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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2020

or

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39163

Hess Midstream LP

(Exact name of Registrant as specified in its charter)

DELAWARE | 84-3211812
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number)
1501 McKinney Street | 77010
Houston, TX (Address of principal executive offices) | (Zip Code)

(Registrant’s telephone number, including area code, is (713) 496-4200)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Class A shares representing limited partner interests | HESM | New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer | ☐ |  | Accelerated filer | ☒
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐
|  |  | Emerging growth company | ☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

18,028,308 Class A shares representing limited partner interests (“Class A Shares”) in the registrant were outstanding as of October 31, 2020.

HESS MIDSTREAM LP

FORM 10-Q

TABLE OF CONTENTS

Item |  |  |  | Page
No. |  |  |  | Number
|  | PART I—FINANCIAL INFORMATION |  |
1. |  | Financial Statements (unaudited) |  |
|  | Consolidated Balance Sheets at September 30, 2020 and December 31, 2019 |  | 2
|  | Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 |  | 3
|  | Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 |  | 4
|  | Consolidated Statements of Changes in Partners’ Capital for the three and nine months ended September 30, 2020 and 2019 |  | 5
|  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 |  | 7
|  | Notes to Consolidated Financial Statements |  | 8
2. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 20
3. |  | Quantitative and Qualitative Disclosures about Market Risk |  | 36
4. |  | Controls and Procedures |  | 36
|  | PART II—OTHER INFORMATION |  |
1. |  | Legal Proceedings |  | 37
1A. |  | Risk Factors |  | 37
6. |  | Exhibits |  | 38
|  | Signatures |  | 39
|  | Certifications |  |

PART I—FINANCIAL INFORMATION

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED BALANCE SHEETS

Item 1. | Financial Statements

| September 30, |  |  | December 31, |
| 2020 |  |  | 2019 |
(in millions, except share amounts) |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 3.0 |  |  | $ | 3.3 |
Accounts receivable—affiliate: |  |  |  |  |  |  |
From contracts with customers |  | 92.5 |  |  |  | 87.6 |
Other receivables |  | 0.4 |  |  |  | 0.3 |
Other current assets |  | 7.8 |  |  |  | 4.7 |
Total current assets |  | 103.7 |  |  |  | 95.9 |
Equity investments |  | 108.2 |  |  |  | 107.8 |
Property, plant and equipment, net |  | 3,103.3 |  |  |  | 3,010.1 |
Long-term receivable—affiliate |  | 1.1 |  |  |  | 1.2 |
Deferred tax asset |  | 44.6 |  |  |  | 49.8 |
Other noncurrent assets |  | 10.8 |  |  |  | 12.9 |
Total assets | $ | 3,371.7 |  |  | $ | 3,277.7 |
Liabilities |  |  |  |  |  |  |
Accounts payable—trade | $ | 40.1 |  |  | $ | 30.6 |
Accounts payable—affiliate |  | 19.8 |  |  |  | 47.9 |
Accrued liabilities |  | 57.8 |  |  |  | 88.7 |
Current maturities of long-term debt |  | 7.5 |  |  |  | - |
Other current liabilities |  | 7.1 |  |  |  | 8.9 |
Total current liabilities |  | 132.3 |  |  |  | 176.1 |
Long-term debt |  | 1,895.5 |  |  |  | 1,753.5 |
Other noncurrent liabilities |  | 24.7 |  |  |  | 16.0 |
Total liabilities |  | 2,052.5 |  |  |  | 1,945.6 |
Partners' capital |  |  |  |  |  |  |
Class A shares (18,028,308 shares issued and outstanding as of September 30, 2020; 17,960,655 shares issued and outstanding as of December 31, 2019) |  | 126.2 |  |  |  | 131.1 |
Class B shares (266,416,928 shares issued and outstanding as of September 30, 2020 and December 31, 2019) |  | - |  |  |  | - |
Total partners' capital |  | 126.2 |  |  |  | 131.1 |
Noncontrolling interest |  | 1,193.0 |  |  |  | 1,200.6 |
Accumulated other comprehensive income |  | - |  |  |  | 0.4 |
Total partners' capital |  | 1,319.2 |  |  |  | 1,332.1 |
Total liabilities and partners' capital | $ | 3,371.7 |  |  | $ | 3,277.7 |

See accompanying notes to unaudited consolidated financial statements.

2

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 (1) |  |  | 2020 |  |  | 2019 (1) |
(in millions, except per unit/share data) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  | $ | 264.7 |  |  | $ | 214.9 |  |  | $ | 825.1 |  |  | $ | 594.5 |
Other income |  |  | 0.1 |  |  |  | - |  |  |  | 0.3 |  |  |  | 0.3 |
Total revenues |  |  | 264.8 |  |  |  | 214.9 |  |  |  | 825.4 |  |  |  | 594.8 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses (exclusive of depreciation shown separately below) |  |  | 83.9 |  |  |  | 71.9 |  |  |  | 270.8 |  |  |  | 184.1 |
Depreciation expense |  |  | 39.5 |  |  |  | 36.0 |  |  |  | 116.9 |  |  |  | 105.0 |
General and administrative expenses |  |  | 4.2 |  |  |  | 7.7 |  |  |  | 15.9 |  |  |  | 19.4 |
Total costs and expenses |  |  | 127.6 |  |  |  | 115.6 |  |  |  | 403.6 |  |  |  | 308.5 |
Income from operations |  |  | 137.2 |  |  |  | 99.3 |  |  |  | 421.8 |  |  |  | 286.3 |
Income from equity investments |  |  | 3.6 |  |  |  | 0.5 |  |  |  | 7.2 |  |  |  | 0.5 |
Interest expense, net |  |  | 23.2 |  |  |  | 12.4 |  |  |  | 71.3 |  |  |  | 44.2 |
Gain on sale of property, plant and equipment |  |  | - |  |  |  | - |  |  |  | 0.1 |  |  |  | - |
Income before income tax expense (benefit) |  |  | 117.6 |  |  |  | 87.4 |  |  |  | 357.8 |  |  |  | 242.6 |
Income tax expense (benefit) |  |  | 1.8 |  |  |  | - |  |  |  | 5.2 |  |  |  | - |
Net income |  |  | 115.8 |  |  |  | 87.4 |  |  |  | 352.6 |  |  |  | 242.6 |
Less: Net income (loss) attributable to net parent investment |  |  | - |  |  |  | (13.0 | ) |  |  | - |  |  |  | (44.0 | )
Less: Net income (loss) attributable to noncontrolling interest |  |  | 110.2 |  |  |  | 81.3 |  |  |  | 335.2 |  |  |  | 232.6 |
Net income attributable to Hess Midstream LP |  |  | 5.6 |  |  |  | 19.1 |  |  |  | 17.4 |  |  |  | 54.0 |
Less: General partner's interest in net income |  |  | - |  |  |  | 1.3 |  |  |  | - |  |  |  | 3.1 |
Limited partners' interest in net income |  | $ | 5.6 |  |  | $ | 17.8 |  |  | $ | 17.4 |  |  | $ | 50.9 |
Net income attributable to Hess Midstream LP per Class A share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  | $ | 0.31 |  |  |  |  |  |  | $ | 0.97 |  |  |  |  |
Diluted: |  | $ | 0.31 |  |  |  |  |  |  | $ | 0.95 |  |  |  |  |
Net income attributable to Hess Midstream LP per limited partner unit (basic and diluted): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  |  |  |  | $ | 0.33 |  |  |  |  |  |  | $ | 0.93 |
Subordinated |  |  |  |  |  | $ | 0.33 |  |  |  |  |  |  | $ | 0.93 |
Weighted average Class A shares outstanding subsequent to the Restructuring: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  | 18.0 |  |  |  |  |  |  |  | 18.0 |  |  |  |  |
Diluted: |  |  | 18.1 |  |  |  |  |  |  |  | 18.1 |  |  |  |  |
Weighted average limited partner units outstanding prior to the Restructuring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  |  |  |  |  | 27.3 |  |  |  |  |  |  |  | 27.3 |
Subordinated |  |  |  |  |  |  | 27.3 |  |  |  |  |  |  |  | 27.3 |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  |  |  |  |  | 27.5 |  |  |  |  |  |  |  | 27.5 |
Subordinated |  |  |  |  |  |  | 27.3 |  |  |  |  |  |  |  | 27.3 |
(1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Hess Infrastructure Partners LP. |

See accompanying notes to unaudited consolidated financial statements.

3

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

|  | Three Months Ended September 30. |  |  | Nine Months Ended September 30. |
|  | 2020 |  |  | 2019 (1) |  |  | 2020 |  |  | 2019 (1) |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 115.8 |  |  | $ | 87.4 |  |  | $ | 352.6 |  |  | $ | 242.6 |
Effect of hedge (gains) losses reclassified to income |  |  | - |  |  |  | (0.2 | ) |  |  | (0.4 | ) |  |  | (0.6 | )
Total other comprehensive income |  |  | - |  |  |  | (0.2 | ) |  |  | (0.4 | ) |  |  | (0.6 | )
Comprehensive income |  |  | 115.8 |  |  |  | 87.2 |  |  |  | 352.2 |  |  |  | 242.0 |
Less: Comprehensive income (loss) attributable to net parent investment |  |  | - |  |  |  | (13.2 | ) |  |  | - |  |  |  | (44.6 | )
Less: Comprehensive income (loss) attributable to noncontrolling interest |  |  | 110.2 |  |  |  | 81.3 |  |  |  | 334.8 |  |  |  | 232.6 |
Comprehensive income attributable to Hess Midstream LP |  | $ | 5.6 |  |  | $ | 19.1 |  |  | $ | 17.4 |  |  | $ | 54.0 |
(1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Hess Infrastructure Partners LP. |

See accompanying notes to unaudited consolidated financial statements.

4

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(UNAUDITED)

| Partners' Capital |  |  |  |  |  |  |  |  |  |  |  |  |
| Class A Shares |  |  | Class B Shares |  |  | Noncontrolling Interest |  |  | Accumulated Other Comprehensive Income |  |  | Total |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2019 | $ | 131.1 |  |  | $ | - |  |  | $ | 1,200.6 |  |  | $ | 0.4 |  |  | $ | 1,332.1 |
Net income |  | 6.5 |  |  |  | - |  |  |  | 122.5 |  |  |  | - |  |  |  | 129.0 |
Equity-based compensation |  | 0.5 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.5 |
Distributions - $0.4258 per share |  | (7.6 | ) |  |  | - |  |  |  | (113.4 | ) |  |  | - |  |  |  | (121.0 | )
Other comprehensive income (loss) |  | - |  |  |  | - |  |  |  | - |  |  |  | (0.2 | ) |  |  | (0.2 | )
Balance at March 31, 2020 | $ | 130.5 |  |  | $ | - |  |  | $ | 1,209.7 |  |  | $ | 0.2 |  |  | $ | 1,340.4 |
Net income |  | 5.3 |  |  |  | - |  |  |  | 102.5 |  |  |  | - |  |  |  | 107.8 |
Equity-based compensation |  | 0.3 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.3 |
Distributions - $0.4310 per share |  | (7.9 | ) |  |  | - |  |  |  | (114.8 | ) |  |  | - |  |  |  | (122.7 | )
Other comprehensive income (loss) |  | - |  |  |  | - |  |  |  | - |  |  |  | (0.2 | ) |  |  | (0.2 | )
Hess Water Services acquisition final settlement |  | - |  |  |  | - |  |  |  | 1.6 |  |  |  | - |  |  |  | 1.6 |
Balance at June 30, 2020 | $ | 128.2 |  |  | $ | - |  |  | $ | 1,199.0 |  |  | $ | - |  |  | $ | 1,327.2 |
Net income |  | 5.6 |  |  |  | - |  |  |  | 110.2 |  |  |  | - |  |  |  | 115.8 |
Equity-based compensation |  | 0.4 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.4 |
Distributions - $0.4363 per share |  | (8.0 | ) |  |  | - |  |  |  | (116.2 | ) |  |  | - |  |  |  | (124.2 | )
Balance at September 30, 2020 | $ | 126.2 |  |  | $ | - |  |  | $ | 1,193.0 |  |  | $ | - |  |  | $ | 1,319.2 |

See accompanying notes to unaudited consolidated financial statements.

