Hess Midstream unlocks growth from Chevron merger

Hess has posted strong operational and financial results for Q2 25, driven by production strength and reliable infrastructure operations. Efficient system utilization and disciplined cost management both enhanced profitability. The company maintains a steady financial position, reestablishing confidence in its distribution strategy. Notably, Hess and Chevron completed the merger, making Chevron the direct parent of Hess. This provides greater clarity on future throughput volumes for Hess.

Hess Midstream LP, originally established as Hess Midstream Partners LP in 2014, is headquartered in Houston, Texas. As a fee-based, growth-oriented company, Hess specializes in the ownership, operation, development, and acquisition of a diversified portfolio of midstream assets vital to the energy sector. The company’s assets are primarily located in the prolific Bakken and Three Forks shale formations, where it provides essential logistics services, including gathering, processing, storage, terminaling, and export for both Hess Corporation and a variety of third-party customers.

The company operates through three segments: Gathering (53.4% of FY 24 revenue), Processing and Storage (38.6%), and Terminaling and Export (8%).

Higher volumes led to robust Q2 25

Hess announced its Q2 25 financial results on July 30, 2025. The company witnessed a 13.3% y/y increase in revenue, reaching $414.2m. This growth was driven by higher physical volumes and higher tariff rates. In addition, throughput volumes increased by 7% y/y for gas processing, 9% y/y for oil terminaling, and 11% y/y for water gathering, attributable to higher production.

Adjusted EBITDA grew by 14.3% y/y to $316m. Net income rose by 12.1% y/y to $179.7m. These results were driven by improved pricing under minimum volume commitments (MVC) and boosted revenue. In addition, adjusted FCF grew by 23.9% y/y to $193.8, reflecting stronger earnings and disciplined cash generation.

Following the earnings release, the stock price hit an all-time high of $44.1, with an EPS of $0.74, bolstered by strong financial results and robust margins.

Hess joins Chevron network

On July 18, 2025, marked the completion of Hess and Chevron merger, which makes Chevron the direct parent of Hess with 37.8% indirect ownership, accounting for $53bn. This deal brings together Chevron’s global scale and financial strength with the premier assets of Hess, including its interests in the prolific Guyana offshore field and Bakken shale operations. The merger is designed to enhance Chevron’s production portfolio by leveraging Hess’ long-term development potential.

In addition, it provides greater clarity on future throughput volumes for Hess, supported by Chevron’s robust investment capacity, which in turn mitigates counterparty risk. Overall, this transaction is expected to support Hess’ long-term growth prospects and sustain its distribution strategy. Furthermore, following the merger, the company received a credit rating upgrade to ‘BBB’.

Resilient financial performance

Hess posted a revenue CAGR of 7.5% over FY 21-24, reaching $1.5bn in FY 24, primarily driven by an increase in throughput volumes for gas processing, terminaling and water gathering, bolstered by increased drilling activity and higher gas capture. EBITDA grew at a CAGR of 7.9% to $1.1bn, with its margin expanding by 86bp to 75%. Net income rose at a CAGR of 68.8% to $223m.

Cash from operations increased from $796m to $940m over the same period, thanks to robust growth in net income. During this period, the company’s ROE rose from 59.4% to 159.1%.

In comparison, Antero Midstream Corporation, a local peer, reported a lower revenue CAGR of 6.7% over the past three years, reaching $1.2bn in FY 24. EBITDA grew at a CAGR of 5.4% to $871m. Net income grew at a CAGR of 6.5%, reaching $401m.

Looking ahead, the analysts estimate a revenue CAGR of 9.6% over FY 24-27, reaching $2bn in FY 27. EBITDA is estimated to grow at a CAGR of 9.3% to $1.5bn, with margins reaching 75.2%. In addition, analysts anticipate a net income CAGR of 39.6% to $606.9m, with EPS expected to increase to $3.6 in FY 27 from $2.5 in FY 24. Likewise, analysts estimate EBITDA CAGR of 3.9% and net profit CAGR of 15.1% for Antero Midstream Corporation.

Compelling valuation levels

Over the past 12 months, the company’s stock has delivered robust returns of 17.2%, reflecting earnings growth. In comparison, Antero Midstream Corporation delivered higher returns (almost double) of 33.1% over the same period. In addition, the company paid an annual dividend of $2.7 in FY 24, resulting in a robust dividend yield of 7.3%. Moreover, analysts expect an average dividend yield of 7.6% over the next three years.

Hess is currently trading at a P/E of 16.4x, based on the FY 25 estimated EPS of $2.5, which is higher than its 3-year historical average of 15x but lower than Antero Midstream Corporation, which is trading at 18.3x. The company is trading at an EV/EBITDA of 7.4x, based on FY 25 estimated EBITDA of $1.3bn, which is higher than its 3-year historical average of 5.3x but lower than Antero Midstream Corporation (10.6x).

Hess is monitored by six analysts, with four having ‘Buy’ ratings and two having ‘Hold’ ratings for an average target price of $45.8, implying a 10.1% upside from its current share price.

Overall, the company has delivered consistent robust operational results as volumes surged, and margins have remained strong. Hess is well positioned for growth, supported by MVCs that ensure a steady supply of expansion of gas and oil throughput, regardless of short-term production swings and long-term commercial contracts. However, Hess’s business is subject to a variety of risks and uncertainties, including fluctuations in crude oil and natural gas production volumes, regulatory changes and environmental liabilities.

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