Western Midstream Partners (WES) 9 May 242024 Q1 Earnings call transcript

This time, I would like to welcome everyone to the Western Midstream Partners First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Daniel Jenkins, Director of Investor Relations. Please go ahead.

Thank you. I'm glad you could join us today for Western Midstream's First Quarter 2024 Conference Call. you night's call, disclosures earnings statements non-GAAP remind deck accompanying regarding to and last and release reconciliations. like that the today's slide forward-looking I'd contain important public recent that factors cause discuss actual materially XX-Q most today. of differ could Midstream's to what Western a description reference and Please other from filings results for risk Form we

Financial turn Officer; Relevant Michael Ure, are call With me and Shults, Michael. reference Kristen today materials now are posted on Officer. our to over Chief Chief the website. Executive I'll our our

you, everyone. levels and rate Thank service exceeded I'm to continued our system announce associated producer Daniel, profitability. of as activity rates overall maintaining contributed all operability X, of expectations cost redeterminations throughput quarter focus on first that to excited with and good the better-than-expected higher levels became afternoon, that effective increases higher high our strong January the and on

forecasts, cash the expect trends the end throughput adjusted we and up expect Also, these latest to year-over-year average ranges. near products, higher Thus, based year. for and throughput growth we free high previously of producer disclosed on guidance our all expect EBITDA end rates throughout flow we the continue to now

shortly. more our provide detail Kristen will updated guidance on expectations

on achievement due fixed gas will going approximately capacity forward. Delaware increases project operational would specifics early all diligently benefit the am the Mentone complex became Basin first which I reliance commissioning and to like bring congratulate April. This Before by that we get offloads natural and fee at teams is WES into to in the III processing Texas becoming Mentone to in construction pleased enterprise, completion. so the major and of since financially stand-alone reduced agreements phase announce first our that This and quarter, the thank to Train processing to completed our worked our a III I XX%, West our

contractors estimates. initial and role our III to and our Again, bringing Mentone many safely of have online cost in critical played with thanks employees all a line in

Focusing in all on core continued quarter producer strong across operated throughput levels assets. resulted first our performance, our activity increased

in from produced basin. in throughput additional sequentially, record-breaking benefited quarter resulted natural online water which another Specifically, and of from Basin, Delaware wells gas the we coming the

Basin, throughput natural gas In throughout natural contribution And the crude annual we assets, also from increased average throughput to Basin, DJ in trend and quarter-over-quarter, both gas due and for we oil a those in NGL and River the trend result growth. for volume full year-over-year Powder increased XXXX, quarter's especially volumes. a increase gradually primarily will to growth a Meritage expect expect

the This cost of drivers and were rates quarter. in $XX higher gross adjusted fourth increased million main margin compared the service increase the to throughput behind our

adjusted in anticipated, certain higher-than-expected lower costs resulting Additionally, were than operating EBITDA.

closed we Finally, last earnings non-core pleased I officially our to call. am sales highlighted on that asset all of quarter's announce that we

closed throughout At the quarter as quarter, end, incorporates asset Xx expect from our to sales at of proceeds now exit the leverage which a below we X.Xx, Meritage threshold. first basis received the approximately that was on for contribution trailing net months well XX-month WES' or X.X leverage non-core as and XXXX ratio

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

everyone. afternoon, good and Michael, you, Thank

full Delaware of Our which mid-October in throughput, and first by driven quarter natural was throughput a X% basis. increased gas Basin sequential year. quarter primarily and throughput This Meritage DJ of increased on the a by quarter last in closed

the We quarter. increased equity gas investments saw during throughput natural from also our

feet approximately day. XXX the million per expect Marcellus sale gathering volumes forward, to April in system Going quarter of natural gas the early impact second cubic we our by

agreement the the NGLs pipeline joint and in respective closed Whitethorn the Mont simultaneously mid-February. and oil at with sales Looking a venture of Belvieu of the crude divestitures reminder, as both their signing

on throughput the Additionally, increased primary NGL sequential closed on basis. driver crude oil sequential by Saddlehorn throughput X% divestitures and the basis, behind were and a quarter reduction our an sales non-core reported XX% Panola basis. quarter the late March. These both a in asset On Pipeline operated

sequentially Basins. the both DJ Throughput and from increased River Powder

However, in increased in due quarter the due Produced on activity. level to increased volumes completion were throughput water unchanged winter disruptions by a storm Delaware sequential caused producer X% Jerry Basin basis mid-January. by to

assets Our by first margin natural the prior for adjusted to gross Mcf compared increased gas quarter per $X.XX quarter.

