Hess Midstream LP Reports First Quarter 2026 Results: Lower Capex, Higher Cash Flow, and Shareholder Returns

Key Highlights

• Net income: \$157.7 million for Q1 2026, down slightly from \$161.4 million in Q1 2025.
• Net cash from operating activities: \$253.3 million.
• Net income attributable to Hess Midstream LP: \$87.6 million, or \$0.68 per Class A share, up from \$0.65 per share in Q1 2025.
• Adjusted EBITDA: \$299.8 million.
• Adjusted Free Cash Flow: \$237.0 million.
• Share/unit repurchases: \$42.0 million in Class A shares and \$18.0 million in Class B units repurchased in Q1 2026.
• Quarterly cash distribution: Increased to \$0.7792 per Class A share, up \$0.0151 from Q4 2025.
• Updated full-year 2026 guidance: Capex cut to \$105 million; Adjusted Free Cash Flow guidance raised to \$910–\$960 million due to lower capex and deferred tax payments.
• No material income tax expected until after 2028 due to new guidance on the Corporate Alternative Minimum Tax.
• Throughput: Oil terminaling down 5% and water gathering down 9% YoY; gas processing up 1% YoY.
• Gross Adjusted EBITDA margin: 83% for Q1 2026 versus 82% a year ago.
• Balance sheet: \$343.0 million drawn on the revolving credit facility as of March 31, 2026.

Detailed Financial and Operational Performance

Hess Midstream LP (NYSE: HESM) reported financial results for the first quarter ended March 31, 2026. The company continues to deliver on its operational and financial strategies, focusing on capital efficiency and shareholder returns.

Financial Performance

• Total revenues and other income: \$390.1 million, up from \$382.0 million in Q1 2025. This increase was primarily driven by higher tariff rates, third-party services, and pass-through revenues, partially offset by lower throughput volumes.
• Operating costs and expenses: \$152.0 million, up from \$144.6 million a year ago due to higher depreciation expense.
• Interest expense (net): \$55.4 million, nearly unchanged from \$56.4 million in Q1 2025.
• Adjusted EBITDA: \$299.8 million, up from \$292.3 million in Q1 2025.
• Adjusted Free Cash Flow: \$237.0 million, up from \$190.7 million in Q1 2025, reflecting lower capital expenditures.
• Capital expenditures: Only \$10.4 million in Q1 2026 compared to \$50.1 million in Q1 2025—a significant 79% decrease following the completion of the gas compression capacity expansion.

Distributions and Shareholder Returns

• Quarterly Distribution: The board declared a distribution of \$0.7792 per Class A share for Q1 2026, a 2% increase sequentially. This is supported by the lower share/unit count after accretive repurchases in Q1 2026.
• Payment Date: Distributions will be paid on May 14, 2026, to shareholders of record as of May 7, 2026.
• Share and Unit Repurchases: The company repurchased \$42 million in Class A shares and \$18 million in Class B units, which is expected to be accretive to shareholders.
• Guidance for Distributions: The company targets at least 5% annual growth in distributions per Class A share.

Updated 2026 Guidance

• Capital Expenditures: Lowered to \$105 million for 2026.
• Adjusted Free Cash Flow: Raised to \$910–\$960 million, thanks to lower capex and deferred income tax payments. The company expects about \$280 million of Adjusted Free Cash Flow after distributions at the midpoint of guidance.
• Outlook to 2028: Hess Midstream expects to generate about \$1 billion of Adjusted Free Cash Flow after distributions through 2028, available for further shareholder returns and debt repayment.
• Income Taxes: The company does not expect to pay material income taxes until after 2028 due to recent federal tax guidance.
• Reaffirmed Guidance for 2026: Throughput, Net Income, and Adjusted EBITDA targets unchanged.

Operational Highlights

• Throughput Volumes (Q1 2026 vs. Q1 2025):
  • Gas Gathering: 438 MMcf/d (up from 431 MMcf/d)
  • Crude Oil Gathering: 110 MBbl/d (down from 117 MBbl/d)
  • Gas Processing: 430 MMcf/d (up from 424 MMcf/d)
  • Crude Terminals: 119 MBbl/d (down from 125 MBbl/d)
  • Water Gathering: 115 MBbl/d (down from 126 MBbl/d)
• Decreases in oil and water throughput were mainly due to lower production and new-well activity, while gas processing saw a slight increase due to higher third-party volumes.

Business and Structural Updates

• Sponsor Changes: Effective July 18, 2025, Chevron became the primary sponsor, following a transition from Hess Corporation and Global Infrastructure Partners.
• Organizational Structure: The company continues to consolidate results, including noncontrolling interests, but reports separate metrics “attributable to Hess Midstream LP.”

What Investors Need to Know (Price-Sensitive Information)

• Lowered Capex and Higher Free Cash Flow: The reduction in capital expenditures, coupled with the deferral of income tax payments, significantly boosts free cash flow, increasing the potential for higher distributions and/or debt repayment. This is a positive catalyst for share value.
• Share and Unit Repurchases: These moves are accretive, reducing share/unit count and supporting higher per-share returns.
• Distribution Growth: The company is targeting annual growth in distributions of at least 5% per share, further enhancing total shareholder return.
• No Income Taxes Until After 2028: As a result of new federal guidance, Hess Midstream expects to avoid material income tax payments until after 2028, freeing up cash for distributions and debt reduction. This is a significant positive for valuation and cash return potential.
• Chevron as Sponsor: The transition to Chevron as the primary sponsor could provide additional operational stability and growth opportunities.
• Strong Margins: Maintaining an 83% Gross Adjusted EBITDA margin demonstrates strong operational efficiency and pricing power.

Other Notable Items

• Credit Facility: \$343 million is drawn on the revolver, but with robust free cash flow, the company is well-positioned to reduce debt.
• Risks: The company outlines typical risks, including sponsor performance, throughput levels, commodity price swings, regulatory compliance, weather, and access to capital markets. However, the firm’s current guidance and financial position appear robust.

Conclusion

Hess Midstream LP’s Q1 2026 results highlight strong cash flow generation, disciplined capital spending, accretive share/unit repurchases, and rising distributions—all underpinned by a stable operational and financial outlook. The deferral of income tax payments until after 2028 is a major positive surprise, materially boosting cash available for shareholder returns. The transition to Chevron as the primary sponsor may provide greater long-term stability and growth opportunities.

Investors should consider the combination of enhanced free cash flow, rising distributions, and continued share buybacks as material, potentially price-moving positives for the stock.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should review official filings and consult with financial advisors before making investment decisions. Past performance is not indicative of future results. Forward-looking statements are subject to risks and uncertainties as outlined in company filings.

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