitments are subject to fluctuation, and these commercial agreements contain fee inflation escalators and fee recalculation mechanisms, substantially all of the transaction price, as this term is defined in Accounting Standards Codification (“ASC”) Topic, ASC 606, is variable at inception of each of the commercial agreements. As the variability is resolved prior to the recognition of revenue, we do not apply a constraint to the transaction price at the inception of the commercial agreements. We elected the practical expedient to recognize revenue in the amount to which we have a right to invoice as permitted under ASC 606. Due to this election and as the transaction price allocated to our unsatisfied performance obligations is entirely variable, we have elected the exemption provided by ASC 606 from the disclosure of revenue recognizable in future periods as our unsatisfied performance obligations are fulfilled. There are no significant financing components in any of our commercial agreements. The minimum volumes that Hess provides to our assets under our commercial agreements include dedicated production covering substantially all of Hess’ existing and future owned or controlled production in the Bakken and projected third-party volumes owned or controlled by Hess through dedicated third-party contracts. If Hess delivers volumes less than the applicable minimum volume commitments under our commercial agreements during any quarter, Hess is obligated to pay us a shortfall fee equal to the volume deficiency multiplied by the related gathering, processing and/or terminaling fee, as applicable. Our responsibility to stand-ready to service a minimum volume over each quarterly commitment period represents a separate, distinct performance obligation. Currently, and for the remainder of the Initial Term of each commercial agreement as described in Note 4, volume deficiencies are measured quarterly and recognized as revenue in the same period, as any associated shortfall payments are not subject to future reduction or offset. During the Secondary Term of each commercial agreement as described in Note 4, Hess will be entitled to receive a credit, calculated in barrels or Mcf, as applicable, with respect to the amount of any shortfall fee paid by Hess, which will initially be reported in deferred revenue. Hess may apply such credit against the fees payable for any volumes delivered to us under the applicable agreement in excess of Hess’ nominated volumes up to four quarters after such credit is earned. Unused credits by Hess will be recognized as revenue when they expire after four quarters. However, Hess will not be entitled to receive any such credit with respect to crude oil terminaling services under our terminal and export services agreement. Our revenues also include pass‑through third‑party rail transportation costs, third-party produced water trucking and disposal costs, electricity fees and certain other fees for which we recognize revenues in an amount equal to the costs. 74 Table of Contents Depreciation Expense. We calculate depreciation using the straight-line method based on the estimated useful lives after considering salvage values of our assets. Depreciation lives range from 12 to 35 years . However, factors such as maintenance levels, economic conditions impacting the demand for these assets, and regulatory or environmental requirements could cause us to change our estimates, thus impacting the future calculation of depreciation. Equity‑Based Compensation . Equity‑based compensation issued to the officers, directors and employees of our general partner is recorded at grant‑date fair value. Expense is recognized on a straight‑line basis over the vesting period of the award and is included in General and administrative expenses in the accompanying consolidated statements of operations. Forfeitures are recognized as they occur. Income Taxes . Deferred income taxes are determined using the liability method and reflect temporary differences between the financial statement carrying amount and income tax basis of assets and liabilities recorded using the statutory income tax rate. Regular assessments are made of the likelihood of those deferred tax assets being realized. 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. Environmental and Legal Contingencies. We accrue and expense environmental costs on an undiscounted basis to remediate existing conditions related to past operations when the future costs are probable and reasonably estimable. 