Hess Midstream LP

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Hess Midstream LP

4.  Hess Midstream LP

HIP was initially formed on May 21, 2015, with Hess selling 50% of HIP to GIP for approximately $2.6 billion on July 1, 2015. On April 10, 2017, HIP completed an initial public offering (IPO) of 16,997,000 common units, representing 30.5% limited partnership interests in its subsidiary Hess Midstream Partners LP (Hess Midstream Partners), for net proceeds of approximately $365.5 million.  In connection with the IPO, HIP contributed a 20% controlling economic interest in each of Hess North Dakota Pipeline Operations LP, Hess TGP Operations LP, and Hess North Dakota Export Logistics Operations LP, and a 100% economic interest in Hess Mentor Storage Holdings LLC (collectively the “Contributed Businesses”).  In exchange for the contributed businesses, Hess and GIP each received common and subordinated units representing a direct 33.75% limited partner interest in Hess

Midstream Partners and a 50% indirect ownership interest through HIP in Hess Midstream Partners’ general partner, which had a 2% economic interest in Hess Midstream Partners plus incentive distribution rights.

On December 16, 2019, Hess Midstream Partners acquired HIP, including HIP’s 80% interest in Hess Midstream Partners’ oil and gas midstream assets, HIP’s water services business and the outstanding economic general partner interest and incentive distribution rights in Hess Midstream Partners LP.  In addition, Hess Midstream Partners’ organizational structure converted from a master limited partnership into an “Up-C” structure in which Hess Midstream Partners’ public unitholders received newly issued Class A shares in a new public entity named Hess Midstream LP (Hess Midstream), which is taxed as a corporation for U.S. federal and state income tax purposes.  Hess Midstream Partners changed its name to “Hess Midstream Operations LP” (HESM Opco) and became a consolidated subsidiary of Hess Midstream, the new publicly listed entity.  As consideration for the acquisition, Hess received a cash payment of $301 million and approximately 115 million newly issued HESM Opco Class B units.  After giving effect to the acquisition and related transactions, public shareholders of Class A shares in Hess Midstream owned 6% of the consolidated entity on an as-exchanged basis and Hess and GIP each owned 47% of the consolidated entity on an as-exchanged basis, primarily through the sponsors’ ownership of Class B units in HESM Opco that are exchangeable into Class A shares of Hess Midstream on a one-for-one basis.

In March 2021, Hess Midstream completed an underwritten public equity offering of 6.9 million Class A shares held by Hess and GIP. These Class A shares of Hess Midstream were obtained by Hess and GIP through the exchange of 6.9 million of their Class B units of HESM Opco. As a result of this transaction, Hess received net proceeds of $70 million and recorded an increase in additional paid-in capital and noncontrolling interests of $56 million and $41 million, respectively. The increase of $41 million in noncontrolling interests is comprised of $14 million resulting from the change in ownership and $27 million due to the recognition of a deferred tax asset as a result of an increase in the tax basis of Hess Midstream LP's investment in HESM Opco.

In August 2021, HESM Opco repurchased 31.25 million Class B units held by Hess and GIP for $750 million. Hess received net proceeds of $375 million. HESM Opco issued $750 million in aggregate principal amount of 4.250% fixed-rate senior unsecured notes due 2030 in a private offering to finance the repurchase. The transaction resulted in an increase in additional paid-in capital and a decrease in noncontrolling interests of $28 million, and an increase in deferred tax assets and noncontrolling interests of $15 million due to a decrease in the book basis of Hess Midstream LP's investment in HESM Opco. The $375 million paid to GIP was recorded as a reduction to noncontrolling interests.

In October 2021, Hess Midstream completed an underwritten public equity offering of approximately 8.6 million Class A Shares held by Hess and GIP. These Class A shares of Hess Midstream were obtained by Hess and GIP through the exchange of approximately 8.6 million of their Class B units of HESM Opco. As a result of this transaction, Hess received net proceeds of $108 million and recorded an increase in additional paid-in capital and noncontrolling interests of $96 million and $62 million, respectively. The increase of $62 million in noncontrolling interests is comprised of $12 million resulting from the change in ownership and $50 million due to the recognition of a deferred tax asset as a result of an increase in the tax basis of Hess Midstream LP's investment in HESM Opco.

After giving effect to the above transactions in 2021, public shareholders of Class A shares of Hess Midstream own approximately 13%, and Hess and GIP each own approximately 43.5%, of the consolidated entity on an as-exchanged basis at December 31, 2021.

Little Missouri 4 (LM4) is a 200 million standard cubic feet per day gas processing plant located south of the Missouri River in McKenzie County, North Dakota, that was constructed as part of a 50/50 joint venture between Hess Midstream and Targa Resources Corp. Hess Midstream has a natural gas processing agreement with LM4 under which it pays a processing fee and reimburses LM4 for its proportionate share of electricity costs. In 2021, these processing fees were $28 million (2020: $26 million; 2019: $6 million) and are included in Operating costs and expenses in the Statement of Consolidated Income.

At December 31, 2021, Hess Midstream liabilities totaling $2,694 million (2020: $2,026 million) are on a nonrecourse basis to Hess Corporation, while Hess Midstream assets available to settle the obligations of Hess Midstream included cash and cash equivalents totaling $2 million (2020: $3 million), property, plant and equipment, net totaling $3,125 million (2020: $3,111 million) and an equity-method investment in LM4 of $102 million (2020: $108 million).