Western Midstream Announces Fourth-Quarter and Full-Year 2022 Results

Announces 2023 Guidance and 2022 Enhanced Distribution Expectation

• Reported fourth-quarter 2022 Net income attributable to limited partners of $328.6 million, generating fourth-quarter Adjusted EBITDA⁽¹⁾ of $515.8 million.
• Reported full-year 2022 Net income attributable to limited partners of $1.190 billion, generating full-year Adjusted EBITDA⁽¹⁾ of $2.128 billion, achieving the full-year 2022 Adjusted EBITDA guidance range of $2.125 billion to $2.225 billion.
• Reported fourth-quarter 2022 Cash flows provided by operating activities of $489.2 million, generating fourth-quarter Free cash flow⁽¹⁾ of $365.6 million.
• Reported full-year 2022 Cash flows provided by operating activities of $1.701 billion, generating full-year Free cash flow⁽¹⁾ of $1.268 billion, achieving the full-year 2022 Free cash flow guidance range of $1.250 billion to $1.350 billion.
• Achieved year-end 2022 net leverage ratio⁽²⁾ of 3.1 times.
• Repurchased 19,532,305 common units for aggregate consideration of $487.6 million through December 31, 2022.
• Provided 2023 Adjusted EBITDA⁽³⁾ guidance range of $2.050 billion to $2.150 billion and total capital expenditures⁽⁴⁾ range between $575.0 million and $675.0 million.
• Expect to maintain a quarterly Base Distribution of $0.50 per unit, or $2.00 per unit annualized for full-year 2023.
• Expect to announce an Enhanced Distribution of $140.0 million, or approximately $0.36 per unit, which if approved, would be paid in conjunction with the first-quarter 2023 Base Distribution.⁽⁵⁾

Today Western Midstream Partners, LP (NYSE: WES) (“WES” or the “Partnership”) announced fourth-quarter and full-year 2022 financial and operating results. Net income (loss) attributable to limited partners for the fourth quarter of 2022 totaled $328.6 million, or $0.85 per common unit (diluted), with fourth-quarter 2022 Adjusted EBITDA⁽¹⁾ totaling $515.8 million, fourth-quarter 2022 Cash flows provided by operating activities totaling $489.2 million, and fourth-quarter 2022 Free cash flow⁽¹⁾ totaling $365.6 million. Net income (loss) attributable to limited partners for full-year 2022 totaled $1.190 billion, or $3.01 per common unit (diluted), with full-year 2022 Adjusted EBITDA⁽¹⁾ totaling $2.128 billion, full-year 2022 Cash flows provided by operating activities totaling $1.701 billion, and full-year 2022 Free cash flow⁽¹⁾ totaling $1.268 billion.

2022 HIGHLIGHTS

• Increased average throughput for natural-gas, crude-oil and NGLs, and produced-water by 1-percent, 3-percent, and 19-percent year-over-year, respectively.
• Repurchased 19,532,305 common units for aggregate consideration of $487.6 million through year-end, including 1,549,948 common units in the fourth quarter for an aggregate consideration of $40.5 million. This represents 39.0-percent of the $1.250 billion common unit repurchase program, which runs through December 31, 2024. The total common units repurchased since September 2020 now represent 13.7-percent of total unaffected units outstanding.
• Achieved year-end 2022 net leverage ratio⁽²⁾ of 3.1 times, which surpasses the 2022 Enhanced Distribution leverage threshold of 3.4 times.
• Achieved full-year Base Distribution guidance of $2.00 per unit.
• Acquired the remaining 50-percent interest in Ranch Westex JV for $40.1 million and sold our 15-percent interest in Cactus II for $264.8 million.
• Executed multiple, long-term commercial agreements with some of our largest producers in the Delaware Basin supported by either minimum volume commitments or acreage dedications and executed several agreements with new customers in the Maverick Basin.

On February 13, 2023, WES paid its fourth-quarter 2022 per-unit distribution of $0.50, which is in line with the prior quarter’s distribution and is consistent with the Partnership’s previously announced annualized regular quarterly distribution (“Base Distribution”) target of $2.00 per unit. Fourth-quarter and full-year 2022 Free cash flow⁽¹⁾ after distributions totaled $168.5 million and $532.7 million, respectively. Fourth-quarter and full-year 2022 capital expenditures⁽⁴⁾ totaled $156.0 million and $538.1 million, respectively.

Fourth-quarter 2022 natural-gas throughput⁽⁷⁾ averaged 4.2 Bcf/d, representing a 1-percent sequential-quarter decrease and a 1-percent increase from fourth-quarter 2021. Fourth-quarter 2022 throughput for crude-oil and NGLs assets⁽⁷⁾ averaged 649 MBbls/d, representing a 9-percent sequential-quarter decrease and an 8-percent decrease from fourth-quarter 2021. Fourth-quarter 2022 throughput for produced-water assets⁽⁷⁾ averaged 851 MBbls/d, representing a 3-percent sequential-quarter decrease and a 7-percent increase from fourth-quarter 2021.

