Hess Midstream LP (HESM) Earnings

Management highlights

- Operational Execution and Maintenance * Completed planned maintenance at TGP on schedule and under budget * Planned maintenance activities originally scheduled for Q2 2026 were shifted to the second half of 2026, with LM4 maintenance scheduled for Q3 * Completed construction of the Greenfield High Pressure Gathering Pipeline infrastructure * Continued capturing operational efficiencies and synergies across the asset portfolio * Achieved lower operating expenses and G&A savings in Q2 due to the shifted maintenance activities and lower corporate allocation - Throughput Volume Performance * Gas processing volumes increased sequentially from Q1, as the TGP maintenance outage was offset by growth in third-party gas volumes * Crude oil terminaling volumes were flat to lower sequentially from Q1 * Management confirms expected sequential volume growth in the second half of 2026 - Financial Strategy and Balance Sheet * Strengthened the balance sheet in Q2, drawing down $87 million of outstanding revolving credit facility balance * Increased the firm's distribution to shareholders in line with the 5% annual distribution growth target, prioritizing shareholder returns * Ended the quarter with a $256 million drawn balance on the revolving credit facility, and maintains a strong cash position

Guidance

- Full year 2026 guidance is maintained, with no upward or downward revision to prior ranges * Adjusted fee cash flow is still guided to $910 million to $960 million, representing a 20% year-over-year increase at the midpoint * Full year 2026 net income is still guided to $650 million to $700 million * Full year 2026 adjusted EBITDA is still guided to $1.225 billion to $1.275 billion, which is approximately flat year-over-year at the midpoint * Full year 2026 excess adjusted free cash flow after funding 5% distribution growth is projected to be approximately $280 million, to be used for incremental shareholder returns and debt repayment - Q3 2026 specific guidance * Net income expected to be $165 million to $175 million * Adjusted EBITDA expected to be $310 million to $320 million, flat at the midpoint relative to Q2 2026, as higher expected revenues and volumes are offset by higher operating expenses from shifted maintenance * Capital expenditures projected to be higher than Q2 2026, resulting in lower adjusted free cash flow relative to Q2 * Second half 2026 volumes are still expected to be higher than first half 2026 volumes - Long-term leverage guidance: Management expects leverage to fall to ~2.5x by 2028, and does not plan to go much lower than that level

Segment performance

For Q2 2026, total revenues (excluding pass-through revenues) increased by $10 million sequentially from Q1 2026. The Gathering segment saw a $7 million sequential increase in revenue, and the Processing segment saw a $3 million sequential increase in revenue. Throughput volumes averaged 433 million cubic feet per day for gas processing, 117,000 barrels of oil per day for crude terminaling, and 121,000 barrels of water per day for water gathering. Net income for the quarter was $174 million, up from $158 million in Q1 2026. Adjusted EBITDA was $314 million, up from $300 million in Q1 2026. The gross adjusted EBITDA margin was maintained at 85%, which is above the firm's 75% long-term target. Capital expenditures for the quarter were $31 million. Adjusted free cash flow came in at approximately $232 million, a 2% sequential decrease from Q1 2026.

Risks & headwinds

- Actual results may differ from forward-looking projections due to known and unknown risks and uncertainties, as disclosed in HES Midstream's SEC filings * Unfavorable weather conditions can cause operational interruptions and push results to the low end of guidance, while favorable weather and strong execution support results at the high end of guidance * Maintenance execution risk: Higher-than-expected maintenance costs or execution delays can push results to the downside * Volatility in G&A allocations from the sponsor is expected in Q4, which can create variability in annual results * Production volume and growth outcomes depend on Chevron's drilling and operational strategy, which is outside of HES Midstream's direct control

Analyst Q&A

• Q: Analyst asks what factors will drive results to the high or low end of full year guidance, and how OPEX/maintenance timing will play out through the end of the year. /

  A: Management states that strong execution of the maintenance plan and favorable weather will push results to the high end, while operational interruptions from bad weather or higher-than-planned maintenance costs will push results to the low end. OPEX phasing shifted, with Q2 maintenance activities moved to Q3, and Q4 typically sees lower OPEX and possible volatility in sponsor G&A allocations, so the full year guidance range remains unchanged from prior quarters.

• Q: Analyst asks what additional volume growth drivers are expected in H2 2026 beyond the absence of maintenance headwinds, especially for third-party gas volumes. /

  A: Volume growth in H2 is mostly normal planned phasing, aligned with Chevron's drilling program schedule and well online timing. Additional volume support comes from Chevron's longer laterals and higher well productivity, which will drive steady throughput growth of at least 5% quarter-over-quarter from Q2 forward. Higher OPEX in Q3 from deferred maintenance offsets higher revenue from volume growth, keeping EBITDA near Q2 levels.

• Q: Analyst asks how Chevron's observed basin efficiency gains impact HES Midstream, and what the production growth outlook looks like. /

  A: Production growth guidance is set by Chevron, but HES Midstream notes that Chevron can maintain steady production at lower rig counts thanks to efficiency gains, which supports the ~200,000 boe/d volume expectation that underpins current guidance. Longer laterals mean fewer new wells to connect, reducing HES Midstream's capital needs and improving capital efficiency, while synergy gains from the Chevron acquisition continue to drive OPEX savings. Lower rig counts have become less important for volume outlook as steady production is maintained.

• Q: Analyst asks if the 85% gross adjusted EBITDA margin (well above the 75% target) indicates the long-term target is conservative, or if margins will converge back to 75%. /

  A: Management confirms that the 85% margin got a small boost from minor one-time credits, but the main driver is OPEX phasing from shifted maintenance. The firm has sustained margins above 80% for some time, but management is comfortable retaining the 75% long-term target with no plans to update guidance at this time, while continuing to benefit from higher near-term margins.

• Q: Analyst asks about capital allocation priorities, specifically the lack of buyback activity this quarter and the long-term leverage target. /

  A: There is no change to the prior financial plan: excess free cash flow will be split between debt pay down and shareholder returns. The firm paid down $87 million in revolver debt this quarter after a $60 million share repurchase earlier in the year, and the board evaluates the mix of returns and pay down throughout the year. Leverage is currently 3x, and is expected to drift down to ~2.5x by 2028, with no plan to go much lower than that level.