Hess Midstream Charts Course for Cash Flow Surge as Major Infrastructure Build Nears Completion

By The Motley Fool
February 2, 2026 at 10:00 a.m. ET

Hess Midstream Partners LP (NYSE: HESM) is transitioning from a high-growth capital project phase to a harvest period, promising a significant acceleration in cash returns to shareholders. During its fourth-quarter 2025 earnings call, executives outlined a future defined by plummeting capital spending and swelling free cash flow, supported by long-term contracts with majority owner Chevron.

With its gas gathering and compression system now "substantially built," the partnership projects 2026 capital expenditures to fall to approximately $150 million—a sharp 40% reduction from 2025 levels. This trend is expected to continue, with annual spending dropping below $75 million in 2027 and 2028. This capital discipline unlocks what CEO Jonathan Stein termed "significant free cash flow generation," estimated at $850-$900 million for 2026, with roughly 10% annualized growth targeted through 2028.

"This isn't just about spending less; it's about leveraging a multi-billion dollar infrastructure investment that's now largely behind us," Stein stated. "The model is designed to deliver a unique combination of predictable distribution growth, balance sheet strength, and incremental shareholder returns."

The financial roadmap hinges on stability provided by Minimum Volume Commitments (MVCs), which cover about 95% of 2026 revenues, insulating the partnership from volume volatility. For the full year 2025, Hess Midstream reported adjusted EBITDA of $1.238 billion. While severe winter weather in December and January pressured fourth-quarter volumes and will impact early 2026 results, full-year 2026 EBITDA guidance remains steady at $1.225-$1.275 billion.

CFO Michael Chadwick emphasized the strategic use of future cash, noting a portion would be allocated to debt repayment, aiming to naturally reduce leverage below the historical 3x target over the coming years. The remaining excess cash is earmarked for shareholder returns, complementing a targeted 5% annual distribution growth per Class A share through 2028.

The long-term outlook is pegged to Chevron's development plan in the Bakken, targeting a plateau of 200,000 barrels of oil equivalent per day. Executives expressed confidence in this plan, citing recent reaffirmations by Chevron and noting that Hess Midstream's own volume and cash flow guidance through 2028 is aligned with it.

Analyst & Investor Commentary:

Eleanor Vance, Energy Infrastructure Analyst at Clearwater Capital: "The transition is clear and compelling. HESM is moving from a capital-intensive growth story to a cash cow. The 95% MVC coverage for 2026 provides an exceptional margin of safety, making the 5% distribution growth target highly secure. The key for investors will be monitoring the execution of the incremental share repurchases with the growing free cash flow pile."

Marcus Thorne, Managing Partner at Thorne Energy Partners: "Finally, some clarity after the Chevron integration. The guide to sub-$75M annual CapEx by 2027 is a game-changer for the equity story. It transforms the EBITDA-to-cash conversion profile. The 10% annual free cash flow growth through 2028, if delivered, should command a premium valuation in the midstream space."

David Park, Independent Shareholder: "It's all promises until we see the buybacks. They talk a big game about 'incremental shareholder returns,' but the proof is in the execution. Cutting CapEx is easy; returning that capital directly to us is harder. And I'm deeply skeptical about the 'optimization' with Chevron—it feels like a code word for reduced activity that could limit upside long after the MVCs roll off."

Rebecca Shaw, Portfolio Manager at Horizon Income Fund: "This is exactly the kind of predictable, contract-backed cash flow story income investors seek. The combination of a covered, growing distribution and a deleveraging balance sheet reduces risk substantially. The weather-impacted Q1 is a temporary blip; the multi-year cash flow trajectory is what matters, and it looks robust."

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This article is based on an earnings call transcript. While we strive for accuracy, there may be errors or omissions. We encourage you to listen to the call and review the company's SEC filings. The Motley Fool has no position in any stocks mentioned.