Q1 2024 Western Midstream Partners LP Earnings Call

Good afternoon, My name is Constantine and I will be your conference operator today.

Konstantin: Good afternoon, my name is Konstantin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Konstantin: At this time I would like to welcome everyone to the Western Midstream partners first quarter 'twenty 'twenty four earnings conference call.

Konstantin: All lines have been placed on mute to prevent any background noise.

Konstantin: After the Speakers' remarks, there will be a question and answer session.

Konstantin: If you would like to answer or ask a question. During this time simply press star followed by the number one on your telephone keypad.

Konstantin: If you would like to withdraw your question. Please press star followed by the number too.

Konstantin: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by the number 2. I would now like to turn the conference over to Daniel Jenkins, Director of Investor Relations. Please do so.

Konstantin: I would now like to turn the conference over to Daniel Jenkins Director of Investor Relations. Please go ahead.

Daniel Jenkins: Thank you I'm glad you could join us today for Western Midstream first quarter 2024 conference call I'd like to remind you that today's call. The accompanying slide deck and last night's earnings release contain important disclosures regarding forward looking statements and non-GAAP reconciliations please reference work.

Daniel Jenkins: Thank you. I'm glad you could join us today for Western Midstream's first quarter 2024 conference call. I'd like to remind you that today's call, the accompanying slide deck, and last night's earnings release contain important disclosures regarding forward-looking statements and non-GAAP reconciliations. Please refer to Western Midstream's most recent Form 10-Q and other public filings for a description of risk factors that could cause actual results to differ materially from what we discussed today. Relevant reference materials are posted on our website. With me today are Michael Ure, our Chief Executive Officer, and Kristen Shults, our Chief Financial Officer. I'll now turn the call over to Michael.

Daniel Jenkins: Stern Midstream <unk>, most recent Form 10-Q, and other public filings for a description of risk factors that could cause actual results to differ materially from what we discuss today relevant reference materials are posted on our website with me today are Michael <unk>, Our Chief Executive Officer, and Christian Shults, our Chief Financial Officer.

Daniel Jenkins: I'll now turn the call over to Michael Thank you Daniel and good afternoon, everyone I'm excited to announce that the first quarter exceeded our expectations as strong producer activity levels higher rates associated with the cost of service rate Redetermination that became effective on January 1st and our continued focus on maintaining high levels of system Operability.

Michael P. Ure: Thank you, Daniel, and good afternoon, everyone. I'm excited to announce that the first quarter exceeded our expectations as strong producer activity levels, higher rates associated with the cost of service rate redeterminations that became effective on January 1st, and our continued focus on maintaining high levels of system operability all contributed to better-than-expected throughput increases and higher overall profitability. Also, based on the latest producer forecasts, we expect these throughput trends to continue throughout the year.

Michael P. Ure: <unk> all contributed to better than expected throughput increases and higher overall profitability also based on the latest producer forecasts. We expect these throughput trends to continue throughout the year. Thus, we now expect higher average year over year throughput growth rates for all products and we expect to end up near the high end of our previously disclosed.

Michael P. Ure: Thus, we now expect higher average year-over-year throughput growth rates for all products, and we expect to end up near the high end of our previously disclosed adjusted EBITDA and free cash flow guidance ranges. Kristen will provide more detail on our updated guidance expectations shortly. This trend we expect will gradually increase throughout 2024, especially for natural gas volumes. This increased throughput and higher cost of service rates were the main drivers behind the $26 million increase in our adjusted gross margin compared to the fourth quarter. Additionally, certain operating costs were lower than anticipated, resulting in higher-than-expected adjusted EBITDA. With that said, I will turn the call over to Kristen to discuss our operational and financial performance.

Kristen: <unk> adjusted EBITDA and free cash flow guidance ranges Kristian will provide more detail on our updated guidance expectations. Shortly before we get into the specifics of the first quarter I am pleased to announce that Menton train three completed the commissioning phase and became operational in early April. This is our first major construction project since becoming a standalone enterprise.

Kristen: And I would like to thank and congratulate all the teams that worked so diligently to bring menton three to completion. This achievement increases our natural gas processing capacity at our West Texas complex in the Delaware basin by approximately 18%, which will benefit west financially due to our fixed fee processing agreements and reduce reliance on off loads going forward.

Kristen: Again, many thanks to all of our employees and contractors, who played a critical role in bringing menton three online safely and in line with our initial cost estimates focusing on our first quarter performance continued strong producer activity levels resulted in increased throughput across all our core operated assets specifically in the Delaware Basin.

Kristen: We benefited from additional wells coming online sequentially, which resulted in another quarter of record breaking natural gas and produced water throughput from the basin and the DJ basin, both natural gas and crude oil and NGL throughput increased quarter over quarter. A trend. We expect to result in annual average year over year growth and in the powder River basin.

Kristen: Throughput also increased primarily due to a full quarter's contribution for meritage and volume growth from those assets a trend. We expect will gradually increase throughout 2020 for especially for natural gas volumes. This increased throughput and higher cost of service rates were the main drivers behind the $26 million increase in our adjusted gross margin compared to the <unk>.

Kristen: Fourth quarter. Additionally.

Kristen: Additionally, certain operating costs were lower than anticipated, resulting in higher than expected adjusted EBITDA. Finally, I am pleased to announce that we officially closed all of our noncore asset sales that we highlighted on last quarter's earnings call at quarter end was net leverage ratio on a trailing 12 month basis was approximately three three times, which incorporate.

Kristen: It's five and a half months of contribution from Meritage as well as the proceeds received from the noncore asset sales that closed throughout the first quarter and we now expect to exit 2024 at or below our three times leverage threshold with that I will turn the call over to Christian to discuss our operational and financial performance.

