8-K: Western Midstream Announces Strong Fourth-Quarter and Full-Year 2024 Results, Sanctions Pathfinder Pipeline, and Provides 2025 Guidance

Western Midstream Partners reports strong 2024 results, highlighted by exceeding Adjusted EBITDA and Free Cash Flow guidance, and announces the sanctioning of the Pathfinder pipeline along with 2025 financial guidance.

Summary

• Western Midstream Partners, LP (WES) announced its fourth-quarter and full-year 2024 financial and operating results.
• Fourth-quarter net income attributable to limited partners was $325.9 million, or $0.85 per common unit (diluted), with Adjusted EBITDA totaling $590.7 million.
• Full-year net income attributable to limited partners was $1.537 billion, or $4.02 per common unit (diluted), with Adjusted EBITDA totaling $2.344 billion.
• The company exceeded the midpoint of its full-year 2024 Adjusted EBITDA guidance range of $2.200 billion to $2.400 billion.
• Full-year Free Cash Flow was $1.324 billion, exceeding the high end of the full-year 2024 Free Cash Flow guidance range of $1.050 billion to $1.250 billion.
• WES achieved record annual natural-gas throughput of 5.1 Bcf/d.
• Adjusted for asset sales, natural-gas throughput increased 16% year-over-year, and crude-oil and NGLs throughput increased 12% year-over-year.
• The company returned $1.246 billion to unitholders in 2024, including a 52% increase in the Base Distribution in May 2024.
• WES has sanctioned the construction of the Pathfinder pipeline to transport over 800 MBbls/d of produced water.
• The company is providing 2025 Adjusted EBITDA guidance of $2.350 billion to $2.550 billion and Free Cash Flow guidance of $1.275 billion to $1.475 billion.
• WES intends to recommend a Base Distribution increase of $0.035 per unit to $0.910 per unit, or $3.64 per unit on an annualized basis, starting in the first-quarter of 2025.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, strategic growth initiatives, and a focus on returning capital to unitholders. The sanctioning of the Pathfinder pipeline and the 2025 guidance further contribute to the positive sentiment.

Positives

• Western Midstream exceeded its Adjusted EBITDA and Free Cash Flow guidance for full-year 2024.
• The company achieved record annual natural-gas throughput.
• WES successfully divested non-core assets for $794.8 million, using the proceeds to reduce long-term debt.
• The company is expanding its produced-water system and constructing the Pathfinder pipeline, supported by a long-term agreement with Occidental.
• WES is targeting a mid-to-low single-digits annual distribution growth rate.
• The company's financial outlook for 2025 remains strong, with an expected increase in Adjusted EBITDA.
• The company has executed amendments with Occidental related to produced-water and natural-gas agreements, extending contract life and minimum-volume commitments.
• The company achieved its year-end leverage target of 3.0-times during the third quarter.

Negatives

• Fourth-quarter and full-year 2024 Free Cash Flow after distributions totaled negative $31.6 million and positive $78.1 million, respectively.
• The company will not pay an Enhanced Distribution in 2025, retiring the Enhanced Distribution concept.

Risks

• The company's ability to meet financial guidance or distribution expectations is subject to various factors.
• Construction costs or capital expenditures could exceed estimated or budgeted costs.
• The supply of, demand for, and price of oil, natural gas, NGLs, and related products or services could impact results.
• The company's ability to meet projected in-service dates for capital-growth projects, including Project Pathfinder, is not guaranteed.

Future Outlook

WES expects continued growth in the Delaware Basin and targets a mid-to-low single-digits annual distribution growth rate. The company plans to focus on organic growth projects and synergistic bolt-on acquisitions to drive distribution increases over time.

Management Comments

• 2024 was a successful year for WES as we achieved double-digit throughput growth across all three product lines and grew both Adjusted EBITDA and Free Cash Flow meaningfully year-over-year, said Oscar Brown, President and Chief Executive Officer.
• We intend to build on this operational and financial momentum in 2025 and target a mid-to-low single-digits annual distribution growth rate, which will be supported by growth in the underlying business and incremental Free Cash Flow generation, Mr. Brown continued.
• This project also advances WESs strategy of prioritizing capital-efficient, organic growth that creates long-term value for all of our stakeholders, concluded Mr. Brown.
• The financial outlook for WES remains strong as we transition into 2025, as we expect Adjusted EBITDA to increase by approximately 5-percent at the midpoint relative to 2024, commented Kristen Shults, Senior Vice President and Chief Financial Officer.
• Going forward, we will be targeting a mid-to-low single-digits annual percentage distribution growth rate, which will be supported by growth in the underlying business and incremental Free Cash Flow generation, Ms. Shults continued.
• We believe these decisions will better enable growth while maintaining our strong, investment-grade balance sheet and drive incremental value creation for stakeholders, concluded Ms. Shults.

Industry Context

The announcement reflects the ongoing importance of the Delaware Basin as a key growth area for midstream companies. The Pathfinder pipeline addresses the increasing need for produced-water disposal solutions in the region. The focus on organic growth and capital efficiency aligns with broader industry trends.

Comparison to Industry Standards

• Western Midstream's focus on the Delaware Basin mirrors strategies employed by competitors such as MPLX and Energy Transfer Partners, who have also invested heavily in the region's infrastructure.
• The Pathfinder pipeline project is similar in scope to other large-scale produced-water infrastructure projects undertaken by companies like WaterBridge Resources.
• The targeted distribution growth rate of mid-to-low single-digits is in line with the approach of other mature MLPs in the midstream sector, such as Enterprise Products Partners and Magellan Midstream Partners.
• The company's leverage target of 3.0x is comparable to the leverage ratios maintained by other investment-grade midstream companies.

Stakeholder Impact

• Shareholders will benefit from the increased Base Distribution and potential for future distribution growth.
• Customers will benefit from the expanded produced-water infrastructure and enhanced service offerings.
• Employees will benefit from the company's continued growth and investment in new projects.
• The company's focus on sustainable practices and responsible disposal of produced water will benefit the environment and local communities.

Next Steps

• Construction of the Pathfinder pipeline and expansion of the produced-water system.
• Commencement of operations for the North Loving plant in the Delaware Basin.
• Potential Base Distribution increase in the first quarter of 2025.
• Continued focus on organic growth projects and synergistic bolt-on acquisitions.

Key Dates