Western Midstream(US:WES)2024-08-08 21:14Financial Data and Key Metrics Changes - The company reported net income attributable to limited partners of $370 million and adjusted EBITDA of $578 million for Q2 2024, with adjusted EBITDA decreasing sequentially by 5% or $30 million due to lower adjusted gross margin and increased operational expenses [13][14] - Cash flow from operating activities totaled $631 million, generating free cash flow of $425 million [15][16] - The company achieved a trailing 12-month net leverage ratio of three times earlier than anticipated [7] Business Line Data and Key Metrics Changes - Natural gas throughput was relatively flat sequentially, with a 3% increase from operated assets, while crude oil and NGL throughput declined by 9% due to divestitures, but increased by 6% from operated assets [11][12] - Produced-water throughput decreased by 4% sequentially due to fluctuations in recycling activities [11] - The adjusted gross margin for natural gas assets remained flat, while the adjusted gross margin for crude oil and NGL assets increased by $0.04 per barrel compared to the prior quarter [12][13] Market Data and Key Metrics Changes - The company expects average year-over-year throughput growth of mid-to-upper teens percentage for natural gas, low teens percentage for crude oil and NGLs, and mid-to-upper teens percentage for produced-water [17] - The capital expenditure guidance for 2024 is between $700 million and $850 million, with over 80% allocated to the Delaware Basin [18] Company Strategy and Development Direction - The company plans to allocate capital towards organic growth projects and accretive M&A to enhance the value of its existing asset base [8][9] - The focus remains on utilizing existing assets and capacity rather than broad expansions in the DJ and Uinta basins [28][29] - The company aims to maintain strict returns thresholds for expansion capital spending while driving increases in return on assets [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about throughput growth for the remainder of the year, expecting to be at the high end of adjusted EBITDA and free cash flow guidance ranges [3][17] - The company highlighted strong operational performance and a commitment to sustainability, with plans to release a sustainability report detailing 2023 accomplishments [21][22] Other Important Information - The company declared a Base Distribution of $87.5 per unit, unchanged from the previous announcement [16] - The company has repurchased $135 million of senior notes in the second quarter, totaling $150 million year-to-date [15] Q&A Session Summary Question: Growth in DJ and Uinta Basins - Management is excited about new volumes in the DJ and Uinta basins but currently has no plans for major expansions, focusing instead on utilizing existing capacity [28][29] Question: M&A Opportunities - The company is looking for M&A opportunities that enhance existing operations and provide synergies, particularly in areas where it currently operates [30] Question: CapEx and New Plant in Permian - A step down in capital expenditures is expected for 2025, with no plans to increase plant capacity in the Permian [33] Question: Distribution Timing - The achievement of a 3 times leverage ratio opens up possibilities for capital allocation without focusing on buybacks, with distribution growth tied to free cash flow generation [34] Question: Uinta Basin Capacity - Current capacity is sufficient to meet the needs of new commercial agreements without requiring plant expansion [36] Question: Commercial Wins and Future Opportunities - The company is optimistic about replicating recent commercial successes but does not expect the same number of deals every quarter [38] Question: Contract Extensions with PSX - The relationship with PSX has been strong historically, and recent agreements are not attributed to ownership changes but rather to long-standing partnerships [44]