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Item 1. Financial Statements

2023-05-03 compared with 2022-11-03 · 141 added, 364 removed, 691 unchanged (42% of the section changed)

Financial Statements

September 30,

(in millions, except share amounts)

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Class A shares ( 44,093,493 shares issued and outstanding as of

September 30, 2022;

March 31, 2023;

44,002,846 shares issued and outstanding

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Class B shares ( 192,228,352 shares issued and outstanding as of

September 30, 2022;

219,641,928 shares issued and outstanding

as of December 31, 2021)

Total partners' capital

March 31, 2023;

195,847,606 shares issued and outstanding as of

December 31, 2022)

Total Class A and Class B partners' capital

Noncontrolling interest

5 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except per share data)

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General and administrative expenses

Total costs and expenses

Total operating costs and expenses

Income from operations

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Distributions - $ 0.5696 per share

Transaction costs

Balance at March 31, 2022

Equity-based compensation

Distributions - $ 0.5492 per share

Recognition of deferred tax asset

Sale of shares held by Sponsors

Class B unit repurchase

Transaction costs

Balance at June 30, 2022

Equity-based compensation

Distributions - $ 0.5559 per share

Balance at September 30, 2022

Balance at March 31, 2023

Balance at December 31, 2021

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Distributions - $ 0.5167 per share

Recognition of deferred tax asset

Sales of shares held by Sponsors

Transaction costs

Balance at March 31, 2022

Equity-based compensation

Distributions - $ 0.4526 per share

Balance at June 30, 2021

Equity-based compensation

Distributions - $ 0.5042 per share

Recognition of deferred tax asset

Class B unit repurchase

Class B unit repurchase transaction costs

Balance at September 30, 2021

See accompanying notes to unaudited consolidated financial statements.

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CONSOLIDATED S TATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

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Bank borrowings with maturities of greater than 90 days

Proceeds from issuance of bonds

Deferred financing costs

Transaction costs

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Description of Business

Hess Midstream LP (“the Company”) is a fee-based, growth-oriented, Delaware limited partnership that operates, develops and acquires a diverse set of midstream assets and provides fee-based services to Hess Corporation (“Hess”) and third-party customers.

We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner that is owned 50 / 50 by Hess and GIP II Blue Holding, L.P.

(“GIP”

and together with Hess, the “Sponsors”).

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 reportable segments:

(1) gathering, (2) processing and storage and (3) terminaling and export (see Note 13, Segments ).

Basis of Presentation

Unless the context otherwise requires, references in this report to the “Company,”

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or like terms, refer to Hess Midstream LP and its subsidiaries.

Basis of Presentation

The consolidated financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at September 30, 2022 and December 31, 2021, the consolidated results of operations for the three and nine months ended September 30, 2022 and 2021, and the consolidated cash flows for the nine months ended September 30, 2022 and 2021.

The consolidated financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at March 31, 2023 and December 31, 2022, the consolidated results of operations for the three months ended March 31, 2023 and 2022, and the consolidated cash flows for the three months ended March 31, 2023 and 2022.

The Company has no items of other comprehensive income (loss);

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We currently do not have any independent assets or operations other than our interest in the Partnership.

Our noncontrolling interest represents the approximate 81.7 % interest in the Partnership retained by Hess and GIP at September 30, 2022 ( 86.7 % at December 31, 2021).

Our noncontrolling interest represents the approximate 81.3 % interest in the Partnership retained by Hess Corporation (“Hess”) and GIP II Blue Holding, L.P.

(“GIP”

and together with Hess, the “Sponsors”) at March 31, 2023 ( 81.7 % at December 31, 2022).

See Note 2, Equity Transactions for a description of changes in noncontrolling interest related to the equity transactions.

Equity Transactions

Equity Offering 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.

The Sponsors received net proceeds from the offering of approximately $ 139.9 million, after deducting underwriting discounts.

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

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

The Sponsors received net proceeds from the offering of approximately $ 291.7 million, after deducting underwriting discounts.

PART I –

FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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, Basis of Presentation .

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

capital balance by $ 27.0 million and decreasing the carrying amount of noncontrolling interest by an equal amount (nine months ended September 30, 2021:

$ 31.8 million) to reflect the change in ownership interest.

Class B Unit Repurchase

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.

On March 27, 2023, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors (divided equally between the Sponsors) 3,619,254 Class B units representing limited partner interests in the Partnership (the “Class B Units”) for an aggregate purchase price of approximately $ 100 million.

The repurchase transaction was consummated on March 30, 2023.

The purchase price per Class B Unit was $ 27.63 , the closing price of the Class A shares representing limited partner interests in the Company (the “Class A Shares”) on March 27, 2023.

The repurchase transaction was funded using borrowings under the Partnership’s revolving credit facility, which were subsequently repaid with proceeds from a $ 400.0 million senior unsecured notes offering (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 repurchase transaction was funded using borrowings under the Partnership’s existing revolving credit facility (see Note 6, Debt and Interest Expense ).

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

The carrying 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 (nine months ended September 30, 2021:

$ 2.2 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 (nine months ended September 30, 2021:

$ 41.2 million) related to the change in the difference between the carrying amount and tax basis of our investment in the Partnership.

