Western Midstream Partners (WES) 4 May 232023 Q1 Earnings call transcript

Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners' First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions] [Operator

like Investor conference Relations. now Jenkins, to turn of Director Please, to would over the Daniel I go ahead.

glad quarter forward-looking non-GAAP I night's earnings I'm Western statements the accompanying you and you. you contain and us call, join Thank last deck today that Midstream's today's first like important XXXX reconciliations. would call. release slide conference to remind could for disclosures regarding

Form that Please description XX-Q cause Midstream's reference recent and a differ factors most filings reference materials to we of public results our are risk what posted discuss could Relevant other actual for from on Western materially website. today.

With Financial me Officer; Chief Officer. Executive Chief Ure, today are our our and Kristen Shults, Michael

the now to I'll turn call over Michael.

Daniel, you, Thank and good everyone. afternoon,

we in to activity water higher continued producer including product in resulting produced quarter, the Basin, across natural strong levels all throughput three throughput. record-breaking lines, experience the During and Delaware gas first

growth and in sequentially, due from natural margin in due quarter quarter Delaware throughput was sold XXXX, Basin, the continued to the Cactus which South first from margin reduced step due to a distributions primarily of call our demand in II throughput Despite in which gas to declined previously Utah assets and assets communicated Wyoming, our last from weather. quarter's fourth down our EBITDA we and adjusted on Texas fees, contractual reduced mostly decreased

increases as quarter go quarter EBITDA quarterly the shortly. declined into improve first regarding to throughput of for detail our performance our adjusted the Although, sequentially, second expect Kristen more we remainder expectations gradually and year. will profitability

system to to processing Basin, extending years natural in the substantial agreement to three to commercial our executed gas gathering our XXXX. firm long-term that gathering Delaware and value amendments highlight continues Occidental's to pleased we very for the their on Subsequent WES. end, I'm capacity by generate quarter increasing agreement and Operationally, team

their Basin, in past multiple processing year, firm amendments executed agreements Occidental's Delaware natural cubic gathering by feet XXX up the the to processing day. and increasing million gas Over capacity we've to per

In quarter $XXX we existing investment-grade market. since XXXX notes liquidity pleased, it sheet. the Moving to to to to and obtained our we debt And issued balance was and borrowings issuance This first subsequent well our status. early the enhance revolver was March, position. received million I'm of refinance very senior end, by

which regarding In addition, These our strength extends today's commitments. our the uncertain maturity with and credit allocation that solidifies capital improved bank to decisions, and executed a position, future be we have liquidity debt is transactions when profile XXXX an amendment maturity real market group of opportunistic market our facility us $X considering fortified billion conditions. our enable of to and volatile capital

$XXX payment in will distribution Finally, base with first of paid or quarter unit. an a of approximately our the Board be million approved approximately total in per that enhanced $X.XX unit of distribution $X.XX per $X.XX for the per conjunction unit

peers. long-term and capital We enhanced especially unitholders differentiate view our relative WES as an strategy our allocation for a our pay our further ability build way to to to to and value distribution

I it will financial turn and to operational our Kristen performance. that, With over discuss to

good and afternoon, Michael, you, Thank everyone.

quarter. the Utah Our was other primarily This throughput mostly and a first in by X% assets, gas lower throughout to quarter to Rockies throughput the from on sequential due quarter specifically due natural snowfall record decreased basis. our in Wyoming, first

during lower gas equity investments experienced quarter. our from the also We throughput natural

in by in and expected of XXXX sequential Cactus This decreased X% oil DJ Basin. II the declines NGLs quarter primarily throughput crude Our basis. to and due was a the divestiture on

X% Excluding sequentially. have NGL the II would Cactus and our sale, throughput crude by oil decreased

due a in on new producer the Delaware increased customer sequential throughput to quarter strong primarily Basin. water connections and basis, continued activity Produced XX% by levels

the to natural margin as our Mcf $X.XX Mcf other has higher compared per was per driven throughput higher-than-average gross in gas compared primarily margin for our which Delaware This Our a the adjusted assets Basin, prior to gas quarter. by by natural increased assets.

