UBS downgrades Hess Midstream stock to Neutral on Bakken activity concerns

Investing.com - UBS downgraded Hess Midstream Partners LP (NYSE:HESM) from Buy to Neutral on Wednesday, while lowering its price target to $43.00 from $45.00. According to InvestingPro data, the company maintains a ’GOOD’ overall financial health score, with particularly strong profitability metrics and a P/E ratio of 15.09x.

The downgrade comes amid concerns that low commodity prices following OPEC+ production increases could lead to reduced drilling activity in the Bakken region, where Hess Midstream operates. UBS specifically noted that Chevron currently runs four rigs in the Bakken, but potential rig reductions would create downside risk to future earnings estimates. Despite these concerns, InvestingPro analysis shows the company has maintained strong revenue growth of 9.02% over the last twelve months.

Hess Midstream stock has outperformed the sector year-to-date, rising 15.98% according to InvestingPro data, compared to the Alerian MLP Index’s 1.98% gain. UBS attributes this outperformance primarily to high cash returns to shareholders, including a 7.24% dividend yield that exceeds its peer group. The company has consistently raised its dividend for 8 consecutive years, with a 13.11% dividend growth rate in the last twelve months.

The company targets 5% dividend per share growth through 2027 and plans to repurchase approximately $100 million of stock quarterly. While UBS believes the dividend remains secure, it warns that share buybacks could face pressure if Chevron reduces Bakken operations, particularly given Chevron’s preference for Permian Basin assets.

UBS also highlighted management departures and stock sales by some executives as additional factors in its rating change for the midstream energy company.

In other recent news, Hess Midstream reported a strong financial performance for the second quarter of 2025. The company’s earnings per share reached $0.74, surpassing analyst predictions of $0.66. Additionally, Hess Midstream’s revenue came in at $414.2 million, exceeding the expected $405.13 million. These results indicate a positive trajectory for the company’s financial health. In leadership developments, John A. Gatling has resigned as President and Chief Operating Officer of Hess Midstream GP LLC. Michael S. Bast has been appointed to succeed Gatling in these roles. Bast has a long history with Hess Corporation, having joined in 2007, and has held various leadership positions. These recent developments highlight significant changes and achievements within Hess Midstream.

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