Is HESM a Buy or a Sell? The Bull and Bear Case (2026)

Last updated October 2026

Short answer

Both cases are real, which is why the question is contested. The bull case for Hess Midstream LP (HESM) rests on Fee-based, contracted cash flow: Nearly all revenue comes from long-term, fixed-fee contracts, which smooths cash flow across commodity cycles. The bear case rests on hESM still carries significant concentration risk: Bakken volumes depend on Chevron's drilling activity, and Chevron's move from three rigs to two is expected to reduce volumes about 5% through 2027. Analysts covering it publish targets from $30.00 to $40.00 against a $30.66 price, so even the professionals disagree by 30% of their own average. We do not give a verdict. What follows is each case at full strength, so you can decide which set of assumptions you actually believe. Walnut is not an investment adviser.

Hess Midstream LP owns and operates midstream infrastructure in the Williston Basin (Bakken and Three Forks shale plays) in North Dakota, running three segments: gathering (oil, gas, and produced water pipelines), processing and storage (natural gas processing and NGL fractionation), and terminaling and export (crude and NGL loading and transport). It earns essentially all revenue from fixed, fee-based, long-term contracts, historically with Hess Corporation and now with Chevron following Chevron's July 2026 completion of its Hess acquisition. This structure insulates cash flow from short-term commodity-price swings, since HESM is paid for handling volumes rather than for the value of the barrels. Trailing revenue is about $1.61 billion and trailing net income about $375 million (as of October 2026); second-quarter 2026 revenue was ~$399 million and EPS of $0.75 beat the ~$0.66 estimate. The story changed on October 7, 2026. Chevron agreed to transfer its entire ownership interest in HESM, including the general partner, making it a fully publicly owned company, while HESM acquires Chevron's DJ Basin midstream assets (crude, gas and water gathering, the Black Diamond system and a 20% stake in the Saddlehorn crude pipeline) for modified Bakken contracts plus a $200 million cash payment funded on its revolver. The Bakken contracts were extended to 2045 but with lower rates from 2027 through 2033, and the old volume commitments were replaced by a single basin-wide minimum revenue commitment set on a two-rig program. Preliminary 2027 guidance calls for adjusted EBITDA of about $900 million (versus roughly $1.23 billion trailing), the distribution held at the Q4 2026 level through 2027 instead of growing 5% a year, and leverage of 3.75-4.0x. The units dropped about 16% on the announcement and are down roughly 24% over the past month. Closing is expected at the end of 2026, and HESM remains an Up-C structure under CEO Jonathan Stein.

The bull case: what would have to be true for $40.00

The most optimistic published target on HESM is $40.00, +30.5% from the $30.66 price as of October 2026. Getting there needs the following to work close to its best case, not merely to avoid going wrong.

1. Fee-based, contracted cash flow

Nearly all revenue comes from long-term, fixed-fee contracts, which smooths cash flow across commodity cycles. Under the October 2026 deal, Bakken contracts extend through 2045, all fees move to a fixed-fee structure with inflation escalators, and a basin-wide minimum revenue commitment set three years in advance (and able to rise but not fall) replaces volume-based commitments. About 70% of post-transaction revenue is expected to carry downside protection. The trade is lower rates from 2027 through 2033 in return for a much longer contract life.

2. Return of capital, reset

HESM had targeted at least 5% annual distribution growth through 2028 and raised its payout for eight straight years; the trailing annual rate is about $3.09 per unit, a ~10% yield as of October 2026. Under the restructuring, the distribution is to be held at the Q4 2026 level through 2027. Preliminary 2027 adjusted free cash flow of about $575 million would leave roughly $160 million after distributions, a thinner cushion than before, and Yahoo data show a trailing payout ratio above 100% of GAAP earnings.

3. Low capital intensity and a second basin

Preliminary 2027 capital spending is about $125 million (roughly $75 million in the Bakken, including a Tioga Gas Plant turnaround, and $50 million in the DJ Basin) against adjusted EBITDA of about $900 million and a 75% gross adjusted EBITDA margin. The DJ Basin assets add about 400,000 barrels per day of crude gathering capacity and 300 MMcf/d of gas gathering; management expects crude throughput to nearly triple, gas throughput to rise more than 30%, and third-party volumes to reach about 20% of the total, reducing single-basin dependence.

