WES - Earnings call transcript Q2 2021 | Western Midstream Partners, LP

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Western Midstream Partners' Second Quarter 2021 Earnings Conference Call. All participants will be in listen only-mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Kristen Shults, Senior Vice President, Finance and Communications. ma'am. ahead, go Please

Kristen Shults

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

Michael Ure

levels products good producer net XX% reported prior Thank behind expectations Basins million, we generated With an adjusted you, increase Yesterday, $XXX and quarter us, EBITDA across our activity $XXX adjusted DJ EBITDA. of portfolio. afternoon, and and quarter's strong Storm Delaware income Winter Kristen, both outperformed of throughput everyone. XXXX over quarter second increased and in second and the all the Uri million

and our We continue to generate disciplined flow capital spending. cost by significant in free cash remaining

of $XXX quarter, For cash million and second we after the free flow distributions. of generated million cash flow $XXX free

Uri. of Winter to drove our incurred few impacts will and impact on that related to therefore, color contractually an that had producer quarter EBITDA million through over are We We with adjusted commitment in margin to previous distribution invoiced minimal activity Related expense is also second on utility want quarter. additional unit, these the quickly we growth quarter, line however, by $X.XXX were per representing our a majority increased and providers second O&M, of the the a provide utility X%. The $X G&A expenses X.X% for additional moments, increase higher-than-anticipated to did, Storm our on thoughts passed forward. quarter a to gross going comment in distribution our charges levels. Craig In annualized on in O&M which

recognized also for liability has $X recorded ago, and June. occurred environmental years an million relates in incident We to since onetime a been several asset the decommissioned. This that

As third as quarter. to compared these the expect of our decreased the these we margin O&M quarter. gross charges onetime prior expense a subside, to O&M events, during normalize percentage Despite adjusted

IT three to in We saw a services XXXX, G&A months at year-over-year our also guidance, level with absorb enterprise. associated in we with remain for infrastructure. fully G&A the cost the increase XX, transition from our as This fees IT we primarily to and of transformation XXXX was and expect contract being consulting, and related increase embedded the associated of this and ended stand-alone costs June a

expect To specifically at to prepare Basin, throughput, these above incremental of structure be of operational cost and to enhanced end our CapEx to million $XXX and We've efficiencies, million. gathering to XXXX the dedicated range high $XXX reduced we our capital our volumes. increased half spend second now the been successful business. attracting incremental and year, of or seeing in we've the for in activity, expect to producer increased Turning Delaware be third-party we're the increased we

EBITDA $X.XXX we impact $XX quarter. the be $X.XXX Coupled While second outperformance, with optimism this Uri EBITDA, now first XXXX modest us high million of Storm increase of end the EBITDA Winter to the billion, we to gives our levels uptick and thus, adjusted adjusted generate XXXX expect our in of near these a during EBITDA. quarter to capital XXXX adjusted activity throughput dollars range expect XXXX despite on efficient billion

near-term allowing committed leverage us at fully targets, market year-end and at generating quickly or reach to greater target By optionality still below X.Xx can the conditions. year these retiring flexibility evolving EBITDA, adapt more our this at and to are to XXXX. and below at end We maturities or of X.Xx incremental maintaining we

Along to conditions employ remaining. dictate. to have approximately Craig discuss of paths authorized represent Our has unit of repurchase program opportunistically recap, our quarterly enhance performance exchange, turn these we intend through enabled to we With Through in increase XX.XX outstanding call of with using entire the units, our To we first the already repurchased to as the senior we previously value. $XXX million planned notes to as retired due second value the distribution, multiple I'll have forward to that, note Anadarko program, operations to and units. over to our our over of half quarter. the $XXX which Craig? stakeholders our XXXX. stakeholder return X% buyback million unit million year us which look today, We million in have the $XXX

Craig Collins

Thank Michael. you,

Before we discuss I performance, would to in earnings to Crestone announced take release. moment quarter's a get this like our into deal operational the

a the Peak processing gas we executed and second long-term gathering Resources. During quarter, Crestone agreement with

producers We're we to dedication only made by competitive the their growing and our forward competitive in operations, look in Creston demonstrates expansive provide acquired and want well Crestone cost sustainable to part leveraging infrastructure the supporting development thank the additional about their on connected to XX,XXX engineering and years acres operations. gas third-party dedication Albert as acres our up our in to As deal, and Arapaho to plans for teams dedicated Watkins commercial to deal efficiencies. our The in The system to and Counties ability success is possible in by operational to excited Crestone business. be Adams, Basin Colorado focusing approximately future. continued and efficient partnership and DJ West for that safe, our remain to the like area gathering our of its located with as may come. backbone advantages and I XXX,XXX in

quarter. second back Turning the to

we first producer all with from Our a as strong disruptions throughput experienced products and quarter Uri increased activity the quarter. without full in market Storm Winter across the

