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Item 1. Financial Statements

2023-08-03 compared with 2023-05-03 · 298 added, 114 removed, 718 unchanged (36% of the section changed)

23 unchanged sentences

Class A shares ( 56,858,493 shares issued and outstanding as of

March 31, 2023;

June 30, 2023;

44,002,846 shares issued and outstanding

1 unchanged sentence

Class B shares ( 176,113,268 shares issued and outstanding as of

March 31, 2023;

June 30, 2023;

195,847,606 shares issued and outstanding as of

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CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions, except per share data)

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Balance at March 31, 2023

Equity-based compensation

Distributions - $ 0.5851 per share

Recognition of deferred tax asset

Sale of shares held by Sponsors

Class B unit repurchase

Transaction costs

Balance at June 30, 2023

Balance at December 31, 2021

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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

See accompanying notes to unaudited consolidated financial statements.

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CONSOLIDATED S TATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in millions)

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Bank borrowings with maturities of greater than 90 days

Proceeds from issuance of senior notes

Deferred financing costs

Transaction costs

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

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 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 June 30, 2023 and December 31, 2022, the consolidated results of operations for the three and six months ended June 30, 2023 and 2022, and the consolidated cash flows for the six months ended June 30, 2023 and 2022.

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

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(“GIP”

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

and together with Hess, the “Sponsors”) at June 30, 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

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.

Equity Offering Transactions

On April 4, 2022, the Sponsors sold an aggregate of 10,235,000 of our Class A shares representing limited partner interests (the “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.

On May 19, 2023, the Sponsors sold an aggregate of 12,765,000 of our Class A Shares, inclusive of the underwriters’

option to purchase up to 1,665,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $ 27.00 per Class A Share, less underwriting discounts.

The Sponsors received net proceeds from the offering of approximately $ 333.4 million, 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 representing limited partner interests in the Partnership (the “Class B Units”), together with an equal number of Class B shares representing limited partner interests in the Company (the “Class B Shares”) held by the Company’s general partner.

As 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 1, Basis of Presentation .

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

capital balance by $ 11.0 million (six months ended June 30, 2022:

$ 27.0 million) and decreasing the carrying amount of noncontrolling interest by an equal amount to reflect the change in ownership interest.

PART I –

FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Class B Unit Repurchases

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 2022 secondary equity offering transaction described above, an aggregate number of Class B Units 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 2022 equity offering transaction described above.

The 2022 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 6, Debt and Interest Expense ).

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 3,619,254 Class B Units for an aggregate purchase price of approximately $ 100.0 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.

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 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 purchase price per Class B Unit was $ 27.63 , the closing price of the Class A Shares on March 27, 2023.

The March 2023 repurchase transaction was funded using borrowings under the Partnership’s existing revolving credit facility (see Note 6, Debt and Interest Expense ).

On June 26, 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 3,350,084 Class B Units for an aggregate purchase price of approximately $ 100.0 million.

The repurchase transaction was consummated on June 29, 2023.

The purchase price per Class B Unit was $ 29.85 , the closing price of the Class A Shares on June 26, 2023.

The June 2023 repurchase transaction was funded using borrowings under the Partnership’s existing revolving credit facility (see Note 6, Debt and Interest Expense ).

Pursuant to the terms of the repurchase agreements described above, immediately following each purchase of the Class B Units from the Sponsors, the Partnership cancelled the repurchased units, and the Company cancelled, for no consideration, an equal number of its Class B Shares.

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 $ 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.

We incurred approximately $ 1.8 million of costs directly attributable to the repurchase transactions that were charged to equity ( six months ended June 30, 2022:

$ 1.5 million ).

As a result of the equity offerings and the unit repurchase transactions described above, we also recognized an additional deferred tax asset of $ 91.5 million ( six months ended June 30, 2022:

$ 86.4 million ) related to the change in the temporary difference between the carrying amount and the 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.

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

PART I –

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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:

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:

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 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.

For the three and six months ended June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

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Terminaling and export services

Water gathering 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(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 months ended March 31, 2023 and 2022, we had the following charges from Hess.

For the three and six months ended June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended March 31,

For the three and six months ended June 30, 2023 and 2022, we had the following activity related to our agreements with LM4:

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

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Estimated useful lives

March 31, 2023

June 30, 2023

December 31, 2022

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Accrued liabilities are as follows:

March 31, 2023

June 30, 2023

December 31, 2022

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Fixed‑Rate Senior Notes

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.

As of June 30, 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.

As of June 30, 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 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.

As of June 30, 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 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.

In addition, as of June 30, 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 March 31, 2023, we were in compliance with all debt covenants under the indentures.

As of June 30, 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

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.

As of June 30, 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 .

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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.

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.

As of June 30, 2023, borrowings of $ 198.0 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 March 31, 2023, the Partnership was in compliance with these financial covenants.