Kristen S. Shults: Thank you, Michael, and good afternoon everyone. Our first quarter natural gas throughput increased by 2% on a sequential quarter basis. This was primarily driven by increased throughput in the Delaware and DJ Basins and a full quarter of Meritage throughput, which closed in mid-October of last year. We also saw increased throughput from our natural gas equity investments during the quarter. Going forward, we expect the sale of the Marcellus Gathering System early in April to impact our second quarter natural gas volumes by approximately 140 million cubic feet per day.

Kristen: You, Michael and good afternoon, everyone. Our first quarter natural gas throughput increased by 2% on a sequential quarter basis. This was primarily driven by increased throughput in the Delaware and DJ basin, and a full quarter of Meritage throughput, which closed in mid October of last year.

Kristen S. Shults: We also saw increased throughput from our natural gas equity investments during the quarter going forward. We expect the sale of the Marcellus gathering system early in April impact, our second quarter natural gas volumes by approximately 140 million cubic feet per day looking at crude oil and Ngls as a reminder, the divestitures of both the white third pipeline.

Kristen S. Shults: Looking at crude oil and NGLs, as a reminder, the divestitures of both the White Thorn Pipeline and the Mount Bellevue Joint Venture closed simultaneously with the signing of their respective sales agreements in mid-February. Additionally, both the Saddlehorn and Panola Pipeline divestitures closed in late March.

Kristen S. Shults: Mount Belvieu joint venture closed simultaneously with the signing of their respective sales agreements in mid February. Additionally, the saddle horn and vanilla pipeline divestitures closed in late March He's noncore asset sales were the primary driver behind the 20% sequential quarter throughput reduction on a reported basis.

Kristen S. Shults: These non-core asset sales were the primary driver behind the 20% sequential quarter throughput reduction on a reported basis. On an operated basis, crude oil and NGL throughput increased by 2% on a sequential quarter basis. Throughput increased sequentially from both the D.J. and Powder River basins.

Kristen S. Shults: On an operated basis, our crude oil and NGL throughput increased by 2% on a sequential quarter basis.

Kristen S. Shults: Throughput increased sequentially from both the DJ and Powder River Basin. However volumes were unchanged in the Delaware basin due to producer level disruptions caused by winter storm Jerry in mid January produced water throughput increased by 7% on a sequential quarter basis due to increased completion activity, our first quarter per Mcf adjusted gross margin for natural.

Kristen S. Shults: However, volumes were unchanged in the Delaware basin due to producer-level disruptions caused by winter storm Jerry in mid-January. However, produced water throughput increased by 7 percent on a sequential quarter basis due to increased completion activity. Our first quarter per MCF adjusted growth margin for natural gas assets increased by 3 cents compared to the prior quarter. This increase was primarily driven by increased throughput at the West Texas Complex, which has a higher-than-average per MCF margin as compared to our other natural gas assets.

Kristen S. Shults: <unk> assets increased by three sets compared to the prior quarter. This increase was primarily driven by increased throughput at the West, Texas complex, which has a higher than average per mcf margin as compared to our other natural gas assets. In addition to higher rates associated with the cost of service rate Redetermination that became effective January one and.

Kristen S. Shults: In addition to higher rates associated with the cost-of-service rate redetermination that became effective January 1st and increased efficiency revenue from certain contracts, this increase was partially offset by the favorable revenue recognition cumulative adjustment associated with our South Texas assets that was recorded in the fourth quarter and did not reoccur in the first quarter. We expect our second quarter per MCF adjusted growth margin to be in line with the first quarter. Our first quarter per MCF adjusted growth margin for crude oil and NGL assets increased by 49 cents compared to the prior quarter due to the sale of our interest in Whitethorne, Saddlehorn, and Panola Pipelines and the Mount Bellevue joint venture, all of which have lower-than-average per-unit margins as compared to our other crude oil and NGL assets.

Kristen S. Shults: And increased efficiency revenue from certain contracts. This increase was partially offset by the favorable revenue recognition cumulative adjustment associated with our south Texas assets that was recorded in the fourth quarter and did not reoccur in the first quarter, we expect our second quarter per Mcf adjusted gross margin to be in line with the first quarter, our first quarter per barrel adjusted gross margin.

Kristen S. Shults: We expect our second quarter per MCF adjusted growth margin to be in line with the first quarter. Our first quarter per MCF adjusted growth margin for our produced water assets increased by 9 cents compared to the prior quarter, primarily due to increased throughput and higher rates associated with the cost-of-service rate redetermination that became effective on January 1st. We expect our second quarter per barrel adjusted growth margin to be in line with the first quarter. During the first quarter, we generated record net income attributable to limited partners of $560 million, which included a $240 million gain pertaining to the sale of non-core assets and record quarterly adjusted EBITDA of $608 million.

Kristen S. Shults: For crude oil and NGL assets increased by 49 cents compared to the prior quarter due to the sale of our interest in whitethorn saddle Horn, and panella pipelines and the Mount Belvieu joint venture all of which have lower than average per unit margins as compared to our other crude oil and NGL assets, we expect our second quarter per barrel adjusted gross margin to be in line.

Kristen S. Shults: And with the first quarter, our first quarter per barrel adjusted gross margin for produced water assets increased by nine cents compared to the prior quarter, primarily due to increased throughput and higher rates associated with the cost of service rate Redetermination that became effective on January one we expect our second quarter per barrel adjusted gross margin to be in line with the first quarter during the first quarter we.

Kristen S. Shults: <unk> record net income attributable to limited partners of $560 million, which included $240 million gain pertaining to the sale of noncore assets and record quarterly adjusted EBITDA of $608 million relative to the fourth quarter of 2023, our adjusted gross margin increased by $26 million. This increase was mostly.

