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Acquisitions | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisitions | Note 3. Acquisitions Hess Water Services Acquisition On March 1, 2019, HIP acquired 100% of the membership interest in Hess Water Services LLC (“Hess Water Services”) that owns Hess’ existing Bakken water services business for $225.0 million in cash. HIP funded the purchase price through a combination of cash on hand and borrowings under its revolving credit facility. The transaction was accounted for as an acquisition of a business between entities under common control, and therefore, the related acquired assets and liabilities were transferred at Hess’ historical carrying value. We recognized $156.1 million of consideration in excess of the book value of net assets acquired as a capital distribution to Hess, which is reflected within Net parent investment in the accompanying consolidated statements of changes in partners’ capital. In May 2020, we received $1.6 million from Hess as part of the final purchase price settlement, which is reflected within Noncontrolling interest in the accompanying consolidated statements of changes in partners’ capital. Hess Water Services is included in our gathering segment (see Note 13, Segments). Tioga System Acquisition On March 22, 2019, we acquired 100% of the membership interests of Tioga Midstream Partners LLC from Summit Midstream Partners, LP that owns oil, gas, and water gathering assets (the “Tioga System Acquisition”). The transaction was accounted for as an asset acquisition. The Tioga System, located in Williams County in western North Dakota, is complementary to our infrastructure, and is currently delivering volumes into our gathering system. We paid $89.2 million in cash at closing, net of cash acquired, and recognized a contingent liability for additional potential payments of $10 million in future periods subject to certain performance metrics. We funded the purchase price through a combination of cash on hand and borrowings under our revolving credit facility. The acquired Tioga System is included in our gathering segment (see Note 13, Segments). Hess Infrastructure Partners LP Acquisition On December 16, 2019, the Company and the Partnership completed the Restructuring, pursuant to which the Partnership acquired all of the partnership interests in HIP from Hess and GIP, including HIP’s retained 80% economic interest in each of the Joint Interest Assets, 100% interest in Hess Water Services and the outstanding economic general partner and incentive distribution rights in the Partnership. The Partnership’s organizational structure converted from a master limited partnership into an “Up-C” structure in which the Partnership’s public unitholders received newly issued Class A Shares in Hess Midstream LP in a one-for-one exchange. The Partnership changed its name to “Hess Midstream Operations LP” and became a consolidated subsidiary of the Company. As a result of the Restructuring, the Sponsors held 898,000 Class A Shares and 266,416,928 Class B Shares in the Company, 266,416,928 Class B Units representing noncontrolling limited partner interests in the Partnership and received cash consideration of $601.8 million. Class B Units of the Partnership together with the same number of Class B Shares of the Company are convertible to Class A Shares of the Company on a one-for-one basis. The acquisition of HIP was accounted for as an acquisition of a business under common control. Accordingly, consolidated financial statements prior to the acquisition date of December 16, 2019 were retrospectively recast to include the financial results of HIP. The Partnership previously consolidated 100% of the Joint Interest Assets and reflected a noncontrolling interest of 80% in such assets representing HIP’s historical ownership of the Joint Interest Assets; therefore, the recast of the previously reported financial information did not result in any changes in segment information, other than inclusion of Hess Water Services in the gathering segment. Retrospective Adjusted Information Tables The following tables present the results of operations for the three and nine months ended September 30, 2019 and cash flows for the nine months ended September 30, 2019 giving effect to the acquisition of HIP. The results of HIP prior to the effective date of the acquisition are included in “Acquisition of HIP” and the consolidated results are included in “Consolidated Results” within the tables below. The Partnership, as previously reported, did not have any items of other comprehensive income during the periods presented. Consolidated Statement of Operations
