Hess Midstream LP (HESM): Business Model Canvas [11-2024 Updated]
- ✓ Fully Editable: Tailor To Your Needs In Excel Or Sheets
- ✓ Professional Design: Trusted, Industry-Standard Templates
- ✓ Pre-Built For Quick And Efficient Use
- ✓ No Expertise Is Needed; Easy To Follow
Hess Midstream LP (HESM) Bundle
In the dynamic world of energy, Hess Midstream LP (HESM) stands out with its robust business model that ensures reliable midstream services. With a strong focus on partnerships—notably with Hess Corporation—HESM thrives on a fee-based revenue model that minimizes exposure to commodity price fluctuations. This post delves into the intricacies of HESM's business model canvas, revealing how the company effectively navigates the midstream landscape, from its key activities to its diverse customer segments. Read on to discover the essential components that drive Hess Midstream's success.
Hess Midstream LP (HESM) - Business Model: Key Partnerships
Hess Corporation as primary partner
Hess Midstream LP generates approximately 98% of its revenues from Hess Corporation through fee-based commercial agreements. For the three months ended September 30, 2024, total revenues attributable to Hess were $371.4 million, compared to $361.3 million in the prior year. For the nine months ended September 30, 2024, revenues from Hess reached $1,079.3 million compared to $986.6 million in 2023.
Joint ventures with Targa Resources Corp.
Hess Midstream LP has a significant joint venture with Targa Resources Corp., specifically the Little Missouri 4 (LM4) gas processing facility. Under this agreement, Hess Midstream pays processing fees per Mcf of natural gas and shares profits and losses based on ownership interest. In the first nine months of 2024, income from equity investments related to LM4 increased by $10.1 million.
Strategic relationships with third-party producers
Hess Midstream LP is actively pursuing strategic relationships with third-party producers to maximize utilization rates and diversify revenue sources. In the three months ended September 30, 2024, revenues from third-party services amounted to $6.2 million, compared to $1.2 million in the same period of 2023. For the nine months ended September 30, 2024, third-party revenues increased to $17.6 million from $3.7 million.
Agreements with rail companies for transportation
Hess Midstream has established agreements with rail companies to facilitate the transportation of crude oil and other products. For the nine months ended September 30, 2024, total revenues from terminaling and export services were $85.9 million, with rail transportation costs recognized in operating expenses amounting to $0 for the third quarter of 2024, indicating an ongoing evaluation of logistics strategies.
| Partnership Type | Partner/Entity | Revenue Contribution (2024) | Notes |
|---|---|---|---|
| Primary Partner | Hess Corporation | $1,079.3 million | Represents 98% of total revenues |
| Joint Venture | Targa Resources Corp. (LM4) | $10.1 million (equity income) | Increased income from higher processing volumes |
| Third-Party Producers | Various Producers | $17.6 million | Increased revenues from third-party services |
| Transportation Agreements | Rail Companies | $0 | Costs for rail transportation included in operating expenses |
Hess Midstream LP (HESM) - Business Model: Key Activities
Gathering and processing crude oil and natural gas
Hess Midstream LP operates extensive gathering systems with throughput volumes of 404 million cubic feet per day (MMcf/d) for gas gathering and 106 thousand barrels per day (MBbl/d) for crude oil gathering as of September 30, 2024. The total revenues from oil and gas gathering services reached $495.6 million for the nine months ended September 30, 2024, reflecting a significant increase from $467.8 million in the same period of 2023. Additionally, gas processing volumes were reported at 419 MMcf/d.
Terminaling and storage of hydrocarbons
The terminaling and export segment experienced revenues of $85.9 million for the nine months ending September 30, 2024, compared to $83.2 million in the prior year. Crude oil terminaling volumes stood at 122 MBbl/d. The operating and maintenance expenses for terminaling services were recorded at $19.6 million for the nine months ended September 30, 2023.
Providing water gathering and disposal services
Water gathering and disposal services generated $86.4 million in revenues for the nine months ended September 30, 2024, up from $68.0 million in the same period of 2023. Water gathering volumes reached 128 MBbl/d. The operating and maintenance expenses related to water gathering were approximately $30.5 million for the nine months ended September 30, 2024.