Kristen S. Shults: Compared to the fourth quarter of 2023, our adjusted growth margin increased by $26 million. This increase was mostly driven by increased throughput and higher rates associated with the cost-of-service rate redeterminations that became effective on January 1st in the Delaware Basin. These increases were partially offset by the favorable revenue recognition cumulative adjustments associated with our South Texas and our DJ Basin oil system that occurred in the fourth quarter and did not occur in the first quarter of this year.

Kristen S. Shults: Driven by increased throughput and higher rates associated with the cost of service rate Redetermination that became effective on January 1st in the Delaware Basin. These.

Kristen S. Shults: These increases were partially offset by the favorable revenue recognition cumulative adjustments associated with our south, Texas and our DJ Basin oil system that occurred in the fourth quarter and did not occur in the first quarter of this year.

Kristen S. Shults: Additionally, our adjusted EBITDA benefited from lower operation and maintenance expense and slightly lower G&A and property and other taxes on a sequential quarter basis. Going forward, we expect our operation and maintenance expense to trend modestly higher in both the second and third quarters, primarily driven by increased throughput, higher utility costs, and our expanded asset base. As a reminder, we expect seasonality associated with our utility expense in the summer months due to higher estimated electricity pricing and greater energy usage in conjunction with increased throughput.

Kristen S. Shults: Additionally, our adjusted EBITDA benefited from lower operation and maintenance expense and slightly lower G&A and property and other taxes on a sequential quarter basis going forward, we expect our operation and maintenance expense to trend modestly higher in both the second and third quarters, primarily driven by increased throughput at our utility costs and our expanded asset base.

Kristen S. Shults: As a reminder, we expect seasonality associated with our utility expense in the summer months due to the higher estimated electricity pricing and greater energy usage in conjunction with increased throughput.

Kristen S. Shults: We also expect our property and other taxes to normalize in the second quarter and revert back to levels similar to the fourth quarter of last year. Turning to cash flow, our first quarter cash flow from operating activities totaled $400 million, generating free cash flow of $225 million. Free cash flow after our fourth-quarter 2023 distribution payment in February was $1.5 million. From a capital markets perspective, in the first quarter, we opportunistically repurchased $15.1 million of senior notes through open market transactions.

Kristen S. Shults: We also expect our property and other taxes to normalize in the second quarter and revert back to levels similar to the fourth quarter of last year, turning to cash flow, our first quarter cash flow from operating activities totaled $400 million generating free cash flow of $225 million.

Kristen S. Shults: Free cash flow after our fourth quarter 2023 distribution payment in February with $1.5 million from a capital markets perspective in the first quarter, we opportunistically repurchased $15 $1 million of senior notes through open market transactions.

Kristen S. Shults: Subsequent to quarter end, we repurchased an additional $134.9 million of various maturities of senior notes, all at approximately 96% of par. We will continue to be prudent allocators of capital and seek to capitalize on opportunities that generate the best possible return for our unit holders. Finally, in April, we declared a base distribution of 87.5 cents per unit, which is in line with our previous announcement in February. This represents an increase of 52% compared to the prior quarter's distribution and is payable on May 15th to unit holders as of May 1st.

Kristen S. Shults: And subsequent to quarter end, we had repurchased an additional $134 9 million of various maturities. The senior notes all at approximately 96% of par.

Kristen S. Shults: We will continue to be prudent allocators of capital and seek to capitalize on opportunities that generate the best possible return for your shareholders. Finally in April we declared base distribution of <unk> 87, five cents per unit, which is in line with our previous announcement in February. This represents an increase of 52% compared to the prior quarter's distribution and is payable.

Kristen S. Shults: On may 15th to unit holders as of May 1st based on our throughput performance to date, we now expect our portfolio wide average year over year throughput to increase by mid to upper teens percentage for natural gas.

Kristen S. Shults: Based on our throughput performance to date, we now expect our portfolio-wide average year-over-year throughput to increase by 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. It is important to remember that our 2024 throughput expectations account for the non-core asset sales we announced in February and exclude those volumes from our 2023 reporter results for In the Delaware Basin, we now expect higher year-over-year average growth rates for 2024 relative to 2023 for all three products, natural gas, crude oil, and NGLs, and produced water.

Kristen S. Shults: Low teens percentage for crude oil and Ngls.

Kristen S. Shults: Mid to upper teens percentage for produced water.

Kristen S. Shults: It's important to remember that our 2020 for throughput expectations account for the noncore asset sales, we announced in February and exclude those volumes from our 2023 reported results for year over year comparative purposes in the Delaware Basin, we now expect stronger year over year average growth rates for 2024 relative to 2023 for all three products natural gas.

Kristen S. Shults: Crude oil and Ngls and produce water.

Kristen S. Shults: This will mostly be driven by strong producer activity levels and a steady number of wells coming online throughout 2024, which has increased slightly relative to our initial expectations in February. We also signed an agreement to add one of our first third-party customers for crude oil and NGLs gathering and treating services in the Delaware Basin, which we expect to begin yielding benefits late in the second quarter.

Kristen S. Shults: This will mostly be driven by strong producer activity levels and a steady number of wells coming online throughout 2024, which has increased slightly relative to our initial expectations in February.

Kristen S. Shults: We also signed an agreement to add one of our first third party customers for crude oil and Ngls gathering and treating the services in the Delaware Basin, which we expect to begin yielding benefits from late in the second quarter and the DJ Basin. We continue to expect average year over year throughput to increase for both natural gas and crude oil and Ngls. This increase will be driven by throughput growth from proxy.

Kristen S. Shults: In the DJ Basin, we continue to expect average year-over-year throughput to increase for both natural gas and crude oil and NGLs. This increase will be driven by throughput growth from approximately double the number of new wells in 2024 relative to 2023. As a reminder, increases in crude oil and NGLs throughput in 2024 will have a minimal impact on our adjusted EBITDA in the near term due to the current structure of demand fee revenue.