5

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(UNAUDITED)

| Partners' Capital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Limited Partners |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Common Unitholders Public |  |  | Common Unitholders Affiliate |  |  | Subordinated Unitholders Affiliate |  |  | General Partner |  |  | Noncontrolling Interest |  |  | Accumulated Other Comprehensive Income |  |  | Net Parent Investment |  |  | Total (1) |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2018 | $ | 357.1 |  |  | $ | 39.5 |  |  | $ | 105.3 |  |  | $ | 14.9 |  |  | $ | 2,194.1 |  |  | $ | 1.2 |  |  | $ | (836.0 | ) |  | $ | 1,876.1 |
Net income |  | 5.3 |  |  |  | 3.4 |  |  |  | 8.6 |  |  |  | 0.8 |  |  |  | 77.2 |  |  |  | - |  |  |  | (14.5 | ) |  |  | 80.8 |
Unit-based compensation |  | 0.3 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.3 |
Distributions to unitholders - $0.3701 per unit |  | (6.3 | ) |  |  | (3.8 | ) |  |  | (10.1 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (20.2 | )
Distributions to general partner |  | - |  |  |  | - |  |  |  | - |  |  |  | (0.6 | ) |  |  | - |  |  |  | - |  |  |  | 0.6 |  |  |  | - |
Distributions to noncontrolling interest |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (57.1 | ) |  |  | - |  |  |  | 57.1 |  |  |  | - |
Contributions from noncontrolling interest |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 55.5 |  |  |  | - |  |  |  | (55.5 | ) |  |  | - |
Other comprehensive income (loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (0.2 | ) |  |  | - |  |  |  | (0.2 | )
Acquisition of Hess Water Services |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (225.0 | ) |  |  | (225.0 | )
Balance at March 31, 2019 | $ | 356.4 |  |  | $ | 39.1 |  |  | $ | 103.8 |  |  | $ | 15.1 |  |  | $ | 2,269.7 |  |  | $ | 1.0 |  |  | $ | (1,073.3 | ) |  | $ | 1,711.8 |
Net income |  | 4.9 |  |  |  | 3.0 |  |  |  | 7.9 |  |  |  | 1.0 |  |  |  | 74.1 |  |  |  | - |  |  |  | (16.5 | ) |  |  | 74.4 |
Unit-based compensation |  | 0.3 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.3 |
Distributions to unitholders - $0.3833 per unit |  | (6.5 | ) |  |  | (4.0 | ) |  |  | (10.5 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (21.0 | )
Distributions to general partner |  | - |  |  |  | - |  |  |  | - |  |  |  | (0.8 | ) |  |  | - |  |  |  | - |  |  |  | 0.8 |  |  |  | - |
Distributions to noncontrolling interest |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (49.0 | ) |  |  | - |  |  |  | 49.0 |  |  |  | - |
Contributions from noncontrolling interest |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12.8 |  |  |  | - |  |  |  | (12.8 | ) |  |  | - |
Other comprehensive income (loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (0.2 | ) |  |  | - |  |  |  | (0.2 | )
Balance at June 30, 2019 | $ | 355.1 |  |  | $ | 38.1 |  |  | $ | 101.2 |  |  | $ | 15.3 |  |  | $ | 2,307.6 |  |  | $ | 0.8 |  |  | $ | (1,052.8 | ) |  | $ | 1,765.3 |
Net income |  | 5.5 |  |  |  | 3.4 |  |  |  | 8.9 |  |  |  | 1.3 |  |  |  | 81.3 |  |  |  |  |  |  |  | (13.0 | ) |  |  | 87.4 |
Unit-based compensation |  | 0.5 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 0.5 |
Distributions to unitholders - $0.3970 per unit |  | (6.9 | ) |  |  | (4.0 | ) |  |  | (10.9 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (21.8 | )
Distributions to general partner |  |  |  |  |  |  |  |  |  |  |  |  |  | (1.1 | ) |  |  |  |  |  |  |  |  |  |  | 1.1 |  |  |  | - |
Distributions to noncontrolling interest |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (46.3 | ) |  |  |  |  |  |  | 46.3 |  |  |  | - |
Contributions from noncontrolling interest |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 8.0 |  |  |  |  |  |  |  | (8.0 | ) |  |  | - |
Other comprehensive income (loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (0.2 | ) |  |  |  |  |  |  | (0.2 | )
Balance at September 30, 2019 | $ | 354.2 |  |  | $ | 37.5 |  |  | $ | 99.2 |  |  | $ | 15.5 |  |  | $ | 2,350.6 |  |  | $ | 0.6 |  |  | $ | (1,026.4 | ) |  | $ | 1,831.2 |
(1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Hess Infrastructure Partners LP. |

See accompanying notes to unaudited consolidated financial statements.

6

PART I—FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

|  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 (1) |
(in millions) |  |  |  |  |  |  |  |
Cash flows from operating activities |  |  |  |  |  |  |  |
Net income |  | $ | 352.6 |  |  | $ | 242.6 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |  |  |  |  |
Depreciation expense |  |  | 116.9 |  |  |  | 105.0 |
(Gain) loss on sale of property, plant and equipment |  |  | (0.1 | ) |  |  | - |
(Gain) loss on interest rate swaps |  |  | (0.4 | ) |  |  | (0.6 | )
(Income) loss from equity investments |  |  | (7.2 | ) |  |  | (0.5 | )
(Increase) decrease in capitalized interest |  |  | - |  |  |  | (4.1 | )
Distributions from equity investments |  |  | 6.8 |  |  |  | - |
Amortization of deferred financing costs |  |  | 5.1 |  |  |  | 3.8 |
Equity-based compensation expense |  |  | 1.2 |  |  |  | 1.1 |
Deferred income tax expense (benefit) |  |  | 5.2 |  |  |  |  |
Changes in assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable – affiliate |  |  | (4.9 | ) |  |  | (7.6 | )
Other current and noncurrent assets |  |  | (3.4 | ) |  |  | (4.7 | )
Accounts payable – trade |  |  | 9.5 |  |  |  | 3.7 |
Accounts payable – affiliate |  |  | (0.5 | ) |  |  | (1.5 | )
Accrued liabilities |  |  | (12.6 | ) |  |  | - |
Other current and noncurrent liabilities |  |  | (1.0 | ) |  |  | (2.8 | )
Net cash provided by (used in) operating activities |  |  | 467.2 |  |  |  | 334.4 |
Cash flows from investing activities |  |  |  |  |  |  |  |
Proceeds from sale of property, plant and equipment |  |  | 0.1 |  |  |  | - |
Additions to property, plant and equipment |  |  | (246.0 | ) |  |  | (194.9 | )
Acquisitions from third parties, net of cash acquired |  |  | - |  |  |  | (89.2 | )
Acquisitions from Hess |  |  | - |  |  |  | (68.9 | )
Payments for equity investments |  |  | - |  |  |  | (33.0 | )
Net cash provided by (used in) investing activities |  |  | (245.9 | ) |  |  | (386.0 | )
Cash flows from financing activities |  |  |  |  |  |  |  |
Net proceeds from (repayments of) bank borrowings with maturities of 90 days or less |  |  | 146.0 |  |  |  | 176.0 |
Repayments of bank borrowings with maturities of greater than 90 days |  |  | - |  |  |  | (7.5 | )
Financing costs |  |  | (1.3 | ) |  |  | - |
Distributions to shareholders/unitholders |  |  | (23.5 | ) |  |  | (63.0 | )
Distributions to noncontrolling interest |  |  | (344.4 | ) |  |  | - |
Hess Water Services acquisition final settlement |  |  | 1.6 |  |  |  | - |
Capital distribution to Hess associated with acquisitions |  |  | - |  |  |  | (156.1 | )
Net cash provided by (used in) financing activities |  |  | (221.6 | ) |  |  | (50.6 | )
Increase (decrease) in cash and cash equivalents |  |  | (0.3 | ) |  |  | (102.2 | )
Cash and cash equivalents, beginning of period |  |  | 3.3 |  |  |  | 109.3 |
Cash and cash equivalents, end of period |  | $ | 3.0 |  |  | $ | 7.1 |
Supplemental disclosure of non-cash investing and financing activities: |  |  |  |  |  |  |  |
(Increase) decrease in accrued capital expenditures and related liabilities |  | $ | 43.8 |  |  | $ | (13.9 | )
(1) The financial information presented in this report has been retrospectively adjusted for the acquisition of Hess Infrastructure Partners LP. |

See accompanying notes to unaudited consolidated financial statements.

7

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

Note 1. D escription of Business

Hess Midstream LP (“the Company”) is a fee-based, growth-oriented, Delaware limited partnership formed by Hess Infrastructure Partners GP LLC (“HIP GP LLC”) and our general partner to own, operate, develop and acquire a diverse set of midstream assets and provide fee-based services to Hess Corporation (“Hess”) and third-party customers. We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner.

On December 16, 2019, we completed the acquisition of Hess Infrastructure Partners LP (“HIP”), incentive distribution rights simplification and conversion from a master limited partnership into an “Up-C” structure (collectively, the “Restructuring”) contemplated by the partnership restructuring agreement, dated October 3, 2019, by and among the Company, Hess Midstream Operations LP (the “Partnership”) and the other parties thereto. Prior to the Restructuring, the Company and the Partnership were indirectly controlled by HIP GP LLC, the general partner of HIP. HIP was originally formed as a joint venture between Hess and GIP II Blue Holding Partnership, L.P. (“GIP” and together with Hess, the “Sponsors”).

All references to “Hess Midstream Operations LP,” “the Partnership,” “us,” “we” or similar terms, when referring to periods between April 10, 2017 (the initial public offering date) and December 16, 2019, refer to Hess Midstream Operations LP (formerly known as Hess Midstream Partners LP, the predecessor registrant to Hess Midstream LP), including its consolidated subsidiaries. All references to “Hess Midstream LP,” “the Company,” “us,” “our,” “we” or similar terms, when referring to periods subsequent to December 16, 2019, refer to Hess Midstream LP, including its consolidated subsidiaries.

Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken. Our assets and operations are organized into the following three reportable segments: (1) gathering, (2) processing and storage and (3) terminaling and export (see Note 13, Segments).

Note 2. Basis of Presentation

The consolidated financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position at September 30, 2020 and December 31, 2019, the consolidated results of operations for the three and nine months ended September 30, 2020 and 2019, and consolidated cash flows for the nine months ended September 30, 2020 and 2019. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.

The consolidated financial statements were prepared in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain notes or other financial information that are normally required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted from these interim consolidated financial statements. These financial statements, therefore, should be read in conjunction with the financial statements and related notes included in the Company’s annual report on Form 10‑K for the year ended December 31, 2019.

On December 16, 2019, we completed the acquisition of HIP, which was accounted for as a business combination of entities under common control. Accordingly, our consolidated financial statements prior to the acquisition date were retrospectively recast to include the financial results of HIP. See Note 3, Acquisitions.

We consolidate the activities of the Partnership, and prior to the Restructuring the activities of Hess North Dakota Pipelines Operations LP, Hess TGP Operations LP and Hess North Dakota Export Logistics Operations LP (collectively, the “Joint Interest Assets”), as variable interest entities (“VIE”) under U.S. GAAP. We have concluded that we are the primary beneficiary of the VIE, as defined in the accounting standards, since we have the power, through our ownership, to direct those activities that most significantly impact the economic performance of the Partnership. This conclusion was based on a qualitative analysis that considered the Partnership’s governance structure and the delegation of control provisions, which provide us the ability to control the operations of the Partnership. All financial statement activities associated with the VIE are captured within gathering, processing and storage, and terminaling and export segments (see Note 13, Segments). We currently do not have any independent assets or operations other than our interest in the Partnership. Our noncontrolling interest represents the approximate 93.7% interest in the Partnership retained by Hess and GIP. Prior to the Restructuring, our noncontrolling interest represented the 80% interest in the Joint Interest Assets retained by HIP.

8

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

New Accounting Pronouncements. On January 1, 2020, we adopted Accounting Standard Update (“ASU”) 2016-13, Financial Instruments – Credit Losses. This ASU makes changes to the impairment model for trade receivables, net investments in leases, debt securities, loans and certain other instruments. The standard requires the use of a forward-looking “expected loss” model compared with the “incurred loss” model. The adoption of this ASU did not have a material impact on our consolidated financial statements.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform, as a new Accounting Standards Codification (“ASC”) Topic, ASC 848. The purpose of ASC 848 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates, such as LIBOR, which is expected to be phased out at the end of calendar year 2021, to alternative reference rates. ASC 848 applies only to contracts, hedging relationships, debt arrangements and other transactions that reference a benchmark reference rate expected to be discontinued because of reference rate reform. ASC 848 contains optional expedients and exceptions for applying U.S. GAAP to transactions affected by this reform. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently assessing the impact of adopting this new guidance as well as when to adopt this guidance.

