Western Midstream (WES) closed the most recent trading day at $41.61, moving +1.41% from the previous trading session. The stock's change was more than the S&P 500's daily gain of 0.67%. Meanwhile, the Dow gained 0.56%, and the Nasdaq, a tech-heavy index, added 0.87%.The the stock of oil and gas transportation and storage company has risen by 5.99% in the past month, leading the Oils-Energy sector's gain of 3.06% and the S&P 500's loss of 5.28%.Market participants will be closely following the financial res ...

Core Viewpoint - Western Midstream (WES) shares have increased by approximately 2.8% since the last earnings report, outperforming the S&P 500, raising questions about the sustainability of this positive trend leading up to the next earnings release [1] Estimates Movement - Estimates revision for Western Midstream has remained flat over the past month [2] VGM Scores - Western Midstream has a subpar Growth Score of D, a Momentum Score of B, and a Value Score of C, resulting in an aggregate VGM Score of C, indicating a middle-tier performance across investment strategies [3] Outlook - Western Midstream holds a Zacks Rank 3 (Hold), suggesting an expectation of an in-line return from the stock in the upcoming months [4] Industry Performance - Western Midstream is part of the Zacks Oil and Gas - Refining and Marketing - Master Limited Partnerships industry, where Targa Resources, Inc. (TRGP) has gained 1.8% over the past month [5] Targa Resources Financials - Targa Resources reported revenues of $4.41 billion for the last quarter, reflecting a year-over-year increase of 3.9%, with an EPS of $1.44 compared to $1.23 a year ago [6] - For the current quarter, Targa Resources is projected to post earnings of $2.04 per share, indicating a year-over-year change of 67.2%, with a 4.4% increase in the Zacks Consensus Estimate over the last 30 days [6] - Targa Resources also holds a Zacks Rank 3 (Hold) and has a VGM Score of A [7]

Group 1 - Western Midstream (NYSE: WES) is a significant midstream company valued at over $15 billion and has outperformed the market by more than 15% since the last recommendation [2] - The Value Portfolio focuses on constructing retirement portfolios using a fact-based research strategy, which includes thorough analysis of 10Ks, analyst commentary, market reports, and investor presentations [2] - The company invests real money in the stocks it recommends, indicating a commitment to its investment strategy [2]

Core Viewpoint - Western Midstream is facing a significant decline in earnings per share (EPS) while experiencing a modest increase in revenue, indicating potential challenges ahead for the company [3][4]. Company Performance - The stock price of Western Midstream closed at $41.37, reflecting a slight increase of +0.24% from the previous trading day, which is lower than the S&P 500's daily gain of 1.77% [1]. - Over the last month, the company's shares increased by 0.34%, which is below the Oils-Energy sector's gain of 0.43% and outperformed the S&P 500's loss of 5.73% [2]. Earnings Estimates - Analysts anticipate an EPS of $0.83 for the upcoming earnings disclosure, representing a 43.54% decline compared to the same quarter last year [3]. - The consensus estimate projects revenue of $945.11 million, reflecting a 6.46% increase from the equivalent quarter last year [3]. Fiscal Year Projections - For the entire fiscal year, the Zacks Consensus Estimates project earnings of $3.41 per share and revenue of $3.79 billion, indicating changes of -15.17% and +5.21%, respectively, from the prior year [4]. Analyst Sentiment - Recent changes to analyst estimates for Western Midstream suggest a favorable outlook on the company's business health and profitability, as positive revisions often reflect improved short-term business dynamics [5]. Valuation Metrics - Western Midstream is currently trading at a Forward P/E ratio of 12.11, which is a discount compared to the industry's average Forward P/E of 23.29 [8]. - The Oil and Gas - Refining and Marketing - Master Limited Partnerships industry is part of the Oils-Energy sector and currently holds a Zacks Industry Rank of 163, placing it in the bottom 36% of over 250 industries [8].

In the latest market close, Western Midstream (WES) reached $41.85, with a +0.02% movement compared to the previous day. The stock's change was more than the S&P 500's daily loss of 0.22%. Meanwhile, the Dow lost 0.03%, and the Nasdaq, a tech-heavy index, lost 0.33%.The the stock of oil and gas transportation and storage company has risen by 1.16% in the past month, leading the Oils-Energy sector's loss of 1.22% and the S&P 500's loss of 7.48%.The upcoming earnings release of Western Midstream will be of gr ...