|  | Three Months Ended September 30, 2019 |
|  | Partnership as Previously Reported |  |  | Acquisition of HIP |  |  | Consolidated Results |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |
Revenues and other income |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  | $ | 195.4 |  |  | $ | 19.5 |  |  | $ | 214.9 |
Total revenues and other income |  |  | 195.4 |  |  |  | 19.5 |  |  |  | 214.9 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses (exclusive of depreciation shown separately below) |  |  | 56.5 |  |  |  | 15.4 |  |  |  | 71.9 |
Depreciation expense |  |  | 34.5 |  |  |  | 1.5 |  |  |  | 36.0 |
General and administrative expenses |  |  | 3.9 |  |  |  | 3.8 |  |  |  | 7.7 |
Total costs and expenses |  |  | 94.9 |  |  |  | 20.7 |  |  |  | 115.6 |
Income from operations |  |  | 100.5 |  |  |  | (1.2 | ) |  |  | 99.3 |
Earnings from equity investments |  |  | 0.5 |  |  |  | - |  |  |  | 0.5 |
Interest expense, net |  |  | 0.6 |  |  |  | 11.8 |  |  |  | 12.4 |
Net income |  |  | 100.4 |  |  |  | (13.0 | ) |  |  | 87.4 |
Less: Net income (loss) attributable to net parent investment |  |  | - |  |  |  | (13.0 | ) |  |  | (13.0 | )
Less: Net income attributable to noncontrolling interest |  |  | 81.3 |  |  |  | - |  |  |  | 81.3 |
Net income attributable to Hess Midstream Partners LP |  |  | 19.1 |  |  |  | - |  |  |  | 19.1 |
Less: General partner's interest in net income attributable to Hess Midstream Partners LP |  |  | 1.3 |  |  |  | - |  |  |  | 1.3 |
Limited partners' interest in net income attributable to Hess Midstream Partners LP |  | $ | 17.8 |  |  | $ | - |  |  | $ | 17.8 |
Net income attributable to Hess Midstream Partners LP per limited partner unit (basic and diluted): |  |  |  |  |  |  |  |  |  |  |  |
Common |  | $ | 0.33 |  |  | $ | - |  |  | $ | 0.33 |
Subordinated |  | $ | 0.33 |  |  | $ | - |  |  | $ | 0.33 |
Weighted average limited partner units outstanding: |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  | 27.3 |  |  |  | - |  |  |  | 27.3 |
Subordinated |  |  | 27.3 |  |  |  | - |  |  |  | 27.3 |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  | 27.5 |  |  |  | - |  |  |  | 27.5 |
Subordinated |  |  | 27.3 |  |  |  | - |  |  |  | 27.3 |
|  | Nine Months Ended September 30, 2019 |
|  | Partnership as Previously Reported |  |  | Acquisition of HIP |  |  | Consolidated Results |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |
Revenues and other income |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  | $ | 542.1 |  |  | $ | 52.4 |  |  | $ | 594.5 |
Other income |  |  | 0.3 |  |  |  | - |  |  |  | 0.3 |
Total revenues and other income |  |  | 542.4 |  |  |  | 52.4 |  |  |  | 594.8 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses (exclusive of depreciation shown separately below) |  |  | 142.0 |  |  |  | 42.1 |  |  |  | 184.1 |
Depreciation expense |  |  | 101.1 |  |  |  | 3.9 |  |  |  | 105.0 |
General and administrative expenses |  |  | 11.6 |  |  |  | 7.8 |  |  |  | 19.4 |
Total costs and expenses |  |  | 254.7 |  |  |  | 53.8 |  |  |  | 308.5 |
Income from operations |  |  | 287.7 |  |  |  | (1.4 | ) |  |  | 286.3 |
Earnings from equity investments |  |  | 0.5 |  |  |  | - |  |  |  | 0.5 |
Interest expense, net |  |  | 1.6 |  |  |  | 42.6 |  |  |  | 44.2 |
Net income |  |  | 286.6 |  |  |  | (44.0 | ) |  |  | 242.6 |
Less: Net income (loss) attributable to net parent investment |  |  | - |  |  |  | (44.0 | ) |  |  | (44.0 | )
Less: Net income attributable to noncontrolling interest |  |  | 232.6 |  |  |  | - |  |  |  | 232.6 |
