Western Midstream Partners (WES) 7 Nov 242024 Q3 Earnings call transcript

Good afternoon. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners Third 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.

you. Thank could Call. for you Quarter Midstream's us Conference XXXX join glad Western today Third I'm to you contain like and forward-looking I'd remind and last slide the statements night's deck accompanying earnings reconciliations. release non-GAAP important regarding that disclosures today's call, most factors Please risk what and other description could we materially from cause actual discuss Form public reference recent XX-Q for filings Western a differ today. Midstream's that of results to Officer, Officer. I'll newly Oscar posted are our me appointed on Chief Chief our Officer; to our Executive the Danny Relevant Kristen reference materials over Operating Brown; today website. With our now Holderman, Schultz, include call Oscar. and Chief turn Financial

Thank you, everyone. afternoon, and Daniel, good

Western take first am here the me Midstream. to Let be of as moment thrilled to say how today I CEO a new

today. in and including, leverage Board Ure Powder I improvements billion standing Xx with, XXXX, outstanding as impressive an member Midstream all As WES is and the am of, Delaware lowering for distributions partnership's today. Under the all has Basin, Michael a Michael's independent have leadership, River contributions and have midstream I partnership WES Xx an to mission, the reductions to of and Basin, thank return for it familiar the strategy. through to the transformation the up of and significantly of that unitholders vision Meritage significant cost growth supportive undergone operational acquisition just repurchases, best-in-class while been business, the in the made partnership his that like $X.X intimately would since under unit

chosen on and next extremely to story, WES chapter of honored chapter this out by of the we As WES's the lead I'm to Board been the growth development. have close

XX%, customer reported and above third to Yesterday, producers, earnings. elevated strong flow for quarter turning plant Now WES, and activity. continued assurance marked operability by despite our turnaround another operationally for service we successful quarter

Basin River the consecutive of robust due in and record throughput quarter growth throughput gas natural Powder natural to throughput increased Basin. sequentially gas our Our in seventh Delaware the

despite activity volumes levels will also producers, the water recycling which elevated continued upstream increased of shortly. Our on in produced comment quarter-over-quarter operations of Danny our used

still we year, driven EBITDA volume contracts, to declined commodity of as liquids range a coupled adjusted our recovery the guidance operations the to and distributions maintenance our from expense. of investments end high decreased seasonally the natural While our lower second expect fixed and relative for under at quarter be higher with pricing, lower result equity our gas

the increase we expect to As we higher due focus to throughput, EBITDA our primarily the fourth quarter, adjusted on from Delaware Basin.

higher forecasts Our activity expectations with consultation supported connection through short-term throughput well our of year-end. are customers, including by and

fourth we the In and expect lower addition, maintenance quarter. operating in expense

mid-August, we of partnership June in February the of incremental to of will $XXX the in our notes, Basin. In use joint debt structure to our pertaining Vida starting the with provide commercial the quarter at XXX gas WES executed million development capacity to Turning new agreements issued retire for in provide This and Mi end, assurance to mid-XXXX. next proceeds commercial customers the These feet and to facility. of tied plant dedicated us realign processing Delaware per million subsequent day we for we enable natural to senior new and to venture general agreements year maturing cubic flow will which purposes. new

the for best unitholders year-end comfortably threshold continue XXXX returns trailing we Xx, net to efficient time. generate allocate ways ratio and the look for leverage reached Our our to capital our of XX-month over has to most

discussed business. quarter, prudently As include: the these first, last options expand capital to investing

option. payback over is periods thresholds. with meet usually lowest return highest projects reasonable grow growth volumes time that We risk, This our our potential will allocate capital that towards and organic our return

Second, allocating capital towards accretive M&A.

of value acquisition our standard will Meritage base We the a will it to evaluate any acquisition. finally, base, as we in very existing that such growth organic opportunities. And relative meet that hold the as distribution. Midstream increasing must potential mind the asset risk-adjusted thresholds opportunities return to high Keep strategic enhance our

incremental grows As continue opportunities Board with cash flow, distribution base business grow will and free our we management the business. in of generate growth to evaluate and line overall the the to our

in to capital also our turn in if the Additionally, unitholders. With relative and call to have that, to opportunities, framework we Chief I higher our to the Officer, to discuss business we place have Danny year, Holderman, outperforms performance enhanced our operational Operating return return expectations initial incremental the quarter. a other exhausted distribution will over our given in

you, Thank everyone. Oscar, and good afternoon,

gas our increases partially Basin natural a plant Delaware the the growth Chipeta of a other and Marcellus quarter. increased throughput X% the result to in due River Texas, in These of and quarter lower quarter basins, turnaround third by as our were strong in our Powder complex South at offset the volumes of assets, and sequential on Utah. Our including throughput in by assets DJ and second from sale activities basis

