Western Midstream(US:WES)2024-05-08 20:20Financial Performance - Total revenues for Q1 2024 were $887.7 million, a 3.4% increase from $858.2 million in Q4 2023 and a 20.9% increase from $733.9 million in Q1 2023 [135]. - Operating income for Q1 2024 was $679.4 million, significantly up from $391.9 million in Q4 2023 and $290.2 million in Q1 2023 [135]. - The company reported a net income of $586,216 thousand for the three months ended March 31, 2024, significantly higher than $295,752 thousand in the previous quarter and $208,341 thousand in the same quarter last year [186]. - The company reported a net income attributable to WES of $572.8 million for the three months ended March 31, 2024, compared to $288.4 million in the previous quarter [228]. - Adjusted EBITDA for the three months ended March 31, 2024, was $608,409 thousand, an increase from $570,665 thousand in the previous quarter and $498,695 thousand in the same quarter last year [186]. - Adjusted gross margin reached $845,052 thousand for the three months ended March 31, 2024, reflecting a 3% increase from $819,381 thousand in the previous quarter and a 22% increase from $695,155 thousand a year ago [195]. Revenue Sources - Service revenues increased by 4% to $848.0 million in Q1 2024 compared to $813.4 million in Q4 2023, and up 22% from $694.7 million in Q1 2023 [143]. - Natural-gas sales decreased by 78% to $3.2 million in Q1 2024 compared to $14.2 million in Q4 2023, primarily due to decreased volumes sold [148]. - NGLs sales increased by $5.6 million compared to the three months ended December 31, 2023, driven by a $3.7 million increase at the DJ Basin and $2.4 million at the Powder River Basin due to increased volumes sold from the acquisition of Meritage [151]. Costs and Expenses - Total cost of product and operation and maintenance expenses remained relatively stable at $241.018 million, with a 7% increase compared to $225.698 million for the three months ended March 31, 2023 [155]. - General and administrative expenses decreased by $5.2 million compared to the three months ended December 31, 2023, primarily due to a $6.2 million decrease in contract labor and consulting costs [164]. - Interest expense decreased by $3.1 million compared to the three months ended December 31, 2023, primarily due to a $5.7 million decrease from no outstanding borrowings under the RCF [172]. - Depreciation and amortization expense increased by $13.4 million compared to the three months ended March 31, 2023, primarily due to a $15.1 million increase at the Powder River Basin complex from the acquisition of Meritage [169]. Investments and Divestitures - The company closed on the sale of several equity investments for combined proceeds of $588.6 million during Q1 2024, including $5.9 million in pro-rata distributions [118]. - In Q1 2024, the company closed the sale of equity investments, generating proceeds of $588.6 million and a net gain of $239.7 million recorded as Gain on divestiture [130]. - The company sold its 33.75% interest in the Marcellus Interest systems for $206.2 million, resulting in an estimated net gain of $65.0 million to be recorded in Q2 2024 [131]. - 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 [132]. Cash Flow and Liquidity - Free cash flow for the three months ended March 31, 2024, was $224,952 thousand, compared to $282,036 thousand in the previous quarter and $141,592 thousand in the same quarter last year [188]. - Net cash provided by operating activities for the three months ended March 31, 2024, was $399,708 thousand, a decrease from $473,300 thousand in the previous quarter and an increase from $302,424 thousand in the same quarter last year [186]. - As of March 31, 2024, the company reported a working capital surplus of $358.2 million, indicating a strong liquidity position [214]. - The company maintains $1.9 billion in effective borrowing capacity under the revolving credit facility as of March 31, 2024 [214]. Market Conditions and Risks - The company anticipates that fluctuations in commodity prices will impact producer activity and, consequently, its operations [124]. - Inflation and supply-chain disruptions have raised operating costs and capital expenditures, which could materially affect financial results [126]. - A 10% change in commodity prices is not expected to materially impact operating income or cash flows for the next 12 months, as 95% of wellhead natural-gas volume and 100% of crude-oil throughput were under fee-based contracts [237]. - The company expects its exposure to credit risk from counterparties, particularly Occidental, to continue impacting cash distributions to unitholders [225]. Shareholder Returns - The Board declared a cash distribution of $0.875 per unit, totaling $340.9 million, payable on May 15, 2024 [209]. - The company distributed $223.4 million to WES unitholders during the three months ended March 31, 2024, compared to $196.6 million in the same period of 2023 [228]. - The company has an authorized amount of $627.8 million remaining under its common-unit buyback program, with no units repurchased in the latest quarter [211].