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Investing.com -- Hess Midstream LP (NYSE:HESM) stock fell 6.3% Friday after the company announced updated guidance reflecting an expected decrease in Bakken rig activity by Chevron from four to three drilling rigs starting in the fourth quarter of 2025.
The midstream operator now anticipates relatively flat Adjusted EBITDA in 2026 compared to 2025, with growth resuming in 2027 driven by continued increases in gas throughput volumes and inflation escalation provisions under existing commercial agreements. While gas throughput volumes are expected to grow through at least 2027, oil throughput volumes are now projected to plateau in 2026 as a result of the reduced rig activity.
Wells Fargo analyst Praneeth Satish downgraded Hess Midstream from Overweight to Equal Weight and lowered the price target to $39.00 from $48.00 following the announcement. "Our prior positive thesis on HESM was driven by growth under a 4-rig program w/ strong capital return & a buyout as upside. Under a 3-rig setup, the buyout is now the main catalyst," Satish noted.
The company also updated its 2025 gas throughput guidance, citing adverse weather conditions, maintenance in the third quarter, and lower expected third-party volumes in the fourth quarter. Gas gathering volumes for 2025 are now expected to average between 455 to 465 million cubic feet per day, while gas processing volumes are projected between 440 to 450 million cubic feet per day.
Hess Midstream expects significantly lower capital spending in 2026 and 2027 after suspending early engineering activities on the Capa gas plant and removing the project from its forward plan. Despite these changes, the company maintains its targeted annual distribution per Class A share growth of at least 5% through 2027.
UBS analyst Manav Gupta maintained a Neutral rating with a $43.00 price target on Hess Midstream, noting that throughput volumes are expected to remain above established minimum volume commitments.
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