Delaware record respectively, second day from X.XX of the the prior oil increasing the in our water gas our throughput in by and throughput rig activity billion quarter. gas, and throughput result, XX%, and producer continued coupled As inventory, the outperformance cubic led the XX% about Basin year, quarter. respectively, and expectations feet about our in completion The the resulted in prior Basin, and of X% in quarter, oil early the increase DJ with during a In outperformed from the in XX%, May. to increased per XX%, gas quarter DUC

throughput the back quarter online third wells half fewer in are to year. expected to We levels the as decrease come of expect DJ in the

beginning these sequential offset throughput However, we quarter recently announced expect portfolio, gas deal per in XXX to day the Across by basis. XXXX. on feet Crestone the cubic about X% increased a help declines million or

by up and increased the increase. approximately day, natural water representing assets XX% about XX,XXX barrels gas sequential XX% liquids throughput Our barrels XX,XXX quarter our crude were quarter. a previous per about from per or oil Throughput from day

DJ a adjusted to by higher Mcf gathering to a $X.XX on throughput $X.XX sequential increased natural basis in per quarter average Basin. gas and the margin fee due gross increased Our

gross $X.XX Our a decreased per and NGL margin as from quarter barrel by basis crude assets sequential investments. adjusted gross contributions on for oil of a $X.XX to equity margin lower result

the increase helped earlier, producers' as we're in movement in Michael has so activity, our is spike more Most seeing ahead, said commodity to producers. the of Looking from our prices Delaware. private and this this

non-affiliate of private XX% to our non-affiliate In we in fact, account throughput for gas throughput forecast, based approximately of compared XXXX. expect on our our producers current XXXX in as Delaware XX% Basin gas to

and public continue Today, expect programs to to activity increase rate Permian gas continue that expectations their similar basins. among looking in of specifically teens. the and and result see exit optimistic double oil by by I'll tailwinds versus oil companies, rates XXXX back our in to flat the top-tier These for we highest the have for now remarks. water we reasons digits line rates. high Our levels the and a position capital percentage digits we digits increase water a for the our we the the business, exit to closing basin, forward with expect higher devote year, XXXX single they to portions the and regarding to to rest it now relatively original U.S. of private are and throughput low XXXX. over digits the mid-single XXXX but high to of strong we're continues beginning Michael turn to and these by of high capital Basin single are exit in as large our Delaware increase acreage. XXXX At by our expected producers to public, the gas operate, where relatively And spend a with of budgets.

Michael Ure

Thanks, Craig.

cost WES, the establishing staff by being and our deal ability tremendous ESG open first safety strong issuing enhancing second goals a our fruits I'm half in protecting future. towards quarter WES for expressing company proud to our highlight minimizing continues we'll and enter the our With today. the close hard embedded forward six facilitate we'll thanks employees in efficiencies and performance tremendous environment, its see where and we stewards XX we progress our our the our ESG reliability the for to I With year. in of talented as look made have sustainable stand-alone environment We our in to ensuring my of the upward of our activity producer we As our the through again environmental we've the company environment, we've workforce a call, system. footprint. contractors. ahead stand-alone spent and second of first as the They of commodity want the with and line months as to report and stated prior creating work labor third our that, foundation questions. integrity trend the of safety, our see and accelerated We the calls, asset our the our goals discuss at quarters potential Crestone for the

Operator

[Operator Please question at Instructions] Kyle Capital Today's ahead. May first One. comes from go

Kyle May

could wondering little and was size and be about us volumes by start give you of talking when those dedication will the of potential more volume could additive we if maybe bit a contribution? a the the Creston see if I sense

Michael Ure

Thanks, Yes. Kyle.

XXXX in the have capital to hit XXXX. the impact So our starting to that that way we'll really expect system volumes with is us minimal in we

and impact a standpoint, starting So the biggest flow in cash from XXXX beyond.

