Hess Midstream Partners LP (NYSE:HESM) Q2 2020 Earnings Conference Call - Final Transcript

Jul 29, 2020 • 12:00 pm ET

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Hess Midstream Partners LP (NYSE:HESM) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
John A. Gatling

we expect lower throughputs relative to the second quarter, as Hess' volumes decline due to the reduction in operated rig count and lower third-party volumes as producer curtailments persist. Consistent with the midpoint of our third quarter financial guidance, we expect gas processing volumes to be approximately 10% lower than the second quarter, with both crude oil terminaling and water gathering volumes expected to be approximately 5% lower compared to the second quarter. Again, with all systems operating close to or below MVC levels minimizing further throughput downside.

Turning to Hess Midstream's capital program. We've updated our full year capital guidance to $260 million, a reduction of $15 million from previous guidance, primarily to reflect the deferral of the turnaround and final tie-in work on the Tioga gas plant expansion project. Full year 2020 expansion capital is expected to be $250 million, comprising approximately $135 million in gas processing, $20 million in gas compression, and $95 million in gathering and well pad interconnects. Maintenance capital has been reduced to approximately $10 million as a result of the TGP turnaround deferral.

In summary, we're well positioned to meet the challenges of 2020 and beyond. We continue to deliver a level of visibility and certainty as a result of our contract structure which provides MVCs for approximately 97% of projected revenues for the second half of the year. This underpins our updated 2020 adjusted EBITDA guidance range of $690 million to $710 million, which has been narrowed and increased. Additionally, looking forward to 2021, we expect to grow adjusted EBITDA by 25% relative to full year 2020 with approximately 95% MVC protection. Demonstrating Hess Midstream resilience to weather current market conditions and continue to deliver strong operational and financial performance in 2020 and for the long-term.

Finally, we want to, again emphasize our continued commitment to operating safely and reliably during this unprecedented pandemic. The safety of our workforce and the communities where we operate remains our top priority.

I'll now turn over the call to Jonathan to review our financial results.

Executive
Jonathan C. Stein

Thanks, John, and good afternoon everyone. As John described, we are pleased with the progress we have made in the first half of 2020, continuing to deliver strong results against the backdrop of an uncertain macro environment, and further emphasizing how both our contract structure and financial strength differentiate our business model.

Our second quarter results again beat our quarterly guidance, and in combination with lower than anticipated costs this year due to the deferral of the TGP turnaround, have allowed us to raise our full year 2020 financial guidance. We are increasing our full year 2020 net Income guidance to be in the range of $425 million to $445 million. Adjusted EBITDA is expected to be in the range of $690 million to $710 million, representing approximately 25% growth compared to full year 2019 results. We still expect to maintain approximately 75% EBITDA margin in 2020, consistent with our historical margin.

Maintenance capital and cash Interest are projected to