Full-year 2022 natural-gas throughput⁽⁷⁾ averaged 4.2 Bcf/d, representing a 1-percent increase from full-year 2021. Full-year 2022 throughput for crude-oil and NGLs assets⁽⁷⁾ averaged 676 MBbls/d, representing a 3-percent increase from full-year 2021. Full-year 2022 throughput for produced-water assets⁽⁷⁾ averaged 836 MBbls/d, representing a 19-percent increase from full-year 2021.

“2022 was an incredibly successful year for WES. We grew average year-over-year throughput across all three products and generated the highest Net income and Adjusted EBITDA in our partnership’s history,” said Michael Ure, President and Chief Executive Officer. “Coming into the year, we introduced our capital-return framework, and we have acted on that framework by increasing our Base Distribution by 53-percent, buying back just under 50-percent of our original unit buyback authorization, retiring $504 million of senior notes, and recommending to pay our first Enhanced Distribution payment. As we reflect on 2022 in its entirety, I am very proud of our team’s accomplishments, which include accretive M&A activity, numerous commercial successes, and meaningful execution on our capital-return framework that continues to create substantial value for our stakeholders.”

2022 ENHANCED DISTRIBUTION

“We have been able to meaningfully improve the health of our balance sheet and reduce net leverage from 4.6 times at year-end 2019 to 3.1 times at year-end 2022, which is significantly below our 2022 Enhanced Distribution threshold of 3.4 times,” said Kristen Shults, Senior Vice President and Chief Financial Officer. “Additionally, we continued to focus on returning capital to stakeholders through a balanced approach of repurchasing $488 million of common units, paying $736 million in Base Distributions, and retiring $504 million of senior notes in 2022.”

Ms. Shults continued, “Taking our financial success and current business needs into consideration, we have recommended that the Board use its discretion to consider WES’s 2022 net proceeds from asset sales of $224.2 million as cash flow available for distribution and consider an Enhanced Distribution for 2022 of $140.0 million, or approximately $0.36 per unit based on our current unit count outstanding. WES expects to request formal approval of this Enhanced Distribution in April and to pay this distribution in conjunction with its first-quarter 2023 distribution in May.”

“Our recommendation to pay an Enhanced Distribution reflects our strong Free cash flow profile and the value creation from non-core asset sales in 2022. We view our financial policy, specifically the Enhanced Distribution framework, as a way to generate additional value for our long-term unitholders and to further differentiate WES relative to its peers,” concluded Ms. Shults.

2023 GUIDANCE

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

• Adjusted EBITDA⁽³⁾ between $2.050 billion and $2.150 billion.
• Total capital expenditures⁽⁴⁾ between $575.0 million and $675.0 million.
• Free cash flow⁽³⁾ between $1.125 billion and $1.225 billion.
• Full-year 2023 Base Distribution of at least $2.00 per unit⁽⁶⁾, which excludes the impact of any potential Enhanced Distribution.

“Although our 2023 Adjusted EBITDA outlook is tempered relative to 2022, we expect our profitability to remain strong. Additionally, we are confident in our ability to generate substantial Free cash flow in 2023, even with an expected year-over-year increase in capital expenditures, which predominantly relates to the construction of Mentone Train III,” said Mr. Ure. “Looking to the future, producer activity levels should remain strong on the acreage we service in the Delaware Basin, and our remaining capital budget allows us to prepare for increasing throughput growth in 2024. As our capital needs subside upon completing Mentone Train III during the fourth quarter of 2023, we will stay focused on creating even more value for our stakeholders through our capital-return framework.”

Mr. Ure continued, “We remain optimistic regarding our expected 2023 operational and financial performance, even with the current and expected challenges facing the energy industry. Our premier asset bases are located within the core of their respective basins, continue to attract producer capital, and are supported by our fee-based contract structures. Additionally, our greatly improved balance sheet puts us in a position of financial strength and enables us to take advantage of market opportunities to create additional value for all stakeholders through further debt reduction, distribution payments, and unit repurchases under our expanded unit buyback program.”

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

WES will host a conference call on Thursday, February 23, 2023, at 1:00 p.m. Central Time (2:00 p.m. Eastern Time) to discuss fourth-quarter and full-year 2022 results. To participate, individuals should dial 888-330-2354 (Domestic) or 240-789-2706 (International) fifteen minutes before the scheduled conference call time and enter participant access code 32054. To access the live audio webcast of the conference call, please visit the investor relations section of the Partnership’s website at www.westernmidstream.com. A replay of the conference call also will be available on the website following the call.

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

FILING OF ANNUAL REPORT ON FORM 10-K

Today WES also announced the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, with the Securities and Exchange Commission. A copy of the report is available for viewing and downloading on the Western Midstream website at www.westernmidstream.com. Unitholders may request hard copies of the report, which contains WES’s audited financial statements, free of charge, by emailing investors@westernmidstream.com, or by submitting a written request to Western Midstream Partners, LP at the following address: 9950 Woodloch Forest Drive, Suite 2800, The Woodlands, TX 77380, Attention: Western Midstream Investor Relations.

ABOUT WESTERN MIDSTREAM

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

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

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

______________________________________________________________

Western Midstream Partners, LP

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

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

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

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

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20230222005168/en/