Kristen S. Shults: Really double the new well count in 2024 relative to 2023 as a reminder increases in crude oil and NGL throughput in 2024, it will have a minimal impact on our adjusted EBITDA in the near term due to the current structure of demand fee revenue. Finally, we continue to expect meaningful throughput growth from the powder River basin in 2024.

Kristen S. Shults: Finally, we continue to expect meaningful throughput growth from the Powder River Basin in 2024, especially for natural gas, primarily due to the full year's contribution from heritage and steady throughput growth from customers in the Basin. As customers continue to refine their drilling programs in the Basin, we will continue to work together and allocate the necessary capital to help them accelerate their development plans in the Powder River Basin.

Kristen S. Shults: For natural gas, primarily due to the full year's contribution from heritage and steady throughput growth from customers in the basin as customers continue to refine their drilling programs in the basin. We will continue to work together and allocate the necessary capital to help them accelerate their development plans and the powder River basin.

Kristen S. Shults: Given the first quarter's outperformance and our updated throughput expectations, we now expect to be towards the high end of our previously announced adjusted EBITDA range of $2.2 to $2.4 billion for the year. However, we expect our adjusted growth margin to be flat in the second quarter, primarily due to lower distributions from equity investments from the closing of the non-core asset sales. Additionally, we expect higher operation and maintenance expense in the second quarter, mostly due to higher expected utility costs and increased asset maintenance and repair expense, which will result in slightly lower adjusted EBITDA on a sequential quarter basis.

Kristen S. Shults: First quarter's outperformance in our updated throughput expectations, we now expect to be towards the high end of our previously announced adjusted EBITDA range of $2 two to $2 4 billion for the year.

Kristen S. Shults: However, we expect our adjusted gross margin to be flat in the second quarter, primarily due to lower distributions from equity investments from the closing of the noncore asset sales. Additionally, we expect higher operation and maintenance expense in the second quarter, mostly due to higher expected utility costs and increased asset maintenance and repair expense to result in slightly lower.

Kristen S. Shults: Adjusted EBITDA on a sequential quarter basis.

Kristen S. Shults: We continue to expect our 2024 capital expenditure guidance to range between $700 and $850 million, implying a midpoint of $775 million. We still expect just over 80% of our capital budget to be spent in the Delaware Basin, the majority of which as expansion capital for the North Loving Plant construction and additional system expansion in our core operating basins to facilitate continued throughput growth. Taking into account the high end of our adjusted EBITDA and our unchanged capital expenditure guidance ranges, we now expect to be towards the high end of our previously announced free cash flow guidance range of $1.05 to $1.25 billion.

Kristen S. Shults: We continue to expect our 2024 capital expenditure guidance range between 700, and $850 million, implying a midpoint of $775 million, we still expect just over 80% of our capital budget to be spent in the Delaware basin. The majority of which is expansion capital for the north loving plant construction and additional system X.

Kristen S. Shults: Our core operating basins to facilitate continued throughput growth taking into account the high end of our adjusted EBITDA and our unchanged capital expenditure guidance ranges, we now expect to be towards the high end of our previously announced free cash flow guidance range of $1.5 billion to $1.25 billion.

Kristen S. Shults: Our full-year base distribution guidance of at least $3.20 per unit remains unchanged. We will continue to evaluate the base distribution on a quarterly basis, influenced by the health and growth trajectory of our business. If performance materializes in line with current expectations, we would expect greater opportunity to evaluate increased returns of capital. As a reminder, any potential enhanced distribution payment in 2025 will be based on our full-year 2024 financial performance, governed by our 2024 year-end leverage threshold of three times and subject to the Board's discretion.

Kristen S. Shults: Our full year base distribution guidance of at least $3 20 per unit remains unchanged. We will continue to evaluate the base distribution on a quarterly basis influenced by the health and growth trajectory of our business.

Kristen S. Shults: If performance materializes in line with current expectations, we would expect a greater opportunity to evaluate increase returns of capital as a reminder, any potential enhanced distribution payment in 2025 based on our full year 2024 financial performance.

Kristen S. Shults: Burnt by our 2020 for yearend leverage threshold of three times and subject to the board's discretion. Finally, we expect to be free cash flow positive after distributions in 2024, when taking into account the high end of our free cash flow guidance range and are unchanged based distribution guidance I'll now turn the call back over to Michael Thank you.

Kristen S. Shults: Finally, we expect to be free cash flow positive after distributions in 2024, when taking into account the high end of our free cash flow guidance range and our unchanged base distribution guidance. I'll now turn the call back over to Michael. Thank you, Kristen.

Michael P. Ure: Thank you, Kristen. Before we open it up for Q&A, I would like to highlight a few key points and reiterate why WES presents such a compelling investment opportunity. First, I think it is important to reflect on the actions we have taken to optimize the MLP model and position WES as a leader amongst our peers in the midstream space. Since becoming a standalone enterprise in 2020, we have taken significant steps to optimize our asset portfolio, reduce operational costs, and focus on generating substantial free cash flow.

Michael: Before we open it up for Q&A I would like to highlight a few key points and reiterate why west presents such a compelling investment opportunity.

Michael P. Ure: First I think it is important to reflect on the actions we have taken to optimize the MLP model and positioned west is a leader amongst our peers in the midstream space. So.

Michael P. Ure: Since becoming a standalone enterprise in 2020, we've taken significant steps to optimize our asset portfolio reduce operational costs and focus on generating substantial free cash flow. In fact, we were the first midstream MLP to focus on free cash flow as the financial performance indicator versus the conventional MLP metrics of distributable cash flow.

Michael P. Ure: In fact, we were the first midstream MLP to focus on free cash flow as a financial performance indicator versus the conventional MLP metrics of distributable cash flow and distribution coverage. This shift resulted in the creation of our robust capital return framework, which has included substantial debt reduction, opportunistic unit buybacks, and the implementation of our enhanced distribution framework designed to return excess cash to unit holders. Additionally, we were one of the first midstream MLPs to enhance our liquidity and greatly strengthen our balance sheet by selling non-core assets, prudently investing expansion capital in line with producer minimum volume commitments, and aligning our distribution policy with the general growth trajectory of our business.