complex, at to throughput increased compared has margin by driven gas than assets. primarily other was Texas higher a which the increase as This West our MCS natural

rate certain of contracts. January became rates efficiency higher and service In associated the to effective increased with X that addition redetermination from cost revenue

increase partially that assets associated first in adjustment did fourth the the Texas with our not revenue favorable by was South offset reoccur was the and This recognition in quarter. quarter recorded cumulative

expect to quarter. the first second in per We quarter our adjusted gross Mcf margin with line be

to of which per sale the Saddlehorn, to Our other venture, quarter quarter by in compared the the than NGL lower first joint compared for oil to have barrel and margin our Pipeline increased per our due adjusted $X.XX crude as NGL of and all margins Whitethorn, Panola average prior assets. assets Belvieu and gross Mont interest unit

We to expect barrel per margin adjusted our first second be in quarter with quarter. line the gross

assets higher became margin throughput of compared service cost associated adjusted due primarily and water $X.XX X. barrel redeterminations the on per rates our effective quarter quarter the by with to first January gross increased for prior rate increased to Our produced that

quarter in per quarter. our line margin the gross with adjusted second to first barrel be expect We

non-core XXXX, the quarterly our adjusted we fourth gross adjusted to pertaining quarter, limited of quarter by partners sale attributable $XXX million million. the first record $XX to increased of income of margin net included of million. which Relative record EBITDA the During and million, gain $XXX $XXX assets generated to a

not throughput associated rate redeterminations Basin. This increase increases by on by These offset were in the DJ our South and and X occur year. in that the the January the Basin this the was associated in of Texas mostly oil increased of first driven favorable cost service quarter did that became with with adjustments system rates occurred cumulative partially and effective revenue quarter higher recognition our fourth Delaware

G&A and taxes basis. operation on benefited expense and EBITDA adjusted quarter lower other slightly maintenance and lower sequential a and our from property Additionally,

forward, higher to increased both our trend expect and costs quarters, asset by in third utility throughput, expense modestly primarily higher driven second the Going and we maintenance operation and our base. expanded

throughput. greater As seasonality a our with reminder, expense expect utility to due the usage conjunction associated months with electricity we the in pricing energy estimated increased summer higher in and

quarter We also back to expect taxes year. last quarter in normalize the second other revert to and similar to the property our of fourth and levels

Turning to cash flow.

generating cash first flow after operating of fourth $XXX a of Free flow cash in quarter $XXX markets free quarter $XX.X first opportunistically million. flow Our $X.X from activities cash we distribution repurchased senior perspective, was payment the through quarter, transactions. our million From XXXX notes open capital in million. million, totaled market February

had million senior to of of various repurchased approximately quarter all we an maturities subsequent end, additional XX% at notes, par. of $XXX.X And

We best to continue return will capitalize and unitholders. possible for be to opportunities prudent generate capital of the seek our on that allocators

XX to in we per announcement base to an Finally, February, April, and X. is on of in May with XX% is declared payable of distribution $X.XXX increase in a prior unitholders as line quarter's May the compared distribution unit, previous our of which

crude throughput for natural upper our percentage now date, for oil to teens by performance low we to year-over-year throughput produced our gas, teens teens a on average portfolio-wide and for percentage mid- expect water. increase to mid- Based NGLs percentage upper to

growth NGLs purposes. important comparative throughput our for relative water. we In results non-core sales year-over-year in account expect reported rates for the exclude our those the remember from produced for that Basin, XXXX X gas, It's crude February and now to to XXXX XXXX products: all for natural XXXX asset Delaware we oil average and expectations year-over-year and announced stronger volumes

strong expectations wells be coming by driven steady 'XX, produce will our online a has February. of to increased mostly in initial slightly in This which relative number

