Howard Midstream Energy Partners LLC

Overview Key strengths Key risks Above-average contract profile, with about 85% of revenue from fixed-fee contracts and about 50% backed by minimum volume commitments (MVCs) Some direct exposure to commodity prices, with about 10%-15% of revenue attributed to commodity-based contracts Assets located across several favorable geographic locations Modest operating scale compared with that of similarly rated peers and some volumetric risk exposure No material debt maturities until 2026 S&P Global Ratings expects Howard Midstream Energy Partners LLC's (HEP) Port Arthur renewable diesel logistics facility, the Spears Pipeline Expansion in South Texas, and the construction of additional processing facility in West Texas will increase the company's cash flows. Although capital expenditure (capex) was elevated in 2023, related to expansion projects and

...We expect the company will generate $270 million-$285 million in S&P Global Ratings- adjusted EBITDA through 2025. S&P Global Ratings expects Howard Midstream Energy Partners LLC's (HEP) Port Arthur renewable diesel logistics facility, the Spears Pipeline Expansion in South Texas, and the construction of additional processing facility in West Texas will increase the company's cash flows. Although capital expenditure (capex) was elevated in 2023, related to expansion projects and contributing to a modest free operational cash flow (FOCF) deficit, we expect capex will come down in 2024 to about $60 million, resulting in surplus FOCF of about $125 million-$150 million in 2024 and 2025 as growth projects come online. HEP's assets are strategically located to take advantage of the growing demand from Gulf Coast liquid natural gas. We now expect the adjusted debt to EBITDA will be 3.0x-3.5x through 2025, with full-year benefit from the expansion projects. HEP's focus on low carbon projects improves...

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