10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39163

Hess Midstream LP

(Exact name of Registrant as specified in its charter)


DELAWARE	84-3211812
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1501 McKinney Street	77010
Houston, TX (Address of principal executive offices)	(Zip Code)

(Registrant’s telephone number, including area code, is (713) 496-4200)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A shares representing limited partner interests	HESM	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

104,071,383 Class A shares representing limited partner interests (“Class A Shares”) in the registrant were outstanding as of October 31, 2024.

HESS MIDSTREAM LP

FORM 10-Q

TABLE OF CONTENTS


Item		Page
No.		Number

	PART I—FINANCIAL INFORMATION

1.	Financial Statements (unaudited)
	Consolidated Balance Sheets at September 30, 2024 and December 31, 2023	2
	Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023	3
	Consolidated Statements of Changes in Partners’ Capital (Deficit) for the nine months ended September 30, 2024 and 2023	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	5
	Notes to Consolidated Financial Statements	6

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
3.	Quantitative and Qualitative Disclosures about Market Risk	35
4.	Controls and Procedures	36

	PART II—OTHER INFORMATION

1.	Legal Proceedings	37
1A.	Risk Factors	37
5.	Other Information	37
6.	Exhibits	38

	Signatures	39
	Certifications

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Item 1. Financial Statements


	September 30,			December 31,
	2024			2023
(in millions, except share amounts)
Assets
Cash and cash equivalents	$	10.3		$	5.4
Accounts receivable from contracts with customers:
Accounts receivable—trade		3.5			1.9
Accounts receivable—affiliate		127.6			122.5
Other current assets		12.8			7.0
Total current assets		154.2			136.8
Equity investments		88.5			90.2
Property, plant and equipment, net		3,291.8			3,229.2
Long-term receivable—affiliate		0.2			0.3
Deferred tax asset		605.2			324.4
Other noncurrent assets		7.0			8.6
Total assets	$	4,146.9		$	3,789.5
Liabilities
Accounts payable—trade	$	42.5		$	38.5
Accounts payable—affiliate		44.9			41.2
Accrued liabilities		103.6			105.9
Current maturities of long-term debt		20.0			12.5
Other current liabilities		9.9			12.1
Total current liabilities		220.9			210.2
Long-term debt		3,469.8			3,198.9
Deferred tax liability		0.5			0.5
Other noncurrent liabilities		13.9			16.7
Total liabilities		3,705.1			3,426.3
Partners’ capital
Class A shares (104,071,383 shares issued and outstanding as of September 30, 2024; 68,367,647 shares issued and outstanding as of December 31, 2023)		531.0			340.2
Class B shares (113,927,226 shares issued and outstanding as of September 30, 2024; 157,941,441 shares issued and outstanding as of December 31, 2023)		-			-
Total Class A and Class B partners’ capital		531.0			340.2
Noncontrolling interest		(89.2	)		23.0
Total partners’ capital		441.8			363.2
Total liabilities and partners’ capital	$	4,146.9		$	3,789.5

See accompanying notes to unaudited consolidated financial statements.

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
(in millions, except per share data)
Revenues
Affiliate services	$	371.4	$	361.3	$	1,079.3	$	986.6
Third-party services		6.2		1.2		17.6		3.7
Other income		0.9		0.6		2.7		1.8
Total revenues		378.5		363.1		1,099.6		992.1
Costs and expenses
Operating and maintenance expenses (exclusive of depreciation shown separately below)		89.0		89.4		254.6		225.0
Depreciation expense		51.5		47.7		151.8		142.1
General and administrative expenses		6.3		6.0		17.2		18.2
Total operating costs and expenses		146.8		143.1		423.6		385.3
Income from operations		231.7		220.0		676.0		606.8
Income from equity investments		3.7		2.0		10.1		5.3
Interest expense, net		51.8		45.8		150.0		131.2
Income before income tax expense		183.6		176.2		536.1		480.9
Income tax expense		18.9		11.4		49.2		26.0
Net income		164.7		164.8		486.9		454.9
Less: Net income attributable to noncontrolling interest		106.1		129.5		334.2		373.8
Net income attributable to Hess Midstream LP	$	58.6	$	35.3	$	152.7	$	81.1

Net income attributable to Hess Midstream LP per Class A share:
Basic	$	0.63	$	0.57	$	1.82	$	1.56
Diluted	$	0.63	$	0.57	$	1.82	$	1.54
Weighted average Class A shares outstanding
Basic		93.0		62.5		84.0		52.2
Diluted		93.0		62.5		84.0		52.2

See accompanying notes to unaudited consolidated financial statements.