We incurred approximately $ 0.9 million of costs directly attributable to the repurchase transaction that were charged to equity.

As a result of the repurchase transaction described above, we also recognized an additional deferred tax asset of $ 4.3 million related to the change in the difference between the carrying amount and tax basis of our investment in the Partnership.

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

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Related Party Transactions

In addition to the Class B unit repurchase transactions and distributions to the Sponsors disclosed elsewhere in the Notes to consolidated financial statements, we had the following related party transactions:

In addition to the Class B unit repurchase transaction and distributions to the Sponsors disclosed elsewhere in the Notes to consolidated financial statements, we had the following related party transactions:

Commercial Agreements

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nominations in each development plan that apply on a three-year rolling basis through the Secondary Term.

For the three and nine months ended September 30, 2022 and 2021, 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.

For the three months ended March 31, 2023 and 2022, 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.

We retain control of our assets and the flow of volumes based on available capacity within our integrated gathering, processing and terminaling systems.

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Revenues from contracts with customers on a disaggregated basis are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

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The following table presents MVC shortfall fees earned during each period:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

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Terminaling and export services

Water gathering and disposal services

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 unaudited consolidated statements of operations.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

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Under our omnibus and employee secondment agreements, Hess provides substantial operational and administrative services to us in support of our assets and operations.

For the three and nine months ended September 30, 2022 and 2021, we had the following charges from Hess.

For the three months ended March 31, 2023 and 2022, 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.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

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In addition, we share profits and losses and receive distributions from LM4 under the LM4 amended and restated limited liability company agreement based on our ownership interest.

For the three and nine months ended September 30, 2022 and 2021, we had the following activity related to our agreements with LM4:

Three Months Ended September 30,

Nine Months Ended September 30,

For the three months ended March 31, 2023 and 2022, we had the following activity related to our agreements with LM4:

Three Months Ended March 31,

(in millions)

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Estimated useful lives

September 30, 2022

March 31, 2023

December 31, 2022

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Accrued liabilities are as follows:

September 30, 2022

March 31, 2023

December 31, 2022

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Fixed‑Rate Senior Notes

On April 8, 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 (see Note 3, Equity Transactions ).

As of September 30, 2022, the Partnership had $ 750.0 million aggregate principal amount of 4.250 % fixed‑rate senior unsecured notes due 2030 that were issued to qualified institutional investors.

As of March 31, 2023, the Partnership had $ 400.0 million aggregate principal amount of 5.500 % fixed‑rate senior unsecured notes due 2030 that were issued to qualified institutional investors.

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

As of March 31, 2023, the Partnership had $ 750.0 million aggregate principal amount of 4.250 % fixed‑rate senior unsecured notes due 2030 that were issued to qualified institutional investors.

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

As of September 30, 2022, the Partnership also had $ 550.0 million aggregate principal amount of 5.125 % fixed‑rate senior unsecured notes due 2028 that were issued to qualified institutional investors.

As of March 31, 2023, the Partnership also had $ 550.0 million aggregate principal amount of 5.125 % fixed‑rate senior unsecured notes due 2028 that were issued to qualified institutional investors.

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

In addition, as of September 30, 2022, the Partnership had $ 800.0 million aggregate principal amount of 5.625 % fixed‑rate senior unsecured notes due 2026 that were issued to qualified institutional investors.

In addition, as of March 31, 2023, the Partnership had $ 800.0 million aggregate principal amount of 5.625 % fixed‑rate senior unsecured notes due 2026 that were issued to qualified institutional investors.

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

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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 September 30, 2022, we were in compliance with all debt covenants under the indentures.

As of March 31, 2023, we were in compliance with all debt covenants under the indentures.

In addition, the covenants included in the indentures governing the senior unsecured notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, 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.

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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 outstanding on the term loan facility at September 30, 2022.

The amended and restated Credit Facilities mature in July 2027 .

As of March 31, 2023, the Partnership had $ 1.4 billion senior secured credit facilities (the “Credit Facilities”) consisting of a $ 1.0 billion 5 -year revolving credit facility and a $ 400.0 million 5 ‑year Term Loan A facility.

The Credit Facilities mature in July 2027 .

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

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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 September 30, 2022, borrowings of $ 43.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $ 400.0 m illion, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.

As of March 31, 2023, borrowings of $ 121.0 million were drawn and outstanding under the Partnership’s revolving credit facility, and borrowings of $ 400.0 m illion, excluding deferred issuance costs, were drawn and outstanding under the Partnership’s Term Loan A facility.

PART I –

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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 September 30, 2022, the Partnership was in compliance with these financial covenants.

As of March 31, 2023, the Partnership was in compliance with these financial covenants.

Fair Value Measurement

At September 30, 2022, our total debt had a carrying value of $ 2,909.0 million and had a fair value of approximately $ 2,641.3 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 September 30, 2022, approximated their fair value.

At March 31, 2023, our total debt had a carrying value of $ 2,990.1 million and had a fair value of approximately $ 2,884.3 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 March 31, 2023, 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.

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First Quarter 2023 (1)

Second Quarter 2022

August 4, 2022

August 12, 2022

Third Quarter 2022 (1)

November 3, 2022

November 14, 2022

(1) For more information, see Note 12, Subsequent Events.

