Western Midstream Partners, LP

Good afternoon. My name is Celina and I will be your conference operator today. At this time, I would like to welcome everyone to the 1Q22 Western Midstream Partners earnings conference call. All lines have been placed on mute to prevent any background noise. 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, press the pound key. Thank you. I would now like to turn the conference over to Daniel Jenkins, Director of Investor Relations. Please go ahead.

Thank you. I'm glad you could join us today for Western Midstream's first quarter 2022 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-gap reconciliations. please reference Western Midstream's most recent form, 10Q, 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, Kristen Schultz, our Chief Financial Officer, and Craig Collins, our Chief Operating Officer. I'll now turn the call over to Michael.

Thank you, Daniel, and good afternoon, everyone. Yesterday, we reported another quarter of strong financial performance. We generated net income available to limited partners of $302 million and record-breaking adjusted EBITDA of $539 million, representing a sequential quarter increase of 27% and 12%, respectively. Taking a closer look at our first quarter results, the sequential quarter EBITDA increase was driven by the following factors. First, Our contracts with minimum volume commitments and associated deficiency payments helped support our gross margin, despite volume declines across the portfolio relative to the fourth quarter. These declines were the result of well completion timing and weather impacts in the Delaware Basin, as well as expected declines in the DJ Basin and on our equity method investments. Craig will expand on throughput shortly. Second, we also entered into and converted certain natural gas processing agreements from actual recoveries to fixed recoveries for multiple customers during the first quarter. As a result of strong plant performance leading to actual recoveries exceeding the contractually specified recoveries, we retained excess natural gas liquid volumes in the Delaware Basin under these contracts. Therefore, these additional volumes, along with high commodity prices, led to an increase in gross margin despite a decrease in throughput. Third, we realized lower operational costs during the first quarter relative to fourth quarter and our first quarter expectations. Compared to fourth quarter, we realized a 12% reduction in operational and maintenance expense primarily due to lower utility costs, which is typical during the first quarter, lower equipment rental expense, and reduced land costs associated with our produced water business, and a 13% reduction in general and administrative expense primarily due to reduced corporate expense and lower contract labor costs, which fluctuates from quarter to quarter. Additionally, in the fourth quarter of 2021, we recorded $26 million of unfavorable revenue recognition cumulative adjustments associated with lower cost of service rates, predominantly at the DJ Basin oil system, which we did not see in the first quarter of 2022. Turning to cash flow, our first quarter cash flow from operations totaled $276 million, which declined compared to the prior quarter in large part due to normal working capital changes, specifically changes in accounts receivable. Free cash flow totaled $200 million, and free cash flow after the fourth quarter distribution payment in January totaled approximately $66 million. I'm incredibly pleased with our financial results this quarter. And I'm even more excited about our team's success in creating additional value for Wes. As Craig will discuss shortly, the team executed numerous contracts in both the Delaware and DJ basins that will generate incremental adjusted EBITDA in 2022 and beyond. I'd like to highlight a few of these recent successes in the Delaware basin. First, we executed long-term amendments to Occidental's gas processing agreement, increasing the firm capacity on our system. Second, we executed a new long-term gas gathering and processing agreement with ConocoPhillips, to provide firm capacity for dedicated volumes on our system. Lastly, we added a new publicly traded customer to our gas and water portfolio, highlighting our ability to service multiple product lines in the basin. These new long-term agreements, along with increased producer activity levels, support our need for additional gas processing capacity and solidify our decision to sanction a new 300 million cubic feet per day gas processing train at our existing Mentone plant, which is part of our West Texas complex. With this expansion, WES will be one of the top three gas processors in the Delaware Basin. The combination of our premier infrastructure, our ability to provide a three-stream, midstream solution to producers, and our continued success in expanding business with our existing customers and with new third-party customers solidifies us as a leading midstream provider in the Delaware Basin. Our exposure in the Delaware Basin is a competitive advantage relative to our peers, and we are excited to play an integral role in the growth of the basin and the country's energy production as a whole. I'll now turn it over to Kristen, who I would like to formally welcome as our newly appointed Chief Financial Officer to discuss our financial performance. Kristen?