EXPECTS TO RECOMMEND A 52-PERCENT BASE
DISTRIBUTION INCREASE
- Subsequent to quarter-end, entered into a series of agreements
to sell WES's equity interests in multiple non-core assets for
aggregate proceeds of $790 million
and for an aggregate multiple of approximately 9.6 times 2023
Adjusted EBITDA.
- Provided 2024 guidance ranges of $2.200
billion to $2.400 billion for
Adjusted EBITDA(1), $700.0
million to $850.0 million for
total capital expenditures(2), and $1.050 billion to $1.250
billion for Free cash flow(1), all of which
include the impact of the non-core asset divestitures.
- As a result of WES's meaningful net leverage reduction, reduced
unit count, and significant, sustainable Free cash flow generation,
management plans to recommend a quarterly Base Distribution
increase of $0.30 per unit, or
$1.20 per unit annualized, starting
in the first quarter of 2024(3).
- Providing 2024 Base Distribution guidance of at least
$3.20 per unit(3). This
includes an increase to $0.875 per
unit starting with our first quarter Base Distribution, which
represents an annual rate of $3.50
per unit, a 52-percent increase over the prior annual rate of
$2.30 per unit.
HOUSTON, Feb. 21,
2024 /PRNewswire/ -- Today Western Midstream
Partners, LP (NYSE: WES) ("WES" or the "Partnership")
announced the execution of multiple agreements to divest of WES's
remaining interest in the Marcellus Interest gathering system,
Saddlehorn Pipeline Company LLC, Whitethorn Pipeline Company LLC,
Panola Pipeline Company LLC, and Enterprise EF78 LLC, for aggregate
proceeds of $790 million.
Additionally, the sale of the interests in Enterprise EF78 LLC and
Whitethorn Pipeline Company LLC, which closed on February 16, 2024, resolved the outstanding legal
proceedings associated with those assets. The sale of the Marcellus
Interest gathering system, Panola Pipeline Company LLC, and
Saddlehorn Pipeline Company LLC are expected to close in the first
or second quarters of 2024, subject to customary closing
conditions.
"For the past few years, we have successfully executed our
strategy of divesting non-core, non-operated assets and redeploying
that capital into our operated asset base with the goal of driving
operational efficiencies alongside additional growth, thus creating
incremental value for our unitholders. Additionally, our ability to
execute accretive, M&A transactions such as the Meritage
Midstream acquisition, has allowed us to cost-efficiently grow and
further diversify our asset footprint," said Michael Ure, President and Chief Executive
Officer.
"Through these divestitures, WES is expected to generate
approximately $790 million in
proceeds, which in the aggregate represents an attractive,
accretive multiple of 9.6 times 2023 Adjusted EBITDA. By recycling
these proceeds back into our core business, we can further grow our
operated asset base and drive material Free cash flow generation,
while at the same time meaningfully reduce net leverage towards our
long-term goal of 3.0 times."
"Since becoming a standalone partnership in 2020, we have worked
diligently to pursue cost and capital efficiencies, bring
additional volumes onto our systems, and maximize the overall value
of our asset base. We have implemented new technologies and
processes to increase operational efficiencies, enhance employee
development and safety, and minimize our environmental footprint,
all while maintaining a conscious eye on reducing costs.
Furthermore, we have been incredibly focused on returning more
capital to our stakeholders through our diversified, transparent
capital-return framework," Mr. Ure continued.
"The shift to Free cash flow generation has paved the way to
strong results, including repurchasing 15-percent of our unaffected
unit count, and following the closing of these non-core asset
divestitures, we would expect our net debt to EBITDA to decrease by
more than 1.5 times by year-end 2024 relative to 2019. These
actions have put our partnership in a position of strength,
resulting in our ability to accelerate the return of capital to our
unitholders and target an increase in our Base Distribution by
52-percent relative to our prior quarter's distribution. As we have
in the past, we will continue to evaluate the Base Distribution on
a quarterly basis with the intention of approving a level of
distribution that is sustainable and aligned with the outlook of
our business. Even with an increase of this magnitude, we believe
we will still have room to target additional Base Distribution
increases in future years as the business performs and Free cash
flow generation continues to grow," concluded Mr. Ure.