Kyle May

Got it.

believe similar XXXX. previously, be And I you helpful. CapEx had XXXX in that for That's suggested to budget the would Okay.

year, Now that thoughts give range the guidance end this you're looking to you can year? us the upper be of budget any next for about near preliminary the

Michael Ure

back the relates we capital year for an as XXXX levels in increase the it half in I into XXXX this activity What draw Yes. of was wouldn't XXXX. XXXX. it in expected for to relates conclusions as saw increase and

activity think bit that A deem as directly be connects hookups in back capital, well levels the of of So the will year half lot beyond. what we this might be and dependent But to are to into going XXXX capital will system in increase the into a we what for little of about the wouldn't we indicative as it additional saw what is on the accrue expected XXXX. and production-oriented that expect XXXX.

future come back this expect we for with I into into would capital we'll being not periods. indicative expectations as of increase So XXXX. what read on might

Operator

And our go from JPMorgan. comes Jeremy Please Tonet, next question today ahead.

Jeremy Tonet

at it a off, little wanted versus how of repurchases, more you you rules just as Any could to versus on guess, far about thinking are was start we be there to lose, capital if think unit bit wondering other might might capital? could kind allocation thumb you as where peel point? maybe capital -- distribution thoughts When going on anything if Just forward specifically how philosophy. allocate I the you back allocation be of the to wanted or X% if about share more. any see guys growth specific deleveraging this to onion comes I

Michael Ure

Yes, it's a great question.

again and this at So exit below primary Xx we year to exit or XXXX want or below at that is focus X.Xx.

utilize near-term the pay for off first the cash XXXX going the Related is free in flow. to as primary using that paying we're part focus that's due to that XXXX maturity cash we're off to that's coming free So well maturity as going us. that of

referenced the and capital. to well savings result, at for of units opportunities. the the buyback achieve rate, distribution the for use to reduction. when So as debt was were in to for look relation us period continue to and of as buyback it it the we tenants relates the the as really that amount from increased the first target annual able as we a And of to those that being Plan opportunistically distribution, least major the

level primarily and seeing to to that our it's the and mix. be an give of revisit getting place optimal fruits business the we return focused stakeholders leverage capital then going reduction, us us feel now, we'll of labors the forward. start on But in we us putting sustainability to to that overall leverage greater As for a certainty as is able to

Jeremy Tonet

how forward you at provide Got we of but producer into year? year a might to retreated Just commodity because out activities, it. I activity it wondering point to up to six user production? That's to wondering recently, next kind XXXX, bit they've CapEx sensitivities could plus any Although that prices what helpful. takes higher 'XX then relative for And into about this there's for here? just shake what months moving looking us you point to be see extrapolate nine kind at if you this materialize but with talked could just a for of bit able know this

Michael Ure

just would comments a I that. Yes. direct couple related to of

as quarter. on the the into in coming what year, a in pointing portfolio year. directed, over well relative slope pretty at XXXX. it's the now is What capital, to i.e., first came XXXX, to so to production-oriented it relates expecting were addition that, tailwinds, the we material increase direct capital, relates connecting overall volumes, being So And high volumes, you are to look connects as XXXX were the actually exit towards growth where headwinds to it exiting to increase as downward we across we we're in exit into if that

bring the to going is that to rewards we're So on that XXXX. volumes reap really of into

reap exiting XXXX with to that in the you're the really year relative that of in XXXX. we the online and to volumes again, rewards so exit, get tailwinds can capital increase So is

and about we on as the So positive all impact we're very in think business. seeing volumes what the

Operator

Bank question go of Derek from comes at ahead. Walker next And today our America. Please

Derek Walker

to to Maybe So Craig, from think just for commentary that me. affects you a continue relative call XXXX? does Occi's kind do I production contribution in year, Occi year XXXX from of private, where see it commentary think sort of next this compares alluded in this commentary? earnings increase? I similar you quick elaborate talked how to two to ones about some factor privates profile guess And I think Can you increasing. you that to just I that

Craig Collins

I through outlined the I think we've that public the our volume Yes. in we've is activity to uptick that mean producers relative of privates non-affiliate seen what amongst XXXX. mix the is our increasing throughout

come we're to going and in our XXXX. from to that their particularly we and into beyond, need where budgets look take tied for As a what public the have XXXX see systems, with really expect they out companies to for

that increase line on stay signaled acceleration to, will XXXX in as what how need the volumes. of get as producers. for that out get we'll that in the beyond, and We of an Michael well activity. in continue of with capital, pretty have for these good worked budgets in private got to rest the XXXX for producers as But in have be connects sight and alluded included dialogue conversations. to them 'XX well just with and compression a really ready those number of for had some We've Thus, mix see our to growth

Derek Walker

Appreciate it. it. Got

Michael Ure

Occi and one obviously of vast has Sorry, that and really a only comment just fraction assets is portfolio that. additional of attractive on a that very

as it were they're that of totality a when so the consideration making when to that. take relates their of fraction just need And into you to comments portfolio

directing you as specific the that to to portfolio. capital on more the when total it's us, so opposed impact And they're where see

