Hess Midstream LP

12 Months Ended

Dec. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Hess Midstream LP

4.  Hess Midstream LP

Hess Midstream LP, a variable interest entity, has an "Up-C" organizational structure. We had an approximate 38% consolidated ownership interest at December 31, 2024 in Hess Midstream LP on an as-exchanged basis, primarily through our ownership of Class B units in Hess Midstream Operations LP (HESM Opco), the operating subsidiary of Hess Midstream LP, which are exchangeable into Class A shares of Hess Midstream LP on a one-for-one basis. An affiliate of Global Infrastructure Partners (GIP) owned an approximate 15% consolidated interest in Hess Midstream LP at December 31, 2024 on an as-exchanged basis, primarily through its ownership of Class B units in HESM Opco, and the public owned an approximate 47% consolidated interest in Hess Midstream LP at December 31, 2024, through the ownership of Class A shares of Hess Midstream LP. We have concluded that we are the primary beneficiary of the variable interest entity since we have the power to direct those activities that most significantly impact the economic performance of Hess Midstream LP, and are obligated to absorb losses or have the right to receive benefits that could potentially be significant to Hess Midstream LP. This conclusion was based on a qualitative analysis that considered Hess Midstream LP’s governance structure, the commercial agreements between Hess Midstream LP and us, and the voting rights established between the members.

In 2022, Hess Midstream LP completed a single underwritten public equity offering of 10.2 million Hess Midstream LP Class A shares held by affiliates of Hess Corporation and GIP. Hess received net proceeds of $146 million from the transaction. The transaction resulted in an increase in Capital in excess of par and Noncontrolling interests of $130 million and $88 million, respectively. The increase to Noncontrolling interests of $88 million is comprised of $16 million resulting from the change in ownership interests and $72 million from an increase to deferred tax assets resulting from a step-up in the tax basis of Hess Midstream LP’s investment in HESM Opco.

In 2022, HESM Opco repurchased 13.6 million HESM Opco Class B units held by affiliates of Hess Corporation and GIP for $400 million in a single transaction. HESM Opco issued $400 million in aggregate principal amount of 5.500% fixed-rate senior unsecured notes due 2030 in a private offering to repay borrowings under its revolving credit facility used to finance the repurchase. The transaction resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of $32 million, and an increase in deferred tax assets and Noncontrolling interests of $17 million resulting from an adjustment in the carrying value of Hess Midstream LP’s investment in HESM Opco without a corresponding adjustment in the tax basis. The $200 million paid to GIP reduced Noncontrolling interests.

In 2023, Hess Midstream LP completed two underwritten public equity offerings of an aggregate of 24.3 million Hess Midstream LP Class A shares. Hess Corporation received net proceeds of $167 million from the first public offering in May 2023, but did not participate or receive any proceeds from the second public offering in August 2023. These transactions, in aggregate, resulted in an increase in Capital in excess of par and Noncontrolling interests of $158 million and $175 million, respectively. The increase to Noncontrolling interests of $175 million is comprised of $9 million resulting from the changes to ownership interests due to the first public offering in May 2023, and $166 million from an increase to deferred tax assets resulting from step-ups in the tax basis of Hess Midstream LP’s investment in HESM Opco.

In 2023, HESM Opco repurchased an aggregate of 13.6 million HESM Opco Class B units in four transactions from affiliates of Hess Corporation and GIP for total proceeds of $400 million. The unit repurchases were financed by borrowings under HESM Opco’s revolving credit facility. The unit repurchases, in aggregate, resulted in an increase in Capital in excess of par and a decrease in Noncontrolling interests of $31 million, and an increase in deferred tax assets and Noncontrolling interests of $23 million due to adjustments in the carrying value of Hess Midstream LP’s investment in HESM Opco without corresponding adjustments in the tax basis. The aggregate proceeds paid to GIP of $212 million reduced Noncontrolling interests. Hess Corporation participated in all the HESM Opco Class B unit repurchase transactions in 2023 on a 50/50 basis with GIP with the exception of the HESM Opco Class B unit repurchase transaction in November 2023. Hess Corporation and GIP received $38 million and $62 million, respectively, of the total proceeds of $100 million. There was no change in Hess Corporation’s ownership interest in Hess Midstream LP on a consolidated basis as a result of this transaction and accordingly, there was no impact to the balance of Noncontrolling interests. However, the transaction did result in an increase in deferred tax assets and Noncontrolling interests of $7 million as a result of an adjustment in the carrying value of Hess Midstream LP’s investment in HESM Opco without a corresponding adjustment in the tax basis.

In 2024, Hess Midstream LP completed three underwritten public equity offerings of an aggregate of 35.7 million Hess Midstream LP Class A shares held by an affiliate of GIP. Hess Corporation did not receive any proceeds from these public equity offerings. As these transactions did not result in a change in Hess Corporation’s ownership interest in Hess Midstream LP on a consolidated basis, there was no adjustment to Noncontrolling interests resulting from changes to ownership interests. However, these transactions, in aggregate, resulted in an increase in Noncontrolling interests and deferred tax assets of $309 million resulting from step-ups in the tax basis of Hess Midstream LP’s investment in HESM Opco.

In 2024, HESM Opco repurchased an aggregate of 8.4 million HESM Opco Class B units in three transactions held by affiliates of Hess Corporation and GIP for total proceeds of $300 million. The unit repurchases were financed using borrowings under HESM Opco’s revolving credit facility and cash on hand. As Hess Corporation participated in these repurchases only to the extent necessary to maintain its current ownership interest in Hess Midstream LP on a consolidated basis, there was no adjustment to Noncontrolling interests resulting from changes to ownership interests. However, the repurchases, in aggregate, resulted in an increase in deferred tax assets and Noncontrolling interests of $30 million due to adjustments in the carrying value of Hess Midstream LP’s investment in HESM Opco without corresponding adjustments in the tax basis. The aggregate proceeds paid to GIP of $187 million reduced Noncontrolling interests.

At December 31, 2024, Hess Midstream LP liabilities totaling $3,652 million (2023: $3,385 million) are on a nonrecourse basis to Hess Corporation, while Hess Midstream LP assets available to settle the obligations of Hess Midstream LP included cash and cash equivalents totaling $4 million (2023: $5 million), property, plant and equipment, net totaling $3,325 million (2023: $3,229 million) and the equity-method investment in LM4 of $87 million (2023: $90 million).

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 LP and Targa Resources Corp. Hess Midstream LP 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 2024, processing fees were $33 million (2023: $24 million; 2022: $21 million) and are included in Operating costs and expenses in the Statement of Consolidated Income.