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)

(UNAUDITED)


	Partners’ Capital
	Class A Shares			Class B Shares		Noncontrolling Interest			Total
(in millions)
Balance at December 31, 2023	$	340.2		$	-	$	23.0		$	363.2
Net income		44.6			-		117.3			161.9
Equity-based compensation		0.5			-		-			0.5
Distributions - $0.6343 per share		(50.7	)		-		(92.9	)		(143.6	)
Recognition of deferred tax asset		100.4			-		-			100.4
Sale of shares held by Sponsors		5.2			-		(5.2	)		-
Class B unit repurchase		(35.6	)		-		(64.4	)		(100.0	)
Transaction costs		(0.3	)		-		(0.4	)		(0.7	)
Balance at March 31, 2024	$	404.3		$	-	$	(22.6	)	$	381.7
Net income		49.5			-		110.8			160.3
Equity-based compensation		0.1			-		-			0.1
Distributions - $0.6516 per share		(52.1	)		-		(93.6	)		(145.7	)
Recognition of deferred tax asset		107.0			-		-			107.0
Sale of shares held by Sponsors		(2.7	)		-		2.7			-
Class B unit repurchase		(41.3	)		-		(58.7	)		(100.0	)
Transaction costs		(0.3	)		-		(0.5	)		(0.8	)
Balance at June 30, 2024	$	464.5		$	-	$	(61.9	)	$	402.6
Net income		58.6			-		106.1			164.7
Equity-based compensation		0.5			-		-			0.5
Distributions - $0.6677 per share		(61.1	)		-		(86.4	)		(147.5	)
Recognition of deferred tax asset		122.4			-		-			122.4
Sale of shares held by Sponsors		(11.1	)		-		11.1			-
Class B unit repurchase		(42.5	)		-		(57.5	)		(100.0	)
Transaction costs		(0.3	)		-		(0.6	)		(0.9	)
Balance at September 30, 2024	$	531.0		$	-	$	(89.2	)	$	441.8

Balance at December 31, 2022	$	245.1		$	-	$	283.9		$	529.0
Net income		20.7			-		121.5			142.2
Equity-based compensation		0.6			-		-			0.6
Distributions - $0.5696 per share		(25.1	)		-		(111.6	)		(136.7	)
Recognition of deferred tax asset		4.3			-		-			4.3
Class B unit repurchase		(17.5	)		-		(82.5	)		(100.0	)
Transaction costs		(0.2	)		-		(0.7	)		(0.9	)
Balance at March 31, 2023	$	227.9		$	-	$	210.6		$	438.5
Net income		25.1			-		122.8			147.9
Equity-based compensation		0.4			-		-			0.4
Distributions - $0.5851 per share		(25.9	)		-		(112.4	)		(138.3	)
Recognition of deferred tax asset		87.2			-		-			87.2
Sale of shares held by Sponsors		11.0			-		(11.0	)		-
Class B unit repurchase		(23.4	)		-		(76.6	)		(100.0	)
Transaction costs		(0.2	)		-		(0.7	)		(0.9	)
Balance at June 30, 2023	$	302.1		$	-	$	132.7		$	434.8
Net income		35.3			-		129.5			164.8
Equity-based compensation		0.3			-		-			0.3
Distributions - $0.6011 per share		(34.2	)		-		(105.9	)		(140.1	)
Recognition of deferred tax asset		86.2			-		-			86.2
Sale of shares held by Sponsors		6.8			-		(6.8	)		-
Class B unit repurchase		(28.9	)		-		(71.1	)		(100.0	)
Transaction costs		(0.2	)		-		(0.5	)		(0.7	)
Balance at September 30, 2023	$	367.4		$	-	$	77.9		$	445.3

See accompanying notes to unaudited consolidated financial statements.

