Hess Midstream LP (HESM): Marketing Mix Analysis [11-2024 Updated]

As Hess Midstream LP (HESM) navigates the dynamic landscape of the energy sector in 2024, its marketing mix reveals a robust strategy focused on product offerings, strategic placement, effective promotion, and competitive pricing. This blog post delves into how HESM's comprehensive services, primarily in the Bakken shale region, and its commitment to sustainability and operational efficiency position it for continued success. Discover how these elements work together to enhance HESM's market presence and drive revenue stability below.

Hess Midstream LP (HESM) - Marketing Mix: Product

Provides midstream services for crude oil, natural gas, and water.

Hess Midstream LP specializes in providing midstream services that encompass the transportation, processing, and storage of crude oil, natural gas, and water. The company operates a network of pipelines and facilities that facilitate the efficient movement and management of these resources, primarily in the Bakken region of North Dakota.

Operates gas gathering, processing, and terminaling facilities.

The company manages extensive gas gathering and processing facilities, which are integral to the midstream sector. Hess Midstream's operations include the gathering of natural gas and crude oil, as well as the processing of these resources at its processing plants. Terminaling facilities are also part of its infrastructure, allowing for the export and transfer of hydrocarbons to various markets.

Offers fee-based commercial agreements primarily with Hess.

Hess Midstream derives a significant portion of its revenue from fee-based commercial agreements, primarily with its parent company, Hess Corporation. For the three months ended September 30, 2024, revenues attributable to these agreements were approximately $377.6 million, reflecting a robust contractual relationship that provides cash flow stability.

Expanding compression capacity and gas capture capabilities.

The company is actively expanding its compression capacity and enhancing its gas capture capabilities. This expansion aims to increase throughput and improve efficiency in gas processing. As of September 30, 2024, Hess Midstream reported gas gathering throughput of approximately 429 million cubic feet per day (MMcf/d).

Includes water gathering and disposal services in service offerings.

In addition to oil and gas services, Hess Midstream offers water gathering and disposal services, which are critical in the hydraulic fracturing process. For the three months ended September 30, 2024, revenues from water gathering and disposal services amounted to $30.7 million, an increase from $26.8 million in the same period in 2023.

Focuses on high-volume throughput in the Bakken region.

Hess Midstream's operations are concentrated in the Bakken region, known for its high-volume crude oil production. The company reported crude oil gathering throughput of approximately 116 thousand barrels per day (MBbl/d) for the three months ended September 30, 2024.

Engages in processing and storage of natural gas liquids (NGLs).

Hess Midstream is involved in the processing and storage of natural gas liquids (NGLs). The company reported NGL loading throughput of approximately 15 MBbl/d as of September 30, 2024. This segment is essential for maximizing the value of natural gas and ensuring efficient supply chain management for NGLs.

Hess Midstream LP (HESM) - Marketing Mix: Place

Operates primarily in the Bakken shale region of North Dakota

Hess Midstream LP operates primarily in the Bakken shale region, which is significant for its prolific oil and gas production. The Bakken region is known for its rich hydrocarbon resources, providing a robust operational backdrop for Hess Midstream's services.

Facilities strategically located to serve Hess and third-party producers

The company's facilities are strategically situated to efficiently serve both Hess and third-party producers. This positioning allows for optimized logistics and distribution, ensuring that services such as gathering, processing, and terminaling can be delivered effectively.

Utilizes extensive pipeline infrastructure for transportation

Hess Midstream maintains an extensive pipeline network that is critical for transporting crude oil, natural gas, and water. As of September 30, 2024, the gathering assets pipeline value was approximately $1.77 billion, with a total throughput capacity of:

Provides services directly to third-party customers, enhancing market reach

Hess Midstream has expanded its market reach by providing services directly to third-party customers. In the third quarter of 2024, revenues from third-party services amounted to $6.2 million, a significant increase from $1.2 million in the same quarter of the previous year. This diversification enhances the company's revenue streams and reduces reliance on Hess alone.

Continues to expand physical footprint through new compressor stations

To further enhance its capacity and efficiency, Hess Midstream is actively expanding its physical footprint. The company has invested in new compressor stations, with capital expenditures reaching approximately $204.2 million in 2024. This expansion is crucial for increasing throughput and optimizing service delivery to both Hess and third-party producers.