Equity‑Based Compensation

Equity‑based award activity for the nine months ended September 30, 2022 is as follows:

Weighted Average

Number of Shares

Outstanding and unvested shares at December 31, 2021

Outstanding and unvested shares at September 30, 2022

As of September 30, 2022, $ 2.3 million of compensation cost related to unvested restricted shares awarded under our long-term incentive plan remains to be recognized over an expected weighted‑average period of 2.0 years.

PART I –

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whichever is more dilutive.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except per share amounts)

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Weighted average Class A shares outstanding:

For the three and nine months ended September 30, 2022 the weighted average number of Class A shares outstanding included 58,300 and 70,262 dilutive restricted shares, respectively, compared with 99,697 and 99,889 dilutive restricted shares for the three and nine months ended September 30, 2021, respectively.

For the three months ended March 31, 2023 and 2022 the weighted average number of Class A shares outstanding included 60,566 and 101,612 dilutive restricted shares, respectively.

Concentration of Credit Risk

Hess represented approximately 100 % of our total revenues and accounts receivable for the three and nine months ended September 30, 2022 and 2021.

Hess represented approximately 100 % of our total revenues and accounts receivable for the three months ended March 31, 2023 and 2022.

Commitments and Contingencies

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

While the Company is still in the initial phases of site investigation, the Company has recorded reserves for the estimated future costs to investigate and remediate any impacts of the release.

As of September 30, 2022 our total reserves for all estimated remediation liabilities, inclusive of the produced water release above, in Accrued liabilities and Other noncurrent liabilities were $ 1.9 million and $ 7.2 million, respectively, compared with $ 0.8 million and $ 3.1 million, respectively, as of December 31, 2021.

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

As of March 31, 2023 our reserves for all estimated remediation liabilities, inclusive of the produced water release above, in Accrued liabilities and Other noncurrent liabilities were $ 1.1 million and $ 3.7 million, respectively, compared with $ 1.4 million and $ 4.3 million, respectively, as of December 31, 2022.

Legal Proceedings

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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 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.

On or about March 14, 2023, the Company received a Notice of Violation (the “Notice”) from the North Dakota Department of Environmental Quality in the connection with the produced water release described under Environmental Contingencies above.

The Notice alerts the Company that it may have violated the State’s water pollution control laws, but neither imposes nor waives any enforcement action.

The State has not yet taken formal enforcement action.

The Company responded to the Notice detailing the steps it has taken to remediate the produced water release.

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

PART I –

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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 September 30, 2022 and December 31, 2021, we did no t have material accrued liabilities for legal contingencies.

Accordingly, as of March 31, 2023 and December 31, 2022, we did no t have material accrued liabilities for legal contingencies.

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

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

The following tables reflect certain financial data for each reportable segment:

Processing and Storage

Terminaling and Export

Interest and Other

(in millions)

For the Three Months Ended September 30, 2022

Revenues and other income

Net income (loss)

Net income (loss) attributable to

Hess Midstream LP

Depreciation expense

Proportional share of equity

affiliates' depreciation

Income from equity investments

Interest expense, net

Income tax expense

Adjusted EBITDA

Capital expenditures*

Processing and Storage

Terminaling and Export

Interest and Other

(in millions)

For the Three Months Ended September 30, 2021

Revenues and other income

Net income (loss)

Net income (loss) attributable to

Hess Midstream LP

Depreciation expense

Proportional share of equity

affiliates' depreciation

Income from equity investments

Interest expense, net

Income tax expense

Adjusted EBITDA

Capital expenditures*

PART I –

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following tables reflect certain financial data for each reportable segment:

Processing and Storage

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(in millions)

For the Nine Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

Revenues and other income

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(in millions)

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Revenues and other income

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Total assets for the reportable segments are as follows:

September 30, 2022

March 31, 2023

December 31, 2022

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Interest and Other

(1) Includes investment in equity investees of $ 98.3 million as of September 30, 2022 and $ 101.6 million as of December 31, 2021.

PART I –

FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) Includes investment in equity investees of $ 92.9 million as of March 31, 2023 and $ 93.9 million as of December 31, 2022.

Subsequent Events

On October 24, 2022 , the board of directors of our general partner declared a quarterly cash distribution of $ 0.5627 per Class A share for the quarter ended September 30, 2022, an approximate 1.2 % increase compared to the distribution on the Class A shares for the quarter ended June 30, 2022.

The distribution will be payable on November 14, 2022 , to shareholders of record as of the close of business on November 3, 2022 .

On April 24, 2023 , the board of directors of our general partner declared a quarterly cash distribution of $ 0.5851 per Class A share for the quarter ended March 31, 2023.

The distribution represents an approximate 2.7 % increase in the quarterly distribution per Class A share for the first quarter of 2023 as compared with the fourth quarter of 2022.

The distribution will be payable on May 12, 2023 , to shareholders of record as of the close of business on May 4, 2023 .

Simultaneously, the Partnership will make a distribution of $ 0.5851 per Class B unit of the Partnership to the Sponsors.

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or similar terms refer to Hess Midstream LP, including its consolidated subsidiaries.

References to “Partnership”

refer to Hess Midstream Operations LP.

This discussion contains forward‑looking statements that involve risks and uncertainties.

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

In March 2022, we brought online one of two new greenfield compressor stations and in September 2022 we brought online the second of the two new greenfield compressor stations planned for 2022.