Delaware a Our offset basins. sale primarily X% record These declined Basin, volumes River throughput sequential equity our declines the Wamsutter Wyoming of total oil and by on Powder oil due the and to the were basis, crude and in DJ decreased lower with investments. quarter by associated pipeline the NGL volumes partially in throughput in

throughput our on levels increased elevated quarter sequential by a despite water producers. Our basis activities produced recycling of X% by

periods. cycle throughput, water While our impacting those near-term in is to expect and future a into system volumes recycling we practice growing

by recoveries with coupled Our margin This primarily natural our compared our third gas under lower contracts, $X.XX quarter decreased driven prior assets was liquids quarter. for fixed gross adjusted the natural by pricing. overall commodity recovery per gas lower Mcf decrease to

which compared natural a experienced at Powder Basin per margin has the other increased throughput we River complex, Additionally, our as gas assets. lower Mcf to

our expect with forward, to third margin fourth line adjusted quarter Going quarter. be in per Mcf gross the we

the payments with compared quarter, equity due quarter third investments. timing distribution $X.XX crude for our to adjusted barrel primarily decreased to Our prior per assets our NGL associated the and by margin gross oil of

our of with associated margin We adjusted barrel gross our third to higher equity modestly per investments. relative payments fourth the expect to distribution to be the quarter due quarter timing

third quarter our quarter flat be the fourth for Our remained quarter-over-quarter, with quarter. barrel water our margin produced barrel in and adjusted line relatively adjusted assets to third gross per we gross margin expect per

Turning NGLs. in in digits and the Basin, fourth to average to DJ offset the low Basins. the Based throughput of throughput expect River slightly our throughput throughput our operated our performance remainder we attention partially initial our relative the growth expectations for expectations and year. result slightly the date increase now higher Powder a by year-over-year to increase double growth percentage on crude for our oil and current lower expectations Delaware less This is of to as quarter, by

to from throughput our we customers. low water for percentage upstream certain expect due increase producing Additionally, by our for produced now to continued levels of growth recycling average operations double digits of year-over-year water

eventually an poor an will barrels volume to and ongoing the as indication However, they activities, wells completion quality rock basin. our of to lead this dedicated inferior these barrels and Furthermore, onto WES, quarterly reduction is or more to for on are could utilize as flow continue basis. variability systems drilling in not this near-term producers

turn DJ percentage which that, the our to for expectation teens by throughput natural the Powder average year-over-year year-over-year I'll be call supported discuss upper Kristen to our the and continues mid- throughput gas River quarter. growth strong to unchanged growth, performance financial basins. With Finally, over Delaware, to at remains in during

Danny, good you, Thank everyone. and afternoon,

adjusted quarter, During to Relative our $XXX of quarter, to generated by attributable million. $XXX third second million. of we income and the the net $X decreased gross million partners limited adjusted EBITDA margin

natural liquids with driven As Oscar mentioned, investments. recoveries prices lower gas distributions contracts, this our lower fixed from was decrease recovery and equity our under by primarily decreased commodity coupled

expense, was and sequential operation repair primarily driven and a in maintenance experienced we expense. which maintenance by increase expected, As our quarter increased

utility second we due the decreased in Our that half quarter. the pricing in ERCOT third benefited lower costs of the from slightly to quarter

operation would the maintenance to we plant since major behind expense to repair the expense, for in turnaround modestly our trend activity forward, especially us lower fourth the year. due mostly and Going and maintenance is quarter, lower expect

from a other Our quarter lower sequential a tax in to basis reduction related property in expense on accrual property values valorem ad Colorado. and tax property decreased

slightly and quarter to second expect would our be than lower we but forward, Going property higher, levels. other taxes

