Chevron to Divest Hess Midstream Interests and DJ Basin Midstream Assets

Chevron Announces Major Midstream Restructuring

Chevron has agreed to transfer its ownership interests in Hess Midstream and its crude oil and natural gas midstream assets in Colorado’s Denver-Julesburg (DJ) Basin to Hess Midstream LP. Announced on October 6, 2026, the transaction will restructure the companies’ existing commercial arrangements in the Bakken and establish new long-term agreements for services in the DJ Basin.

The deal is designed to lower Chevron’s costs for gathering and processing oil and gas in North Dakota’s Bakken region while enabling Hess Midstream to operate as an independent, multi-basin midstream company.

Under the agreement, Hess Midstream will pay Chevron $200 million in cash and take ownership of the relevant assets and interests. Chevron expects the transaction to close by the end of 2026, subject to regulatory approvals and other customary closing conditions.

Key Financial Details of the Transaction

The restructuring combines an asset transfer with changes to long-term service agreements.

Key details include:

• Cash consideration: Hess Midstream will pay Chevron $200 million.

• Debt removal: Chevron expects to deconsolidate Hess Midstream, including approximately $3.7 billion of associated debt.

• Bakken cost savings: Revised commercial terms are expected to reduce Chevron’s unit midstream costs in the Bakken by approximately 50%.

• Expected accounting loss: Chevron anticipates a one-time after-tax loss of approximately $3 billion to $4 billion at closing.

• Expected completion: The companies are targeting year-end 2026, subject to closing conditions.

The expected accounting loss does not represent the same thing as the $200 million cash payment. It reflects the accounting treatment of the transaction, including Chevron’s inability to recognize future Bakken cost savings as an asset.

Chevron expects the restructuring to improve its return on capital employed by approximately 0.5 percentage points on an absolute basis.

Hess Midstream Expands Its Presence in the DJ Basin

The DJ Basin assets being transferred are located primarily in Weld County, Colorado. They include crude oil and natural gas gathering and storage infrastructure that will broaden Hess Midstream’s geographic footprint beyond its established Bakken operations.

The assets include approximately:

• 400,000 barrels per day of crude oil gathering capacity.

• 300 million cubic feet per day of natural gas gathering capacity.

• 420,000 barrels of storage capacity.

• A 20% interest in the Saddlehorn Pipeline, a roughly 600-mile crude oil pipeline connecting the DJ Basin with Cushing, Oklahoma.

  
  
  The infrastructure is supported by approximately 670,000 dedicated acres and agreements with Chevron and other customers. The associated long-term arrangements extend through 2045.

With the DJ Basin assets integrated into its operations, Hess Midstream expects to become one of the largest midstream companies in the basin by gathered volumes.

Revised Bakken Agreements Target Lower Operating Costs

A central element of the transaction is the revision of Chevron’s existing Bakken midstream agreements with Hess Midstream.

The companies have agreed to reduce the tariffs and fees Chevron pays for crude oil and natural gas gathering and processing services. The revised arrangements will extend the contracts from 2033 through 2045.

Certain cost-of-service agreements will also convert to fixed-fee arrangements with inflation escalators. Minimum revenue commitments will provide a defined revenue framework for Hess Midstream, helping support the economics of its infrastructure investments.

The changes are intended to align the interests of both companies. Chevron expects lower transportation and processing costs, while Hess Midstream will gain longer-term commercial visibility and a broader customer and asset base.

Chevron also expects to reduce its Bakken drilling activity from three rigs to two in December 2026. The revised commercial structure is designed to support continued investment in the basin despite this planned change.

Hess Midstream Moves Toward Independence

The transaction represents a significant corporate restructuring for Hess Midstream. Chevron will contribute all its consolidated ownership interests in Hess Midstream, including its interests in the general partner, and those contributed interests will be cancelled.

The restructuring is expected to reduce Hess Midstream’s outstanding shares by nearly 40% and establish a new independent governance structure. Chevron-affiliated directors will leave the general partner’s board at closing, while Hess Midstream shareholders are expected to gain the right to elect board members beginning in 2028.

The resulting company will have a stronger presence in both the Bakken and DJ Basins, with commercial agreements extending through 2045.

For Hess Midstream, the transaction combines a broader infrastructure portfolio with a revised commercial framework and a new ownership structure. The company expects the arrangement to support future growth and shareholder returns.

Why the Saddlehorn Pipeline Matters

The Saddlehorn Pipeline is an important part of the DJ Basin asset package. It transports crude oil from Colorado toward the Cushing, Oklahoma, storage and trading hub, connecting regional production with a major US crude oil logistics centre.

Hess Midstream’s 20% interest in the pipeline adds a long-distance transportation asset to its gathering and storage infrastructure. Such connections can help producers move crude oil from producing areas to downstream markets and other transportation networks.

The pipeline interest also diversifies Hess Midstream’s asset portfolio beyond facilities located directly around wells and production sites.

The value of these assets depends not only on their physical capacity but also on throughput, customer commitments, operating costs, and the terms of their commercial agreements.

What the Deal Means for the US Oil and Gas Industry

The transaction illustrates how energy companies can restructure midstream ownership and commercial agreements to improve operating economics without necessarily selling their upstream production assets.

For Chevron, the priority is reducing the cost of moving and processing hydrocarbons in the Bakken while improving capital efficiency. The company expects to continue producing in the region through technology deployment and operational improvements.

For Hess Midstream, the deal provides entry into the DJ Basin on a larger scale and creates a more diversified infrastructure business. Long-term service agreements with Chevron should provide a foundation for revenue, although future results will depend on operating performance, production volumes, and contract terms.

The transaction remains subject to closing conditions and regulatory approvals. Until completion, the asset transfer and revised commercial arrangements should be treated as an announced agreement rather than a finalized transaction.

Sources

1. Chevron — Official announcement: Chevron to Divest Its Ownership Interests in Hess Midstream and DJ Basin Crude Midstream Assets

2. Hess Midstream — Official announcement: Transformative Transaction Leading to New Independent Multi-Basin Midstream Company

3. Reuters: Chevron to divest midstream assets in Bakken restructuring

4. U.S. Securities and Exchange Commission: Hess Midstream transaction announcement