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Investing.com -- S&P Global Ratings has upgraded Hess Midstream Operations LP to ’BBB-’ from its previous rating, following the completion of Chevron (NYSE:CVX)’s acquisition of Hess Corp (NYSE:HES).’s entire interest in the company.
The ratings agency has assigned a stable outlook to Hess Midstream, reflecting expectations that the company will maintain adjusted debt to EBITDA between 2.5x and 3.0x through 2025, supported by an above-average contract profile.
S&P now assesses Hess Midstream as "moderately strategic" to Chevron, compared to its previous classification as "strategically important" to Hess Corp. This change reflects that Hess Midstream will constitute a smaller percentage of Chevron’s overall business, with Bakken production representing only about 5% of Chevron’s total production after the acquisition.
The upgraded rating is one notch above Hess Midstream’s stand-alone credit profile, based on S&P’s consideration of the relationship between Chevron and Hess Midstream as moderately strategic. The agency expects Hess Midstream to remain successful and receive extraordinary support from Chevron in certain foreseeable circumstances.
S&P indicated it could lower the rating if Hess Midstream’s adjusted debt to EBITDA was sustained above 4.0x or if the company no longer holds strategic importance to Chevron. However, a downgrade of Chevron would not automatically trigger a negative rating action on Hess Midstream.
The agency noted that a rating upgrade could occur if Hess Midstream improves its scale and diversity, enhancing its business risk profile while maintaining leverage below 3.5x. Alternatively, an upgrade might happen if Hess Midstream becomes more important to Chevron’s overall business strategy, though this is considered unlikely in the near term.
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