Turning flow. to cash

from quarter of $XXX totaled was cash cash million. $XX second Our after $XXX quarter flow cash operating activities flow million. XXXX million, in August generating free Free flow third payment distribution

with base announced, a prior retire we best issued book and the XX-year our XXXX in deal in August priced X.XX% we rate, spread $XXX market November previously million to note upcoming paid the and by ultimately was pleased quarter at the as well declared was senior for on the October, As order issuance as in to XX unit, XXXX was than relative how of points XXX unchanged notes record treasury which WES' the November basis due purposes. distribution oversubscribed, above payable Xx credit $X.XXX of used more were the was of of per will history. In unitholders We in be general partnership XX-year X. which distribution and received maturities is that to

XXXX to guidance end respectively. and billion $X.XX our throughput the to $X.X guidance, NGLs year, for to financial and for our flow billion be expectations of and the on Focusing despite towards EBITDA still crude billion reducing free of we adjusted previously high disclosed expect our water, $X.X produced ranges oil and cash $X.XX billion

and achieved million Uinta $X.XX $XXX million $XXX to distribution Based at year Our our to guidance third implying approximately of expenditure on XXXX. Delaware capital $XXX to of of XX% full XXXX. Even a throughput Basins remains allocate paid budget guidance year base to begun we growth at spend million, next towards facilitate announcement, we we now to have in unchanged the River for Powder unit quarter Basin, per full year have though the be incremental our least midpoint distribution still expect calendar capital our range in year. capital

our XXXX NGLs, XX in year. The relative in barrels important that and in the this XX,XXX in in with Focusing of half volumes Basins, moderate cubic all year organic oil adjusted to expect first will natural feet gas products of to remember crude per overall It's repeat include XXXX. growth DJ approximately our will lost million of throughput Delaware XXXX. on asset associated these throughput day million strong day of sales a and and XXXX, the that to of asset not we noncore $XX throughput for XXXX not from growth throughput both that rates EBITDA XXXX approximately sales per after represent closed several

report assets Additionally, Texas. With working in that we through we our process in DJ expect said, crude XXXX with quarter and will late oil throughput a customers, budgeting volumes I demand assets of and fee South producing the Basin oil gas XXXX earnings million guidance our over all in the the fourth crude still natural in our and that, turn our are with Oscar. our provide now will call expectations from when $XX February. With back reduction we we to revenue associated financial and

Kristen. Thanks,

Before Q&A, continues to we open it up well very I key highlight a points like few to on be why positioned. WES for would

attractive most to opportunity a to investment the yield and yields distribution of First, very S&P remains all continues relative subsectors of compelling one the WES of the offer the XXX. average

yield the distribution increase of the in you all distribution XXXX Additionally, for WES year highest Index, and distribution the investment-grade companies the the credit maintain was WES MLPs in now base this the to with and midstream several first ranks WES quarter an companies. yield Russell to other has Furthermore, implemented amongst within compare the midstream entities #X that midstream enabled terms XX% in peers all of rating. when

to valuation to well EBITDA value the compared to represent a the an approximately Second, future This fact the on lowest discount despite one basis, and Xx MLP increased at of contract that free balance cash continues growth from due MLP extremely sector a structures. X.Xx of sheets, positioned valuation continue the trade to is XXXX valuations of supportive generation strong in XXXX. space, the through MLPs enterprise flow history average the for low the of to

Third, the of these model. characteristics new aspects are of the all positive sector MLP

corporate model MLP and that MLPs finally, other the valuation new the though advantaged widened assure MLPs gap the This continue the for deserving fact I between space the midstream rerate, account tax structures to C very by into the continue the will free in face customer differentiated and and to years. The WES's Corps of everyone of and want economy of continues compelling discount that a the considerably. valuation present valuation over a cash optimization for argue that sectors model. companies whole. And on mission, providing other a WES offer the to coming combination the take has is to you one continue when that of will defy leader most as We and new investment strong service even especially generation the to burden tax recently vision a flow the space midstream of MLP all WES MLP advance the focusing initiatives. space has I leading superior become in and opportunity midstream strategic expectations,

We have on next with very growth excellent strong which WES its financial base an development. a provides operational lead chapter to team this and and platform of

member a remain I over XXXX, As same. an partnership's pursuing in want in and expansion on that line organic capital allocation time of the all the the of business, growth shaping all accretive executing And role of opportunities, development of priorities assure goals opportunistically the of I important base high-return with M&A, distribution to our growing Board our the since you played and the objectives.