add yielding in to oil We for begin in also to from third-party and second the benefits late NGLs which our Basin, the first customers quarter. and we signed crude one expect services of an treating gathering Delaware agreement

and new relative continue This XXXX. oil both to In throughput count the increase growth crude XXXX year-over-year DJ the well from by be NGLs. to average and will Basin, double we increase for natural driven expect throughput in approximately gas to

crude term in a EBITDA our will As adjusted the XXXX minimal on fee have in due oil throughput to near the a revenue. and demand NGL increases current in impact reminder, of structure

in meaningful growth the due the to throughput from expect throughput steady Basin And Powder especially contribution from growth to and continue XXXX. gas, customers we natural basin. River from year's Meritage in the Finally, primarily for full

development their River together allocate and As necessary drilling accelerate Basin. to continue capital help them the to basin, work plans refine customers programs will in we the to continue the Powder their in

our of $X.X $X.X expect updated the throughput our range Given year. be first high EBITDA quarter's expectations, for announced outperformance towards billion to the end now we of adjusted to billion and previously

due However, from we gross primarily asset be margin to from expect to quarter, non-core adjusted our lower of sales. second in the closing distributions equity the flat investments the

in Additionally, a asset increased repair in expected maintenance expense to and and due we and adjusted maintenance higher expect lower the on quarter costs basis. second operation EBITDA slightly utility higher mostly expense sequential to result quarter

of for and implying between North throughput expect spent expansion core $XXX of the $XXX to the our over to expect still majority be guidance of million, $XXX continue our construction capital capital the and additional continued in Delaware a We just We plant operating budget expenditure million million. has capital facilitate to growth. range XXXX XX% Loving midpoint Basin, which

our Taking guidance our $X.XX EBITDA end towards capital of of expect our ranges, expenditure to free cash range the previously unchanged $X.XX end flow guidance into and high billion account announced be to the now billion. adjusted of high we

remains Our at unit full least of distribution base per year $X.XX guidance unchanged.

of evaluate by We and the a influenced distribution the our health basis, base business. to will growth quarterly on trajectory continue

in If returns performance greater capital. to expect increased of current expectations, we materializes would evaluate line opportunity with

year-end based the threshold As a by in governed financial year full potential on performance payment reminder, distribution Xx and be board's to our XXXX discretion. subject our will any of leverage XXXX XXXX enhanced

Finally, of back When we our I'll free over now cash base account expect guidance. to flow our to Michael. cash guidance be end into after high positive the in XXXX. and distribution unchanged distributions the range call turn flow taking free

you, Thank Kristen.

such I Before up WES like for Q&A, opportunity. to we investment reiterate key highlight why would compelling open a it few points presents and a

as a is it the actions reflect and think we leader peers amongst midstream have position in model on WES I First, to space. taken optimize our to the MLP the important

our portfolio, XXXX, enterprise Since generating on reduce operational and significant stand-alone costs flow. cash free to focus taken substantial have becoming steps a we in optimize asset

coverage. performance fact, In the the MLP financial free cash on flow conventional cash first a flow versus of distribution and as indicator MLP distributable metrics midstream were we focus to

cash excess creation and our opportunistic enhanced reduction, of to This debt of substantial to framework included shift designed buybacks has framework unitholders. our robust unit that implementation resulted return the in capital return the distribution

the greatly we of liquidity strengthen Additionally, balance with enhance prudently producer general investing sheet trajectory our capital return line volume This into by our and our and and with leader a MLPs were distribution assets, of growth one to first commitments minimum transformed aligning framework in expansion non-core MLP midstream policy the our a capital space. with the has within WES optimized strong strategy, our model business. along midstream selling

of With valuation flow average increasing. the MLP approximately the distribution MLP future trades XXXX. time valuation of strong cash XXXX the to X.Xx compared is MLP said, to average and when from plentiful average yield business current X% just that midstream liquidity prospects, stronger balance current a negative was discount the X% XXXX compared and through over Furthermore, despite sheets, MLPs XXXX, yield at free generated Xx, from through leverage distribution average a