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. Fair Value Measurements. We measure assets and liabilities requiring fair value presentation using an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclose such amounts according to the level of valuation inputs under the following hierarchy: Level 1: Quoted prices in an active market for identical assets or liabilities. Level 2: Inputs other than quoted prices that are directly or indirectly observable. Level 3: Unobservable inputs that are significant to the fair value of assets or liabilities. The classification of an asset or liability within the fair value measurement hierarchy is based on the lowest level of input significant to its fair value. There were no nonrecurring fair value measurements during the years ended December 31, 2022 and 2021. We had other short‑term financial instruments, primarily cash and cash equivalents, accounts receivable and accounts payable, for which the carrying value approximated their fair value as of December 31, 2022 and 2021. Derivatives. We may utilize derivative instruments for financial risk management activities. In these activities, we may use futures, forwards, options and swaps, individually or in combination, to mitigate our exposure to fluctuations in interest rates. 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. 75 Table of Contents Note 3. Equity Transactions Equity Offering Transactions On March 15, 2021, Hess Investments North Dakota LLC (“HINDL”) and GIP II Blue Holding, L.P. ( “GIP” and, together with HINDL, 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. On October 8, 2021, the Sponsors sold an aggregate of 8,625,000 of our Class A Shares, inclusive of the underwriters’ 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. 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. The above equity offering transactions were conducted pursuant to a registration rights agreement among us and the Sponsors. The Class A Shares sold in the offerings were obtained by the Sponsors by exchanging to us the respective number of their Class B Units in the Partnership, together with an equal number of our Class B Shares and, a s a result, the total number of Class A and Class B Shares did not change. 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 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 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. 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 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’ capital due to the transaction being characterized as a transaction among or with shareholders. 76 Table of Contents Note 4. Related Party Transactions We are part of the consolidated operations of Hess, and substantially all of our revenues as shown on the accompanying consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020 were derived from transactions with Hess and its affiliates, although we plan to provide our services to third parties in the future. 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 Effective January 1, 2014, we entered into i) gas gathering, ii) crude oil gathering, iii) gas processing and fractionation, iv) storage services, and v) terminal and export services fee‑based commercial agreements with certain subsidiaries of Hess. Effective January 1, 2019, in connection with the Hess Water Services Acquisition, we entered into long-term fee-based water services agreements with a subsidiary of Hess. For the services performed under these commercial agreements, we receive a fee per barrel of crude oil, barrel of water, Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, delivered during each month, and Hess is obligated to provide us with minimum volumes of crude oil, water, natural gas and NGLs. MVCs are equal to 80 % of Hess' nominations in each development plan that apply on a three-year rolling basis such that MVCs are set for the three years following the most recent nomination. Without our consent, the MVCs resulting from the nominated volumes for any quarter or year contained in any prior development plan cannot be reduced by any updated development plan unless dedicated production is released by us. The applicable MVCs may, however, be increased as a result of the nominations contained in any such updated development plan. Except for the water services agreements and except for a certain gathering sub-system as described below, each of our commercial agreements with Hess has an initial 10 -year term effective January 1, 2014 (“Initial Term”). For this gathering sub-system, the Initial Term is 15 years effective January 1, 2014 and for the water services agreements the Initial Term is 14 years effective January 1, 2019. Each of our commercial agreements other than our