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.

9

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

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 |

10

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

|  | 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 |

11

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

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 |

12

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

Note 4. Related Party Transactions

Commercial Agreements

Effective January 1, 2014, we entered into long-term fee-based (i) gas gathering, (ii) crude oil gathering, (iii) gas processing and fractionation, (iv) storage services, and (v) terminal and export services agreements with certain subsidiaries of Hess. Effective January 1, 2019, in connection with the Hess Water Services Acquisition, we entered into long-term fee-based water services agreements with certain subsidiaries of Hess. Under our commercial agreements, we provide gathering, compression, processing, fractionation, storage, terminaling, loading, transportation and produced water disposal services to Hess, for which we receive a fee per barrel of crude oil, barrel of water, Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, delivered during each month, and Hess is obligated to provide us with minimum volumes of crude oil, water, natural gas and NGLs. These agreements also include inflation escalators and fee recalculation mechanisms that allow fees to be adjusted annually.

For the three and nine months ended September 30, 2020 and 2019, approximately 100% of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes contracted with Hess and delivered to us under these agreements. We retain control of our assets and the flow of volumes based on available capacity within our integrated gathering, processing and terminaling systems. Together with Hess, we are pursuing strategic relationships with third‑party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.

Revenues from contracts with customers on a disaggregated basis are as follows:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil and gas gathering services |  | $ | 118.7 |  |  | $ | 86.4 |  |  | $ | 349.2 |  |  | $ | 245.6 |
Water gathering and disposal services |  |  | 24.2 |  |  |  | 19.5 |  |  |  | 71.7 |  |  |  | 52.4 |
Processing and storage services |  |  | 90.1 |  |  |  | 74.0 |  |  |  | 273.7 |  |  |  | 207.8 |
Terminaling and export services |  |  | 31.7 |  |  |  | 35.0 |  |  |  | 130.5 |  |  |  | 88.7 |
Total revenues from contracts with customers |  | $ | 264.7 |  |  | $ | 214.9 |  |  | $ | 825.1 |  |  | $ | 594.5 |
Other income |  |  | 0.1 |  |  |  | - |  |  |  | 0.3 |  |  |  | 0.3 |
Total revenues |  | $ | 264.8 |  |  | $ | 214.9 |  |  | $ | 825.4 |  |  | $ | 594.8 |

During the three and nine months ended September 30, 2020, we earned $7.8 million and $11.9 million, respectively, of minimum volume shortfall fee payments, compared with $3.0 million and $6.5 million for the three and nine months ended September 30, 2019, respectively.

The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These third-party costs are included in Operating and maintenance expenses in the accompanying unaudited consolidated statements of operations.

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rail transportation costs |  | $ | 5.0 |  |  | $ | 12.0 |  |  | $ | 49.3 |  |  | $ | 24.1 |
Produced water trucking and disposal costs |  |  | 14.0 |  |  |  | 14.5 |  |  |  | 45.6 |  |  |  | 40.2 |
Electricity fees |  |  | 10.3 |  |  |  | 8.3 |  |  |  | 29.7 |  |  |  | 23.2 |
Total |  | $ | 29.3 |  |  | $ | 34.8 |  |  | $ | 124.6 |  |  | $ | 87.5 |

Omnibus and Employee Secondment Agreements

Under our omnibus and employee secondment agreements, Hess provides substantial operational and administrative services to us in support of our assets and operations. For the three and nine months ended September 30, 2020 and 2019, we had the following charges from Hess. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the fundamental nature of the services being performed for our operations.

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HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses |  | $ | 16.7 |  |  | $ | 13.4 |  |  | $ | 47.5 |  |  | $ | 36.3 |
General and administrative expenses |  |  | 3.9 |  |  | $ | 3.7 |  |  |  | 11.2 |  |  |  | 10.5 |
Total |  | $ | 20.6 |  |  | $ | 17.1 |  |  | $ | 58.7 |  |  | $ | 46.8 |

LM4 Agreements

Separately from our commercial agreements with Hess, we entered into a gas processing agreement with Little Missouri 4 (“LM4”), a 50/50 joint venture with Targa Resources Corp., under which we pay a processing fee per Mcf of natural gas and reimburse LM4 for our proportionate share of electricity costs. These processing fees are included in Operating and maintenance expenses in the accompanying consolidated statements of operations. In addition, we share profits and losses and receive distributions from LM4 under the LM4 amended and restated limited liability company agreement based on our ownership interest. For the three and nine months ended September 30, 2020 and 2019, we had the following activity related to our agreements with LM4:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Processing fee incurred |  | $ | 6.8 |  |  | $ | 0.9 |  |  | $ | 18.2 |  |  | $ | 0.9 |
Earnings from equity investments |  |  | 3.6 |  |  |  | 0.5 |  |  |  | 7.2 |  |  |  | 0.5 |
Distributions received from equity investments |  |  | 3.0 |  |  |  | - |  |  |  | 6.8 |  |  |  | - |

Note 5. Property, Plant and Equipment

Property, plant and equipment, at cost, is as follows:

|  | Estimated useful lives |  | September 30, 2020 |  |  | December 31, 2019 |
(in millions, except for number of years) |  |  |  |  |  |  |  |  |  |
Gathering assets |  |  |  |  |  |  |  |  |  |
Pipelines |  | 22 years |  | $ | 1,449.7 |  |  | $ | 1,352.7 |
Compressors, pumping stations and terminals |  | 22 to 25 years |  |  | 770.8 |  |  |  | 725.9 |
Gas plant assets |  |  |  |  |  |  |  |  |  |
Pipelines, pipes and valves |  | 22 to 25 years |  |  | 460.0 |  |  |  | 460.0 |
Equipment |  | 12 to 30 years |  |  | 428.3 |  |  |  | 428.2 |
Buildings |  | 35 years |  |  | 182.3 |  |  |  | 182.3 |
Processing and fractionation facilities |  | 25 years |  |  | 188.7 |  |  |  | 188.6 |
Logistics facilities and railcars |  | 20 to 25 years |  |  | 385.9 |  |  |  | 385.5 |
Storage facilities |  | 20 to 25 years |  |  | 19.5 |  |  |  | 19.5 |
Other |  | 20 to 25 years |  |  | 20.9 |  |  |  | 13.0 |
Construction-in-progress |  | N/A |  |  | 208.7 |  |  |  | 149.3 |
Total property, plant and equipment, at cost |  |  |  |  | 4,114.8 |  |  |  | 3,905.0 |
Accumulated depreciation |  |  |  |  | (1,011.5 | ) |  |  | (894.9 | )
Property, plant and equipment, net |  |  |  | $ | 3,103.3 |  |  | $ | 3,010.1 |

Note 6. Accrued Liabilities

Accrued liabilities are as follows:

|  | September 30, 2020 |  |  | December 31, 2019 |
(in millions) |  |  |  |  |  |  |  |
Accrued capital expenditures |  | $ | 18.5 |  |  | $ | 34.7 |
Accrued interest |  |  | 13.9 |  |  |  | 18.7 |
Other accruals |  |  | 25.4 |  |  |  | 35.3 |
Total |  | $ | 57.8 |  |  | $ | 88.7 |

14

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

Note 7. Debt and Interest Expense

Fixed‑Rate Senior Notes

As of September 30, 2020, the Partnership had $800.0 million of 5.625% fixed‑rate senior notes due 2026 that were issued to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on February 15 and August 15.

In addition, as of September 30, 2020, the Partnership had $550.0 million of 5.125% fixed‑rate senior notes due 2028 that were issued to qualified institutional investors. The notes are guaranteed by certain subsidiaries of the Partnership. Interest is payable semi‑annually on June 15 and December 15.

Each of the indentures for the 2026 and 2028 senior notes contains customary covenants that restrict our ability and the ability of our restricted subsidiaries to (i) declare or pay any dividend or make any other restricted payments; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00. As of September 30, 2020, we were in compliance with all debt covenants under the indentures.

In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company.

Credit Facilities

As of September 30, 2020, the Partnership had senior secured credit facilities (the “Credit Facilities”) consisting of a $1,000.0 million 5-year revolving credit facility and a fully drawn $400.0 million 5-year Term Loan A facility. Facility fees accrue on the total capacity of the revolving credit facility. Borrowings under the 5-year Term Loan A facility will generally bear interest at LIBOR plus the applicable margin ranging from 1.55% to 2.50%, while the applicable margin for the 5-year syndicated revolving credit facility ranges from 1.275% to 2.000%. Pricing levels for the facility fee and interest-rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. At September 30, 2020, borrowings of $178.0 million were drawn under the Partnership’s revolving credit facility, and borrowings of $400.0 million, excluding deferred issuance costs, were drawn under the Partnership’s Term Loan A facility.

The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes. The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the presently owned and after-acquired assets of the Partnership and its direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions. The Credit Facilities contain representations and warranties, affirmative and negative covenants and events of default that the Partnership considers to be customary for an agreement of this type, including a covenant that requires the Partnership to maintain a ratio of total debt to EBITDA (as defined in the Credit Facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to the Partnership obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter. As of September 30, 2020, the Partnership was in compliance with these financial covenants.

15

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

Fair Value Measurement

At September 30, 2020, our total debt had a carrying value of $1,903.0 million and had a fair value of approximately $1,938.6 million, based on Level 2 inputs in the fair value measurement hierarchy. The carrying value of the amounts under the Term Loan A facility and revolving credit facility at September 30, 2020, approximated their fair value. Any changes in interest rates do not impact cash outflows associated with fixed rate interest payments or settlement of debt principal, unless a debt instrument is repurchased prior to maturity.

Note 8. Partners’ Capital and Distributions

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash, as defined in the partnership agreement, to shareholders of record on the applicable record date. The following table details the distributions declared and/or paid for the periods presented:

z

Period |  | Record Date |  | Distribution Date |  | Distribution per Common and Subordinated Unit/Class A share |
First Quarter 2019 |  | May 3, 2019 |  | May 14, 2019 |  | $ | 0.3833 |
Second Quarter 2019 |  | August 5, 2019 |  | August 13, 2019 |  | $ | 0.3970 |
Third Quarter 2019 |  | November 4, 2019 |  | November 13, 2019 |  | $ | 0.4112 |
Fourth Quarter 2019 |  | February 6, 2020 |  | February 14, 2020 |  | $ | 0.4258 |
First Quarter 2020 |  | May 4, 2020 |  | May 14, 2020 |  | $ | 0.4310 |
Second Quarter 2020 |  | August 6, 2020 |  | August 14, 2020 |  | $ | 0.4363 |
Third Quarter 2020(1) |  | November 5, 2020 |  | November 13, 2020 |  | $ | 0.4417 |

(1) For more information, see Note 14, Subsequent Events.

Note 9. Equity‑Based Compensation

Equity‑based award activity for the nine months ended September 30, 2020 is as follows:

|  |  |  |  |  | Weighted Average |
|  |  |  |  |  | Award Date |
|  | Number of Shares |  |  | Fair Value |
Outstanding and unvested shares at December 31, 2019 |  |  | 136,060 |  |  | $ | 21.95 |
Granted |  |  | 175,888 |  |  |  | 10.71 |
Forfeited |  |  | (15,951 | ) |  |  | 14.84 |
Vested |  |  | (67,653 | ) |  |  | 21.96 |
Outstanding and unvested shares at September 30, 2020 |  |  | 228,344 |  |  | $ | 13.78 |

As of September 30, 2020, $2.1 million of compensation cost related to unvested restricted shares awarded under our long-term incentive plan remains to be recognized over an expected weighted‑average period of 1.9 years.

Note 10. Earnings per Share/Limited Partner Unit

Earnings per limited partner unit prior to the Restructuring on December 16, 2019, were computed by dividing the respective limited partners’ interest in net income attributable to Hess Midstream Partners LP by the weighted average number of common and subordinated units outstanding. Because we had more than one class of participating securities, we used the two‑class method when calculating earnings per limited partner unit. The classes of participating securities included common units, subordinated units, general partner interest and incentive distribution rights. Our net income includes earnings related to businesses acquired through transactions between entities under common control for periods prior to their acquisition by us. We have allocated these pre-acquisition earnings to Net income attributable to net parent investment.

Subsequent to the Restructuring, we calculate earnings per Class A Share and we do not have any other participating securities. Approximately 100% of income tax expense is attributed to earnings of Class A Shares. Class B Units of the Partnership together with the equal number of Class B Shares of the Company are convertible to Class A Shares of the Company on a one-for-one basis. In addition, our restricted equity-based awards may have a dilutive effect on our earnings per share. Diluted earnings per Class A Share are calculated using the “treasury stock method” or “if-converted method”, whichever is more dilutive.