Maintenance and operational support
Hess Midstream LP's operational support includes maintenance activities that led to an increase in operating and maintenance expenses by $12.1 million in the first nine months of 2024 compared to the same period in 2023. The depreciation expense for the same period was $151.8 million, reflecting the investment in new gathering and processing assets. The total operating costs and expenses for the company were reported at $423.6 million for the nine months ended September 30, 2024.
| Key Activity | Volume/Revenue | Cost/Expense |
|---|---|---|
| Gas Gathering | 404 MMcf/d | $134.7 million |
| Crude Oil Gathering | 106 MBbl/d | $70.7 million |
| Gas Processing | 419 MMcf/d | $85.9 million |
| Crude Oil Terminaling | 122 MBbl/d | $19.6 million |
| Water Gathering | 128 MBbl/d | $30.5 million |
Hess Midstream LP (HESM) - Business Model: Key Resources
Extensive pipeline and terminal infrastructure
The infrastructure of Hess Midstream LP includes approximately 1,000 miles of crude oil and natural gas pipelines in the Bakken region. As of September 30, 2024, the total property, plant, and equipment at cost was reported at $5,032.6 million, with accumulated depreciation of $1,740.8 million, resulting in a net property, plant, and equipment value of $3,291.8 million.
| Infrastructure Component | Length (miles) | Capacity (MBbl/d) |
|---|---|---|
| Crude Oil Pipelines | 1,000 | 116 |
| Gas Gathering Pipelines | N/A | 442 MMcf/d |
| Water Gathering Systems | N/A | 128 MBbl/d |
Skilled workforce and operational expertise
Hess Midstream employs a skilled workforce with expertise in midstream operations, ensuring efficient management of its extensive infrastructure. As of September 30, 2024, the company reported an increase in employee costs allocated under its omnibus and employee secondment agreements, reflecting the investment in human capital necessary for operational excellence.
Long-term commercial agreements with Hess
The company operates under long-term fee-based commercial agreements with Hess Corporation. For the three months ending September 30, 2024, revenues attributable to Hess represented 98% of total revenues, amounting to $377.6 million, compared to $362.5 million in the same period of the previous year.
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) |
|---|---|---|
| Affiliate Services | 371.4 | 361.3 |
| Third-party Services | 6.2 | 1.2 |
| Total Revenues | 378.5 | 363.1 |
Advanced technology for processing and monitoring
Hess Midstream utilizes advanced technology to enhance its processing and monitoring capabilities. The company reported an adjusted EBITDA of $286.9 million for the third quarter of 2024, reflecting the effectiveness of its operational technologies. The continuous investment in technology not only improves operational efficiency but also ensures compliance with safety and environmental regulations.
| Key Technology Component | Description |
|---|---|
| Processing Facilities | Utilizes state-of-the-art gas processing technology to handle 419 MMcf/d of gas processing. |
| Monitoring Systems | Advanced monitoring systems for pipeline integrity and operational efficiency, crucial for minimizing downtime and ensuring safety. |
Hess Midstream LP (HESM) - Business Model: Value Propositions
Reliable and efficient midstream services
Hess Midstream LP provides a comprehensive suite of midstream services that includes gathering, processing, and terminaling of crude oil and natural gas. In the third quarter of 2024, the company reported gas gathering throughput volumes of 404 million cubic feet per day (MMcf/d) and crude oil gathering volumes of 106 thousand barrels per day (MBbl/d). The total revenues for the gathering segment reached $587.1 million for the nine months ended September 30, 2024, representing a significant increase compared to prior periods.
Fee-based revenue model reduces commodity price exposure
The company operates primarily under a fee-based revenue model, which stabilizes cash flows and minimizes exposure to commodity price fluctuations. For the nine months ended September 30, 2024, approximately 98% of revenues were derived from fees charged to Hess and third-party customers under long-term contracts. This model is crucial in maintaining consistent revenue streams, with total revenues reaching $1.099 billion over the same period.
Strong commitment to safety and environmental standards
Hess Midstream LP emphasizes safety and environmental compliance as core components of its operations. The company has implemented various measures to ensure adherence to safety regulations and environmental standards. As of September 30, 2024, the company maintained a reserve of $2.2 million for estimated remediation liabilities related to environmental incidents. This commitment not only enhances operational reliability but also builds trust with stakeholders and customers.
Capacity to handle increasing volumes from Hess and third parties
With a robust infrastructure in place, Hess Midstream is well-positioned to accommodate increasing volumes from both Hess and third-party producers. The company reported a significant increase in throughput volumes, with gas processing volumes reaching 419 MMcf/d. The infrastructure enhancements have enabled Hess Midstream to manage growing demand effectively, with total revenues from processing and storage services at $423.7 million for the nine months ended September 30, 2024.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gas Gathering Volume (MMcf/d) | 404 | 404 | 373 | 373 |
| Crude Oil Gathering Volume (MBbl/d) | 106 | 106 | 98 | 98 |
| Gas Processing Volume (MMcf/d) | 386 | 386 | 361 | 361 |
| Total Revenues (in millions) | $378.5 | $363.1 | $1,099.6 | $992.1 |
| Net Income Attributable to Hess Midstream LP (in millions) | $58.6 | $35.3 | $152.7 | $81.1 |
Hess Midstream LP (HESM) - Business Model: Customer Relationships
Long-term contracts ensure stable revenue
Hess Midstream LP operates primarily under long-term contracts, which provide significant revenue stability. For the nine months ended September 30, 2024, total revenues were reported at $1,099.6 million, with revenues from affiliate services accounting for $1,079.3 million, representing a substantial portion of their revenue base. These contracts minimize exposure to commodity price fluctuations, as the company does not own the crude oil or natural gas it handles.