Group 1 - Western Midstream (NYSE: WES) has reached debt levels that management has guided to, indicating a shift to a slow growth mindset for the company [2] - The company, like many midstream firms, offers a generous distribution, which suggests potential for income generation despite the slow growth outlook [2] - The oil and gas industry is characterized as a boom-bust, cyclical sector, requiring patience and experience for successful investment [2] Group 2 - The analysis provided in the article focuses on identifying undervalued companies within the oil and gas sector, including a detailed examination of balance sheets, competitive positions, and development prospects [1] - The service offered includes exclusive analysis for members, which is not available on the free site, highlighting the depth of research conducted [1]

Group 1 - Western Midstream Partners, LP (WES) will release a post-earnings interview on its website providing insights into its Q4 2024 results and 2025 outlook [1] - WES is a master limited partnership focused on developing, acquiring, owning, and operating midstream assets across several states including Texas, New Mexico, Colorado, Utah, and Wyoming [2] - The company engages in various activities such as gathering, compressing, treating, processing, and transporting natural gas, as well as handling condensate, natural-gas liquids, and crude oil [2] Group 2 - A significant portion of WES's cash flows is secured through fee-based contracts, which protect the company from direct exposure to commodity price volatility [2] - WES plans to participate in several investor conferences in 2025, including Barclays IG Energy & Utilities Corporate Days on March 5, NYSE Virtual Energy & Utilities Day on March 20, and the 22nd Annual Energy Infrastructure CEO & Investor Conference from May 20 to 22 [3]

Financial Data and Key Metrics Changes - In Q4 2024, the company generated net income attributable to Limited Partners of $326 million and adjusted EBITDA of $591 million, with a sequential increase in adjusted gross margin by $41 million driven by increased throughput from the DJ and Delaware Basins [28][30] - For the full year 2024, net income attributable to limited partners was $1.54 billion, and adjusted EBITDA reached $2.34 billion, exceeding the midpoint of the 2024 adjusted EBITDA guidance range [31][34] - Free cash flow generation totaled $1.32 billion in 2024, exceeding the high end of the guidance range [33] Business Line Data and Key Metrics Changes - Q4 natural gas throughput increased by 4% sequentially, with record throughput in the Delaware Basin for eight consecutive quarters [16] - Crude oil and NGL throughput increased by 6% sequentially, while produced water throughput saw an 8% increase due to strong producer activity [16][20] - For the full year 2024, natural gas throughput averaged 5.1 billion cubic feet per day, a 16% year-over-year increase, while crude oil and NGL throughput averaged 530,000 barrels per day, a 12% year-over-year increase [19][20] Market Data and Key Metrics Changes - The Delaware Basin is expected to remain the main engine of throughput growth in 2025, with modest increases anticipated across all product lines due to strong producer activity [21] - In the DJ Basin, throughput is expected to remain flat for natural gas and slightly down for crude oil and NGLs based on current customer forecasts [22] - The Powder River Basin is projected to see slight increases in throughput for both natural gas and crude oil and NGLs due to increased activity levels [24] Company Strategy and Development Direction - The company announced a significant expansion of its produced water gathering and disposal infrastructure in the Delaware Basin, including the Pathfinder Pipeline, which will transport over 800,000 barrels of produced water per day [7][11] - The company aims to prioritize capital-efficient organic growth, targeting a long-term annual distribution growth rate of mid to low single digits, excluding potential increases from large organic growth projects or acquisitions [14][39] - The focus will be on productivity and efficiency improvements to enhance competitiveness and support sustainable distribution growth [15][39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth in 2025, driven by strategic investments in organic growth projects and strong operational performance [49][52] - The company is well-positioned to capitalize on incremental organic and inorganic growth opportunities, with a focus on maintaining a strong investment-grade balance sheet [50][53] - Management highlighted the importance of strong relationships with customers, particularly Occidental Petroleum, to support long-term development plans [51][52] Other Important Information - The company plans to retire the enhanced distribution concept to simplify its capital allocation framework and focus on sustainable base distribution growth [39] - A new long-term produced water agreement with Occidental Petroleum was announced, supporting the company's growth strategy [8][10] Q&A Session Summary Question: Growth outlook and capital allocation framework - Management explained that the mid to low-single-digit distribution growth target was based on extensive forecasting and planning, aligning with expected EBITDA growth [58][60] Question: Pathfinder pipeline contract and returns - Management confirmed that the initial contract with Occidental Petroleum supports the pipeline's capacity and is expected to enhance returns over time [63][65] Question: Discussions with other customers for pipeline capacity - Management indicated ongoing discussions with other producers to fill the pipeline and improve returns [68][70] Question: Competitors in the Permian produced water market - Management emphasized the unique midstream solution offered by the company, differentiating it from shorter-term oilfield service solutions [71][73] Question: Long-term contracts with Occidental Petroleum - Management confirmed existing long-term contracts and ongoing efforts to extend agreements with all customers [77][81] Question: Capital expenditures for 2026 - Management indicated that capital expenditures for 2026 would be higher due to the inclusion of Pathfinder and ongoing growth in various basins [84][89] Question: Criteria for bolt-on acquisitions - Management outlined that acquisitions should complement existing operations, meet midstream return requirements, and generate synergies [94][95] Question: Free cash flow drivers - Management noted that free cash flow is influenced by throughput performance, cost savings, and capital expenditures [96][100] Question: Timing of buybacks - Management stated that while a buyback program was authorized, it is unlikely to be utilized in the near term due to ongoing growth projects [102][105]

