Hess Midstream stock analysis after Chevron’s Hess buyout

Hess Midstream (NYSE: HESM) stock price has been quite volatile this week as investors digest the news that Chevron will acquire Hess Corporation. The stock was trading at $30.32 on Tuesday, down from this month’s high of $31.40.

Hess Midstream is an MLP in the energy industry. The company is involved in gathering, processing and storage, and terminating and exporting of crude oil and other liquids, including water.

The company has a long-term with Hess Corporation, which still holds a 42.2% stake. As part of this partnership, HESM transports Hess’s crude oil. Other large shareholders are Gip Li Blue Holding, Alps Advisors, and Energy Income Partners.

The biggest energy news of this week was the decision by Chevron to acquire Hess in a stock deal valued at over $53 billion. That buyout came a few days after Exxon announced a deal to acquire Pioneer Natural Resources.

It is still unclear what Chevron will decide to do with Hess Midstream Partners. A likely scenario is where it maintains its shareholding. Alternatively, it could decide to sell the company, which is now valued at over $2 billion. 

Either way, Hess Midstream Partners seems like a good investment because of the resurgence of the energy sector. Most importantly, its contracts with Hess Corporation will not be affected because of how closely the two companies are integrated.

The next key catalyst for the HESM stock price will be its quarterly earnings, which will come out on Wednesday. The company guided that its Q3 net income will be between $145 million and $155 million. It also expects its adjusted EBITDA will be between $250 million and $260 million.

For the year, its net income is expected to come between $595 million and $625 million. Hess Midstream has always been quite conservative, meaning that it could beat its estimates.

Hess Midstream has a strong forward dividend yield of almost 8%, which is strong one for income investors. Its dividend is also safe as the company is not as leveraged as other companies in the industry.

HESM chart by TradingView

The daily chart shows that the HESM stock price has been quite volatile this year. It initially jumped from a low of $24.67 in February and then jumped to a high of $31.82 in August. It has now pulled back and is sitting at an important support level since this price was the highest point in January.

Hess Midstream share price has remained above the 50-day and 100-day exponential moving averages (EMA). The Relative Strength Index (RSI) has drifted downwards. It has also formed an ascending triangle pattern.

Therefore, the shares will likely have a bullish breakout after earnings. If this happens, the next level to watch will be at $31.82, the highest point this year.

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