rights, of multiples unitholder very presents space. MLP deserving account investment for new the model, the while for rerate removing and a the enhancing of a made of provide the great models in sustainability model tax old few addressing years, LP MLP midstream historical valuation by deficiencies the improving new And the and the strides deferred benefits same at health model model operating opportunity, valuation the is has of has compelling Over distribution partnerships, MLPs incentive changed. valuations midstream the and MLP both current into example, last benefits taking the many

subsectors Furthermore, investment WES' midstream our space, the average all distribution provides provides now strongest partnership tax relative the S&P to increase the not Index. you subsectors take distribution of within one XXX. annualized now when compared to of of highest XXX the only deferred into the but midstream yield other opportunities, of S&P within all yield peers recent WES the account and

than relative in endorse multiyear flow to don't If our estimates, of the leading we while consensus that result consensus Additionally, flow cash return In need and cash to yields of for XXXX free peers generation or for generate this cash WES incremental completeness the note flow our back free match for many more free shows XX% achieved, increasing should current yield. stakeholders. accuracy cash example, midstream coming allow we capital growth free opportunities substantially over years. peers approximate WES' to would potentially estimated to estimates to XXXX, consensus their flow

the business endorses that undervalued. we term, to relative stakeholders. or peers MLP with that capital in incremental even itself into opportunities the incremental creating longer not fact an This thereby cash valuation to subject WES allocate MLP, the comparatively taxes, to as Furthermore, income within associated remains back feels paradigm growing the flow an undervalued burden to are

clearly positioned robust transformed in of on better combination with leader space strong leverage a future operating navigate adoption The have partnership and sustainable, asset a is secure low midstream cash our opportunities. and in obstacles diversified to more financially base, within and the into resulted philosophies all much has strong free WES flow capitalize

I close, work the entire of their thank to dedication. WES would and for all To workforce like hard

quarter the questions. first line year, the for making will goals. that, focused great our strong substantial achieving open a we With start our provides Our teams XXXX on towards and performance to progress are

Instructions] of Research. the from Wolfe [Operator Keith from comes Stanley question Your line first

with to new in Loving. North another more start been still support how ask beyond you along has getting and contracts to before for a there move far would do securing wanted that on work much of plant? can progress that? Just you made contracts is lot Or plant Are another forward firm

now, expecting actually the -- seeing add have plant to need stage, come this One we're have Again, North at that. online XXXX. Yes, sits to seeing as And the Keith. Loving. another right reminder, plant to not need North we're capacity actually after to to we're QX Loving a add not At it incremental

Great.

Occidental with from other years an just generally contracts contract day, few midstream slides, over for the providers I from you and that's the just them -- one, exposed longer see showed midstream side, want to your west they run expirations. other any amount meaningful Second the don't next uplift confirm on given duration?

actually Yes. None to are with figures contracts of those WES. relative

comes Spiro from question from Dounis of line the next Your Citi.

to going a up. the forward. Mentone of how back us to thinking needs from just in just go question, Keith's just how about you're up builds that for And have utilize well? fills processing Maybe coming initial sense with quickly Maybe online, give then of And how cost been Loving, which some capital North as just that quickly effective maybe defraying here? offloads planning here, pretty the

Yes.

for the So Spiro, question. thanks

We offloads are we for until operating do Mentone North continue will QX So III. still bring in have I XXXX. online some in that at Loving full up capacity we

online again, bridge until that continue So time. at we to get that they'll us

company, push there about I to bring at in had independent Okay. an more to out Understood. business. thinking you of third-party one of Kristen, this back new you of was third-party And when a in step think take the just point spinning maybe the commercial were then more customer sort side time just broader side. a mentioned And let me on things, NGL I guess,

of curious up stands the update kind where list on Just that an stacks on and you. for priority get where to it

existing Yes. That's customers. customers Delaware huge in, year's new of well well team. our call as we've Basin still just for business They've with as this covered the and numerous in priority a as last brought in year-end kind

that double that hard in really that's So has Delaware a to down cost the business. as operations, been over our our teams at last and the fact, look doing our commercial get growth been work And growth, if well. few Basin go engineering testament after really what third-party our ability it's and you to years the have Permian

I'll it Great. there. leave

line comes Tonet next Jeremy Your from from JP of Morgan. question the

for is This Jeremy. Katz Noah on

X expected sales First, in wanted second of and in touch to quarter. with closed volumes in in asset we the the quarter a NGL quarter. timing on quarter I the first step in equity on non-core you X guys down crude the and the the the interest first sales within in the Previously,

volumes? in difference investment to step expect what the equity results speak remainder of the in 'XX? the should you timing cadence the Can for down of Like how throughout and impacted the quarter we

Yes.

