Hess Midstream LP (HESM): Business Model Canvas [Dec-2025 Updated]

When you look at Hess Midstream LP's structure, you're seeing a classic, highly stable midstream play, defintely not one of those wild commodity bets. Honestly, the whole thing is engineered around long-term, fee-based contracts, with Chevron acting as the massive, reliable anchor customer through at least 2033. This stability is what drives the numbers; for instance, their 2025 Adjusted EBITDA guidance sits comfortably between $1,245 million and $1,255 million, even while they plan about $270 million in capital expenditures. If you want to see exactly how they lock in that cash flow through Minimum Volume Commitments and manage their key assets in the Bakken, dive into the full Business Model Canvas below; it lays out the entire operational moat.

Hess Midstream LP (HESM) - Canvas Business Model: Key Partnerships

You're looking at the core relationships that underpin Hess Midstream LP's stability, and honestly, they are heavily concentrated, which is typical for a master limited partnership tied to a specific producer. These partnerships are the bedrock of their fee-based revenue model.

• Chevron Corporation (indirect parent of Hess) owning approximately 37.9%.
• Long-term commercial agreements with Chevron through 2033.
• Third-party Bakken and Williston Basin E&P producers.
• Financial institutions for debt and credit facilities.

The relationship with Chevron, which became the indirect parent following the July 18, 2025, merger with Hess Corporation, is paramount. Following the May 30, 2025, exit of Global Infrastructure Partners (GIP), Hess Corporation's ownership stake settled at approximately 37.8% as of August 2025, though the required structure notes 37.9%. This relationship is secured by long-term contracts.

The primary service agreements with the Hess/Chevron upstream business extend through 2033 for most crude oil and gas infrastructure, which is a huge de-risking factor for Hess Midstream LP's cash flows. The minimum volume commitments (MVCs) are set annually based on 80% of nominations, providing a solid floor. For instance, gas gathering volumes for full year 2025 are guided to average between 455 to 465 million cubic feet (MMcf) per day, and gas processing volumes between 440 to 450 MMcf per day.

It's not just the sponsor, though. Hess Midstream LP also services third-party producers in the Williston Basin. While lower third-party volumes were noted as a factor in Q4 2025 guidance adjustments, the company still expects long-term growth in gas throughput volumes through at least 2027, suggesting a growing reliance on non-sponsor volumes over time.

Financing these operations and growth requires strong relationships with capital providers. As of September 30, 2025, the drawn balance on the revolving credit facility stood at $356.0 million. This facility, along with other debt instruments, is managed with key financial partners. For example, in February 2025, Hess Midstream Operations LP priced an $800.0 million aggregate principal amount of 5.875% senior unsecured notes due 2028. The ability to access capital markets was recently validated when S&P upgraded the senior unsecured debt rating to an investment grade rating of BBB- on July 24, 2025.

Here's a quick look at the financial flexibility and debt structure as of late 2025:

The reliance on the revolving credit facility for short-term needs, like funding the August 2025 share repurchase, shows the importance of that banking relationship. Finance: draft 13-week cash view by Friday.

Hess Midstream LP (HESM) - Canvas Business Model: Key Activities

You're looking at the core engine room of Hess Midstream LP, the day-to-day work that turns infrastructure into cash flow. It's all about keeping the pipes flowing and the facilities running at peak efficiency for your main customer, Hess Corp (now integrated with Chevron).

Operating and maintaining integrated oil, gas, and water systems.

The maintenance and operation activity is constant, ensuring the physical assets deliver on their contractual obligations. This is where the reliability of the system directly impacts the fee-based revenue Hess Midstream collects. The throughput numbers from the third quarter of 2025 show this operational success clearly when compared to the prior year.

• Gas processing throughput increased 10% in Q3 2025 versus Q3 2024.
• Oil terminaling volumes grew 7% in Q3 2025 compared to Q3 2024.
• Water gathering volumes saw a 7% increase in Q3 2025 over the prior-year quarter.
• Sequentially, gas gathering and processing volumes were up approximately 3% from Q2 2025.

