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Related Party Transactions | 6 Months Ended
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Jun. 30, 2024
Related Party Transactions [Abstract] |
Related Party Transactions | Note 3. Related Party Transactions In addition to the Class B Unit repurchase transactions and distributions to the Sponsors disclosed elsewhere in the Notes to consolidated financial statements, we had the following related party transactions: Commercial Agreements We have long-term fee based commercial agreements with certain subsidiaries of Hess to provide i) gas gathering, ii) crude oil gathering, iii) gas processing and fractionation, iv) storage services, v) terminaling and export services, and (vi) water handling services. For the services performed under these commercial agreements, 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. Minimum volume commitments (“MVCs”) are equal to 80% of Hess’ nominations in each development plan that apply on a three-year rolling basis such that MVCs are set for the three years following the most recent nomination. Without our consent, the MVCs resulting from the nominated volumes for any quarter or year contained in any prior development plan cannot be reduced by any updated development plan unless dedicated production is released by us. The applicable MVCs may, however, be increased as a result of the nominations contained in any such updated development plan. If Hess fails to deliver its applicable MVCs during any quarter, then Hess will pay us a shortfall fee equal to the volume of the deficiency multiplied by the applicable fee. 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 effective January 1, 2014 (“Initial Term”). For this gathering sub-system, the Initial Term is 15 years effective January 1, 2014 and for the water services agreements the Initial Term is 14 years effective January 1, 2019. Each of our commercial agreements other than our storage services agreement includes an inflation escalator capped at 3% in any calendar year and a fee recalculation mechanism that allows fees to be adjusted annually during the Initial Term for updated estimates of cumulative throughput volumes and our capital and operating expenditures in order to target a return on capital deployed over the Initial Term of the applicable commercial agreement (or, with respect to the crude oil services fee under our terminal and export services agreement, the 20-year period commencing on the effective date of the agreement). For certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess, we exercised our renewal options to extend each of these commercial agreement for one additional 10-year term (“Secondary Term”) effective January 1, 2024 through December 31, 2033. There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining gathering sub-system, the Secondary Term is 5 years, and for the water services agreements the Secondary Term is 10 years, and we have the sole option to renew these remaining agreements for their Secondary Term that is exercisable at a later date. Upon the expiration of the Secondary Term, if any, the agreements will automatically renew for subsequent one-year periods unless terminated by either party no later than 180 days prior to the end of the applicable Secondary Term. Consistent with the existing terms of the commercial agreements, during the Secondary Term of each of our commercial agreements other than our storage services agreement and terminal and export services agreement (with respect to crude oil terminaling services), the fee recalculation model under each applicable agreement is replaced by an inflation-based fee structure. The initial fee for the first year of the Secondary Term is determined based on the average fees paid by Hess under the applicable agreement during the last three years of the Initial Term (with such fees adjusted for inflation through the first year of the Secondary Term). For each year following the first year of the Secondary Term, the applicable fee will be adjusted annually based on the percentage change in the consumer price index, provided that we may not increase any fee by more than 3% in any calendar year solely by reason of an increase in the consumer price index, and no fee will ever be reduced below the amount of the applicable fee payable by Hess in the prior year as a result of a decrease in the consumer price index. During the Secondary Term, MVCs continue to be set at 80% of Hess’ nominated volumes in each development plan set three years in advance. Except for the crude oil terminaling and water handling services, Hess is entitled to receive a credit, calculated in barrels or Mcf, as applicable, with respect to the amount of any shortfall fee paid by Hess and may apply such credit against any volumes delivered to us under the applicable agreement in excess of Hess’s nominated volumes during any of the following four quarters after such credit is earned, after which time any unused credits will expire. The shortfall amounts received under MVCs during the Secondary Term (except for the crude oil terminaling and water handling services) are recorded as deferred revenue and recognized as revenue as the credits are utilized or expire. At June 30, 2024, deferred revenue included in Accrued liabilities in the accompanying consolidated balance sheet was $1.3 million (December 31, 2023: none). Revenues 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, for the three and six months ended June 30, 2024 were 98% for both periods, compared with approximately 100% of revenues for the three and six months ended June 30, 2023. In 2023, we began providing our services directly to third-party customers. 