storage services agreement includes an inflation escalator and a fee recalculation mechanism that allows fees to be adjusted annually during the Initial Term for updated estimates of cumulative throughput volumes and our capital and operating expenditures in order to target a return on capital deployed over the Initial Term of the applicable commercial agreement (or, with respect to the crude oil services fee under our terminal and export services agreement, the 20 -year period commencing on the effective date of the agreement). We have the unilateral right, exercisable by the delivery of a written notice on or before the date that is three years prior to the expiration of the Initial Term, to extend each commercial agreement for one additional 10 -year term (“Secondary Term”). For a certain gathering sub-system, the Secondary Term is 5 -years and for the water services agreements the Secondary Term is 10 years. On December 30, 2020, we exercised our renewal options to extend the terms of certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess for the Secondary Term through December 31, 2033. There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining water gathering and disposal agreements as well as the remaining gas gathering agreement, we have the sole option to renew these agreements for an additional term that is exercisable at a later date. During the Secondary Term of each of our commercial agreements other than our storage services agreement and terminal and export services agreement (with respect to crude oil terminaling services), the fee recalculation model under each applicable agreement will be replaced by an inflation-based fee structure. The initial fee for the first year of the Secondary Term will be determined based on the average fees paid by Hess under the applicable agreement during the last three years of the Initial Term (with such fees adjusted for inflation through the first year of the Secondary Term). For each year following the first year of the Secondary Term, the applicable fee will be adjusted annually based on the percentage change in the consumer price index, provided that we may not increase any fee by more than 3 % in any calendar year solely by reason of an increase in the consumer price index, and no fee will ever be reduced below the amount of the applicable fee payable by Hess in the prior year as a result of a decrease in the consumer price index. During the Secondary Term of our commercial agreements, Hess will continue to have MVCs equal to 80 % of Hess' nominations in each development plan that apply on a three-year rolling basis through the Secondary Term. 77 Table of Contents For the years ended December 31, 2022, 2021 and 2020, approximately 100 % of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes contracted with Hess and delivered to us under these agreements. 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. Revenues from contracts with customers on a disaggregated basis were as follows: Year Ended December 31, 2022 2021 2020 (in millions) Oil and gas gathering services $ 600.8 $ 540.4 $ 469.3 Processing and storage services 470.8 435.7 370.3 Terminaling and export services 124.5 137.5 159.4 Water gathering and disposal services 77.1 90.2 92.6 Total revenues from contracts with customers $ 1,273.2 $ 1,203.8 $ 1,091.6 Other income 2.0 - 0.3 Total revenues $ 1,275.2 $ 1,203.8 $ 1,091.9 The following table presents MVC shortfall fees earned during each period: Year Ended December 31, 2022 2021 2020 (in millions) Oil and gas gathering services $ 93.0 $ 43.0 $ 12.5 Processing and storage services 34.9 4.4 - Terminaling and export services 32.0 32.8 4.8 Water gathering and disposal services 0.4 6.8 1.4 Total $ 160.3 $ 87.0 $ 18.7 The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These third-party costs are included in Operating and maintenance expenses in the accompanying consolidated statements of operations. Year Ended December 31, 2022 2021 2020 (in millions) Electricity and other related fees $ 44.8 $ 50.3 $ 40.0 Produced water trucking and disposal costs 33.1 37.0 55.9 Rail transportation costs 3.5 0.1 50.7 Total $ 81.4 $ 87.4 $ 146.6 78 Table of Contents Omnibus and Employee Secondment Agreements We entered into an omnibus agreement with Hess under which we pay Hess on a monthly basis an amount equal to the total allocable costs of Hess’ employees and contractors, subcontractors or other outside personnel engaged by Hess and its subsidiaries to the extent such employees and outside personnel perform operational and administrative services for us in support of our assets, plus a specified