16

PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

| Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in millions, except per share amounts) | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net income | $ | 115.8 |  |  | $ | 87.4 |  |  | $ | 352.6 |  |  | $ | 242.6 |
Less: Net income attributable to net parent investment |  | - |  |  |  | (13.0 | ) |  |  | - |  |  |  | (44.0 | )
Less: Net income attributable to noncontrolling interest |  | 110.2 |  |  | 81.3 |  |  |  | 335.2 |  |  | 232.6 |
Net income attributable to Hess Midstream LP |  | 5.6 |  |  |  | 19.1 |  |  |  | 17.4 |  |  |  | 54.0 |
Less: General partner's interest in net income prior to the Restructuring |  | - |  |  |  | 1.3 |  |  |  | - |  |  |  | 3.1 |
Limited partners' interest in net income | $ | 5.6 |  |  | $ | 17.8 |  |  | $ | 17.4 |  |  | $ | 50.9 |
Common unitholders' interest in net income attributable to Hess Midstream LP |  |  |  |  | $ | 8.9 |  |  |  |  |  |  | $ | 25.5 |
Subordinated unitholders' interest in net income attributable to Hess Midstream LP |  |  |  |  | $ | 8.9 |  |  |  |  |  |  | $ | 25.4 |
Net income attributable to Hess Midstream LP per Class A share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic: | $ | 0.31 |  |  |  |  |  |  | $ | 0.97 |  |  |  |  |
Diluted: | $ | 0.31 |  |  |  |  |  |  | $ | 0.95 |  |  |  |  |
Net income attributable to Hess Midstream LP per limited partner unit (basic and diluted): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  |  |  | $ | 0.33 |  |  |  |  |  |  | $ | 0.93 |
Subordinated |  |  |  |  | $ | 0.33 |  |  |  |  |  |  | $ | 0.93 |
Weighted average Class A shares outstanding subsequent to the Restructuring: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  | 18.0 |  |  |  |  |  |  |  | 18.0 |  |  |  |  |
Diluted: |  | 18.1 |  |  |  |  |  |  |  | 18.1 |  |  |  |  |
Weighted average limited partner units outstanding prior to the Restructuring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  |  |  |  | 27.3 |  |  |  |  |  |  |  | 27.3 |
Subordinated |  |  |  |  |  | 27.3 |  |  |  |  |  |  |  | 27.3 |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common |  |  |  |  |  | 27.5 |  |  |  |  |  |  |  | 27.5 |
Subordinated |  |  |  |  |  | 27.3 |  |  |  |  |  |  |  | 27.3 |

For the three and nine months ended September 30, 2020, the weighted average number of Class A shares outstanding included 98,306 and 76,198 dilutive restricted shares, respectively. For the three and nine months ended September 30, 2019, the weighted average number of common units outstanding included 140,197 and 135,060 dilutive restricted units, respectively.

Note 11. Concentration of Credit Risk

Hess represented approximately 100% of our total revenues and accounts receivable for the three and nine months ended September 30, 2020 and 2019.

Note 12. Commitments and Contingencies

Environmental Contingencies

The Company is subject to federal, state and local laws and regulations relating to the environment. As of September 30, 2020, our reserves for estimated remediation liabilities included in Accrued liabilities and Other noncurrent liabilities were $1.3 million and $3.0 million, respectively, compared with $0.7 million and $2.1 million, respectively, as of December 31, 2019.

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PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

Legal Proceedings

In the ordinary course of business, the Company is from time to time party to various judicial and administrative proceedings. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of a known contingency, we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.

As of September 30, 2020 and December 31, 2019, we did not have material accrued liabilities for legal contingencies. Based on currently available information, we believe it is remote that the outcome of known matters would have a material adverse impact on our financial condition, results of operations or cash flows.

Note 13. Segments

Our operations are located in the United States and are organized into three reportable segments: (1) gathering, (2) processing and storage and (3) terminaling and export. Our reportable segments comprise the structure used by our Chief Operating Decision Maker (“CODM”) to make key operating decisions and assess performance. These segments are strategic business units with differing products and services. Our CODM evaluates the segments’ operating performance based on multiple measures including Adjusted EBITDA, defined as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and our proportional share of depreciation of equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non-cash, non‑recurring items, if applicable.

The following tables reflect certain financial data for each reportable segment:

|  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the Three Months Ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues and other income |  | $ | 142.9 |  |  | $ | 90.2 |  |  | $ | 31.7 |  |  | $ | - |  |  | $ | 264.8 |
Net income (loss) |  |  | 72.4 |  |  |  | 50.7 |  |  |  | 18.0 |  |  |  | (25.3 | ) |  |  | 115.8 |
Net income (loss) attributable to Hess Midstream LP |  |  | 4.5 |  |  |  | 3.2 |  |  |  | 1.1 |  |  |  | (3.2 | ) |  |  | 5.6 |
Depreciation expense |  |  | 24.2 |  |  |  | 11.2 |  |  |  | 4.1 |  |  |  | - |  |  |  | 39.5 |
Proportional share of equity affiliates' depreciation |  |  | - |  |  |  | 1.3 |  |  |  | - |  |  |  | - |  |  |  | 1.3 |
Income from equity investments |  |  | - |  |  |  | 3.6 |  |  |  | - |  |  |  | - |  |  |  | 3.6 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 23.2 |  |  |  | 23.2 |
Income tax expense (benefit) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1.8 |  |  |  | 1.8 |
Adjusted EBITDA |  |  | 96.6 |  |  |  | 63.2 |  |  |  | 22.1 |  |  |  | (0.3 | ) |  |  | 181.6 |
Capital expenditures* |  |  | 30.2 |  |  |  | 36.1 |  |  |  | 0.1 |  |  |  | - |  |  |  | 66.4 |
|  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the Three Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues and other income |  | $ | 105.9 |  |  | $ | 74.0 |  |  | $ | 35.0 |  |  | $ | - |  |  | $ | 214.9 |
Net income (loss) |  |  | 46.5 |  |  |  | 42.8 |  |  |  | 14.3 |  |  |  | (16.2 | ) |  |  | 87.4 |
Net income (loss) attributable to Hess Midstream LP |  |  | 9.1 |  |  |  | 8.8 |  |  |  | 2.8 |  |  |  | (1.6 | ) |  |  | 19.1 |
Depreciation expense |  |  | 20.8 |  |  |  | 11.2 |  |  |  | 4.0 |  |  |  | - |  |  |  | 36.0 |
Proportional share of equity affiliates' depreciation |  |  | - |  |  |  | 0.5 |  |  |  | - |  |  |  | - |  |  |  | 0.5 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12.4 |  |  |  | 12.4 |
Adjusted EBITDA |  |  | 67.3 |  |  |  | 54.5 |  |  |  | 18.3 |  |  |  | (3.8 | ) |  |  | 136.3 |
Capital expenditures* |  |  | 96.7 |  |  |  | 15.0 |  |  |  | 0.4 |  |  |  | - |  |  |  | 112.1 |

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PART I – FINANCIAL INFORMATION (CONT’D)

HESS MIDSTREAM LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Table of Contents

|  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the Nine Months Ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues and other income |  | $ | 420.9 |  |  | $ | 274.0 |  |  | $ | 130.5 |  |  | $ | - |  |  | $ | 825.4 |
Net income (loss) |  |  | 220.0 |  |  |  | 159.2 |  |  |  | 54.6 |  |  |  | (81.2 | ) |  |  | 352.6 |
Net income (loss) attributable to Hess Midstream LP |  |  | 13.9 |  |  |  | 10.0 |  |  |  | 3.4 |  |  |  | (9.9 | ) |  |  | 17.4 |
Depreciation expense |  |  | 71.2 |  |  |  | 33.6 |  |  |  | 12.1 |  |  |  | - |  |  |  | 116.9 |
Proportional share of equity affiliates' depreciation |  |  | - |  |  |  | 3.8 |  |  |  | - |  |  |  | - |  |  |  | 3.8 |
Income from equity investments |  |  | - |  |  |  | 7.2 |  |  |  | - |  |  |  | - |  |  |  | 7.2 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 71.3 |  |  |  | 71.3 |
Income tax expense (benefit) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5.2 |  |  |  | 5.2 |
Gain on sale of property, plant and equipment |  |  | 0.1 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.1 |
Adjusted EBITDA |  |  | 291.1 |  |  |  | 196.6 |  |  |  | 66.7 |  |  |  | (4.7 | ) |  |  | 549.7 |
Capital expenditures* |  |  | 71.9 |  |  |  | 129.9 |  |  |  | 0.4 |  |  |  | - |  |  |  | 202.2 |
|  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the Nine Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues and other income |  | $ | 298.0 |  |  | $ | 208.0 |  |  | $ | 88.8 |  |  | $ | - |  |  | $ | 594.8 |
Net income (loss) |  |  | 132.5 |  |  |  | 124.2 |  |  |  | 38.8 |  |  |  | (52.9 | ) |  |  | 242.6 |
Net income (loss) attributable to Hess Midstream LP |  |  | 25.8 |  |  |  | 25.4 |  |  |  | 7.8 |  |  |  | (5.0 | ) |  |  | 54.0 |
Depreciation expense |  |  | 59.5 |  |  |  | 33.5 |  |  |  | 12.0 |  |  |  | - |  |  |  | 105.0 |
Proportional share of equity affiliates' depreciation |  |  | - |  |  |  | 0.5 |  |  |  | - |  |  |  | - |  |  |  | 0.5 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 44.2 |  |  |  | 44.2 |
Adjusted EBITDA |  |  | 192.0 |  |  |  | 158.2 |  |  |  | 50.8 |  |  |  | (8.7 | ) |  |  | 392.3 |
Capital expenditures* |  |  | 284.2 |  |  |  | 23.7 |  |  |  | 0.1 |  |  |  | - |  |  |  | 308.0 |

*Includes acquisition, expansion and maintenance capital expenditures.

Total assets for the reportable segments are as follows:

|  | September 30, 2020 |  |  | December 31, 2019 |
(in millions) |  |  |  |  |  |  |  |
Gathering |  | $ | 1,862.6 |  |  | $ | 1,844.9 |
Processing and Storage(1) |  |  | 1,153.7 |  |  |  | 1,055.1 |
Terminaling and Export |  |  | 296.1 |  |  |  | 310.7 |
Interest and Other |  |  | 59.3 |  |  |  | 67.0 |
Total assets |  | $ | 3,371.7 |  |  | $ | 3,277.7 |

(1) | Includes investment in equity investees of $108.2 million as of September 30, 2020 and $107.8 as of December 31, 2019.

Note 14. Subsequent Events

On October 26, 2020, the board of directors of our general partner declared a quarterly cash distribution of $0.4417 per Class A share for the quarter ended September 30, 2020, a 1.2% increase compared to the distribution on the Class A shares for the quarter ended June 30, 2020, which equals a 5% increase on an annualized basis. The distribution will be payable on November 13, 2020, to shareholders of record as of the close of business on November 5, 2020.

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PART I – FINANCIAL INFORMATION (CONT’D)

Table of Contents

Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited financial statements and accompanying footnotes included under Item 1. Financial Statements and in conjunction with the audited consolidated financial statements and accompanying footnotes in our Annual Report on Form 10‑K for the year ended December 31, 2019 (our “2019 Annual Report”).

Unless otherwise stated or the context otherwise indicates, references in this report to “Hess Midstream Operations LP,” “the Partnership,” “us,” “we” or similar terms, when referring to periods between April 10, 2017 and December 16, 2019, refer to Hess Midstream Operations LP (formerly known as Hess Midstream Partners LP, the predecessor registrant to Hess Midstream LP), including its consolidated subsidiaries. All references to “Hess Midstream LP,” “the Company,” “us,” “our,” “we” or similar terms, when referring to periods subsequent to December 16, 2019, refer to Hess Midstream LP, including its consolidated subsidiaries.

This discussion contains forward‑looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in our 2019 Annual Report and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020.

Overview

We are a fee-based, growth-oriented, limited partnership formed by Hess Infrastructure Partners GP LLC (“HIP GP LLC”) and our general partner to own, operate, develop and acquire a diverse set of midstream assets and provide fee-based services to Hess Corporation (“Hess”) and third-party customers. We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner. Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken.