Here's a snapshot of the system capacity that Hess Midstream is actively operating and maintaining:

Executing capital projects, like the new 35 MMcf/d compressor station in Q3 2025.

You have to spend money to make money, and Hess Midstream is actively investing to debottleneck and expand capacity. The focus shifted mid-year, leading to a guidance reduction, but key projects were still delivered.

• Completed construction of a new compressor station in the third quarter of 2025.
• This new station provides approximately 35 MMcf/d of installed capacity.
• The new station is expandable to provide an additional 35 MMcf/d in the future.
• Full year 2025 capital expenditure guidance was reduced to approximately $270 million.
• This reduction followed the suspension and removal of the Capa gas plant project from the forward plan.

For context on the capital plan, the initial 2025 guidance for total capital expenditures was approximately $300 million. Management expects capital spending in 2026 and 2027 to land between the historical base of $125 million and the previous guidance range of $250-$300 million.

Managing long-term Minimum Volume Commitment (MVC) contracts.

The management of these contracts is central to Hess Midstream's predictable cash flow profile. These agreements with Hess Corp (now Chevron) provide the floor for revenue, regardless of short-term production fluctuations.

• MVCs were reviewed and updated as part of the annual nomination process set forth in long-term commercial contracts with Hess Corp.
• Historically, approximately 95% of 2022 revenues were protected by MVCs.
• The company's Q3 2025 Adjusted EBITDA reached $320.7 million, supported by these contract-driven revenues.

Optimizing system throughput and availability for customers.

Optimization is about maximizing the use of existing assets, which directly feeds into the throughput growth seen across the board. Availability is key, especially when external factors, like Northern Border pipeline maintenance, create opportunities for third-party volume capture.

• The Q3 2025 performance showed strong availability, allowing for higher third-party gas volumes.
• The company is targeting at least 5% annual distribution growth per Class A share through 2027, which relies on consistent operational performance.
• The updated full-year 2025 Adjusted EBITDA guidance is between $1,245 million and $1,255 million.

You see the direct result of this optimization in the shareholder returns; the Q3 2025 quarterly cash distribution was increased to $0.7548 per Class A share, an increase of $0.0178 from the second quarter of 2025.

Hess Midstream LP (HESM) - Canvas Business Model: Key Resources

You're looking at the core assets that make Hess Midstream LP tick, the tangible and intangible things they absolutely need to run the business. For Hess Midstream LP, these resources are heavily weighted toward physical infrastructure and the contractual backbone supporting it, especially now that Chevron Corporation is the primary sponsor.

Extensive Midstream Asset Network in the Bakken/Williston Basin

Hess Midstream LP's primary resource is its integrated network of oil, gas, and produced water handling assets. These are all strategically situated to serve the Bakken and Three Forks Shale plays in North Dakota. This physical footprint is significant; Hess Midstream LP accounts for more than 10% of total processed gas in the entire basin. The performance of these assets is clear in the third quarter of 2025 results.

Here's a snapshot of the operational scale as of September 30, 2025, which shows the resources are actively utilized:

The company's 2025 capital expenditure guidance was actually cut to approximately $270 million for the full year, indicating that much of the heavy lifting for the core asset base is complete, allowing them to focus on cash generation. This asset base is the engine that generated $320.7 million in Adjusted EBITDA in the third quarter of 2025 alone.

Long-Term, Fixed-Fee Contracts with MVCs, Providing Revenue Stability

The physical assets are locked in by contracts that provide exceptional revenue visibility. This is the financial moat. The core commercial agreements for oil and gas services extend through December 31, 2033. This long duration is a massive resource for planning.

The structure relies on Minimum Volume Commitments (MVCs). Here's how that stability is quantified:

• MVCs are set at 80% of the customer's nomination.
• Once set, MVCs can only be increased, never reduced.
• Approximately 80% of Hess Midstream LP's revenues were protected by MVCs in 2025.
• Gas gathering and processing is expected to be about 75% of total affiliate revenues in 2026 and 2027.

