Goldman Sachs Downgrades Hess Midstream Partners LP (HESM) to Sell
Goldman Sachs analyst John Mackay downgraded Hess Midstream Partners LP (NYSE: HESM) from Neutral to Sell with a price target of $32.00..
The analyst comments "We are downgrading Hess Midstream (HESM) to Sell from Neutral with a 12-month price target of $32/sh. We see -7% downside to our price target vs. +13% average upside for our coverage universe. While we continue to view HESM as a high-quality, well-contracted midstream business with a strong sponsor relationship, we see a more challenging risk/reward at current levels. Specifically, we see a volume growth profile that is likely to lag midstream peers owing to a plateauing production outlook from CVX in the basin, meaningful long-term recontracting risk as legacy fee agreements are meaningfully above market rates, and a slowing capital returns framework. As we have previously published, given CVX's past transaction of Noble Midstream (following the acquisition of its sponsor Noble Energy), we believe HESM is a possible M&A target given its strategic partnership with CVX (historically HES) and also note our M&A rank of 2 in our price target; however focus has remained on CVX's long term Bakken plans. We expect the basin to be somewhat resilient through the end of the decade with recent performance better than prior sentiment, and CVX continues to assess its interest in its newer Bakken position. With limited near-term catalysts and downside risk to consensus EBITDA estimates - where we are on average -5% below the Street on 2026-2030 EBITDA - we see the current risk/reward as skewed to the downside, supporting our downgrade to Sell."
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Shares of Hess Midstream Partners LP closed at $37.87 yesterday.