Western Midstream Partners, LP (WES) Earnings Call Transcript & Summary

Welcome to Western Midstream's First Quarter 2025 Post Earnings Call Fireside chat with our Chief Financial Officer, Kristen Shults.

Kristen, can you give us an overview of WES' first quarter financial and operational results?

Sure, Daniel. So first quarter was a very strong quarter for us financially. Our first quarter adjusted EBITDA was $594 million. That was an increase relative to fourth quarter of 2024. Our adjusted gross margin decreased slightly because of decreased throughput, but the revenue recognition adjustment we had in Q4 of $9.2 million also contributed to that decrease relative to Q4. Our operating expense also decreased driven mostly by lower O&M and G&A and our free cash flow after distributions was $58 million. The Board formally approved a 4% distribution increase like we telegraphed as part of the year-end call. And so the distribution per unit now sits at $0.91. From an operational perspective, we had very high levels of system operability over 99%. Fourth quarter was very strong in the DJ. And so from a gas perspective, you actually saw a decrease in our gas volumes quarter-over-quarter because the DJ went back to what I would call a more normalized level. For oil, slight decrease there on an operated asset basis, mostly driven by the DJ again as well as a little bit from the Delaware Basin and then water decreased 2% just because of the timing of wells and then some more volumes being taken off for recycling purposes.

We announced that the North Loving plant is now fully online. How does this impact WES going forward?

Yes. So really exciting. Obviously, we've been working on that plant for a while. This is our first major greenfield construction project. It will bring our total processing capacity in the Delaware Basin up to 2.2 Bcf a day. That plant itself is a 250 million cubic feet per day train. And so it's going to help on the gross margin side slightly because we won't be burdened by the offloading fees that we previously had. We'll also see an increase though on the OpEx side as we actually bring in people to run that plant, maintain it. So we'll reduce the need for offloads on a go-forward basis. And so what you'll really see from a throughput perspective is no real changes there because we're just taking those volumes and putting them back on our system. That plant has actually been full since we started it up. Obviously, we need a little bit of spare capacity within the system as we do turnarounds or different maintenance activities. So we have some of that in the system today, but the plant is full.

The macroeconomic environment has become much more volatile since WES initially announced guidance in February. Can we expect any changes to WES' 2025 plans?

So we actually reaffirmed our guidance. We stay obviously in very close contact with our producing customers being primarily focused on the G&P side of midstream, what they do and their change in forecast obviously directly impact us, and it very much impacts our capital program. So as of right now, with those conversations we have had, we haven't seen any material changes from a forecast perspective or throughput perspective for this year. If for some reason, that does change in the future, our first lever that we're going to start pulling is on capital because, obviously, once again, being on the G&P side, if they stop a rig or they stop drilling in the acreage that we're in, we're going to quickly drop capital from the plans. I'd say from just taking a step back and looking at WES on where we are now, you'll see that we've also done a lot in the past few years to put WES in a really strong position to go into some type of market downturn or commodity price downturn. Our balance sheet and our leverage is sitting underneath 3x right now. We've instilled a lot of just best practices and efficiencies, processes within the company that weren't there prior to COVID and just feel like we're in a great place if the cycle does turn, and we do see some changes in customers' forecast.

Do you expect any changes to the Pathfinder pipeline project at this point based on the recent market volatility?

No, we don't. The issue we are trying to solve with Pathfinder is around ore pressure issues within the basin and us needing to relocate that water to another part of the basin. That's not going to go away. And so we're still moving forward with that project. Once again, we have that underwritten with a very large commitment by Oxy. So as we're looking at our '25 budget and our '26 budget, those costs related to Pathfinder that we discussed last time, that $400 million to $450 million range for Pathfinder, those are fixed, and we're going to spend that money. We're going to continue to build out that pipe. From a producing customer perspective, we've seen -- we've had and have seen a lot of excitement from producers around the pipe itself and other midstream companies. So I think as the issues that we're trying to solve for become more noticed and more recognized within the basins by others, then more demand for that pipe will start to show up. And so we're very optimistic and really excited to continue building that.

Kristen, thank you for joining us today. For our listeners, if you have any additional questions, please feel free to reach out to us. Our contact information is located in the Investor Relations section of our corporate website at westernmidstream.com.