Hess Midstream LP

NYSE:HESM

Earnings Call Transcript 2020-Q2

[Operator]

Good day, ladies and gentlemen, and welcome to the Second Quarter 2020 Hess Midstream Conference Call. My name is Andrew, and I will be your operator for today. [Operator Instructions].

I would now like to turn the conference over to Jennifer Gordon, Vice President of Investor Relations. Please proceed.

[Jennifer Gordon, Director, IR]

Thank you, Andrew. Good afternoon, everyone, and thank you for participating in our second quarter earnings conference call. Our earnings release was issued this morning and appears on our website, www.hessmidstream.com.

Today's conference call contains projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to known and unknown risks and uncertainties and that may cause actual results to differ from those expressed or implied in such statements. These risks include those set forth in the Risk Factor section of Hess Midstream's filings with the SEC.

Also on today's conference call, we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures can be found in the earnings release.

With me today are John Gatling, President and Chief Operating Officer; and Jonathan Stein, Chief Financial Officer. In compliance with social distancing protocols as a result of COVID-19, we are conducting the call remotely, so please bear with us. In case there are audio issues, we will be posting transcripts of each speaker's prepared remarks on www.hessmidstream.com following their presentation.

I'll now turn the call over to John Gatling.

[John Gatling, President & COO, Hess Midstream GP LLC]

Thanks, Jennifer. Good afternoon, everyone, and welcome to Hess Midstream's Second Quarter 2020 Conference Call. Today, I'll review our operating performance and highlights as we continue to execute our strategy, provide additional details regarding our 2020 plans and discuss Hess Corporation's latest results and outlook for the Bakken. Jonathan will then review our financial results.

I'd like to begin with our results for the second quarter 2020. Despite a volatile environment, today, we're announcing that we exceeded our second quarter earnings guidance, lowered expenses and raised our 2020 operational and financial guidance. Additionally, we're reaffirming our 2021 guidance, including adjusted EBITDA growth of 25% compared to full year 2020 and a targeted annual distribution growth per share of 5%.

Our second quarter results reflect strong Bakken performance led by Hess Corporation, which drove our throughputs above expectations and contributed to Hess Midstream exceeding second quarter adjusted EBITDA guidance. For the second quarter of 2020, gas processing volumes averaged 289 million cubic foot per day, a decrease of 10% compared to first quarter, and crude terminaling volumes were 144,000 barrels of oil per day, a 12% decrease compared to first quarter.

Both decreases were primarily driven by lower third-party throughputs, which was in line with our expectations and guidance. Water gathering volumes averaged 66,000 barrels of water per day in the second quarter 2020, a 22% increase compared to the first quarter, as we continue to capture incremental trucked water into our expanding gathering system. Third parties contributed approximately 11% of our gas and 8% of our oil volumes in the second quarter, consistent with our guidance and expectations at the midpoint of the range.

Now turning to Hess upstream highlights. Earlier today, Hess reported strong second quarter production results capitalizing on the success of the plug-and-perf completion design and mild weather conditions. Second quarter Bakken net production averaged 194,000 barrels of oil equivalent per day, an increase of 39% from the year ago quarter and above guidance of approximately 185,000 barrels of oil equivalent per day.

Additionally, Hess was able to avoid production curtailments in the first half of 2020 by leveraging Hess Midstream's pipeline and rail terminal system which provides significant export capacity and optionality, north and south of Missouri River to key markets throughout the United States, including deliveries to load Hess chartered very large crude carriers. For the full year 2020, Hess now forecasts Bakken production to average approximately 185,000 barrels of oil equivalent per day, up from previous guidance of 175,000 barrels of oil equivalent per day.

Turning to Hess Midstream guidance. As announced earlier this month, the safety of our workforce and the communities where we operate is our top priority. And as such, the planned maintenance turnaround for the Tioga Gas Plant, originally scheduled for the third quarter of 2020, will be deferred until 2021 to ensure safe and timely execution in light of the COVID-19 pandemic.

The turnaround preparation activities undertaken to date positions us well to complete the work in 2021. We continue to progress the expansion of the Tioga Gas Plant with the project now well advanced and facility construction expected to be completed as previously announced by the end of 2020. Incremental gas processing capacity is expected to be available in 2021 upon completion of the turnaround during which time the expanded plant and residue and natural gas liquids takeaway pipelines will be tied in.

