8-K: Western Midstream Reports Strong Second Quarter 2024 Results Driven by Record Throughput

Western Midstream announced strong second-quarter 2024 results, highlighted by record throughput in key basins and solid financial performance.

Summary

• Western Midstream Partners, LP reported a net income attributable to limited partners of $369.8 million for the second quarter of 2024.
• The company generated an Adjusted EBITDA of $578.1 million and free cash flow of $424.8 million in the second quarter.
• Cash flows from operating activities totaled $631.4 million for the quarter.
• A base distribution of $0.875 per unit, or $3.50 per unit on an annualized basis, was announced, consistent with the previous quarter.
• The company achieved record natural gas throughput in the Delaware and DJ Basins, with 1.9 Bcf/d and 1.5 Bcf/d respectively, representing a 6% sequential-quarter increase in both basins.
• Record total operated crude oil and NGLs throughput of 396 MBbls/d was achieved, a 6% sequential-quarter increase.
• The company reduced total debt by $762.6 million since year-end 2023, achieving its long-term net leverage threshold of 3.0x earlier than expected.
• Second-quarter capital expenditures totaled $207.5 million.
• The company repurchased $134.9 million of senior notes in the open market during the second quarter, bringing the year-to-date total to $150.0 million at an average of 96% of par.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong operational and financial results, record throughput, debt reduction, and a focus on returning capital to unitholders. The company's management is confident in future growth, and the overall tone is optimistic.

Positives

• The company achieved record throughput in key basins, demonstrating strong operational performance.
• Western Midstream generated significant free cash flow, indicating financial health.
• The company successfully reduced its debt, improving its financial position.
• The company executed multiple commercial agreements, securing future revenue streams.
• The company is seeing a return to growth in the DJ and Uinta Basins.
• The company is experiencing increased throughput from existing customers in the Powder River Basin.
• The company has reduced senior notes on a net basis by $942.6 million since January 2020.
• The company has paid out approximately $3.5 billion to unitholders through Base and Enhanced Distributions since January 2020.
• The company has bought back over $1.1 billion of common units, or 15% of the unaffected unit count since January 2020.

Negatives

• Second-quarter Adjusted EBITDA declined 5% sequentially due to lower distributions from equity investments, higher seasonal operation and maintenance expenses, and more normalized property taxes.
• Total throughput for crude oil and NGLs assets decreased by 9% sequentially due to asset sales.
• Total throughput for produced water assets decreased by 4% sequentially.

Risks

• The company's ability to meet financial guidance or distribution expectations is subject to various factors.
• The supply, demand, and price of oil, natural gas, NGLs, and related services can impact results.
• The company's ability to meet projected in-service dates for capital-growth projects is a risk.
• Construction costs or capital expenditures exceeding estimated or budgeted costs could negatively impact the company.
• The company's performance is subject to the other factors described in the Risk Factors section of WESs most-recent Form 10-K.

Future Outlook

The company anticipates throughput to continue to grow throughout the remainder of the year, which will drive 2024 Adjusted EBITDA and Free cash flow towards the high end of previously disclosed guidance ranges. The company expects to use the Base Distribution, and its Enhanced Distribution framework, as the primary tools for returning incremental capital to unitholders.

Management Comments

• The second quarter was another strong quarter operationally for WES, with robust system operability contributing to operated natural-gas and crude-oil and NGLs throughput growth.
• We experienced several throughput records during the quarter including record throughput for natural-gas in both the Delaware and DJ Basins, record total operated crude-oil and NGLs throughput, and record Delaware Basin crude-oil and NGLs throughput.
• This continued growth gives us confidence in our increased throughput expectations for all products for the year.
• We are excited to see a return to growth in these basins, and in fact, if these agreements are fully utilized, we could potentially see our plants reach full utilization starting in 2026.
• We believe our strong operating model, prudent capital allocation principles, and our transparent capital-return framework will further position WES as a leader within the midstream space.

Industry Context

The results reflect the ongoing demand for midstream services in key basins like the Delaware and DJ, and the company's ability to capitalize on these opportunities. The expansion of processing capacity and new commercial agreements indicate a positive outlook for the company's growth in the midstream sector.

Comparison to Industry Standards

• Western Midstream's throughput growth in the Delaware and DJ Basins is comparable to other midstream operators focused on these regions, such as Energy Transfer and Kinder Morgan.
• The company's debt reduction efforts align with industry trends of deleveraging and strengthening balance sheets.
• The base distribution of $0.875 per unit is competitive with other midstream MLPs, such as MPLX and Enterprise Products Partners.
• The company's focus on expansion-oriented capital spending and accretive M&A is consistent with strategies employed by other midstream companies seeking growth opportunities.
• The company's record throughput in key basins is a positive sign compared to industry averages, indicating strong operational performance.

Stakeholder Impact

• Shareholders will benefit from the strong financial performance, base distribution, and potential for future growth.
• Employees will be impacted by the company's continued operational success and expansion.
• Customers will benefit from the company's expanded infrastructure and services.
• Suppliers will benefit from the company's continued operations and capital expenditures.
• Creditors will benefit from the company's debt reduction and improved financial position.

Next Steps

• The company will host a conference call on August 8, 2024, to discuss the second-quarter results.
• The company will participate in the Citi One-on-One Midstream / Energy Infrastructure Conference on August 13-14, 2024.
• The company will continue to prudently allocate capital to efficiently grow its business through expansion-oriented capital spending and accretive M&A.
• The company will use the Base Distribution, and its Enhanced Distribution framework, as the primary tools for returning incremental capital to unitholders.

Key Dates

Keywords

Midstream, Natural Gas, Crude Oil, NGLs, Throughput, EBITDA, Free Cash Flow, Distribution, Debt Reduction, Delaware Basin, DJ Basin, Produced Water