Hess Midstream Posts Quarterly Profit of $179.1 Million Despite Lower Revenue
Key Facts
Hess Midstream reported on October 30 that net income in the third quarter of 2026 was $179.1 million, compared with $175.5 million a year earlier, while net income attributable to the company reached $99.4 million. Class A basic earnings per share were $0.77, up from $0.75 in the third quarter of 2025. Earnings improved despite revenue and other income falling to $410.1 million from $420.9 million in the year-earlier period. The company attributed the $10.8 million decline in revenue mainly to lower handling volumes, partly offset by higher tariffs. It also reduced operating expenses to $147.7 million from $162.0 million a year earlier, mainly because of lower service agreement and maintenance fees, the company said.
Oil terminal handling volumes fell 10% year over year in the third quarter, while gas processing declined 8% and water gathering fell 4%. The company said lower production was the main driver of the volume declines, while direct third-party volumes remained relatively stable. These indicators put pressure on revenue tied to transportation, processing and gathering services, reflected in the year-over-year revenue comparison. Higher tariffs offset part of the impact of lower volumes, the company said. By contrast, results showed higher net income and earnings per share than in the same quarter a year earlier. The comparison highlights the divergence between weaker activity volumes and lower operating expenses.
Adjusted EBITDA was $319.9 million for the quarter, and adjusted free cash flow was $247.9 million. Net cash provided by operating activities was $267.9 million. Chief Executive Jonathan Stein said the company's record of generating free cash flow after distributions provides a consistent foundation for future distributions. He added that the company expects this cash flow to support continued distributions, capital allocation and shareholder returns. The company also declared a quarterly cash distribution of $0.7985 per Class A share for the third quarter, an increase of $0.0097 from the second quarter. The distribution is scheduled to be paid on November 13 to shareholders of record at the close of trading on November 5.
The company is targeting annual distribution growth of 5% per Class A share in the fourth quarter of 2026 and expects quarterly distributions in 2027 to remain at least at the fourth-quarter 2026 level. It said the targeted 2027 distributions will be fully funded by adjusted free cash flow. Capital spending was $21.5 million in the third quarter, down 73% from $79.8 million a year earlier. The company attributed the decline mainly to the completion of its gas compression capacity expansion in January 2026. The spending reduction comes as operating volumes continue to fall, while the company's guidance provides a framework for tracking performance through the rest of the year. Hess Midstream reaffirmed its 2026 outlook for net income, adjusted EBITDA, free cash flow and capital spending.
The company expects 2026 net income of $650 million to $675 million and adjusted EBITDA of $1,225 million to $1,250 million. It estimated adjusted free cash flow at $910 million to $935 million and capital spending at $105 million. The outlook follows adjusted free cash flow of $247.9 million in the third quarter, with full-year figures remaining within the ranges the company reaffirmed. The company is also awaiting completion of the DJ Basin asset deal announced on October 6, which is expected to close by the end of 2026. Stein said the addition of the assets will expand the company's operations across several basins and is expected to increase crude oil gathering volumes to about three times their current level. The deal includes a $200 million payment to Chevron, while the transaction announcement estimates 2027 adjusted EBITDA of about $850 million to $950 million on a pro forma basis.
EL7 data showed the stock closed at $30.61 on October 23, then at $31.18 on October 26 and $31.67 on October 27. The closing price continued to rise, reaching $31.71 on October 28 and $32.25 on October 29. In premarket trading after the results were announced on October 30, the stock rose 0.62%, according to data cited by Investing.com. Adjusted earnings per share also topped analysts' consensus of $0.72, the same source said. The stock's move followed a rise in closing prices during the week before the announcement. The November distribution dates and the planned completion of the DJ deal by the end of 2026 remain the next announced milestones for shareholders.