Hess Midstream LP (NYSE: HESM) has recently announced the signing of a definitive agreement for the repurchase of approximately $100 million of Class B units by its subsidiary, Hess Midstream Operations LP, from affiliates of Hess Corporation and Global Infrastructure Partners, Hess Midstream’s sponsors. This move is part of the company's financial strategy aimed at delivering significant shareholder returns while maintaining balance sheet strength.
Since the beginning of 2021 through this transaction, the company will have returned $1.75 billion to shareholders through ongoing unit repurchases, reducing the total unit count by nearly 25%. Following this unit repurchase, Hess Midstream expects to maintain more than $1.25 billion of financial flexibility through 2026, which can be used to support potential incremental unit repurchases.
The repurchased units, totaling 2,724,052 Class B units of Hess Midstream Operations LP, are equal to approximately 1.2% of the consolidated company. The purchase price per Class B unit is $36.71, based on the closing price of the Class A shares on June 24, 2024. After completing the unit repurchase transaction, 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 unit repurchase is anticipated to close on June 26, 2024, and the company expects to fund the repurchase with cash on hand.
This repurchase is expected to result in increased distributable cash flow per Class A share, providing capacity for incremental distribution growth above Hess Midstream’s annual distribution target of at least 5% through 2026, consistent with the company's return of capital framework.
Hess Midstream LP is a fee-based, growth-oriented midstream company that owns, operates, develops, and acquires a diverse set of midstream assets to provide services to Hess Corporation and third-party customers. The company owns oil, gas, and produced water handling assets primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota. Following these announcements, the company's shares moved -0.6%, and are now trading at a price of $36.48. For the full picture, make sure to review Hess Midstream LP's 8-K report.