Derek Walker

and Maybe Mike just quick a here. that, follow-up Craig. Appreciate

side? per on going being margin or we gas Just Should the think deal the commentary, about there expect Should equity the the the on oil think the you that Colorado And we margin the rate? run in contribution was you that margin I oil announced. the higher about due just You investments. an similar forward? just to how should expect from talked And -- gas similar down side, barrel have to forward XQ increase that DJ. relative on on margin to just be going to we margin, should we then

Michael Ure

Yes.

actually, the it it at when look as you pretty So quarter-on-quarter. limited relates to frankly, margin, variability,

So quarter-on-quarter quarters. QX for second for quarter natural for $X.XX is oil then water gas is was NGLs in and $X.XX, $X.XX, second and and $X.X, for crude quarter both $X.XX

at depending look when contribution and as or different portfolio volumes from limited from the well as associated pretty there variability see contract variance are equity little rates it. you're that actually, always So the where of are a method going bit our coming on you it, investments within to with

relates But those is of XXXX when again, don't it to online As the related come contracts. to we give more Crestone, are to going volumes expectation actually beyond. specifics really and

as any So XXXX. margin gross might indication in mean drive what wouldn't for to that

Craig Collins

would I resets that the on service those rate like. an can cost from next, look of what just one And have margins to the year going add impact gross

wouldn't I out But a the the in variability. term, yes, into far don't near whole necessarily So too lot of extrapolate future. expect

Operator

go question comes next our with Shneur Gershuni UBS. Please today And from ahead.

Shneur Gershuni

and at tower. was wondering of some recently allocation capital a understand of that of sort to priority gave through next seems But the the that the high-class the other leverage guess did question. on I reduce what like the the but the kind that increase are consider similar amount what was the like follow-ups maturity I that you'll it's Maybe about? thinking like I start buyback like units you're you is answers to And peers a as kind well onetime towards fully sponsor of a function the next in would of buyback your few up end sort Just ratio of it with Do that from problem, optimal special options step-up end distribution the something a program as the one in of you distribution? the year. in to 'XX of a previously. of you

Michael Ure

that Shneur. get and other would certainly. have It's where actually we a the leverage I attractive point, Yes, and to where debt of the And a attractive are additional opportunities as we is available place the of thankfully, reduced, those levels. us. leverage very to we're question leverage is more reduction a highlights concur into getting definitely level the open great opportunity utility that certain

And the lot ways in the so at to those term, that to for And open We're level to get return to is incremental stakeholders. And wherein we'll yes. to answer is our leverage point. best near a capital of available point, opportunities able is that options. are there that definitely us to be considering us. primary ideal good And however, can focus part the the we focus that's in assess up been this to which

Shneur Gershuni

on color for as you the is connect to as plan? makeup the understand the there of as need you thinking are And maybe a Or with of about you makeup would really do processing plenty CapEx Can 'XX? can't the build capital-light share of Appreciate you I side us well -- thinking have Great. options at do of that what there. be, and you're spend how but majority capital, new final a number sort point, or what for about a 'XX. you're the follow-up this give us well

Michael Ure

great a it's question. Yes,

expecting currently in way seen to be that we're mix us, for similar to it pretty the So XXXX. you've the

needs operate. in other our so As would for if we offloads first mentioned utilize capacity we areas which the look or can look of XXX%-owned that in we before, to we're we assets -- the exists arrangements that have outside we've

to our we similar for capital quick see CapEx be current XXXX what relative so, to would would And mix XXXX a today. expect Very we in cycle XXXX. volume-oriented expectation of that

Shneur Gershuni

a it just given your versus of what function be that type 'XX your delta that that good So and road Is of adjust map? are way. a kind of a more sort really similar mix, of the clarify, 'XX then expected for just so for to kind expected of volumes should expecting volumes you're

Michael Ure

activity-dependent-type Sure. exactly. Yes, structure, very

Operator

next Please with And Mosca our ahead. Robert comes question today from Mizuho. go

Robert Mosca

end messaging you out maybe any 'XX and service volume cost that Just could have adjustments wondering the relative feature. be point the been somewhat if indications more quarter in of deliberate a shake growth higher towards to range of the You've early could XXXX? of fourth CapEx of in how

adjustment in So just year? rates the to that or in year's captured be associated activity CapEx next curious, with your growth for possibly this