to all you their sheet. To to to also close, download and workforce XXXX report investment-grade entire Sustainability a of our copy am to thank like encourage I for dedication on published are would that continued WES committed while of the and would I read priorities balance pleased we We hard strong Report these all partnership. and I to announce executing maintaining our work our about our of accomplishments. the yesterday,

accomplished a you I line XXXX high late finishing and results the this look fourth questions. to year, We have forward note on we'll updating that, for open quarter February. With on and a in our lot

line question JPMorgan. Tonet of [Operator comes at Instructions] Your the first from Jeremy

of been the touch that, transition transition Oscar CEO question base time, I some had the market -- thus was face want to on, one the of just Really the here many Mike from pretty to seemed company us. for the with just really for side, abrupt. And me. company

And timing. I bit so walk if in here. you seemed I more the a a abrupt us process just could through -- it was just bit guess, wondering

with you if us anything So could be helpful. would share

couple Sure. It's and operating Michael capacities considered that of a with mean, debated been smooth. a Well, I've like policy smooth pretty from I a in the been thought financial pretty policy worked years. all of actually XXXX, our perspective, and recall it's things and him weeks. and through since [indiscernible] friend about number

of same our of So policy -- in partnership. those importantly, said the find you'll my most goals it's we've times, to been we are couple everything our views things a the is concerned, are as extent, on of and the as the allocation same. And terms for anyone's capital

in the going perspective I last quickly and -- seen from the and faith community. Michael of , past. one, company, guy organization given So slide on as team the he's the and in I've of his been my focus and kind Board focus leadership just the his the really familiarity very is long able in transitions with And perspective, and to his it's forward. I've moving been abruptness the think religious number you from me, know, on the some a the to just great. family for guys

that a with all constituents -- building slow can having and little our having CEOs all of so once and things the get with down. two confusing And

came to move move quickly. to to we just we once an So forward, agreement wanted

we so are. And that's where

it. Got

So the transition mutual, be just was clear? to

no Absolutely. the matter. we X-K, the no disagreement as any And there's in -- with company there's on Michael saw and

a journey a So the been look transition. fabulous X it's last really has you smooth Again a team if for back quite the at years, and partnership going it's to be job. the done

is really today. regenerating where think that's going where business So build today growth and accomplished, of in business the from to look and is little standing next focusing all the terms been organic it again to is up from I to to different a X the it

billion in future. hopefully $XX a big and the way grow in like a that Something enterprise

things to little So be it's bit it to Michael the to and we focus just like going different held allow a opportune time tight. path felt an on

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

And in does My the question as more Basin. the Delaware in Delaware itself is little consolidator Basin? basin? a consolidation you happening more see the on WES a see Do

Yes.

and by for led I know, pretty really a little been in robust as you guys strategics. midstream M&A the the space think bit it's last environment

ahead curve think I were we on that. of the

seen a space, all Going it have way bit a back balance sheets Meritage. we've the with the given lot sellers buyers. feels What recently, the to more advantage more like little XXXX strong than the that in the

value. we M&A, We'll so look have, as what can incremental at continue can of focused we set always any assets to to real really that's drive others we on bring to

also better. But control probably always I our a there but tie, something organic, disciplined and -- risk So we're we the there, on from front. ourselves because can looking opportunities are out Delaware, that perspective, in see in organic were If we can we wins think just growing. and we pretty the do

answers So that question. hopefully, your

part favorable next a President. And some is your oil see Absolutely. Do It second looks regulatory on years? the like and have for X commented this. different already Government, you of different for gas peers more a outlook

give going answer a is yes. I'm But short to the response. measured you

new So -- friendly this general. likely administration is very and I think to that in this be do administration more to gas oil

think I should widely view in at beneficiaries kind that, of space the in we've market be of of particular, least primary seen, held the the midstream what that. one it's that,

customers, our that a able move little as quickly its well anticipate more more quickly should hopefully and and way we'd So grow find being to to us.

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

indicated Can color that? the moderate to you think, growth should up, on Wanted in of volume might give much products. driving the what's a magnitude the across growth further how on give prepared can end little follow XXXX remarks more you characterization I of any Kristen, volume the at And decelerate?