Michael P. Ure: Distribution coverage. This shift resulted in the creation of a robust capital return framework that has included substantial debt reduction opportunistic unit buybacks and the implementation of our enhanced distribution framework designed to return excess cash to unitholders. Additionally, we were one of the first midstream mlps to enhance our liquidity.

Michael P. Ure: Greatly strengthen our balance sheet by selling noncore assets prudently investing expansion capital in line with producer minimum volume commitments and aligning our distribution policy with the general growth trajectory of our business. This strategy along with our strong capital return framework has optimized the MLP model and transformed west into a leader within the mid.

Michael P. Ure: This strategy, along with our strong capital return framework, has optimized the MLP model and transformed West into a leader within the midstream space. With that said, the current average MLP valuation trades at approximately eight times, a discount of 5.5 times compared to the average MLP valuation from 2011 through 2016.

Michael P. Ure: Stream space with that said the current average MLP valuation trades at approximately eight times a discount of five five times compared to the average MLP valuation from 'twenty 11 through 2016. Furthermore, despite stronger balance sheets plentiful liquidity and strong future business prospects. The average current distribution yield is.

Michael P. Ure: Furthermore, despite stronger balance sheets, plentiful liquidity, and strong future business, the average current distribution yield is just over 9% compared to the average MLP distribution yield of 7% from 2011 through 2016, a time when midstream MLPs generated negative free cash flow, and leverage was increasing. Over the last few years, the operating model of many midstream MLPs has changed, and while both models provide the same tax-deferred benefits, the new MLP model has made great strides in addressing the deficiencies of the old MLP model.

Michael P. Ure: Just over 9% compared to the average MLP distribution yield of 7% from 2011 through 2016, a time when midstream mlps generated negative free cash flow and leverage was increasing over the last few years. The operating model of many midstream Mlps is changed and while both models provide the same tax deferred benefits the new MLP.

Michael P. Ure: Model has made great strides in addressing the deficiencies of the old MLP model.

Michael P. Ure: Improving the health and sustainability of the partnerships and enhancing LP unit holder benefits by removing incentive distribution rights, for example, the new MLP model is deserving of a valuation re-rate and, at current valuations, presents a very compelling investment opportunity, taking into account historical valuation multiples for the midstream space. Furthermore, when you take into account WES's recent annualized distribution increase, our partnership now provides the highest distribution yield compared to the average yield of other midstream peers and of all subsectors within the S&P 500 index.

Michael P. Ure: Improving the health and sustainability of the partnerships and enhancing L. P unit holder benefits by removing incentive distribution rights. For example, the new MLP model is deserving of evaluation re rate and at current valuations presents a very compelling investment opportunity taking into account historical valuation multiples for the midstream space. Furthermore.

Michael P. Ure: <unk> when you take into account west as recent annualized distribution increase our partnership now provides the highest distribution yield compared to the average yield of other midstream peers and of all subsectors within the S&P 500 Index West now provides one of the strongest tax deferred investment opportunities not only within the midstream space, but relative to also.

Michael P. Ure: WES now provides one of the strongest tax-deferred investment opportunities, not only within the midstream space but relative to all subsectors of the S&P 500. Additionally, while we don't endorse the accuracy or completeness of consensus estimates, we note that the multi-year consensus for WES shows free cash flow generation increasing over the coming years. If achieved, this growth should result in leading free cash flow yields relative to our midstream peers and potentially allow for incremental opportunities to return capital to stakeholders.

Michael P. Ure: Sectors of the S&P 500. Additionally, while we don't endorse the accuracy or completeness of consensus estimates. We note that multiyear consensus for Wes shows free cash flow generation, increasing over the coming years.

Michael P. Ure: If achieved this growth should result in leading free cash flow yields relative to our midstream peers and potentially allow for incremental opportunities to return capital back to stakeholders in.

Michael P. Ure: In 2025, for example, many of our peers would need to generate substantially more free cash flow than their current 2025 consensus estimates to match WES's approximate 11% estimated free cash flow yield. This supports the fact that even in the longer term, WES remains comparatively undervalued relative to peers within an MLP valuation paradigm that itself feels undervalued. Furthermore, as an MLP, we are not subject to the incremental cash flow burden associated with income taxes, thereby creating incremental opportunities to allocate capital back to growing the business or to stakeholders.

Michael P. Ure: In 2025 for example, many of our peers would need to generate substantially more free cash flow than their current 2025 consensus estimates to match West is approximate 11% estimated free cash flow yield.

Michael P. Ure: This endorses the fact that even in the longer term west remains comparatively undervalued relative to peers within an MLP valuation paradigm that itself feels undervalued.

Michael P. Ure: Are there more as an MLP were not subject to the incremental cash flow burden associated with income taxes, thereby creating incremental opportunities to allocate capital back into growing the business or to stakeholders.

Michael P. Ure: The adoption of strong operating philosophies in combination with our strong diversified asset base, low leverage, and robust free cash flow have all resulted in a more sustainable, financially secure partnership. West has clearly transformed into a leader within the midstream space and is much better positioned to navigate obstacles and capitalize on future opportunities. To close, I would like to thank the entire West workforce for all of their hard work and dedication. Our strong first quarter performance provides a great start to the year, and our teams are focused on making substantial progress toward achieving our 2024 goals. With that, we will open the line for questions.

Michael P. Ure: The adoption of strong operating philosophies in combination with our strong diversified asset base low leverage and robust free cash flow have all resulted in a more sustainable financially secure partnership.