Hess Midstream LP (HESM) - Marketing Mix: Promotion

Emphasizes stability through long-term contracts with Hess

Hess Midstream LP has established long-term fee-based commercial agreements with Hess Corporation, which account for approximately 98% of total revenues for the three and nine months ended September 30, 2024. These contracts include gas gathering, crude oil gathering, gas processing, storage services, terminaling, and export services, providing a stable revenue stream and reducing financial volatility for the company.

Engages in strategic relationships to attract third-party producers

In addition to its strong ties with Hess, Hess Midstream is actively pursuing strategic relationships with third-party producers and other midstream companies. This initiative aims to maximize utilization rates and expand its customer base beyond Hess. For example, revenues from third-party services increased to $17.6 million for the nine months ended September 30, 2024, compared to $3.7 million in the same period of 2023.

Utilizes operational efficiency as a competitive advantage

Hess Midstream focuses on operational efficiency to maintain a competitive edge. The company reported an operating income of $676 million for the nine months ended September 30, 2024, reflecting a robust increase from $606.8 million in the prior year. This operational efficiency allows Hess Midstream to deliver services at competitive rates while ensuring high-quality service delivery.

Highlights commitment to environmental sustainability in operations

The company is committed to environmental sustainability, implementing measures to minimize its ecological footprint. Hess Midstream operates under strict environmental regulations and invests in technologies to reduce emissions and manage waste effectively. This commitment is evident in the ongoing remediation efforts following a produced water release incident in 2022, where the estimated remediation liability stood at $2.2 million as of September 30, 2024.

Focuses on transparency and reliability in service delivery to maintain client trust

Transparency and reliability are core to Hess Midstream's promotional strategy. The company maintains open communication with its clients regarding service performance and operational changes. Hess Midstream's recent financial disclosures show a net income attributable to the company of $152.7 million for the nine months ended September 30, 2024, highlighting its reliability as a service provider.

Hess Midstream LP (HESM) - Marketing Mix: Price

Revenue primarily derived from fee-based agreements, minimizing commodity price exposure.

Hess Midstream LP generates approximately 98% of its revenues from fee-based commercial agreements with Hess and third-party customers as of September 30, 2024. This structure effectively minimizes their exposure to commodity price fluctuations, as the company does not engage in the trading of crude oil, natural gas, or NGLs.

Prices adjusted annually for inflation up to 3% under existing contracts.

The fee structure for Hess Midstream’s services includes provisions for annual adjustments based on inflation, capped at 3% per year. This mechanism is intended to provide a stable revenue stream while adapting to inflationary pressures.

Competitive pricing structure to attract new customers while retaining existing ones.

To maintain competitiveness, Hess Midstream employs a pricing strategy designed to attract new customers while retaining existing ones. This includes a fixed fee structure based on average fees from prior years, adjusted for inflation.

Utilizes minimum volume commitments (MVCs) to ensure revenue stability.

The company employs Minimum Volume Commitments (MVCs) across its services, which help ensure revenue stability. As of the latest reports, Hess Midstream expects that all volumes will remain above the established MVC levels for the years 2024, 2025, and 2026.

Recent increases in operating costs partially offset by strategic pricing adjustments.

Operating costs for Hess Midstream increased significantly, with a reported rise of $13.7 million in the first nine months of 2024 compared to the same period in 2023. This increase was driven by higher pass-through costs and maintenance activities. Strategic pricing adjustments have been implemented to counterbalance these rising costs, ensuring that the company can continue to provide services profitably while managing operational expenses.

In summary, Hess Midstream LP (HESM) effectively leverages its marketing mix to enhance its market position and drive growth in the competitive midstream sector. By offering a diverse range of fee-based services and maintaining a strong presence in the Bakken region, the company ensures reliable revenue streams while fostering strategic partnerships. Its commitment to operational efficiency and environmental sustainability further strengthens its appeal to both existing and potential clients, positioning Hess Midstream for continued success in 2024 and beyond.

Updated on 16 Nov 2024

Resources:

1. 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.
2. 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.