WES - Earnings call transcript Q2 2022 | Western Midstream Partners, LP

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Operator

Good afternoon. My name is Rex and I will be your conference operator today. At this time, I would like to welcome everyone to the 2Q 2022 Western Midstream Partners Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like of the Investor now Daniel over Jenkins, Director Relations. to would conference turn to I Please go ahead.

Daniel Jenkins

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

Michael Ure

and Daniel, Yesterday, performance quarter strong good everyone. you, Thank another financial Western Midstream. operational at we of and reported afternoon

success operation quarter Basin from was and investments, distributions driven by throughput across by financial expense. all the three higher second Our equity offset partially Delaware and increased maintenance products higher in primarily

water substantial and per quarter straight second free in several achieved barrels processing produced EBITDA records per the generating record also XXX,XXX Basin, We throughput adjusted Delaware gathering day in including throughput cash the gas for gas record quarter, day, Delaware the Basin, in natural X.X record of flow. the Bcf

of plan the stakeholders. capital our delivered also We on return our accelerate have to to

million XX $X units the unit. units approximately program at average per buyback repurchased Since billion of from February, announcing repurchased open have price an Occidental we market million X.X XXth, $XXX $XX.XX our have July units we through in approximately program. of this unit under in million and Specifically

the approximately units retired have Additionally, Anadarko the XX.X% a common unit note through beginning we at million programs buyback unit unaffected XX exchange, of count becoming or of our now the organization XXXX. since and including stand-alone

senior Inclusive our the to now X.X have debt quarter. retired our also billion leverage adjusted the we below of times, of ratio threshold reduced $X.XX $XXX mentioned XX% million of and repurchases aggregate We of retired just since previously the notes we EBITDA our year-end debt XXXX trailing January unit during notes XX-month balance issuance. of senior senior over or notes have

in through on in a have appreciation of to $XX.XX retirement As total XXXX basis, per any excludes distributions for senior $X.XX our returned since and now XXth of and returned unitholders repurchases unit price. driven July debt issuance, we market a $X.XX unit current unit which notes our January

partially will efforts half return distribution. distribution our and retirement, additional gives through We flexibility on Considering our a base recent to opportunities an in repurchases accelerate us distribution. enhanced other of our through below year-end the strong financial are very unit to of pleased net to to the our to ratio whether debt stakeholders leverage unitholders capital debt-to-EBITDA our our performance decision X.X times an depend leverage of pay to additional return already buybacks with XXXX. second The threshold financial capital maintaining evaluate or enhanced is

debt would unit and to pay more calculation. permanent fund revolver we in enhanced if computation capital potentially in the excluded distribution outstanding with extent be to aggregate we debt or we differently, intend enhanced the for to be refinance borrowings permanent distribution. considered Additionally equity an the Said transactions those in repurchases with reductions from only borrowings the those

we week. people The focus sustainability are responsibly. and our details support report annual released to on Turning operate sustainable to ESG. working this how We report environments

have built proud We the very culture we of WES. unique are at

our minimizing This environmental and Our to a people energy on to energy expertise approach have climate creative we to our today's to advancing footprint to work transition. we why feel are the handling role of and playing with key find are in challenges. in some others and transporting gas worked natural reasons energy solutions tirelessly focus and

ESG We in for success, health work will of talk the the well WES volatility our execution, more economic people, sheet, about efforts our market The of us our confidence strong that operational recent light in even our is of continued and later call. concerns. balance give and positioned all

the sector industry years, leader our to allocation, improving the first utilizing to WES on few capacity, the past free discipline peers attractive our focused the cash in focus investors. amongst has sheets. been the has This existing and on prudent de-risking has flow, respective increasingly of balance Midstream more capital a by meaningfully Over enterprise health our made discuss sector dynamics to its been financial through and returning and flexibility our that, performance. continue increased to I call financial creating have to second market Kristen? on for Kristen will the the our are return actions capital quarter the capital. positioned stakeholders. well The now to value our capitalize to turn unitholders have taken these of we With we over and being