percentage markup of such amount depending on the type of service provided, as well as an allocable share of direct costs of providing these services. We also entered into an employee secondment agreement with Hess under which certain employees of Hess are seconded to our general partner to provide services with respect to our assets and operations, including executive oversight, business and corporate development, unitholder and investor relations, communications and public relations, routine and emergency maintenance and repair services, routine operational services, routine administrative services, construction services, and such other operational, commercial and business services that are necessary to develop and execute the Company’s business strategy. On a monthly basis, we pay a secondment fee to Hess that is intended to cover and reimburse Hess for the total costs actually incurred by Hess and its affiliates in connection with employing the seconded employees to the extent such total costs are attributable to the provision of services with respect to the Company’s assets and operations. For the years ended December 31, 2022, 2021 and 2020, we had the following charges from Hess. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the fundamental nature of the services being performed for our operations. Year Ended December 31, 2022 2021 2020 (in millions) Operating and maintenance expenses $ 71.2 $ 63.6 $ 62.8 General and administrative expenses 15.9 15.4 15.1 Total $ 87.1 $ 79.0 $ 77.9 LM4 Agreements Separately from our commercial agreements with Hess, effective January 24, 2018, we entered into a gas processing agreement with LM4, a 50 / 50 joint venture with Targa, under which we deliver natural gas to LM4, and LM4 processes and redelivers certain volumes of residue gas and NGLs resulting from such processing services. The agreement has a 16 -year initial term, after which it is automatically renewed for subsequent one-year terms unless terminated by either party . Under this agreement, we pay a processing fee per Mcf of natural gas and reimburse LM4 for our proportionate share of electricity costs. These processing fees are included in Operating and maintenance expenses in the accompanying consolidated statements of operations. We are entitled to 50 % of the available processing capacity of the LM4 gas processing plant. Should Targa not use all of the remaining processing capacity at the plant on any day, such unutilized portion of the available capacity will be available for our use. Regardless of the actual portion of the plant available capacity utilized by each joint venture member during a given period, under the LM4 amended and restated limited liability company agreement, profits and losses and cash distributions of the LM4 joint venture are allocated 50 / 50 between Targa and us. LM4 was placed in service in the third quarter of 2019. For the years ended December 31, 2022, 2021 and 2020, we had the following activity related to our agreements with LM4: Year Ended December 31, 2022 2021 2020 (in millions) Processing fee incurred $ 20.5 $ 27.7 $ 25.6 Earnings from equity investments $ 5.3 $ 10.6 $ 10.3 Distributions received from equity investments $ 13.0 $ 17.4 $ 9.7 79 Table of Contents Note 5. Property, Plant and Equipment Property, plant and equipment, at cost, is as follows: Estimated useful lives December 31, 2022 December 31, 2021 (in millions, except for number of years) Gathering assets Pipelines 22 years $ 1,591.7 $ 1,489.7 Compressors, pumping stations and terminals 22 to 25 years 923.1 809.0 Gas plant assets Pipelines, pipes and valves 22 to 25 years 460.0 460.0 Equipment 12 to 30 years 428.2 428.3 Processing and fractionation facilities 25 years 414.4 408.7 Buildings 35 years 182.3 182.3 Logistics facilities and railcars 20 to 25 years 389.3 386.5 Storage facilities 20 to 25 years 19.7 19.5 Other 20 to 25 years 25.5 25.8 Construction-in-progress N/A 136.3 131.6 Total property, plant and equipment, at cost 4,570.5 4,341.4 Accumulated depreciation ( 1,397.7 ) ( 1,216.4 ) Property, plant and equipment, net $ 3,172.8 $ 3,125.0 Note 6. Accrued Liabilities and Other Current Liabilities Accrued liabilities are as follows: December 31, 2022 December 31, 2021 (in millions) Accrued interest $ 35.4 $ 30.9 Accrued capital expenditures 24.1 26.5 Other accruals 23.4 18.8 Total $ 82.9 $ 76.2 Other current liabilities are as follows: December 31, 2022 December 31, 2021 (in millions) Property and sales and use tax payable $ 10.7 $ 10.1 Other current liabilities 0.7 0.1 Total $ 11.4 $ 10.2 Note 7. Debt and Interest Expense Total long-term debt is as