Western Midstream Announces Second-Quarter 2020 Results

|Aug 10|magazine54 min read

HOUSTON, Aug. 10, 2020 /PRNewswire/ -- Today Western Midstream Partners, LP (NYSE: WES) ("WES" or the "Partnership") announced second-quarter 2020 financial and operating results. Net income (loss) available to limited partners for the second quarter of 2020 totaled $267.6 million, or $0.60 per common unit (diluted), with second-quarter 2020 Adjusted EBITDA(1) totaling $514.4 million, second-quarter 2020 Cash flows from operating activities totaling $345.7 million, and second-quarter 2020 Free cash flow(1) totaling $208.6 million.

SECOND-QUARTER HIGHLIGHTS

  • Gathered record Delaware Basin produced-water throughput of 773 MBbls/d, representing an 8-percent sequential-quarter increase
  • Achieved record Delaware oil throughput of 202 MBbls/d, representing a 5-percent sequential-quarter increase
  • Executed open-market repurchases for $64.5 million of Senior Notes due 2021, 2022, and 2023 for an aggregate repurchase price of $63 million

 


(1)

Please see the definitions of the Partnership's non-GAAP measures at the end of this release and reconciliation of GAAP to non-GAAP measures.

In July 2020, WES announced its second-quarter 2020 per-unit distribution of $0.3110, which is unchanged from WES's first-quarter 2020 per-unit distribution. Second-quarter 2020 Free cash flow after distributions totaled $67.7 million.

"Less-than-expected producer curtailments, commercial successes, and realized cost efficiencies underpin our impressive and above-expectation second-quarter results," said Chief Executive Officer, Michael Ure. "Although our sector continues to face significant uncertainty, we are optimistic that activity will increase into 2021 and confident in our ability to generate meaningful free cash flow after distributions while advancing our long-term objectives."

Second-quarter 2020 total natural-gas throughput(1) averaged 4.4 Bcf/d, representing a 1-percent sequential-quarter decrease and a 3-percent increase from second-quarter 2019. Second-quarter 2020 total throughput for crude-oil and NGLs assets(1) averaged 711 MBbls/d, representing a 6-percent sequential-quarter decrease and a 19-percent increase from second-quarter 2019. Second-quarter 2020 total throughput for produced-water assets averaged 773 MBbls/d, representing an 8-percent sequential-quarter increase and a 50-percent increase from second-quarter 2019.

Second-quarter 2020 and year-to-date capital expenditures(2) totaled $69.6 million and $227.6 million, respectively.


(1)

Represents total throughput attributable to WES, which excludes the 25% third-party interest in Chipeta and the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating, which collectively represent WES's noncontrolling interests.

(2)

Accrual-based, includes equity investments, and excludes capitalized interest and capital expenditures associated with the 25% third-party interest in Chipeta.

 

REVISED 2020 GUIDANCE
Revised 2020 guidance is based on to-date results and customer-provided production-forecast information obtained by WES. Updated guidance is as follows:

  • Adjusted EBITDA(1) between $1.85 billion and $1.90 billion, which represents a $100 million increase to the midpoint of guidance previously issued with WES's first-quarter 2020 earnings results ("prior guidance")
  • Total capital expenditures(2) between $400 million and $450 million, which represents a $75 million reduction to the prior-guidance midpoint. Total year capital expenditures include capital expenditures attributable to the second Latham train completed during first-quarter 2020 and the addition of approximately 28,750 horsepower of compression, 65 miles of gathering lines, 90 MBbls/d of Delaware Basin saltwater-disposal capacity, and two 30 MBbls/d oil-stabilization trains, also in the Delaware Basin

"Second-quarter commodity-price increases lessened the adverse impact of production curtailments and current commodity prices support continued producer activity," said Chief Financial Officer, Mike Pearl. "We expect incremental drilling and completion activity to continue into 2021 and beyond so long as commodity prices remain supportive. Irrespective of market conditions, we will remain committed to exercising capital discipline and realizing cost savings to maximize Free cash flow after distributions, which we will prioritize toward leverage reduction."


(1)

A reconciliation of the Adjusted EBITDA range to net cash provided by operating activities and net income (loss) is not provided because the items necessary to estimate such amounts are not reasonably estimable at this time.

(2)

Accrual-based, includes equity investments, and excludes capitalized interest and capital expenditures associated with the 25% third-party interest in Chipeta.