4. Independence from Chevron

Chevron completed its acquisition of Hess in July 2026 and, under the October 2026 agreement, will transfer its whole interest in HESM, including the general partner, with closing expected at the end of 2026. HESM becomes a fully public company with a seven-member initial board chaired by John P. Reddy, and public investors begin electing directors in 2028. Chevron remains the main Bakken customer, but is cutting Bakken rigs from three to two in December 2026, and management expects Bakken volumes to fall about 5% through 2027 before plateauing in 2028.

The bear case: what would have to be true for $30.00

The most pessimistic published target is $30.00, -2.2% from the current price. That is not a floor and not a forecast; it is roughly what one analyst thinks Hess Midstream LP is worth if the risks below bite instead of the drivers above.

HESM still carries significant concentration risk: Bakken volumes depend on Chevron's drilling activity, and Chevron's move from three rigs to two is expected to reduce volumes about 5% through 2027. The October 2026 restructuring cuts Bakken rates from 2027, drops preliminary 2027 adjusted EBITDA to about $900 million, and lifts leverage to 3.75-4.0x against a long-term target of 3.5-3.75x, with debt of about $3.7 billion and very little cash. Distribution growth is paused through 2027, and coverage after distributions is thinner, so analysts flag leverage and payout coverage as watchpoints; the consensus rating is underperform with an average target near $33.67. The deal still has to close (expected end of 2026), integrating the DJ Basin assets is new execution risk, and the units trade near the bottom of their 52-week range (~$29.85-41.44). As a partnership with an Up-C structure it has tax and structural considerations that differ from a standard corporation, and it lacks the diversified export and energy-transition exposure of larger midstream peers.

The bear case deserves the same attention as the bull case, and usually gets less. If you are holding HESM already, the question is not whether these risks exist but whether any of them has moved from possible to actually happening in the reported numbers.

Where analysts land on HESM

6 analysts cover HESM, with an average target of $33.67 (+9.8% against $30.66) and a split of 0 buy, 4 hold, 3 sell. Bear in mind sell-side ratings skew positive across the whole market, so that split is not a balanced vote. The full target table, the recent rating actions by firm, and how the consensus has shifted are on the HESM forecast and price target page.

How is HESM valued? (as of October 2026)

Price

$30.66

Market cap

$6.32B

P/E (TTM)

10.57

Forward P/E

10.80

Price / book

7.65

Beta

0.56

52-week range

$29.85 to $41.44

Snapshot for HESM as of October 2026, sourced from Yahoo Finance and may be delayed. Valuation figures move with price and earnings; verify the current numbers with your broker before deciding.

Revenue (TTM): ~$1.61B
Q2 2026 revenue: ~$399M (-3.7% YoY)
Net income (TTM): ~$375M
Preliminary 2027 adj. EBITDA: ~$900M
Market cap: ~$6.3B
Distribution yield (trailing): ~10%
P/E (trailing / forward): ~10.6x / ~10.8x
EV / EBITDA (trailing): ~6.1x

After the October 2026 sell-off, HESM trades at about 10.6 times trailing earnings and roughly 6 times trailing EBITDA, with a trailing yield near 10%, cheaper than before the Chevron deal was announced. Those trailing figures overstate future earnings power: preliminary 2027 adjusted EBITDA of about $900 million is well below the ~$1.23 billion trailing figure, and analysts' 2027 revenue estimate is about $1.45 billion. The market is pricing lower Bakken fees, a paused distribution and higher leverage against contracts that now run to 2045.

How do you decide if HESM is a buy?

Rather than asking whether HESM is a buy in the abstract, it tends to help to answer four questions:

Thesis: do you believe the bull case above, and is it still true today?
Time horizon: a single stock can be volatile, so a longer horizon absorbs more of the swings.
Position sizing: a thesis can be right and the sizing still wrong; decide how much of your portfolio one name should be.
Overlap: check whether you already hold HESM indirectly through an index or sector ETF before adding more.

What would change your mind on HESM

Write the tripwires down before you need them. Deciding what would falsify your view is far harder once a position is moving against you.

