HOUSTON–(BUSINESS WIRE)–Hess Midstream LP (NYSE:HESM) (“Hess Midstream”), today announced that it has entered into a definitive agreement to repurchase $400 million of Class B units by its subsidiary, Hess Midstream Operations LP, to affiliates of Hess Corporation and Global Infrastructure Partners, sponsors of Hess Midstream (the “Sponsors”). The terms of the proposed Unit Repurchase Transaction have been unanimously approved by the Board of Directors of the General Partner of Hess Midstream (the “Board”), based on the unanimous approval and recommendation of its Conflicts Committee composed entirely of independent directors.
“With today’s announcement, we are once again demonstrating both our financial flexibility and our commitment to a consistent and continuous return of capital to our shareholders,” said Jonathan Stein, Chief Financial Officer of Hess Midstream. “The unit buyback transaction is expected to optimize our capital structure to achieve our 3.0x debt/Adjusted EBITDA target for full year 2022 and deliver significant and immediate upside to our shareholders. In addition, we expect to continue to have financial flexibility, including continued free cash flow after distributions, to allow for potential additional return of capital to shareholders in 2022.”
The redeemed Units will be canceled upon the closing of the Unit Repurchase Transaction, which is expected to result in increased distributable cash flow per Unit and the ability to further grow distributions beyond our annual distribution target of 5% , in accordance with Hess Midstream’s capital repayment framework. The purchase price per Class B Unit will be the same as the Class A Share price paid by the public in the secondary public offering of approximately $250 million by Limited Partners also announced today. The repurchase of units is expected to close substantially concurrently with the closing of the secondary public offering and is subject to a number of conditions, including the successful completion of the secondary public offering, receipt by the Conflicts Committee of a fairness opinion from his financial advisor and other customary conditions. Hess Midstream plans to fund the redemption of units through debt financing, which may include borrowings under its existing revolving credit facility.
This press release is neither an offer to sell nor a solicitation of an offer to buy any securities and does not constitute an offer to sell or a solicitation of an offer to buy or a sale of any securities in any jurisdiction in which such offer, solicitation or sale is unlawful.
About Hess Midstream
Hess Midstream LP is a paying, growth-oriented midstream company that owns, operates, develops and acquires a diverse set of midstream assets to provide services to Hess Corporation and third-party clients. Hess Midstream has oil, gas and produced water processing assets that are primarily located in the Bakken and Three Forks Shale areas in the Williston Basin region of North Dakota. More information is available at www.hessmidstream.com.
Caution Regarding Forward-Looking Information
This press release contains “forward-looking statements” within the meaning of the United States federal securities laws. Words such as ‘anticipate’, ‘estimate’, ‘expect’, ‘expect’, ‘guidance’, ‘might’, ‘could’, ‘should’, ‘would’, ‘believe’, ‘have the ‘intent to’, ‘project’, ‘plan’, ‘predict’, ‘will fly’, ‘target’ and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, but are not limited to: our future financial and operating results, including our ability to increase our distributions or achieve our target distribution growth rate or reduce indebtedness below our objective of debt/adjusted EBITDA; our business strategy and profitability; the expected timing and completion of the redemption of the Class B Units from Hess Corporation (“Hess”) and Global Infrastructure Partners (“GIP”); and our ability to realize future accretive opportunities, including additional return of capital to shareholders.
Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by such forward-looking statements. The following important factors could cause actual results to differ materially from our forward-looking statements: the direct and indirect effects of the global COVID-19 pandemic and other public health developments on our business and that of our business partners, suppliers and customers, including Hess; the ability of Hess and other parties to fulfill their obligations to us, including the ability of Hess to meet its drilling and development plans on a timely basis or at all and the operation of joint ventures that we may not control not ; our ability to generate sufficient cash flow to pay current and expected levels of distributions; reductions in the volumes of crude oil, natural gas, natural gas liquids (“NGLs”) and produced water that we collect, process, terminal or store; fluctuations in prices and demand for crude oil, natural gas and NGLs, including due to the global COVID-19 pandemic; changes in global economic conditions and the effects of a global economic downturn on our business and that of our suppliers, customers, business partners and lenders; our ability to comply with government regulations or make capital expenditures necessary to maintain compliance, including our ability to obtain or maintain necessary permits for capital projects on a timely basis, if required, or the revocation or modification of existing permits; our ability to identify, evaluate and successfully execute our capital projects, investment opportunities and growth strategies, whether through organic growth or acquisitions; the satisfaction of the closing conditions of the repurchase of the Class B Units, including the closing of the secondary public offering and the receipt of a fairness opinion by the Conflicts Committee; costs or liabilities associated with federal, state, and local laws, regulations, and governmental actions applicable to our business, including legislative and regulatory initiatives related to environmental protection and safety, such as spills, releases , pipeline integrity and measures to limit greenhouse gas emissions; our ability to meet the terms of our credit facility, indebtedness and other financing agreements, which, if accelerated, we may not be able to repay; reduced demand for our intermediary services, including the impact of weather conditions or the availability of competing third-party collection, processing and transportation operations; the potential disruption or interruption of our business due to catastrophic events, such as accidents, severe weather, labor disputes, information technology failures, stresses or disruptions, and cyberattacks; any limitations on our ability to access the debt or capital markets on terms acceptable to us, including as a result of weakness in the oil and gas industry or negative outcomes in the commodities and financial markets; liability arising from litigation; and other factors described in Section 1A—Risk Factors of our Annual Report on Form 10-K and any additional risks described in our other filings with the Securities and Exchange Commission.
As we go, we believe our forward-looking statements are reasonable. However, in view of these risks and uncertainties, care should be taken not to place undue reliance on such forward-looking statements, as such statements speak only as of the date on which they are made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statements we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
In addition to our financial information presented in accordance with US generally accepted accounting principles (“GAAP”), management uses certain supplemental non-GAAP measures to facilitate comparisons of past performance and future periods. “Adjusted EBITDA” presented in this release is defined as reported net income (loss) before net interest expense, income tax expense, amortization and our share proportionate amortization of our affiliates, as adjusted to remove the impact of certain items. that we do not consider as an indication of our ongoing operating performance, such as transaction costs, other income and other non-cash and non-recurring items, if any. “Distributable Cash Flow” or “DCF” is defined as Adjusted EBITDA less net interest, excluding amortization of deferred financing charges, cash paid for federal and state income taxes and maintenance capital expenditures. DCF does not reflect changes in working capital balances. We believe that investors’ understanding of our performance is enhanced by disclosing these measures because they can help assess our operating performance relative to other publicly traded companies in the midstream energy industry, regardless of historical cost basis or, in the case of the EBITDA adjustment, methods of financing and assessing the ability of our assets to generate sufficient cash flow to make distributions to our shareholders. These measures are not and should not be considered substitutes for net income or cash flow from operating activities under GAAP and should not be considered in isolation.