Western Midstream Announces Second-Quarter 2023 Results

Announces Revised 2023 Guidance

• Reported second-quarter 2023 Net income attributable to limited partners of $247.1 million, generating second-quarter Adjusted EBITDA⁽¹⁾ of $488.3 million.
• Reported second-quarter 2023 Cash flows provided by operating activities of $490.8 million, generating second-quarter Free cash flow⁽¹⁾ of $340.1 million.
• Announced a second-quarter Base Distribution of $0.5625 per unit, or $2.25 on an annualized basis, which represents a 12.5-percent increase to the prior-quarter’s Base Distribution.
• Repurchased $117.6 million of near-term senior notes at approximately 94-percent of par during the second quarter, and subsequent to quarter end, repurchased an additional $159.1 million of senior notes.
• Revised 2023 Adjusted EBITDA⁽²⁾ guidance to range between $1.950 billion and $2.050 billion, a reduction of approximately 5-percent at the midpoint.
• Revised 2023 Free cash flow⁽²⁾ guidance to range between $900.0 million and $1.000 billion as a result of revised Adjusted EBITDA guidance.

Today Western Midstream Partners, LP (NYSE: WES) (“WES” or the “Partnership”) announced second-quarter 2023 financial and operating results. Net income (loss) attributable to limited partners for the second quarter of 2023 totaled $247.1 million, or $0.64 per common unit (diluted), with second-quarter 2023 Adjusted EBITDA⁽¹⁾ totaling $488.3 million. Second-quarter 2023 Cash flows provided by operating activities totaled $490.8 million, and second-quarter 2023 Free cash flow⁽¹⁾ totaled $340.1 million.

RECENT HIGHLIGHTS

• Achieved record Delaware Basin natural-gas throughput of 1.59 Bcf/d for the second quarter, representing a 1-percent sequential-quarter increase.
• Gathered record Delaware Basin crude-oil and NGLs throughput of 208 MBbls/d for the second quarter, representing a 1-percent sequential-quarter increase.
• Announced a new 250 MMcf/d cryogenic processing plant in the North Loving area of our West Texas complex (“North Loving Plant”) underpinned by previously announced commercial agreements containing significant minimum-volume commitments.
• Obtained full investment-grade ratings after receiving an upgrade to BBB- from Fitch in May.

On August 14, 2023, WES will pay its second-quarter 2023 per-unit Base Distribution of $0.5625, representing a 12.5-percent sequential-quarter increase to the Partnership’s first-quarter Base Distribution. Second-quarter 2023 Free cash flow⁽¹⁾ after distributions, which included the payment of our first Enhanced Distribution, totaled $3.1 million. Second-quarter 2023 and year-to-date capital expenditures⁽³⁾ totaled $184.3 million and $363.6 million, respectively.

Second-quarter 2023 natural-gas throughput⁽⁴⁾ averaged 4.3 Bcf/d, representing a 4-percent sequential-quarter increase. Second-quarter 2023 throughput for crude-oil and NGLs assets⁽⁴⁾ averaged 626 MBbls/d, representing a 2-percent sequential-quarter increase. Second-quarter 2023 throughput for produced-water assets⁽⁴⁾ averaged 943 MBbls/d, representing a 1-percent sequential-quarter decrease.

“Once again, we experienced record natural-gas and crude-oil and NGLs throughput in the Delaware Basin,” said Michael Ure, President and Chief Executive Officer. “Additionally, second-quarter throughput from our Utah and Wyoming assets increased as inclement weather experienced during the first quarter subsided, driving an overall increase in our natural-gas and crude-oil volumes.”

Mr. Ure continued, “Despite these throughput increases, second-quarter Adjusted EBITDA declined on a sequential-quarter basis primarily due to an expected seasonal increase in operation and maintenance expense and normalized property and other taxes.”

