• Net Income: $370 million attributable to limited partners.
• Adjusted EBITDA: $578 million for the second quarter.
• Cash Flow from Operating Activities: $631 million in the second quarter.
• Free Cash Flow: $425 million generated in the second quarter.
• Adjusted Gross Margin: Decreased by $9 million compared to the first quarter.
• Debt Repurchases: $135 million of senior notes repurchased in the second quarter.
• Base Distribution: $0.875 per unit declared in July, payable on August 14th.
• Capital Expenditure Guidance: $700 million to $850 million for 2024.
• Adjusted EBITDA Guidance: Expected towards the high end of $2.2 billion to $2.4 billion for 2024.
• Free Cash Flow Guidance: Expected towards the high end of $1.05 billion to $1.25 billion for 2024.

• Warning! GuruFocus has detected 6 Warning Sign with WES.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Western Midstream Partners LP (NYSE:WES) reported record throughput for natural gas, crude oil, and NGLs in the Delaware Basin for the fifth consecutive quarter.
• The company executed numerous agreements with new and existing customers, enhancing its commercial success and expected future growth.
• WES achieved its net leverage ratio threshold of three times earlier than anticipated, improving its financial flexibility.
• The company is focused on strategic capital allocation, including organic growth projects and accretive M&A, to enhance returns for unitholders.
• WES maintains a strong distribution yield, offering a compelling investment opportunity compared to its midstream peers and broader market indices.

Negative Points

• Reported crude oil and NGLs throughput declined by 9% on a sequential quarter basis due to equity investment divestitures.
• Adjusted EBITDA decreased by 5% sequentially, impacted by the sale of the Marcellus gathering system and increased operational expenses.
• Produced water throughput decreased by 4% sequentially, influenced by fluctuations in recycling activities and upstream operations.
• The company anticipates higher operation and maintenance expenses in the third quarter due to increased throughput and seasonal utility costs.
• Despite strong commercial agreements, the immediate financial impact is limited, with most benefits expected in future periods rather than 2024.

Q & A Highlights

Q: How does Western Midstream plan to manage growth in the DJ and Uinta Basins, and are there plans for expansion beyond current capacity? A: Michael Ure, CEO, stated that while they are excited about the new volumes in the DJ and Uinta Basins, there are currently no plans for major expansions. The focus is on utilizing existing assets and capacity to service customers in those areas.

Q: Are there opportunities for M&A in secondary basins, and how does Western Midstream view asset acquisitions outside the Permian? A: Michael Ure, CEO, emphasized that their M&A strategy focuses on acquiring assets that enhance existing operations, primarily in areas where they currently operate, to leverage synergies and differentiate their offerings.

Q: With the achievement of a three times leverage target, how does this impact the timing for another distribution increase? A: Michael Ure, CEO, explained that reaching the leverage target allows more flexibility in capital allocation. The focus will be on aligning distribution growth with free cash flow generation, without the immediate need for buybacks.

Q: Regarding the Uinta Basin, what is the current processing capacity at Chipeta, and is there a need for further investment? A: Michael Ure, CEO, confirmed that the current capacity at Chipeta is sufficient to meet the needs of new commercial agreements, and no plant expansion is required at this time.

Q: Can you elaborate on the commercial wins in the Delaware Basin and their capital intensity? A: Michael Ure, CEO, noted that the recent commercial agreements are highly accretive with minimal capital requirements, allowing Western Midstream to utilize existing capacity efficiently.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.