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.

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 offering of approximately $291.7 million, after deducting underwriting discounts.

The Company did not receive any proceeds in the offering.

The offering was conducted pursuant to a registration rights agreement among us and the Sponsors.

On April 4, 2022, the Partnership purchased directly from the Sponsors 13,559,322 Class B units representing limited partner interests in the Partnership for an aggregate purchase price of $400.0 million.

The purchase price per Class B unit was $29.50, which is equal to the public offering price per Class A share in the secondary offering described above.

The repurchase transaction was funded using borrowings under the Partnership’s revolving credit facility, which were subsequently repaid with proceeds from a $400.0 million aggregate principal amount of 5.500% senior unsecured notes due 2030.

In addition, we utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through a 5% increase in our quarterly distribution level for the first quarter of 2022 in addition to the quarterly increase consistent with our targeted 5% growth in annual distributions per Class A share.

The repurchase transaction was consummated on March 30, 2023.

The purchase price per Class B Unit was $27.63, the closing price of the Class A shares representing limited partner interests in the Company (the “Class A Shares”) on March 27, 2023.

The repurchase transaction was funded using borrowings under the Partnership’s existing revolving credit facility.

In addition, we utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through an approximate 1.5% increase in our distribution level per Class A share in addition to the quarterly 1.2% increase per Class A share consistent with our target of at least 5% growth in annual distributions per Class A share.

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

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FINANCIAL INFORMATION (CONT’D)

Third Quarter Results

Significant financial and operating highlights for the third quarter of 2022 included:

First Quarter Results

Significant financial and operating highlights for the first quarter of 2023 included:

Consolidated net income of $142.2 million;

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Distributable cash flow of $196.6 million;

Cash distribution of $0.5627 per Class A share declared on October 24, 2022, an approximate 1.2% increase compared with the second quarter of 2022, consistent with the Company’s targeted 5% growth in annual distributions per Class A share.

Revenues and other income in the third quarter of 2022 were $334.8 million compared with $303.9 million in the prior-year quarter.

Third quarter 2022 revenues and other income were up $30.9 million compared to the prior-year quarter, of which $37.5 million is primarily due to higher volumes, slightly higher tariff rates and generally higher minimum volume commitment (”MVC”) levels in gas gathering 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 $6.6 million.

In the third quarter of 2022, we earned $27.0 million of shortfall fee payments related to MVCs compared with $31.6 million in the prior-year quarter, which were lower primarily due to higher gas capture.

Total costs and expenses in the third quarter of 2022 were $130.8 million, down from $144.7 million in the prior-year quarter.

The decrease is primarily attributable to lower operating and other expenses of $11.9 million, driven by the Tioga Gas Plant maintenance turnaround expenses in the prior year quarter and lower pass-through expenses of $6.6 million, for which we recognize revenues in the same amount, as described above.

This decrease is partially offset by $4.0 million higher depreciation expense for additional assets placed in service and $0.6 million higher general and administrative expenses.

Interest expense increased $11.9 million primarily attributable to the $750.0 million 4.25% fixed-rate senior notes issued in August of 2021 and the $400.0 million 5.500% fixed-rate senior notes issued in April of 2022.

Income tax expense increased $4.4 million driven by increased ownership of the Partnership by Hess Midstream LP following the equity offering and unit repurchase transactions in 2021 and 2022.

Income from equity investments decreased $0.2 million.

As a result, consolidated net income increased $28.3 million while Adjusted EBITDA increased $48.6 million for the third quarter of 2022 compared with the third quarter of 2021.

Throughput volumes increased 24% for gas processing and 20% for gas gathering in the third quarter of 2022 compared with the third quarter of 2021, primarily due to higher gas capture in the current year quarter and the Tioga Gas Plant turnaround in the prior year quarter.

Cash distribution of $0.5851 per Class A share declared on April 24, 2023, an approximate 2.7% increase in the quarterly distribution per Class A share for the first quarter of 2023 as compared with the fourth quarter of 2022.

The increase consists of an approximate 1.5% increase in the Company’s distribution level per Class A share in addition to the quarterly 1.2% increase per Class A share consistent with its target of at least 5% growth in annual distributions per Class A share.

Revenues and other income in the first quarter of 2023 were $305.0 million compared with $312.4 million in the prior-year quarter.

While physical volumes for gas gathering and processing and tariff rates were higher in the first quarter of 2023 compared with the prior-year quarter, revenues and other income were down $7.4 million due to the transition from higher minimum volume commitment (“MVC”) levels in 2022 to lower MVC levels in 2023 with actual physical volumes that are at or above MVCs in 2023.

Total operating costs and expenses in the first quarter of 2023 were $116.3 million, relatively flat compared with $116.9 million in the prior-year quarter, as higher depreciation and operating and maintenance expenses on our expanding gathering infrastructure were offset by lower pass-through costs.

Interest expense in the first quarter of 2023 was $41.6 million, up from $31.3 million in the prior-year quarter primarily attributable to the $400.0 million 5.50% fixed-rate senior notes issued in April of 2022 and higher interest rates on the Term Loan A credit facility.

As a result, consolidated net income decreased $17.4 million while Adjusted EBITDA decreased $2.6 million for the first quarter of 2023 compared with the first quarter of 2022.

