HOUSTON - Hess Midstream LP (NYSE: HESM), a midstream oil and gas company, has reached an agreement to repurchase approximately $100 million of Class B units from its sponsors, Hess Corporation (NYSE:HES) and Global Infrastructure Partners. The buyback involves 2,724,052 Class B units at $36.71 each, the closing price of Class A shares on June 24, 2024, and is set to close on June 26, 2024.
The unit repurchase, approved by the Board of Directors and its independent conflicts committee, is part of Hess Midstream's broader strategy to return value to shareholders. With the completion of this transaction, the company will have returned $1.75 billion to shareholders since 2021, reducing total unit count by nearly 25%.
The repurchased units will be canceled, potentially allowing for increased distributable cash flow per Class A share and the capacity for distribution growth above the company's annual target of at least 5% through 2026.
Following the transaction, the ownership of Hess Midstream on a consolidated basis will be approximately 41.0% for the public, 21.2% for Global Infrastructure Partners, and 37.8% for Hess Corporation. The repurchase is anticipated to be funded with cash on hand, and the company expects to maintain over $1.25 billion in financial flexibility through 2026, which could support further unit repurchases.
Hess Midstream LP operates in the Bakken and Three Forks Shale plays in North Dakota, providing services to Hess Corporation and third-party customers. The company emphasizes that forward-looking statements in the press release, such as the ability to execute future accretive opportunities and potential incremental unit repurchases, are based on current expectations and involve risks and uncertainties.
This news is based on a press release statement from Hess Midstream LP.
In other recent news, Hess Midstream LP has been active in capital market activities and displayed mixed financial performance in its Q1 2024 results. The company announced a public offering of 10 million Class A shares by an affiliate of Global Infrastructure Partners, with J.P. Morgan serving as the bookrunning manager.
In addition, Hess Midstream Operations LP, a subsidiary of Hess Midstream, has successfully priced $600 million in senior unsecured notes to reduce existing debt, an increase from the initially planned offering of $500 million.
Turning to financial performance, Hess Midstream's Q1 2024 results showed earnings per share of $0.59, falling short of analyst expectations, while revenue of $355.6 million slightly exceeded forecasts. The company reported a substantial increase in throughput volumes across its operations, attributing this growth to higher production and improved gas capture. Net income for the quarter was $161.9 million, reflecting a significant increase from the previous year.
In terms of future expectations, Hess Midstream has reaffirmed its full-year 2024 guidance, targeting a net income range of $670 to $720 million. The company continues to aim for at least 5% annual distribution growth per Class A share through 2026. These recent developments reflect Hess Midstream's strategic financial maneuvers and operational performance.
InvestingPro Insights
Hess Midstream LP (NYSE: HESM) has demonstrated a notable commitment to shareholder returns, as evidenced by its recent agreement to repurchase $100 million of Class B units. This action aligns with the company's historical trend of enhancing shareholder value. According to InvestingPro Tips, HESM has not only raised its dividend for 7 consecutive years but also pays a significant dividend to shareholders. These consistent increases in dividends underscore the company's financial health and commitment to its shareholders.
From a financial standpoint, InvestingPro Data reveals that Hess Midstream's market capitalization stands at $8.21 billion, with a Price to Earnings (P/E) ratio of 16.41, indicating the company's earnings relative to its share price. While the company's P/E ratio for the last twelve months as of Q1 2024 is higher at 23.55, which could suggest a premium valuation relative to near-term earnings growth, it's important to note that the company's revenue growth over the same period was 10.36%. This growth is a positive sign for potential investors, indicating the company's ability to increase its revenue streams.
Furthermore, HESM's strong dividend yield of 7.1% as of the most recent data point is an attractive feature for income-seeking investors. This yield is complemented by a 14.4% dividend growth over the last twelve months as of Q1 2024, which is particularly compelling in the current investment landscape.
For those interested in diving deeper into Hess Midstream's financials and strategic outlook, there are additional InvestingPro Tips available that could provide further insights. For instance, while some analysts have revised their earnings downwards for the upcoming period, it's crucial to consider the company's overall track record and financial flexibility. Investors can access more tips and a comprehensive analysis by visiting https://www.investing.com/pro/HESM. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
With 13 additional InvestingPro Tips listed for Hess Midstream, investors have a wealth of information at their fingertips to make informed decisions about this midstream oil and gas company's investment potential.
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