As of June 30, 2023, the Partnership was in compliance with these financial covenants.

Fair Value Measurement

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.

At June 30, 2023, our total debt had a carrying value of $ 3,068.7 million and had a fair value of approximately $ 2,924.3 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 June 30, 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

Second Quarter 2023 (1)

August 3, 2023

August 14, 2023

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

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whichever is more dilutive.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions, except per share amounts)

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Weighted average Class A shares outstanding:

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.

For the three and six months ended June 30, 2023 the weighted average number of Class A Shares outstanding included 19,640 and 40,103 dilutive restricted shares, respectively, compared with 50,874 and 76,243 dilutive restricted shares for the three and six months ended June 30, 2022, respectively.

Concentration of Credit Risk

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

Hess represented approximately 100 % of our total revenues and accounts receivable for the three and six months ended June 30, 2023 and 2022.

Commitments and Contingencies

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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 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.

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

Remediation infrastructure was put in place and remediation and monitoring is ongoing.

As of June 30, 2023 our reserves for all estimated remediation liabilities, inclusive of the produced water release above, in Accrued liabilities and Other noncurrent liabilities were $ 0.9 million and $ 3.5 million, respectively, compared with $ 1.4 million and $ 4.3 million, respectively, as of December 31, 2022.

Legal Proceedings

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

Accordingly, as of June 30, 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 June 30, 2023

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 June 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*

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 Three Months Ended March 31, 2023

For the Six Months Ended June 30, 2023

Revenues and other income

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(in millions)

For the Three Months Ended March 31, 2022

For the Six Months Ended June 30, 2022

Revenues and other income

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Interest expense, net

Income tax expense (benefit)

Income tax expense

Adjusted EBITDA

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Total assets for the reportable segments are as follows:

March 31, 2023

June 30, 2023

December 31, 2022

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Interest and Other

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

(1) Includes investment in equity investees of $ 92.8 million as of June 30, 2023 and $ 93.9 million as of December 31, 2022.

Subsequent Events

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 .

On July 24, 2023 , the board of directors of our general partner declared a quarterly cash distribution of $ 0.6011 per Class A Share for the quarter ended June 30, 2023.

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

The distribution will be payable on August 14, 2023 , to shareholders of record as of the close of business on August 3, 2023 .

Simultaneously, the Partnership will make a distribution of $ 0.6011 per Class B Unit of the Partnership to the Sponsors.

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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.

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.

On March 30, 2023, the Partnership purchased directly from the Sponsors 3,619,254 Class B units representing limited partner interests in the Partnership (“Class B Units”) for an aggregate purchase price of approximately $100 million.

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 (“Class A Shares”) on March 27, 2023.

On June 29, 2023, the Partnership purchased directly from the Sponsors 3,350,084 Class B Units for an aggregate purchase price of approximately $100 million.

The purchase price per Class B Unit was $29.85, the closing price of the Class A Shares on June 26, 2023.

The repurchase transactions were funded using borrowings under the Partnership’s existing revolving credit facility.

On May 19, 2023, the Sponsors sold an aggregate of 12,765,000 of our Class A Shares, inclusive of the underwriters’

option to purchase up to 1,665,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $27.00 per Class A Share, less underwriting discounts.

The Sponsors received net proceeds from the offering of approximately $333.4 million, after deducting underwriting discounts.

The Company did not receive any proceeds from the offering.

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

In addition, we utilized the excess free cash flow beyond our growing distributions to provide increased return of capital to our shareholders through an immediate 1.5% increase in our quarterly distribution level per Class A Share in each of the first two quarters of 2023 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)

First Quarter Results

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

Second Quarter Results

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

Consolidated net income of $147.9 million;

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Distributable cash flow of $202.6 million;

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.

Cash distribution of $0.6011 per Class A Share declared on July 24, 2023, an approximate 2.7% increase in the quarterly distribution per Class A Share for the second quarter of 2023 as compared with the first quarter of 2023.

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.

Revenues and other income in the second quarter of 2023 were $324.0 million compared with $313.4 million in the prior-year quarter.

Second quarter 2023 revenues and other income were up $10.6 million compared to the prior-year quarter primarily due to higher tariff rates partly offset by lower shortfall fees due to the transition from higher MVC levels in 2022 to actual physical volumes in 2023 that are at or above MVCs.

Total operating costs and expenses in the second quarter of 2023 were $125.9 million, compared with $118.1 million in the prior-year quarter.

The increase was primarily attributable to higher operating expenses and higher depreciation expense for additional assets placed in service.

Interest expense in the second quarter of 2023 was $43.8 million, up from $37.4 million in the prior-year quarter primarily attributable to higher interest rates on the Term Loan A and revolving credit facilities.

Income tax expense increased $1.0 million resulting from ownership changes following Class B Unit repurchase and secondary equity offering transactions.

