UBS-Midstream Natural Gas What Matters the Most This Week...-20251103

Sector Thoughts

Many midstream names report 3Q earnings this week: HESM (Monday),WMB (Monday), MPLX (Tuesday), WES (Tuesday), PAA (Wednesday), TRGP (Wednesday), ET (Wednesday), KNTK (Wednesday), TRP (Thursday), PPL (Thursday),ENB (Friday).

HESM

We believe more than the earnings focus will be on CVX's Nov 12th analyst day event. CVX could provide its vision for HESM next 2-3 years. We are modeling 3Q25 adjusted EBITDA estimate of $315.2MM vs $316.0MM in 2Q25. The slight QoQ decrease is driven by adverse weather conditions and maintenance in the quarter. In mid-September, HESM announced updated financial and operational guidance for 2025, 2026, and 2027. The guidance change was based on expected decrease in Bakken rig activity due to Chevron decreasing rig count from four to three commencing in 4Q25. We will listen to the call for additional color on Chevron's Bakken plan, future volume guidance, and updated capital allocation plans. We note that HESM canceled the Capa gas plant as part of its updated guidance in mid September, and expects significantly lower capital spending in 2026 and 2027 as a result. We will also listen for updates on distribution growth as HESM continues to target annual distribution growth of 5% through 2027.