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    HESM
    Earnings call· Jun 2026(Q2 FY26)

    Hess Midstream Q2 FY26 earnings call HESM

    Aug 3, 2026 Source

    Executive summary

    Hess Midstream Q2 FY26 — Strong Adjusted Free Cash Flow and Operational Execution

    Hess Midstream delivered strong Q2 FY26 results, driven by operational efficiencies and lower operating expenses, maintaining an 85% adjusted EBITDA margin. The company reiterated its full-year adjusted free cash flow guidance, emphasizing its commitment to shareholder returns through growing distributions and incremental share repurchases, alongside continued debt reduction. Volumes are expected to grow in the second half of the year, with capital expenditures projected to increase in Q3 due to shifted activity.

    Highlights

    5

    • Reiterated full-year 2026 adjusted free cash flow guidance of $910 million to $960 million, representing a 20% increase year-over-year at the midpoint.

    • Adjusted EBITDA for Q2 FY26 increased to $314 million from $300 million in Q1 FY26.

    • Gross adjusted EBITDA margin was maintained at approximately 85% in Q2 FY26, exceeding the 75% target.

    • Revolving credit facility balance decreased by $87 million in Q2 FY26 to $256 million.

    • Completed planned maintenance at TGP on time and under budget, and greenfield high-pressure gathering pipeline infrastructure was completed.

    Concerns

    3

    • Adjusted free cash flow decreased by approximately 2% from Q1 FY26 to $232 million in Q2 FY26.

    • Q3 FY26 adjusted free cash flow is projected to decrease relative to Q2 FY26 due to higher capital expenditures.

    • Throughput volumes for crude terminalling were flat to lower compared to Q1 FY26.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year 2026 Adjusted Free Cash Flow
    $910 million to $960 million
    high materiality
    High
    Full-year 2026 Net Income
    $650 million to $700 million
    medium materiality
    High
    Full-year 2026 Adjusted EBITDA
    $1.225 billion and $1.275 billion
    high materiality
    High
    Q3 2026 Net Income
    $165 million to $175 million
    medium materiality
    High
    Q3 2026 Adjusted EBITDA
    $310 million to $320 million
    medium materiality
    High
    Q3 2026 Adjusted Free Cash Flow
    decrease relative to Q2 2026
    medium materiality
    High
    Second Half 2026 Volumes
    higher than the first half of the year
    medium materiality
    High
    Annual Distribution Growth
    5% annual growth
    high materiality
    High
    Debt Leverage Ratio
    2.5x
    high materiality
    High
    Volume Growth
    at least 5% growth
    medium materiality
    High

    Operational metrics

    10
    Net Income
    $174 millionup from $158 million in Q1 FY26
    Q2 FY26

    Increased primarily due to lower operating expenses and G&A savings.

    Adjusted EBITDA
    $314 millionup from $300 million in Q1 FY26
    Q2 FY26

    Increase primarily due to lower operating expenses with some activity shifting into the second half of the year as well as G&A savings.

    Gathering revenues
    increased by approximately $7 millionQoQ
    Q2 FY26

    Contributed to total revenue increase.

    Processing revenues
    increased by approximately $3 millionQoQ
    Q2 FY26

    Contributed to total revenue increase.

    Gross Adjusted EBITDA margin
    85%maintained
    Q2 FY26

    Above the 75% target, highlighting strong operating leverage.

    Capital expenditures
    $31 million
    Q2 FY26

    In line with quarterly activity, expected to be higher in Q3.

    Net interest
    $51 million
    Q2 FY26

    Reported for the quarter.

    Revolving credit facility balance
    $256 milliondecrease of approximately $87 million from Q1 FY26
    end of Q2 FY26

    Reflects debt repayment during the quarter.

    Debt leverage ratio
    3x
    current

    Expected to go lower, targeting 2.5x by 2028.

    Share repurchase
    $60 million
    March 2026

    From the public NR sponsor.

    Industry KPIs

    2
    MetricValueDetails
    Pipeline throughput storage433 MMcf/d (gas processing), 117,000 bbl/d (crude terminalling), 121,000 bbl/d (water gathering)
    FCF shareholder distributions$910 million to $960 million (FCF), 5% (distribution growth)USD, %

    Capital programs

    1
    Greenfield high-pressure gathering pipeline infrastructurecompleted

    Completed as part of the capital program in Q2 FY26.