Michael P. Ure: <unk> is clearly transformed into a leader within the midstream space and is much better positioned to navigate obstacles and capitalize on future opportunities to close I would like to thank the entire west workforce for all of their hard work and dedication our strong first quarter performance provides a great start to the year and our teams are focused on making substantial progress.

Michael P. Ure: <unk> towards achieving our 2024 goals with that we will open the line for questions.

Michael P. Ure: Okay.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.

Konstantin: At this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Keith Stanley from Wolf Research. Your line is open.

Konstantin: Your first question comes from the line of Keith Stanley from Wolfe Research. Your line is open.

Keith T. Stanley: Hi, thank you. I just wanted to start and ask how much progress has been made on securing new firm contracts that would support another plant beyond North Loving. Are you far along in getting more contracts for that, or is there still a lot of work to do before you can move forward with another plant?

Keith T. Stanley: Hi, Thank you.

Keith T. Stanley: Wanted to start.

Keith T. Stanley: And ask how much progress has been made on securing new firm contracts that would support another plant beyond north loving are you far along in getting more contracts for that or is there still a lot of work to do before you can move forward with another plant.

Michael P. Ure: Yeah, Keith, at this stage, we're not actually seeing the need to add another plant at North Loving. Again, reminder, we're expecting to have North Loving 1 come online in Q1 of 2025, and as it sits right now, we're not actually seeing the need to add incremental plant capacity after that.

Speaker Change: Yes, Keith at this stage, we're not actually seeing the need to have to add another plant.

Michael P. Ure: North Loving again reminder, we're expecting to have north loving one.

Michael P. Ure: Come online Q1 of 2025 and as it sits right now we're not actually seeing the need to add incremental plant capacity after that.

Speaker Change: Great. Thanks a.

Michael P. Ure: Great, thanks. Second one, just accidental slides the other day, they showed an uplift for them over the next few years from midstream contract expirations. I want to just confirm that's with other midstream providers, and you don't see any meaningful amount exposed on the west side, given your contracts generally run a longer duration. Yeah, none of those figures are actually relative to contracts with

Michael P. Ure: Second one just a occidental slides the other day they showed an uplift for them from over the next few years for midstream contract expirations.

Michael P. Ure: I wanted to just confirm that as with other midstream providers and you don't see any meaningful amount.

Michael P. Ure: Exposed on the west side, given your contracts generally run a longer duration.

Michael P. Ure: Yeah, none of those figures are actually relative to contracts with West.

Michael P. Ure: Yes, none of those figures are actually relative to contracts with Wes.

Speaker Change: Thank you thank.

Speaker Change: Thank you.

Michael P. Ure: Your next question comes from the line of Spiro <unk> from Citi. Your line is open.

Spiro Michael Dounis: Your next question comes from the line of Spiro Dounis from Citi. Your line is open.

Spiro Michael Dounis: Thanks, Operator afternoon team maybe.

Spiro Michael Dounis: Thanks, operator. Afternoon, team. Maybe just go back to Keith's initial question, just thinking about the processing needs going forward. You know, maybe just give us a sense for Mentone coming online, how quickly that fills up, and then with North Bloving, how quickly that fills up as well, and just maybe how you're planning to utilize offloads from here, which have been pretty effective in deferring some of the cost of capital here.

Spiro Michael Dounis: Maybe just go back to Keith's initial question, just thinking about the processing needs going forward.

Spiro Michael Dounis: Maybe you can just give us a sense for mentioned coming online how quickly that fills up and then with north loving how quickly that goes up as well and just maybe how you're planning to utilize offloads from here, which have been pretty effective in.

Spiro Michael Dounis: Frankly, the cost of capital here.

Michael P. Ure: Yeah, so Spiro, thanks for the question. So we are operating at full capacity for Mentone 3. We do still have some offloads that will continue up until we bring North Loving 1 online in Q1 of 2025. So again, they'll continue to bridge us until we get that online at that time.

Speaker Change: Yes. So managed bureau, thanks for the question. So we are operating at full capacity for Menton three we do still have some offloads that we will continue up until we bring north loving one online in Q1 of 2025. So again they'll continue to bridge us until we get that online at that time.

Speaker Change: Okay understood and then maybe just thinking about the commercial side of things Christian I think you had mentioned a new third party customer on the NGL side.

Kristen S. Shults: Okay, understood. And then maybe we should just think about the commercial side of things. Kristen, I think you mentioned a new third-party customer on the NGL side. And I guess we just take a step back at one point in time when you were sort of spinning out to more of an independent company; there was this broader push to bring in more third-party business. Just kind of curious to get an update on where that stands and where it stacks up on the priority list for you.

Kristen S. Shults: I guess, let me just take a step back at one point in time, when you were sort of spinning asking more of an independent company. There was this broader push to bring in more third party business, just kind of curious to get an update on where that stands and where it stacks up on the priority list for you.

Kristen S. Shults: Yeah, that's still a huge priority for our team. They've brought in, and you know we covered this kind of in last year's year-end call as well, numerous customers in the Delaware Basin as well as new business with existing customers. So, in fact, if you look at our Delaware Basin third-party growth, it's double what the Permian growth has been over the last few years as well. That's really a testament to the hard work that our commercial operations engineering teams have been doing, our ability to get our costs down and really go after that business. Great, I'll leave it there.

Kristen: Yes, that's still a huge priority for our team they've brought in.

Kristen S. Shults: We've covered that kind of in last year's year end call as well as numerous customers in the Delaware basin as well as new business with existing customers. So.

Kristen S. Shults: In fact, if you look at our Delaware Basin third party growth.

Kristen S. Shults: Paul what the Permian growth has been over the last few years as well.

Kristen S. Shults: That's really a testament to the hard work that our commercial operations engineering teams have been doing.

Kristen S. Shults: Our ability to get our cost down and really go after that business.

Speaker Change: Great I'll leave it there thank you everybody.

