Hess Midstream (HESM) has fallen 20 percent this month after Chevron (CVX) announced it would sell its stake. But beneath the panic lie two structural reasons to own the stock: Chevron has committed to using HESM's infrastructure through 2045, and the 10 percent current yield provides real cash compensation while you wait for the market to recognize the value.
The selloff stemmed from HESM's agreement to accept lower fees from Chevron for Bakken Shale operations starting in 2027 through 2033. This reduced the company's 2026 EBITDA guidance and painted a conservative 2027 outlook. Fair enough—the near-term earnings take a hit.
But Chevron's divestment is not a vote of no confidence. Integrated oil companies routinely shed midstream assets to focus on upstream production. Chevron sold midstream stakes last year as part of its restructuring. This action follows the playbook, not a break from it.
The real catalyst: Chevron extended its firm commitment to ship crude through HESM's infrastructure from 2033 to 2045. That is 12 years of locked-in volume. HESM also acquired energy storage assets in the Denver Julesburg Basin, adding a new revenue stream and geographic diversification beyond Bakken.
At 10 percent yield, HESM compensates shareholders handsomely for the near-term fee compression. The company plans another dividend increase in the near term. You collect cash while Chevron's extended commitment and the storage acquisition drive earnings upside after 2027.
The market is punishing HESM for losing an anchor shareholder and lower near-term fees. Sophisticated investors should see the 20% decline as a mispricing. Chevron's 12-year pipeline commitment and a 10% yield make HESM a core holding for income portfolios that can tolerate 18-month volatility.