 

CONFERENCE CALL TOMORROW AT 1 P.M. CDT
WES will host a conference call on Tuesday, August 11, 2020, at 1:00 p.m. Central Daylight Time (2:00 p.m. Eastern Daylight Time) to discuss second-quarter 2020 results. To participate, individuals should dial 877-883-0383 (Domestic) or 412-902-6506 (International) 15 minutes before the scheduled conference call time and enter participant access code 2048166. 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 for two weeks following the call.

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 the Rocky Mountains, North-central Pennsylvania, Texas, and New Mexico, 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 the ultimate impact of efforts to fight COVID-19 on the global economy and the timeline for a recovery in commodity demand and prices; 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 and Form 10-Q 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 CONTACTS

Kristen S. Shults
Vice President, Investor Relations and Communications
[email protected]
832.636.6000

Abby Dempsey
Investor Relations Supervisor
[email protected]
832.636.6000

 

Western Midstream Partners, LP
RECONCILIATION OF GAAP TO NON-GAAP MEASURES

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.

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 interests owners' proportionate share of revenues and expenses.

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 interests owners' proportionate share of revenues and cost of product.

Below are reconciliations of (i) net cash provided by operating activities (GAAP) to Free cash flow (non-GAAP), (ii) net income (loss) (GAAP) and net cash provided by operating activities (GAAP) to Adjusted EBITDA (non-GAAP), and (iii) operating income (loss) (GAAP) to Adjusted gross margin (non-GAAP), as required under Regulation G of the Securities Exchange Act of 1934. Management believes that WES's Free cash flow, Adjusted EBITDA, and Adjusted gross margin 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. Free cash flow, Adjusted EBITDA, and Adjusted gross margin as defined by WES, may not be comparable to similarly titled measures used by other companies. Therefore, WES's Free cash flow, Adjusted EBITDA, and Adjusted gross margin should be considered in conjunction with net income (loss) attributable to Western Midstream Partners, LP and other applicable performance measures, such as operating income (loss) or cash flows from operating activities.

 

Western Midstream Partners, LP

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (CONTINUED)


Free Cash Flow




Three Months Ended 
June 30,


Six Months Ended 
June 30,

thousands


2020


2019


2020


2019

Reconciliation of Net cash provided by operating activities to Free cash flow









Net cash provided by operating activities


$

345,688



$

343,458



$

738,999



$

686,531


Less:









Capital expenditures


140,249



318,281



313,065



704,425


Contributions to equity investments


5,104



40,790



16,064



77,333


Add:









Distributions from equity investments in excess of cumulative earnings


8,288



9,260



13,340



17,052


Free cash flow


$

208,623



$

(6,353)



$

423,210



$

(78,175)


Cash flow information









Net cash provided by operating activities






$

738,999



$

686,531


Net cash used in investing activities






(355,001)



(2,865,168)


Net cash provided by (used in) financing activities






(424,222)



2,182,290


 

 

Western Midstream Partners, LP

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (CONTINUED)


Adjusted EBITDA




Three Months Ended 
June 30,


Six Months Ended 
June 30,

thousands


2020


2019


2020


2019

Reconciliation of Net income (loss) to Adjusted EBITDA









Net income (loss)


$

281,341



$

175,058



$

(8,059)



$

387,037


Add:









Distributions from equity investments


71,576



70,522



137,496



132,535


Non-cash equity-based compensation expense


5,677



4,343



10,911



6,141


Interest expense


94,654



79,472



183,240



145,348


Income tax expense


5,044



1,278



5,044



11,370


Depreciation and amortization


119,805



121,117



252,124



235,063


Impairments (1)


10,150



797



606,952



1,187


Other expense


(2,098)



58,639



1,950



93,852


Less:









Gain (loss) on divestiture and other, net


(2,843)



(1,061)



(2,883)



(1,651)


Gain (loss) on early extinguishment of debt


1,395





8,740




Equity income, net – related parties


54,415



63,598



115,762



121,590


Interest income – Anadarko note receivable


4,225



4,225



8,450



8,450


Other income


1,652





1,652




Income tax benefit






4,280




Adjusted EBITDA attributable to noncontrolling interests (2)