Throughput volumes increased 7% for gas processing and 6% for gas gathering in the first quarter of 2023 compared with the first quarter of 2022 primarily due to higher gas capture.

Water gathering volumes increased 10% reflecting continued steady organic growth of our water handling business.

Throughput volumes in the third quarter of 2022 compared with the third quarter of 2021 decreased 4% for crude oil gathering and 1% for terminaling due to lower third party volumes.

Throughput volumes in the first quarter of 2023 compared with the first quarter of 2022 decreased 8% for crude oil gathering and 4% for terminaling due to lower production and lower third‑party volumes.

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

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Results of Operations

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Results of operations for the three months ended September 30, 2022 and 2021 are presented below (in millions, unless otherwise noted).

For the Three Months Ended September 30, 2022

Processing and Storage

Terminaling and Export

Interest and Other

Consolidated Hess Midstream LP

Affiliate services

Total revenues

Costs and expenses

Operating and maintenance expenses

(exclusive of depreciation

shown separately below)

Depreciation expense

General and administrative expenses

Total costs and expenses

Income (loss) from operations

Income from equity investments

Interest expense, net

Income (loss) before income tax expense

Income tax expense

Net income (loss)

Net income (loss) attributable to

noncontrolling interest

Net income (loss) attributable to

Hess Midstream LP

Throughput volumes

Gas gathering (MMcf/d) (1)

Crude oil gathering (MBbl/d) (2)

Gas processing (MMcf/d) (1)

Crude oil terminaling (MBbl/d) (2)

NGL loading (MBbl/d) (2)

Water gathering (MBbl/d) (2)

(1) Million cubic feet per day

(2) Thousand barrels per day

PART I –

FINANCIAL INFORMATION (CONT’D)

For the Three Months Ended September 30, 2021

Processing and Storage

Terminaling and Export

Interest and Other

Consolidated Hess Midstream LP

Affiliate services

Total revenues

Costs and expenses

Operating and maintenance expenses

(exclusive of depreciation

shown separately below)

Depreciation expense

General and administrative expenses

Total costs and expenses

Income (loss) from operations

Income from equity investments

Interest expense, net

Income (loss) before income tax expense

Income tax expense

Net Income (loss)

Net income (loss) attributable to

noncontrolling interest

Net income (loss) attributable to

Hess Midstream Partners LP

Throughput volumes

Gas gathering (MMcf/d) (1)

Crude oil gathering (MBbl/d) (2)

Gas processing (MMcf/d) (1)

Crude oil terminaling (MBbl/d) (2)

NGL loading (MBbl/d) (2)

Water gathering (MBbl/d) (2)

(1) Million cubic feet per day

(2) Thousand barrels per day

Revenues and other income increased $24.7 million in the third quarter of 2022 compared to the third quarter of 2021, of which $26.2 million is attributable to higher gas gathering MVC levels and gas gathering volumes, driven by higher gas capture.

In addition, $3.7 million of the increase is attributable to higher tariff rates.

This increase is partially offset by $3.9 million attributable to lower crude oil gathering volumes, $0.9 million is attributable to lower water gathering and disposal revenue primarily due to lower MVC levels and $0.4 million is attributable to lower pass-through revenues.

Operating and maintenance expenses increased $10.8 million, of which $5.9 million is attributable to the produced water release in August 2022, $3.5 million is attributable to higher operating expenses on our expanding gathering infrastructure and $1.8 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

This increase is partially offset by $0.4 million attributable to lower pass-through costs, including electricity and other fees.

Depreciation expense increased $1.5 million due to new compressors and other new gathering assets brought into service.

PART I –

FINANCIAL INFORMATION (CONT’D)

Processing and Storage

Revenues and other income increased $10.6 million in the third quarter of 2022 compared to the third quarter of 2021, of which $18.2 million is attributable to higher physical volumes, as volumes moved above MVC levels in the third quarter of 2022.

This increase is partially offset by $6.2 million attributable to lower pass-through revenue, including electricity and other fees related to temporary offloads during the TGP turnaround in 2021 and $1.4 million is attributable to lower tariff rates.

Operating and maintenance expenses decreased $30.6 million, of which $18.7 million is attributable to the TGP turnaround in 2021 and $6.2 million is attributable to lower pass-through costs including electricity and other fees related to temporary offloads during the TGP turnaround.

In addition, $2.6 million is attributable to lower operating expenses, $1.8 million is attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements and $1.3 million is attributable to lower third-party processing fees due to lower Hess volumes processed at the LM4 plant.

Depreciation expense increased $2.5 million, primarily due to the TGP expansion and turnaround assets placed in service.

Terminaling and Export

Revenues and other income decreased $4.4 million in the third quarter of 2022 compared to the third quarter of 2021, of which $5.0 million is attributable to lower MVC shortfall fees, partially offset by $0.6 million higher volumes.

Operating and maintenance expenses increased $1.3 million, primarily due to higher employee costs allocated to us under our omnibus and employee secondment agreements.

Interest and Other

Interest expense, net of interest income, increased $11.9 million in the third quarter of 2022 compared to the third quarter of 2021, primarily attributable to the $400.0 million 5.50% fixed-rate senior notes issued in April 2022 and the $750.0 million 4.25% fixed-rate senior notes issued in August 2021.