In 2019, we announced plans to expand natural gas processing capacity at the Tioga Gas Plant (“TGP”) by 150 MMcf/d for total processing capacity of 400 MMcf/d for expected capital expenditures of approximately $150 million. The TGP expansion project is well advanced, with facility construction expected to be completed by the end of 2020. Incremental gas processing capacity is expected to be available in 2021 upon completion of a scheduled plant maintenance turnaround, during which the expansion and residue and natural gas liquid (“NGL”) takeaway pipelines will be tied in.

On December 16, 2019, the Company and the Partnership completed the transactions (the “Restructuring”) contemplated by the Partnership Restructuring Agreement, dated October 3, 2019, by and among the Company, the Partnership and the other parties thereto. As a result of the Restructuring, the Company was delegated control of the Partnership and replaced the Partnership as its publicly traded successor. Prior to the Restructuring, the Company and the Partnership were indirectly controlled by HIP GP LLC, the general partner of Hess Infrastructure Partners LP (“HIP”). HIP was originally formed as a joint venture between Hess and GIP II Blue Holding Partnership, L.P. (“GIP” and together with Hess, the “Sponsors”) and owned an 80% economic interest in certain of the Partnership’s existing assets (the “Joint Interest Assets”), a 100% interest in certain other businesses, including Hess Water Services LLC (“Hess Water Services”) and a 100% interest in Hess Midstream Partners GP LP (“MLP GP LP”), which held all of the Partnership’s outstanding incentive distribution rights and the general partner interest in the Partnership, and controlled the Partnership.

Pursuant to the Restructuring, the Partnership acquired HIP, including HIP’s 80% interest in the Joint Interest Assets, 100% interest in Hess Water Services and the outstanding economic general partner interest 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 (“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. After consummation of the Restructuring, the Sponsors and their affiliates received an aggregate of 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 aggregate cash consideration of $601.8 million.

The acquisition of HIP by the Partnership, including its 80% economic interest in the Joint Interest Assets and 100% interest in Hess Water Services, was accounted for as an acquisition of a business under common control. Accordingly, our consolidated financial statements prior to the acquisition date of December 16, 2019 were retrospectively recast to include the financial results of HIP.

Our assets and operations are organized into the following three reportable segments: (1) gathering (2) processing and storage and (3) terminaling and export.

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Our Ongoing Response to Global Pandemic and Market Conditions

The coronavirus (“COVID-19”) global pandemic continues to have a profound impact on society and industry. The Company’s first priority in the midst of the COVID-19 pandemic remains the health and safety of the Company’s workforce and local communities. A multidisciplinary emergency response team has been established in coordination with Hess that has been overseeing plans and precautions to reduce the risks of COVID-19 in the work environment while maintaining business continuity based on the most current recommendations by government and public health agencies. The Company and Hess have implemented a variety of health and safety measures including enhanced cleaning procedures and modified work practices such as travel restrictions, health screenings, reduced personnel at work sites wherever this can be done safely, and remote working arrangements for office workers.

In addition to the global health concerns of COVID-19, the pandemic has severely impacted demand for oil. In response to the resulting sharp decline in oil prices, Hess reduced its rig count in the Bakken from 6 rigs to 1 rig during the second quarter of 2020. In addition, third parties in the Bakken have also curtailed production and reduced drilling activity. Our contract structure is expected to largely offset the impact of the reduction in volumes on our financial performance metrics, as our minimum volume commitments provide minimum levels of cash flows and the fee recalculation mechanisms under our agreements support our cash flow stability. See “Other Factors Expected to Significantly Affect Our Future Results.”

Consistent with Hess’ expected reduced activity and our focus on preserving balance sheet strength, in March 2020 we announced a 20% reduction to our 2020 expansion capital program, primarily due to fewer expected well connects and the deferral or cancellation of certain gas compression activities, and a 55% reduction to our 2021 expansion capital program. In order to preserve long-term sustainability and financial strength, we also lowered our targeted annualized distribution growth rate per share from 15% to 5% and extended this growth target through 2022.

In July 2020, we announced that the planned maintenance turnaround at the TGP plant originally scheduled for the third quarter of 2020 was deferred until 2021 to ensure safe and timely execution in light of the COVID-19 pandemic. The TGP expansion project is well advanced, with facility construction expected to be completed as previously announced by the end of 2020 and brought online in 2021 upon completion of the maintenance turnaround.

Third Quarter Results

Significant financial and operating highlights for the third quarter of 2020 included:

| • | Consolidated net income of $115.8 million;

| • | Net income attributable to Hess Midstream LP after deduction for noncontrolling interest of $5.6 million, or $0.31 per Class A share;

| • | Net cash provided by operating activities of $149.6 million;

| • | Adjusted EBITDA of $181.6 million;

| • | Distributable cash flow of $156.2 million;

| • | Free cash flow of $115.2 million;

| • | Cash distribution of $0.4417 per Class A share, declared on October 26, 2020;

| • | Throughput volumes increased across all segments compared with the prior-year quarter, including 14% for gas processing and 8% for crude oil terminaling, driven by higher Hess production and increased gas capture.

For additional information regarding our non‑GAAP financial measures, see “How We Evaluate Our Operations” and “Reconciliation of Non‑GAAP Financial Measures” below.

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How We Generate Revenues

We generate substantially all of our revenues by charging fees for gathering, compressing and processing natural gas and fractionating NGLs; gathering, terminaling, loading and transporting crude oil and NGLs; storing and terminaling propane; and gathering and disposing of produced water. We have entered into long‑term, fee‑based commercial agreements with Hess effective January 1, 2014, for oil and gas services agreements, and effective January 1, 2019, for water services agreements.

Except for the water services agreements and except for a certain gathering sub-system, as described below, each of our commercial agreements with Hess has an initial 10-year term and we have the unilateral right to renew each of these agreements for one additional 10-year term. Initial term for the water services agreements is 14 years and the secondary term is 10 years. In September 2018, we amended our gas gathering and gas processing and fractionation agreements to enable us to provide certain services to Hess in respect of volumes to be delivered to and processed at the LM4 plant. The amended and restated gas gathering agreement also extends the initial term of the gathering agreement with respect to a certain gathering sub-system by 5 years to provide for a 15-year initial term and decreases the secondary term for that gathering sub-system by 5 years to provide for a 5-year secondary term. These agreements include dedications covering substantially all of Hess’ existing and future owned or controlled production in the Bakken, minimum volume commitments, inflation escalators and fee recalculation mechanisms, all of which are intended to provide us with cash flow stability and growth, as well as downside risk protection. In particular, Hess’ minimum volume commitments under our commercial agreements provide minimum levels of cash flows and the fee recalculation mechanisms under the agreements allow fees to be adjusted annually to provide us with cash flow stability. During the secondary term of the agreements, the fee recalculation model will be replaced by an inflation-based fee structure. Fees for the first year of the secondary term will be determined based on the average fees paid by Hess under the applicable agreement during the last three years of the initial term and adjusted annually based on the percentage change in the consumer price index. Our revenues also include revenues from third-party volumes contracted with Hess and delivered to us under these commercial agreements with Hess, as well as pass-through third-party rail transportation costs, third-party produced water trucking and disposal costs and electricity fees for which we recognize revenues in an amount equal to the costs. Together with Hess, we are pursuing strategic relationships with third-party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.

How We Evaluate Our Operations

Our management uses a variety of financial and operating metrics to analyze our operating results and profitability. These metrics include (i) volumes, (ii) operating and maintenance expenses, (iii) Adjusted EBITDA, (iv) free cash flow, and (v) distributable cash flow.

Volumes. The amount of revenues we generate primarily depends on the volumes of crude oil, natural gas, NGLs and produced water that we handle at our gathering, processing, terminaling, storage facilities and disposal facilities. These volumes are affected primarily by the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets, including changes in crude oil prices, which may further affect volumes delivered by Hess. Although Hess has committed to minimum volumes under our commercial agreements described above, our results of operations will be impacted by our ability to:

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| • | utilize the remaining uncommitted capacity on, or add additional capacity to, our existing assets, and optimize our existing assets;

| • | identify and execute expansion projects, and capture incremental throughput volumes from Hess and third parties for these expanded facilities;

| • | increase throughput volumes at our Ramberg Terminal Facility, Tioga Rail Terminal and the Johnson’s Corner Header System by interconnecting with new or existing third‑party gathering pipelines; and

| • | increase gas throughput volumes by interconnecting with new or existing third‑party gathering pipelines.

Operating and Maintenance Expenses. Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses are comprised primarily of costs charged to us under our omnibus agreement and employee secondment agreement, third‑party contractor costs, utility costs, insurance premiums, third‑party service provider costs, related property taxes and other non‑income taxes and maintenance expenses, such as expenditures to repair, refurbish and replace storage facilities and to maintain equipment reliability, integrity and safety. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of substantial expenses, such as gas plant turnarounds. We seek to manage our maintenance expenditures by scheduling periodic maintenance on our assets in order to minimize significant variability in these expenditures and minimize their impact on our cash flow.

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Adjusted EBITDA, Free Cash Flow and Distributable Cash Flow. We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and our proportional share of depreciation of our equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non‑cash, non‑recurring items, if applicable. We define free cash flow as Adjusted EBITDA less capital expenditures, excluding acquisition capital expenditures. We use distributable cash flow to analyze our liquidity and performance. We define distributable cash flow as Adjusted EBITDA less net interest, excluding amortization of deferred financing costs, cash paid for federal and state income taxes and maintenance capital expenditures. Distributable cash flow does not reflect changes in working capital balances.

Adjusted EBITDA, free cash flow and distributable cash flow are non‑GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

| • | our operating performance as compared to other publicly traded companies in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;

| • | the ability of our assets to generate sufficient cash flow to make distributions to our shareholders;

| • | our ability to incur and service debt and fund capital expenditures; and

| • | the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that the presentation of Adjusted EBITDA, free cash flow and distributable cash flow provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA, free cash flow and distributable cash flow are net income (loss) and net cash provided by (used in) operating activities. Adjusted EBITDA, free cash flow and distributable cash flow should not be considered as alternatives to GAAP net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA, free cash flow and distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA, free cash flow or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA, free cash flow and distributable cash flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA, free cash flow and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

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Results of Operations

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Results of operations for the three months ended September 30, 2020 and 2019 are presented below (in millions, unless otherwise noted). The financial information for 2019 has been retrospectively adjusted for the acquisition of HIP. See Note 3. Acquisitions in Item 1. Financial Statements.

For the Three Months Ended September 30, 2020 |  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated Hess Midstream LP |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  | $ | 142.9 |  |  | $ | 90.1 |  |  | $ | 31.7 |  |  | $ | - |  |  | $ | 264.7 |
Other income |  |  | - |  |  |  | 0.1 |  |  |  | - |  |  |  | - |  |  |  | 0.1 |
Total revenues |  |  | 142.9 |  |  |  | 90.2 |  |  |  | 31.7 |  |  |  | - |  |  |  | 264.8 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses (exclusive of depreciation shown separately below) |  |  | 44.1 |  |  |  | 30.4 |  |  |  | 9.4 |  |  |  | - |  |  |  | 83.9 |
Depreciation expense |  |  | 24.2 |  |  |  | 11.2 |  |  |  | 4.1 |  |  |  | - |  |  |  | 39.5 |
General and administrative expenses |  |  | 2.2 |  |  |  | 1.5 |  |  |  | 0.2 |  |  |  | 0.3 |  |  |  | 4.2 |
Total costs and expenses |  |  | 70.5 |  |  |  | 43.1 |  |  |  | 13.7 |  |  |  | 0.3 |  |  |  | 127.6 |
Income (loss) from operations |  |  | 72.4 |  |  |  | 47.1 |  |  |  | 18.0 |  |  |  | (0.3 | ) |  |  | 137.2 |
Income from equity investments |  |  | - |  |  |  | 3.6 |  |  |  | - |  |  |  | - |  |  |  | 3.6 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 23.2 |  |  |  | 23.2 |
Income (loss) before income tax expense (benefit) |  |  | 72.4 |  |  |  | 50.7 |  |  |  | 18.0 |  |  |  | (23.5 | ) |  |  | 117.6 |
Income tax expense (benefit) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1.8 |  |  |  | 1.8 |
Net income (loss) |  |  | 72.4 |  |  |  | 50.7 |  |  |  | 18.0 |  |  |  | (25.3 | ) |  |  | 115.8 |
Less: Net income (loss) attributable to noncontrolling interest |  |  | 67.9 |  |  |  | 47.5 |  |  |  | 16.9 |  |  |  | (22.1 | ) |  |  | 110.2 |
Net income (loss) attributable to Hess Midstream LP |  | $ | 4.5 |  |  | $ | 3.2 |  |  | $ | 1.1 |  |  | $ | (3.2 | ) |  | $ | 5.6 |
Throughput volumes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gas gathering (MMcf/d)(1) |  |  | 316 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 316 |
Crude oil gathering (MBbl/d)(2) |  |  | 138 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 138 |
Gas processing (MMcf/d)(1) |  |  |  |  |  |  | 296 |  |  |  |  |  |  |  |  |  |  |  | 296 |
Crude oil terminaling (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 141 |  |  |  |  |  |  |  | 141 |
NGL loading (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 12 |  |  |  |  |  |  |  | 12 |
Water gathering (MBbl/d)(2) |  |  | 78 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 78 |