Bull case breaks if: Fee-based, contracted cash flow stalls in the reported numbers rather than in the narrative around them.
Bear case breaks if: hESM still carries significant concentration risk: Bakken volumes depend on Chevron's drilling activity, and Chevron's move from three rigs to two is expected to reduce volumes about 5% through 2027 fails to materialise over several reporting periods while the drivers keep compounding.
Neither matters if: the position has grown large enough that being wrong would damage the whole portfolio. Sizing overrides the argument.

For the full picture, see the HESM stock guide (what the company does, the ETFs that hold it, similar stocks, and the themes it fits). In Walnut you can ask its AI about HESM against your real portfolio and see your actual exposure before deciding.

Investing in Hess Midstream LP with AI

Connect the broker you already use and ask Walnut's AI how HESM fits what you actually hold: whether you own it already through a fund, what it would do to your concentration, and how it has tracked the S&P 500. Read-only by default, and you approve anything before it reaches your broker.

Does HESM fit me?

FAQ

Is HESM a good stock to buy right now?

That depends on which case you find more convincing, and both are on this page. The bull case rests on Fee-based, contracted cash flow, with revenue (ttm) at ~$1.61B. The bear case rests on hESM still carries significant concentration risk: Bakken volumes depend on Chevron's drilling activity, and Chevron's move from three rigs to two is expected to reduce volumes about 5% through 2027. Analysts covering it are spread from $30.00 to $40.00, which is itself a signal that this is genuinely contested. If you believe the thesis, the real questions become sizing and overlap rather than timing. Walnut is not an investment adviser and this is not a recommendation.

Should I sell HESM?

Nobody can answer that for you, and the honest version of the question is narrower: has anything changed in the reason you bought it? The bear case on this page is the place to check. HESM still carries significant concentration risk: Bakken volumes depend on Chevron's drilling activity, and Chevron's move from three rigs to two is expected to reduce volumes about 5% through 2027. If that risk is what you were worried about and it is now playing out, that is a real signal. If the price simply fell while the thesis held, that is a different situation entirely. The most pessimistic published target is $30.00, -2.2% from the $30.66 price, which is one analyst's downside case rather than a floor. Walnut is not an investment adviser.

What is the bull case for HESM?

Fee-based, contracted cash flow. Nearly all revenue comes from long-term, fixed-fee contracts, which smooths cash flow across commodity cycles. The most optimistic analyst target on HESM is $40.00, +30.5% from the $30.66 price. That figure is only reachable if this thesis works close to its best case.

What is the bear case for HESM?

What does Hess Midstream LP do?

Hess Midstream LP owns and operates midstream infrastructure in the Williston Basin (Bakken and Three Forks shale plays) in North Dakota, running three segments: gathering (oil, ga

What would have to change for HESM to stop being worth holding?

Decide that in advance, because it is far harder to think clearly once a position is moving against you. The concrete tripwires here: the driver behind the bull case (Fee-based, contracted cash flow) stalling in the reported numbers rather than in the narrative, the risk above (hESM still carries significant concentration risk: Bakken volumes depend on Chevron's drilling activity, and Chevron's move from three rigs to two is expected to reduce volumes about 5% through 2027) turning from a possibility into a reported fact, or the position growing large enough that a bad outcome would matter to your whole portfolio regardless of who is right.

What does Hess Midstream (HESM) do?

It owns and operates midstream infrastructure in North Dakota's Bakken shale, gathering, processing, storing, and transporting crude oil, natural gas, NGLs, and produced water, and it agreed in October 2026 to add Chevron's DJ Basin gathering assets in Colorado. It earns fee-based revenue under long-term contracts rather than by taking direct commodity-price exposure.

Is HESM a stock or a partnership?

HESM is a limited partnership with an Up-C structure, and the October 2026 restructuring keeps that structure rather than converting to a C corporation. Its tax treatment and governance differ from a standard corporation, which is worth understanding before investing. Walnut is not an investment adviser.

Who is HESM's main customer?

Historically Hess Corporation, and now Chevron, which completed its acquisition of Hess in July 2026. Chevron remains the anchor Bakken customer under contracts extended to 2045, but under an October 2026 agreement it will transfer its entire ownership interest in HESM, expected to close at the end of 2026.

Walnut is informational, not investment advice, and gives no verdict on HESM. Analyst targets referenced here come from a October 2026 pull of published third-party research and change constantly. Verify current figures with your broker before acting on them.