Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Western Midstream Partners LP (WES, Financial) reported strong operational performance with natural gas throughput increasing sequentially, marking the seventh consecutive quarter of record throughput in the Delaware Basin.
- The company executed new agreements for the Mi Vida joint venture, providing 100 million cubic feet per day of dedicated natural gas processing capacity starting mid-2025, enhancing flow assurance for customers.
- WES successfully issued $800 million in senior notes, which were well-received by the market, indicating strong investor confidence.
- The company maintained a high distribution yield, ranking number one among midstream MLPs and other midstream companies with an investment-grade credit rating.
- WES continues to focus on capital allocation priorities, including high-return organic expansion opportunities and accretive M&A, while maintaining a strong investment-grade balance sheet.
Negative Points
- Adjusted EBITDA declined relative to the second quarter due to decreased natural gas liquids volume, lower commodity pricing, and higher seasonal operations and maintenance expenses.
- Total crude oil and NGL throughput declined by 2% sequentially, impacted by lower volumes in the DJ Basin and the sale of certain assets.
- The company expects moderated throughput growth in 2025 compared to previous years, partly due to asset sales and reduced demand volumes.
- Lower earnings are anticipated in 2025 from crude assets in the DJ Basin and South Texas due to contract changes.
- The CEO transition was perceived as abrupt by market participants, raising concerns about continuity and strategic direction.
Q & A Highlights
Q: Can you provide more details on the CEO transition, as it seemed abrupt?
A: Oscar Brown, CEO, explained that the transition was smooth from their perspective. He has worked with the former CEO, Michael Ure, since 2016 and shares similar views on financial and operating policies. The transition was mutual, and there were no disagreements. The change was seen as an opportune time for Michael to focus on personal priorities, while Oscar aims to continue the company's growth trajectory.
Q: Do you see more consolidation happening in the Delaware Basin, and does WES see itself as a consolidator?
A: Oscar Brown, CEO, noted that the M&A environment has been robust, with strategic acquisitions leading the way. WES remains disciplined in evaluating opportunities, preferring organic growth when possible. However, they are open to strategic acquisitions that add value, particularly in the Delaware Basin.
Q: With a new administration, do you expect a more favorable regulatory outlook for oil and gas?
A: Oscar Brown, CEO, believes the new administration is likely to be more favorable to the oil and gas industry, which could benefit the midstream sector. This could lead to quicker growth for their customers, positively impacting WES.
Q: Can you elaborate on the expected moderation in volume growth for 2025?
A: Kristen Shults, CFO, stated that while growth is expected across the portfolio, it will be at a more moderate pace compared to previous years. This is due to steady activity levels and the absence of acquisitions like Meritage Midstream. They are still finalizing forecasts and will provide more guidance in February.
Q: Could you explain the Mi Vida contracting update and its impact?
A: Oscar Brown, CEO, clarified that the restructuring of the Mi Vida joint venture provides WES with 100 million cubic feet per day of dedicated processing capacity. This is more of a commercial restructuring rather than a significant capacity increase.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
