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HOUSTON - Hess Midstream LP (NYSE: HESM), a midstream company with a market capitalization of $8.51 billion, has initiated a $200 million repurchase of its Class B and Class A shares, the company disclosed earlier this week. The transaction includes the buyback of approximately $190 million worth of Class B units from its sponsors, Hess Corporation and Global Infrastructure Partners, and a $10 million accelerated share repurchase (ASR) of Class A shares from the public. According to InvestingPro analysis, the company appears undervalued at current levels, with a P/E ratio of 14.41 and an impressive dividend yield of 7.7%.
The Board of Directors of Hess Midstream’s general partner, acting on the unanimous recommendation of its independent conflicts committee, approved the terms of the Class B unit repurchase. The subsidiary, Hess Midstream Operations LP, will carry out the repurchase of 5,151,842 Class B units at $36.88 each, the closing price of Class A shares on May 5, 2025. This repurchase is expected to close on May 9, 2025, and will be funded through borrowings under the company’s existing credit facility.
In parallel, Hess Midstream has entered into an ASR agreement with JPMorgan Chase Bank to repurchase $10 million of its publicly traded Class A shares. The company will receive an initial delivery of 189,804 Class A shares, representing about 70% of the expected repurchases under the ASR agreement. Final settlement is anticipated in May 2025, with funding also coming from the company’s credit facility.
Following these transactions, public ownership of Hess Midstream will be approximately 55.1%, with Global Infrastructure Partners holding 7.1% and Hess Corporation 37.8%. The repurchased securities will be canceled, which is expected to result in increased distributable cash flow per Class A share. This could potentially allow for distribution growth above the company’s annual target of at least 5% through 2027. InvestingPro data shows the company has maintained dividend payments for 9 consecutive years, with an 11.9% dividend growth in the last twelve months. For deeper insights into HESM’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Hess Midstream’s Chief Financial Officer, Jonathan Stein, stated that these repurchase transactions align with the company’s financial strategy to deliver shareholder returns while maintaining balance sheet strength. He also mentioned that the company has over $1.25 billion of financial flexibility to support further repurchases through 2027.
Hess Midstream LP, a growth-oriented midstream company, provides services to Hess Corporation and third-party customers, primarily in the Bakken and Three Forks Shale plays in North Dakota. The company has demonstrated strong financial performance with an 8.77% revenue growth in the last twelve months and maintains a robust gross profit margin of 76.69%. This information is based on a press release statement and InvestingPro data.
In other recent news, Hess Midstream Partners LP announced its Q1 2025 earnings, reporting an earnings per share (EPS) of $0.65, which exceeded the forecast of $0.63. However, the company faced a revenue shortfall, with earnings of $382 million compared to the expected $384.46 million. Despite the revenue miss, Hess Midstream maintained a robust gross adjusted EBITDA margin of 80%, surpassing its target of 75%. The company projects Q2 2025 net income between $170-180 million and adjusted EBITDA of $300-310 million. Analysts from JPMorgan and UBS participated in the earnings call, discussing the company’s drilling program and its outlook in the Bakken Basin. Hess Midstream reaffirmed its commitment to a four-rig drilling program and emphasized its focus on maintaining stable operations and financial performance. The company also highlighted its strategy for capital allocation, with plans for ongoing shareholder returns and capital expenditures projected at $300 million for the year.
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