Today Western Midstream Partners, LP (NYSE: WES) ('WES' or the 'Partnership') announced first-quarter 2020 financial and operating results.
Net income (loss) available to limited partners for the first quarter of 2020 totaled $(251.4) million, or a loss of $0.57 per common unit (diluted), with first-quarter 2020 Adjusted EBITDA(1) totaling $513.6 million, first-quarter Cash flows from operating activities totaling $393.3 million, and first-quarter 2020 Free cash flow(1) totaling $214.6 million. The net loss includes $596.8 million of non-cash impairments of goodwill and long-lived assets primarily resulting from lower sustained commodity prices and forecasted in-basin producer activity reductions following the worldwide outbreak of the coronavirus ('COVID-19'). In total, non-cash impairments reduced first-quarter 2020 net income by $1.34 per common unit (diluted).
RECENT HIGHLIGHTS
Gathered record Delaware Basin produced-water throughput of 717 MBbls/d for the first quarter, representing an 18-percent sequential-quarter increase
Achieved record Delaware oil throughput of 192 MBbls/d for the first quarter, representing a 14-percent sequential-quarter increase
Processed record Delaware and DJ Basin gas throughput of 2.8 Bcf/d for the first quarter, representing a 9-percent sequential-quarter increase
Commenced operations of Latham Train II at the DJ Basin complex and Loving ROTF Train III at the DBM oil system
Repurchased $100 million of Senior Notes due 2021 and 2022 for an aggregate price of $90.1 million via open-market repurchases
Please see the definitions of the Partnership's non-GAAP measures at the end of this release and reconciliation of GAAP to non-GAAP measures.
'WES's first-quarter results attest to the high-quality of our asset portfolio,' said Chief Executive Officer, Michael Ure. 'COVID-19 and the resulting precipitous decline in commodity prices have created significant near-to-medium-term uncertainty, but we remain steadfast in our belief that our high-quality assets and the contracts underpinning the financial stability of our portfolio position WES to manage through this unprecedented cycle. Our first-quarter results demonstrate the strength of our assets in a normalized environment, and our employees' ability to operate efficiently as a dedicated midstream workforce capable of producing improved results.'
First-quarter 2020 total natural-gas throughput(1) averaged 4.5 Bcf/d, representing a 3-percent sequential-quarter increase and a 6-percent increase from first-quarter 2019. First-quarter 2020 total throughput for crude-oil and NGLs assets(1) averaged 760 MBbls/d, representing a 3-percent sequential-quarter decrease and a 28-percent increase from first-quarter 2019. First-quarter 2020 total throughput for produced-water assets averaged 717 MBbls/d, representing an 18-percent sequential-quarter increase and a 38-percent increase from first-quarter 2019.
First-quarter 2020 Free cash flow(2), which is calculated 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, totaled $214.6 million, representing nearly a fourfold increase to fourth-quarter 2019 Free cash flow. For the first quarter of 2020, WES declared a per-unit quarterly distribution of $0.3110, which represents a 50-percent decrease from the fourth-quarter 2019 per-unit distribution and an aggregate quarterly distribution of $140.9 million.
Represents total throughput attributable to WES, which excludes the 25% third-party interest in Chipeta and the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating, which collectively represent WES's noncontrolling interests.
Our revised guidance is based on information obtained through direct discussions with a large majority of our customers. We will continue monitoring producer activity levels and may adjust our 2020 guidance and future distribution levels based on additional curtailments and other changes to producer-planned activities that may be communicated to us throughout the balance of 2020. Notwithstanding and based on known changes to producer activity, our updated guidance is as follows:
Adjusted EBITDA between $1.725 billion and $1.825 billion, which includes previously announced cost reductions of approximately $75 million attributable to estimated operating and maintenance and general and administrative expense cost savings
Total capital expenditures between $450 million and $550 million, representing a 45-percent reduction to prior guidance, including costs associated with approximately 15,000 horsepower of compression, over 65 miles of gathering, the completion of the second Latham train during first-quarter 2020, and the addition of two 30 MBbls/d oil-stabilization trains and approximately 120 MBbls/d of saltwater disposal capacity in the Delaware Basin by year-end 2020
50-percent distribution decrease from fourth-quarter 2019 per-unit distribution of $0.622
'Our revised 2020 guidance demonstrates our continued focus on exercising capital discipline to create long-term value for stakeholders by generating positive free cash flow after distributions, while continuing to deliver exceptional customer service in a safe and responsible manner,' said Chief Financial Officer, Mike Pearl. 'Our timely and highly successful bond offering earlier this year coupled with our recent 50-percent distribution reduction results in no near-term need to access the capital markets. Although our largely undrawn $2.0 billion revolver provides us ample liquidity to manage through the current economic downturn, we expect that our full-year 2020 operational and financial performance and distribution reduction will result in the generation of meaningful 2020 Free cash flow after distributions. Our ability to generate near-term Free cash flow after distributions allows us to strengthen our balance sheet through leverage reduction so that we are positioned to be financially flexible and opportunistic as current market conditions abate.'
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 the Rocky Mountains, North-central Pennsylvania, Texas, and New Mexico, 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.
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 the ultimate impact of efforts to fight COVID-19 on the global economy and the timeline for a recovery in commodity demand and prices; 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 and Form 10-Q 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.
Contact:
Tel: 832.636.6000
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. In prior periods, management considered 'Distributable cash flow,' defined as Adjusted EBITDA attributable to Western Midstream Partners, LP ('Adjusted EBITDA'), plus (i) interest income and (ii) the net settlement amounts from the sale and/or purchase of natural gas, condensate, and NGLs under WES Operating's commodity-price swap agreements to the extent such amounts were not recognized as Adjusted EBITDA, less (i) Service revenues - fee based recognized in Adjusted EBITDA in excess of (less than) customer billings, (ii) net cash paid (or to be paid) for interest expense (including amortization of deferred debt issuance costs originally paid in cash and offset by non-cash capitalized interest), (iii) maintenance capital expenditures, (iv) income taxes, and (v) Distributable cash flow attributable to noncontrolling interests to the extent such amounts are not excluded from Adjusted EBITDA, as a viable performance-measurement and distribution-assessment tool. Although management continues to recognize Distributable cash flow as a useful metric for purposes of comparing our operating and financial performance against that of its peers, management considers Free cash flow as a superior and improved performance-measurement tool in light of an ongoing transition within the midstream industry that has shifted investor focus from distribution-growth to capital discipline, cost efficiency, and balance-sheet strength. Henceforth, Free cash flow will be the metric that we use to assess our ability to make distributions to our unitholders; however, 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.
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 interests owners' proportionate share of revenues and expenses.
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 interests owners' proportionate share of revenues and cost of product.
Below are reconciliations of (i) net cash provided by operating activities (GAAP) to Free cash flow (non-GAAP), (ii) net income (loss) (GAAP) and net cash provided by operating activities (GAAP) to Adjusted EBITDA (non-GAAP), and (iii) operating income (loss) (GAAP) to Adjusted gross margin (non-GAAP), as required under Regulation G of the Securities Exchange Act of 1934. Management believes that WES's Free cash flow, Adjusted EBITDA, and Adjusted gross margin 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. Free cash flow, Adjusted EBITDA, and Adjusted gross margin as defined by WES, may not be comparable to similarly titled measures used by other companies. Therefore, WES's Free cash flow, Adjusted EBITDA, and Adjusted gross margin should be considered in conjunction with net income (loss) attributable to Western Midstream Partners, LP and other applicable performance measures, such as operating income (loss) or cash flows from operating activities.
WESTERN GAS PARTNERS, LP 