Michael Ure

Yes, percentage increasing. that, expected tell We to place. at a on activity couple couple the consider. of reflective the a as be definitely take it's those affiliate don't an for what yes, assessments time for mentioned, of and that indication, to have Craig too early things comments example, do gas, is But of

our has non-affiliate increased. third-party So more for They therefore, gas oriented. are

we as the capital, all contracts. so specific And about wouldn't in increase of I cost think necessary service-type

service this at it at of assessment a of have the that as an we contracts. amount that don't line year the fair point, be look levels like, the related the So on of and might cost impact because activity of that in straight the might might draw exactly to cost not are rates capital not end oriented service increase of occur relates would a it what to

Robert Mosca

to year, would wondering see expectation And in think there, more offset said you in your if acreage? color. But that you some I then on case Okay. I'm provide not that 'XX. helpful if be base Essentially, should sure for DJ the able just right. could DJ heard your is that client prepared remarks, next if Crestone the That's color Great. I declines deal helpful. the

Michael Ure

you do want to Craig, on that? comment

Craig Collins

help see natural Yes. the is where otherwise to to DJ to volumes year deal be to this relatively And in year. would incremental see that's we're up Actually, in our the we'll being part this exit due we declines. going the volumes large from that for flat the, next Crestone relative in offset year, what

Operator

Seaport comes ahead. Global Instructions] [Operator question Sunil Today's go from Securities. Please Sibal from next

Sunil Sibal

on And all everybody. afternoon call. thanks Good color for the the Hi.

maturities WES I'm agencies get also start a of so on debt fairly curious, managing just far? think decent for has then, do some and rating you with the for been out laying done taken a year, debt from since of reduction. discussions of your have So, have that job And credit plan kind front? them would actions you the the how you

Michael Ure

great Yes. It's question. a

relates So, we've relates credit the results that very debt maintain those the positively, EBITDA received debt reduction into overall them. positive being actual growth the it is the to dialogue agencies, we as it metrics. with in a especially seen and that overall as to constant reduction Obviously, very improvement and not just

As us ratings. been open there you referred it ratings, of relates be Occidental degrees, the to pretty will their to agency on however, with they've with connection that depending varying in some

And expect engaged we've would despite that so, positive that in. we debt continue reduction would all the that, activities

attractive as that's business, today, on of positive it So, from reduce have and where as our customer really we an rating to elements grade the debt out. it leverage in I been of from be investment at perspective, being standpoint. very indication position the and put able dependent I a very us option. somewhat view in overtime comes our think much look our that largest a way ourselves metrics a will But it

Sunil Sibal

of ballpark up of numbers of the would third-party it related could to Kind uptick of end us end up And third-party 'XX, would in sense you XXXX? further will there like seems in where it. contributions? flows kind Got or in or be kind a give cash that,

Michael Ure

the as additional anything which than revenue it relates percent in disclosed to non-affiliate an have volumes, not affiliate XX-Q in what other we is perspective. disclosed affiliate would the XX-odd from versus range I

Sunil Sibal

next to see Or how we are See, to that you in that you ballpark kind still the years? of out just have numbers those out/ of to saying should for expect couple come wait be

Michael Ure

actually that Yes. go any will We or relates ratio to it projection over specific provide don't as time. guidance where

Sunil Sibal

that the around for And some cures, and positioning front. do been asset other available in some M&A space, was your you be kind things of where question me on then you it. midstream guys how Got has last There view might transactions are? the

Michael Ure

Yes.

a I question. think great it's

So of a that. as couple relates it comments to

terms in an of of portfolio. have We an seen in our attractiveness like uptick improvement assets the

us opportunistically so, it opportunities to sales be perspective of element to acquisition noncore assets, able us that operational And ourselves part great getting standpoint to them best we opportunities the we relates out that would as they that do about for forward. to a be is exist. overall look as a look footprint targets, position puts think leverage be our find as our as in footprint accretive a M&A to into able and we of From those the for would to place from financial

with until so, strong our and in we opportunities this best optimal customer base see range. ourselves that to our continue putting be asset might we standpoint, from leverage to we able goal up able synergies, point a and strong see will that to definitely achieve position get can relations sit. some in And the or And to be to base, execute if on customer has be assets been our to to around

Operator

the conference turn management ladies gentlemen, like final I'd the session. for concludes And the remarks. and back to to question-and-answer this our over team

Michael Ure

positive by thank performance to to this the entire you the future. what the to for Thank for very efforts call, this deliver base very employee much team. all like joining. I'd and all for we you their quarter's point Thank us up look for joining can forward of in

Operator

today's for thank attending call. This presentation. concludes all today's you conference We

may lines, disconnect wonderful and now a your You day. have

Western Midstream Partners (WES) 10 Aug 212021 Q2 Earnings call transcript