As a result, consolidated net income decreased $3.9 million while Adjusted EBITDA increased $5.5 million for the second quarter of 2023 compared with the second quarter of 2022.

Throughput volumes increased 23% for gas processing and 19% for gas gathering in the second quarter of 2023 compared with the second quarter of 2022 primarily due to higher production, including third-party volumes, higher gas capture, and recovery from severe weather in the second quarter of 2022.

Water gathering volumes increased 34% reflecting continued steady organic growth of our water handling business.

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.

Throughput volumes in the second quarter of 2023 compared with the second quarter of 2022 increased 16% for terminaling and 7% for crude oil gathering primarily due to higher production and higher 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 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

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Results of operations for the three months ended June 30, 2023 and 2022 are presented below (in millions, unless otherwise noted).

For the Three Months Ended June 30, 2023

Processing and Storage

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Costs and expenses

Operating and maintenance expenses

(exclusive of depreciation

shown separately below)

Depreciation expense

General and administrative expenses

Total operating 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 June 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 operating 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

Revenues and other income increased $8.3 million in the second quarter of 2023 compared to the second quarter of 2022, of which $15.6 million is attributable to higher tariff rates, $2.7 million is attributable to higher water gathering and disposal revenue and $0.6 million is attributable to other income, including pass-through income.

While physical crude oil gathering volumes increased in the second quarter of 2023, they remained below MVCs resulting in a partially offsetting $5.4 million decline in revenues due to the reduction in the MVC levels from the second quarter of 2022.

The remaining decrease of $5.2 million is attributable to gas gathering volumes where actual physical volumes were above MVCs in the second quarter of 2023 and below MVCs in the second quarter of 2022, with physical volumes in 2023 lower than MVC levels in 2022.

Operating and maintenance expenses increased $2.0 million primarily attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

Depreciation expense increased $1.6 million due to new compressors, produced water disposal facilities and other new gathering assets brought into service.

PART I –

FINANCIAL INFORMATION (CONT’D)

Processing and Storage

Revenues and other income increased $6.3 million in the second quarter of 2023 compared to the second quarter of 2022, of which $3.1 million is attributable to higher gas processing volumes where actual physical volumes were above MVC levels in the second quarter of 2023, $1.9 million is attributable to higher tariff rates and $1.3 million is attributable to other income, including pass-through income.

Operating and maintenance expenses increased $3.0 million, of which $1.3 million is attributable to higher maintenance costs, $0.8 million is attributable to higher third-party processing fees due to higher volumes processed at the LM4 plant and $0.9 million is attributable to all other operating expenses.

Income from equity investments increased $0.7 million in the second quarter of 2023 compared to the second quarter of 2022 primarily due to higher volumes processed at the LM4 plant.

Terminaling and Export

Revenues and other income decreased $4.0 million in the second quarter of 2023 compared to the second quarter of 2022.

Although physical volumes increased in the second quarter of 2023, they remained below the MVC levels of the second quarter of 2022, resulting in a $6.0 million decline in revenues.

Additionally, $1.6 million of the decrease is attributable to lower rail transportation pass-through revenues.

This decrease was partially offset by $3.6 million attributable to higher tariff rates and other income.

Total operating costs and expenses in the Terminaling an Export segment were relatively flat in the second quarter of 2023 compared to the second quarter of 2022, as higher maintenance costs were offset by lower rail transportation pass-through costs.

Interest and Other

Interest expense, net of interest income, increased $6.4 million in the second quarter of 2023 compared to the second quarter of 2022, primarily attributable to higher interest rates on the Term Loan A and revolving credit facilities.

Income tax expense increased $1.0 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 and 2023.

PART I –

FINANCIAL INFORMATION (CONT’D)

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Results of operations for the six months ended June 30, 2023 and 2022 are presented below (in millions, unless otherwise noted).

For the Six Months Ended June 30, 2023

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

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Interest expense, net

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Income (loss) before income tax expense

Income tax expense

Net income (loss)

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FINANCIAL INFORMATION (CONT’D)

For the Three Months Ended March 31, 2022

For the Six Months Ended June 30, 2022

Processing and Storage

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Interest expense, net

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Income (loss) before income tax expense

Income tax expense

Net Income (loss)

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(2) Thousand barrels per day

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.

Revenues and other income increased $9.4 million in the first six months of 2023 compared to the first six months of 2022, of which $30.0 million is attributable to higher tariff rates, $3.8 million is attributable to higher water gathering and disposal revenue, $1.5 million is attributable to higher pass-through revenues and $0.7 million is attributable to other income.

Despite higher gas gathering physical volumes in the first six months of 2023, these revenue increases were partially offset by $15.7 million as the higher gas gathering volumes were still below the MVC levels in the first six months of 2022.

