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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates positive elements such as increased adjusted gross margin, decreased operation and maintenance expenses, and strong cash flow. The Q&A section reveals sustainable cost management initiatives and potential for distribution step-ups, enhancing investor confidence. The acquisition of Aris Water Solutions and the expansion plans in New Mexico further support growth prospects. Despite some uncertainties, the overall sentiment is positive, likely leading to a stock price increase in the short term.
Net Income $332 million for the third quarter, with no year-over-year comparison provided.
Adjusted EBITDA $634 million for the third quarter, with no year-over-year comparison provided.
Adjusted Gross Margin for Natural Gas Decreased by $0.05 per Mcf on a sequential quarter basis due to lower excess natural gas liquids volumes and lower pricing in the Delaware Basin, partially offset by higher throughput in the DJ Basin.
Adjusted Gross Margin for Crude Oil and NGLs Increased by $0.08 per barrel on a sequential quarter basis due to increased efficiency fees on certain contracts in the Delaware Basin.
Operation and Maintenance Expense Decreased by 5% or $12 million quarter-over-quarter due to less asset maintenance, repair, and chemical expenses.
Cash Flow from Operating Activities $570 million for the third quarter, with no year-over-year comparison provided.
Free Cash Flow $397 million for the third quarter, with no year-over-year comparison provided.
Acquisition of Aris Water Solutions: Completed acquisition of Aris Water Solutions on October 15, solidifying WES' position as a leading 3-stream midstream flow assurance provider in the Delaware Basin. This acquisition includes recycling and beneficial reuse assets and solutions, with targeted $40 million of annual run rate synergies.
North Loving II Project: Sanctioned the North Loving II natural gas processing plant to support throughput growth in the Delaware Basin.
Delaware Basin Expansion: Achieved record natural gas throughput in the Delaware Basin, with low double-digit year-over-year growth expected for natural gas and low to mid-single-digit growth for crude oil and NGLs in 2026.
DJ Basin Growth: Expecting low to mid-single-digit throughput growth for crude oil and NGLs in 2026, driven by new wells coming online.
Cost Reduction Initiatives: Achieved significant cost reductions, including a 5% decrease in operation and maintenance expenses in Q3. Despite increased throughput, operation and maintenance expenses and G&A are expected to remain flat for 2025 compared to 2024, excluding Aris acquisition costs.
Operational Efficiency: Achieved the highest level of asset operability in WES' history during Q3, while reducing operational costs.
Produced Water Midstream Solutions: Positioned as a leader in produced water gathering, transportation, disposal, recycling, and reuse in the Delaware Basin, following the Aris acquisition.
Pathfinder Pipeline Project: Executed an agreement for incremental disposal capacity to support the Pathfinder pipeline project in the Delaware Basin, optimizing the pipeline's route and enhancing returns.
Produced Water Challenges: The challenges associated with produced water tied to crude oil and natural gas development in the Delaware Basin are significant. Federal and state regulators have raised concerns, and addressing the growing volume of produced water will require comprehensive solutions.
Powder River Basin Throughput Decline: Due to commodity price weakness throughout 2025, there has been a decline in customer activity levels, leading to lower natural gas throughput. This has also resulted in the deferral of certain expansion projects in the region.
Intermittent Volume Curtailments: In the Delaware Basin, intermittent volume curtailments due to downstream maintenance are expected to slightly impact the rate of natural gas throughput growth in the fourth quarter.
DJ Basin Throughput Decline: Lower activity levels in the DJ Basin in 2025 relative to 2024 are expected to result in a modest decline in overall throughput in 2026.
Increased Costs from Aris Acquisition: The acquisition of Aris Water Solutions will lead to increased operation and maintenance expenses and G&A costs in the fourth quarter, with a 20%-25% rise expected compared to the third quarter.
Commodity Price Weakness: Continued commodity price weakness could lead to select rig drops or temporary rig relocations, particularly in the Powder River Basin, potentially impacting throughput in 2026.