Focus on building trust with third-party customers
Hess Midstream has been actively pursuing strategic relationships with third-party producers, particularly in the Bakken region. In 2024, revenues from third-party services increased to $17.6 million, up from $3.7 million in the previous year. This growth indicates a successful effort to establish trust and reliability among third-party clients, thereby enhancing customer relationships.
Continuous communication and support for operational needs
The company emphasizes ongoing communication with its customers to ensure their operational needs are met. For the three months ended September 30, 2024, Hess Midstream reported adjusted EBITDA of $289.3 million, reflecting increased operational efficiency and customer satisfaction. This focus on service delivery is evident in their operational metrics, including throughput volumes of 429 MMcf/d for gas gathering and 112 MBbl/d for crude oil gathering.
Feedback mechanisms to enhance service delivery
Hess Midstream employs feedback mechanisms to refine its service offerings continuously. The company has seen a 29% increase in water gathering volumes, which indicates a responsive adjustment to customer needs. Additionally, the operational and maintenance expenses for the nine months ended September 30, 2024, were $254.6 million, allowing for the necessary investments in infrastructure to support enhanced service delivery.
| Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $378.5 million | $363.1 million | +3.8% |
| Adjusted EBITDA | $289.3 million | $271.7 million | +6.5% |
| Gas Gathering Volumes | 429 MMcf/d | 404 MMcf/d | +6.2% |
| Crude Oil Gathering Volumes | 112 MBbl/d | 106 MBbl/d | +5.7% |
| Water Gathering Volumes | 123 MBbl/d | 99 MBbl/d | +24.2% |
Hess Midstream LP (HESM) - Business Model: Channels
Direct service agreements with Hess and third parties
Hess Midstream LP generates approximately 98% of its revenues from commercial agreements with Hess and third parties. For the three months ended September 30, 2024, revenues from affiliate services amounted to $371.4 million, while third-party services contributed $6.2 million, resulting in total revenues of $378.5 million.
Digital platforms for service management and reporting
The company utilizes digital platforms to enhance service management and reporting. As of September 30, 2024, Hess Midstream reported a total of $1,099.6 million in revenues for the nine months ended September 30, 2024, which reflects the integration of digital tools for operational efficiency.
Industry events and conferences for networking
Hess Midstream actively participates in industry events and conferences, which serve as a vital channel for networking and establishing strategic partnerships. The company's focus on expanding its relationships with third-party producers is evident, as they are pursuing collaborations to maximize utilization rates across their operations in the Bakken region.
Marketing through industry publications and outreach
The marketing strategy of Hess Midstream includes targeted outreach through industry publications, enabling them to communicate effectively with potential clients. As of September 30, 2024, their ongoing marketing efforts have supported a significant increase in throughput volumes, with gas gathering reaching 429 MMcf/d.
| Channel Type | Revenue Contribution (Q3 2024) | Revenue Contribution (9M 2024) |
|---|---|---|
| Affiliate Services | $371.4 million | $1,079.3 million |
| Third-Party Services | $6.2 million | $17.6 million |
| Total Revenues | $378.5 million | $1,099.6 million |
Hess Midstream LP (HESM) - Business Model: Customer Segments
Major oil and gas producers like Hess
Hess Midstream LP generates approximately 98% of its revenues from Hess Corporation, its primary customer. For the three months ended September 30, 2024, revenues from Hess amounted to approximately $371.4 million. The contracts with Hess include various services such as oil and gas gathering, processing, and terminaling.
Independent producers seeking midstream services
In addition to Hess, Hess Midstream is expanding its customer base to independent oil and gas producers. For the nine months ended September 30, 2024, revenues from third-party services amounted to $17.6 million, reflecting ongoing efforts to attract independent producers. The company aims to enhance utilization rates by forming strategic relationships with these producers.
Companies involved in water disposal and gathering
Hess Midstream provides water gathering and disposal services, which are critical for oil and gas production. For the nine months ended September 30, 2024, revenues from water gathering and disposal services were approximately $86.4 million, up from $68.0 million in the same period of the previous year. This growth indicates a strong demand for these services among producers operating in water-intensive environments.