As a result of the turnaround deferral, which removes previously planned downtime from our forecast, we have updated our full year gas throughput guidance. We now expect gas processing volumes to average 275 million to 285 million cubic foot per day for the full year 2020, an increase of 12% at the midpoint compared to previous guidance.

Our complete financial and operational guidance is available on our earnings release that was distributed this morning. For the balance of 2020, we continue to expect the majority of our systems to operate close to or below MVC levels. The low end of our updated full year volume guidance continues to reflect a conservative assumption that Hess Midstream will effectively receive 0 third-party volumes for the remainder of 2020.

While we do not anticipate this being the most likely outcome, this downside scenario demonstrates the strength of our contract structure with Hess Corporation, which allows us to continue to deliver our targeted 5% annual distribution per share growth in 2020 with a coverage of approximately 1.2x. For the third quarter, we expect lower throughputs relative to the second quarter as Hess volumes declined due to the reduction in operated rig count and lower third-party volumes as producer curtailments persist.

Consistent with the midpoint of our third quarter financial guidance, we expect gas processing volumes to be approximately 10% lower than the second quarter, with both crude and oil terminaling and water gathering volumes expected to be approximately 5% lower compared to the second quarter. Again, with all systems operating close to or below MVC levels, minimizing further throughput downside.

Turning to Hess Midstream's capital program. We've updated our full year capital guidance to $260 million, a reduction of $15 million from previous guidance, primarily to reflect the deferral of the turnaround and final tie-in work on the Tioga Gas Plant expansion project. Full year 2020 expansion capital is expected to be $250 million comprising approximately $135 million in gas processing, $20 million in gas compression and $95 million in gathering and well pad interconnects. Maintenance capital has been reduced to approximately $10 million as a result of the TGP turnaround deferral.

In summary, we're well positioned to meet the challenges of 2020 and beyond. We continue to deliver a level of visibility and certainty as a result of our contract structure, which provides MVCs for approximately 97% of projected revenues for the second half of the year. This underpins our updated 2020 adjusted EBITDA guidance range of $690 million to $710 million, which has been narrowed and increased.

Additionally, looking forward to 2021, we expect to grow adjusted EBITDA by 25% relative to full year 2020, with approximately 95% MVC protection, demonstrating Hess Midstream's resilience to weather current market conditions and continue to deliver strong operational and financial performance in 2020 and for the long term.

Finally, we want to, again, emphasize our continued commitment to operating safely and reliably during this unprecedented pandemic. The safety of our workforce and the communities where we operate remain our top priority.

I'll now turn the call over to Jonathan to review our financial results.

[Jonathan Stein, CFO, Hess Midstream GP LLC]

Thanks, John, and good afternoon, everyone. As John described, we are pleased with the progress we have made in the first half of 2020, continuing to deliver strong results against the backdrop of an uncertain macro environment, and further emphasizing how both our contract structure and financial strength differentiate our business model. Our second quarter results again beat our quarterly guidance. And in combination with lower-than-anticipated costs this year due to the deferral of the TGP turnaround, have allowed us to raise our full year 2020 financial guidance. We are increasing our full year 2020 net income guidance to be in the range of $425 million to $445 million. Adjusted EBITDA is expected to be in the range of $690 million to $710 million, representing approximately 25% growth compared to full year 2019 results.

We still expect to maintain approximately 75% EBITDA margin in 2020, consistent with our historical margin. Maintenance capital and cash interest are projected to total approximately $100 million for the full year 2020, and distributable cash flow is expected to be in the range of $590 million to $610 million, resulting in expected distribution coverage of approximately 1.2x. We expect to end the year with leverage at or below our conservative 3x adjusted EBITDA leverage target.

Our 2020 adjusted EBITDA guidance includes approximately 97% of our revenues protected by MVCs in the second half of the year, highlighting our stability the lower end of our 2020 guidance conservatively assumes 0 third-party volumes for the balance of 2020, while still providing distribution coverage of approximately 1.2x. Our strong contract structure and financial strength enable us to provide visibility and stability to our forward trajectory through 2022, supported by downside protection and cash flow stability mechanisms in our contract.