follows: December 31, 2022 December 31, 2021 (in millions) Fixed-rate senior notes: 5.625 % due 2026 $ 800.0 $ 800.0 5.125 % due 2028 550.0 550.0 4.250 % due 2030 750.0 750.0 5.500 % due 2030 400.0 - Total fixed-rate senior notes 2,500.0 2,100.0 Term Loan A facility 400.0 390.0 Revolving credit facility 18.0 104.0 Total Borrowings 2,918.0 2,594.0 Unamortized deferred financing costs and discounts ( 32.4 ) ( 30.5 ) Total debt 2,885.6 2,563.5 Less: current maturities of long-term debt 2.5 20.0 Total long-term debt $ 2,883.1 $ 2,543.5 80 Table of Contents As of December 31, 2022, the maturity profile of total debt, excluding deferred financing costs and discounts, is as follows: (in millions) Total 2023 2024 2025 2026 2027 2028 and thereafter Fixed-rate senior notes $ 2,500.0 $ - $ - $ - $ 800.0 $ - $ 1,700.0 Term Loan facility 400.0 2.5 12.5 22.5 32.5 330.0 - Revolving credit facility 18.0 - - - - 18.0 - Total debt (excluding interest) $ 2,918.0 $ 2.5 $ 12.5 $ 22.5 $ 832.5 $ 348.0 $ 1,700.0 Fixed‑Rate Senior Notes 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 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 unsecured 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; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00. As of December 31, 2022, we were in compliance with all debt covenants under the indentures. In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indentures, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company. 81 Table of Contents Credit Facilities 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 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). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. At December 31, 2022, borrowings of $ 18.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $ 400.0 million, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility. 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 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, 2022, the Partnership was in compliance with these financial covenants. Fair Value Measurement At December 31, 2022, our total debt had a carrying value of $ 2,885.6 million and had a fair value of approximately $ 2,720.7 million, based on Level 2 inputs in the fair value measurement hierarchy. The carrying value of the amounts under the Term Loan A facility and revolving credit facility at December 31, 2022, approximated their fair value. 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. Interest Paid The total amount of interest paid on all fixed-rate senior notes and credit facilities, including facility fees, during the years ended December 31, 2022, 2021 and 2020 was $ 136.8 million, $ 84.5 million and $ 88.9 million, respectively. 82 Table of Contents Note 8. Partners’ Capital and Distributions Shares Outstanding 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 of the Company outstanding from December 31, 2019 through December 31, 2022 are as follows: Class A Shares Public Sponsors Total Class A Shares Class B Shares Sponsors Total Class A and Class B Shares Balance, December 31, 2019 17,062,655 898,000 17,960,655 266,416,928 284,377,583 Equity-based compensation 67,653 - 67,653 - 67,653 Balance, December 31, 2020 17,130,308 898,000 18,028,308 266,416,928 284,445,236 Equity-based compensation 118,760 - 118,760 - 118,760 Equity offering transaction - March 2021 6,900,000 - 6,900,000 ( 6,900,000 ) - Equity offering transaction - October 2021 8,625,000 - 8,625,000 ( 8,625,000 ) - Repurchase Transaction - - - ( 31,250,000 ) ( 31,250,000 ) Balance, December 31, 2021 32,774,068 898,000 33,672,068 219,641,928 253,313,996 Equity-based compensation 95,778 - 95,778 - 95,778 Equity offering transaction - April 2022 10,235,000 - 10,235,000 ( 10,235,000 ) - Repurchase Transaction - - - ( 13,559,322 ) ( 13,559,322 ) Balance, December 31, 2022 43,104,846 898,000 44,002,846 195,847,606 239,850,452 Distributions Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to shareholders of record on the applicable record date. The following table details the distributions declared and/or paid for the periods presented: Period Record Date Distribution Date Distribution per Class A share First Quarter 2020 May 4, 2020 May 14, 2020 $ 0.4310 Second Quarter 2020 August 6, 2020 August 14, 2020 $ 0.4363 Third Quarter 2020 November 5, 2020 November 13, 2020 $ 0.4417 Fourth Quarter 2020 February 4, 2021 February 12, 2021 $ 0.4471 First Quarter 2021 May 3, 2021 May 13, 2021 $ 0.4526 Second Quarter 2021 August 9, 2021 August 13, 2021 $ 0.5042 Third Quarter 2021 November 4, 2021 November 12, 2021 $ 0.5104 Fourth Quarter 2021 February 3, 2022 February 14, 2022 $ 0.5167 First Quarter 2022 May 5, 2022 May 13, 2022 $ 0.5492 Second Quarter 2022 August 4, 2022 August 12, 2022 $ 0.5559 Third Quarter 2022 November 3, 2022 November 14, 2022 $ 0.5627 Fourth Quarter 2022 (1) February 2, 2023 February 13, 2023 $ 0.5696 (1) For more information, see Note 15 , Subsequent Events . 