Western Midstream Partners, LP

Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and one. I would now like to turn the call over to Director of Investor Relations, Daniel Jenkins. You may begin.

Thank you. I'm glad you could join us today for Western Midstream's third quarter 2023 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-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 Schultz, our Chief Financial Officer. I'll now turn the call over to Michael.

Thank you, Daniel, and good afternoon, everyone. During the third quarter, increased throughput from all operated assets and across all products led to improved adjusted gross margin and adjusted EBITDA on a sequential quarter basis. Specifically, In the Delaware Basin, our throughput increased across all three products, mostly due to new production coming online and continued high facility operability. In the DJ Basin, both natural gas and crude oil and NGL's throughput increased quarter over quarter, a trend we expect to continue into the fourth quarter. And throughput also increased from our other assets, specifically in South Texas, as additional volumes from new customers came online. Focusing on the Delaware Basin, We achieved record natural gas, crude oil and NGLs, and produced water throughput during the third quarter. For the first time in WESA's history, we averaged more than a BCF per day of natural gas gathered from third parties for the months of August and September, demonstrating our focus on growing the entirety of our business. This throughput record is a testament to our team's ability to successfully compete for new business by reducing costs and providing superior customer service. Since 2021, West has grown its third-party volumes in the Delaware Basin by approximately 65%, which is more than twice the rate of natural gas volume growth from the entire Delaware Basin. I would also like to highlight a new contract extension that West recently executed with one of our largest producing customers in the Delaware Basin, bringing total dedicated acreage from that producer to roughly 40,000 acres and extending the duration of our agreement by 10 years, to 2035. This extended dedication keeps significant natural gas volumes on West's infrastructure over the long term and supports expected volume growth over the coming years. Before I turn the call over to Kristen, I wanted to discuss the Meritage Midstream Acquisition we announced in early September, which is the second largest unaffiliated corporate level M&A transaction in West's history and our first significant acquisition since becoming an independent partnership in 2020. We have consistently said that our M&A strategy is focused on accretive deals that optimize the value of our existing asset base and allow us to leverage our operational expertise to generate incremental value for our unit holders. We believe that the Meritage acquisition fits within that strategy for a number of reasons. First, the Meritage deal transforms and significantly expands WES's existing Powder River Basin asset base, adding natural gas gathering and processing facilities, and increasing WESA's total processing capacity in the region to approximately 440 million cubic feet per day. Through the Meritage acquisition, we were able to optimize our previously subscale position to become the largest gathering and processing provider in the basin, which places us in a strong strategic position to compete for additional blocks of undaticated acreage in the basin. Second, this transaction provides meaningful customer diversification by adding several new investment grade customers as well as several high-quality, financially strong private customers to Wes's customer base. Third, we acquired numerous long-term contracts secured by large acreage dedications or substantial minimum volume commitments that are expected to contribute to Wes's earnings and free cash flow over the coming years. Finally, we consummated the deal at an extremely attractive valuation of approximately five to six times 2024 adjusted EBITDA, not including the synergies we have identified for 2024 and beyond that are expected to reduce the forward acquisition multiple. Overall, the Meritage acquisition enhances WES's future profitability and our free cash flow generation profile, which should in turn increase our ability to return more capital to stakeholders over time. This starts with our third quarter base distribution, which we just increased by 1.25 cents per unit, or 5 cents per unit on an annualized basis. The Meritage acquisition was funded with cash, including amounts received from our recent issuance of $600 million of five-year senior notes and from borrowings on a revolving credit facility. As a result, our trailing net leverage ratio will increase in the near term, but we expect a return to pre-Meritage leverage levels by year-end 2024 as we grow adjusted EBITDA and capture cost synergies. Additionally, our focus over the past several years on strengthening our balance sheet by reducing costs Capturing operational efficiencies and growing adjusted EBITDA paired with meaningful debt reduction put our partnership in a position of strength to execute an all-cash transaction such as Meritage. Finally, it is important to note that while we meaningfully strengthened our legacy asset base in the Powder River Basin, our other core basins continue to experience increased producer activity levels. In 2024, the Delaware Basin will continue to be the main driver of throughput growth. And we continue to invest meaningfully amounts of capital towards meeting growing customer demand with the expansion of Mentone and the construction of our greenfield plant at North Loving. In the DJ Basin, which generates roughly 50% of our free cash flow, we reached the trough of the throughput decline, and we expect to see producers gradually grow volumes over the coming quarters. The Powder River Basin has favorable producer activity levels and acreage with competitive economics. And when paired with our existing core basins, we'll support WESA's long-term growth strategy for years to come. With that, I will turn the call over to Kristin to discuss our operational and financial performance.