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended September 30,
	2024			2023
(in millions)
Cash flows from operating activities
Net income	$	486.9		$	454.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		151.8			142.1
Income from equity investments		(10.1	)		(5.3	)
Distributions from equity investments		11.8			7.8
Amortization of deferred financing costs		7.0			6.3
Equity-based compensation expense		1.1			1.3
Deferred income tax expense		49.0			25.9
Changes in assets and liabilities:
Accounts receivable – trade		(1.6	)		(1.2	)
Accounts receivable – affiliate		(5.0	)		2.5
Other current and noncurrent assets		(5.8	)		(5.7	)
Accounts payable – trade		4.0			(7.6	)
Accounts payable – affiliate		(6.0	)		(0.6	)
Accrued liabilities		13.9			0.8
Other current and noncurrent liabilities		(15.2	)		(2.4	)
Net cash provided by operating activities		681.8			618.8
Cash flows from investing activities
Additions to property, plant and equipment		(211.0	)		(160.0	)
Net cash used in investing activities		(211.0	)		(160.0	)
Cash flows from financing activities
Net proceeds from (repayments of) bank borrowings with maturities of 90 days or less		(310.0	)		258.0
Bank borrowings with maturities of greater than 90 days
Repayments		(7.5	)		-
Proceeds from issuance of senior notes		600.0			-
Deferred financing costs		(9.5	)		-
Transaction costs		(2.1	)		(1.5	)
Class B unit repurchase		(300.0	)		(300.0	)
Distributions to shareholders		(163.9	)		(85.2	)
Distributions to noncontrolling interest		(272.9	)		(329.9	)
Net cash used in financing activities		(465.9	)		(458.6	)
Increase (decrease) in cash and cash equivalents		4.9			0.2
Cash and cash equivalents, beginning of period		5.4			3.1
Cash and cash equivalents, end of period	$	10.3		$	3.3
Supplemental disclosure of non-cash investing and financing activities:
(Increase) decrease in accrued capital expenditures and related liabilities	$	6.8		$	(13.9	)
Recognition of deferred tax asset	$	329.8		$	177.7

See accompanying notes to unaudited consolidated financial statements.

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

Note 1. Basis of Presentation

Unless the context otherwise requires, references in this report to the “Company,” “we,” “our,” “us” or like terms, refer to Hess Midstream LP and its subsidiaries.

The consolidated financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at September 30, 2024 and December 31, 2023, the consolidated results of operations for the three and nine months ended September 30, 2024 and 2023, and the consolidated cash flows for the nine months ended September 30, 2024 and 2023. The Company has no items of other comprehensive income (loss); therefore, net income (loss) is equal to comprehensive income (loss). The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.

The consolidated financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted from these interim consolidated financial statements. These financial statements, therefore, should be read in conjunction with the financial statements and related notes included in the Company’s annual report on Form 10‑K for the year ended December 31, 2023.

We consolidate the activities of Hess Midstream Operations LP (“the Partnership”), as a variable interest entity (“VIE”) under U.S. GAAP. We have concluded that we are the primary beneficiary of the VIE, as defined in the accounting standards, since we have the power, through our ownership, to direct those activities that most significantly impact the economic performance of the Partnership. This conclusion was based on a qualitative analysis that considered the Partnership’s governance structure and the delegation of control provisions, which provide us the ability to control the operations of the Partnership. All financial statement activities associated with the VIE are captured within gathering, processing and storage, and terminaling and export segments (see Note 11, Segments). We currently do not have any independent assets or operations other than our interest in the Partnership. Our noncontrolling interest represents the approximate 52.3% interest in the Partnership retained by Hess Corporation (“Hess”) and GIP II Blue Holding, L.P. (“GIP” and together with Hess, the “Sponsors”) at September 30, 2024 (69.8% at December 31, 2023). See Note 2, Equity Transactions for a description of changes in noncontrolling interest related to the equity transactions.

New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU adds required disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help users of financial statements understand how the chief operating decision maker evaluates segment expenses and operating results. The ASU does not change how an entity identifies its operating segments. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this ASU on April 1, 2024, and applied the amendments retrospectively to all prior periods presented in our consolidated financial statements (see Note 11, Segments).

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires, among other disclosures, greater disaggregation of information, the use of certain categories in the rate reconciliation, and the disaggregation of income taxes paid by jurisdiction. The ASU is effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted. We continue to assess the impact of this ASU on our consolidated financial statements.

Note 2. Equity Transactions

Equity Offering Transactions

On May 19, 2023, the Sponsors sold an aggregate of 12,765,000 of our Class A Shares representing limited partner interests (the “Class A Shares”), inclusive of the underwriters’ option to purchase up to 1,665,000 of additional shares, which was fully exercised, in an underwritten public offering at a price to the public of $27.00 per Class A Share, less underwriting discounts. The Sponsors received net proceeds from the offering of approximately $333.4 million, after deducting underwriting discounts.