For example, the 2025 MVC for Gas Gathering was 382 MMcf/d, while actual throughput was higher. The fee structure also includes mechanisms that generally escalate fees at CPI, which helps insulate margins from inflation pressures. This contractual framework is so strong that management targets being able to grow its distribution by 5% annually through 2027 using cash flow generated just from the MVCs.

Investment-Grade Senior Unsecured Debt Rating of BBB- (upgraded July 2025)

The credit rating is a key intangible resource, signaling market trust and access to capital markets on favorable terms. On July 24, 2025, S&P upgraded Hess Midstream LP's senior unsecured debt rating to BBB- from BB+, achieving investment grade status. This upgrade followed the closing of Chevron Corporation's acquisition of Hess Corporation.

This rating underpins financial flexibility. The stable outlook from S&P reflects the expectation that Hess Midstream LP will maintain its leverage, measured as adjusted debt to EBITDA, between 2.5x and 3.0x through 2025. The company also reported a drawn balance of $356.0 million on its revolving credit facility as of September 30, 2025, showing its current debt position against that strong rating.

Experienced Operational and Management Team

While the average tenure of the current management team is short-less than a year (0.4 years) as of late 2025-due to recent leadership changes post-acquisition, the Board of Directors brings deep experience, with an average tenure of 5.7 years. This is defintely important for governance continuity.

Key leadership appointments in July 2025 included:

• Jonathan C. Stein named Chief Executive Officer.
• Michael J. Chadwick appointed Chief Financial Officer.
• Andy Walz, President, Chevron Downstream, Midstream & Chemicals, joined the Board as Chairman.

The team is executing on a plan that saw Q3 2025 Adjusted Free Cash Flow hit $186.8 million, and the company narrowed its full-year 2025 Adjusted EBITDA guidance to a range of $1.245 billion to $1.255 billion.

Hess Midstream LP (HESM) - Canvas Business Model: Value Propositions

You're looking at the core reasons why Hess Midstream LP (HESM) captures value in the Bakken and Three Forks plays. It's all about contract structure and operational scale, which translates directly into predictable cash flow for investors.

Highly stable cash flow due to fee-based structure and MVCs

Hess Midstream LP's structure is designed to decouple its earnings from commodity price volatility. This is achieved through contracts that are almost entirely fee-based.

• 100% fee-based contracts minimize direct commodity price exposure.
• Approximately 80% of 2025 revenues are protected by Minimum Volume Commitments (MVCs).
• MVCs are set on a three-year rolling basis, currently providing downside risk protection through 2027.
• MVCs are set annually at 80% of the sponsor's volume nomination for the subsequent three years.

Integrated, single-source solution for oil, gas, and water handling

Hess Midstream LP offers a comprehensive suite of services across the midstream value chain, primarily serving Hess Corporation and third parties in the Bakken. This integration helps ensure operational efficiency for their anchor customer.

Here's a look at the throughput volumes that define the scale of this integrated service offering for the full year 2025 guidance, noting some volumes were revised downward due to weather and maintenance late in the year:

The company generated $320.7 million in Adjusted EBITDA for the third quarter of 2025.

Structural revenue growth via inflation escalators (CPI-based) in contracts

Contractual terms build in predictable revenue increases, providing a layer of organic growth even when physical volumes are flat. This is a key component of their capital return framework.

• Fees increase annually based on Consumer Price Index (CPI) escalation.
• The CPI escalation is explicitly capped at 3% annually in certain agreements.
• Hess Midstream LP targets at least 5% annual distribution growth per Class A share through 2027.
• Adjusted EBITDA for 2025 is guided between $1,235 million and $1,285 million.

High system reliability and operational excellence in a key basin

Operational performance in the Bakken supports the volume assumptions underpinning the contracts. You see this reflected in the throughput growth figures.

• Gas throughputs increased sequentially in Q3 2025 despite localized flooding.
• Q3 2025 throughput increased 10% for gas processing year-over-year.
• Q2 2025 throughput showed year-over-year increases of 7% for gas processing, 9% for oil terminaling, and 11% for water gathering.
• The Gross Adjusted EBITDA Margin was maintained at approximately 80% for Q3 2025, exceeding the 75% target.
• The company completed construction of a new compressor station in Q3 2025, adding 35 MMcf/d of installed capacity.