increase rate in increased that an quarter was from in South the XXXX our fourth partially assets cost annual adjustment Texas. of revenue This of offset service by

cost Excluding the Mcf fourth service impact rate gross $X.XX. per of would adjustment the increased adjusted of by approximately our quarter, the in margin have

expect in We utilize increasing margin slightly our the adjusted more Mcf natural Delaware service decrease we fully gas Basin. second throughput to quarter gross per offloads to as

oil crude $X.XX at in XXXX The due of Our quarter system. decrease per primarily to a Cactus barrel fourth that compared sold quarter by prior the decreased rate an for from gross of adjustment XXXX. in increased distributions to margin was annual quarter, adjusted fourth partially the Basin and of assets service DJ was increase revenue our II NGL $X.XX oil the the in offset by that cost

Excluding cost quarter, would the margin gross adjusted by rate have the per barrel of adjustment in service fourth our $X.XX. decreased

increase to fee expect to Basin. Basin throughput We barrel demand in gross per DJ in the in modestly the growth the margin Delaware our revenues second and due quarter adjusted

Our service margin primarily fee that per the by adjusted on January effective lower became due rate compared quarter, XXXX gross redetermination barrel to revenues. $X.XX the and our to X, decreased produced assets water deficiency prior for cost of

mix slightly contract second to our due in with expect per adjusted improving throughput. margin We quarter barrel the gross associated increased increase to mostly

affected partners throughput which and Utah to portfolio quarter, $XXX the of was of first reductions distributions of primarily we equity due due EBITDA a from XXXX, quarter that II, generated Cactus a fourth quarter, mostly and to from gross in to weather. distributions $XX Wyoming million, Relative sold decrease adjusted assets $XXX by in investment in remaining our in income and our our decreased to million. margin adjusted the million the limited decrease During attributable net fourth

demand we addition, In decreases what assets. Basin a we partially margin in were last from our increased offset from reduced Texas line experienced contractual quarter. South our assets fees in communicated to in margin step down contribution Delaware by due with These

third partially utility expense. by years, maintenance second quarter in higher increase prior quarters personnel maintenance with sequential our seasonal and a offset expenses, O&M and which expenses higher lower experienced typically in as during we expense expect we expected, line trend to increased driven months. with by the summer expense in factors utility Consistent our are O&M As were the and

During go-forward due in decreased Because to other a the taxes tax complex. first property valorem substantially, of related at assessments reduction quarter finalization XXXX property ad DJ and the Basin accrual to expect the more of results. other quarter, to in the property impact and our expense quarter line first reduction XXXX of be with in our the the fourth accrual we tax quarterly

Turning to flow. cash

after Free flow $XX million February $XXX Our quarter totaled from free of cash balance proceeds XX-year cash payment sheet million in our closed perspective, refinance negative notes. fourth senior in From distribution used a first and the on we flow facility of cash generating credit flow for early million. under partnership totaled borrowings operations We to $XXX quarter million. rate purposes. general April, $XXX fixed

issuance and needed. debt was heavily retaining investment-grade to a first Our future in maturities puts since status as us position oversubscribed refinance strong

Additionally, conditions. help strategy capital $X we of maturity regardless XXXX. billion credit extends prevailing of amendment will an market provide execute unsecured return markets flexibility, better the which facility date which These and our transactions financial us our allocation to executed capital the to April

to our require financial this guidance Basin from our to we're announced may see changes processing forecast At customers call. growth associated time, and earnings our making Delaware our not of With quarter strong previously XXXX fourth volume we future capacity. ranges any that out to us continue said, increase

the disclosed could We needs of accelerate future update ranges. our any continue Texas capital processing and will that time West guidance the and due financial to changes the previously additional potentially spending assess need our in at we complex affect market for

expect, least our per currently annual that We of unit guidance we $X XXXX. distribution in will however maintain base at

throughput increase activity across expect all average we year-over-year in Focusing to three on Delaware, basin-specific still the products.

the and associated wells expected driven to of the We drilling come type to number timing. reducing by be efficiencies that in and forecast approximately online associated producers offset are throughput We curves. updates will rig mostly and producer’s by completion changes wells improvements XXX schedules

expect will throughput similar be NGLs. last be DJ and gas base producer steady both declines as activity declines. increased to the and a and natural offset levels by natural percentage annual load still throughput Basin, In activity The decline crude on gas oil we year for will

associated oil commitments. changes adjusted volumes to wells gas with throughput decline cease the in come and natural projected Basin of a volume and revenues to to we EBITDA deficiency later as DJ year we in additional online. demand the expected These on are For minimum this crude our have expect collect NGL impact and and NGLs, fee crude oil minimal due

result in we Focusing on second though record throughput. impacts experienced snowfall throughput are and in quarter. specifically the logistic curtailments in impacted expect the that portfolio Utah lingering our other quarter Even EBITDA Wyoming, minimal, our could negatively throughout that we difficulties some first adjusted assets the associated select asset

back will I With to Michael. that, call the over now turn

Thank you, Kristen.