Kristen Shults

and afternoon, everyone. Thank good Michael, you,

quarter, that The adjusted margin, operation was increase and by million, in quarter the gross second of income partners generated we expense. to offset increased adjusted available adjusted During increased $XXX driven and million. totaled another limited quarter EBITDA EBITDA partially record-breaking maintenance net of sequential to by $XXX

a approximately the not increased third increased to Our the throughput due million reoccur three basis, the increased adjusted we in investments DJ all on sequential sequential Basin. products basis, gas to quarter. do throughput and from gross quarter in expect margin Basin, across increased in quarter Distributions Delaware natural also which a $XX on by equity

incremental liquid the quarter recovery resulted margin commodity excess second and elevated prices natural strong performance gross our with contracts. Additionally, retained in volumes associated fixed the our plant in under gas

maintenance approximately maintenance a by to and operation repair. with on quarter expenses $XX primarily sequential and due associated Our increased and utility million, basis, expense increased costs, higher increased

in one-time level project transformation be in third O&M the our line plant and support increase quarter, quarter more further $XX as complete expected field to with perform effort. quarter, After O&M expect our expect we second million we expense results. to the third We a to maintenance

decrease While additional utility fees the use incur our service we as throughput costs months, winter as during and prices increases. decline usage produced-water expect should to

cash performance from prior cash second flow, which $XXX to increase operations totaled the our $XXX to was flow our due the flow quarter May EBITDA positive million. Free course first quarter to after million, totaled Turning working capital totaled business. a flow in changes strong material $XXX adjusted and and cash of free from distribution normal quarter payment increased approximately cash million compared

per is unit. equal to quarter August prior XX. base distribution a declared consistent recently of target unit quarter's we The on Finally, previously second cash payable and of the is per the annualized distribution distribution $X announced $X.XX distribution with

second With in throughput producer of continued gas the cash to Basin, our that we ranges previously expect we Looking adjusted with throughout Despite for expected further our offload as and activity half adjusted per expense, margin throughput to free flow. investments with utilize Delaware into announced from to higher the comfortable we expect arrangements. executed recently the natural said, increase O&M strong continue lower the XXXX levels. our equity slight year year, and increases the due to XXXX, we and remain as guidance in compression Mcf experience gross distributions EBITDA headwinds to associated

III we and the to expansion meantime, construction and of the us assurance call for provide excess so volumes on the Mentone discuss the customers' focuses of in will over that our XXXX In budget base capital Delaware in the existing Train I'll Basin XXXX. asset to the of Craig remaining beyond. bridge utilizing organic through our III, capacity expected of Mentone flow operational to now in Craig? can the completion our offload our we're performance. fourth quarter arrangements Finally, turn

Craig Collins

volumes On attributable basis, This sequential new load processing in volumes primarily Delaware increased by Basin natural the Kristen. driven a and by you, quarter the DJ Basin Thank on throughput in increase to volumes. was increased gas X%. increased

an also equity investments. in throughput We our natural saw increase gas from

Our investments water quarter. DJ offset DBM prior were throughput in X% compared liquids to prior XX% Delaware decreased system. Expected the compared the by increased increased partially reduced increased throughput the volumes quarter and to liquids due by from Produced-water throughput to by crude natural throughput and equity our Basin. declines at oil the Basin in gas the

our Our increased per Mcf assets increased at to and Mcf which $X.XX quarter, prior adjusted West throughput gas primarily the a other margin to natural gas assets. contract due complex, compared mix Texas by higher per gross in our margin for compared our our natural changes to as has

our coupled performance higher with benefited prices quarter. in commodity In the strong second margin addition, plant continued

has a oil our increased compared driven the throughput gas and assets, barrel lower oil per compared increased to margin by prior at barrel despite quarter. gross assets crude NGL other distributions per factors; and the Our crude system, equity by margin liquids and oil DBM from which adjusted our throughput $X.XX This was primarily for to two as investments. higher natural higher

Our adjusted primarily margin mix contract per compared decreased throughput efficiency prior water to gross our for assets quarter in by due our produced the and to as fees $X.XX changes barrel decreased increased.