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

On August 17, 2023, GIP sold an aggregate of 10,000,000 of our Class A Shares in an underwritten public offering at a price of $28.80 per Class A Share, less underwriting discounts. GIP also granted the underwriter an option to purchase up to an additional 1,500,000 Class A Shares at the same price per Class A Share, less underwriting discounts, which was exercised in full on August 22, 2023. GIP received net proceeds from the offering of approximately $328.8 million, after deducting underwriting discounts.

On February 8, 2024, GIP sold an aggregate of 11,500,000 of our Class A shares, inclusive of the underwriter’s option to purchase up to 1,500,000 of additional shares, which was fully exercised, in an underwritten public offering at a price to the underwriter of $32.83 per Class A Share. GIP received net proceeds from the offering of approximately $377.5 million.

On May 31, 2024, GIP sold an aggregate of 10,000,000 of our Class A shares in an underwritten public offering at a price to the underwriter of $34.025 per Class A Share. GIP also granted the underwriter an option to purchase up to an additional 1,500,000 Class A shares at the same price per Class A share, which was exercised in full on June 3, 2024. GIP received net proceeds from the offering of approximately $391.3 million.

On September 20, 2024, GIP sold an aggregate of 12,650,000 of our Class A shares, inclusive of the underwriter’s option to purchase up to 1,650,000 of additional shares, which was fully exercised, in an underwritten public offering at a price to the underwriter of $35.12 per Class A Share. GIP received net proceeds from the offering of approximately $444.3 million.

The Company did not receive any proceeds in the equity offering transactions. The above equity offering transactions were conducted pursuant to a registration rights agreement among us and the Sponsors. The Class A Shares sold in the offerings were obtained by GIP by exchanging to us the respective number of their Class B units representing limited partner interests in the Partnership (the “Class B Units”), together with an equal number of Class B shares representing limited partner interests in the Company (the “Class B Shares”) held by the Company’s general partner. As a result, the total number of Class A and Class B Shares did not change. The Company retained control in the Partnership based on the delegation of control provisions, as described in Note 1, Basis of Presentation. As a result of the equity offering transactions described above, we recognized adjustments decreasing the carrying amount of the Class A shareholders’ capital balance by $8.6 million during the nine months ended September 30, 2024 and increasing the carrying amount of noncontrolling interest by an equal amount to reflect the change in ownership interest. During the nine months ended September 30, 2023 we recognized adjustments increasing the carrying amount of the Class A shareholders’ capital balance by $17.8 million and decreasing the carrying amount of noncontrolling interest by an equal amount.

Class B Unit Repurchases

On March 27, 2023, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors 3,619,254 Class B Units for an aggregate purchase price of approximately $100.0 million. The repurchase transaction was consummated on March 30, 2023. The purchase price per Class B Unit was $27.63, the closing price of the Class A Shares on March 27, 2023.

On June 26, 2023, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors 3,350,084 Class B Units for an aggregate purchase price of approximately $100.0 million. The repurchase transaction was consummated on June 29, 2023. The purchase price per Class B Unit was $29.85, the closing price of the Class A Shares on June 26, 2023.

On September 19, 2023, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors 3,301,420 Class B Units for an aggregate purchase price of approximately $100.0 million. The repurchase transaction was consummated on September 22, 2023. The purchase price per Class B Unit was $30.29, the closing price of the Class A Shares on September 19, 2023.

On March 11, 2024, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors 2,816,901 Class B Units for an aggregate purchase price of approximately $100.0 million. The repurchase transaction was consummated on March 14, 2024. The purchase price per Class B Unit was $35.50, the closing price of the Class A Shares on March 11, 2024.

On June 24, 2024, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors 2,724,052 Class B Units for an aggregate purchase price of approximately $100.0 million. The repurchase transaction was consummated on June 26, 2024. The purchase price per Class B Unit was $36.71, the closing price of the Class A Shares on June 24, 2024.

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

On September 9, 2024, the Company, the Partnership and our Sponsors entered into a unit repurchase agreement pursuant to which the Partnership agreed to purchase from the Sponsors 2,823,262 Class B Units for an aggregate purchase price of approximately $100.0 million. The repurchase transaction was consummated on September 11, 2024. The purchase price per Class B Unit was $35.42, the closing price of the Class A Shares on September 9, 2024.