12,864



11,544



25,629



22,894


Adjusted EBITDA


$

514,441



$

432,920



$

1,028,028



$

861,250


Reconciliation of Net cash provided by operating activities to Adjusted EBITDA









Net cash provided by operating activities


$

345,688



$

343,458



$

738,999



$

686,531


Interest (income) expense, net


90,429



75,247



174,790



136,898


Uncontributed cash-based compensation awards




1,218





648


Accretion and amortization of long-term obligations, net


(2,197)



(1,337)



(4,297)



(2,848)


Current income tax expense (benefit)


2,077



458



(35)



6,485


Other (income) expense, net (3)


(2,173)



(470)



(412)



(902)


Cash paid to settle interest-rate swaps


12,763





12,763




Distributions from equity investments in excess of cumulative earnings – related parties


8,288



9,260



13,340



17,052


Changes in assets and liabilities:









Accounts receivable, net


207,838



6,818



200,136



(2,668)


Accounts and imbalance payables and accrued liabilities, net


(101,247)



25,669



(72,323)



81,198


Other items, net


(34,161)



(15,857)



(9,304)



(38,250)


Adjusted EBITDA attributable to noncontrolling interests (2)


(12,864)



(11,544)



(25,629)



(22,894)


Adjusted EBITDA


$

514,441



$

432,920



$

1,028,028



$

861,250


Cash flow information









Net cash provided by operating activities






$

738,999



$

686,531


Net cash used in investing activities






(355,001)



(2,865,168)


Net cash provided by (used in) financing activities






(424,222)



2,182,290




(1)

Includes goodwill impairment for the six months ended June 30, 2020.

(2)

For all periods presented, includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating, which collectively represent WES's noncontrolling interests.

(3) 

Excludes non-cash losses on interest-rate swaps of $59.0 million and $94.6 million for the three and six months ended June 30, 2019, respectively.

 

 

Western Midstream Partners, LP

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (CONTINUED)


Adjusted Gross Margin




Three Months Ended 
June 30,


Six Months Ended 
June 30,

thousands


2020


2019


2020


2019

Reconciliation of Operating income (loss) to Adjusted gross margin









Operating income (loss)


$

373,766



$

310,060



$

158,863



$

628,988


Add:









Distributions from equity investments


71,576



70,522



137,496



132,535


Operation and maintenance


145,186



148,431



304,377



291,260


General and administrative


36,423



30,027



76,888



52,871


Property and other taxes


19,395



14,282



37,871



30,567


Depreciation and amortization


119,805



121,117



252,124



235,063


Impairments (1)


10,150



797



606,952



1,187


Less:









Gain (loss) on divestiture and other, net


(2,843)



(1,061)



(2,883)



(1,651)


Equity income, net – related parties


54,415



63,598



115,762



121,590


Reimbursed electricity-related charges recorded as revenues


21,605



20,189



40,828



36,778


Adjusted gross margin attributable to noncontrolling interests (2)


16,167



16,034



32,592



31,584


Adjusted gross margin


$

686,957



$

596,476



$

1,388,272



$

1,184,170


Adjusted gross margin for natural-gas assets


$

454,476



$

412,494



$

925,842



$

824,922


Adjusted gross margin for crude-oil and NGLs assets


165,767



137,716



333,595



269,086


Adjusted gross margin for produced-water assets


66,714



46,266



128,835



90,162




(1)

Includes goodwill impairment for the six months ended June 30, 2020.

(2)

For all periods presented, includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating, which collectively represent WES's noncontrolling interests.

 

 

Western Midstream Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)




Three Months Ended 
June 30,


Six Months Ended 
June 30,

thousands except per-unit amounts


2020


2019


2020


2019

Revenues and other









Service revenues – fee based


$

642,628



$

593,544



$

1,344,024



$

1,173,518


Service revenues – product based


7,000



16,675



22,921



36,054


Product sales


21,736



74,469



78,385



146,602


Other


391



366



738



763


Total revenues and other


671,755



685,054



1,446,068



1,356,937


Equity income, net – related parties


54,415



63,598



115,762



121,590


Operating expenses









Cost of product


18,602



122,877



121,872



236,940


Operation and maintenance


145,186



148,431



304,377



291,260


General and administrative


36,423



30,027



76,888



52,871


Property and other taxes


19,395



14,282



37,871



30,567


Depreciation and amortization


119,805



121,117



252,124



235,063


Long-lived asset impairments


10,150



797



165,935



1,187


Goodwill impairment






441,017




Total operating expenses


349,561



437,531



1,400,084



847,888


Gain (loss) on divestiture and other, net


(2,843)