enter Delaware total is throughput growth as the legacy in this mid oil our declines curve. the Basin gas be In we volumes which Regardless, gas rate in volumes the and XXXX well to and Delaware online growth we a DJ, single-digit of the XXX back the crude type year, we XX% previous maintaining decline down expect DJ single-digit growth second expected phase our of expect slow in NGL by partially the natural expectations mature approximately we're XXXX that percentage expected Basin. XXXX We expect Basin percentage of wells in fixed throughput volumes. exit into natural production low in half in produced-water rate come In the count. wells the of low anticipated in as during half the enter the to of more the volume increase will in offset year

on-load flow until to an we to our activity in the of From the the system current rates acreage additional onto return continue service. continued area rigs oil Watkins Third-party and we continue decline through volumes standpoint, expect would Basin. the to

permitting We it permit growing, approved sites the the momentum in on producer they each multiple COGCC. gain Weld as are approval also contain optimism pad is permits in recently Several process. encouraged positive and by that been the County clarity with some that have process appears

those have of and for revised last we call cost steel chemicals pressures already Michael. guidance chains quarter. inflationary to other the we in such as for relatively and parts This the expansion our and increases were from our to prior but Finally, chain challenges, we and for all steel back benefit supply well XXXX the of recent continue quarter. services turn from large actively to I'll organic lubricants. a contemplated year Despite connects, portion a over inflation remain these which from price pipe will major items manage standpoint, supply and seen preordering most consistent in prices needed and now

Michael Ure

Thanks Craig.

here, As highlight we week. to in sustainability this will my of read our I some encourage achievements remarks opening you few a released to time report. our I but take the mentioned annual report I

volunteer organization. XX% XX% inclusion addressing female donations efforts, first further an of standalone and our very a achievements and racial proud year in X ESG are of compression since X or This of The of technologies the causes. of GHG We in employees XXX enhance the XX% volunteer expand and a installation year minorities our efforts, leadership saw and successful equity diversity nearly are becoming ethnic Scope new other and these to expansion issues our who of which gross managers community detection or extremely in reduce and our emissions accomplishments program, senior our of in electrical reduction which to field. include XXXX leak include

such an in Thank role employees which organization, of is young to played people the one giving community. reducing and most such heart have WES, you of the to of a personally who our quality emissions back such proud. an all our of For awesome I'm dedicated integral

in as our on years developing overall To we're this Our customers. operations. track momentum and continue a WES. strong ratios positioned leverage early far, returns thus well peers. operations our track the our energy maintains organization to we the traded confident allocation, culture our record to lowest of I'm publicly is a debt-to-EBITDA our a debt publicly of our of proportional with also the very that our carbon to our one forward under the leader traded be to WES enhancing returning and is pleased operational service sustainability to relative since capital as standalone midstream We're We financial years well sustainability of has peers. to great leader growing prudent in of midstream unitholders. units look been operating in further ahead, as in say repurchased and reduction to the of commitment reducing continues by three stakeholders total advance building efficiency at WES to that footprint recap, needs of record WES XXXX and a amongst as to capital evidence proud

contractors, group continue leadership year, we what's XXXX. second look our regards. the As has open half deck operational will in With and comparative hard forward to peer first all that, an financial our employees will and updated we ahead we'll reports our earnings, the through second these the of slide the to been line and performance half excellent questions. the of believe in of for of work which Thanks we WES's post to demonstrate quarter

Operator

Gabe Moreen. question Your of Instructions] [Operator comes line the from first

open. line Your is

Gabe Moreen

question your a point? on afternoon, here, you Hi. the and of being of feel opportunistic like terms aggressive last basically in were that I it now. LTM, X.X, to at I still now right just be good about kind year-end an have pretty think about right want confirm, I just you the Kristen, target. back is to on of year, buybacks? feel kind unit unit factor gating when price opportunistic in of comes this Can It to to unit the everyone. guess, want considering you're and things are around X.X you rest talked you talk follow-up seems what targets of couple leverage just the your the you like you've just you room I for pulling I have repurchases. where the -- leverage weeks. basis close

Michael Ure

enhanced the definitely Gabe. utilize question, opportunities relates to we program. will construct in we'd that, if intentionally continue that about a the will repurchase that it to be as was billion program, we a whether do to there's the to leverage for in we little left as or free buyback in in to way. think as opportunities the do the regard. target to $X.X excess opportunities if for had opportunities distribution. $X.X flow, certainly, distribution, continue And Again, then a other utilize under be units other there do an Thanks order to we able so. we cash that we'll not is additional pay program or for Yes, and that But to to left and units, prudent to opportunities enhanced back have buy still that to utilize place to utilize then if over We are try an program -- billion that And opportunistically there including other sure. buyback like see

