Hess Midstream (NYSE:HESM | HESM Price Prediction) just wrapped up a multiyear infrastructure buildout, and CEO Jonathan Stein is telling investors the hard work is done. Now comes the payoff.
The most revealing thing Stein said on the Q4 2025 earnings call wasn’t about quarterly volumes or weather disruptions. It was about what comes next for capital spending:
“In 2026, we expect to spend approximately $150 million, a 40% reduction in capital spending relative to 2025. We expect our capital spend to decrease even further in 2027 and 2028 to less than $75 million per year.”
The buildout is over. The free cash flow era is beginning.
What Lower Capex Actually Means
With the infrastructure bill largely paid, Stein framed the forward picture around free cash flow generation rather than growth spending:
“We expect significant adjusted free cash flow generation in 2026 of $850 to $900 million, reflecting 12% growth over 2025 at the midpoint, followed by annualized growth of approximately 10% through 2028.”
That free cash flow supports a targeted 5% annual distribution growth per Class A share through 2028, incremental share repurchases, and debt repayment. The quarterly distribution already increased to $0.7641 per Class A share in Q4.
The company also announced $260 million in combined repurchases in March 2026, including a $42 million accelerated share repurchase with JPMorgan and an $18 million buyback of Class B units from a Chevron affiliate.
The Chevron Integration Advantage
Stein was candid about why Hess Midstream can hit these capex levels without sacrificing throughput. The tight integration with Chevron, which became HESM’s sponsor in July 2025, allows for coordinated upstream and midstream planning that prevents overbuilding:
“As Chevron talked about having an increasing percentage of longer laterals… longer laterals not only make the wells more economic… but also, in general, produce the same volume but with less wells reducing our well connect capital requirement.”
CFO Michael Chadwick reinforced this by noting that approximately 95% of 2026 revenues are covered by minimum volume commitments, providing a revenue floor even as winter weather continues to weigh on Q1 volumes.
The Weather Caveat
Q4 throughput took a hit. Oil terminaling fell 4%, gas processing dropped 1%, and water gathering slid 5% due to severe winter conditions. Stein acknowledged the cold has extended into early 2026 but expects a second-half recovery consistent with historical seasonal patterns.
Full-year 2026 adjusted EBITDA guidance sits at $1.225 billion to $1.275 billion, roughly flat with 2025’s $1.238 billion. The real story isn’t EBITDA growth this year. It’s the free cash flow that a dramatically lower capex profile unlocks, and what management intends to do with it.
Hess Midstream spent years building the infrastructure. The CEO is now saying the bill is paid, the distribution is growing, and the buybacks are already happening. The company’s forward outlook is tied to Chevron’s Bakken development plan and its ability to manage leverage through the cycle.
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