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, including affiliated services and third-party services, on a disaggregated basis are as follows:
|  | Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  |  | 2024 |  |  | 2023 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |
Affiliate services |  |  |  |  |  |  |  |  |  |  |  |  |
Oil and gas gathering services |  | $ | 165.3 |  |  | $ | 152.7 |  |  |  | $ | 324.6 |  |  | $ | 297.3 |
Processing and storage services |  |  | 135.2 |  |  |  | 121.6 |  |  |  |  | 270.6 |  |  |  | 235.4 |
Terminaling and export services |  |  | 29.6 |  |  |  | 26.2 |  |  |  |  | 57.0 |  |  |  | 51.4 |
Water gathering and disposal services |  |  | 28.4 |  |  |  | 21.4 |  |  |  |  | 55.7 |  |  |  | 41.2 |
Total affiliate services |  | $ | 358.5 |  |  | $ | 321.9 |  |  |  | $ | 707.9 |  |  | $ | 625.3 |
Third-party services |  |  | 6.1 |  |  |  | 1.6 |  |  |  |  | 11.4 |  |  |  | 2.5 |
Total revenues from contracts with customers |  | $ | 364.6 |  |  | $ | 323.5 |  |  |  | $ | 719.3 |  |  | $ | 627.8 |
Other income |  |  | 0.9 |  |  |  | 0.5 |  |  |  |  | 1.8 |  |  |  | 1.2 |
Total revenues |  | $ | 365.5 |  |  | $ | 324.0 |  |  |  | $ | 721.1 |  |  | $ | 629.0 |
The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These pass-through revenues are included in Affiliate services and the related pass-through costs are included in Operating and maintenance expenses in the accompanying unaudited consolidated statements of operations.
|  | Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  |  | 2024 |  |  | 2023 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |
Electricity and other related fees |  | $ | 13.6 |  |  | $ | 11.5 |  |  |  | $ | 27.0 |  |  | $ | 22.5 |
Produced water trucking and disposal costs |  |  | 9.5 |  |  |  | 8.7 |  |  |  |  | 19.3 |  |  |  | 17.0 |
Rail transportation costs |  |  | - |  |  |  | (1.6 | ) |  |  |  | - |  |  |  | (3.4 | )
Total |  | $ | 23.1 |  |  | $ | 18.6 |  |  |  | $ | 46.3 |  |  | $ | 36.1 |
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 six months ended June 30, 2024 and 2023, 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.
|  | Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  |  | 2024 |  |  | 2023 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance expenses |  | $ | 20.5 |  |  | $ | 19.5 |  |  |  | $ | 39.6 |  |  | $ | 37.4 |
General and administrative expenses |  |  | 3.5 |  |  |  | 3.8 |  |  |  |  | 7.0 |  |  |  | 7.7 |
Total |  | $ | 24.0 |  |  | $ | 23.3 |  |  |  | $ | 46.6 |  |  | $ | 45.1 |
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 six months ended June 30, 2024 and 2023, we had the following activity related to our agreements with LM4:
|  | Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  |  | 2024 |  |  | 2023 |
(in millions) |  |  |  |  |  |  |  |  |  |  |  |  |
Processing fee incurred |  | $ | 8.6 |  |  | $ | 5.8 |  |  |  | $ | 15.4 |  |  | $ | 10.8 |
Earnings from equity investments |  |  | 3.7 |  |  |  | 1.7 |  |  |  |  | 6.4 |  |  |  | 3.3 |
Distributions received from equity investments |  |  | 3.9 |  |  |  | 1.8 |  |  |  |  | 7.4 |  |  |  | 4.4 |

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-5 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-6 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 235 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477968/946-235-50-2 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 235 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147477968/946-235-50-2 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 220 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-07(2)(g)(3)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 220 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-07(2)(c)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 220 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-07(2)(e)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479134/946-220-S99-1 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/850/tableOfContent Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-6 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-1 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 850 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147483326/850-10-50-1 + Details
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