The Dakota Access pipeline, which carries Bakken crude, being laid in a trench through farm fields near New Salem, North Dakota; it is not one of the assets in this deal · Tony Webster, via Wikimedia Commons · CC BY-SA 2.0

Article · 2026-10-07 · 7 min read · Oil and gas pipelines · Stocks

Chevron gives up Hess Midstream for cheaper Bakken contracts

On Tuesday 6 October Chevron agreed to hand Hess Midstream its stake of about 38 percent, the general partner that controls it and its DJ Basin crude oil gathering assets, in return for $200 million in cash and Bakken pipeline and processing contracts that it says cut its unit costs there by about half and now run to 2045; Chevron will take Hess Midstream and about $3.7 billion of its debt off its books and expects a one-time after-tax loss of about $3 billion to $4 billion at closing, which both companies expect by year-end 2026.

By the desk. Researched and written by an AI model from the sources listed at the end; nothing here restates another publication's text.

CVXdirect HESMdirect

What Chevron signed

On Tuesday 6 October Chevron Corporation told the Securities and Exchange Commission that it will divest its ownership interests in Hess Midstream LP and its crude oil midstream assets in the DJ Basin, the Denver Julesburg oil and gas field of Colorado. Midstream is the middle link of the oil business: the pipes, gas plants and storage that move oil and gas from the well toward refineries. The current report, filed under items 7.01 and 8.01, carries Chevron's release of the same day as exhibit 99.1. ^{[1, 2]}

There is no outside buyer. Chevron said several of its subsidiaries signed a series of definitive agreements with Hess Midstream itself, which rewrite the Bakken contracts under which Hess Midstream gathers and processes Chevron's oil and gas in North Dakota and set up new contracts for the DJ Basin. 'In exchange for the improved long-term commercial framework and $200 million in cash consideration,' the release says, Chevron will transfer to Hess Midstream 'its ownership interests and general partner position in Hess Midstream, as well as its DJ Basin crude oil midstream assets.' Reuters reported the deal the same day in the same terms. ^{[2, 7]}

Chevron gave its reason in cost terms. It said the revised agreements extend the Bakken contracts and are expected to reduce its Bakken unit midstream costs, the fee paid for each barrel moved and processed, by approximately 50 percent. 'This transaction resets the commercial framework between our upstream and midstream assets in the Bakken and DJ Basins,' said Andy Walz, Chevron's President of Downstream, Midstream and Chemicals. 'It lowers our Bakken cost structure while positioning Hess Midstream to advance as an independent company.' ^[2]

What changes hands

Hess Midstream's own release, also of Tuesday 6 October, names the pieces. Chevron will contribute 77,827,485 Class B units of Hess Midstream Operations LP and 449,000 Class A shares of Hess Midstream, all of which Hess Midstream will cancel, together with 100 percent of the general partner, Hess Midstream GP LP, and of that partner's own general partner. A general partner is the entity that runs a partnership; owning it is how Chevron controlled Hess Midstream with a minority of the units. Hess Midstream said the cancellation will cut its outstanding shares by nearly 40 percent, and that all Chevron-affiliated directors will leave the board at closing, with shareholders able to elect directors from 2028. Chevron's annual report for 2025 put its consolidated interest at approximately 38 percent. ^{[3, 4]}

The DJ Basin assets lie mainly in Weld County, Colorado. Hess Midstream's release lists about 400 thousand barrels a day of oil gathering capacity, 300 million cubic feet a day of gas gathering capacity, 420 thousand barrels of storage and a 20 percent stake in Saddlehorn, an approximately 600-mile crude oil pipeline regulated by the Federal Energy Regulatory Commission that runs from the DJ Basin to the Cushing storage hub in Oklahoma, all backed by about 670 thousand dedicated acres. Chevron's release describes the package as crude oil midstream assets; Hess Midstream's says it also includes natural gas gathering. ^{[2, 3]}

In the Bakken, Hess Midstream said the tariffs Chevron pays for crude oil and gas gathering and processing will be reduced for 2027 through 2033 and the agreements extended from 2033 to 2045. Contracts priced on a cost-of-service basis, where fees are reset to cover costs and a return, become fixed fees with inflation escalators, and Chevron commits to pay at least 80 percent of the Bakken revenue Hess Midstream expects from it through 2033. Its quarterly report for the period to 30 June shows the stakes: Hess Midstream said it generates 'substantially all' of its revenues under fee-based agreements with Chevron. The release adds that Chevron is expected to move from three drilling rigs to two in the Bakken in December 2026. ^{[3, 6]}