Financial Data and Key Metrics Changes - The company generated net income attributable to Limited Partners of $326 million and adjusted EBITDA of $591 million in the fourth quarter [18] - For the full year 2024, net income attributable to limited partners was $1.54 billion, with adjusted EBITDA reaching $2.34 billion, exceeding the midpoint of the guidance range [19][20] - Free cash flow for 2024 totaled $1.32 billion, surpassing the high end of the guidance range [20] Business Line Data and Key Metrics Changes - Natural gas throughput increased by 4% sequentially in Q4, achieving record levels in the Delaware Basin [10] - Crude oil and NGLs throughput rose by 6% sequentially, driven by strong customer activity [10] - Produced water throughput saw an 8% sequential increase, attributed to strong producer activity [10] Market Data and Key Metrics Changes - Average throughput across all three products increased by double digits year over year, with natural gas throughput averaging 5.1 billion cubic feet per day, a 16% increase [13] - Crude oil and NGLs throughput averaged 530,000 barrels per day, representing a 12% year-over-year increase [14] - Produced water throughput averaged 1.1 million barrels per day, an 11% increase compared to the previous year [14] Company Strategy and Development Direction - The company announced a significant expansion of its produced water gathering and disposal infrastructure in the Delaware Basin, including the Pathfinder pipeline [4][5] - The strategy focuses on capital-efficient organic growth to generate strong returns for unitholders and sustain base distribution growth [7][8] - The company aims to target a long-term annual distribution growth rate of mid to low single digits, excluding potential increases from large organic growth projects [8][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth driven by strong operational performance and strategic positioning [29] - The company anticipates continued throughput growth in 2025, particularly in the Delaware Basin, supported by strong producer activity [15][31] - Management highlighted the importance of maintaining strong relationships with customers, particularly Occidental Petroleum, to support long-term development plans [30] Other Important Information - The company plans to retire the enhanced distribution concept to simplify its capital allocation framework and focus on sustainable base distribution growth [23] - A new long-term produced water agreement with Occidental Petroleum was executed, enhancing the company's service offerings [4][5] Q&A Session Summary Question: Growth outlook and capital allocation framework - Management explained that the mid to low single-digit distribution growth target was based on extensive forecasting and planning [36] Question: Pathfinder pipeline contract and filling capacity - Management indicated that the contract with Occidental Petroleum supports the pipeline's capacity and is expected to enhance returns over time [39] Question: Discussions with other customers for pipeline capacity - Management confirmed ongoing discussions with other producers to fill the pipeline and improve returns [43] Question: Competitors in the Permian produced water market - Management emphasized the unique long-term midstream solution offered by the company compared to shorter-term oilfield service solutions [45] Question: Future contract extensions with Occidental Petroleum - Management noted ongoing efforts to maintain and extend contracts with all customers, particularly in the Delaware Basin [50] Question: Capital expenditures for 2026 - Management indicated that capital expenditures for 2026 would be higher due to the Pathfinder project and ongoing growth initiatives [53] Question: Criteria for bolt-on acquisitions - Management outlined that acquisitions should complement existing operations and meet midstream return requirements [61] Question: Timing of buybacks given capital requirements - Management stated that while a buyback program was authorized, significant market dislocation would be needed to consider it in the near term [68]