Income tax expense increased $4.4 million driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2021 and 2022.

PART I –

FINANCIAL INFORMATION (CONT’D)

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Results of operations for the nine months ended September 30, 2022 and 2021 are presented below (in millions, unless otherwise noted).

For the Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Results of operations for the three months ended March 31, 2023 and 2022 are presented below (in millions, unless otherwise noted).

For the Three Months Ended March 31, 2023

Processing and Storage

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Costs and expenses

Operating and maintenance expenses

(exclusive of depreciation

shown separately below)

Operating and maintenance expenses (exclusive

of depreciation shown separately below)

Depreciation expense

General and administrative expenses

Total costs and expenses

Total operating costs and expenses

Income (loss) from operations

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FINANCIAL INFORMATION (CONT’D)

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Processing and Storage

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Costs and expenses

Operating and maintenance expenses

(exclusive of depreciation

shown separately below)

Operating and maintenance expenses (exclusive

of depreciation shown separately below)

Depreciation expense

General and administrative expenses

Total costs and expenses

Total operating costs and expenses

Income (loss) from operations

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(2) Thousand barrels per day

Revenues and other income increased $47.2 million in the first nine months of 2022 compared to the first nine months of 2021, of which $54.7 million is attributable to higher gas gathering MVC levels and gas gathering volumes due to higher gas capture and $9.6 million is attributable to higher tariff rates.

This increase is partially offset by $9.4 million attributable to lower crude oil gathering MVC levels and $7.5 million attributable to lower water gathering and disposal revenue due to lower MVC levels in 2022 when compared to the same period in 2021.

The remaining decrease of $0.2 million is attributable to lower pass-through revenues.

Operating and maintenance expenses increased $21.8 million, of which $11.8 million is attributable to higher operating expenses on our expanding gathering infrastructure and $5.9 million is attributable to the produced water release in August 2022.

There was also an increase of $4.3 million attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

This increase is partially offset by $0.2 million attributable to lower pass-through costs, including produced water trucking and disposal and electricity fees.

Revenues and other income increased $1.1 million in the first quarter of 2023 compared to the first quarter of 2022, of which $12.1 million is attributable to higher tariff rates, $1.3 million is attributable to higher pass-through revenues;

$1.0 million is attributable to higher water gathering and disposal revenue and $0.3 million is attributable to other income.

This increase is partially offset by $8.0 million attributable to lower gas gathering volumes where actual physical volumes were above MVCs in the first quarter of 2023 and below MVCs in the first quarter of 2022, with MVC levels in 2023 lower than in 2022.

The remaining decrease of $5.6 million is attributable to lower crude oil gathering volumes, as actual physical volumes were below MVCs in the first quarter of 2022 and remained below MVCs in the first quarter of 2023, with MVC levels in 2023 lower than in 2022.

Operating and maintenance expenses increased $1.4 million primarily attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees.

Depreciation expense increased $2.9 million due to new compressors, produced water disposal facilities and other new gathering assets brought into service.

General and administrative expenses increased $1.2 million attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

PART I –

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Processing and Storage

Revenues and other income increased $32.1 million in the first nine months of 2022 compared to the first nine months of 2021, of which $41.6 million is attributable to higher physical volumes due to higher gas capture.

This increase is partially offset by $5.7 million attributable to lower pass-through revenue, including electricity and other fees related to temporary offloads during the TGP turnaround in 2021.

In addition, the remaining decrease of $3.4 million is attributable to lower tariff rates and $0.4 million is attributable to other income.

Operating and maintenance expenses decreased $35.8 million, of which $19.3 million is attributable to the TGP turnaround in 2021 and $6.1 million is attributable to lower third-party processing fees due to lower volumes processed at the LM4 plant.

In addition, $5.7 million is attributable to lower pass-through costs, including electricity and other fees related to temporary offloads during the TGP turnaround in 2021, $3.8 million is attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements and $0.9 million is attributable to lower operating costs.

Depreciation expense increased $8.9 million due to the TGP expansion and turnaround assets placed in service in 2021.

General and administrative expenses decreased $1.2 million attributable to lower employee costs allocated to us under our omnibus and employee secondment agreements.

Income from equity investments decreased $4.4 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to lower volumes processed and higher maintenance expenses at the LM4 plant.

Revenues and other income increased $0.6 million in the first quarter of 2023 compared to the first quarter of 2022, of which $1.8 million is attributable to higher tariff rates and $0.6 million is attributable to other income.

This increase is partially offset by $1.4 million attributable to lower gas processing volumes where actual physical volumes were above MVCs in the first quarter of 2023 and below MVCs in the first quarter of 2022, with MVC levels in 2023 lower than in 2022.

The remaining decrease of $0.4 million is attributable to lower pass-through revenue.

Total operating costs and expenses in the Processing and Storage segment were relatively flat in the first quarter of 2023 compared to the first quarter of 2022.

Income from equity investments increased $1.2 million in the first quarter of 2023 compared to the first quarter of 2022 primarily due to higher volumes processed at the LM4 plant.

Terminaling and Export

Revenues and other income decreased $6.2 million in the first nine months of 2022 compared to the first nine months of 2021, of which $10.0 million is attributable to lower MVC shortfall levels and $1.7 million attributable to lower tariff rates.

