HOUSTON - Hess Midstream LP (NYSE: HESM) has entered into a definitive agreement to repurchase approximately $100 million of Class B units, according to an announcement made today. The transaction involves Hess Midstream Operations LP, a subsidiary of Hess Midstream, buying back units from its parent company affiliates, Hess Corporation (NYSE:HES) and Global Infrastructure Partners.
The board of Hess Midstream's general partner, including its independent conflicts committee, has unanimously approved the repurchase terms. The buyback is part of an overarching financial strategy that has seen the company return $1.85 billion to shareholders through similar repurchases since early 2021.
Chief Financial Officer Jonathan Stein stated that the strategy underscores the company's capacity to deliver shareholder value while maintaining a strong balance sheet. The latest repurchase is expected to provide immediate accretion to shareholders and support further distribution growth beyond the company's annual target of at least 5% through 2026.
The repurchase agreement stipulates that 2,823,262 Class B units, representing about 1.3% of the consolidated company, will be bought at $35.42 each, equivalent to the closing price of Class A shares on September 9, 2024. Following the transaction, public ownership in Hess Midstream will stand at approximately 41.5%, with Global Infrastructure Partners and Hess Corporation holding 20.7% and 37.8%, respectively. The deal, expected to close on September 11, 2024, will be funded via borrowings under an existing revolving credit facility.
Hess Midstream LP operates as a fee-based, growth-oriented midstream company, owning and managing assets predominantly in the Bakken and Three Forks shale plays in North Dakota. The company provides services to Hess Corporation and third-party customers.
The press release also contains forward-looking statements regarding future financial and operational results, including the completion of the Class B unit repurchase and the ability to execute future accretive opportunities. These statements are based on current projections and expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.
This article is based on a press release statement from Hess Midstream LP.
In other recent news, Hess Midstream LP has reported impressive second-quarter results for 2024, exceeding production expectations and raising its full-year guidance. The company saw a 7% and 8% increase in gas processing and oil terminaling volumes, respectively, from the previous quarter. Net production in the Bakken averaged 212,000 barrels of oil equivalent per day, surpassing the forecasted range. Despite anticipating a slight decrease in the third quarter due to contractual obligations and maintenance activities, Hess Midstream remains confident about its operations in the Bakken.
The company has also outlined its capital return strategy, emphasizing a balance between maintaining a solid leverage ratio and returning capital to shareholders. Expansion plans are underway for 2027 to address the need for additional gas processing capacity. Hess Midstream projects Bakken net production to be between 200,000 to 205,000 barrels of oil equivalent per day in Q3. The company expects to generate $675 million to $725 million in adjusted free cash flow for 2024.
These recent developments highlight Hess Midstream's operational strength and strategic planning, positioning the company for sustained performance in the Bakken region.
InvestingPro Insights
In light of Hess Midstream LP's (NYSE: HESM) recent announcement of a $100 million Class B unit repurchase, a dive into the company's financial metrics and analyst insights from InvestingPro provides a clearer picture of what investors may consider. With a market capitalization of $7.82 billion and a robust dividend yield of 7.54% as of the last reported period, HESM stands out as a significant player in the midstream sector. The company's commitment to shareholder returns is further evidenced by its history of raising dividends for 7 consecutive years.
InvestingPro data reveals that HESM's P/E ratio stands at 15.41, which is considered high relative to near-term earnings growth. Additionally, the company's price/book ratio as of the last twelve months was reported at 16.84, indicating a premium valuation compared to book value. Despite these valuations, Hess Midstream has maintained a strong operating income margin of 60.69%, showcasing efficient management and profitability in its operations.
InvestingPro Tips highlight that while analysts have revised their earnings expectations downwards for the upcoming period, the company is still predicted to be profitable this year. This is a crucial consideration for investors looking at the company's ability to sustain its dividend payments and pursue buyback strategies. Furthermore, Hess Midstream's low price volatility offers a degree of stability in what can be a turbulent market sector.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available at: https://www.investing.com/pro/HESM. These tips delve deeper into the company's financial health and market performance, providing valuable insights for informed decision-making.
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