In addition, while crude oil gathering physical volumes increased in the first six months of 2023, they remained below MVCs resulting in a $10.9 million decline in revenues due to the reduction in the MVC levels from the first six months of 2022.

Operating and maintenance expenses increased $3.4 million in the first six months of 2023 compared to the first six months of 2022, of which $1.9 million is primarily attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements and $1.5 million is attributable to higher pass-through costs, including produced water trucking and disposal and electricity fees.

Depreciation expense increased $4.5 million due to new compressors, produced water disposal facilities and other new gathering assets brought into service.

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Processing and Storage

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.

Revenues and other income increased $6.9 million in the first six months of 2023 compared to the first six months of 2022, of which $3.7 million is attributable to higher tariff rates, $1.7 million is attributable to higher gas processing volumes where actual physical volumes were above MVC levels in the first six months of 2023 and $1.5 million is attributable to other income, including pass-through income.

Operating and maintenance expenses increased $2.5 million, of which $1.3 million is attributable to higher maintenance costs, $0.5 million is attributable to higher third-party processing fees due to higher volumes processed at the LM4 plant and $0.7 million is attributable all other operating expenses.

Income from equity investments increased $1.9 million in the first six months of 2023 compared to the first six months of 2022 primarily due to higher volumes processed at the LM4 plant.

Terminaling and Export

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.

Revenues and other income decreased $13.1 million in the first six months of 2023 compared to the first six months of 2022.

Although physical volumes increased in the first six months of 2023, they remained below the MVC levels of the first six months of 2022, resulting in a $12.4 million decline in revenues.

Additionally, $7.7 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.

These decreases were partially offset by $7.0 million attributable to higher tariff rates and other income.

Operating and maintenance expenses decreased $4.6 million, of which $7.7 million is attributable to lower rail transportation pass-through costs, partially offset by $3.1 million higher maintenance and other operating costs.

Interest and Other

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 –

FINANCIAL INFORMATION (CONT’D)

Interest expense, net of interest income, increased $16.7 million in the first six months of 2023 compared to the first six months of 2022, of which $10.7 million is attributable to higher interest rates on the Term Loan A and revolving credit facilities and $6.0 million is attributable to the $400.0 million 5.50% fixed-rate senior notes issued in April 2022.

Income tax expense increased $2.5 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 and 2023.

Other Factors Expected to Significantly Affect Our Future Results

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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.

All of our 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 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.

PART I –

FINANCIAL INFORMATION (CONT’D)

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.

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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.

PART I –

FINANCIAL INFORMATION (CONT’D)

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.

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

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Interest expense, net

Income tax expense (benefit)

Income tax expense

Adjusted EBITDA

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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 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.

On July 24, 2023, we declared a quarterly cash distribution of $0.6011 per Class A Share, to be paid on August 14, 2023 to shareholders of record on August 3, 2023.

Simultaneously, the Partnership will make a distribution of $0.6011 per Class B Unit of the Partnership to the Sponsors.

Fixed‑Rate Senior Notes

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.

As of June 30, 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.

As of June 30, 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 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.

As of June 30, 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 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.

In addition, as of June 30, 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 March 31, 2023, we were in compliance with all debt covenants under the indentures.

As of June 30, 2023, 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 that would not be consolidated with the financial results of the Partnership and its subsidiaries.

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Credit Facilities

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.

As of June 30, 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.

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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.

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.

As of June 30, 2023, borrowings of $198.0 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 March 31, 2023, we were in compliance with these financial covenants.

As of June 30, 2023, we were in compliance with these financial covenants.

Operating Activities.

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.

Net cash provided by operating activities decreased $0.5 million for the six months ended June 30, 2023, compared to the same period in 2022.

The change in operating cash flows resulted primarily from an increase in expenses, other than depreciation, amortization, equity-based compensation and other non-cash gains and losses of $18.8 million, a decrease in distributions received from equity investments of $1.7 million, partially offset by an increase in cash provided by changes in working capital of $16.8 million, and an increase in revenue of $3.2 million.

Investing Activities.

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.

Net cash used in investing activities decreased $3.4 million for the six months ended June 30, 2023, compared to the same period in 2022 driven by lower payments for additions to property, plant, and equipment.

Financing Activities.

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.

Net cash used in financing activities increased $3.2 million for the six months ended June 30, 2023, compared to the same period in 2022.

In the first six months of 2023, we had lower net proceeds from bank borrowings of $191.1 million, net of any changes in financing costs, higher distributions to shareholders and noncontrolling interest of $12.2 million and spent $200.0 million less for repurchases of Class B Units of the Partnership 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in millions)

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

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.

At June 30, 2023, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.

At June 30, 2023, our total debt had a carrying value of $3,068.7 million and a fair value of approximately $2,924.3 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 $95.1 million or $101.1 million, respectively.

3 unchanged sentences

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