83 Table of Contents Note 9. Equity-Bas ed Compensation We adopted the Hess Midstream LP 2017 Long-Term Incentive Plan (the “LTIP”). Awards under the LTIP are available for officers, directors and employees of our general partner or its affiliates, and any individuals who perform services for the Company. The LTIP provides the Company with the flexibility to grant restricted share awards, restricted shares, phantom units, share options, share appreciation rights, distribution equivalent rights, profits interest shares and other equity‑based awards. The LTIP limits the number of shares that may be delivered pursuant to vested awards to 3,000,000 Class A Shares. Under the LTIP, we granted phantom unit awards with distribution equivalent rights to certain officers, employees and directors. These phantom units and distribution equivalent rights vest ratably over a three‑year period for officers and employees, and vest after one year for directors. Each phantom unit represents the right to receive one Class A Share upon vesting (or an equivalent amount of cash). Cash distributions on the phantom units accumulate and are paid upon vesting. Fair value of phantom units is based on the fair value of Class A Shares on the grant date. Equity‑based award activity for the year ended December 31, 2022 was as follows: Weighted Average Award Date Number of Shares Fair Value Outstanding and unvested shares at December 31, 2021 187,931 $ 16.75 Granted 53,548 33.52 Vested ( 95,778 ) 16.89 Outstanding and unvested shares at December 31, 2022 145,701 $ 22.82 (in millions) 2022 2021 2020 Fair value of shares granted $ 1.8 $ 1.8 $ 1.9 Fair value of shares vested $ 1.6 $ 1.8 $ 1.5 During the year ended December 31, 2022, we recognized compensation expense related to the outstanding awards of $ 1.6 million (2021: $ 1.4 million, 2020: $ 1.5 million). 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. Note 10. 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. 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. In addition, our restricted equity-based awards may have a dilutive effect on our earnings per share. Diluted earnings per Class A Share are calculated using the “treasury stock method” or “if-converted method”, whichever is more dilutive. Year Ended December 31, (in millions, except per share amounts) 2022 2021 2020 Net income 620.6 617.8 484.9 Less: Net income attributable to noncontrolling interest 536.7 571.4 460.9 Net income attributable to Hess Midstream LP 83.9 46.4 24.0 Net income attributable to Hess Midstream LP per Class A share: Basic: $ 2.03 $ 1.81 $ 1.33 Diluted: $ 2.01 $ 1.76 $ 1.31 Weighted average Class A shares outstanding: Basic: 41.3 25.6 18.0 Diluted: 41.4 25.7 18.1 For the year ended December 31, 2022, the weighted average number of Class A Shares outstanding included 70,795 dilutive restricted shares (2021: 103,672 ; 2020: 88,013 shares). 84 Table of Contents 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. For the year ended December 31, 2021, the “if-converted” method was more dilutive. A reconciliation of the numerator and the denominator of the diluted earnings per Class A Share calculation under the “if-converted” method for the year ended December 31, 2021, is presented below: Year Ended December 31, 2021 (in millions, except per share data) Diluted net income per share Numerator: Net income attributable to Hess Midstream LP $ 46.4 Effect of exchange of Class B Units of the Partnership and the equal number of Class B Shares of the Company to Class A Shares of the Company 571.4 Effect of income tax expense on additional income attributable to Hess Midstream LP (1) ( 139.4 ) Diluted net income attributable to Hess Midstream LP $ 478.4 Denominator: Basic weighted average Class A Shares outstanding 25.6 Effect of dilutive securities: Weighted average Class B Units/Shares 246.7 Restricted equity-based awards 0.1 Diluted weighted average shares outstanding 272.4 Diluted net income attributable to Hess Midstream LP per Class A Share $ 1.76 (1) Income tax effect is calculated assuming 24.39 % blended U.S. federal and state income tax rate. Note 11. Concen tration of Credit Risk Hess represented approximately 100 % of our total revenues and accounts receivable from contracts with customers for the years ended December 31, 2022, 2021 and 2020. Note 12. Commitments and Contingencies Environmental Contingencies The Company is subject to federal, state and local laws and regulations relating to the environment. 