Even with the deferral of the TGP turnaround, we continue to expect approximately 25% adjusted EBITDA growth in 2021 compared to full year 2020. In both 2021 and 2022, we also expect approximately $750 million of free cash flow, defined as adjusted EBITDA less CapEx. That includes approximately 95% of our revenues protected by MVCs, sufficient for Hess Midstream to be free cash flow-positive after funding interest expense and growing distribution, while maintaining distribution coverage of approximately 1.4x without the need for any incremental debt or equity.

Turning to our results. I will compare results from the second quarter to the first quarter. For the second quarter, net income was $108 million compared to $129 million for the first quarter. Adjusted EBITDA for the second quarter was $173 million compared to $195 million for the first quarter.

The change in adjusted EBITDA relative to the first quarter was primarily attributable to the following: total revenues decreased by $18 million, driven by lower Hess and third-party production, including a decrease in processing revenues of approximately $10 million, a decrease in gathering revenues of approximately $4 million and a decrease in terminaling revenues of approximately $4 million; total operating expenses, including G&A and excluding depreciation and amortization and pass-through costs, were higher, decreasing adjusted EBITDA by approximately $4 million, including seasonally higher maintenance and operating costs of approximately $5 million; higher costs associated with the TGP turnaround of approximately $3 million offset by lower general and administrative expenses of approximately $4 million, resulting in second quarter adjusted EBITDA of $173 million, exceeding the top end of our guidance range by approximately $3 million due to higher-than-expected volumes and lower operating costs due to the deferral of certain maintenance activities to the third quarter.

Second quarter maintenance capital expenditures were approximately $1 million. And net interest, excluding amortization of deferred finance costs, was $22 million. The result was that distributable cash flow was approximately $150 million for the second quarter, covering our distribution by approximately 1.2x. On July 27, we announced our second quarter distribution that increased 5% on an annualized basis. Expansion capital expenditures in the second quarter were $78 million. At quarter end, that was approximately $1.8 million, representing leverage of approximately 3x adjusted EBITDA on a trailing 12-month basis.

Turning to guidance for the balance of the year. In the third quarter of 2020, we expect net income to be approximately $90 million to $100 million and adjusted EBITDA to be approximately $155 million to $165 million. Third quarter maintenance capital expenditures and net interest, excluding amortization of deferred finance costs, are expected to be approximately $25 million, resulting in expected distributable cash flow of approximately $130 million to $140 million, delivering distribution coverage of approximately 1.1x with approximately 97% of projected revenues protected by MVCs.

Our third quarter guidance includes updated costs based on the deferral of the TGP turnaround, which reduces expected operating cost by approximately $12 million and maintenance capital by approximately $8 million. We expect to spend approximately $8 million across operating costs and maintenance capital related to the turnaround in the third quarter, including work completed before the deferral, the immobilization of the workforce and preservation of materials.

In addition, the third quarter guidance includes higher seasonal maintenance activity that, together with lower expected volumes, as our throughput decreased to MVC levels, decreases expected adjusted EBITDA by $5 million to $10 million relative to the second quarter. In the fourth quarter, with expected revenues at MVC levels and seasonally lower operating costs, we expect distribution coverage to be approximately 1.2x with revenues that continue to be approximately 97% protected by MVCs.

Even in periods of great uncertainty, the strength of our business model is clear. With revenues that are approximately 95% protected by MVCs for the next 2.5 years and our annual rate redetermination mechanism that adjusts our rates to changes in volume and capital, we have differentiated visibility to our financial metrics, including approximately 25% adjusted EBITDA growth in 2020 and 2021. Conservative leverage of 3x adjusted EBITDA or less, distribution per share targeted to increase 5% annually and expected free cash flow of $750 million in 2021 and 2022.

This concludes my remarks. We'll be happy to answer any questions. I will now turn the call over to the operator.

[Operator]

[Operator Instructions]. And our first question comes from the line of Jeremy Tonet with JPMorgan.

[Vinay Chitteti, JPMorgan Chase & Co.]

This is Vinay on for Jeremy. Just wanted to quickly touch upon your EBITDA guidance for 2020 and '21. With almost approximately $370 million EBITDA already in the books, the 2H guidance seems to be very conservative.

I understand you guys have assumed 0 third-party volume assumption for the balance of year, but we have also seen approximately 11% gas in 2Q when there were a lot of curtailments as well. Could you talk about like there seems to be a lot of upside risk for the EBITDA guidance here. Can you just talk about what are the moving pieces why you have assumed 0 third-party volume assumption even after seeing a lot of recovery in market production since 2Q?

