Western Midstream Partners, LP - 2024 Q3 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2024, for Western Midstream Partners, LP (WES) and its consolidated subsidiary, Western Midstream Operating, LP (WES Operating). WES is a master limited partnership engaged in gathering, compressing, treating, processing, and transporting natural gas, crude oil, NGLs, and produced water. Operations are concentrated in Texas, New Mexico, and the Rocky Mountains. The filing is a combined report for both registrants.
Key Financial Metrics (Nine Months Ended Sept 30, 2024)
- Revenue: Total revenues and other increased to $2.68 billion (up from $2.25 billion in 2023), driven by higher fee-based service revenues.
- Net Income: Net income attributable to WES was $1.24 billion, compared to $734 million in the prior year period.
- Adjusted EBITDA: Reported at $1.75 billion, a 17% increase year-over-year.
- Free Cash Flow: Generated $1.01 billion, a 49% increase compared to the prior year.
- Cash Flow from Operations: Net cash provided by operating activities was $1.58 billion.
- Debt: Total carrying value of debt was approximately $7.94 billion as of September 30, 2024.
- Liquidity: Cash and cash equivalents totaled $1.12 billion. The company maintains a $2.0 billion revolving credit facility (RCF) with no outstanding borrowings at period end.
- Distributions: Declared a quarterly distribution of $0.875 per unit for Q3 2024.
Material Changes vs. Prior Period
- Divestitures: The company realized a net gain of $299.4 million on divestitures, primarily from the sale of equity interests in Mont Belvieu JV, Whitethorn LLC, Panola, and Saddlehorn in Q1, and the Marcellus Interest systems in Q2. Proceeds totaled approximately $794 million.
- Acquisitions: The impact of the Meritage acquisition (closed Oct 2023) continued to drive volume growth in the Powder River Basin.
- Throughput: Natural gas throughput attributable to WES increased 17% year-over-year to 4,998 MMcf/d. Crude oil and NGLs throughput decreased 17% to 529 MBbls/d, largely due to the aforementioned divestitures.
- Impairments: Long-lived asset impairments were minimal at $6.2 million for the nine months ended Sept 30, 2024, compared to $52.9 million in the prior year period.
- Interest Expense: Increased to $279.2 million (from $250.6 million) due to new debt issuances in 2023 and 2024.
Guidance, Outlook, and Risks
- Outlook: Management expects business performance to be driven by producer activity, which is sensitive to commodity prices. The company is adjusting capital spending plans to reflect customer activity levels while maintaining liquidity.
- Capital Allocation: The company has a $1.25 billion unit repurchase program authorized through December 31, 2024. No units were repurchased in the first nine months of 2024; approximately $627.8 million remains available.
- Debt Management: In Q3 2024, WES Operating issued $800 million of 5.450% Senior Notes due 2034 to refinance maturing debt and fund capital expenditures. The company also repurchased $150 million of senior notes.
- Risks: Key risks include commodity price volatility, credit risk related to major counterparty Occidental (which accounts for a significant portion of revenues), inflation impacting capital costs, and regulatory changes affecting hydraulic fracturing or environmental standards.
Investor Verification Checklist
- Verify the impact of the Meritage acquisition on Powder River Basin throughput and margin stability.
- Monitor the divestiture of equity interests (Mont Belvieu, Whitethorn, etc.) and the resulting reduction in equity income from related parties.
- Assess the credit exposure to Occidental, given its status as the primary customer and the recent sale of 19.5 million WES units by Occidental affiliates.
- Review the cost-of-service rate redeterminations effective January 1, 2024, and their sustained impact on fee-based revenues in West Texas and DBM systems.
- Track the utilization of the $1.25 billion buyback program and the timing of future unit repurchases.