(1) Million cubic feet per day
(2) Thousand barrels per day

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For the Three Months Ended September 30, 2019 |  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated Hess Midstream LP |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  | $ | 105.9 |  |  | $ | 74.0 |  |  | $ | 35.0 |  |  | $ | - |  |  | $ | 214.9 |
Total revenues |  |  | 105.9 |  |  |  | 74.0 |  |  |  | 35.0 |  |  |  | - |  |  |  | 214.9 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses (exclusive of depreciation shown separately below) |  |  | 36.1 |  |  |  | 19.3 |  |  |  | 16.5 |  |  |  | - |  |  |  | 71.9 |
Depreciation expense |  |  | 20.8 |  |  |  | 11.2 |  |  |  | 4.0 |  |  |  | - |  |  |  | 36.0 |
General and administrative expenses |  |  | 2.5 |  |  |  | 1.2 |  |  |  | 0.2 |  |  |  | 3.8 |  |  |  | 7.7 |
Total costs and expenses |  |  | 59.4 |  |  |  | 31.7 |  |  |  | 20.7 |  |  |  | 3.8 |  |  |  | 115.6 |
Income (loss) from operations |  |  | 46.5 |  |  |  | 42.3 |  |  |  | 14.3 |  |  |  | (3.8 | ) |  |  | 99.3 |
Income from equity investments |  |  | - |  |  |  | 0.5 |  |  |  | - |  |  |  | - |  |  |  | 0.5 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12.4 |  |  |  | 12.4 |
Net Income (loss) |  |  | 46.5 |  |  |  | 42.8 |  |  |  | 14.3 |  |  |  | (16.2 | ) |  |  | 87.4 |
Less: Net income (loss) attributable to net parent investment |  |  | 1.6 |  |  |  | - |  |  |  | - |  |  |  | (14.6 | ) |  |  | (13.0 | )
Less: Net income (loss) attributable to noncontrolling interest |  |  | 35.8 |  |  |  | 34.0 |  |  |  | 11.5 |  |  |  | - |  |  |  | 81.3 |
Net income (loss) attributable to Hess Midstream Partners LP |  | $ | 9.1 |  |  | $ | 8.8 |  |  | $ | 2.8 |  |  | $ | (1.6 | ) |  | $ | 19.1 |
Throughput volumes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gas gathering (MMcf/d)(1) |  |  | 270 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 270 |
Crude oil gathering (MBbl/d)(2) |  |  | 119 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 119 |
Gas processing (MMcf/d)(1) |  |  |  |  |  |  | 259 |  |  |  |  |  |  |  |  |  |  |  | 259 |
Crude oil terminaling (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 130 |  |  |  |  |  |  |  | 130 |
NGL loading (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 16 |  |  |  |  |  |  |  | 16 |
Water gathering (MBbl/d)(2) |  |  | 45 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 45 |

(1) | Million cubic feet per day

(2) | Thousand barrels per day

Gathering

Revenues and other income increased $37.0 million in the third quarter of 2020 compared to the third quarter of 2019, of which $15.6 million is attributable to higher gas gathering and compression volumes and $3.9 million is attributable to higher crude oil gathering volumes driven by higher Hess production, gas capture and increasing minimum volume commitment levels. In addition, $11.0 million of the increase in revenue is attributable to higher tariff rates, $4.7 million is attributable to higher water services revenue and $1.8 million is attributable to pass-through electricity fees. Operating and maintenance expenses increased $8.0 million, of which $5.7 million is attributable to higher maintenance costs on our expanded infrastructure, including employee costs, $1.8 million is attributable to higher pass-through electricity costs due to additional compressors coming online and $1.0 million is attributable to higher insurance and property taxes, offset by $0.5 million lower produced water pass-through trucking and disposal costs. Depreciation expense increased $3.4 million due to new compressors, produced water disposal facilities and other new gathering assets being brought into service.

Processing and Storage

Revenues and other income increased $16.2 million in the third quarter of 2020 compared to the third quarter of 2019, of which $9.7 million is attributable to higher volumes driven by higher Hess production, gas capture and placing LM4 in service in the third quarter of 2019. The remaining increase of $6.5 million is primarily attributable to higher tariff rates.

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Operating and maintenance expenses increased $11.1 million, of which $5.9 million is attributable to LM4 processing fees and $2.1 million is attributable to higher maintenance activity. The remaining increase of $3.1 million is primarily attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

Terminaling and Export

Revenues and other income decreased $3.3 million in the third quarter of 2020 compared to the third quarter of 2019, of which $7.0 million is attributable to lower rail transportation pass‑through revenues. This decrease is offset by $2.4 million attributable to higher tariff rates and $1.3 million attributable to higher throughput volumes at our terminals driven by higher Hess production and increasing minimum volume commitment levels. Operating and maintenance expenses decreased $7.1 million primarily attributable to lower rail transportation pass-through costs.

Interest and Other

General and administrative expenses decreased $3.5 million in the third quarter of 2020 compared to the third quarter of 2019 primarily due to costs associated with the Restructuring. Interest expense, net of interest income, increased $10.8 million in the same periods primarily attributable to the $550 million 5.125% fixed-rate senior notes issued in connection with the Restructuring and higher borrowings under our credit facilities. Income tax expense of $1.8 million in 2020 is the result of being a separate taxable entity.

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Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Results of operations for the nine months ended September 30, 2020 and 2019 are presented below (in millions, unless otherwise noted). The financial information for 2019 has been retrospectively adjusted for the acquisition of HIP. See Note 3. Acquisitions in Item 1. Financial Statements.

For the Nine Months Ended September 30, 2020 |  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated Hess Midstream LP |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  | $ | 420.9 |  |  | $ | 273.7 |  |  | $ | 130.5 |  |  | $ | - |  |  | $ | 825.1 |
Other income |  |  | - |  |  |  | 0.3 |  |  |  | - |  |  |  | - |  |  |  | 0.3 |
Total revenues |  |  | 420.9 |  |  |  | 274.0 |  |  |  | 130.5 |  |  |  | - |  |  |  | 825.4 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses (exclusive of depreciation shown separately below) |  |  | 124.0 |  |  |  | 83.6 |  |  |  | 63.2 |  |  |  | - |  |  |  | 270.8 |
Depreciation expense |  |  | 71.2 |  |  |  | 33.6 |  |  |  | 12.1 |  |  |  | - |  |  |  | 116.9 |
General and administrative expenses |  |  | 5.8 |  |  |  | 4.8 |  |  |  | 0.6 |  |  |  | 4.7 |  |  |  | 15.9 |
Total costs and expenses |  |  | 201.0 |  |  |  | 122.0 |  |  |  | 75.9 |  |  |  | 4.7 |  |  |  | 403.6 |
Income (loss) from operations |  |  | 219.9 |  |  |  | 152.0 |  |  |  | 54.6 |  |  |  | (4.7 | ) |  |  | 421.8 |
Income from equity investments |  |  | - |  |  |  | 7.2 |  |  |  | - |  |  |  | - |  |  |  | 7.2 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 71.3 |  |  |  | 71.3 |
Gain on sale of property, plant and equipment |  |  | 0.1 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 0.1 |
Income (loss) before income tax expense (benefit) |  |  | 220.0 |  |  |  | 159.2 |  |  |  | 54.6 |  |  |  | (76.0 | ) |  |  | 357.8 |
Income tax expense (benefit) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5.2 |  |  |  | 5.2 |
Net income (loss) |  |  | 220.0 |  |  |  | 159.2 |  |  |  | 54.6 |  |  |  | (81.2 | ) |  |  | 352.6 |
Less: Net income (loss) attributable to noncontrolling interest |  |  | 206.1 |  |  |  | 149.2 |  |  |  | 51.2 |  |  |  | (71.3 | ) |  |  | 335.2 |
Net income (loss) attributable to Hess Midstream LP |  | $ | 13.9 |  |  | $ | 10.0 |  |  | $ | 3.4 |  |  | $ | (9.9 | ) |  | $ | 17.4 |
Throughput volumes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gas gathering (MMcf/d)(1) |  |  | 320 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 320 |
Crude oil gathering (MBbl/d)(2) |  |  | 143 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 143 |
Gas processing (MMcf/d)(1) |  |  |  |  |  |  | 302 |  |  |  |  |  |  |  |  |  |  |  | 302 |
Crude oil terminaling (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 149 |  |  |  |  |  |  |  | 149 |
NGL loading (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 14 |  |  |  |  |  |  |  | 14 |
Water gathering (MBbl/d)(2) |  |  | 66 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 66 |
(1) Million cubic feet per day
(2) Thousand barrels per day

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For the Nine Months Ended September 30, 2019 |  | Gathering |  |  | Processing and Storage |  |  | Terminaling and Export |  |  | Interest and Other |  |  | Consolidated Hess Midstream LP |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  | $ | 298.0 |  |  | $ | 207.8 |  |  | $ | 88.7 |  |  | $ | - |  |  | $ | 594.5 |
Other income |  |  | - |  |  |  | 0.2 |  |  |  | 0.1 |  |  |  | - |  |  |  | 0.3 |
Total revenues |  |  | 298.0 |  |  |  | 208.0 |  |  |  | 88.8 |  |  |  | - |  |  |  | 594.8 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses (exclusive of depreciation shown separately below) |  |  | 99.2 |  |  |  | 47.5 |  |  |  | 37.4 |  |  |  | - |  |  |  | 184.1 |
Depreciation expense |  |  | 59.5 |  |  |  | 33.5 |  |  |  | 12.0 |  |  |  | - |  |  |  | 105.0 |
General and administrative expenses |  |  | 6.8 |  |  |  | 3.3 |  |  |  | 0.6 |  |  |  | 8.7 |  |  |  | 19.4 |
Total costs and expenses |  |  | 165.5 |  |  |  | 84.3 |  |  |  | 50.0 |  |  |  | 8.7 |  |  |  | 308.5 |
Income (loss) from operations |  |  | 132.5 |  |  |  | 123.7 |  |  |  | 38.8 |  |  |  | (8.7 | ) |  |  | 286.3 |
Income from equity investments |  |  | - |  |  |  | 0.5 |  |  |  | - |  |  |  | - |  |  |  | 0.5 |
Interest expense, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 44.2 |  |  |  | 44.2 |
Net Income (loss) |  |  | 132.5 |  |  |  | 124.2 |  |  |  | 38.8 |  |  |  | (52.9 | ) |  |  | 242.6 |
Less: Net income (loss) attributable to net parent investment |  |  | 3.9 |  |  |  | - |  |  |  | - |  |  |  | (47.9 | ) |  |  | (44.0 | )
Less: Net income (loss) attributable to noncontrolling interest |  |  | 102.8 |  |  |  | 98.8 |  |  |  | 31.0 |  |  |  | - |  |  |  | 232.6 |
Net income (loss) attributable to Hess Midstream Partners LP |  | $ | 25.8 |  |  | $ | 25.4 |  |  | $ | 7.8 |  |  | $ | (5.0 | ) |  | $ | 54.0 |
Throughput volumes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gas gathering (MMcf/d)(1) |  |  | 259 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 259 |
Crude oil gathering (MBbl/d)(2) |  |  | 113 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 113 |
Gas processing (MMcf/d)(1) |  |  |  |  |  |  | 244 |  |  |  |  |  |  |  |  |  |  |  | 244 |
Crude oil terminaling (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 125 |  |  |  |  |  |  |  | 125 |
NGL loading (MBbl/d)(2) |  |  |  |  |  |  |  |  |  |  | 15 |  |  |  |  |  |  |  | 15 |
Water gathering (MBbl/d)(2) |  |  | 38 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 38 |
(1) Million cubic feet per day
(2) Thousand barrels per day

Gathering

Revenues and other income increased $122.9 million in the first nine months of 2020 compared to the first nine months of 2019, of which $48.1 million is attributable to higher gas gathering and compression volumes and $16.6 million is attributable to higher crude oil gathering volumes driven by higher Hess production, gas capture and increasing minimum volume commitment levels. In addition, $33.3 million of the increase in revenue is attributable to higher tariff rates, $13.8 million is attributable to higher water services revenue and $5.7 million is attributable to higher pass-through electricity fees. The remaining $5.4 million is attributable to higher produced water pass-through trucking and disposal fees.