The repurchase transactions described above were funded using borrowings under the Partnership’s existing revolving credit facility and cash on hand (see Note 6, Debt and Interest Expense). Pursuant to the terms of the repurchase agreements described above, immediately following each purchase of the Class B Units from the Sponsors, the Partnership cancelled the repurchased units, and the Company cancelled, for no consideration, an equal number of its Class B Shares.

The repurchase transactions were accounted for in accordance with ASC 810 whereby changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. The carrying amounts of the noncontrolling interest were adjusted to reflect the changes in the ownership interest with the difference between the amounts of consideration paid and the amounts by which the noncontrolling interest were adjusted recognized as a reduction in equity attributable to Class A shareholders. Distributions to noncontrolling interest holders related to the 2024 repurchase transactions exceeded the noncontrolling interest’s carrying value resulting in a deficit balance as shown in the accompanying consolidated statement of changes in partners’ capital (deficit).

We incurred approximately $2.4 million of costs directly attributable to the repurchase transactions that were charged to equity (nine months ended September 30, 2023: $2.5 million).

As a result of the equity offering and the unit repurchase transactions described above, we also recognized an additional deferred tax asset of $329.8 million (nine months ended September 30, 2023: $177.7 million) related to the change in the temporary difference between the carrying amount and the tax basis of our investment in the Partnership. The effect of recognizing the additional deferred tax asset was included in Class A shareholders’ equity balance in the accompanying consolidated statement of changes in partners’ capital (deficit) due to the transactions being characterized as transactions among or with shareholders.

Note 3. Related Party Transactions

In addition to the Class B Unit repurchase transactions and distributions to the Sponsors disclosed elsewhere in the Notes to consolidated financial statements, we had the following related party transactions:

Commercial Agreements

We have long-term fee based commercial agreements with certain subsidiaries of Hess to provide i) gas gathering, ii) crude oil gathering, iii) gas processing and fractionation, iv) storage services, v) terminaling and export services, and (vi) water handling services.

For the services performed under these commercial agreements, we receive a fee per barrel of crude oil, barrel of water, Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, delivered during each month, and Hess is obligated to provide us with minimum volumes of crude oil, water, natural gas and NGLs. Minimum volume commitments (“MVCs”) are equal to 80% of Hess’ nominations in each development plan that apply on a three-year rolling basis such that MVCs are set for the three years following the most recent nomination. Without our consent, the MVCs resulting from the nominated volumes for any quarter or year contained in any prior development plan cannot be reduced by any updated development plan unless dedicated production is released by us. The applicable MVCs may, however, be increased as a result of the nominations contained in any such updated development plan. If Hess fails to deliver its applicable MVCs during any quarter, then Hess will pay us a shortfall fee equal to the volume of the deficiency multiplied by the applicable fee.

Except for the water services agreements and except for a certain gathering sub-system as described below, each of our commercial agreements with Hess has an initial 10-year term effective January 1, 2014 (“Initial Term”). For this gathering sub-system, the Initial Term is 15 years effective January 1, 2014 and for the water services agreements the Initial Term is 14 years effective January 1, 2019. Each of our commercial agreements other than our storage services agreement includes an inflation escalator capped at 3% in any calendar year and a fee recalculation mechanism that allows fees to be adjusted annually during the Initial Term for updated estimates of cumulative throughput volumes and our capital and operating expenditures in order to target a return on capital deployed over the Initial Term of the applicable commercial agreement (or, with respect to the crude oil services fee under our terminal and export services agreement, the 20-year period commencing on the effective date of the agreement).

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

For certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess, we exercised our renewal options to extend each of these commercial agreements for one additional 10-year term (“Secondary Term”) effective January 1, 2024 through December 31, 2033. There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining gathering sub-system, the Secondary Term is 5 years, and for the water services agreements the Secondary Term is 10 years, and we have the sole option to renew these remaining agreements for their Secondary Term that is exercisable at a later date. Upon the expiration of the Secondary Term, if any, the agreements will automatically renew for subsequent one-year periods unless terminated by either party no later than 180 days prior to the end of the applicable Secondary Term.

