Investing

Hess Midstream Is Down Nearly 23% in a Month. Here’s What Chevron Changed

One Chevron deal sent Hess Midstream units into a monthlong slide, but the reason the stock fell and the reason it may have fallen too far are two completely different stories.

By Joel South
Published October 21, 2026, 8:45am ET · 3 min read

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Hess Midstream (NYSE:HESM | HESM Price Prediction) has fallen nearly 23% over the past month to $30.62 as of midday, Oct. 20, including a 22.63% slide over the past month. One transaction caused it. On Oct. 6, the company announced a deal with Chevron (NYSE:CVX), and the deal is expected to close by year-end. The units closed at $38.69 on Oct. 6 and $33.03 on Oct. 7. That 14.6% one-day drop a week ago set the direction for the whole month.

HESM price target

4 Moving Parts Reshape Hess Midstream

The pending deal has four parts:

  • Cash out: Hess Midstream pays Chevron $200 million.
  • Assets in: It acquires Chevron’s DJ Basin gathering and storage assets, which adds a second basin to a operations that has been all Bakken.
  • Units retired: Chevron contributes its Hess Midstream interests, which offsets about 78 million Class B units and 449,000 Class A shares.
  • Net effect: Shares outstanding fall by nearly 40% once the deal closes.

The DJ assets put Hess Midstream in the same basin as Western Midstream Partners (NYSE:WES), which lists the DJ as one of its core operating basins.

Lower Tariffs Buy Years of Contract Certainty

Chevron gets lower Bakken tariffs for several years starting in 2027. In return, Hess Midstream gets contracts extended well into the next decade. It trades higher rates for longer certainty. The company’s preliminary 2027 adjusted EBITDA guidance is $850 million to $950 million. Its 2026 guidance is $1,225 million to $1,250 million. At the centers, that is a drop of about 27%. The 2027 range is a forecast, and no results back it yet.

The August call had already suggested at slower growth. Chief Executive Jonathan Stein said, “Chevron did mention this, that even at a lower rig count, they’re able to maintain production.”

He said future growth would come mostly from price escalators and cost savings, “A lot of that is inflation escalation as you go forward. And so that’s really a kind of driver and some OPEX savings.” The tariff cut takes that flat volume outlook and adds lower rates on top of it.

Why a Flat Payout Costs Less With 40% Fewer Units

Hess Midstream targets annualized per-share distribution growth of at least 5% through the third and fourth quarters. After that, it holds the per-share payout flat through 2027 at the fourth-quarter level. The second-quarter payout was $0.7888, or $3.155 a year. At the current price, that is a yield of about 10.4%.

A freeze keeps each holder’s check at the same dollar amount. The company’s total distribution bill equals the per-share rate times the number of units. If units fall by nearly 40%, the total bill falls with them even though the rate stays put. EBITDA drops by roughly a quarter while the unit count drops by more than a third, so cash flow per remaining unit could hold up. The $200 million cash payment and the DJ assets’ earnings will decide how much room is left. As a limited partnership, Hess Midstream reports taxes differently from an ordinary corporation, so holders should check its year-end tax materials.

The peers show the range. MPLX (NYSE:MPLX) expects distribution increases of 12.5% in both 2026 and 2027. Western Midstream has kept its quarterly payout at $0.930. Hess Midstream is moving from MPLX’s growth model toward Western’s steady one.

Verdict: Right on Earnings, Too Harsh on the Payout

The market is right to mark down a business whose EBITDA steps down about 27%. A yield of about 10.4% on a fixed payout, though, suggests investors doubt the distribution itself (a double-digit yield usually sets off the warning signs we cataloged in a free dividend traps report). The shrinking unit count makes that doubt look overdone. Before the deal, leverage stood at three times EBITDA, and management was aiming for about two and a half times by 2028. The stock is worth watching through the closing date and the third-quarter earnings report. If leverage stays near three times after the deal, the selloff looks overdone. If it grows significantly, the discount is deserved.

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Joel South

Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.

He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.

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