Western Midstream’s Earnings Call Highlights Achievements and Challenges

Western Midstream Partners, Lp ((WES)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Western Midstream Partners, LP, presented a balanced perspective, highlighting significant achievements alongside some concerns. The commissioning of the North Loving plant and a robust financial position were key achievements, while challenges such as sequential throughput declines, market volatility, and the impact of commodity prices were also discussed.

North Loving Plant Commissioning

The North Loving plant in the Delaware Basin was completed and became operational in February, significantly boosting West Texas natural gas processing capacity by approximately 13%, or 250 million cubic feet per day. This development marks a crucial step in enhancing the company’s operational capabilities.

Strong Balance Sheet and Liquidity

Western Midstream boasts an investment-grade credit rating, with net leverage below three times and approximately $2.4 billion in liquidity. This strong financial standing provides the company with a solid foundation to navigate market uncertainties and pursue growth opportunities.

Positive Conversations for Pathfinder Pipeline

The company reported positive discussions with customers and midstream providers regarding the Pathfinder produced water pipeline. This project is expected to be operational by January 2027, indicating promising future growth in this segment.

Adjusted Gross Margin Increases

The earnings call highlighted an increase in adjusted gross margins, with natural gas assets seeing a rise of $0.05 per thousand cubic feet, and crude oil and NGL assets increasing by $0.17 per barrel compared to the previous quarter. This improvement reflects the company’s effective cost management and operational efficiency.

Distribution Increase

Western Midstream declared a quarterly distribution of $0.91 per unit, marking a 4% increase over the prior quarter’s distribution. This increase underscores the company’s commitment to delivering value to its shareholders.

Sequential Throughput Decline

Despite the achievements, the company experienced a sequential decline in throughput, with natural gas throughput decreasing by 2% and crude oil and NGL throughput decreasing by 6%. This decline poses a challenge that the company needs to address moving forward.

Revenue Recognition Adjustments

An $8 million decrease in adjusted gross margin was noted, primarily due to decreased throughput and non-recurring favorable revenue recognition adjustments from the prior quarter. This adjustment highlights the impact of operational fluctuations on financial results.

Market Volatility and Commodity Price Concerns

The company expressed concerns over recent market volatility and commodity price weakness, which are causing producers to reevaluate their operational plans. This uncertainty could potentially impact future growth, necessitating strategic adjustments.

Forward-Looking Guidance

Looking ahead, Western Midstream provided substantial guidance on its financial and operational outlook. Despite a 2% sequential decrease in natural gas throughput and a 6% decrease in crude oil and NGL throughput, the company anticipates mid-single-digit percentage growth in natural gas and produced water throughput, and low single-digit growth in crude oil and NGLs for the year. The company plans to maintain its investment-grade credit rating and retire senior notes maturing in 2025, demonstrating confidence in its financial resilience and strategic positioning.

In summary, Western Midstream Partners, LP’s earnings call reflected a balanced sentiment, with notable achievements such as the North Loving plant commissioning and a strong financial position. However, challenges like throughput declines and market volatility were also acknowledged. The company remains optimistic about its growth prospects and financial resilience, despite the potential impacts of lower commodity prices.