Net income attributable to Hess Midstream Partners LP |  |  | 54.0 |  |  |  | - |  |  |  | 54.0 |
Less: General partner's interest in net income attributable to Hess Midstream Partners LP |  |  | 3.1 |  |  |  | - |  |  |  | 3.1 |
Limited partners' interest in net income attributable to Hess Midstream Partners LP |  | $ | 50.9 |  |  | $ | - |  |  | $ | 50.9 |
Net income attributable to Hess Midstream Partners LP per limited partner unit (basic and diluted): |  |  |  |  |  |  |  |  |  |  |  |
Common |  | $ | 0.93 |  |  | $ | - |  |  | $ | 0.93 |
Subordinated |  | $ | 0.93 |  |  | $ | - |  |  | $ | 0.93 |
Weighted average limited partner units outstanding: |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  | 27.3 |  |  |  | - |  |  |  | 27.3 |
Subordinated |  |  | 27.3 |  |  |  | - |  |  |  | 27.3 |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  | 27.5 |  |  |  | - |  |  |  | 27.5 |
Subordinated |  |  | 27.3 |  |  |  | - |  |  |  | 27.3 |
Consolidated Statement of Cash Flows
|  | Nine Months Ended September 30, 2019 |
|  | Partnership as Previously Reported |  |  | Acquisition of HIP |  |  | Consolidated Results |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 286.6 |  |  | $ | (44.0 | ) |  | $ | 242.6 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation expense |  |  | 101.1 |  |  |  | 3.9 |  |  |  | 105.0 |
(Gain) loss on interest rate swaps |  |  | - |  |  |  | (0.6 | ) |  |  | (0.6 | )
Earnings from equity investments |  |  | (0.5 | ) |  |  | - |  |  |  | (0.5 | )
(Increase) decrease in capitalized interest |  |  | - |  |  |  | (4.1 | ) |  |  | (4.1 | )
Amortization of deferred financing costs |  |  | 0.9 |  |  |  | 2.9 |  |  |  | 3.8 |
Equity-based compensation |  |  | 1.1 |  |  |  | - |  |  |  | 1.1 |
Changes in assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable—affiliate |  |  | (5.2 | ) |  |  | (2.4 | ) |  |  | (7.6 | )
Other current and noncurrent assets |  |  | (5.0 | ) |  |  | 0.3 |  |  |  | (4.7 | )
Accounts payable—trade |  |  | 2.2 |  |  |  | 1.5 |  |  |  | 3.7 |
Accounts payable—affiliate |  |  | 4.3 |  |  |  | (5.8 | ) |  |  | (1.5 | )
Accrued liabilities |  |  | 9.2 |  |  |  | (9.2 | ) |  |  | - |
Other current and noncurrent liabilities |  |  | (2.5 | ) |  |  | (0.3 | ) |  |  | (2.8 | )
Net cash provided by (used in) operating activities |  |  | 392.2 |  |  |  | (57.8 | ) |  |  | 334.4 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |  |
Payments for equity investments |  |  | (33.0 | ) |  |  | - |  |  |  | (33.0 | )
Acquisitions from Hess |  |  | - |  |  |  | (68.9 | ) |  |  | (68.9 | )
Acquisitions from third parties, net of cash acquired |  |  | (61.0 | ) |  |  | (28.2 | ) |  |  | (89.2 | )
Additions to property, plant and equipment |  |  | (184.4 | ) |  |  | (10.5 | ) |  |  | (194.9 | )
Net cash provided by (used in) investing activities |  |  | (278.4 | ) |  |  | (107.6 | ) |  |  | (386.0 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |  |
Net proceeds from (repayments of) bank borrowings with maturities of 90 days or less |  |  | 11.0 |  |  |  | 165.0 |  |  |  | 176.0 |
Repayments of bank borrowings with maturities of greater than 90 days |  |  | - |  |  |  | (7.5 | ) |  |  | (7.5 | )
Capital distribution to Hess associated with acquisitions |  |  | - |  |  |  | (156.1 | ) |  |  | (156.1 | )
Distributions to unitholders |  |  | (63.0 | ) |  |  | - |  |  |  | (63.0 | )
Distributions to general partner |  |  | (2.5 | ) |  |  | 2.5 |  |  |  | - |
Distributions to noncontrolling interest |  |  | (152.4 | ) |  |  | 152.4 |  |  |  | - |
Contributions from noncontrolling interest |  |  | 76.3 |  |  |  | (76.3 | ) |  |  | - |
Net cash provided by (used in) financing activities |  |  | (130.6 | ) |  |  | 80.0 |  |  |  | (50.6 | )
Net increase (decrease) in cash and cash equivalents |  |  | (16.8 | ) |  |  | (85.4 | ) |  |  | (102.2 | )
Cash and cash equivalents at beginning of period |  |  | 20.3 |  |  |  | 89.0 |  |  |  | 109.3 |
Cash and cash equivalents at end of period |  | $ | 3.5 |  |  | $ | 3.6 |  |  | $ | 7.1 |

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