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Hess Midstream LP (NYSE:NYSE:HESM) is a fee-based midstream player that owns major midstream assets of one of the largest oil and gas companies, Hess (HES). Its oil, gas and produced water handling assets are not only used by third party customers, but also by HES itself. This automatically creates an unique advantage in securing stable and predictable demand in the future.
As with most midstream operators, since 2020 HESM has delivered very solid returns. Yet, as we can see in the chart below HESM has managed to register a significant alpha relative to the midstream index.
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Such outperformance might automatically lead to a question of whether HESM has reached a point of overvaluation. Plus, it might also raise a concern of whether beating the index by such a wide margin is sustainable, especially against the backdrop of midstream sector dynamics where it is very difficult to record strong growth figures…