few take valuation for well open it to we Before a its extremely we positioned. why minutes to Q&A, to would up discuss continue and WES I unitholders and believe be reiterate like

growth investment structures, business, S&P comparable flow of amount tremendous generation, the the profile long-term of considering Overall, the the producer WES generates has the to the into valuation. stable, trades to data, yet comparable a with lowest free the When relative continued yield levels nature of very the differentiated flow screens take associated and fee-based sectors free WES XXX. When well S&P WES the of strong highest cash contract sectors activity relative account cash you at XXX.

We into be and distribution leader generating yield continue a buybacks account to increases, taking a in superior return total reduction. market unit when capital debt

on have this while We leaders the generating employed. of one being strong returns in done capital

footing very contracts, we volume and markets cash also of commodity profile to cost market expectations. is by minimal throughput sheet and is on robust or our price given minimum either very of WES flow the dependency financial given our with liquidity the free strong balance all WES fee-based under on As and service capital commitments. well-insulated investment-grade volatility our favorable look from service strong future supported position, maturity almost

focus the to capital on will strategy stakeholders of allocation leader as pillars reputation terms substantial total return. our value all for advance continue generating capital We in our to of in three balanced

like As I often the objectives. values workforce hard to all their by dedication call to our WES the of thanking for close work do, for I living and our entire would business and

XXXX. through you I a of teams an the year. our the already Our solid throughout impressive first first performance three progress year and to start to provides accomplishments on have look quarter updating list forward additional months of the achieved

that, open questions. With line the for we'll

comes line Dounis Spiro [Operator of with Instructions] Your Citi. first question the from

open. line Your is

Afternoon operator. Thanks, guys.

go It to keep I a just up XXX million one, the so, firmed all over Curious forward? sense doing feet last that? to cubic do do guys was into about you or there the you've to of MVCs. it going is commercial activities. much day I to First volumes think you some among how the want that appetite for what headroom of like year looks is interruptible customers more And

is This Spiro. comment in specifically What commitments. of Thanks of upside is bit volumes of would little producers a commitment terms I it they in of typically total excess Michael. amount as relates go I to say will up firm not that in to that maximum specific to of There's to that deliver usually excess the can't metrics. just come terms level. expect expect online firm they potential

And incremental stronger that's through commitments. so little expectations when as their those volumes whole. as years incremental bit system those the in tightness you they firm the usually in as sign incremental basin and firmer as a up then as well progress there's a our become and as And

that robustness result And and hopefully, so of through. overall the overall. hope will seen what in the terms and commitments in firm year expect past of level And that in we've coming we confidence the terms incremental continue would will volumes over

it. Got

for Understood. that, Thanks Okay. Michael.

this for curious of of like It fronts. going just going sort two having need to that internally one, capacity on now. processing Second you're deliberation forward. more sort sounds But

in an is opportunities timing guess I here the that what of at decision that terms potentially? processing the kind the one flow understand more then I that Are nothing question terms occur cash of of front. driven? of customer the another of might is, to part year So there's EBITDA And offload that this and deciding that announce free really really plant? Is looking CapEx. impact, second factor that guess I in this But is, would impact you on

of of earlier the still And takes year so, commentary. range? to but in Are you guys that where sort think as I your compared EBITDA lot the to a there had you point guidance like you provided sounds a and in on within Kristen, yes, It puts it. about just want put tracking you

Yes, Spiro.

XXXX the an plant with impact decision that EBITDA. to regards on would would So, any not we have have

so, dotted we over we Difficulty] couple t's announce and capacity we like a done really what ahead right incremental now to add i's sure and is make is that it And it that take before we're years, past that [Technical something as doing our and we've of crossed go have that. that the

full we're up And the of our that come with in be the results process various our the of then drive and efficient assessing we that stack midst cost all unitholders to be. through solution best best so what most for So, the now needs going might for the company. can that's our going right the opportunities,

as Michael. Thanks, always. team. Got it. Thanks, Helpful color

you. Thank

question next the line from Jeremy Tonet comes with of Your JPMorgan.

