Hess Midstream LP (HESM) (“Hess Midstream”) reported fourth quarter 2022 net income of $149.8 million compared with net income of $165.1 million for the fourth quarter of 2021. After deduction for noncontrolling interests, net income attributable to Hess Midstream was $21.8 million, or $0.49 basic earnings per Class A share compared with $16.9 million, or $0.51 basic earnings per Class A share in the year-ago quarter. Hess Midstream generated Adjusted EBITDA of $245.1 million. Distributable Cash Flow (“DCF”) for the fourth quarter of 2022 was $202.6 million and Adjusted Free Cash Flow was $144.1 million.
“Despite severe weather conditions in 2022, we delivered volume growth and made targeted compression additions that increased our gas capture capability and position us well for expected volume growth in 2023 and beyond,” said John Gatling, President and Chief Operating Officer of Hess Midstream. “With stable and focused capital investments, we expect to drive increasing volumes through our systems, sustainably generating free cash flow and supporting the return of capital to our shareholders."
Hess Midstream’s results contained in this release are consolidated to include the noncontrolling interests in Hess Midstream Operations LP owned by affiliates of Hess Corporation (“Hess”) and Global Infrastructure Partners (“GIP” and together with Hess, the “Sponsors”). We refer to certain results as “attributable to Hess Midstream LP,” which exclude the noncontrolling interests in Hess Midstream Operations LP owned by the Sponsors.
Adjusted EBITDA, Distributable Cash Flow and Adjusted Free Cash Flow are non-GAAP measures. Definitions and reconciliations of these non-GAAP measures to GAAP reporting measures appear in the following pages of this release.
Financial Results
Revenues and other income in the fourth quarter of 2022 were $314.6 million compared with $316.3 million in the prior-year quarter. Fourth quarter 2022 revenues included $16.7 million of pass-through electricity, produced water trucking and disposal costs and certain other fees and $41.7 million of shortfall fee payments related to minimum volume commitments (“MVC”) compared with $21.3 million and $23.3 million, respectively, in the prior-year quarter. Fourth quarter 2022 revenues and other income were down $1.7 million compared to the prior-year quarter primarily due to lower gas and crude oil throughput volumes, partially offset by MVC shortfall fees and slightly higher tariff rates. Total operating costs and expenses in the fourth quarter of 2022 were $118.2 million, up from $116.4 million in the prior-year quarter. The increase was primarily attributable to depreciation expense for additional assets placed in service. Interest expense in the fourth quarter of 2022 was $40.7 million, up from $31.4 million in the prior-year quarter primarily attributable to the $400.0 million 5.50% fixed-rate senior notes issued in April 2022 and higher interest rates on the Term Loan A credit facility.
Net income for the fourth quarter of 2022 was $149.8 million, or $0.49 basic earnings per Class A share, after deduction for noncontrolling interests, compared with $0.51 basic earnings per Class A share in the year-ago quarter. While net income attributable to Hess Midstream increased as a result of a unit repurchase transaction completed earlier in 2022, the earnings per share declined slightly from the year-ago quarter based on a higher number of Class A shares following a secondary equity offering also completed earlier in 2022. Substantially all of income tax expense was attributed to earnings of Class A shares reflective of our organizational structure. Net cash provided by operating activities for the fourth quarter of 2022 was $222.6 million.
Adjusted EBITDA for the fourth quarter of 2022 was $245.1 million. Relative to distributions, DCF for the fourth quarter of 2022 of $202.6 million resulted in an approximately 1.5x distribution coverage ratio. Adjusted Free Cash Flow for the fourth quarter of 2022 was $144.1 million.
Full year 2022 net income was approximately $620.6 million, full year Adjusted EBITDA was approximately $982.9 million, and full year Adjusted Free Cash Flow of $610.6 million exceeded declared distributions of $536.6 million. At 2022 year-end, debt was approximately $2.9 billion, representing leverage of approximately 3.0x.
Hess Midstream plans to issue 2023 guidance in a separate release on January 25, 2023.
Operational Highlights
Throughput volumes in the fourth quarter of 2022 compared with the fourth quarter of 2021 decreased 12% for crude oil gathering and 11% for terminaling primarily due to the impact of severe winter weather in December. Throughput volumes decreased 5% for gas processing and 5% for gas gathering in the fourth quarter of 2022 compared with the fourth quarter of 2021 primarily due to deferred maintenance that was incurred in November and the impact of severe winter weather in December. Water gathering volumes increased 7% reflecting continued steady organic growth of our water handling business.
Capital Expenditures
Capital expenditures for the fourth quarter of 2022 totaled $62.4 million, including $58.5 million of expansion capital expenditures and $3.9 million of maintenance capital expenditures, and were primarily attributable to continued expansion of our gas compression capacity. Capital expenditures in the prior-year quarter were $54.4 million, including $52.2 million of expansion capital expenditures and $2.2 million of maintenance capital expenditures, and were also primarily attributable to expansion of our gas compression capacity.
Quarterly Cash Distributions
On January 23, 2023, our general partner’s board of directors declared a quarterly cash distribution of $0.5696 per Class A share for the fourth quarter of 2022, an approximate increase of 1.2% over the distribution for the prior quarter, consistent with Hess Midstream's targeted 5% growth in annual distributions per Class A share. The distribution is expected to be paid on February 13, 2023 to shareholders of record as of the close of business on February 2, 2023.
Investor Webcast
Hess Midstream will review fourth quarter financial and operating results and other matters on a webcast today at 12:00 p.m. Eastern Time.