putting forecast more our of currently forecast so robust we in for XXXX. Keith, process together -- the Yes, are a

we what very the be that than gets but pace activity And portfolio, a increased the relatively that we the activity we basins, when 'XX will the study levels expect leading growth a across more you've and and while wells forecast DJ incremental had received still thus a and -- back growth. growth look in seen is 'XX. We've online. at Delaware we've think you've moderate to at level more those particular, far, relative more take the in coming basis, that seen of within strong still I years moderate activity in step few just

in total the to to So part, look portfolio increased from due of average year-over-year at we when 'XX, Meritage was growth, Additionally, Midstream. throughput our 'XX acquisition

so as acquisitions haven't in such this. we 'XX, had another And

been In fact, assets. divesting we've

receiving there's overall, 'XX the next between through how to we'll few months, -- around be some to just 'XX thinking we 'XX. over So updated Obviously, saw environment work to [indiscernible]. we guidance to forecasts commentary then need in well differences the from then continuing for what 'XX We'll budgets we about our that will through what further they're from as and as and new all think a through to of and work February. those macro allow and their continue us that thoughts provide to

That's helpful.

a Second with should feet about cubic structure added have Or question, plant? use half think with own can update? XXX Transfer the you new you day Mi contracting the just now incremental that? your So your for you a is million more little can just to we effectively that customers? Vida capacity how processing that Or a Energy JV you talk of

a that on more the concept. think plant plant restructuring a It's one, it's commercial sort of of arrangement. Yes, a I just within of

basically that. a have XX-XX taken being simply capacity of we've to the full instead access owner, half So and

to adds there. incremental million some not that, not net down see step change. a It's our doing capacity benefits it's but we to So $XXX

Everen question next of Instructions] [Operator TPH. from Van line Your Zack at the comes

with what I this Just starting said Does service higher your sense. moderated contracts? potentially kind all the point of to cost of growth, makes back on think rates you

Yes.

it early in receive forecast next a does to So because you give service few cost of going on an that's relate the months. we're that to update little probably really mostly to the

we So issue we'll as have to well. when come February back that in to guidance

a you then Was that Could assets crude little bit just mentioned on worries. Ford. to at provide contracts end the there? No and there on Eagle you the rolling color more lower just the you. earnings in Got DJ the related And off?

Yes.

the about contract been like last And about. some about for we've we just talking efficiency this with that have revenues I changes perspective. So think in and we were that from this of you're talking talking a step South few years rate the Texas

trying like little of whole what bit the XXXX So might do clarity we're to just there. look what look entire across and a is that in portfolio give

of Your comes line next question Baramov Ned the at from Fargo. Wells

for timing XXXX. to follow and regarding growth? NBCs the the think in your ] the turn How [ DJ EBITDA drive up outlook Just do you volumes earlier questions on in tempered when about exceed volume

Yes.

what XXXX think through we've Obviously, talked something NBCs specifically side, on But about So depend forecast and NBC that in ] for potentially [ oil as really a in XXXX. there. the in there. producer ] on longer-term about more even the I levels DJ breaking that will get that level past [ would we

then are on And vacated there of Directors? helpful. That's seat any Board fill plans eighth the to the board

that I'll Oscar, take Its one.

support So anticipate another would director. and happens. would X we expect potentially add the the for see board. certainly And forward but moving of what now, up full let with it's that But really to now, and at independent we've we're to set for we'll kind I X, board would

America. line comes Bank Mitra of Indraneel next Your the question at of from

of of I low system, what utilization or the know system? Oxy the kind family of your you're processing a run sorry, of restructuring But question, you Vida plant, in through kind capacity core is that there. in the is it First it fits Or just WES plan? that how to family in Mi kind the terms is -- super where with

to best do I'll answer. my

the of asking within understood utility think and complex, I the would areas, utility is lower be or it I lower areas. higher it you're one or

the then over it we And et where right south. the are cetera, So the flow to to of most growth up spills new the plants north, now.

Great. Okay.

to processing in would question, coming beyond potential North underwrite any plant a plants new on outlook second on beyond processing need Loving that? you XQ, 'XX The what and

Oscar. it's start, I'll Yes,

arrangement consistent to which commercial anything to in immediate is to updated so with those good we those And up we development are can we with and it customers a of is them. don't sort plans We our constantly the if underwrite Our philosophy build. serve see capacity try again, But certainly by have come plants on our adding customers. implants future. work being

then it course, at and sense makes So look to if we'll good that. of us, it's them for returns

that imminent we on today, customers but nothing something -- really growth we the just basin can contract what the to with always It kind So and work structure underwrite. our at. you on depends of just in look

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

everybody. and care. Great. the full Take seeing WES to to grow team the again as work look we in the you seeing for to XXXX forward hard between. -- we all everybody of road on Well, thanks, Thanks February continue many the talking hopefully in to business, and

today's This conference call. concludes

may You disconnect. now