Spiro Michael Dounis: Great. I'll leave it there. Thanks, everybody.

Speaker Change: Thanks Darryl.

Spiro Michael Dounis: Yeah.

Spiro Michael Dounis: Your next question comes from the line of Jeremy Tonet from JP Morgan Your line is open.

Jeremy Bryan Tonet: Your next question comes from the line of Jeremy Tonet from JP Morgan. Your line is open.

Noah Katz: Hey, this is Noah Katz on for Jeremy. First, I wanted to touch on the timing of the non-core asset sales you guys closed on in the quarter. Previously, we expected a step down in the crude and NGL volumes within equity interest in the first quarter, with two of the sales in the first quarter and three in the second quarter. Can you speak to how the difference in timing impacted results for the quarter and the cadence of the step down in equity investment volumes? Yeah, so we closed on four.

Jeremy Bryan Tonet: Hey, this is Noah cats on for Jeremy first I wanted to touch on the timing of the noncore asset sales you guys closed on in the quarter.

Noah Katz: Previously, we expected a step down in the crude and NGL volumes within equity interest in the first quarter with two of the sales in the first quarter and three in the second quarter.

Noah Katz: We can tell the difference in timing impacted results for the quarter and the cadence of the step down in equity investment volumes like what should we expect throughout the remainder of 'twenty four thank you.

Kristen S. Shults: Yeah, so we closed on four of the five asset sales in Q1, so you did see a volume step down from Q4 of 23 to Q1 of 24. I still expect there to be, because of the last sale that we closed in Q4 and just the timing within Q1-Q2, you'll see another little bit of a step down from Q1 to Q2. Overall, with all of the asset divestitures, the oil volume should be decreasing, you know, relative to last year, by the time you're all said and done.

Speaker Change: So we closed on four of the five asset sales in Q1, and so you did see a volume step down from Q4 of 2003 to Q1 of 'twenty four.

Kristen S. Shults: I still expect there to be because of the loss sale that we closed in Q4 and just the timing within Q1, two youll see another a little bit of a step down from Q1 to Q2 overall with all of that the divestitures the oil volume should be decreasing relative to last year about two third by the time you all.

Kristen S. Shults: <unk> done.

Noah Katz: Thanks for that. That's very helpful.

Speaker Change: Thanks for that that's helpful and.

Speaker Change: And as a follow up can you speak to your expectation for Capex cadence throughout 'twenty four I mean, you guys reported about $205 million in the quarter and gave guidance for the full year at $775 million at the midpoint. So just trying to think through how the rest of the year should shake out now that <unk> three is in service.

Noah Katz: And as a follow-up, can you speak to your expectation for CapEx cadence throughout the year? I mean, you guys reported about $205 million in the quarter, and I think you have guidance for the full year at $775 million at the midpoint. So just trying to think through how the rest of the year should shake out now that Mentone 3 is in service. Yeah, so Q1 strong capital for

Speaker Change: Yes, So Q1 strong capital for the quarter I would expect to see that first second quarter and third quarter as well. We've got we are full steam ahead and building on north loving there.

Kristen S. Shults: Yeah, so Q1. Strong capital for the quarter. I would expect to see that first, second, and third quarter as well. We've got, we are full steam ahead and building on North Loving there. As we get towards maybe the latter part of the year, we might see a little bit of a step down in Q4, but pretty strong as we're looking through the summer months and into the fall.

Kristen S. Shults: As we get towards maybe the latter part of the year, we might see a little bit of a step down in Q4, but pretty.

Kristen S. Shults: <unk> strong as we're looking through the summer months and into the fall.

Speaker Change: Sounds good thank you.

Kristen S. Shults: Again, if you would like to ask a question Press Star then the number one on your telephone keypad.

Zackery Lee Van Everen: Again, if you would like to ask a question, press star, then the number 1 on your telephone's pad. Alas, your next question comes from the line of Zack Van Everen from TPH & Company. Your line is open.

Speaker Change: Your next question comes from the line of Zach than ever even from Tpa and company. Your line is open.

Zackery Lee Van Everen: Hey guys, thanks for taking my question. Just on the pre-cash flow continuing to increase, do you guys have a preference between buybacks and just letting the enhanced distribution kick in if it meets all its metrics?

Speaker Change: Hey, guys. Thanks for taking my question just on the free cash flow continuing to increase you guys have a preference between buybacks and just letting the enhanced distribution kick in if it meets all its metrics.

Speaker Change: Yes, I think what you've seen Zack as time has gone on after we've repurchased 15% of the company using the buybacks. We obviously still believe that Thats a strong tool for us.

Michael P. Ure: Yeah, I think what you've seen, Zack, as time has gone on, after we've repurchased 15% of the company using the buybacks, we obviously still believe that that's a strong tool for us. But it's intended to be utilized when we see sort of disconnections from a market perspective. We've seen a much more healthy market, you know, as of late, which is why we've focused more on distribution as a whole.

Michael P. Ure: But it's intended to be utilized when we see sort of disconnections for market perspective, we've seen a much more healthy market as of late which is why we focus more on the distribution as a whole.

Michael P. Ure: You did see that in the middle of the quarter and then subsequent to quarter end, we actually repurchased a fair amount on the debt side to again, you know, make sure that we achieve the leverage threshold that we're focused on for a year in 2024, as well as to see some arbitrage opportunities relative to the rate on that debt relative to the cash rate that we're able to receive. And so, you know, if things continue as they have occurred, we would intend to continue to focus on those areas, continue distribution growth, and pay back to holders and then leverage opportunities that might exist as we progress and continue to achieve the free cash flow targets that we've talked about.

Michael P. Ure: You didn't see that.

Michael P. Ure: In the middle of the quarter and then subsequent to quarter end, we actually repurchased a fair amount on the debt side to again.