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 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. 85 Table of Contents Lease and Purchase Obligations As of December 31, 2022 and 2021, we did no t have material lease obligations. 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. Note 13. Segm ents Our operations are located in the United States and are organized into three reportable segments: (i) gathering, (ii) processing and storage and (iii) terminaling and export. Our reportable segments comprise the structure used by our Chief Operating Decision Maker (“CODM”) to make key operating decisions and assess performance. These segments are strategic business units with differing products and services. The accounting policies of the segments are identical to those described in Note 2 , Summary of Significant Accounting Policies and Basis of Presentation . Our CODM evaluates the segments’ operating performance based on multiple measures including Adjusted EBITDA, defined as net income (loss) before interest expense, income tax (benefit), depreciation and amortization, and our proportional share of depreciation of our equity affiliates as further adjusted for other non‑cash, non‑recurring items, if applicable. Gathering . Our gathering segment consists of the following assets: • Natural Gas Gathering and Compression . A natural gas gathering and compression system located primarily in McKenzie, Williams and Mountrail Counties, North Dakota connecting Hess and third‑party owned or operated wells to the Tioga Gas Plant, LM4 gas processing plant, and third‑party pipeline facilities. The system also includes the Hawkeye Gas Facility. • Crude Oil Gathering : A crude oil gathering system located primarily in McKenzie, Williams, and Mountrail Counties, North Dakota, connecting Hess and third‑party owned or operated wells to the Ramberg Terminal Facility and the Johnson’s Corner Header System. The system also includes the Hawkeye Oil Facility. • Produced Water Gathering and Disposal. A produced water gathering system and disposal facilities located primarily in Williams and Mountrail Counties, North Dakota. Processing and Storage . Our processing and storage segment consists of the following assets: • Tioga Gas Plant (TGP) . A natural gas processing and fractionation plant located in Tioga, North Dakota. • Mentor Storage Terminal . A propane storage cavern and rail and truck loading and unloading facility located in Mentor, Minnesota. • Equity Investment in LM4 Joint Venture. The Partnership’s 50 % equity method investment in LM4 joint venture that owns a natural gas processing plant located in McKenzie County, North Dakota, which was placed in service in the third quarter of 2019. Terminaling and Export . Our terminaling and export segment consists of the following assets: • Ramberg Terminal Facility . A crude oil pipeline and truck receipt terminal located in Williams County, North Dakota that is capable of delivering crude oil into an interconnecting pipeline for transportation to the Tioga Rail Terminal and to multiple third‑party pipelines and storage facilities. • Tioga Rail Terminal. A crude oil and NGL rail loading terminal in Tioga, North Dakota that is connected to the Tioga Gas Plant, the Ramberg Terminal Facility and our crude oil gathering system. • Crude Oil Rail Cars. A total of 550 crude oil rail cars, constructed to the DOT‑117 safety standards, which we operate as unit trains consisting of approximately 100 to 110 crude oil rail cars. • Johnson’s Corner Header System. An approximately six ‑mile crude oil pipeline header system located in McKenzie County, North Dakota that receives crude oil by pipeline from Hess and third parties and delivers crude oil to third‑party interstate pipeline systems. 