Hess will receive approximately $275 million in cash and approximately 115 million newly issued units in Hess Midstream Partners LP (NYSE: HESM) as part of a proposed transaction announced today by HESM.
Under the terms of the proposed transaction, HESM will acquire Hess Infrastructure Partners LP (HIP), a 50/50 joint venture between Hess Corporation and Global Infrastructure Partners, including HIP’s 80% interest in HESM’s oil and gas midstream assets, HIP’s water services business and the outstanding economic general partner interest and incentive distribution rights in HESM. In addition, HESM’s organizational structure will convert from a master limited partnership (MLP) into an “Up-C” structure in which HESM’s public unitholders will receive newly issued securities in a new public entity to be named “Hess Midstream LP” (“Hess Midstream”). Upon completion of the transaction, Hess Corporation will own approximately 134 million HESM units, or 47 percent of Hess Midstream on a consolidated basis, valued at approximately $2.6 billion based on the closing price per HESM common unit on Oct. 2, 2019.
Hess Corporation Chief Executive Officer
said: “This transaction is compelling for all parties involved and was unanimously approved by each company’s board of directors. It simplifies the ownership structure of Hess Midstream, provides transparency on the value of Hess’ midstream interests, and positions Hess Midstream for sustainable growth and value creation as a large-scale, publicly traded midstream company accessible to a broad range of investors.”
“Hess Midstream will continue to play an important role in supporting Hess’ production growth in the Bakken, where we have a premier acreage position and a 15 year inventory of high return drilling locations. In turn, Hess’ production growth in the Bakken along with third parties are expected to drive Hess Midstream’s industry leading earnings growth through 2021,” Hess said. “Cash proceeds from the transaction will be used to fund our world class investment opportunities in Guyana and the Bakken.”
Hess Corporation will continue to provide operational services to Hess Midstream and maintain the same commercial contracts with Hess Midstream as under the current MLP structure. The transaction, which is non-taxable to Hess Corporation, is expected to close in the fourth quarter of 2019, subject to customary closing conditions and regulatory approvals. Morgan Stanley & Co. LLC acted as financial advisor to Hess Corporation on this transaction.