Natural Gas Throughput: Expected to increase in the fourth quarter of 2025, with mid-single digits percentage growth year-over-year. Delaware Basin to see low double-digit growth in 2025 and continue as the primary engine of throughput growth in 2026.
Crude Oil and NGLs Throughput: Expected low single digits percentage growth year-over-year in 2025. Delaware Basin to see low to mid-single-digit growth in 2025. DJ Basin to experience low to mid-single digits growth in 2025, but overall throughput to decline modestly in 2026.
Produced Water Throughput: Expected to increase by approximately 40% year-over-year in 2025, with average fourth quarter throughput of 2.6 to 2.7 million barrels per day. Growth driven by Aris acquisition.
Adjusted Gross Margin: Fourth quarter per Mcf adjusted gross margin for natural gas expected to be slightly lower than the third quarter. Per barrel adjusted gross margin for crude oil and NGLs expected to remain in line with the third quarter. Combined fourth quarter per barrel adjusted gross margin for produced water expected to range between $0.85 and $0.90.
Capital Expenditures: 2025 capital expenditures expected to be towards the high end of $625 million to $775 million. 2026 capital expenditures projected to be at least $1.1 billion, driven by organic growth and Aris acquisition.
Free Cash Flow: 2025 free cash flow expected to exceed the high end of the guidance range of $1.275 billion to $1.475 billion, with incremental contributions from Aris assets.
Adjusted EBITDA: 2025 adjusted EBITDA expected to be towards the high end of $2.35 billion to $2.55 billion, including $45 million to $50 million from Aris assets.
Powder River Basin Throughput: Expected to decline in the fourth quarter of 2025 and into 2026 due to commodity price weakness and lower customer activity levels.
DJ Basin Throughput: Overall throughput expected to decline modestly in 2026, but Oxy's development of Bronco CAP area in early 2026 may provide incremental volumes.
Delaware Basin Growth: Continued throughput growth expected in 2026, supported by Aris acquisition and organic growth initiatives like North Loving II.
Quarterly Distribution: In October, a quarterly distribution of $0.91 per unit was declared, consistent with the prior quarter's distribution. This will be paid on November 14 to unitholders of record on October 31.
The earnings call summary indicates positive elements such as increased adjusted gross margin, decreased operation and maintenance expenses, and strong cash flow. The Q&A section reveals sustainable cost management initiatives and potential for distribution step-ups, enhancing investor confidence. The acquisition of Aris Water Solutions and the expansion plans in New Mexico further support growth prospects. Despite some uncertainties, the overall sentiment is positive, likely leading to a stock price increase in the short term.
The earnings call highlights several positive factors: the completion of the North Loving Plant, prudent capital allocation, a 4% distribution increase, and expected throughput growth. The Q&A session further supports a positive outlook with leverage-neutral financing for the Aris deal, strong customer support, and confidence in growth projects. Additionally, the company maintains its 2025 guidance despite a lower commodity price environment, indicating resilience. These factors, combined with optimistic guidance and strategic growth initiatives, suggest a positive sentiment, likely leading to a stock price increase of 2% to 8%.
The earnings call summary presents a mixed picture. Financial performance shows stability with a 4% distribution increase, but adjusted gross margin decreased. The Q&A highlights potential risks like market volatility and operational delays. Guidance remains unchanged despite lower commodity prices, indicating resilience. However, management's unclear responses on contract specifics and potential CapEx adjustments add uncertainty. Overall, the sentiment is neutral, with no strong positive or negative catalysts evident.
The earnings call shows strong financial performance with increased net income and EBITDA, but uncertainties in capital allocation and contract renewals pose risks. The shareholder return plan focuses on sustainable growth, yet the retirement of enhanced distribution may limit flexibility. The Q&A reveals management's unclear responses on capital spending and growth targets, adding uncertainty. Despite strong financials, these factors balance out, leading to a neutral sentiment.
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