CVX - Hess Midstream Remains Undervalued With Chevron-Linked Upside
2024-02-03 02:00:00 ET
Summary
- Hess Midstream shares have returned over 20% in the past year and have reached a 12-month high.
- The company's adjusted EBITDA increased by 8% in its latest earnings report, driven by growth in gas, oil, and water gathering volumes.
- Hess Midstream is no longer relying on minimum volume commitments for revenue protection, and its contracts with Hess stretch for several years.
- With secure and growing cash flow, the standalone value is about $42, which Chevron may pay in an M&A deal after closing its purchase of Hess.
Shares of Hess Midstream ( HESM ) have steadily marched to a 12-month high and have now returned over 20% including dividends in the past year. Since I last wrote about this MLP in early November , shares have returned over 14%. In that article, I argued that Hess Midstream was undervalued on a stand-alone basis and that Chevron ( CVX ) may seek to acquire it after completing its Hess ( HES ) purchase. The CVX-portion of my thesis remains, and I will focus on HESM’s underlying results to determine stand-alone fair value and a potential take-out price. I remain bullish on the stock....
Hess Midstream Remains Undervalued With Chevron-Linked Upside