2024 GUIDANCE
Based on the most current production forecast information from
our producer customers, and including the impact of our non-core
asset divestitures, WES is providing 2024 guidance as follows:
- Adjusted EBITDA(1) between $2.200 billion and $2.400
billion
- Total capital expenditures(2) between $700.0 million and $850.0
million
- Free cash flow(1) between $1.050 billion and $1.250
billion
- Full-year 2024 Base Distribution of at least $3.20 per unit(3), which excludes the
impact of any Enhanced Distribution
"The financial outlook for WES remains strong as we transition
into 2024, which we expect will be driven by another year of
throughput growth that generates material increases in both
Adjusted EBITDA and Free cash flow," commented Kristen Shults, Senior Vice President and Chief
Financial Officer. "Based on these growth expectations, we
anticipate Adjusted EBITDA to range between $2.200 billion to $2.400
billion for full-year 2024, growing approximately 11-percent
year-over-year at the midpoint."
"Similar to years past, the Delaware Basin will continue to be the
partnership's growth engine as our diversified customer base
continues to allocate substantial capital to the region, and we
expect last year's increased producer activity levels to result in
annual throughput growth in the DJ Basin for the first time since
2021. Additionally, we expect the integration of the Meritage asset
base to drive additional throughput growth and contribute to our
overall profitability, and we will continue capturing operational
synergies and implementing efficiencies over our expanded Powder
River Basin footprint."
"As the construction of Mentone III and North Loving continues
in 2024, and we prepare for continued throughput growth, we expect
total capital expenditures to range between $700.0 million to $850.0
million. Approximately 81-percent of our capital
expenditures will be spent in the Delaware Basin, focused on the construction of
the North Loving plant, which will enable us to accommodate future
growth and process additional volumes in 2025 and beyond."
"Finally, taking into consideration our expectations of
year-over-year Adjusted EBITDA growth and our projected capital
expenditure needs, we estimate our Free cash flow will increase by
approximately 19-percent at the midpoint, which positions WES to
continue returning capital to stakeholders. As demonstrated with
our plan to recommend an increase to the Base Distribution of
52-percent for the first quarter, we remain committed to returning
more of WES's Free cash flow to investors over time as the
business continues to grow," Ms. Shults continued.
"Management's confidence in the sustainability of Free cash flow
led to our decision to recommend an increase to the Base
Distribution, rather than pay a material Enhanced Distribution in
future years. While the Enhanced Distribution is a critical
component of our capital allocation framework, we believe aligning
the Base Distribution with our baseline cash generation
expectations for the business generates maximum unitholder
value and allows the Enhanced Distribution to provide for
incremental returns of capital when the business outperforms,"
concluded Ms. Shults.
CONFERENCE CALL TOMORROW AT 1:00 P.M.
CT
As previously announced, WES will host a conference call on
Thursday, February 22, 2024, at 1:00
p.m. Central Time (2:00 p.m. Eastern
Time) to discuss its fourth-quarter and full-year 2023
results, and 2024 guidance. 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 small number
of phone lines are available for analysts; individuals should dial
888-390-0546 (Domestic) or 617-892-4906 (International) ten to
fifteen minutes before the scheduled conference call time. A replay
of the live audio webcast can be accessed on the Partnership's
website at www.westernmidstream.com for one year after 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 master limited
partnership formed to develop, acquire, own, and operate midstream
assets. With midstream assets located in Texas, New
Mexico, Colorado,
Utah, and Wyoming, 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 its customers under
certain gas processing contracts. A substantial majority of WES's
cash flows are protected from direct exposure to commodity price
volatility through fee-based contracts.
For more information about WES, 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;
the successful closing of the divestitures noted above; 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.
(1) A
reconciliation of the Adjusted EBITDA range to net cash provided by
operating activities and net income (loss), and a reconciliation of
the Free cash flow range to net cash provided by operating
activities, is not provided because the items necessary to estimate
such amounts are not reasonably estimable at this time. These
items, net of tax, may include, but are not limited to, impairments
of assets and other charges, divestiture costs, acquisition costs,
or changes in accounting principles. All of these items could
significantly impact such financial measures. At this time, WES is
not able to estimate the aggregate impact, if any, of these items
on future period reported earnings. Accordingly, WES is not able to
provide a corresponding GAAP equivalent for the Adjusted EBITDA or
Free cash flow ranges.
(2) Accrual-based,
includes equity investments, excludes capitalized interest, and
excludes capital expenditures associated with the 25% third-party
interest in Chipeta.
(3) Full-year 2024
Base Distribution (paid in 2024) of at least $3.20 per unit, which includes the February 2024 distribution of $0.575 per unit. Board action on any distribution
increase will be requested in April
2024, and is subject to the Board's assessment of the needs
of the business at that time.
WESTERN MIDSTREAM CONTACTS
Daniel Jenkins
Director, Investor Relations
Investors@westernmidstream.com
866.512.3523
Rhianna Disch
Manager, Investor Relations
Investors@westernmidstream.com
866.512.3523
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SOURCE Western Midstream Partners, LP