Finance: draft 13-week cash view by Friday.

Hess Midstream LP (HESM) - Canvas Business Model: Customer Relationships

You're looking at the core of Hess Midstream LP's stability, which is its deep, structural relationship with its primary customer, now Chevron Corporation, following the merger with Hess Corporation.

Strategic, long-term partnership with Chevron (primary customer).

The relationship is cemented by long-term contracts that provide exceptional revenue visibility. The oil and gas commercial agreements, which began on January 1, 2014, were extended for a secondary term running through December 31, 2033. The water services agreements, effective January 1, 2019, have a primary cost of service term of 14 years. Following the merger, Chevron beneficially owns approximately 37.8% of Hess Midstream LP on a consolidated basis. This infrastructure serves the entirety of the former Hess Corporation's Bakken acreage.

Here's a look at the operational scale supporting this relationship based on 2025 guidance:

Contractual, non-commodity-sensitive relationship via fixed-fee agreements.

The revenue structure is designed to be highly stable. Hess Midstream LP operates on 100% fee-based contracts, which minimizes direct commodity price exposure. The cash flow stability is further buttressed by Minimum Volume Commitments (MVCs). As of July 2025, approximately 80% of revenues are protected by these MVCs. These MVCs are set annually at 80% of the customer's nomination on a three-year rolling basis, and critically, once set, they can only be increased, never reduced. This structure allows management to target annual distribution per Class A share growth of at least 5% through 2027, which they state can be covered by cash flow generated just from the MVCs. For the full year 2025, Hess Midstream LP expects Adjusted EBITDA between $1,235 million and $1,285 million.

The contractual protections translate to clear financial expectations:

• Targeted annual distribution per Class A share growth of at least 5% through 2027.
• Expected Adjusted Free Cash Flow after distributions for 2025 is approximately $135 million at the midpoint of guidance.
• Gross Adjusted EBITDA Margin is targeted to be approximately 75% in 2025.
• The company expects its leverage to decrease to below its long-term target of 3x Adjusted EBITDA by the end of 2025.

Dedicated capacity and system expansion to meet customer growth.

Hess Midstream LP is actively investing capital to support anticipated volume growth from Chevron's development activities. The company expects throughput volumes in 2025 to increase by approximately 10% across oil and gas systems compared with 2024. Total capital expenditures for 2025 are approximately $300 million, with about $175 million allocated to project-based capital expenditures. This project capital is focused on enhancing capture capability.

Key expansion projects coming online in 2025 include:

• Completion of two new compressor stations.
• Initial aggregate gas compression capacity addition of 85 MMcf per day.
• Capacity is expandable up to 140 MMcf per day.
• Commencement of construction for a gas processing plant with capacity of approximately 125 MMcf per day, expected online in 2027.

However, customer activity can shift near-term plans; Chevron's decision to reduce its Bakken rig count from four to three starting in the fourth quarter of 2025 caused Hess Midstream LP to guide for relatively flat Adjusted EBITDA in 2026 compared to 2025. This change also resulted in a reduction of total 2025 capital expenditure guidance to approximately $270 million, implying fourth-quarter capital expenditures of about $70 million, due to suspending the Capa gas plant project.

Finance: draft 13-week cash view by Friday.

Hess Midstream LP (HESM) - Canvas Business Model: Channels

You're looking at the physical arteries Hess Midstream LP uses to move resources for its customers, mainly Hess Corporation and third parties in the Williston Basin. These are the pipelines, terminals, and gathering lines that turn production into delivered product.

Direct pipeline and gathering systems from wellhead to processing

This channel involves the physical infrastructure to move natural gas and crude oil from the wellhead to processing or storage facilities. The company completed construction of a new compressor station in the third quarter of 2025, adding 35 MMcf/d of installed capacity, with potential for future expansion. This supports the overall system capacity and capture capability.

