Hess Midstream Q1 EBITDA Margin Jumps to 83%, Free Cash Flow Forecast Up 20%
HESM•Hess Midstream reported Q1 adjusted EBITDA margin of 83%, surpassing its 75% target, and cut 2026 CapEx by one-third to $105 million after infrastructure completion. Free cash flow guidance rose to $910–960 million, up 20% year-over-year, supported by lower CapEx, deferred cash taxes and fixed-fee contracts with MVCs through 2028.
1. Q1 Performance and System Optionality
Hess Midstream achieved an adjusted EBITDA margin of approximately 83% in the quarter ended March 2026, well above its long-term target of 75%. Severe winter weather in January and February weighed on volumes, but a March recovery and capture of third-party gas through system optionality helped offset the impact.
2. Capital Expenditure Reduction
The company reduced its 2026 capital spending guidance by one-third to about $105 million, reflecting completion of major infrastructure projects and upstream efficiency gains. This right-sizing of expenditures underscores confidence in sustaining operations with lower ongoing investment.
3. Boost in Free Cash Flow Guidance
Management raised full-year 2026 adjusted free cash flow guidance to a range of $910 million to $960 million, marking a 20% year-over-year increase at the midpoint. Key drivers include the significant CapEx reduction, deferred cash taxes under new IRS alternative minimum tax guidance, and strong operational cash conversion.
4. Contract Structure and Future Outlook
Hess Midstream’s fixed-fee contracts with minimum volume commitments through 2028 provide substantial downside protection, while continued strategic alignment with Chevron’s longer lateral drilling enhances capital efficiency. Management anticipates second-half EBITDA growth of roughly 8% over H1 as new well completions come online.