(1,061)



(2,883)



(1,651)


Operating income (loss)


373,766



310,060



158,863



628,988


Interest income – Anadarko note receivable


4,225



4,225



8,450



8,450


Interest expense


(94,654)



(79,472)



(183,240)



(145,348)


Gain (loss) on early extinguishment of debt


1,395





8,740




Other income (expense), net (1)


1,653



(58,477)



(108)



(93,683)


Income (loss) before income taxes


286,385



176,336



(7,295)



398,407


Income tax expense (benefit)


5,044



1,278



764



11,370


Net income (loss)


281,341



175,058



(8,059)



387,037


Net income (loss) attributable to noncontrolling interests


8,304



5,464



(24,569)



98,783


Net income (loss) attributable to Western Midstream Partners, LP


$

273,037



$

169,594



$

16,510



$

288,254


Limited partners' interest in net income (loss):









Net income (loss) attributable to Western Midstream Partners, LP


$

273,037



$

169,594



$

16,510



$

288,254


Pre-acquisition net (income) loss allocated to Anadarko




(163)





(29,279)


General partner interest in net (income) loss


(5,461)





(330)




Limited partners' interest in net income (loss)


$

267,576



$

169,431



$

16,180



$

258,975


Net income (loss) per common unit – basic and diluted


$

0.60



$

0.37



$

0.04



$

0.69


Weighted-average common units outstanding – basic and diluted


443,973



453,000



443,972



376,702




(1)

Includes losses associated with the interest-rate swap agreements for the three and six months ended June 30, 2019.

 

 

Western Midstream Partners, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


thousands except number of units


June 30,
2020


December 31,
2019

Total current assets


$

559,163



$

402,412


Anadarko note receivable


259,481



260,000


Net property, plant, and equipment


8,914,716



9,064,931


Other assets


2,219,883



2,619,110


Total assets


$

11,953,243



$

12,346,453


Total current liabilities


$

891,046



$

485,954


Long-term debt


7,544,396



7,951,565


Asset retirement obligations


327,971



336,396


Other liabilities


254,313



227,245


Total liabilities


9,017,726



9,001,160


Equity and partners' capital





Common units (443,992,499 and 443,971,409 units issued and outstanding at June 30, 2020, and December 31, 2019, respectively)


2,820,327



3,209,947


General partner units (9,060,641 units issued and outstanding at June 30, 2020, and December 31, 2019)


(22,347)



(14,224)


Noncontrolling interests


137,537



149,570


Total liabilities, equity, and partners' capital


$

11,953,243



$

12,346,453


 

 

Western Midstream Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)




Six Months Ended 
June 30,

thousands


2020


2019

Cash flows from operating activities





Net income (loss)


$

(8,059)



$

387,037


Adjustments to reconcile net income (loss) to net cash provided by operating activities and changes in assets and liabilities:





Depreciation and amortization


252,124



235,063


Long-lived asset impairments


165,935



1,187


Goodwill impairment


441,017




(Gain) loss on divestiture and other, net


2,883



1,651


(Gain) loss on early extinguishment of debt


(8,740)




(Gain) loss on interest-rate swaps




94,585


Cash paid to settle interest-rate swaps


(12,763)




Change in other items, net


(93,398)



(32,992)


Net cash provided by operating activities


$

738,999



$

686,531


Cash flows from investing activities





Capital expenditures


$

(313,065)



$

(704,425)


Acquisitions from related parties




(2,007,501)


Acquisitions from third parties




(93,303)


Contributions to equity investments - related parties


(16,064)



(77,333)


Distributions from equity investments in excess of cumulative earnings – related parties


13,340



17,052


Proceeds from the sale of assets to third parties




342


Other


(39,212)




Net cash used in investing activities


$

(355,001)



$

(2,865,168)


Cash flows from financing activities





Borrowings, net of debt issuance costs


$

3,586,173



$

2,710,750


Repayments of debt


(3,583,149)



(467,595)


Increase (decrease) in outstanding checks


(4,686)



(5,662)


Registration expenses related to the issuance of Partnership common units




(855)


Distributions to Partnership unitholders


(422,679)



(408,234)


