Hess Midstream LP's $100 Million Repurchase Initiative Unveiled
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Hess Midstream LP Announces Major Unit Repurchase Strategy
Hess Midstream LP (NYSE: HESM) has made a significant announcement regarding its financial strategy. The company is executing a definitive agreement for the repurchase of approximately $100 million of Class B units from its sponsors, Hess Corporation and Global Infrastructure Partners. This strategic move has been unanimously approved by the Board of Directors of the general partner of Hess Midstream.
Strategic Financial Moves for Shareholder Value
Jonathan Stein, the Chief Financial Officer, expressed confidence in this initiative, highlighting the company's unique approach to financial management. "We continue to execute unit repurchase transactions as part of our financial strategy, which showcases our capacity to deliver meaningful returns to our shareholders while also reinforcing our balance sheet strength," he said. Since 2021, Hess Midstream has returned a remarkable $1.85 billion to shareholders through ongoing unit repurchases.
Insight into the Unit Repurchase Mechanism
The details of the repurchase agreement indicate that the units will be cancelled upon closing, thereby enhancing the distributable cash flow per Class A share. This move aligns with Hess Midstream's consistent goal of achieving a distribution growth rate of at least 5% through 2026.
Unit Repurchase Overview
Under the agreement, Hess Midstream Operations LP, a consolidated subsidiary, will repurchase 2,823,262 Class B units for about $100 million, translating to approximately 1.3% ownership of the company. Each Class B unit carries a purchase price of $35.42, based on the closing price of Class A shares on a recent trading day. This repurchase will adjust the ownership distribution to approximately 41.5% for public shareholders, 20.7% for Global Infrastructure Partners, and 37.8% for Hess Corporation.
Hess Midstream's Commitment to Growth
Hess Midstream LP operates as a fee-based, growth-oriented midstream company dedicated to fostering growth and providing essential services to Hess Corporation and third-party customers. The company is well-positioned within the Bakken and Three Forks Shale plays, managing oil, gas, and produced water handling assets. By funding this unit repurchase through its revolving credit facility, Hess Midstream demonstrates its sound financial structure and commitment to long-term growth.
Future Outlook for Hess Midstream
The leadership at Hess Midstream remains optimistic about future developments. They affirm their strategy focuses not just on this immediate repurchase but also on maintaining flexibility for potential future transactions. The clear financial vision includes a robust pipeline of opportunities designed to enhance shareholder value.
Frequently Asked Questions
What is the significance of Hess Midstream's $100 million repurchase?
This initiative is designed to enhance shareholder value and increase distributable cash flow while maintaining a strong balance sheet.
Who approved the unit repurchase transaction?
The Board of Directors of Hess Midstream's general partner approved the transaction based on recommendations from an independent conflicts committee.
What impact will the unit repurchase have on shareholders?
Shareholders can expect immediate accretion in per-share cash flow and a commitment to growth in distributions over the coming years.
How is Hess Midstream funding the repurchase?
The unit repurchase will be funded through borrowings under Hess Midstream’s existing revolving credit facility.
What are Hess Midstream's growth prospects?
With a commitment to a distribution growth target of at least 5% and ongoing financial flexibility, Hess Midstream is well-positioned for future growth opportunities.
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