Why a loss of $3 billion to $4 billion

Because Chevron controls the general partner, Hess Midstream's assets and debt sit inside Chevron's own accounts. Chevron's annual report says it assumed about $3.7 billion of debt related to Hess Midstream Operations LP when it bought Hess, debt that is 'non-recourse to Chevron Corporation', meaning lenders cannot claim against Chevron itself. Chevron said that on closing it expects to fully deconsolidate Hess Midstream, removing it and that debt from its balance sheet. ^{[2, 4]}

In its filing Chevron said its 'preliminary accounting assessment' indicates a one-time after-tax loss estimated at approximately $3 billion to $4 billion, to be treated as a special item, a charge it reports outside its adjusted earnings. Its release gives the reason: the company 'is unable to recognize future Bakken midstream cost savings as an asset.' What Chevron gives up leaves its books at closing, while what it gets back, mostly lower fees in later years, cannot be booked as something it owns. Hess Midstream books the other side the opposite way: it said the value of the DJ Basin assets and shares it receives will be added to a contract liability, an obligation to provide service, recognized as revenue through 2045. Chevron also said it expects the deal to add 0.5 percent on an absolute basis, half a percentage point, to its return on capital employed, its profit measured against all the money tied up in the business. ^{[1, 2, 3]}

The record behind it

Hess Midstream came to Chevron with Hess. Chevron's release of Friday 18 July 2025 announced that it had completed its acquisition of Hess Corporation, adding Guyana and 463 thousand net acres in the Bakken. Its annual report for 2025 says Chevron was targeting $10 billion to $15 billion of asset sales over the five years ending in 2028, had generated approximately $9 billion of proceeds from 2024 through January 2026, and expects $1 billion to $2 billion of asset sale proceeds a year through 2030. That report also says asset dispositions and restructurings 'may result in significant gains or losses in future periods.' ^{[5, 4]}

The reports differ in places. Agence France-Presse, carried by Boursorama, translated the charge as a loss before tax ('une perte avant impôts'); Chevron's filing and release say after tax, and Reuters and OilPrice.com also report it as after tax. Chevron's release says the deal needs regulatory approvals as well as customary closing conditions, as OilPrice.com repeats; Hess Midstream's release mentions only customary closing conditions. OilPrice.com described the deal as part of a broader portfolio rationalization after the Hess purchase; Chevron's release does not tie it to its asset sale program. ^{[8, 1, 2, 7, 9, 3]}

What settles it next

Hess Midstream said it would discuss the deal on a webcast on Wednesday 7 October at 11:00 a.m. Eastern Time. Chevron's third quarter results call is set for Friday 30 October at 11:00 a.m. Eastern Time, by its advisory of 1 October. As of early Wednesday 7 October, Hess Midstream's list of filings on EDGAR showed no current report on the agreement; its newest filing was dated Wednesday 23 September. ^{[3, 10, 11]}

Both companies said they expect to close by year-end 2026. The loss figure is Chevron's preliminary estimate and it will be fixed only at closing, subject to 'any closing adjustments', its filing says. After closing, Hess Midstream said it will operate under a new name, to be finalized before then, keep its headquarters in Houston and issue updated 2027 guidance; its preliminary guidance puts 2027 adjusted earnings before interest, taxes, depreciation and amortization at about $850 million to $950 million. ^{[1, 2, 3]}

Who it reaches

Chevron (CVX) is the seller: it gives up its stake, its general partner and its DJ Basin crude oil gathering assets, takes $200 million in cash and lower Bakken fees through 2045, and expects to book the loss as a special item at closing, by its current report and release. ^{[1, 2]}

Hess Midstream (HESM) is the other party: it cancels the units and shares Chevron contributes, takes on the DJ Basin assets and the Saddlehorn stake, pays $200 million and accepts lower Bakken tariffs for longer contracts, and becomes, in its own words, an 'independent, multi-basin midstream company' whose revenue still comes mostly from Chevron. ^{[3, 6]}

Sources

Every stock is a company; the desk grades the company behind the stock. This article describes; it does not recommend. Adjacent means the company is not named in the event and the path by which it is reached is stated above.

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