Operating and maintenance expenses increased $24.8 million, of which $12.5 million is attributable to higher maintenance costs on our expanded infrastructure, including employee costs, $5.7 million is attributable to higher pass-through electricity costs due to additional compressors coming online, $5.4 million is attributable to higher produced water pass-through trucking and disposal costs, and $1.2 million is attributable to higher insurance and property taxes. Depreciation expense increased $11.7 million due to new compressors, produced water disposal facilities and other new gathering assets being brought into service and gathering assets acquired from Summit Midstream Partners, LP at the end of the first quarter of 2019.

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Processing and Storage

Revenues and other income increased $66.0 million in the first nine months of 2020 compared to the first nine months of 2019, of which $44.5 million is attributable to higher volumes driven by higher Hess production, gas capture and placing LM4 in service in the third quarter of 2019. In addition, $20.7 million of the increase is attributable to higher tariff rates. The remaining $0.8 million of the increase is attributable to higher pass-through electricity fees.

Operating and maintenance expenses increased $36.1 million, of which $17.3 million is attributable to LM4 processing fees, $8.2 million is attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements, $4.9 million is attributable to higher maintenance activity other than TGP turnaround, $3.6 million is attributable to TGP turnaround activity, and $1.3 million is attributable to higher insurance and property tax. The remaining $0.8 million of the increase is attributable to higher pass-through electricity costs. General and administrative expenses increased $1.5 million attributable to higher employee costs allocated to us under our omnibus and employee secondment agreements.

Terminaling and Export

Revenues and other income increased $41.7 million in the first nine months of 2020 compared to the first nine months of 2019, of which $25.2 million is attributable to higher rail transportation pass‑through revenues. In addition, $9.1 million of the increase is attributable to higher throughput volumes at our terminals driven by higher Hess production and increasing minimum volume commitment levels, and $7.4 million is attributable to higher tariff rates. Operating and maintenance expenses increased $25.8 million primarily attributable to higher rail transportation pass-through cost.

Interest and Other

General and administrative expenses decreased $4.0 million in the first nine months of 2020 compared to the first nine months of 2019 primarily due to costs associated with the Restructuring. Interest expense, net of interest income, increased $27.1 million in the same periods primarily attributable to the $550 million 5.125% fixed-rate senior notes issued in connection with the Restructuring and higher borrowings under our credit facilities. Income tax expense of $5.2 million in 2020 is the result of being a separate taxable entity.

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Other Factors Expected to Significantly Affect Our Future Results

We currently generate substantially all of our revenues under fee‑based commercial agreements with Hess, including third parties contracted with affiliates of Hess. These contracts provide cash flow stability and minimize our direct exposure to commodity price fluctuations, since we generally do not own any of the crude oil, natural gas, or NGLs that we handle and do not engage in the trading of crude oil, natural gas, or NGLs. However, commodity price fluctuations indirectly influence our activities and results of operations over the long-term, since they can affect production rates and investments by Hess and third parties in the development of new crude oil and natural gas reserves. The markets for oil and natural gas are volatile and will likely continue to be volatile in the future. In the second quarter of 2020, as a result of the sharp decline in crude oil prices, Hess reduced its rig count from 6 rigs to 1 rig in the Bakken. In addition, third parties in the Bakken have also curtailed production and reduced drilling activity. Our contract structure is expected to largely offset the impact of the reduction in volumes on our financial performance metrics, as our minimum volume commitments provide minimum levels of cash flows and the fee recalculation mechanisms under our agreements support our cash flow stability. To the extent our previous plans included revenues for volumes, including third-party volumes contracted through Hess, above currently established minimum volume commitment levels, such revenues could decline to the minimum volume commitment levels.

The throughput volumes at our facilities depend primarily on the volumes of crude oil and natural gas produced by Hess in the Bakken, which, in turn, is ultimately dependent on Hess’ exploration and production margins. Exploration and production margins depend on the price of crude oil, natural gas, and NGLs. These prices are volatile and influenced by numerous factors beyond our or Hess’ control, including the domestic and global supply of and demand for crude oil, natural gas and NGLs. During the first quarter of 2020, worldwide crude oil prices declined significantly due in part to reduced global demand stemming from the COVID-19 global pandemic. Sustained periods of low prices for oil and natural gas could materially and adversely affect the quantities of oil and natural gas that Hess can economically produce. The commodities trading markets, as well as global and regional supply and demand factors, may also influence the selling prices of crude oil, natural gas and NGLs. While the initial term of our commercial agreements provides for an annual fee recalculation mechanism to target a return on capital deployed, the secondary term of our commercial agreements changes to an inflation-based fixed fee structure with minimum volume commitments continuing through the second term, which may provide greater exposure to price volatility. Furthermore, our ability to execute our growth strategy in the Bakken, including attracting third-party volumes, will depend on crude oil and natural gas production in that area, which is also affected by the supply of and demand for crude oil and natural gas.

Reconciliation of Non‑GAAP Financial Measures

The following table presents a reconciliation of Adjusted EBITDA, free cash flow and distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

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|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in millions) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Reconciliation of Adjusted EBITDA and Distributable Cash Flow to net income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 115.8 |  |  | $ | 87.4 |  |  | $ | 352.6 |  |  | $ | 242.6 |
Plus: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation expense |  |  | 39.5 |  |  |  | 36.0 |  |  |  | 116.9 |  |  |  | 105.0 |
Proportional share of equity affiliates' depreciation |  |  | 1.3 |  |  |  | 0.5 |  |  |  | 3.8 |  |  |  | 0.5 |
Interest expense, net |  |  | 23.2 |  |  |  | 12.4 |  |  |  | 71.3 |  |  |  | 44.2 |
Income tax expense (benefit) |  |  | 1.8 |  |  |  | - |  |  |  | 5.2 |  |  |  | - |
Loss (gain) on sale of property, plant and equipment |  |  | - |  |  |  | - |  |  |  | (0.1 | ) |  |  | - |
Adjusted EBITDA |  | $ | 181.6 |  |  | $ | 136.3 |  |  | $ | 549.7 |  |  | $ | 392.3 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest, net |  |  | 21.6 |  |  |  |  |  |  |  | 66.7 |  |  |  |  |
Maintenance capital expenditures |  |  | 3.8 |  |  |  |  |  |  |  | 6.5 |  |  |  |  |
Distributable cash flow |  | $ | 156.2 |  |  |  |  |  |  | $ | 476.5 |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Adjusted EBITDA attributable to noncontrolling interest and net parent investment |  |  |  |  |  |  | 109.7 |  |  |  |  |  |  |  | 316.5 |
Cash interest paid, net |  |  |  |  |  |  | 0.6 |  |  |  |  |  |  |  | 1.1 |
Maintenance capital expenditures, net |  |  |  |  |  |  | 0.3 |  |  |  |  |  |  |  | 1.0 |
Distributable cash flow, as previously reported(1) |  |  |  |  |  | $ | 25.7 |  |  |  |  |  |  | $ | 73.7 |
Reconciliation of Adjusted EBITDA, Free Cash Flow and Distributable Cash Flow to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net cash provided by operating activities |  | $ | 149.6 |  |  | $ | 83.4 |  |  | $ | 467.2 |  |  | $ | 334.4 |
Changes in assets and liabilities |  |  | 8.9 |  |  |  | 37.0 |  |  |  | 12.9 |  |  |  | 12.9 |
Amortization of deferred financing costs |  |  | (1.6 | ) |  |  | (1.3 | ) |  |  | (5.1 | ) |  |  | (3.8 | )
Proportional share of equity affiliates' depreciation |  |  | 1.3 |  |  |  | 0.5 |  |  |  | 3.8 |  |  |  | 0.5 |
Interest expense, net |  |  | 23.2 |  |  |  | 12.4 |  |  |  | 71.3 |  |  |  | 44.2 |
Capitalized interest |  |  | - |  |  |  | 4.1 |  |  |  | - |  |  |  | 4.1 |
Distribution from equity investments |  |  | (3.0 | ) |  |  | - |  |  |  | (6.8 | ) |  |  | - |
Earnings from equity investments |  |  | 3.6 |  |  |  | 0.5 |  |  |  | 7.2 |  |  |  | 0.5 |
Other |  |  | (0.4 | ) |  |  | (0.3 | ) |  |  | (0.8 | ) |  |  | (0.5 | )
Adjusted EBITDA |  | $ | 181.6 |  |  | $ | 136.3 |  |  | $ | 549.7 |  |  | $ | 392.3 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest, net |  |  | 21.6 |  |  |  |  |  |  |  | 66.7 |  |  |  |  |
Maintenance capital expenditures |  |  | 3.8 |  |  |  |  |  |  |  | 6.5 |  |  |  |  |
Distributable cash flow |  | $ | 156.2 |  |  |  |  |  |  | $ | 476.5 |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Adjusted EBITDA attributable to noncontrolling interest and net parent investment prior to Restructuring |  |  |  |  |  |  | 109.7 |  |  |  |  |  |  |  | 316.5 |
Cash interest paid, net |  |  |  |  |  |  | 0.6 |  |  |  |  |  |  |  | 1.1 |
Maintenance capital expenditures, net |  |  |  |  |  |  | 0.3 |  |  |  |  |  |  |  | 1.0 |
Distributable cash flow, as previously reported(1) |  |  |  |  |  | $ | 25.7 |  |  |  |  |  |  | $ | 73.7 |
Adjusted EBITDA |  |  | 181.6 |  |  |  | 136.3 |  |  |  | 549.7 |  |  |  | 392.3 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Capital expenditures(2) |  |  | 66.4 |  |  |  | 122.3 |  |  |  | 202.2 |  |  |  | 241.9 |
Free cash flow |  | $ | 115.2 |  |  | $ | 14.0 |  |  | $ | 347.5 |  |  | $ | 150.4 |
(1) Distributable cash flow prior to the Restructuring is calculated net of any amounts attributable to noncontrolling interest. Subsequent to the Restructuring, we will generally make cash distributions to holders of Class A Shares and to holders of noncontrolling interest pro rata. Therefore, distributable cash flow subsequent to the Restructuring includes amounts attributable to noncontrolling interest. (2) Includes payments for equity investments but excludes acquisition capital. |

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Capital Resources and Liquidity

We expect our ongoing sources of liquidity to include:

| • | cash on hand;

| • | cash generated from operations;

| • | borrowings under our revolving credit facility;

| • | issuances of additional debt securities; and

| • | issuances of additional equity securities.

We believe that cash generated from these sources will be sufficient to meet our operating requirements, our planned short‑term capital expenditures, debt service requirements, our quarterly cash distribution requirements, future internal growth projects or potential acquisitions.

Our partnership agreement requires that we distribute all of our available cash, as defined in the agreement, to our shareholders. On October 26, 2020, we declared a quarterly cash distribution of $0.4417 per Class A share, to be paid on November 13, 2020 to shareholders of record on November 5, 2020.

Fixed‑Rate Senior Notes

As of September 30, 2020, we had $800.0 million of 5.625% fixed‑rate senior notes due 2026 that were issued to qualified institutional investors. The notes are guaranteed by certain of our subsidiaries. Interest is payable semi‑annually on February 15 and August 15.

In addition, as of September 30, 2020, we had $550.0 million of 5.125% fixed‑rate senior notes due 2028 that were issued to qualified institutional investors. The notes are guaranteed by certain of our subsidiaries. Interest is payable semi‑annually on June 15 and December 15.

Each of the indentures for the 2026 and 2028 senior notes contains customary covenants that restrict our ability and the ability of our restricted subsidiaries to (i) declare or pay any dividend or make any other restricted payments; (ii) transfer or sell assets or subsidiary stock; (iii) incur additional debt; or (iv) make restricted investments, unless, at the time of and immediately after giving pro forma effect to such restricted payments and any related incurrence of indebtedness or other transactions, no default has occurred and is continuing or would occur as a consequence of such restricted payment and if the leverage ratio does not exceed 4.25 to 1.00. As of September 30, 2020, we were in compliance with all debt covenants under the indentures.