Gabe Moreen

your the you is notch curious, control. from getting ask a Thanks, to things? out quite of, buybacks unit to to return follow-up Michael. And I how terms to not. -- little extra balance just grade, then I'm a or that. But maybe, standpoint, extent those is of what can capital a I'm bit curious, that one to IG I get getting know a factor really bit in investment just a

Michael Ure

Yes.

well certainly As leeway, metric established have it the from a to fair been With a the be from we're relates agencies, in within in to investment-grade provided. of ranges amount the to frankly, territory. metrics order relative leverage, standpoint, that

to able a do agency still would to rating perspective. have that, we a level be so, comfort And from

that working you if anything standpoint, to don't the add necessarily else noted, isn't that Kristen, we're from metrics, As I know under. constraint currently there's the there.

Kristen Shults

No.

don't anything been with not the conversations the in just see agencies, before our changing general, put but have that’s really for balance already positive, we've I rating we think there. I sheet, had

Gabe Moreen

and bit of follow recap, your of a commentary, I if in on but on little inflationary, versus versus sense? can it's So O&M if you're a what up kind currently here XQ of beyond? just just Kristen, O&M that makes some it all maybe maybe, you bit sounds then understand is can kind scaling just And also seasonal exactly, Great. structural like maybe seeing back little what higher,

Kristen Shults

That's, right.

seasonality step the is utility So We've back the summer months. We O&M, -- from also a the take use just more bit utility pricing perspective, There side. utility some to little a during increased was on on lower. a QX our seen side.

So continue that coming quarter expect that's in we the quarter, and as to second third the out, into well.

us run quarter, going working allowing is transformation expecting effort in maintenance repair project, with better on and The around we're more side. to probably that on field $XX quarter, be forward, the a level rate second the with that's exception efficient the our and proactive to third spend million, a

the we and of returning bit little uptick to second QX. quarter, in then the when into an quarter a expect back So level, get third

Gabe Moreen

Good. you. Thank

Operator

comes question line the next from Tonet. of Your Jeremy

open. line Your is

Jeremy Tonet

good afternoon. Hi,

Michael Ure

Jeremy, how Hey are you?

Jeremy Tonet

Good.

slice of question a differently guys wondering unit balance a point And driven think trying time cash at to level Just buyback just sheet as to other unitholders? repurchases about in unit is if wanted the or maximize hit I it considerations slightly you was to return more free such capacity when I certain could. of or or kind price flow by

Michael Ure

Jeremy, under third ability opportunity that that we certainly definitely those are to therefore repurchase; the able to of balance regard into when seeing quarter and come factors factors execute meaningful on be a that Are to in sheet opportunistic and program. second consideration all Again, free able in the are potentially the many utilize factors enhanced those we consideration. pay program. we there we to the and as distribution saw opportunity all an talk cash flow an those about out be into and of to weakness seeing of definitely are buyback so

Jeremy Tonet

on base for role And a your obviously thoughts is kind in initiatives? touch and to there. I'm the wanted Ira, just then And changes a there play that. if plans Oxy big WES for bit. to wondering of has here alongside things CCS these Thanks Oxy just it. side Got

Michael Ure

Yes it's great question. a

dialogue is The We with does out is there. regard. proposed with frequently being in have that leader a currently obviously Oxy provide active to And there. incremental Oxy argue opportunity for that clearly everyone I’d regards legislation opportunities

resulted And them has so frequent relationship will close ways with active able around participate. be in -- our WES to and that dialogue

Jeremy Tonet

That’s it Thanks. will there. helpful. it. I Got leave

Michael Ure

Thanks Jeremy.

Operator

of comes Neel question the line from next Your Mitra.

open. Your is line

Neel Mitra

Hi, taking question. for my thanks

mentioned and QX. the guidance the maybe Just will decline second, regarding wanted And changed the persist? on out as forward Was Will versus structural when till unexpected it to was anticipated? how and was that offtake going What raise was G&P inflation? expected what rates be also going given put And forward in guidance use last that agreements. O&M then that long you versus it bridge Mentone comes you III quarter online? the what will

Kristen Shults

Yes.