Michael P. Ure: Make sure that we achieve the leverage threshold.

Michael P. Ure: Now we're focused on for year end 2024, as well is to see some arbitrage opportunities relative to the rate on that debt.

Michael P. Ure: Relative to the cash rate that we're able to receive and so.

Zackery Lee Van Everen: Perfect. That makes sense.

Michael P. Ure: If things continue as has occurred we.

Zackery Lee Van Everen: We would intend to continue to focus on those areas continued distribution growth and payback to Tito holders and then <unk>.

Zackery Lee Van Everen: <unk> opportunities that might exist as we progress and continue to achieve the free cash flow targets that we've talked about.

Speaker Change: Perfect that makes sense and then maybe just one I think you guys touched on this last quarter, but you do still have some maybe what would be considered noncore assets, whether that's in Utah. Our southwest Wyoming are you still looking at holding onto those or how do you see the M&A markets for some of those kind of noncore assets.

Zackery Lee Van Everen: And then maybe just one, I think you guys touched on this last quarter, but, you know, you do still have some maybe what would be considered non-core assets, whether that's in Utah or Southwest Wyoming. You know, are you still looking at holding on to those? Or how do you see the M&A markets for some of those, you know, kind of non-core assets you guys still have?

Zackery Lee Van Everen: You guys still have.

Michael P. Ure: Yeah, so I would remove Utah from that. I think that, you know, we very much see our operations there with Jupiter as being core to us. The equity method investments that we have, however, we definitely continue to look at opportunities that we can optimize around those assets because they obviously have value to us. However, if someone is willing to pay a value that's greater to them than what it is that we value them at, then we'll continue to divest of those over time. Our posture around those has been pretty consistent over the past four to five years, and I would expect that that would continue as long as we hold them. Perfect. That's all.

Speaker Change: Yes so.

Michael P. Ure: Remove utah from that I think that we very much see.

Michael P. Ure: Our operations there with you Peter is being has been core to us the equity method investments that we have however.

Michael P. Ure: We definitely continue to look at opportunities that we can optimize around those assets, obviously a value to us. However, if somebody is willing to pay a value that is greater to them than what it is that we value the math and we will continue to divest of those over time.

Michael P. Ure: Our posture around those have been pretty consistent over the past four to five years and would expect that that would.

Michael P. Ure: <unk> as long as we hold them.

Speaker Change: Perfect. That's all I had thanks guys.

Zackery Lee Van Everen: Perfect. That's all I had. Thanks, guys.

Speaker Change: Thank you.

Zackery Lee Van Everen: Your next question comes from the line of Manav Gupta from UBS. Your line is open.

Manav Gupta: Your next question comes from the line of Manav Gupta from UBS. Your line is open.

Manav Gupta: I guess just on the CAPEX fund, once you do get the North Loving plant up and running, then what would be a good CAPEX cadence for, maybe on a run rate basis for 2025 once North Loving does come online?

Manav Gupta: Hey, guys just on the Capex front once you do get the north loving plant up and running then what would be a good capex cadence.

Manav Gupta: Maybe on a run rate basis for 2025 months North loving does come online.

Michael P. Ure: Yeah, so the direction that we would give is that if the current activity levels, you know, sort of remain where we're at, we'd probably look to 2022 as a pretty good guide in terms of what expected capital should be, should we not have those kind of larger projects, i.e., building out a plant, and that was give or take in the half a billion dollar range from a capital perspective.

Speaker Change: Yes so.

Michael P. Ure: The action that we would give is that.

Michael P. Ure: Sure.

Michael P. Ure: If the current activity levels.

Michael P. Ure: To remain where we're at we would probably look to 2022 is a pretty good guide in terms of blood.

Michael P. Ure: Expected capital should be should we not have those kind of larger projects I E building out a plant.

Michael P. Ure: That was give or take and they have a $1 billion range from a capital perspective.

Manav Gupta: Perfect. And a quick follow-up: as I understand it, you know, companies should be conservative.

Speaker Change: Perfect and a quick follow up and then understand companies should be conservative you did beat strong and youre guiding towards the top end of the range what can be the blue sky scenario here, which could get you above the top end of the range as the year progresses.

Manav Gupta: You did beat strong, and you're guiding towards the top end of the range. What could be the blue sky scenario here which could get you above the top end of the range as the year progresses? Yeah, if we have continued outperformance.

Michael P. Ure: Yeah, if we have continued outperformance from a volume perspective, if we're able to continue to see the operational efficiencies on the cost side that we've been able to drive through, really, for many years now, but, you know, really continue to reap the benefits for altogether, that, in addition to adding new opportunities, you know, out there throughout the year, is where we would expect that that could potentially drive us, you know, above the high end of the range.

Manav Gupta: Yes, we have continued outperformance from a volume perspective, if we're able to continue to see the operational efficiencies on the cost side that we've been able to drive through really for many years now, but really continue to reap the benefits.

Michael P. Ure: Four altogether that in addition to adding new opportunities out there throughout the year.

Michael P. Ure: As where we would expect that that could potentially drive us.

Michael P. Ure: Above the high end of the range.

Michael P. Ure: Thank you so much thank you.

Speaker Change: There are no further questions at this time, Mr. <unk> I turn the call back over to you.

Konstantin: There are no further questions at this time. Mr. Ure, I turn the call back over to you. Thank you.

Michael P. Ure: Thank you. Thank you everyone for joining us. We look forward to speaking to you in three months' time.

Ure: Thank you. Thank you everyone for joining we look forward to speaking to you in three months time.

Speaker Change: This concludes today's conference call you may now disconnect.

Konstantin: This concludes today's conference call. You may now disconnect.

Konstantin: Okay.

Konstantin: Yes.

Konstantin: Okay.

Konstantin: Okay.

Konstantin: Okay.

Konstantin: Yeah.

Konstantin: Sure.