Distributions to Chipeta noncontrolling interest owner


(2,775)



(3,793)


Distributions to noncontrolling interest owners of WES Operating


(8,676)



(106,666)


Net contributions from (distributions to) related parties


21,832



456,938


Above-market component of swap agreements with Anadarko




7,407


Finance lease payments


(10,262)




Net cash provided by (used in) financing activities


$

(424,222)



$

2,182,290


Net increase (decrease) in cash and cash equivalents


$

(40,224)



$

3,653


Cash and cash equivalents at beginning of period


99,962



92,142


Cash and cash equivalents at end of period


$

59,738



$

95,795


 

 

Western Midstream Partners, LP

OPERATING STATISTICS

(Unaudited)




Three Months Ended 
June 30,


Six Months Ended 
June 30,



2020


2019


2020


2019

Throughput for natural-gas assets (MMcf/d)









Gathering, treating, and transportation


554



528



547



527


Processing


3,563



3,524



3,605



3,498


Equity investments (1)


458



402



451



390


Total throughput


4,575



4,454



4,603



4,415


Throughput attributable to noncontrolling interests (2)


162



178



164



177


Total throughput attributable to WES for natural-gas assets


4,413



4,276



4,439



4,238


Throughput for crude-oil and NGLs assets (MBbls/d)









Gathering, treating, and transportation


359



302



360



303


Equity investments (3)


367



311



391



308


Total throughput


726



613



751



611


Throughput attributable to noncontrolling interests (2)


15



13



15



13


Total throughput attributable to WES for crude-oil and NGLs assets


711



600



736



598


Throughput for produced-water assets (MBbls/d)









Gathering and disposal


773



515



745



516


Throughput attributable to noncontrolling interests (2)


15



10



15



10


Total throughput attributable to WES for produced-water assets


758



505



730



506


Per-Mcf Adjusted gross margin for natural-gas assets (4)


$

1.13



$

1.06



$

1.15



$

1.08


Per-Bbl Adjusted gross margin for crude-oil and NGLs assets (5)


2.56



2.52



2.49



2.49


Per-Bbl Adjusted gross margin for produced-water assets (6)


0.97



1.01



0.97



0.98



















(1)

Represents the 14.81% share of average Fort Union throughput, 22% share of average Rendezvous throughput, 50% share of average Mi Vida and Ranch Westex throughput, and 30% share of average Red Bluff Express throughput.

(2)

For all periods presented, includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating, which collectively represent WES's noncontrolling interests.

(3)

Represents the 10% share of average White Cliffs throughput; 25% share of average Mont Belvieu JV throughput; 20% share of average TEG, TEP, Whitethorn, and Saddlehorn throughput; 33.33% share of average FRP throughput; and 15% share of average Panola and Cactus II throughput.

(4)

Average for period. Calculated as Adjusted gross margin for natural-gas assets, divided by total throughput (MMcf/d) attributable to WES for natural-gas assets.

(5)

Average for period. Calculated as Adjusted gross margin for crude-oil and NGLs assets, divided by total throughput (MBbls/d) attributable to WES for crude-oil and NGLs assets.

(6)

Average for period. Calculated as Adjusted gross margin for produced-water assets, divided by total throughput (MBbls/d) attributable to WES for produced-water assets.

 

 

Western Midstream Partners, LP

OPERATING STATISTICS (CONTINUED)

(Unaudited)




Three Months Ended June 30,



2020


2019


2020


2019


2020


2019



Natural gas

(MMcf/d)


Crude oil & NGLs

(MBbls/d)


Produced water

(MBbls/d)

Delaware Basin


1,309



1,179



202



141



773



515


DJ Basin


1,329



1,266



113



112






Equity investments


458



402



367



311






Other


1,479



1,607



44



49






Total throughput


4,575



4,454



726



613



773



515






Six Months Ended June 30,



2020


2019


2020


2019


2020


2019



Natural gas

(MMcf/d)


Crude oil & NGLs

(MBbls/d)


Produced water

(MBbls/d)

Delaware Basin


1,349



1,178



197



143



745



516


DJ Basin


1,368



1,262



120



107






Equity investments


451



390



391



308






Other


1,435



1,585



43



53






Total throughput


4,603



4,415



751



611



745



516


 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/western-midstream-announces-second-quarter-2020-results-301109207.html

SOURCE Western Midstream Partners, LP