| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 58.54 | 65 |
| Intrinsic value (DCF) | 15.77 | -56 |
| Graham-Dodd Method | n/a | |
| Graham Formula | 46.28 | 30 |
Hess Midstream LP (NYSE: HESM) is a leading midstream energy company specializing in the ownership, development, and operation of critical infrastructure for oil and gas transportation, processing, and storage. Headquartered in Houston, Texas, Hess Midstream operates across three key segments: Gathering, Processing and Storage, and Terminaling and Export. The company's extensive network includes over 1,350 miles of natural gas and NGL gathering pipelines, 550 miles of crude oil gathering pipelines, and strategic processing facilities like the Tioga Gas Plant in North Dakota. Hess Midstream plays a pivotal role in the Bakken shale region, providing essential midstream services to producers, including Hess Corporation, its primary customer. With a market capitalization exceeding $8.2 billion, the company is well-positioned in the energy sector, benefiting from stable fee-based contracts and long-term growth opportunities in North American energy infrastructure. Hess Midstream's focus on operational efficiency and strategic asset expansion makes it a key player in the midstream energy landscape.
Hess Midstream LP presents a compelling investment case due to its stable cash flows, long-term contracts, and strategic positioning in the Bakken shale play. The company's fee-based revenue model reduces exposure to commodity price volatility, providing predictable earnings. With a strong dividend yield (~6.5%) and a disciplined capital expenditure program, HESM is attractive for income-focused investors. However, risks include concentration risk with Hess Corporation as its primary customer and potential regulatory challenges in the midstream sector. The company's moderate leverage (total debt of ~$3.47B) and solid operating cash flow ($940M in FY 2023) support its financial stability, but investors should monitor energy transition trends impacting long-term demand for fossil fuel infrastructure.
Hess Midstream's competitive advantage lies in its strategic asset footprint in the Bakken region, where it operates as a critical service provider for Hess Corporation and third-party producers. The company benefits from long-term, fee-based contracts that ensure revenue stability, with approximately 90% of its EBITDA under minimum volume commitments. Its vertically integrated midstream system—spanning gathering, processing, and terminaling—provides operational synergies and cost efficiencies. Compared to peers, HESM's focus on the Bakken offers regional specialization but also exposes it to basin-specific risks. The company's partnership with Hess Corporation ensures steady volumes, though this customer concentration could be a vulnerability if Hess reduces production. HESM's competitive positioning is further strengthened by its scalable infrastructure, which allows for incremental expansions with relatively low capital intensity. However, larger diversified midstream players like Enterprise Products Partners (EPD) or Energy Transfer (ET) may offer more geographic diversification, reducing basin-specific risks. HESM's disciplined growth strategy and strong sponsor backing provide stability, but its smaller scale limits its ability to compete for large-scale projects outside its core region.