So a in you're quarter announced QX into that revised in we're took then account everything When we still and that maintaining now. the couple there. it pieces right of seeing guidance last it's --

gross per guidance well. as of was rate we revised O&M And that's were as seeing unit also expense true and and margin the and that still that so, and was that uptick G&P the part part expected that holds of the expected today

we second I now expecting from we're most right the line inflation seeing we're when standpoint, of were half in is of looking think an XXXX. into So, and spending what right when just standpoint standpoint from activity actuals

Neel Mitra

so? increasing given trending from think peers. the new past when other volumes do then Are the by in your just and year III? do Delaware? Delaware And how over see And you the the a the you on announcements in Mentone the just processing next activity you of looking the Great. you processing volumes the capacity Okay. beyond then And that new E&Ps would DJ or as plant side, with follow-up need a

Michael Ure

Yes.

additional capacity That not if authorizing absolutely capacity It's be we into from in to of of as forward. frankly monitoring Mentone necessary consideration So, been constantly standpoint. went incremental at continues, our quarter. the is last terms just are growth stronger expectations going positive

in to on yesterday and That will regards us the going be keyed probably levels beyond. way You Oxy Ecopetrol that meaningful a acreage. that transitioning for WES mentioned increase will on the into XXXX to likely with activity pretty JV announcement

as consideration nothing we and into take to that potential it need as at the here see commentary relates sit we as would we you look there's sits incremental so, as if now capacity, we right required at reiterate today. there capacity to to look DJ the be but want it on I to Craig, on add anything volumes or side? as And know don't

Craig Collins

from capacity look we sufficient to we'll mean, producers I obviously of than the as bringing opportunities. well and to a some our We've continue peers, gas good I those for DJ. continue really job think additional the onto more have done Yeah. both of from as in system

here of just more decline is a I quickly, flatten pretty to the there. it's out production the to volumes think curves we're up the to base rate on on those lot where the been where a getting is point than going the of type start where production based

And but Delaware. in so comments terms slow decline to for look to on the we of rate that starting nothing, down Michael's be up the on still in the add DJ. forward to opportunities decline But see to of going continue there and further

I well. think it that summed up

Neel Mitra

Okay. Thank very you much. Great.

Operator

comes the of next question Michael from Cusimano. Your line

open. Your line is

Michael Cusimano

Hi. because afternoon, of some much by How of investors like out can I broken through where frame the all adjustments feedback and the you've either you in margin before hoping your just past. it think your of Maybe adjustment we through that gotten at fee out or cost by we've year-end? commodity somewhat assume basin goes Good everyone. service goes

Michael Ure

of to very there are But XX% of we service fee-oriented XXX% not portion water service cost fixed fee the XX% around commitments. don't all or actually minimum so perspective. that percentage a volume that of actually cost be clear, that out that talk it's gas, Yeah, most oil We from is about minimum at contracts has coverage cost definitely that fixed by And break is is our covered proportion either what of service. is or of versus and that commitment. least volume some of the and

Michael Cusimano

Got it.

maybe it stream year? it where And you rates depend Okay. does is three reset well, as or all commodity every across by

Michael Ure

of on three on have and each But gas oil proportions commodities. of three elements are service service all commodities: different water again there of contracts do cost cost all of those. We

Michael Cusimano

year that may then And Okay. has materialize having. the not volume steep the been to downward was expectation the some rates that some of this with follow had DJ believe ramp I pressure that into because Oxy permit up issues on a

wondering to I'm think it guess DJ is every wrong could I that rates that materializing? year improve So with possibly not

Michael Ure

it's are Yeah, stage. this great potential too tell tell but what going to rates early be. impact early too It's to on at question a the it's to

As optimistic familiar a have in mentioned the Craig bit his more to little on that to a achieve levels with side prepared more order and necessary remarks, work bit we're the feel activity DJ to means permits. starting gotten to as relates little continued it more as producers in process through

so be our what and expectation volumes the a would of DJ. what will will come in time rates and when on to lot obviously what the depend extent of system at And out through

Michael Cusimano

Appreciate Okay. f for the me. That's all

Operator

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

Michael Ure

to Thank for you the your time. I future. appreciate Look forward everyone joining.

Operator

This concludes today's conference call.

You may disconnect. now

Western Midstream Partners (WES) 5 Aug 222022 Q2 Earnings call transcript