X we asset in QX. closed on the of X sales So

down to another of sale oil and year, the So of you're lost you a be just and QX all should there QX to overall, to bit 'XX said a the relative still APA of be with down because X/X QX the little closed decreasing from to did all done. the by divestitures, step of see from QX QX. expect QX, a XX. that about volume And last of volume time in timing within see step I the we you'll

And can for have the reported I expectation year your to guidance speak 'XX? cadence think helpful. the you at for I throughout you about mean $XXX That's CapEx $XXX in million and a the as at follow-up, full guys quarter, you million midpoint.

through So think out service. Mentone that the the III to in now shake how should rest just trying is of year

Yes.

for we that well. would ahead the step and we but So quarter bit as building see steam for summer as North capital got strong might of we're through maybe year, latter there looking to in the third I part see second on quarter. quarter months Loving fall. and get expect -- into are full QX little pretty and towards we strong of the QX, the a as down the a We've

Everen from [Operator Instructions] line Your from the & next TPH of Zach Company. question Van comes

distribution it and you those letting on the guys buybacks free just the all flow cash a increase. metrics? Just have kick if enhanced meets preference continuing between Do to in

Yes.

tool believe still seen, you've gone much think market of the repurchased it's see as sort we've the intended as of which what is strong we've as buybacks, on, more us. But a XX% I to why focused healthy be that using after that's more of perspective. has obviously distribution from whole. market time for disconnections we Zach, We've on a the late, a we seen a utilized company when

see make the leverage then some that debt rate sure we're -- threshold see cash able that we repurchased at the subsequent the in focused a on again that actually we did You the to to debt rate that arbitrage amount that on quarter fair of and XXXX we're opportunities to the to as achieve well to year-end as relative on relative receive. quarter the middle for end, side to

has continue distribution to And so then progress continue unitholders opportunities as as to cash if things free areas, we on that to might and and growth we leverage continue targets those continued intend about. focus occurred, flow the we've talked would to that achieve exist

in those guys would Are at looking Perfect. you still M&A non-core this And do on whether those? be just to do still but then maybe sense. That last Southwest how Utah of the kind quarter, some for I what think you Wyoming. assets, non-core have. touched -- makes that's or one, holding maybe on still considered guys you assets markets you some of you see Or have

Yes.

remove that. from I opt would you to So

I The been around we us. has we think there method equity that core continue Capita definitely to can to our [ however, optimize much ] those look operations see assets. at that opportunities very with investments we have,

value is to than that's however, They it willing continue time. that obviously to divest if pay at over have to we'll value greater and us is them what them value someone we a to

continue long to as the pretty consistent we Our over years that that, those as would them. X been past hold have would and posture X expect around

Your comes next Gupta Manav line UBS. from question of the from

be months run front. good what and Just basis a online? on Loving get Loving maybe plant for a come Once North XXXX do does CapEx North cadence on for the running, CapEx would rate up then the you

Yes.

activity sort XXXX good at, that direction that the levels in we would where building to guide is look the from capital what capital current Should we those take, $X.X was, give And have larger range of we'd pretty perspective. as not a of if remain expected probably give the should we're a be? So plant. in billion projects, i.e., a kind of that or terms out

I should Perfect. company be follow-up. conservative. quick a And And as understand

the the could you top as towards guiding you're get range. blue and top the end strong year beat of of which sky What did here, can end scenario range progresses? the above the be You the

end continue able really the opportunities reap new cost we're in benefits expect altogether. outperformance We a to now, for adding perspective, could have operational been range. there really is that we've drive the we if from throughout see drive to to the volume where efficiencies side That that, would potentially able to high the through above many on of us but to the addition continued year continue that out the years

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

in Thank joining. for you. X speaking Thank forward to you, to time. months' look everyone, you We

This conference call. concludes today's

disconnect. may You now