Here are the expected full-year 2025 throughput volumes for the gathering segment:

For the third quarter of 2025 specifically, throughput volumes showed growth compared to the prior-year quarter:

• Gas processing throughput increased by 10% year-over-year.
• The company has approximately ~290 MBbl/d of Crude Oil Gathering Capacity.

Crude oil terminaling and export facilities

These facilities handle the movement and storage of crude oil, connecting production to downstream markets. The Q3 2025 results showed solid utilization in this area.

The expected full-year 2025 throughput guidance for crude oil terminaling is:

• Crude Oil Terminaling Throughput: 130 to 140 MBbl/day.
• Q3 2025 Oil Terminaling throughput increased by 7% compared to the prior-year quarter.

The contractual commitments underpinning this channel are also clear:

The total Crude Terminals capacity guidance as of July 2025 was approximately ~505 MBbl/d.

Produced water gathering and disposal facilities

This channel manages the produced water stream, which is a necessary service tied directly to the upstream production volumes. Hess Midstream LP has about ~330 Miles of Water Gathering Pipelines.

The expected full-year 2025 throughput guidance for water gathering is:

• Water Gathering Throughput: 120 to 130 MBbl/day.
• Q3 2025 Water Gathering throughput increased by 7% compared to the prior-year quarter.

The Minimum Volume Commitment for the Water Services Agreement in 2025 was set at 104 MBbl/day.

Finance: draft 13-week cash view by Friday.

Hess Midstream LP (HESM) - Canvas Business Model: Customer Segments

You're looking at the core relationships Hess Midstream LP has established to drive its fee-based cash flows, which is key to understanding its stability as of late 2025.

Anchor Customer: Chevron Corporation (via its Hess subsidiary)

The relationship with the anchor customer remains central. As of March 31, 2025, Hess Corporation continued to own approximately 37.8% of Hess Midstream LP on a consolidated basis, following the merger completion with Chevron Corporation in July 2025. Hess Midstream Operations LP, a subsidiary, completed an accretive $100 million repurchase of Class B units held by Hess Corporation and Global Infrastructure Partners in January 2025, with Hess Corporation receiving $38 million of that amount.

The infrastructure supports Hess Corporation's development activity, which is a primary driver for volume growth.

Upstream Oil and Gas Producers (E&P) operating in the Bakken

Hess Midstream LP provides services to both its anchor customer's E&P arm and other third-party producers in the Williston Basin area, specifically the Bakken and Three Forks Shale plays. The company's 2025 capital budget included approximately $125 million allocated to gathering system well connects to service both Hess and third-party customers, plus maintenance activities.

Here are the expected average daily throughput volumes for full-year 2025:

Operational performance in the first three quarters of 2025 showed volume increases across the board compared to the prior year periods. For instance, Q3 2025 throughput volumes saw year-over-year increases of:

• Gas processing: 10%
• Oil terminaling: 7%
• Water gathering: 7%

Energy commodity purchasers utilizing terminaling and export services

The customer base includes purchasers that rely on Hess Midstream LP's terminaling and export capabilities, though the primary revenue driver is tied to gathering and processing volumes from the upstream side. Gas processing and gathering is expected to represent approximately 75% of total affiliate revenues in 2025, when excluding pass-through revenues. This indicates that while terminaling is a segment, the core customer relationship is volume-based service provision to the producers themselves.

The pass-through revenues, which cover costs charged to customers for third-party services like electricity and water disposal, are also a component of the revenue stream from these customers. For Q3 2025, these pass-through costs included in revenues totaled $27.9 million.

The growth in throughput volumes directly supports the revenue base from these customers. For example, Q1 2025 saw a 7% rise in oil terminaling volumes year-over-year.

Hess Midstream LP (HESM) - Canvas Business Model: Cost Structure

You're looking at the core outflows for Hess Midstream LP as of late 2025, focusing on where the cash actually goes to keep those fee-based assets running and deliver returns. It's a structure heavily influenced by capital deployment and shareholder commitments, so let's break down the hard numbers we have from the third quarter and the full-year outlook.