Consistent with the existing terms of the commercial agreements, during the Secondary Term of each of our commercial agreements other than our storage services agreement and terminal and export services agreement (with respect to crude oil terminaling services), the fee recalculation model under each applicable agreement is replaced by an inflation-based fee structure. The initial fee for the first year of the Secondary Term is determined based on the average fees paid by Hess under the applicable agreement during the last three years of the Initial Term (with such fees adjusted for inflation through the first year of the Secondary Term). For each year following the first year of the Secondary Term, the applicable fee will be adjusted annually based on the percentage change in the consumer price index, provided that we may not increase any fee by more than 3% in any calendar year solely by reason of an increase in the consumer price index, and no fee will ever be reduced below the amount of the applicable fee payable by Hess in the prior year as a result of a decrease in the consumer price index. During the Secondary Term, MVCs continue to be set at 80% of Hess’ nominated volumes in each development plan set three years in advance. Except for the crude oil terminaling and water handling services, Hess is entitled to receive a credit, calculated in barrels or Mcf, as applicable, with respect to the amount of any shortfall fee paid by Hess and may apply such credit against any volumes delivered to us under the applicable agreement in excess of Hess’s nominated volumes during any of the following four quarters after such credit is earned, after which time any unused credits will expire. The shortfall amounts received under MVCs during the Secondary Term (except for the crude oil terminaling and water handling services) are recorded as deferred revenue and recognized as revenue as the credits are utilized or expire. At September 30, 2024, deferred revenue included in Accrued liabilities in the accompanying consolidated balance sheet was $1.3 million (December 31, 2023: none).

Revenues attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes contracted with Hess and delivered to us under these agreements, for the three and nine months ended September 30, 2024 were 98% for both periods, compared with approximately 100% of revenues for the three and nine months ended September 30, 2023. In 2023, we began providing our services directly to third-party customers. Together with Hess, we are pursuing strategic relationships with third‑party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.

Revenues from contracts with customers, including affiliate services and third-party services, on a disaggregated basis are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
(in millions)
Affiliate services
Oil and gas gathering services	$	171.0	$	170.5	$	495.6	$	467.8
Processing and storage services		140.8		132.2		411.4		367.6
Terminaling and export services		28.9		31.8		85.9		83.2
Water gathering and disposal services		30.7		26.8		86.4		68.0
Total affiliate services	$	371.4	$	361.3	$	1,079.3	$	986.6
Third-party services		6.2		1.2		17.6		3.7
Total revenues from contracts with customers	$	377.6	$	362.5	$	1,096.9	$	990.3
Other income		0.9		0.6		2.7		1.8
Total revenues	$	378.5	$	363.1	$	1,099.6	$	992.1

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These pass-through revenues are included in Affiliate services and the related pass-through costs are included in Operating and maintenance expenses in the accompanying unaudited consolidated statements of operations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
(in millions)
Electricity and other related fees	$	13.6	$	13.0	$	40.6	$	35.5
Produced water trucking and disposal costs		11.2		12.1		30.5		29.1
Rail transportation costs		-		-		-		(3.4	)
Total	$	24.8	$	25.1	$	71.1	$	61.2

Omnibus and Employee Secondment Agreements

Under our omnibus and employee secondment agreements, Hess provides substantial operational and administrative services to us in support of our assets and operations. For the three and nine months ended September 30, 2024 and 2023, we had the following charges from Hess. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the fundamental nature of the services being performed for our operations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
(in millions)
Operating and maintenance expenses	$	21.0	$	18.7	$	60.6	$	56.1
General and administrative expenses		3.9		4.0		10.9		11.7
Total	$	24.9	$	22.7	$	71.5	$	67.8

LM4 Agreements

Separately from our commercial agreements with Hess, we entered into a gas processing agreement with Little Missouri 4 (“LM4”), a 50/50 joint venture with Targa Resources Corp., under which we pay a processing fee per Mcf of natural gas and reimburse LM4 for our proportionate share of electricity costs. These processing fees are included in Operating and maintenance expenses in the accompanying consolidated statements of operations. In addition, we share profits and losses and receive distributions from LM4 under the LM4 amended and restated limited liability company agreement based on our ownership interest. For the three and nine months ended September 30, 2024 and 2023, we had the following activity related to our agreements with LM4:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
(in millions)
Processing fee incurred	$	8.4	$	6.9	$	23.8	$	17.7
Earnings from equity investments		3.7