Hess Midstream Partners LP announced the formation of a 50/50 joint venture with Targa Resources Corp. (“Targa”) to construct a new 200 million standard cubic feet per day gas processing plant called Little Missouri Four (“LM4”). The new gas plant will be located at Targa’s existing Little Missouri facility, south of the Missouri River in McKenzie County, North Dakota.
Targa will manage the construction of LM4 and will operate the plant. Hess Midstream’s 50 percent interest in the joint venture will be held through Hess TGP Operations LP, in which Hess Midstream owns a 20 percent controlling economic interest, and Hess Infrastructure Partners LP (“HIP”) owns the remaining 80 percent economic interest. LM4 is expected to be completed in the fourth quarter of 2018.
John Gatling, Chief Operating Officer of Hess Midstream said, “The Little Missouri Four Gas Processing Plant demonstrates our commitment to executing our strategy by providing additional Bakken basin processing capacity, which provides another layer of organic growth to meet our long-term targeted annual distribution per unit growth. By executing infrastructure projects that provide more optionality to producers, Hess Midstream expects to continue to capture additional Hess and third-party volumes, reinforcing the competitive advantage we enjoy from our strategically located infrastructure in the core of the Bakken."
Doug Burgum, Governor of North Dakota said, “We are thrilled to welcome Hess’ significant investment, which underscores the company’s longstanding presence in North Dakota and commitment to our state. This processing plant will provide much-needed capacity at a time when North Dakota’s oil production nears record levels and associated natural gas production continues to climb. It’s a huge step in the right direction toward continuing to meet our flaring reduction goals and encouraging responsible energy development and infrastructure investment.”
Jonathan Stein, Hess Midstream’s Chief Financial Officer said, “The joint venture with Targa and related investments are expected to be fully integrated into our existing contract structure. This reinforces the competitive advantage we have through our long-term contracts with Hess Corporation, which are 100 percent fee-based and designed to deliver stable and growing cash flows while providing downside protection. This strategic investment is expected to continue to enhance Hess Midstream’s organic growth trajectory with limited use of our balance sheet, while further increasing our dropdown timing flexibility.”
Construction costs for LM4 are anticipated to be approximately $150 million (gross to the joint venture), with $15 million attributable to Hess Midstream ($60 million funded by HIP). In addition, Hess Midstream and HIP will also invest approximately $100 million gross, $20 million attributable to Hess Midstream, for new pipeline infrastructure to gather volumes to the LM4 plant.
With these investments, Hess Midstream will have total processing capacity of 350 million standard cubic feet per day of gas in the Bakken, with export optionality north and south of the Missouri river. Hess Midstream retains the option to further expand processing capacity by de-bottlenecking the Tioga Gas Plant in the future and, as a result, the previously planned turnaround at the Tioga Gas Plant in 2019 is expected to be deferred.