In addition, the covenants included in the indentures governing the senior notes contain provisions that allow the Company to satisfy the Partnership’s reporting obligations under the indenture, as long as any such financial information of the Company contains information reasonably sufficient to identify the material differences, if any, between the financial information of the Company, on the one hand, and the Partnership and its subsidiaries on a stand-alone basis, on the other hand and the Company does not directly own capital stock of any person other than the Partnership and its subsidiaries, or material business operations that would not be consolidated with the financial results of the Partnership and its subsidiaries. The Company is a holding company and has no independent assets or operations. Other than the interest in the Partnership and the effect of federal and state income taxes that are recognized at the Company level, there are no material differences between the consolidated financial statements of the Partnership and the consolidated financial statements of the Company.

Credit Facilities

As of September 30, 2020, we had senior secured syndicated credit facilities (the “Credit Facilities”) consisting of a $1,000.0 million 5-year revolving credit facility and a fully drawn $400.0 million 5-year Term Loan A facility. Facility fees accrue on the total capacity of the revolving credit facility. Borrowings under the 5-year Term Loan A facility will generally bear interest at LIBOR plus an applicable margin ranging from 1.55% to 2.50%, while the applicable margin for the 5-year syndicated revolving credit facility ranges from 1.275% to 2.000%. Pricing levels for the facility fee and interest rate margins are based on the Partnership’s ratio of total debt to EBITDA (as defined in the Credit Facilities). If the Partnership obtains an investment grade credit rating, the pricing levels will be based on the Partnership’s credit ratings in effect from time to time. At September 30, 2020, borrowings of $178.0 million were drawn under the Partnership’s revolving credit facility, and borrowings of $400.0 million, excluding deferred issuance costs, were drawn under the Partnership’s Term Loan A facility.

The Credit Facilities can be used for borrowings and letters of credit for general corporate purposes. The Credit Facilities are guaranteed by each direct and indirect wholly owned material domestic subsidiary of the Partnership, and are secured by first priority perfected liens on substantially all of the presently owned and after-acquired assets of the Partnership and its

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direct and indirect wholly owned material domestic subsidiaries, including equity interests directly owned by such entities, subject to certain customary exclusions. The Credit Facilities contain representations and warranties, affirmative and negative covenants and events of default that the Partnership considers to be customary for an agreement of this type, including a covenant that requires the Partnership to maintain a ratio of total debt to EBITDA (as defined in the Credit Facilities) for the prior four fiscal quarters of not greater than 5.00 to 1.00 as of the last day of each fiscal quarter (5.50 to 1.00 during the specified period following certain acquisitions) and, prior to the Partnership obtaining an investment grade credit rating, a ratio of secured debt to EBITDA for the prior four fiscal quarters of not greater than 4.00 to 1.00 as of the last day of each fiscal quarter. As of September 30, 2020, we were in compliance with these financial covenants.

Cash Flows

Operating Activities. Cash flows provided by operating activities increased $132.8 million for the first nine months of 2020 compared to the same period in 2019. The change in operating cash flows resulted from an increase in revenues and other income of $230.6 million and distributions from equity investments of $6.8 million, offset by an increase in expenses other than depreciation, amortization and equity‑based compensation of $104.6 million.

Investing Activities. Cash flows used in investing activities decreased $140.1 million for the first nine months of 2020 compared to the same period in 2019. The decrease in investing cash outflows resulted from our previous acquisition of Summit Midstream Partners’ Tioga Gathering System for $89.2 million, our previous acquisition of Hess Water Services for $225.0 million, of which $68.9 million was included in cash outflows from investing activities, lower payments for our investment in the LM4 joint venture of $33.0 million and proceeds from the sale of property, plant and equipment of $0.1 million, partially offset by an increase in payments for capital expenditures of $51.1 million.

Financing Activities. Cash flows used in financing activities increased $171.0 million for the first nine months of 2020 compared to the same period in 2019 due to an increase in distributions to shareholders and noncontrolling interest of $304.9 million and a decrease in borrowings of $23.8 million. The remaining change resulted from our previous acquisition of Hess Water Services for $225.0 million, as described above, of which $156.1 million was included in the cash outflows from financing activities as a distribution to Hess in 2019 and a final settlement amount of $1.6 million received from Hess in 2020.

Capital Expenditures

Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational regulations. Our partnership agreement requires that we distinguish between maintenance capital expenditures and expansion capital expenditures. Maintenance capital expenditures are capital expenditures made to maintain, over the long term, our operating capacity, operating income or revenue. Examples of maintenance capital expenditures are expenditures to repair, refurbish or replace existing assets, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations. In contrast, expansion capital expenditures are expenditures incurred for acquisitions or capital improvements that we expect will increase our operating capacity, operating income or revenue over the long term. Examples of expansion capital expenditures include the acquisition of equipment, construction, development or acquisition of additional capacity, or expenditures for connecting additional wells to our gathering systems, to the extent such capital expenditures are expected to expand our long‑term operating capacity, operating income or revenue.

The following table sets forth a summary of maintenance and expansion capital expenditures and reconciles capital expenditures on an accrual basis to additions to property, plant and equipment on a cash basis:

| Nine Months Ended September 30, |
| 2020 |  |  | 2019 |
(in millions) |  |  |  |  |  |  |
Expansion capital expenditures | $ | 195.7 |  |  | $ | 205.6 |
Maintenance capital expenditures |  | 6.5 |  |  |  | 3.2 |
Total capital expenditures |  | 202.2 |  |  |  | 208.8 |
(Increase) decrease in accrued capital expenditures and related liabilities |  | 43.8 |  |  |  | (13.9 | )
Additions to property, plant and equipment | $ | 246.0 |  |  | $ | 194.9 |

Capital expenditures in 2020 are primarily attributable to civil and field construction and fabrication activities related to expansion of the Tioga Gas Plant.

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Cautionary Note Regarding Forward-looking Information

This Quarterly Report on Form 10‑Q, including information incorporated by reference herein, contains “forward-looking statements” within the meaning of U.S. federal securities laws. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Our forward-looking statements may include, without limitation: our future financial and operational results; our business strategy; our industry; our expected revenues; our future profitability; our maintenance or expansion projects; our projected budget and capital expenditures and the impact of such expenditures on our performance; and future economic and market conditions in the oil and gas industry.

Forward-looking statements are based on our current understanding, assessments, estimates and projections of relevant factors and reasonable assumptions about the future. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. The following important factors could cause actual results to differ materially from those in our forward-looking statements:

| • | the direct and indirect effects of the COVID-19 global pandemic and other public health developments on our business and those of our business partners, suppliers and customers, including Hess;

| • | the ability of Hess and other parties to satisfy their obligations to us, including Hess’ ability to meet its drilling and development plans on a timely basis or at all and the operation of joint ventures that we may not control;

| • | our ability to generate sufficient cash flow to pay current and expected levels of distributions;

| • | reductions in the volumes of crude oil, natural gas, NGLs and produced water we gather, process, terminal or store;

| • | fluctuations in the prices and demand for crude oil, natural gas and NGLs, including as a result of the COVID-19 global pandemic;

| • | changes in global economic conditions and the effects of a global economic downturn on our business and the business of our suppliers, customers, business partners and lenders;

| • | our ability to comply with government regulations or make capital expenditures required to maintain compliance, including our ability to obtain or maintain permits necessary for capital projects in a timely manner, if at all, or the revocation or modification of existing permits;

| • | our ability to successfully identify, evaluate and timely execute our capital projects, investment opportunities and growth strategies, whether through organic growth or acquisitions;

| • | costs or liabilities associated with federal, state and local laws, regulations and governmental actions applicable to our business, including legislation and regulatory initiatives relating to environmental protection and safety, such as spills, releases, pipeline integrity and measures to limit greenhouse gas emissions;

| • | our ability to comply with the terms of our credit facility, indebtedness and other financing arrangements, which, if accelerated, we may not be able to repay;

| • | reduced demand for our midstream services, including the impact of weather or the availability of the competing third-party midstream gathering, processing and transportation operations;

| • | potential disruption or interruption of our business due to catastrophic events, such as accidents, severe weather events, labor disputes, information technology failures, constraints or disruptions and cyber-attacks;

| • | any limitations on our ability to access debt or capital markets on terms that we deem acceptable, including as a result of weakness in the oil and gas industry or negative outcomes within commodity and financial markets;

| • | liability resulting from litigation; and

| • | other factors described in the section entitled “Risk Factors” in Item 1A—Risk Factors in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2020 and June 30, 2020, as well as any additional risks described in our other filings with the Securities and Exchange Commission.

As and when made, we believe that our forward-looking statements are reasonable. However, given these risks and uncertainties, caution should be taken not to place undue reliance on any such forward-looking statements since such statements speak only as of the date when made and there can be no assurance that such forward-looking statements will occur and actual results may differ materially from those contained in any forward-looking statement we make. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.

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PART I – FINANCIAL INFORMATION (CONT’D)

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Item 3. | Quantitative and Qualitati ve Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. We generally do not take ownership of the crude oil, natural gas or NGLs that we currently gather, process, terminal, store or transport for our customers. Because we generate substantially all of our revenues by charging fees under long-term commercial agreements with Hess with minimum volume commitments, Hess bears the risks associated with fluctuating commodity prices and we have minimal direct exposure to commodity prices.

In the normal course of our business, we are exposed to market risks related to changes in interest rates. Our financial risk management activities may include transactions designed to reduce risk by reducing our exposure to interest rate movements. Interest rate swaps may be used to convert interest payments on certain long‑term debt. At September 30, 2020, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.

At September 30, 2020, our total debt had a carrying value of $1,903.0 million and a fair value of approximately $1,938.6 million, based on Level 2 inputs in the fair value measurement hierarchy. A 15% increase or decrease in interest rates would decrease or increase the fair value of our fixed rate debt by approximately $54.5 million or $57.3 million, respectively. The carrying value of the amounts under our Term Loan A facility and revolving credit facility at the year-end approximated their fair value. Any changes in interest rates do not impact cash outflows associated with fixed rate interest payments or settlement of debt principal, unless a debt instrument is repurchased prior to maturity.

Item 4. | Controls and Procedures

Based upon their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) as of September 30, 2020, John B. Hess, Chief Executive Officer, and Jonathan C. Stein, Chief Financial Officer, concluded that these disclosure controls and procedures were effective as of September 30, 2020.

There was no change in internal control over financial reporting, as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act, in the quarter ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

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PART II – OTHER INFORMATION

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Item 1. | Legal Proceedings

Information regarding legal proceedings is contained in Note 12, Commitments and Contingencies in the Notes to Consolidated Financial Statements and is incorporated herein by reference.

Item 1A. | Risk Factors

Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 includes certain risk factors that could materially affect our business, financial condition, or future results. Those risk factors have not materially changed, except for the risks associated with the COVID-19 global pandemic included in Part II, Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2020 and June 30, 2020.

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PART II – OTHER INFORMATION (CONT’D)

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Item 6. | E xhibits

a. |  | Exhibits |  |
|  | 31.1 |  | Certification required by Rule 13a‑14(a) (17 CFR 240.13a‑14(a)) or Rule 15d‑14(a) (17 CFR 240.15d‑14(a))
|  | 31.2 |  | Certification required by Rule 13a‑14(a) (17 CFR 240.13a‑14(a)) or Rule 15d‑14(a) (17 CFR 240.15d‑14(a))
|  | 32.1 |  | Certification required by Rule 13a‑14(b) (17 CFR 240.13a‑14(b)) or Rule 15d‑14(b) (17 CFR 240.15d‑14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
|  | 32.2 |  | Certification required by Rule 13a‑14(b) (17 CFR 240.13a‑14(b)) or Rule 15d‑14(b) (17 CFR 240.15d‑14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
|  | 101(INS) |  | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|  | 101(SCH) |  | Inline XBRL Taxonomy Extension Schema Document
|  | 101(CAL) |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
|  | 101(LAB) |  | Inline XBRL Taxonomy Extension Labels Linkbase Document
|  | 101(PRE) |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
|  | 101(DEF) |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
|  | 104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, the reunto duly authorized.

HESS MIDSTREAM LP (Registrant)
By: HESS MIDSTREAM GP LP, its General Partner
By: HESS MIDSTREAM GP LLC, its General Partner
By |  | /s/ John B. Hess
|  | John B. Hess
|  | Chairman of the Board of Directors and Chief Executive Officer
By |  | /s/ Jonathan C. Stein
|  | Jonathan C. Stein
|  | Chief Financial Officer

Date: November 5, 2020

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