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Investing.com - Wells Fargo downgraded Hess Midstream Partners LP (NYSE:HESM) from Overweight to Equal Weight on Friday, while reducing its price target to $39.00 from $48.00. The company, which maintains a robust 7.47% dividend yield and has raised dividends for 8 consecutive years according to InvestingPro data, faces new challenges.
The downgrade comes as Chevron reduces its rig count from four to three, significantly impacting Hess Midstream’s growth prospects and capital return potential.
Wells Fargo now forecasts Hess Midstream to grow at a low single-digit CAGR on a standalone basis, with materially reduced capital return compared to previous projections.
The firm estimates total return for Hess Midstream now stands at approximately 13% (comprising 8% yield, 3% dividend growth, and 2% buybacks), down from 21% in its prior assessment.
According to Wells Fargo, Hess Midstream "no longer offers sector-leading capital return" under the new three-rig setup, with a potential buyout now representing the main catalyst for the stock.
In other recent news, Hess Midstream LP reported strong financial performance for the second quarter of 2025, with earnings per share of $0.74, surpassing analyst expectations of $0.66. The company’s revenue also exceeded projections, reaching $414.2 million compared to the anticipated $405.13 million. This positive performance comes as Hess Midstream adjusts its financial outlook through 2027, following Chevron’s decision to reduce Bakken drilling activity. The midstream operator expects oil throughput volumes to plateau in 2026, while gas throughput volumes are projected to grow through at least 2027. In light of these developments, UBS downgraded Hess Midstream from Buy to Neutral, citing concerns over potential reduced drilling activity in the Bakken region due to low commodity prices. Additionally, there has been a leadership change at Hess Midstream, with John A. Gatling resigning as President and Chief Operating Officer, and Michael S. Bast appointed as his successor. These recent developments highlight Hess Midstream’s dynamic operational and financial landscape.
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