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| Statement |
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| This growth position WES to deliver another year of strong operating cash flow, which totaled approximately $1.7 billion for 2023 |
| I want to again express my appreciation for all of the WES employees for their extra strong effort to put us in the position that we are today |
| And so that's part of the reason why there's great confidence in the sustainability at this stage for the distribution increase of $3.50 and why we think that there may even be incremental opportunities to increase that further into the future |
| For the past few years, we have successfully executed our strategy of divesting legacy non-core assets and reallocating capital into our core asset base with the goal of generating incremental business and accelerating capital return to our unitholders |
| Furthermore by coupling divestiture with strategic M&A such as Meritage Midstream acquisition we've been able to cost effect grow and further diversify our operated asset footprint |
| And so we're quite optimistic as it relates to the performance of those assets, not only for 2024 as we look into future periods as well |
| Management's confidence in the sustainability of our free cash flow generation underpins our recommendation to increase the base distribution rather than pay a material enhanced distribution in future years |
| First of all, the well performance as we highlighted has been very strong under the assets that WES services |
| So from an EBITDA and a free cash flow growth, there's even better growth than what you might expect just from a throughput standpoint |
| So between Mentone III coming online shortly and then, North Loving Train I, we think that that sets us up nicely to be able to handle the growth that we're seeing in our asset base |
| Additionally, by focusing on capital efficient growth and capital discipline, we have been able to grow our free cash flow from $37 million at year end 2019 to an expected $1.15 billion at the midpoint based on our 2024 free cash flow guidance |
| I think from our standpoint, we have incredible confidence in the culture, the team, our operational capabilities to be able to go out there and acquire bolt-on acquisitions in areas which we operate that we can enhance our existing position, drive synergies through the system and then increase our free cash flow going forward |
| Then we sensitize that on a go forward basis relative to expectations and have confidence that is a sustained level going forward and frankly even provides an opportunity for us to grow that even further into the future |
| All of these actions have put our partnership at a position of strength, which has ultimately resulted in our ability to accelerate the return of capital to our unitholders and target an increased to our quarterly based destruction of 41% relative to our pre-pandemic quarterly distribution level |
| We still again believe that's going to results in positive outcomes from free cash flow generation point-of-view going forward, which is to your point the incident or the commentary that we made around the sustainability of the distribution at that level and even the potential for increased distributions going forward |
| 2023 was a successful and pivotal year for WES as we achieved another year of record throughput growth across all three products |
| Our people's hard work and dedication to WES's foundational principles and core values enabled us to make landmark achievements for the organization and create sustainable value for our stakeholders |
| Our ability to continue capturing throughput growth from our core basins, while maintaining cost and capital discipline has positioned WES on solid financial and operational footing as we enter 2024 |
| This is reflected in our strong 2024 guidance that we announced in yesterday's press release, which anticipates continued throughput growth in 2024 and into 2025 and includes the capital investment necessary to complete the construction of Mentone III and the majority of the North Loving plant |
| The financial outlook for WES remains strong as we transition into 2024, which we expect will be driven by another year of throughput growth that generates an 11% increase in adjusted EBITDA and a 19% increase in free cash flow at the midpoint |
| Focusing on the Delaware Basin, this was an extremely successful year for WES as throughput increased across all three products, resulting in record throughput from the basin |
| We also experienced tremendous commercial success and further diversified our customer base by adding 12 new third-party customers across both our natural gas and produce water businesses |
| Without a doubt, all of our efforts over the past few years have greatly improved WES's balance sheet and free cash flow generation and then provide a significant flexibility to be able to return more capital to unitholders |
| These commercial successes were the primary drivers behind the sanctioning of both Mentone III and the North Loving plant, which will increase our total processing capacity in the basin by 34% and maintain WES's position as one of the top 5 natural gas processors in the Delaware Basin |
| These accomplishments have also helped WES grow its third-party natural gas throughput at more than double the rate of the basin since early 2021 |
| These actions, coupled with the recent non-core asset divestitures, have ultimately resulted in our ability to accelerate the return of capital to our unitholders and position us to recommend a 52% increase relative to the base distribution |
| We've also implemented new technologies and processes to increased operational efficiencies, enhance employee development and safety and to minimize our environmental footprint |
| Since closing the Meritage transaction and working to integrate it into our business, we have been pleased with its performance relative to our baseline expectations and we have identified another $6 million of operational cost savings that we believe are achievable by the end of 2024 |
| Focusing on the Meritage transaction, since taking ownership of the assets, our team has better refined the Powder River Basin capital assumption and in combination of some of those operational efficiencies we're implementing |
| With that said we are off to a strong start and plan to make substantial progress capturing expected cost savings and implementing operational efficiencies throughout 2024 |
| Statement |
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| Produced water throughput decreased by 2% on a sequential quarter basis due to temporary volume curtailments associated with activities to support adjacent producer development |
| We expect our first quarter per barrel adjusted gross margin to increase by approximately 5% relative to the fourth quarter, mostly due to the loss of volumes associated with the sale of the Whitethorn pipeline and the Mont Belvieu JV, both of which closed last week |
| We expect to see a slight decline in produced water volumes relative to 2023 |
| We expect our first quarter per NCF adjusted gross margin to be flat with the fourth quarter primarily due to higher go forward rate associated with the cost of service rate redetermination that are offset by the loss of volume from the recently divested Marcellus gathering system in Pennsylvania |
| I know you noted that you're still below MVC levels on the crude oil side of things |
| But I guess what's implicit in that is that there now seems to be some level of sort of self-restraint on CapEx and I think some of our numbers imply spending kind of below $700 million for the next few years to continue to ratably grow this distribution |
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