Western Midstream Partners, Lp ((WES)) has held its Q4 earnings call. Read on for the main highlights of the call.
Western Midstream Partners recently held its earnings call, presenting a generally positive outlook with notable achievements in throughput and distribution growth. The announcement of the Pathfinder Pipeline project and the successful integration of acquisitions and asset sales were key highlights. Despite some challenges, such as expected flat to slightly down throughput in the DJ Basin and a slight decrease in gross margin for produced water, the overall sentiment remains positive due to strong performance and strategic growth plans.
Record Throughput Growth
Western Midstream Partners reported double-digit and record throughput growth across all three product lines for 2024. Natural gas throughput increased by 16%, crude oil and NGLs throughput by 12%, and produced water throughput by 11% year-over-year, showcasing the company’s robust operational performance.
Pathfinder Pipeline Project
The company announced the Pathfinder Pipeline, a major midstream project in the Delaware Basin. This pipeline is capable of transporting over 800,000 barrels per day of produced water, supported by a long-term agreement with Occidental Petroleum, marking a significant step in expanding their infrastructure.
Significant EBITDA and Free Cash Flow Growth
Western Midstream achieved substantial growth in annual adjusted EBITDA and free cash flow, with increases of 13% and 37%, respectively, for 2024. The company also expects a 5% adjusted EBITDA growth in 2025, indicating strong financial health and future potential.
Distribution Increase
The company announced a record distribution payout in 2024, including a 52% increase to the base distribution. A planned 4% increase in the distribution for 2025 is also on the horizon, targeting mid to low single-digit annual growth rates, which reflects their commitment to returning value to unitholders.
Successful Integration and Asset Sales
Western Midstream successfully integrated Meritage Midstream and completed non-core asset sales totaling $795 million, demonstrating effective strategic management and focus on core operations.
Flat to Slightly Down Throughput in DJ Basin
The company anticipates that DJ Basin throughput in 2025 will remain flat for natural gas and flat to slightly down for crude oil and NGLs. This expectation is due to a decrease in the number of wells coming to market, presenting a challenge in maintaining growth.
Slight Decrease in Produced Water Gross Margin
A slight decrease in produced water per barrel adjusted gross margin is expected in the first quarter of 2025. This is attributed to new amendments with Occidental Petroleum and changes in cost of service rates, which could impact profitability.
Retirement of Enhanced Distribution
Western Midstream decided to retire the enhanced distribution concept, opting instead to focus on sustainable base distribution growth. This strategic shift underscores their commitment to long-term stability and growth.
Forward-Looking Guidance
In its guidance, Western Midstream outlined plans for expanding their produced water gathering and disposal infrastructure in the Delaware Basin, including the Pathfinder Pipeline. They project adjusted EBITDA to range between $2.35 billion and $2.55 billion for 2025 and plan to allocate approximately $625 million to $775 million in capital expenditures. The company also announced a base distribution increase, aligning with their strategy to prioritize capital-efficient organic growth and high returns for unitholders.
In summary, Western Midstream Partners’ earnings call highlighted a positive outlook with strong performance in throughput and distribution growth. The announcement of the Pathfinder Pipeline and successful strategic initiatives underscore their commitment to growth and value creation. Despite some challenges, the company’s forward-looking guidance and strategic focus suggest a promising future.