Hess Midstream (NYSE:HESM) shares fell over 16% to $32.25 on Wednesday morning after Chevron agreed to transfer its ownership interests in the midstream company and DJ Basin crude oil assets in exchange for revised Bakken terms, with the company forecasting 2027 Adjusted EBITDA of $850 million to $950 million.
The agreements will extend Chevron’s Bakken midstream contracts and are expected to reduce its unit midstream costs by about 50%, improving its cost structure and return on capital employed.
Chevron will also receive $200 million in cash consideration as part of the transaction, which is expected to close by the end of 2026 subject to regulatory approvals and other conditions.
Chevron expects to fully deconsolidate Hess Midstream, including about $3.7 billion of its debt, while transferring its ownership interests and general partner position to Hess Midstream.
The transaction is expected to increase Chevron’s return on capital employed by 0.5 percentage points and generate long-term economic value through lower Bakken costs and higher earnings.
Chevron will recognize a one-time after-tax loss of about $3 billion to $4 billion at closing because it cannot recognize the future savings from lower Bakken midstream costs as an asset.
As per its full-year 2026 guidance and preliminary 2027 financial guidance, the company expects Adjusted Free Cash Flow of $525 million to $625 million, based on about $125 million of capital expenditures across the DJ and Bakken basins.
Hess Midstream forecasts it will continue targeting annual distribution growth of 5% per Class A share in the third and fourth quarters of 2026.
The company expects to maintain quarterly distributions in 2027 at the expected fourth-quarter 2026 level, with distributions fully funded by Adjusted Free Cash Flow.
The restructuring gives Hess Midstream greater independence while providing Chevron with a new long-term commercial framework for its Bakken and DJ Basin operations.
Chevron said it expects to maintain Bakken production through technology deployment and operational improvements across its shale and tight-oil portfolio.
The deal was approved by the conflicts committee of Hess Midstream’s general partner, which comprises independent directors, and remains subject to customary closing conditions and regulatory approvals.
Source: www.proactiveinvestors.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