    Risks & headwinds

    3
    Weather conditions impacting operationsSecond half of 2026

    Potential for interruptions

    Mitigation: Strong execution of maintenance plan

    Maintenance costs exceeding expectationsSecond half of 2026

    Higher costs could impact downside of EBITDA guidance

    Mitigation: Focus on efficient execution of maintenance programs

    Volatility in G&A allocations from sponsorQ4 FY26

    Possible volatility

    Mitigation: Anticipated and factored into guidance

    What to watch in Q3 FY26

    4

    Second half volume growth

    H2 FY26
    CurrentFlat to lower on oil, higher on gas in Q2 FY26
    TargetAt least 5% growth into the second half of the year

    Why it matters

    Volume growth is a key driver for revenue and EBITDA, underpinning full-year guidance.

    continued volume growth quarter-on-quarter from this point forward, at least 5% growth into the second half of the year.

    Q&A highlights

    6

    What are the key factors that could drive full-year EBITDA to the high or low end of the guidance range, and how will OpEx and maintenance timing unfold in the second half?

    The high end of EBITDA guidance depends on strong maintenance execution and favorable weather, while the low end could be impacted by weather interruptions or higher maintenance costs. OpEx phasing shifted from Q2 to Q3, with Q4 typically seeing lower OpEx and potential G&A allocation volatility.

    “So the high end of the range would probably require continued strong execution of our maintenance plan and favorable weather conditions to ensure we have fewer interruptions in our operations. And on the downside, that would be the opposite.”

    asked by Vrathan Reddy · answered by Michael Chadwick

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Operational Performance and Maintenance

    Hess Midstream successfully executed its operational priorities in Q2 FY26, including the completion of planned maintenance at TGP on time and under budget. The company also completed greenfield high-pressure gathering pipeline infrastructure. Looking ahead, Q3 plans include maintenance at LM4 and other deferred maintenance work, indicating continued focus on asset integrity and efficiency.

    02

    Financial Strategy and Shareholder Returns

    The company continued to deliver on its financial strategy by strengthening its balance sheet and increasing distributions. Hess Midstream reiterated its 2026 adjusted free cash flow guidance of $910 million to $960 million, representing a 20% year-over-year increase at the midpoint. This strong cash flow generation supports a targeted 5% annual distribution growth and incremental share repurchases, while also facilitating debt reduction.

    03

    Volume Trends and Outlook

    Q2 FY26 throughput volumes averaged 433 MMcf/d for gas processing, 117,000 bbl/d for crude terminalling, and 121,000 bbl/d for water gathering. While crude volumes were flat to lower QoQ, gas volumes were higher due to third-party contributions offsetting TGP maintenance. Management expects volumes to grow in the second half of the year, with at least 5% growth into H2, driven by Chevron's drilling program and increased productivity from longer laterals.

    04

    Capital Expenditures and Efficiency

    Capital expenditures in Q2 FY26 were $31 million, reflecting ongoing program execution. The company anticipates higher capital spend in Q3 due to planned activity. Hess Midstream emphasizes its capital efficiency, leveraging historical investments and new infrastructure to achieve similar volumes with less new well activity, particularly as Chevron focuses on longer laterals.

    05

    EBITDA Margin and Cost Management

    Adjusted EBITDA for Q2 FY26 reached $314 million, up from $300 million in Q1, primarily due to lower operating expenses and G&A savings. The gross adjusted EBITDA margin was maintained at an impressive 85%, well above the 75% target. This strong margin performance is attributed to operational efficiencies and synergies from the Hess/Chevron merger, though some OpEx phasing📎 shifted to later quarters.

    06

    Debt Reduction and Leverage Targets

    Hess Midstream reduced its revolving credit facility balance by $87 million in Q2 FY26, ending the quarter at $256 million drawn. The company plans to use excess adjusted free cash flow for both incremental shareholder returns and debt repayment. Management targets reducing the debt leverage ratio from the current 3x to approximately 2.5x by 2028, driven by debt paydown and increasing EBITDA.

    AI-generated summary of the company’s earnings call. Not investment advice.