Executive Summary

Delivered a solid quarter with year-over-year growth and sequential improvement in Adjusted EBITDA, supported by stronger third‑party gas volumes and resilient operations despite August flooding; Adjusted EBITDA was $320.7M (+11.8% y/y; +1.5% q/q) with Gross Adjusted EBITDA margin of 82% (above 75% target) .
Q3 results modestly beat S&P Global consensus: EPS $0.75 vs $0.731*, Revenue $420.9M vs $417.9M*, and company Adjusted EBITDA $320.7M vs S&P EBITDA consensus $315.2M*; upside was driven by increased third‑party gas volumes tied to Northern Border maintenance .
Guidance refined: FY25 Net Income narrowed to $685–$695M (from $685–$735M), Adjusted EBITDA narrowed to $1,245–$1,255M (from $1,235–$1,285M), Capex cut to ~$270M (from $300M), and Adjusted FCF lifted to $760–$770M (from $725–$775M) as the Capa gas plant was suspended .
Capital returns accelerated: distribution raised to $0.7548 (+$0.0178 q/q) and $100M of buybacks completed (Class A $70M, Class B $30M), with management reiterating ≥5% annual distribution growth target through 2027 and flexibility for further repurchases .

What Went Well and What Went Wrong

What Went Well
- Third‑party gas volumes created upside tailwinds in late Q3 as customers navigated Northern Border maintenance; gas throughputs rose sequentially and y/y, underscoring strategic positioning in the Bakken .
- Adjusted EBITDA increased to $320.7M with Gross Adjusted EBITDA margin at 82% (vs 81% y/y) despite seasonal cost pressures, remaining well above the 75% target .
- Strengthened capital return: 2.4% distribution increase q/q (to $0.7548) and $100M buyback executed in Q3, leveraging excess FCF and lower share/unit count to maintain total distributed cash .
What Went Wrong
- Total net income ticked down sequentially ($175.5M vs $179.7M in Q2) on higher seasonal maintenance and employee costs (+~$2M), even as EBITDA improved .
- Q4 outlook embeds scheduled maintenance and lower third‑party volumes, implying flattish volumes and EBITDA ($315–$325M) into year‑end .
- Longer‑term growth optics tempered near‑term: the Capa gas plant suspension reduces capital intensity (positive for FCF) but contributed to a narrower/lower midpoint FY25 EBITDA range vs July, and management telegraphed 2026 EBITDA likely flat before growth resumes in 2027 .

Financial Results

Consolidated results (y/y and q/q comparisons)

Metric	Q3 2024	Q2 2025	Q3 2025
Revenues and other income ($M)	$378.5	$414.2	$420.9
Net income ($M)	$164.7	$179.7	$175.5
Net income attributable to HESM LP ($M)	$58.6	$90.3	$97.7
Basic EPS per Class A ($)	$0.63	$0.74	$0.75
Adjusted EBITDA ($M)	$286.9	$316.0	$320.7
Gross Adjusted EBITDA Margin (%)	81%	82%	82%
Net cash from operating activities ($M)	$224.9	$276.9	$258.9
Adjusted Free Cash Flow ($M)	$141.4	$193.8	$186.8

Q3 2025 vs S&P Global consensus

Metric	Actual	Consensus	Surprise
EPS ($)	$0.75	$0.731*	+$0.019 (+2.6%)*
Revenue ($M)	$420.9	$417.9*	+$3.0 (+0.7%)*
EBITDA ($M)	$320.7 (Adjusted)	$315.2 (S&P EBITDA)*	+$5.5 (+1.7%)*

Segment revenue breakdown

Segment Revenue ($M)	Q3 2024	Q2 2025	Q3 2025
Gathering	$203.5	$222.4	$227.3
Processing & Storage	$145.1	$157.9	$159.6
Terminaling & Export	$29.9	$33.9	$34.0
Total	$378.5	$414.2	$420.9

Operating KPIs (average throughput)

KPI	Q3 2024	Q2 2025	Q3 2025
Gas gathering (Mcf/d)	442	464	480
Crude oil gathering (bopd)	116	127	123
Gas processing (Mcf/d)	419	449	462
Crude terminals (bopd)	122	137	130
NGL loading (bbl/d)	15	17	18
Water gathering (bbl/d)	128	138	137

Notes: Non‑GAAP metrics (Adjusted EBITDA, Adjusted FCF) are as defined by the company; reconciliations provided in the press release/8‑K .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Income ($M)	FY 2025	$685–$735	$685–$695	Narrowed; lower upper end
Adjusted EBITDA ($M)	FY 2025	$1,235–$1,285	$1,245–$1,255	Narrowed; slightly lower midpoint
Capital Expenditures ($M)	FY 2025	$300	~$270	Lowered (Capa plant suspended)
Adjusted Free Cash Flow ($M)	FY 2025	$725–$775	$760–$770	Raised and narrowed
Net Income ($M)	Q4 2025	n/a	$170–$180	New
Adjusted EBITDA ($M)	Q4 2025	n/a	$315–$325	New
Distribution per Class A ($)	Q3 2025	$0.7370 (Q2 actual)	$0.7548 (declared for Q3)	Raised

