Western Midstream Partners LP (WES) reported second quarter net income attributable to limited partners of $247.1 million, or $0.64 per diluted common unit, compared to $300 million, or 0 $.74 per diluted common unit, in the comparable period of 2022.
WES reported total revenue of $738.3 million for the quarter, compared with $876.4 million in the year-ago quarter, the association said in a recent earnings release.
The partnership’s adjusted EBITDA for the second quarter was $488.3 million, compared to $498.7 million in the first quarter. WES President and CEO Michael Ure attributed the decrease “primarily to an expected seasonal increase in operating and maintenance expenses and the normalization of property taxes and other taxes,” according to the statement.
WES declared a second-quarter base distribution of $0.5625 per unit, or $2.25 annually, representing a 12.5 percent increase over the prior quarter’s base distribution, according to the statement.
WES said it achieved record Delaware Basin natural gas output of 1.59 billion cubic feet per day (Bcfpd) in the second quarter. The partnership also reported record Delaware Basin crude oil and natural gas liquids (NGL) output of 208,000 barrels per day (bpd) in the second quarter. Both figures represent a one percent increase over the first quarter figures, according to the statement.
WES’ natural gas production for the second quarter averaged 4.3 Bcfpd, representing a four percent increase compared to the prior quarter. The partnership’s performance for crude oil and NGLs averaged 626,000 bpd, while performance for produced water assets averaged 943,000 bpd, representing an increase of two percent and one per cent compared to the previous quarter, respectively.
“Once again, we experienced record natural gas and crude oil and NGL performance in the Delaware Basin,” said CEO Michael Ure. “Additionally, second quarter performance at our Utah and Wyoming assets increased as the inclement weather experienced in the first quarter abated, resulting in an overall increase in our natural gas and crude oil volumes.”
“We still anticipate year-on-year performance growth for all three products. However, operational challenges for producers emerged in the second quarter as new wells came online and exceeded expectations creating challenges across the production chain. Based on discussions with our producers and after analyzing their revised forecasts, we expect these challenges to be temporary in nature, however, we expect these challenges to continue into the second half of 2023, bringing year-on-year growth to a slower pace than our initial expectations,” added Ure.
“These performance changes, specifically in the Delaware Basin, have caused us to revise our 2023 adjusted EBITDA guidance range to between $1.95 billion and $2.05 billion, a reduction of approximately five percent at the midpoint .That said, we continue to believe that our producers will meet their long-term volume expectations and that the outperformance of the latest wells will provide support. [sic] our belief that our assets serve the best rock in the Delaware Basin,” Ure said.
“While we are disappointed with the new outlook for the second half of 2023, we are confident in the protections provided by our long-term, stable contract structures. In situations like these, when cash flow expectations for the year ongoing declines due to volumetric changes, the protections included in our cost of service contracts should benefit WES in future periods, allowing us to still earn our stated rate of return over the life of the contract,” he added Ur.
In May, WES announced the sanctioning of a new cryogenic processing plant in the North Loving area of its West Texas complex with a capacity of 250 million cubic feet of gas per day (MMcfpd). WES expects the plant to be in service by the end of the fourth quarter of 2024, according to a previous press release.
“We are pleased to announce the expansion of our West Texas complex with the addition of the North Loving Plant,” Ure said in the statement. “The recent amendment to Occidental’s natural gas processing agreement to provide up to 300 MMcf/d of additional enterprise processing capacity provides greater certainty about the future profitability of WES and supports our decision to sanction a additional plant. Including the Mentone Train III and North Loving Plant, we expect our West Texas complex to grow from current processing capacity of 1.54 Bcf/da to 2.09 Bcf/da by the end of 2024.” .
“Over the past year, our commercial team has generated substantial value for WES by executing multiple long-term agreements that provide up to 950 MMcf/d of firm processing commitments. While we have already realized of some benefits from these arrangements, the vast majority of volumes are expected over the next several years, and the decision to sanction an additional plant greatly enhances our ability to accommodate our producer customers and generate incremental value for our interest groups”. Ure said.
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