“We still anticipate year-over-year throughput growth across all three products. However, producer operational challenges appeared during the second quarter when new wells came online and outperformed expectations leading to challenges across the production chain. Based on discussions with our producers and after analyzing their revised forecasts, we expect these challenges to be temporary in nature. However, we do expect these challenges to continue into the second half of 2023, causing year-over-year growth to be at a slower pace than our initial expectations.”

“These throughput changes, specifically in the Delaware Basin, have caused us to revise our 2023 Adjusted EBITDA guidance range to $1.950 billion to $2.050 billion, a reduction of approximately 5-percent at the midpoint. With that said, we continue to believe that our producers will meet their volume expectations over the long-run, and the outperformance from the most recent wells further support our belief that our assets service the best rock in the Delaware Basin.”

“While we are disappointed in the new outlook for the second half of 2023, we are confident in the protections that our stable, long-term contract structures provide. In situations such as these, when current year cash flow expectations decline due to volumetric changes, the protections included in our cost-of-service contracts should benefit WES in future periods, allowing us to still earn our stated rate of return over the life of the contract.”

“Subsequent to quarter end, we announced a 12.5-percent increase in the quarterly Base Distribution to $0.5625 per unit. Our ability to significantly reduce leverage, coupled with numerous commercial successes, supported this distribution increase. Additionally, while our growth may be more weighted towards 2024 than originally anticipated, our confidence in our underlying business and contract structures reaffirms our decision regarding the Base Distribution increase and our view that the long-term trajectory of WES remains strong. Furthermore, our investment-grade balance sheet and strong financial position continue to provide optionality and allow us to continue generating long-term value for our stakeholders.”

“WES remains committed to executing on its balanced approach of returning capital to our stakeholders. During the second quarter, we utilized a portion of the net proceeds from our $750 million senior notes issuance in mid-March to repurchase $117.6 million of near-term maturity senior notes at approximately 94-percent of par. These activities have continued into the third quarter, and we have now repurchased a total of $276.7 million of senior notes to date since the beginning of the second quarter.”

“Moving to operations, in May, we announced the sanctioning of the 250 MMcf/d North Loving Plant to support our producers’ long-term throughput growth needs in the Delaware Basin. This new plant is supported by long-term commercial agreements with significant minimum-volume commitments, and is expected to be online by the end of 2024, or early 2025. Together with Mentone Train III, we are growing our Delaware Basin processing capacity by approximately 36-percent, securing our position as one of the leading natural-gas processors in the Delaware Basin,” concluded Mr. Ure.

REVISED 2023 GUIDANCE

Based on the most current production forecast information from our producer customers, WES is providing revised 2023 guidance as follows:

• Adjusted EBITDA⁽²⁾ between $1.950 billion and $2.050 billion.
• Total capital expenditures⁽³⁾ between $700.0 million to $800.0 million, which is unchanged since our May 2023 North Loving Plant announcement.
• Free cash flow⁽²⁾ between $900.0 million and $1.000 billion, in line with the decrease in Adjusted EBITDA guidance.
• Full-year 2023 Base Distribution of at least $2.1875 per unit⁽⁵⁾, which is unchanged since our July 2023 Base Distribution increase announcement, excludes the impact of a potential Enhanced Distribution.

CONFERENCE CALL TOMORROW AT 1:00 P.M. CT

WES will host a conference call on Wednesday, August 9, 2023, at 1:00 p.m. Central Time (2:00 p.m. Eastern Time) to discuss its second-quarter 2023 results. To participate, individuals should dial 888-770-7129 (Domestic) or 929-203-2109 (International) ten to fifteen minutes before the scheduled conference call time and enter the participant access code 2187921. To access the live audio webcast of the conference call, please visit the investor relations section of the Partnership’s website at www.westernmidstream.com. A replay of the conference call also will be available on the website following the call.

For additional details on WES’s financial and operational performance, please refer to the earnings slides and updated investor presentation available at www.westernmidstream.com.