Management reiterated ≥5% annual distribution growth per Class A share through 2027 and highlighted excess FCF supporting returns .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 and Q1)	Current Period (Q3)	Trend
Return of capital (dividends/buybacks)	Q1: Target ≥5% annual distribution growth through 2027; $100M Class B repurchase completed . Q2: Distribution raised; $200M combined repurchases executed; ongoing flexibility .	Q3: Distribution raised to $0.7548 and $100M buyback executed; ≥5% annual growth reiterated with capacity for further repurchases .	Strengthening; ongoing
Capex outlook	FY25 capex $300M (Q1) .	FY25 capex cut to ~$270M after suspending Capa gas plant; management indicated “significantly lower” capex in coming years and a ~$125M base run‑rate (plus small growth) for 2026 starting point .	Lower capital intensity; FCF up
Sponsor integration (Chevron)	Merger closed in July; Chevron ~37.8–37.9% consolidated interest .	Board integration is “going very well”; two distribution increases approved; search underway for a fourth independent director .	Stable/positive governance
Volumes and GORs	Q2: Throughput growth across systems y/y; reiterated multi‑year growth outlook .	Oil expected to plateau on 3 rigs; gas to increase over time as GORs trend higher; gas is ~75% of revenues .	Gas‑led growth
MVCs (2028 setting)	n/a in Q1/Q2 press releases.	Process unchanged; MVC set mechanically at 80% of the third year of Chevron’s development plan; 2028 MVCs to be provided after December budget .	Visibility pending December
2026/2027 outlook	Q2: Expected ≥10% EBITDA growth in 2026, ≥5% in 2027 (pre‑update) .	Early view: 2026 EBITDA likely flat vs 2025 with growth resuming in 2027; lower capex boosts FCF .	Growth deferred, FCF rising

Management Commentary

CEO Jonathan Stein: “We delivered solid operational performance in the third quarter, growing gas throughput across our systems on a year‑over‑year and sequential basis.” He highlighted third‑party volume upside from Northern Border maintenance and suspension of the Capa gas plant, lowering capital needs and increasing FCF to support capital returns .
CFO Mike Chadwick: “Our gross adjusted EBITDA margin for the third quarter was maintained at approximately 80%, above our 75% target,” with Q4 guided net income of $170–$180M and Adjusted EBITDA of $315–$325M; FY25 Adjusted EBITDA narrowed to $1,245–$1,255M and Adjusted FCF to $760–$770M .
Strategic framing: With Chevron operating three rigs aimed at maintaining an oil plateau and increasing gas over time (driven by GORs and high gas capture), management expects continued FCF growth through 2027 and flexibility for incremental buybacks while sustaining ≥5% distribution growth .

Q&A Highlights

GORs and gas growth: Gas volumes expected to rise over time with oil plateauing on three rigs; gas represents ~75% of revenues, underpinning HESM’s long‑term growth mix .
2028 MVCs: No change to the mechanics; MVCs set at 80% of the third year of Chevron’s development plan; update expected post‑December budget .
Capex trajectory: Management reiterated a ~$125M base well‑connect/maintenance run‑rate with small growth projects, “significantly below” prior $250–$300M for 2026–27, boosting FCF and return capacity .
Buyback cadence/leverage: At ~3x leverage, lower capex in 2026 alongside stable EBITDA supports continued 5% dividend growth and optional buybacks; free cash flow growth is expected through 2027 .
Chevron integration: Board functioning well; multiple distribution increases approved; alignment on long‑term operating plan and capital discipline .

Estimates Context

Q3 2025: EPS $0.75 vs $0.731 consensus*, Revenue $420.9M vs $417.9M*, and company Adjusted EBITDA $320.7M vs S&P EBITDA consensus $315.2M*; modest beats support estimate stability to slight upward revisions, particularly on FCF given lower capex .
Near‑term (Q4 2025): Consensus EPS $0.715* and Revenue $420.8M* are broadly consistent with company guidance embedding maintenance and lower third‑party volumes; Street may keep 4Q largely unchanged while adjusting FY mix to reflect lower capex and narrowed ranges* .
Medium‑term: With 2026 EBITDA likely flat and 2027 returning to growth, estimate revisions may shift from EBITDA growth to higher FCF and distributions in 2026 before growth resumes in 2027 .

Key Takeaways for Investors

Modest beat on EPS/Revenue/EBITDA and sustained >80% Gross Adjusted EBITDA margin demonstrate operating leverage and tariff/contract resilience .
Capital intensity falling (Capa suspended) lifts FY25 Adjusted FCF to $760–$770M and supports ongoing distribution growth and buybacks; capex expected “significantly lower” in coming years .
2026 looks like an FCF year (flat EBITDA, lower capex), with EBITDA growth resuming in 2027; set expectations accordingly for factor rotation from growth to yield/FCF .
Gas‑led growth underpinning long‑term runway as GORs rise and gas remains ~75% of revenue mix; third‑party upside remains a lever under regional maintenance dynamics .
Distribution increased to $0.7548; management remains committed to ≥5% annual distribution growth through 2027 with flexibility for incremental repurchases .
Watch December catalysts: 2026 guidance and disclosure of 2028 MVCs will shape Street models and may be a stock reaction event .

Values with an asterisk () are retrieved from S&P Global consensus via the GetEstimates tool and may reflect S&P’s standardized definitions (e.g., EBITDA) rather than company-reported “Adjusted EBITDA.” [S&P Global data]*

Hess Midstream LP (HESM)·Q3 2025 Earnings Summary