Western Midstream(WES) - 2025 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION (UNAUDITED) This section provides the unaudited consolidated financial statements, management's discussion and analysis of financial condition, and disclosures on market risk and internal controls Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Western Midstream Partners, LP and its subsidiary, including statements of operations, balance sheets, and cash flows, followed by detailed notes Western Midstream Partners, LP Financial Statements Western Midstream Partners, LP reported a net income of $309.0 million for Q1 2025, a decrease from $572.8 million in Q1 2024 due to a non-recurring divestiture gain, while total revenues and operating cash flow increased WES Consolidated Statement of Operations Highlights (Q1 2025 vs Q1 2024) | thousands except per-unit amounts | Three Months Ended March 31, 2025 (thousands) | Three Months Ended March 31, 2024 (thousands) | | :--- | :--- | :--- | | Total revenues and other | $917,116 | $887,729 | | Service revenues – fee based | $823,197 | $781,262 | | Gain (loss) on divestiture and other, net | $(4,667) | $239,617 | | Operating income (loss) | $409,803 | $679,374 | | Net income (loss) attributable to WES, LP | $309,007 | $572,830 | | Net income (loss) per common unit – diluted | $0.79 | $1.47 | WES Consolidated Balance Sheet Highlights | thousands | March 31, 2025 (thousands) | December 31, 2024 (thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $448,447 | $1,090,464 | | Total current assets | $1,189,894 | $1,847,190 | | Net property, plant, and equipment | $9,727,094 | $9,714,609 | | Total assets | $12,456,877 | $13,144,785 | | Short-term debt | $350,597 | $1,011,032 | | Long-term debt | $6,925,033 | $6,926,647 | | Total liabilities | $9,123,306 | $9,769,615 | | Total equity and partners' capital | $3,333,571 | $3,375,170 | WES Consolidated Statement of Cash Flows Highlights (Q1 2025 vs Q1 2024) | thousands | Three Months Ended March 31, 2025 (thousands) | Three Months Ended March 31, 2024 (thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $530,793 | $399,708 | | Net cash provided by (used in) investing activities | $(140,790) | $396,849 | | Net cash provided by (used in) financing activities | $(1,032,020) | $(774,098) | | Net increase (decrease) in cash and cash equivalents | $(642,017) | $22,459 | Western Midstream Operating, LP Financial Statements Western Midstream Operating, LP reported Q1 2025 net income of $315.1 million, a decrease from $584.8 million in Q1 2024 primarily due to a prior-year divestiture gain, with total debt at $7.3 billion WES Operating Consolidated Statement of Operations Highlights (Q1 2025 vs Q1 2024) | thousands | Three Months Ended March 31, 2025 (thousands) | Three Months Ended March 31, 2024 (thousands) | | :--- | :--- | :--- | | Total revenues and other | $917,116 | $887,729 | | Operating income (loss) | $409,615 | $679,734 | | Net income (loss) attributable to WES Operating, LP | $315,076 | $584,831 | WES Operating Consolidated Balance Sheet Highlights | thousands | March 31, 2025 (thousands) | December 31, 2024 (thousands) | | :--- | :--- | :--- | | Total assets | $12,483,406 | $13,134,410 | | Short-term debt | $350,597 | $1,011,032 | | Long-term debt | $6,925,033 | $6,926,647 | | Total liabilities | $9,080,174 | $9,708,284 | Notes to Consolidated Financial Statements These notes detail the Partnership's business, revenue, transactions, capital structure, and segment reporting, including related-party transactions, 2024 divestitures, distribution policies, and outstanding debt - The Partnership is a midstream energy company engaged in gathering, processing, and transporting natural gas, NGLs, crude oil, and produced water, with assets primarily in Texas, New Mexico, and the Rocky Mountains[42] - In Q1 2024, the Partnership sold its interests in Mont Belvieu JV, Whitethorn LLC, Panola, and Saddlehorn for combined proceeds of $588.6 million, resulting in a net gain of $239.7 million[59] - The Board declared a cash distribution of $0.910 per unit for Q1 2025, payable in May 2025, an increase from $0.875 per unit in prior quarters[61] - As of March 31, 2025, total outstanding debt was approximately $7.3 billion, with WES Operating retiring $663.8 million principal of its 3.100% Senior Notes due 2025 during Q1 2025[86][87] - The Partnership operates as a single reportable segment, with Adjusted EBITDA used as the primary performance measure by its Chief Operating Decision Maker (CODM)[98][99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's financial performance, operational results, and liquidity, covering key events, throughput volumes, revenue/expense analysis, and non-GAAP reconciliations, highlighting divestiture impacts, stable throughput, and strong liquidity Executive Summary The executive summary highlights Q1 2025 events, including senior note retirement, increased quarterly distribution to $0.910 per unit, North Loving plant start-up, and key throughput data showing increases in natural gas and produced-water volumes - Completed the start-up of the North Loving plant in late-February 2025, adding 250 MMcf/d of gas processing capacity to the West Texas complex[112] - Increased the first-quarter 2025 per-unit distribution to $0.910, up from $0.875 in the previous quarter[112] Throughput YoY Change (Q1 2025 vs Q1 2024) | Asset Type | Q1 2025 Throughput | YoY Change | | :--- | :--- | :--- | | Natural-gas assets (MMcf/d) | 5,291 | +2% | | Crude-oil and NGLs assets (MBbls/d) | 514 | -11% | | Produced-water assets (MBbls/d) | 1,190 | +4% | Results of Operations This section compares Q1 2025 operating results, showing a decrease in net income to $309.0 million due to the absence of a 2024 divestiture gain, while fee-based service revenues increased by 5% and operation and maintenance expenses rose by 16% - Total natural-gas throughput increased by 120 MMcf/d year-over-year, driven by higher production in the West Texas, DJ Basin, and Powder River Basin complexes[129] - Crude-oil and NGLs throughput decreased by 62 MBbls/d year-over-year, primarily due to the divestiture of Whitethorn LLC and Saddlehorn in Q1 2024[131] - Fee-based service revenue increased by $41.9 million year-over-year, led by a $31.1 million increase at the West Texas complex due to higher throughput[137] - Operation and maintenance expense increased by $31.6 million year-over-year, driven by higher costs for equipment, materials, utilities, and labor[146] Reconciliation of Non-GAAP Financial Measures This section reconciles non-GAAP measures, reporting Q1 2025 Adjusted Gross Margin at $860.8 million, Adjusted EBITDA at $593.6 million (down 2% YoY), and Free Cash Flow at $399.4 million (up 78% YoY) due to lower capital expenditures Non-GAAP Financial Measures (Q1 2025 vs Q1 2024) | thousands | Three Months Ended March 31, 2025 (thousands) | Three Months Ended March 31, 2024 (thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Adjusted Gross Margin | $860,783 | $845,052 | +2% | | Adjusted EBITDA | $593,572 | $608,409 | -2% | | Free Cash Flow | $399,398 | $224,952 | +78% | Liquidity and Capital Resources The company maintains strong liquidity from operations, a $2.0 billion revolving credit facility, and capital markets access, reporting a $179.0 million working capital surplus and $142.4 million in Q1 2025 capital expenditures, while retiring $663.8 million in senior notes - Primary sources of liquidity include cash from operations, the $2.0 billion RCF, and potential debt/equity issuances[189] - In February 2025, the Board authorized a new $250.0 million common unit buyback program, effective through December 31, 2026[191] - Capital expenditures decreased by $51.4 million year-over-year to $142.4 million for Q1 2025, mainly due to the completion of the North Loving plant[194] - During Q1 2025, WES Operating retired the 3.100% Senior Notes due 2025, paying off the $663.8 million principal amount[202] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk disclosure highlights mitigated commodity price exposure, with 96% of natural gas and 100% of crude oil/produced water volumes under fee-based contracts, and minimal interest rate risk due to no outstanding variable-rate borrowings - For Q1 2025, 96% of wellhead natural-gas volume and 100% of crude-oil and produced-water throughput were serviced under fee-based contracts, limiting direct commodity price exposure[217] - A 10% change in commodity prices would not materially impact operating income, financial condition, or cash flows for the next 12 months[217] - As of March 31, 2025, there were no outstanding borrowings under the RCF or commercial paper program, minimizing immediate exposure to variable interest rates[218] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[220] - No material changes to internal control over financial reporting occurred during the first quarter of 2025[221] PART II: OTHER INFORMATION This section provides disclosures on legal proceedings, risk factors, unregistered sales of equity securities, other information including director appointments, and a comprehensive list of exhibits filed with the report Item 1. Legal Proceedings The company is not a party to any material legal proceedings outside the ordinary course of business that would adversely affect its financial condition or operations - The company is not party to any legal proceedings that are expected to have a material adverse effect on its business or financial condition[224] Item 1A. Risk Factors This section refers investors to the detailed risk factors in the 2024 Annual Report on Form 10-K, indicating no material changes during the quarter - Investors are directed to the risk factors previously disclosed in the 2024 Form 10-K[225] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no common units were repurchased under its $250.0 million buyback program during Q1 2025, with the full authorized amount remaining available through December 31, 2026 - No common units were repurchased during the first quarter of 2025[226] - As of March 31, 2025, the entire $250.0 million authorized amount remains available under the current unit repurchase program[226] Item 5. Other Information This section discloses no Rule 10b5-1 trading plan adoptions or terminations by directors or executive officers, and reports the appointment of Robert G. Phillips as an independent director on May 4, 2025 - On May 4, 2025, Robert G. Phillips was appointed as an independent member of the Board of Directors[229] - No executive officers or directors adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025[227] Item 6. Exhibits This section provides an index of all exhibits filed with or incorporated by reference into the Form 10-Q report, including various agreements, indentures, and SEC-required certifications - Lists exhibits filed with the report, including a Retirement Agreement for Robert W. Bourne and an amended Executive Severance Plan[236] - Includes required CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002[236][237]