Western Midstream(US:WES)2025-02-27 21:56Financial 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]