[John Gatling, President & COO, Hess Midstream GP LLC]

Yes. Maybe I'll start off with just addressing the third parties, and then I'll hand it over to Jonathan to address the financial aspects of it. So yes, we had a very strong first quarter, and it even continued into our second quarter from a third party's perspective. We averaged about 11% in the second quarter. Looking at our guidance right now, the low end of our guidance has third parties approximately 0. And the midpoint of our guidance has about 5% in there, and the upper end has about 10%.

From our perspective, it really depends on what the producers are doing. And we're, again, trying to take a very conservative look at this. And that's kind of what you're seeing with our guidance as it relates to that.

But just a reminder, I mean, the third-party producers, they're already hooked up to our system. When they bring that volume on, it will be available to us, and we'll have the capacity -- the system capacity to handle it. So really, we just wanted to kind of leave that open for the producers as they bring additional volumes in. So with that, I'll hand it over to Jonathan to address the financial side of that.

[Jonathan Stein, CFO, Hess Midstream GP LLC]

Sure. Thanks, John. So let me just start -- let me go through the drivers of the change in our guidance, and then I can talk about how changes in that would work. So in terms of -- if you look at the top end of our guidance change, we increased that by $10 million. The drivers of that were a strong second quarter. So that was $3 million above the upper end of our guidance. We defer the TGP turnaround that reduced our OpEx by $12 million. We did add back some projects into Q3 with the deferral of the turnaround. That gave us the opportunity now to do projects that we seasonally would typically do in Q3. So we added that back.

That's part of the Q3, as I talked about -- together with the revenue decline, I talked about $5 million to $10 million decrease from Q2 to Q3. So additional projects are included within that.

In terms of upside to that, I mean, I think, what I would highlight first is that we are now at or below MVCs that provides 97% protection to the rest of the year. To the extent that volumes come back, of course, first, we'll have to get above the MVC level first, in order before we would see any upside. And then we would see upside as those volumes come above MVCs.

I think, critically, even with the deferral of costs that we have this year into next year, I think it's important that with the -- going through the rest of this year, we have the 97% MVC protection, but then that does lead to the 25% increase in EBITDA. Going into 2021, which supports our free cash flow of $750 million next year, and that's even with the deferral cost in 2021.

So a number of moving pieces there, potentially some upside, but of course, we have to -- our MVC levels will have to get above MVC for the upside to occur. And then that really sets the stage for continued growth into 2021.

[Vinay Chitteti, JPMorgan Chase & Co.]

Got it, guys. Thanks for the color. I mean, I just wanted to touch upon there on the 2021 guidance as well. So a couple of things here. One, the base of 2020 EBITDA guidance looks to the upside. So if you assume the top end of guide of $700 million -- $710 million. And then there is an additional OpEx increment coming up in 2021, that's another $10 million to $15 million, looks like from how much you shifted from your previous guidance in 3Q to 2021.

So there is about like a lot of upside there. And then you still reaffirmed your 25% EBITDA guidance. Could you talk about what's actually driving the upside of the guidance here from an increased base and also an increased OpEx side?

[Jonathan Stein, CFO, Hess Midstream GP LLC]

Yes, sure. So as we look to our 2021, I mean, just in terms of the numbers, we deferred $20 million of OpEx and maintenance CapEx gather across both of those, from 2020 for the turnaround. We had spent $12 million this year. We'll expect to spend through Q2 and Q3 on the turnaround. Some of that work will be preserved, but some of it will release some ramp-up costs.

John talked about also some expansion capital that was deferred related to the tie-in of TGP expansion. It's about $7 million that will occur at the time of the tie-in of the turnaround will occur at that same time.

So that's, let's call it, $20 million to $35 million of the upside of work of costs that are going into 2021. But as we said and as you highlighted, we're still saying, look, we can have that 25% EBITDA growth going forward. And we'll give more detail as we get closer and we give our 2021 guidance. But clearly, there will be some increase and decreases in the underlying elements as we get closer.

Certainly, what we just talked about is a decrease to that -- to the EBITDA and free cash flow. But then we have things like, for example, if you look at our interconnect CapEx for 2020, that's at $95 million right now. Certainly, we expect less drilling in '21. So you could see that being something that will go down.