Capital expenditures saw a recent adjustment. Hess Midstream LP reduced its full-year 2025 capital expenditure guidance to approximately $270 million. This revision came after suspending the Capa gas plant project and removing it from the forward plan. To give you some context on that spending, the earlier 2025 budget had allocated approximately $125 million to ongoing capital expenditures, which covered gathering system well connects for both Hess and third-party customers, along with necessary maintenance. The capital spending for the third quarter of 2025 itself totaled $79.8 million.

Operating costs are a significant, recurring outflow. For the third quarter of 2025, total operating costs and expenses hit $162.0 million. This figure includes costs that are passed through to customers, like electricity and produced water trucking. Honestly, understanding the components of that total is key to seeing the operational leverage.

Financing costs are also a major line item. The net interest expense for Hess Midstream LP in the third quarter of 2025 was $57.1 million. This was higher than the prior-year quarter, primarily because of increased borrowings under the Company's revolving credit facility. It's definitely something to watch, especially given the recent investment-grade upgrade to BBB- by S&P on July 24, 2025, which should help manage future borrowing costs.

The commitment to unitholders forms a structural cost floor. Hess Midstream LP continues to target at least 5% annual distribution growth per Class A share through 2027. This is a non-negotiable part of their financial plan, supported by the expectation of continued Adjusted Free Cash Flow growth. The third quarter 2025 distribution was declared at $0.7548 per Class A share.

The cost structure is also defined by necessary upkeep:

• Maintenance and integrity spending for pipeline infrastructure is embedded within the capital expenditure budget.
• Ongoing capital expenditures, which include maintenance, were initially budgeted at approximately $125 million for the full year 2025.
• Expansion projects, like gas gathering system and compression expansions, make up the remainder of the capital plan.

The company is clearly prioritizing capital discipline right now.

Hess Midstream LP (HESM) - Canvas Business Model: Revenue Streams

Hess Midstream LP (HESM) operates on a 100% Fee-Based Contracts structure, which minimizes direct commodity price exposure for its core services. Revenue is generated across three primary service areas serving Hess Corporation and third-party customers.

Fee-based revenue from gas gathering, compression, and processing forms a significant portion of the total. Gas processing and gathering is projected to represent approximately 75% of total affiliate revenues in 2026 and 2027, excluding pass-through revenues. For the full year 2025, throughput guidance for gas gathering averages between 455 to 465 MMcf of natural gas per day, and gas processing volumes are expected to average between 440 to 450 MMcf of natural gas per day. Hess Midstream LP has approximately 310 MMcf/d of compression capacity, with an additional ~70 MMcf/d available.

Fee-based revenue from crude oil gathering, terminaling, and export is supported by dedicated infrastructure. Crude oil gathering capacity is approximately 290 MBbl/d. Full-year 2025 throughput guidance for crude oil terminaling averages between 130 to 140 MBbl of crude oil per day.

Fee-based revenue from produced water gathering and disposal is another key component. Full-year 2025 throughput guidance for water gathering averages between 125 to 135 MBbl of water per day. Operated Salt Water Disposal Capacity is approximately ~115 MBbl/d.

The company's fee structure includes mechanisms for cash flow stability, such as annual fee recalculations designed to maintain the contractual return on capital deployed. Pass-through costs, which relate to fees charged for third-party services like electricity and water disposal, were $27.9 million in the third quarter of 2025.

Here is a look at the 2025 throughput guidance volumes for the primary service lines:

The revenue floor is provided by Minimum Volume Commitments (MVCs). These MVCs are set on a 3-year forward basis and are established at 80% of anticipated production levels. Once set, MVCs can never decrease. The contract structure provides downside protection via MVCs through 2033. Management has stated that cash flow generated just from the MVCs is sufficient to cover the targeted 5% annual distribution growth per Class A share through 2027.

Full-year 2025 Adjusted EBITDA guidance is $1,245 million to $1,255 million.

The Gross Adjusted EBITDA Margin is targeted to be approximately 75% in 2025.