Hess Midstream Partners LP (HESM)

History and Background

Hess Midstream Partners LP (later Hess Midstream LP, now Crestwood Equity Partners LP after an acquisition) was formed by Hess Corporation to own, operate, develop, and acquire midstream energy assets. It focused primarily on providing midstream services to Hess and other customers in the Bakken and Three Forks shale plays. Significant milestones include its initial public offering and subsequent acquisitions to expand its asset base.

Core Business Areas

• Gathering: Gathering crude oil, natural gas, and produced water from wellheads through a network of pipelines and infrastructure.
• Processing: Processing natural gas to remove impurities and separate natural gas liquids (NGLs).
• Transportation: Transporting crude oil, natural gas, and produced water to processing facilities, storage terminals, and ultimately to end markets via pipelines and other transportation methods.
• Storage: Providing storage services for crude oil, natural gas, and NGLs at strategic locations.

Leadership and Structure

Before the Crestwood acquisition, Hess Midstream LP was led by a management team appointed by its general partner, Hess Midstream GP LLC, which was controlled by Hess Corporation. The organizational structure was that of a master limited partnership (MLP).

Key Offerings

• Crude Oil Gathering: Gathering crude oil from wellheads in the Bakken and Three Forks. Market share varied by region within the Bakken and depended on contracts with producers; difficult to specify one overall market share figure. Competitors include ONEOK, Plains All American, and other regional gathering companies.
• Natural Gas Gathering and Processing: Gathering and processing natural gas in the Bakken and Three Forks. Market share similar to crude oil gathering, region-specific and contract-driven. Competitors include ONEOK, Targa Resources, and other regional processors.
• Produced Water Gathering: Gathering produced water for disposal or recycling. Market share is region-specific and depends on the customer base. Competitors include Oasis Midstream Partners (now merged into Crestwood).

Industry Overview

The midstream energy sector involves the transportation, storage, and processing of crude oil, natural gas, and NGLs. The industry is influenced by factors like production levels, commodity prices, infrastructure development, and regulatory changes. Increasing US oil and gas production has driven demand for midstream services.

Positioning

Hess Midstream LP was positioned as a key midstream service provider for Hess Corporation, primarily in the Bakken. Its competitive advantages included its relationship with Hess, its strategic asset locations, and its operational expertise. However, dependence on Hess was also a potential disadvantage.

Total Addressable Market (TAM)

The total addressable market (TAM) for midstream services in the Bakken region is estimated to be in the billions of dollars annually. Hess Midstream LP's position within this TAM was dependent on production volumes and contract terms, and they were well positioned within the region.

Key Competitors

• ONEOK (OKE)
• Plains All American Pipeline (PAA)
• Targa Resources (TRGP)

Competitive Landscape

Hess Midstream Partners LP's advantage was its close relationship with Hess Corporation. Its disadvantages were its geographical concentration and dependence on a single customer. Competitors had more diversified asset bases and customer portfolios.

Little Missouri Gathering System

• Year: 2019
• Acquisition Price (USD millions): 625
• Strategic Rationale: Expanded gathering capabilities in the Bakken, increasing Hess Midstream's capacity and reach.

Historical Growth: Historical growth was driven by increasing production in the Bakken and expansion of midstream infrastructure. Specific growth rates varied from year to year.

Future Projections: Future projections before the acquisition by Crestwood varied based on analyst estimates and Bakken production forecasts. Crestwood's future projections now encompass the acquired assets.

Recent Initiatives: Recent initiatives before the acquisition included expanding gathering and processing capacity, optimizing operations, and pursuing strategic acquisitions. Crestwood has maintained this trend.

Hess Midstream Partners LP, now part of Crestwood Equity Partners LP, was a key midstream player in the Bakken shale play, benefiting from its relationship with Hess Corporation. It possessed strategic assets, but its dependence on Hess and exposure to Bakken production were vulnerabilities. Future growth hinged on infrastructure expansion and market dynamics, all of which are now managed by Crestwood. The company successfully provided midstream services but faced risks related to commodity prices and regulations.

Data Sources:

• Hess Midstream Partners LP SEC Filings
• Industry Reports
• Analyst Estimates
• Company Press Releases

Disclaimers:

This analysis is based on publicly available information and analyst estimates. It is not financial advice, and readers should consult with a qualified financial advisor before making any investment decisions. Market share data is approximate and may vary depending on the source and methodology used. The information provided is historical and reflects the company prior to its acquisition by Crestwood Equity Partners LP.