Hess Midstream Charts a Course for Robust Cash Returns

Hess US42809H1077

Hess Midstream LP has laid out a detailed financial roadmap through 2028, with a core strategy centered on generating and returning substantial cash to shareholders. The company's updated projections signal a significant shift toward lower capital spending and higher free cash flow, aiming to bolster investor confidence.

The company provided specific guidance for 2026, with longer-term objectives extending to 2028. The figures underscore a deliberate pivot to a more capital-efficient model.

• Net Income is forecast to reach $650–700 million in 2026.
• Adjusted EBITDA is projected to be in the range of $1.225–1.275 billion for the same year.
• Capital Expenditures (Capex) are set to drop sharply to approximately $150 million in 2026, before declining further to under $75 million annually in 2027 and 2028.
• Adjusted Free Cash Flow is expected to hit $850–900 million in 2026.

This disciplined approach to spending is designed to unlock considerable surplus cash. Management anticipates generating roughly $1 billion in excess free cash flow after distributions through the end of 2028.

Shareholder Returns and Strategic Focus

A direct outcome of this strengthened cash flow profile is an enhanced commitment to shareholder distributions. Hess Midstream has formalized a target to increase its per-share distribution by at least 5% annually through 2028. Based on recent trading, the stock offers a dividend yield of approximately 8.47%.

The surplus cash also provides flexibility for balance sheet management, including a goal to reduce leverage to below 3.0x Adjusted EBITDA, and potential share repurchases.

Operational Alignment and Governance Shifts

Operationally, the company expects flat oil throughput volumes in the Bakken region, while natural gas volumes are projected to grow at a modest compound annual growth rate (CAGR) of about 1.5% through 2028. In a move reflecting strategic coordination, Hess Midstream has halted construction on the Capa gas processing plant, aligning its plans with the production guidance of its strategic partner, Chevron.

Recent boardroom changes further cement this alignment. Andrew B. Walz departed for a role at Chevron, while Kristi H. McCarthy was appointed Chair of the Board. Barbara F. Harrison, a Chevron executive, also joined the board, making the operational synergy between the two entities more explicit.

Market Perspective and Forward Look

Despite the outlined cash flow strategy, Hess Midstream shares are down approximately 7.6% for the year 2025 to date. The current analyst consensus rating remains "Hold," with an average price target near $41.44—suggesting a potential upside of around 20% from recent levels. An analysis dated December 10 estimated the stock's intrinsic value to be above its current trading price.

Whether this financial update can provide lasting support for the equity will hinge on execution. Key factors include the successful realization of the outlined capex reductions and the maintenance of throughput volumes, which are closely tied to Chevron's production activities in North Dakota. The next significant milestone will be the fourth-quarter earnings report, where investors will look for details on cost-saving implementation and capital allocation. From a technical standpoint, market observers note the importance of the share price reclaiming the $35 level.