This decrease was partially offset by $4.2 million attributable to higher rail transportation pass-through revenues and $1.3 million attributable to other income.

Operating and maintenance expenses increased $6.4 million, of which $4.2 million is attributable to higher rail transportation pass-through costs and $2.7 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements, partially offset by $0.5 million attributable to other operating costs.

Revenues and other income decreased $9.1 million in the first quarter of 2023 compared to the first quarter of 2022, of which $6.5 million is attributable to lower volumes, as actual physical volumes were below MVCs in the first quarter of 2022 and remained below MVCs in the first quarter of 2023, with MVC levels in 2023 lower than in 2022.

Additionally, $6.1 million of the decrease is attributable to lower rail transportation pass-through revenues.

This decrease was partially offset by $3.5 million attributable to higher tariff rates and other income.

Operating and maintenance expenses decreased $4.9 million, of which $6.1 million is attributable to lower rail transportation pass-through costs, partially offset by $1.2 million higher other operating costs.

Interest and Other

Interest expense, net of interest income, increased $34.6 million in the first nine months of 2022 compared to the first nine months of 2021, primarily attributable to the $400.0 million 5.50% fixed-rate senior notes issued in April 2022 and the $750.0 million 4.25% fixed-rate senior notes issued in August 2021.

Income tax expense increased $10.4 million in the same periods driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2021 and 2022.

Interest expense, net of interest income, increased $10.3 million in the first quarter of 2023 compared to the first quarter of 2022, primarily attributable to 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 $1.5 million in the same period driven by increased ownership of the Partnership by Hess Midstream LP following equity offering and unit repurchase transactions in 2022.

PART I –

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

We expect to be above MVC levels in 2023 and 2024.

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.

All volumes are expected to be approximately at or above MVC levels in 2023 on a full year basis, followed by growing volumes above currently established MVC levels in 2024 and 2025.

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

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The 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.

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions)

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Our partnership agreement requires that we distribute all of our available cash, as defined in the agreement, to our shareholders.

On October 24, 2022, we declared a quarterly cash distribution of $0.5627 per Class A share, to be paid on November 14, 2022 to shareholders of record on November 3, 2022.

On April 24, 2023, we declared a quarterly cash distribution of $0.5851 per Class A share, to be paid on May 12, 2023 to shareholders of record on May 4, 2023.

Simultaneously, the Partnership will make a distribution of $0.5851 per Class B unit of the Partnership to the Sponsors.

On August 16, 2022 the United States enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), 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.

The alternative minimum tax is designed to be a temporary acceleration of cash tax as amounts paid under such regime are creditable against the regular U.S.

corporate income tax liability in following tax years.

The Department of the Treasury is expected to publish regulations relevant to many aspects of the minimum tax on corporations, including the calculation of adjusted financial statement income.

We are currently awaiting such guidance and continue to evaluate the effect of the new law to our future cash flows and financial results.

Fixed‑Rate Senior Notes

On April 8, 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.

As of September 30, 2022, the Partnership had $750.0 million aggregate principal amount of 4.250% fixed‑rate senior unsecured notes due 2030 that were issued to qualified institutional investors.

As of March 31, 2023, the Partnership had $400.0 million aggregate principal amount of 5.500% fixed‑rate senior unsecured notes due 2030 that were issued to qualified institutional investors.

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

As of March 31, 2023, the Partnership had $750.0 million aggregate principal amount of 4.250% fixed‑rate senior unsecured notes due 2030 that were issued to qualified institutional investors.

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

As of September 30, 2022, the Partnership also had $550.0 million aggregate principal amount of 5.125% fixed‑rate senior unsecured notes due 2028 that were issued to qualified institutional investors.

As of March 31, 2023, the Partnership also had $550.0 million aggregate principal amount of 5.125% fixed‑rate senior unsecured notes due 2028 that were issued to qualified institutional investors.

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

In addition, as of September 30, 2022, the Partnership had $800.0 million aggregate principal amount of 5.625% fixed‑rate senior unsecured notes due 2026 that were issued to qualified institutional investors.

In addition, as of March 31, 2023, the Partnership had $800.0 million aggregate principal amount of 5.625% fixed‑rate senior unsecured notes due 2026 that were issued to qualified institutional investors.

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

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As of September 30, 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 indenture, 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

PART I –

FINANCIAL INFORMATION (CONT’D)

that would not be consolidated with the financial results of the Partnership and its subsidiaries.

As of March 31, 2023, we were in compliance with all debt covenants under the indentures.

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.

PART I –

FINANCIAL INFORMATION (CONT’D)

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 outstanding on the term loan facility at September 30, 2022.

The amended and restated Credit Facilities mature in July 2027.

As of March 31, 2023, the Partnership had $1.4 billion senior secured credit facilities (the “Credit Facilities”) consisting of a $1.0 billion 5-year revolving credit facility and a $400.0 million 5‑year Term Loan A facility.

The 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%.

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 September 30, 2022, borrowings of $43.0 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.

As of March 31, 2023, borrowings of $121.0 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.

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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 September 30, 2022, we were in compliance with these financial covenants.

As of March 31, 2023, we were in compliance with these financial covenants.

Operating Activities.

