Chevron has moved to spin off Hess Midstream after a restructuring of contracts covering the Bakken, the play at the centre of the company's takeover of Hess Corp.

The transaction follows a revamp of the commercial agreements that govern Hess Midstream's position in the North Dakota basin, where Hess built its gathering, processing and export infrastructure around the crude, gas and produced-water streams of its operated acreage.

What does the spin-off change?

The spin-off separates the midstream business from Chevron's upstream portfolio in the Bakken. Chevron closed its acquisition of Hess — the deal that triggered a prolonged arbitration battle with ExxonMobil and CNOOC over pre-emption rights in the Stabroek block offshore Guyana — and inherited both the producing assets and the contracted infrastructure that serves them.

Restructuring those contracts before the spin-off appears to have been the gating step. Midstream entities of this type typically sit on fee-based gathering and processing agreements with the upstream producer; changing the ownership of the counterparty requires the commercial terms to be reset.

The Bakken remains the relevant basin. Hess Midstream's systems handle crude gathering, natural gas gathering and processing, and produced water across the play, and the company also holds capacity positions at export terminals serving the basin.

What to watch

The watch items are the mechanics and timing of the spin-off: how Chevron structures the distribution to shareholders, whether the revised Bakken contracts carry the same fee floors and throughput commitments as the originals, and what the separation means for future midstream expansion tied to Bakken development drilling.

Chevron has not yet detailed a completion date for the separation.