Your open. line is

on This for everyone. Jeremy. Eli there is Hi

touch to on wanted Just unit repurchases.

seemed step $X like repurchased a from slight levels. historical quarter. guys first the down You million It in

the be like, the we move needle the remainder throughout the framing So, of could repurchases thinking bit? what flexibility, about less should share there And of cadence year? how financial a

a Yes. great question. Eli, it's

had have. total. to So, the perspective point, had buyback unit around always opportunistic our an half about -- of amount. fulfilled authorization It's XX% logic of we same already already we repurchases original the largely about this We're basis. on and that we've Up we've

we've over commitment So that on obviously time. executed

any to on dependent quarter, whether or see we dislocations units. not in just it's one and opportunities so, And given repurchase

So, towards quarter. what specifically look because going during drive market dependent it's couldn't what basis, that us really on like that's a I to quarter-to-quarter on conditions the forecast might particular

is thinking of more coming to Understood. on or XQ, kind recognize a parameters That's but how be We thoughts gears we III that, then return should maybe for get Thanks. projects in switching Mentone about And some future beyond bit. on little I spend? CapEx. helpful. maybe wanted general color incremental around

parameters to consistent continue return return have We capital. been will look profile projects consistent. and sanction Yes, solid be we and before for always our a

on that capital thus It's in incremental And and held it dependent regards Mentone, returns from project positive to would can same we that to we're really with particular capacity relates a we've overall. around perspective. that really feel where under sit it or that. return on as and pleased then still with the logic those on any a or timing track comfortable be that established. of when the would So, driving far, is be requirement timing we processing we've additional thresholds capital that's that still will that already meet And

Thanks, helpful. That’s it. Got guys.

line Wolfe from Your of the next with question comes Keith Stanley Research.

is line open. Your

just are you. Can basis? what tracking on quantify, QX. you some I imagine you weather products in Thank the last across the guided versus volumes Hi. how the quarter impact to change the from percentage there's

to Overall, still last quarter. that Yes. saw we're tracking the numbers you same

little where we Utah, noise You we're nothing year-over-year in and it with of the perspective. an from average seeing storms, this impacted, had but quarter Wyoming bit a just saw that materially just

separate then it. And Got technical just question.

existing contracts volumes? you As what does as and under this the rate to move commitments. contract processing assume vary amend add to expanded to capacity volume rate or you deal is forward with the that deal firm the add Oxy contracts Should the for amended similar we is,

Yes. around the really that those the it's Typically incremental more up volumes. with level service with offering regards we're amendments, to

going So, in other from interruptible firm. to words,

Okay, got you. it. Thank

[Operator question of from Gabe with Mizuho. Instructions] next comes line Your Moreen the

Your open. line is

driving unit towards Hey, that kind curious and this the question repurchases. to obtaining pertains good X.X% investment-grade, of the ask the as may you're know afternoon everyone. I'm it about be but target wrong after year-end to I

out all of flow Should repurchases talking we about because the you're think the in unit being really about free the on your sheet the balance opportunities just cash to the consider market. the work comments a you're Michael much should opportunistic yields slides sand that all I X.X% willing wondering volatility more work frankly, put kind line repurchases? just in I'm arise to and to unit how and there for quite the

end of talked and to held distribution. question if about opportunistic Gabe. Yes. incremental capital met still year again that might at X.X% the repurchases potential in we on No, we're cash leverage at a terms threshold a We've of a great well the look free be really call that we've enhanced what and as there's around target unit only flow of always available which it's that intending The projects both threshold some this to we've is though again yield overall as as us.

in other In whether then use haven't capital means on pay repurchase we to distribution. words, that unit the side enhanced project other been able it's we would or the

of look And repurchase we threshold. for unit the so opportunities program would will leverage we still irrespective definitely -- that on

if And to distribution. us the out takes enhanced be paying able that all means is we're wouldn't that buyback above an we program utilize that then it and

do we overall going and to unit still to that to capital all be flexibility repurchases So, projects we are have throughout stakeholders our the think of the the year. enhancing

Fair enough. Michael. Thanks

Thanks Gabe.

back time. no There at further I Ure turn Mr. over the you. are this questions to call

the everyone and you about the forward look year. much. quarters year you quarter. everyone Thank to about We Thank for very first the next speaking the joining. Excited to for future start of

today's for conference call. concludes Thank you This attending.

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