86 Table of Contents The following tables reflect certain financial data for each reportable segment: Gathering Processing and Storage Terminaling and Export Interest and Other Consolidated (in millions) For the Year Ended December 31, 2022 Revenues and other income $ 677.9 $ 470.8 $ 126.5 $ - $ 1,275.2 Net income (loss) 389.6 329.1 85.0 ( 183.1 ) 620.6 Net income (loss) attributable to Hess Midstream LP 66.4 56.6 14.4 ( 53.5 ) 83.9 Depreciation expense 107.4 57.7 16.2 - 181.3 Proportional share of equity affiliates' depreciation - 5.1 - - 5.1 Income from equity investments - 5.3 - - 5.3 Interest expense, net - - - 149.3 149.3 Income tax expense - - - 26.6 26.6 Adjusted EBITDA 497.0 391.9 101.2 ( 7.2 ) 982.9 Capital expenditures* 210.2 8.8 12.8 - 231.8 Gathering Processing and Storage Terminaling and Export Interest and Other Consolidated (in millions) For the Year Ended December 31, 2021 Revenues and other income $ 630.6 $ 435.7 $ 137.5 $ - $ 1,203.8 Net income (loss) 377.6 263.8 103.7 ( 127.3 ) 617.8 Net income (loss) attributable to Hess Midstream LP 36.3 25.5 10.1 ( 25.5 ) 46.4 Depreciation expense 101.0 48.4 16.2 - 165.6 Proportional share of equity affiliates' depreciation - 5.1 - - 5.1 Income from equity investments - 10.6 - - 10.6 Interest expense, net - - - 105.4 105.4 Income tax expense (benefit) - - - 14.6 14.6 Adjusted EBITDA 478.6 317.3 119.9 ( 7.3 ) 908.5 Capital expenditures* 154.0 28.8 0.2 - 183.0 Gathering Processing and Storage Terminaling and Export Interest and Other Consolidated (in millions) For the Year Ended December 31, 2020 Revenues and other income $ 561.9 $ 370.6 $ 159.4 $ - $ 1,091.9 Net income (loss) 300.7 218.7 73.5 ( 108.0 ) 484.9 Net income (loss) attributable to Hess Midstream LP 19.2 13.7 4.7 ( 13.6 ) 24.0 Depreciation expense 96.0 44.8 16.1 - 156.9 Proportional share of equity affiliates' depreciation - 5.1 - - 5.1 Income from equity investments - 10.3 - - 10.3 Interest expense, net - - - 94.7 94.7 Income tax expense (benefit) - - - 7.3 7.3 Gain on sale of property, plant and equipment 0.1 - - - 0.1 Adjusted EBITDA 396.6 268.6 89.6 ( 6.0 ) 748.8 Capital expenditures* 96.2 156.2 0.6 - 253.0 * Includes expansion and maintenance capital expenditures. 87 Table of Contents Total assets for reportable segments are as follows: December 31, 2022 December 31, 2021 (in millions) Gathering $ 2,022.0 $ 1,927.0 Processing and Storage (1) 1,099.2 1,149.5 Terminaling and Export 275.8 281.4 Interest and Other 191.2 127.7 Total assets $ 3,588.2 $ 3,485.6 (1) Includes investment in equity investees of $ 93.9 million as of December 31, 2022 and $ 101.6 million as of December 31, 2021. Note 14. Inc ome Taxes Although the Company is a Delaware limited partnership, we are subject to corporate income tax on our share of the Partnership’s earnings because of our election to be treated as a corporation for U.S. federal and state income tax purposes. The provision (benefit) for income taxes consisted of: Year Ended December 31, (in millions) 2022 2021 2020 Federal Current $ 0.1 $ 0.1 $ - Deferred taxes and other accruals 22.8 12.5 6.2 State 3.7 2.0 1.1 Total provision (benefit) for income taxes $ 26.6 $ 14.6 $ 7.3 The difference between the effective income tax rate and the U.S. statutory rate is reconciled below: Year Ended December 31, 2022 2021 2020 U.S. statutory rate 21.0 % 21.0 % 21.0 % Noncontrolling interest in partnership ( 17.4 ) ( 19.0 ) ( 19.7 ) State tax 0.5 0.3 0.2 Effective rate 4.1 % 2.3 % 1.5 % 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’ equity balance in the accompanying consolidated statement of changes in partners’ capital due to the transactions being characterized as transactions among or with shareholders. The components of deferred tax assets and liabilities are as follows: December 31, 2022 2021 (in millions) Deferred tax liabilities Investments $ ( 0.5 ) $ ( 0.4 ) Total deferred tax liabilities ( 0.5 ) ( 0.4 ) Deferred tax assets Investments 148.9 102.3 Net operating loss carryforwards 28.3 15.0 Total deferred tax assets 177.2 117.3 Net deferred tax assets (liabilities) $ 176.7 $ 116.9 At December 31, 2022, we have recognized a deferred tax asset of $ 23.5 million related to U.S. federal net operating loss carryforwards which do not expire and $ 4.8 million related to U.S. state net operating loss carryforwards which begin to expire in 2030 . We have no unrecognized tax benefits or interest and penalties related to tax liabilities recorded in the financial statements. For the years presented, we earned all net income before taxes in the United States. We file income tax returns in the U.S. and various states. We are not subject to corporate income tax examination for years prior to 2019. 88 Table of Contents N ote 15. Sub sequent Events On January 23, 2023 the board of directors of our general partner declared a quarterly cash distribution of $ 0.5696 per Class A Share for the quarter ended December 31, 2022, an increase of approximately 10.2 % compared with the quarter ended December 31, 2021. The distribution was paid on February 13, 2023 to shareholders of record as of the close of business on February 2, 2023 . On February 13, 2023 , the Partnership also made a distribution of $ 0.5696 per Class B Unit of the Partnership to the Sponsors. 89 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.