So there's really a number of ins and outs at this point. We're going to give more details as we get closer. But certainly -- and a lot of this as well, we have the rate reset, which occurs at the end of the year. That will take into account any increased cost, incremental costs that are above the plan on a total basis.

So when you put all that together, that still supports our 25% EBITDA growth, together with the fact that MVCs are going up, so that supports the revenue just on an MVC basis alone. And then that really supports the $750 million of free cash flow that we have, sufficient to fund our distributions next year without any incremental debt. So no change, therefore, to our EBITDA growth or free cash flow metric for next year.

[Vinay Chitteti, JPMorgan Chase & Co.]

Great. I just want to quickly touch upon the FCF debt. So you guys have about like $750 million of FCF generating in 2021 and '22. And looking at -- you will have a substantial cash flow even after your distributions. Just want to understand your capital allocation strategy or if you would be looking at increased buybacks or if you would be looking at any small assets in the M&A side. How do you think about the capital allocation strategy there?

[John Gatling, President & COO, Hess Midstream GP LLC]

Yes. Maybe let me start off with the -- on the M&A side, and then I'll hand it over to Jonathan. So I mean, I think what we've said is we want to be very focused on our acquisitions. Bakken is our priority. It continues to be our priority to support both Hess and third parties.

In particular, we're looking for opportunities to strengthen our footprint through bolt-on acquisitions and kind of working through that. So I would say there's definitely opportunity for us to continue to grow. And then as we've talked about before, we also have the Gulf of Mexico assets, Hess has Gulf of Mexico assets that would be an entry point for us potentially to enter a new basin through that relationship.

So from our perspective, we do see some opportunity to deploy capital from an M&A perspective. But again, we have the luxury of being very selective with that. We've got growth ahead of us, even without those acquisitions. So there are opportunities for us to continue to strengthen our asset base. But again, it really needs to be focused and smart and make a lot of sense for how we do things.

In addition, as we look at other basins like Gulf of Mexico, as an example, we continue to look to build on the contractual structure that we've got in place for the Bakken assets and would look to do something very similar there.

So again, I think our -- we've got a very defined and specific focused strategy around our acquisition targets. And we're fortunate that we really don't have to chase the acquisitions that we've got growth kind of built-in. So with that, Jonathan, do you want to talk a little bit about the financial side?

[Jonathan Stein, CFO, Hess Midstream GP LLC]

Yes. Thanks. I think, well, the only thing I would just add is just echoing, of course, what John said, that we'll be continuing to be very disciplined and whatever the opportunity is, our focus is on being -- using the free cash flow exit that we have after dividends and making sure we stay with our conservative leverage target at 3x and then whatever financial flexibility we have, absent opportunities, as John said, in a disciplined basis, then of course, the return of capital to shareholders is on the table, including buybacks.

Now buybacks for us, given our float, would be from the sponsors, but that would be very accretive opportunities for all of our shareholders. So certainly, again, we'll remain disciplined but, certainly, look at those opportunities as they come.

[Operator]

Your next question comes from the line of Spiro Dounis with Crédit Suisse.

[Spiro Dounis, Crédit Suisse]

Just a follow-up on that last question there around M&A. And John, you mentioned Gulf of Mexico. I know prior to COVID hitting, it sounded like you guys were getting fairly close to doing something there. It sounds like something you're spending a lot of time on. I think since then, that's been stabled a bit. Just curious, do you have enough visibility now that you feel like you can maybe pick up the pencils there and do a little more work? And to what degree is the election factoring into really any strategic decisions at this point?

[John Gatling, President & COO, Hess Midstream GP LLC]

Yes. No, thanks for the question. And there -- I would think both aspects of that are good. We really never put the pencil down. I mean, obviously, with COVID hitting in some of the economic environment impact, that obviously changed a little bit of direction for us.

But we continue to see high-quality assets in the Gulf of Mexico. I think Hess has done a great job building assets that are definitely a focus for any midstream opportunity in that. I think from our perspective, we're obviously a natural owner of those assets longer term. So I think we've continued to evaluate that and look at that. So those -- we're still very excited about that and something we're focused on.

