Western Midstream Partners, LP

Good day, and welcome to the Western Midstream Partners second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Kristen Schultz, Senior Vice President, Finance and Communication. Please go ahead, ma'am.

Thank you. I'm glad you could join us today for Western Midstream's second quarter 2021 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 Western Midstream's most recent Form 10-K and Form 10-Q and other public filings for 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 Craig Collins, our Chief Operating Officer. I'll now turn the call over to Michael.

Thank you, Kristen, and good afternoon, everyone. Yesterday, we reported second quarter 2021 net income of $226 million and adjusted EBITDA of $491 million. an 11% increase over prior quarters adjusted EBITDA. With strong producer activity levels and winter storm URI behind us, both the DJ and Delaware basins outperformed our second quarter expectations and generated increased throughput across all products in the portfolio. We continue to generate significant free cash flow by remaining disciplined in our cost and capital spending. For the second quarter, we generated $380 million of free cash flow, and $247 million of free cash flow after distributions. We also increased our second quarter distribution to 0.319 cents per unit, representing a 1.3% increase over the previous quarter, which is in line with our commitment to an annualized distribution growth of 5%. In a few moments, Craig will provide additional color on producer activity levels. We did, however, want to quickly comment on the second quarter impacts that drove higher than anticipated O&M expense and our thoughts on G&A going forward. Related to O&M, we incurred $6 million in additional utility charges that were invoiced by our providers related to Winter Storm URI. The majority of these utility expenses are contractually passed through in gross margin and therefore had a minimal impact on adjusted EBITDA for the quarter. We also recognized $4 million for a one-time environmental liability recorded in June. This relates to an incident that occurred several years ago, and the asset has since been decommissioned. As these charges subside, we expect O&M expense to normalize during the third quarter. Despite these one-time events, our O&M as a percentage of adjusted gross margin decreased compared to the prior quarter. We also saw a year-over-year increase in G&A for the three months ended June 30, 2021, from costs associated with contracting consulting primarily related to IT services and fees associated with the transition and transformation of our IT infrastructure. This increase was embedded in our 2021 guidance, and we expect G&A to remain at this level as we fully absorb the cost of being a standalone enterprise. Turning to the second half of the year, we're seeing increased producer activity, specifically in the Delaware Basin, and we've been successful in attracting incremental third-party business, To prepare for increased throughput, we now expect to be at or above the high end of our 2021 CapEx range of $275 to $375 million. We've reduced our cost structure and enhanced our operational efficiencies, and we expect increased capital spend to be dedicated to gathering these incremental volumes. While we expect these capital efficient dollars to generate a modest increase in 2021 adjusted EBITDA, this uptick in activity gives us optimism on 2022 throughput levels and thus 2022 EBITDA. Coupled with our second quarter outperformance, we now expect to be near the high end of our 2021 adjusted EBITDA range of $1.825 to $1.925 billion, despite the $30 million adjusted EBITDA impact of winter storm URI during the first quarter. We are still fully committed to maintaining our leverage target at or below 4.0 times at the end of this year and at or below 3.5 times at year end 2022. By retiring near-term maturities and generating incremental EBITDA, we can more quickly reach these targets, allowing us greater optionality and flexibility to adapt to evolving market conditions. Our performance through the first half of the year has enabled us to enhance stakeholder value. To recap, as of today, we have already retired the entire $431 million senior notes due in 2021. Through the Unit Buyback Program and Anadarko Note Exchange, we have repurchased 31.34 million units, which represents over 7% of our outstanding units. We intend to opportunistically employ our previously authorized $250 million unit repurchase program, of which we have approximately $200 million remaining. Along with our planned increase to our quarterly distribution, we look forward to using these multiple paths to return value to stakeholders as conditions dictate. With that, I'll turn the call over to Craig to discuss our operations in the second quarter. Craig?