Western Midstream Partners’ Earnings Call Highlights

Western Midstream Partners, Lp ((WES)) has held its Q3 earnings call. Read on for the main highlights of the call.

Western Midstream Partners, Lp’s recent earnings call reflected a balanced sentiment, highlighting both achievements and challenges. The company celebrated record adjusted EBITDA and strategic acquisitions while acknowledging obstacles such as decreased throughput in crude oil and NGLs, and anticipated declines in the Powder River Basin due to commodity price weaknesses.

Record Adjusted EBITDA

Western Midstream Partners achieved its second consecutive quarter of record adjusted EBITDA. This milestone was primarily driven by lower operational costs and successful cost reduction initiatives, underscoring the company’s efficiency in managing expenses.

Acquisition of Aris Water Solutions

The acquisition of Aris Water Solutions marked a significant strategic move for Western Midstream. This acquisition enhances its position as a leading midstream flow assurance provider in the Delaware Basin, with expected annual run rate synergies of $40 million.

Increased Natural Gas Throughput

The company reported the highest total natural gas throughput in its history, with substantial contributions from the Delaware Basin, highlighting its robust operational capabilities in this area.

Operational and Maintenance Expense Reduction

Operational and maintenance expenses saw a 5% reduction, amounting to $12 million quarter-over-quarter. This was attributed to decreased asset maintenance and repair expenses, reflecting the company’s focus on cost efficiency.

Free Cash Flow and Distribution

Western Midstream generated free cash flow of $397 million and maintained a quarterly distribution of $0.91 per unit, consistent with the previous quarter, demonstrating financial stability and shareholder commitment.

Crude Oil and NGLs Throughput Decline

There was a 4% decline in crude oil and NGLs throughput on a sequential quarter basis, primarily due to decreased throughput from the Delaware Basin, indicating areas needing attention.

Powder River Basin Throughput Challenges

The company anticipates a decline in natural gas and crude oil throughput in the Powder River Basin due to lower customer activity levels and ongoing commodity price weaknesses, presenting a challenge for future operations.

Decreased Adjusted Gross Margin for Natural Gas

The adjusted gross margin for natural gas decreased by $0.05 per Mcf sequentially, impacted by lower excess natural gas liquids volumes and pricing in the Delaware Basin.

Fourth Quarter Margin Expectations

Looking ahead, Western Midstream expects the fourth quarter per Mcf adjusted gross margin for natural gas to be slightly lower than the third quarter, with minimal financial impact from intermittent volume curtailments.

Forward-Looking Guidance

Western Midstream Partners projects mid-single digits percentage growth for natural gas and low single digits for crude oil and NGLs year-over-year. Produced water throughput is expected to increase by approximately 40% compared to 2024 levels. The company aims to reach the high end of its 2025 adjusted EBITDA guidance range of $2.35 billion to $2.55 billion. Capital expenditures for 2025 are anticipated to hit the high end of the $625 million to $775 million range, with 2026 expenditures expected to be at least $1.1 billion. The company’s strong balance sheet supports its extensive growth plans, with leverage expected to remain at or near 3x through 2026.

In summary, Western Midstream Partners’ earnings call showcased a blend of positive achievements and challenges. The company continues to demonstrate financial resilience and strategic growth, despite facing throughput declines in certain areas. The forward-looking guidance suggests a focus on growth and operational efficiency, supported by a robust balance sheet and strategic acquisitions.