The political dynamic is definitely something that we have to look at and understand, but again, I think Hess has done a good job managing the assets. We wouldn't anticipate there being any -- regardless of which administration is basically making the decisions, we feel like we've got some high-quality assets there. They're well operated. We know we're getting into -- we're well-established in the Gulf. Hess is well-established in the Gulf, and I think we can continue to leverage that operational excellence, just like we've done on the midstream in North Dakota, do that same -- replicate that same model in the Gulf of Mexico.

So from our perspective, we see it as continuing to be a good option for us and something that we're definitely continuing to look at.

[Spiro Dounis, Crédit Suisse]

Great. That's helpful. Second question, also a follow-up on a previous one. I know you guys obviously are being conservative here in the guidance, but just sort of moving that aside, could you just -- maybe just give us some specifics around some of the discussion with your customers.

One of your peers in the Bakken was on earlier, alluding to, I guess, some completion crews coming back, pretty substantial DUC inventory, the fact that the current crude price environment is enough to, at the very least, return shut-ins to production.

But of course, the next question is just when the rigs actually return to the basin. So just curious what your discussions have been like with producers and how that's influencing your view?

[John Gatling, President & COO, Hess Midstream GP LLC]

Sure. Yes. No, we continue to maintain very good relationships with all of our customers. I mean, obviously, Hess, we're very integrated with Hess, but also the other producers in the basin. We have seen -- I mean, as you look at it, and I'm sure you guys look at it, too, but as you look at the weekly rig count, it's plus 1, minus 1, plus 1, minus 1, it's kind of bouncing around in that just above double digits there.

And so we're continuing to monitor that, and we do see some additional activity on the completion side. The previously curtailed production is coming back on, and we are seeing that across the basin. But it really kind of -- it's regional based. And so where the producers are that they're bringing on production affects how the gathering systems are set up.

So from our perspective, we just -- it's really unpredictable at the moment. We are seeing some improvement in prices, and we are seeing some additional activity. But we just felt like the uncertainty around what the producers are going to ultimately do. Just -- we just felt like the guidance range and us setting the targets that we did made a lot of sense.

Again, as I mentioned previously, I do think there's opportunity there just because we've got pipe in place. We've got capacity, and we're already connected to those customers. So as they make the decisions to bring that production back online, we're well positioned to capture and bring it into our system. And just to, again, reiterate what Jonathan mentioned is, and I do think it's an important point is, in a lot of our systems, we're either below or at near MVCs, so again, because of that kind of regional nature of our gathering system and how that's all set up, it really depends on where we are as it relates to our MVC levels.

So that will be something that plays into that. And all of those things are the things that we considered as we established our guidance range going into the balance of the year and also looking at 2021. And Jonathan...

[Spiro Dounis, Crédit Suisse]

Got it. During your -- Sorry.

[John Gatling, President & COO, Hess Midstream GP LLC]

Yes. No, no, I was just going to say. I don't know if, Jonathan, if you want to add anything.

[Jonathan Stein, CFO, Hess Midstream GP LLC]

No, no. Spiro, go ahead.

[Spiro Dounis, Crédit Suisse]

Yes. And last one is the obligatory DAPL shutdown question. Just curious how you guys are thinking about that potential? Is it an opportunity or a threat for you? Any thoughts on that would be appreciated.

[Jonathan Stein, CFO, Hess Midstream GP LLC]

Yes. I mean, look, the DAPL uncertainty, and I think Hess addressed it in their call earlier. Obviously, Hess is continuing to ship on DAPL. We're monitoring, or Hess is monitoring the decisions of the court with the stay. So that's obviously playing into it. But we've really been -- not that we've been planning for this specific event, but we've been planning for significant flexibility and capacity and optionality for all of our customers, both south of the Missouri River, north of Missouri River, pipe terminals, rail terminals. We kept our rail terminal active throughout the entire operation from the time we started it up to now. And I think it's really set us in a strong position that we can continue to provide reliable export support to both Hess and third parties. So I definitely think that we differentiate ourselves with having high-quality assets that have tremendous flexibility and ability to export crude pretty much anywhere in the United States.

So from our perspective, while if the DAPL line was to be shut in, that would create some potential incremental cost for Hess. As John mentioned earlier in the call today, we have tremendous flexibility to get Hess to market pretty much anywhere they want to go and, ultimately, can minimize that additional cost structure through our advantaged infrastructure.

[Operator]

Thank you all very much. This concludes today's conference. Thank you for your participation, and you may now disconnect. Have a great day.