Net cash provided by operating activities increased $66.5 million for the nine months ended September 30, 2022 compared to the same period in 2021.

The change in operating cash flows resulted primarily from an increase in revenues and other income of $73.1 million, an increase in cash provided by changes in working capital of $26.4 million, partially offset by an increase in cash operating expenses of $25.9 million and a decrease in distributions received from equity investments of $7.1 million.

Net cash provided by operating activities increased $8.1 million for the three months ended March 31, 2023 compared to the same period in 2022.

The change in operating cash flows resulted primarily from an increase in cash provided by changes in working capital of $24.1 million, partially offset by a decrease in revenues and other income of $7.4 million, an increase in expenses, other than depreciation, amortization, equity-based compensation and other non-cash gains and losses of $6.5 million, and a decrease in distributions received from equity investments of $2.1 million.

Investing Activities.

Net cash used in investing activities increased $56.6 million for the nine months ended September 30, 2022 compared to the same period in 2021 driven by higher payments for additions to property, plant, and equipment.

Net cash used in investing activities increased $9.5 million for the three months ended March 31, 2023 compared to the same period in 2022 driven by higher payments for additions to property, plant, and equipment.

Financing Activities.

Net cash used in financing activities increased $9.5 million for the nine months ended September 30, 2022 compared to the same period in 2021.

In the first nine months of 2022, we had higher repayments on our debt of $13.5 million, net of any changes in financing costs, partially offset by lower distributions to shareholders and noncontrolling interest of $3.5 million and $0.5 million lower transaction costs related to the $400.0 million Class B Unit Repurchase Transaction in 2022 compared to the $750.0 million Class B Unit Repurchase Transaction in 2021.

Net cash used in financing activities decreased $1.1 million for the three months ended March 31, 2023 compared to the same period in 2022.

In the first three months of 2023, we used $100.0 million to repurchase Class B units of the Partnership and paid higher distributions to shareholders and noncontrolling interest of $5.7 million and higher transaction costs of $0.2 million compared to the same period in 2022.

Our net proceeds from bank borrowings were $107.0 million higher in the first three months of 2023 compared to the same period in 2022.

PART I –

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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:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

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current and future production growth and gas capture targets.

The activities focus 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.

Capital expenditures in 2021 were also attributable to continued expansion of our compression capacity, as well as maintenance capital expenditures related to the Tioga Gas Plant turnaround.

The activities focus on the construction of two new compressor stations and associated pipeline infrastructure, which are expected to be placed in service later in 2023 and provide, in aggregate, an additional 100 MMcf/d of gas compression capacity when brought online.

Capital expenditures in 2022 were also attributable to continued expansion of our compression capacity.

PART I –

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The following important factors could cause actual results to differ materially from those in our forward-looking statements:

the direct and indirect effects of the COVID-19 global pandemic and other public health developments on our business and those of our business partners, suppliers and customers, including Hess;

the ability of Hess and other parties to satisfy their obligations to us, including Hess’

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the actual volumes we gather, process, terminal and store for Hess in excess of our MVCs and relative to Hess' nominations;

fluctuations in the prices and demand for crude oil, natural gas and NGLs, including as a result of the COVID-19 global pandemic;

changes in global economic conditions and the effects of a global economic downturn on our business and the business of our suppliers, customers, business partners and lenders;

fluctuations in the prices and demand for crude oil, natural gas and NGLs;

changes in global economic conditions and the effects of a global economic downturn or inflation on our business and the business of our suppliers, customers, business partners and lenders;

the direct and indirect effects of an epidemic or outbreak of an infectious disease, such as COVID-19 and its variants, on our business and those of our business partners, suppliers and customers, including Hess;

our ability to comply with government regulations or make capital expenditures required to maintain compliance, including our ability to obtain or maintain permits necessary for capital projects in a timely manner, if at all, or the revocation or modification of existing permits;

our ability to successfully identify, evaluate and timely execute our capital projects, investment opportunities and growth strategies, whether through organic growth or acquisitions;

costs or liabilities associated with federal, state and local laws, regulations and governmental actions applicable to our business, including legislation and regulatory initiatives relating to environmental protection and safety, such as spills, releases, pipeline integrity and measures to limit greenhouse gas emissions;

costs or liabilities associated with federal, state and local laws, regulations and governmental actions applicable to our business, including legislation and regulatory initiatives relating to environmental protection and health and safety, such as spills, releases, pipeline integrity and measures to limit greenhouse gas emissions and climate change;

our ability to comply with the terms of our credit facility, indebtedness and other financing arrangements, which, if accelerated, we may not be able to repay;

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Interest rate swaps may be used to convert interest payments on certain long‑term debt.

At September 30, 2022, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.

At September 30, 2022, our total debt had a carrying value of $2,909.0 million and a fair value of approximately $2,641.3 million, based on Level 2 inputs in the fair value measurement hierarchy.

At March 31, 2023, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.

At March 31, 2023, our total debt had a carrying value of $2,990.1 million and a fair value of approximately $2,884.3 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 $95.2 million or $100.3 million, respectively.

1 unchanged sentence

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.

Our exposure to market risk related to changes in interest rates has not materially changed from what we previously disclosed in our 2022 Annual Report.

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

What changed 10-Q

Item 1. Financial Statements