ABOUT WESTERN MIDSTREAM

Western Midstream Partners, LP (“WES”) is a Delaware master limited partnership formed to acquire, own, develop, and operate midstream assets. With midstream assets located in Texas, New Mexico, Colorado, Utah, Wyoming, and Pennsylvania, WES is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural-gas liquids, and crude oil; and gathering and disposing of produced water for its customers. In its capacity as a natural-gas processor, WES also buys and sells natural gas, natural-gas liquids, and condensate on behalf of itself and as an agent for its customers under certain contracts.

For more information about Western Midstream Partners, LP, please visit www.westernmidstream.com.

This news release contains forward-looking statements. WES’s management believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove correct. A number of factors could cause actual results to differ materially from the projections, anticipated results, or other expectations expressed in this news release. These factors include our ability to meet financial guidance or distribution expectations; our ability to safely and efficiently operate WES’s assets; the supply of, demand for, and price of oil, natural gas, NGLs, and related products or services; our ability to meet projected in-service dates for capital-growth projects; construction costs or capital expenditures exceeding estimated or budgeted costs or expenditures; and the other factors described in the “Risk Factors” section of WES’s most-recent Form 10-K filed with the Securities and Exchange Commission and other public filings and press releases. WES undertakes no obligation to publicly update or revise any forward-looking statements.

Western Midstream Partners, LP

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

WES defines Adjusted gross margin attributable to Western Midstream Partners, LP (“Adjusted gross margin”) as total revenues and other (less reimbursements for electricity-related expenses recorded as revenue), less cost of product, plus distributions from equity investments, and excluding the noncontrolling interest owners’ proportionate share of revenues and cost of product.

WES defines Adjusted EBITDA as net income (loss), plus (i) distributions from equity investments, (ii) non-cash equity-based compensation expense, (iii) interest expense, (iv) income tax expense, (v) depreciation and amortization, (vi) impairments, and (vii) other expense (including lower of cost or market inventory adjustments recorded in cost of product), less (i) gain (loss) on divestiture and other, net, (ii) gain (loss) on early extinguishment of debt, (iii) income from equity investments, (iv) interest income, (v) income tax benefit, (vi) other income, and (vii) the noncontrolling interest owners’ proportionate share of revenues and expenses.

WES defines Free cash flow as net cash provided by operating activities less total capital expenditures and contributions to equity investments, plus distributions from equity investments in excess of cumulative earnings. Management considers Free cash flow an appropriate metric for assessing capital discipline, cost efficiency, and balance-sheet strength. Although Free cash flow is the metric used to assess WES’s ability to make distributions to unitholders, this measure should not be viewed as indicative of the actual amount of cash that is available for distributions or planned for distributions for a given period. Instead, Free cash flow should be considered indicative of the amount of cash that is available for distributions, debt repayments, and other general partnership purposes.

Below are reconciliations of (i) gross margin (GAAP) to Adjusted gross margin (non-GAAP), (ii) net income (loss) (GAAP) and net cash provided by operating activities (GAAP) to Adjusted EBITDA (non-GAAP), and (iii) net cash provided by operating activities (GAAP) to Free cash flow (non-GAAP), as required under Regulation G of the Securities Exchange Act of 1934. Management believes that Adjusted gross margin, Adjusted EBITDA, and Free cash flow are widely accepted financial indicators of WES’s financial performance compared to other publicly traded partnerships and are useful in assessing WES’s ability to incur and service debt, fund capital expenditures, and make distributions. Adjusted gross margin, Adjusted EBITDA, and Free cash flow as defined by WES, may not be comparable to similarly titled measures used by other companies. Therefore, WES’s Adjusted gross margin, Adjusted EBITDA, and Free cash flow should be considered in conjunction with net income (loss) attributable to Western Midstream Partners, LP and other applicable performance measures, such as gross margin or cash flows provided by operating activities.

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