Rail and transportation companies for logistics
Hess Midstream also collaborates with rail and transportation companies to facilitate logistics for its operations. In the nine months ended September 30, 2024, the company recognized approximately $30.5 million in revenues related to produced water trucking and disposal costs. This segment of the business is vital for ensuring efficient transportation and disposal of water used in the hydraulic fracturing process.
| Customer Segment | Revenue (9 Months Ended September 30, 2024) | Revenue Change (Year Over Year) | Percentage of Total Revenue |
|---|---|---|---|
| Hess Corporation | $1,079.3 million | +9.4% | 98% |
| Independent Producers | $17.6 million | +376.2% | 1.6% |
| Water Disposal and Gathering | $86.4 million | +27.1% | 7.9% |
| Rail and Transportation Companies | $30.5 million | +4.8% | 2.8% |
Hess Midstream LP (HESM) - Business Model: Cost Structure
Operating and Maintenance Expenses
For the nine months ended September 30, 2024, the operating and maintenance expenses for Hess Midstream LP totaled $254.6 million, reflecting an increase from $225.0 million in the same period of 2023. This includes:
| Expense Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Gathering | $148.4 | $134.7 |
| Processing and Storage | $82.8 | $70.7 |
| Terminaling and Export | $23.4 | $19.6 |
Depreciation of Pipeline and Terminal Assets
Depreciation expenses increased to $151.8 million for the nine months ended September 30, 2024, compared to $142.1 million in the same period of 2023. This increase is primarily due to new assets placed in service, including:
- Depreciation for gathering assets: $94.5 million
- Depreciation for processing and storage assets: $44.3 million
- Depreciation for terminaling and export assets: $13.0 million
General and Administrative Costs
General and administrative expenses for the nine months ended September 30, 2024, totaled $17.2 million, an increase from $18.2 million in 2023. This includes:
| Expense Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| General and Administrative | $17.2 | $18.2 |
Costs Associated with Third-Party Services and Agreements
Costs related to third-party services increased significantly, attributed to higher processing fees and maintenance activities. The operating and maintenance expenses related to third-party services were approximately $2.4 million higher due to increased activity levels. Overall, the total costs associated with third-party services for the nine months ended September 30, 2024, were as follows:
- Third-party processing fees: $7.7 million
- Maintenance activities: $5.1 million
- Employee costs allocated: $4.2 million
Overall, Hess Midstream LP's cost structure demonstrates a balanced approach to managing operational costs while investing in necessary infrastructure and third-party services to support its growing business model.
Hess Midstream LP (HESM) - Business Model: Revenue Streams
Fee-based commercial agreements with Hess
Hess Midstream LP generates approximately $1,079.3 million in revenue from fee-based commercial agreements with Hess for the nine months ended September 30, 2024. This includes:
- Oil and gas gathering services: $495.6 million
- Processing and storage services: $411.4 million
- Terminaling and export services: $85.9 million
- Water gathering and disposal services: $86.4 million
For the third quarter of 2024, revenues from these agreements were $371.4 million, compared to $361.3 million in the third quarter of 2023.
Third-party service revenues
Hess Midstream LP has begun providing services directly to third-party customers, generating $17.6 million in third-party service revenues for the nine months ended September 30, 2024, compared to $3.7 million for the same period in 2023. In the third quarter of 2024, third-party revenues amounted to $6.2 million, up from $1.2 million in the third quarter of 2023.
Income from equity investments in joint ventures
Income from equity investments increased by $4.8 million in the first nine months of 2024 compared to the same period in 2023, primarily due to higher volumes processed at the LM4 plant. For the third quarter of 2024, income from equity investments was $3.7 million, compared to $2.0 million in the third quarter of 2023.
Pass-through costs for transportation and disposal services
Hess Midstream LP recognizes pass-through revenues equal to the costs incurred in providing transportation and disposal services. For the nine months ended September 30, 2024, total pass-through revenues were $71.1 million, while for the third quarter of 2024, these revenues were $24.8 million.
| Revenue Stream | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | YTD Revenue 2024 (in millions) | YTD Revenue 2023 (in millions) |
|---|---|---|---|---|
| Fee-based agreements with Hess | $371.4 | $361.3 | $1,079.3 | $986.6 |
| Third-party service revenues | $6.2 | $1.2 | $17.6 | $3.7 |
| Income from equity investments | $3.7 | $2.0 | $10.1 | $5.3 |
| Pass-through revenues | $24.8 | $25.1 | $71.1 | $61.2 |
Updated on 16 Nov 2024
Resources:
- Hess Midstream LP (HESM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Hess Midstream LP (HESM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Hess Midstream LP (HESM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.