Hess Midstream Partners LP (Hess Midstream) reported its second quarter 2017 net income of US$68.1 million, compared with net income of US$40.1 million in the second quarter of 2016. From the IPO closing on 10 April 2017, through 30 June 2017, earnings attributable to Hess Midstream were US$11.4 million, or US$0.21 per common unit. Hess Midstream generated Adjusted EBITDA of $18.6 million and DCF of US$18.4 million, or US$17 million and US$16.8 million, respectively, for the post-IPO period.
John Hess, Chairman and Chief Executive Officer, said: “We are excited about Hess Midstream Partners’ prospects for the future and believe the business is well positioned to deliver long-term, competitive distribution growth. Hess Midstream Partners will benefit from Hess’ production momentum in the Bakken. Hess is currently operating four rigs in the Bakken that, with 60 stage fracs and increased proppant levels, should deliver production growth of approximately 10% a year over the next several years.”
Unless otherwise noted herein, all results included in this release reflect the results of our predecessor for accounting purposes, for periods prior to the closing of our IPO on 10 April 2017, as well as the results of Hess Midstream Partners LP, for the period subsequent to the closing of the IPO. We refer to certain results as “attributable to Hess Midstream Partners LP,” which excludes the non-controlling interests in Hess Midstream’s assets retained by Hess Infrastructure Partners LP (Hess Infrastructure Partners).
On 5 April 2017, Hess Midstream’s common units began trading on the New York Stock Exchange under the symbol ‘HESM’. On 10 April 2017, Hess Midstream closed its IPO of 16 997 000 common units representing a 30.5% limited partner interest in the partnership at a price to the public of US$23.00 per unit.
Revenues in the second quarter of 2017 were US$138.3 million, including US$13.7 million shortfall fees. Revenues are up from US$119.0 million in the prior year quarter primarily attributable to higher tariff rates, throughput volumes and shortfall fees related to minimum volume commitments, offset by lower pass-through third party rail transportation costs. Total costs and expenses in the second quarter of 2017 were US$69.7 million, down from US$77.7 million in the prior-year quarter primarily as a result of lower maintenance and third party rail transportation costs. Net income for the second quarter of 2017 was US$68.1 million, of which US$11.4 million is attributable to Hess Midstream Partners LP for the post-IPO period. Net cash provided by operating activities was US$102.2 million in the second quarter of 2017.
Adjusted EBITDA was US$97.1 million, of which US$17.0 million is attributable to Hess Midstream Partners LP for the post-IPO period. DCF of US$16.8 million for the post-IPO period resulted in a 1.1x DCF coverage ratio relative to distributions.
At the end of the second quarter 2017, Hess Midstream had a US$300 million undrawn revolving credit facility available to fund organic growth projects or acquisitions from Hess Corporation, Hess Infrastructure Partners or third parties.
Second quarter 2017 throughput volumes were higher compared with the second quarter 2016 and also reflect a strong recovery from the first quarter 2017 severe winter weather and organic growth. This resulted in a 15% increase in gas gathering volumes, a 16% increase in gas processing volumes at the Tioga Gas Plant, a 3% increase in crude oil gathering volumes and a 22% increase in throughput at our crude oil terminals compared with the first quarter 2017. In addition to the improved operating conditions in North Dakota, Hess Midstream continued safe ramp-up of the Hawkeye Gas Facility which began operation in the first quarter. Furthermore, we continued to execute the Johnson’s Corner Header System project, a pipeline header system that receives crude oil from Hess Corporation and third parties delivering to a southern interstate pipeline export route, which is expected to commence operations in the second half of 2017.
Gross capital expenditures in the second quarter of 2017 totalled US$17.1 million, including US$2.1 million of maintenance capital expenditures and US$15.0 million of expansion capital expenditures, compared with US66.2 million, including US$1.8 million of maintenance capital expenditures and US$64.4 million expansion capital expenditures in the prior year quarter. The decrease in expansion capital expenditures was primarily attributable to completion of the Hawkeye Gas and Oil Facilities in the first quarter of 2017. Net capital expenditures attributable to Hess Midstream Partners LP in the second quarter of 2017 totalled US$3.1 million, including US$0.4 million of maintenance capital expenditures and uS$2.7 million expansion capital expenditures. Under our contribution agreement, Hess Infrastructure Partners reimbursed the full cost of maintenance capital expenditures incurred during the second quarter of 2017.
Quarterly cash distributions
On 25 July 2017, the general partner’s board of directors declared a cash distribution of US$0.2703 per unit for the second quarter of 2017, prorated from 10 April 2017, the closing of Hess Midstream’s IPO, through 30 June 2017. This equates to a minimum quarterly distribution of US$0.3000 per unit on a full quarter basis.
Hess Midstream is targeting long-term 15% annual distribution growth per unit.
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