Hold Rating Maintained for Hess Midstream Amid Chevron Acquisition Uncertainties

Hess Midstream Partners (HESM) has received a new Hold rating, initiated by Morgan Stanley analyst, Robert Kad.

Robert Kad has given his Hold rating due to a combination of factors surrounding Hess Midstream Partners. The acquisition of Hess by Chevron introduces a new sponsor, which maintains the company’s stable cash flow but raises strategic questions for the future. The primary concern is whether Chevron, now the majority shareholder, will choose to keep Hess Midstream as an independent entity or integrate it more fully, potentially through a buy-in.
While such a transaction might not significantly impact Chevron financially, it could offer benefits such as better upstream integration, reduced operating costs, and a simplified corporate structure. Additionally, historical precedents, like Chevron’s acquisition of Noble Energy, suggest a potential for similar strategic moves. Despite these uncertainties, the stock’s current valuation, with a projected 29% total return including dividends, supports maintaining a Hold rating.