Company Structure and Operations - Western Midstream Partners, LP owns a 98.0% limited partner interest in Western Midstream Operating, LP[27] - The company is engaged in gathering, compressing, treating, processing, and transporting natural gas, as well as gathering and disposing of produced water[29] - The company’s operations are organized into a single segment that engages in gathering, compressing, treating, processing, and transporting natural gas, crude oil, and produced water[37] - The company’s assets include both owned assets and ownership interests accounted for under the equity method[28] - The company’s operations include the sale of natural gas, NGLs, and condensate on behalf of itself and its customers[29] Financial Position and Credit Facilities - The company has a $2.0 billion senior unsecured revolving credit facility[24] - As of December 31, 2024, the company had approximately $2.0 billion in effective borrowing capacity under the revolving credit facility (RCF), providing liquidity for expansion and acquisition opportunities[47] - The company requires $341.0 million in available cash per quarter to maintain its announced distribution of $0.87500 per unit, totaling $1,364.0 million annually[163] - The company's cash flows, rather than profitability, primarily determine the cash available for distribution, which may fluctuate from quarter to quarter[162] - The company has a buyback program of $1.25 billion that ends on December 31, 2024[24] Acquisitions and Sales - The company sold its 15% interest in Cactus II Pipeline LLC in November 2022[24] - The company acquired Meritage Midstream Services II, LLC on October 13, 2023[24] - The acquisition of Meritage was completed in October 2023 for $885.0 million, funded by cash and proceeds from a $600.0 million senior note issuance[42] - The company closed the sale of its 33.75% interest in the Marcellus Interest systems for proceeds of $206.2 million, resulting in a net gain of $63.9 million recorded in the consolidated statement of operations[40] - In the first quarter of 2024, the company sold equity investments including a 25.00% interest in Mont Belvieu JV for combined proceeds of $588.6 million, resulting in a net gain of $239.7 million[41] Revenue Sources and Customer Dependence - For the year ended December 31, 2024, 60% of total revenues were attributable to production owned or controlled by Occidental, highlighting the company's reliance on this key partner[51] - Occidental accounts for over 50% of the company's revenues related to natural gas, crude oil, NGLs, and produced water, with 60% of total revenues and 91% of throughput for crude oil and NGLs attributable to Occidental's production[146] - A material reduction in Occidental's production could lead to a significant decline in the company's revenues and cash available for distribution[146] - The company reported that 95% of its wellhead natural-gas volume and 100% of its crude-oil and produced-water throughput were serviced under fee-based contracts, providing a stable revenue stream[47] Growth and Expansion Plans - The company plans to enhance growth through systematic acquisition activity while controlling operating, capital, and administrative costs to maintain sustainable distribution growth[45] - The Mentone Train III processing plant was completed, adding 300 MMcf/d of processing capacity to the West Texas complex[61] - The North Loving Plant is under construction with a capacity of 250 MMcf/d, expected to be completed in Q1 2025, bringing total processing capacity of the West Texas complex to 2,190 MMcf/d[63] - Three oil-treating facilities were brought online, adding 45 MBbls/d of treating capacity to the DBM oil system[64] - Several produced-water disposal wells were added, increasing disposal capacity by 210 MBbls/d[65] Regulatory and Compliance Risks - Proposed revisions to pipeline safety regulations by PHMSA could increase compliance costs and operational delays for the company[105] - The company is subject to civil penalties for violations of CFTC and FTC regulations, which can exceed $1.0 million per day per violation[112] - The company’s natural-gas gathering operations may face increased costs and capital expenditures due to potential changes in state or federal regulations[113] - The company is required to comply with ratable-take and common-purchaser statutes, which prohibit discrimination among natural gas producers[114] - FERC's anti-manipulation rules apply to non-jurisdictional entities in connection with gas sales, purchases, or transportation subject to FERC jurisdiction[116] Environmental and Climate Change Regulations - The company has incurred and will continue to incur significant operating and capital expenditures to comply with environmental regulations, which may materially affect its financial condition and results of operations[126] - The EPA's new regulations for ground-level ozone standards could require the installation of new emission controls, significantly increasing capital expenditures and operating costs[127] - Colorado's Senate Bill 24-229 mandates a 50% reduction in oil and gas NO emissions by 2030 relative to 2017 levels, potentially increasing compliance costs for the company[128] - The U.S. aims to reduce net GHG emissions by 50% - 52% below 2005 levels by 2030, which may impose additional costs and affect demand for oil and gas[128] - Increased regulation related to climate change and air emissions could raise operating costs and reduce demand for the company's services, impacting financial performance[187] Operational Risks and Challenges - The company faces various risks, including commodity-price risks and regulatory changes, which could materially affect its financial performance and ability to pay distributions[140] - The company is exposed to credit risk from third-party customers, and non-payment could reduce its ability to make distributions to unitholders[166] - Sustained low prices for natural gas, NGLs, or oil could adversely affect the company's business and cash distributions[155] - The company faces inflationary pressures on costs for labor, materials, and services, which could negatively impact profitability[161] - The company's limited geographic diversification means that adverse developments in key operational areas could disproportionately affect its financial results and cash distributions to unitholders[171] Governance and Partnership Structure - The general partner's liability is limited, which may affect the company's ability to manage obligations and could reduce cash available for distribution to unitholders[204] - The company may issue additional units without unitholder approval, potentially diluting existing ownership interests and affecting market prices[209] - Unitholders may be liable to repay distributions if they were wrongfully distributed, with a three-year liability period for those aware of the violation[211] - The general partner has limited liability for decisions made in good faith, protecting them from monetary damages unless proven otherwise[212] - The partnership's taxation as a flow-through entity is crucial; any change in status could significantly reduce cash available for distribution[215]