Good afternoon. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners' First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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 2023 conference call. I would 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 discuss today. Relevant reference materials are posted on our website. With me today are Michael Ure, our Chief Executive Officer; and Kristen Shults, our Chief Financial Officer. I'll now turn the call over to Michael.

Thank you, Daniel, and good afternoon, everyone. During the first quarter, we continued to experience strong producer activity levels in the Delaware Basin, resulting in higher throughput across all three product lines, including record-breaking natural gas and produced water throughput. Despite continued throughput growth in the Delaware Basin, our first quarter adjusted EBITDA declined sequentially, primarily due to decreased distributions from Cactus II which was sold in the fourth quarter of 2022, reduced margin from our South Texas assets due to a contractual step down in demand fees, which we previously communicated on last quarter's call and reduced natural gas throughput and margin from our assets in Utah and Wyoming, mostly due to weather. Although, adjusted EBITDA declined sequentially, we expect quarterly profitability to gradually improve as throughput increases for the remainder of the year. Kristen will go into more detail regarding our first quarter performance and our second quarter expectations shortly. Operationally, I'm very pleased to highlight that our commercial team continues to generate substantial value for WES. Subsequent to quarter end, we executed long-term amendments to Occidental's natural gas gathering and processing agreement in the Delaware Basin, increasing their firm capacity on our system and extending the gathering agreement by three years to 2035. Over the past year, we've executed multiple amendments to Occidental's natural gas processing and gathering agreements in the Delaware Basin, increasing their firm processing capacity by up to 800 million cubic feet per day. Moving to the balance sheet. In March, we obtained investment-grade status. And subsequent to quarter end, we issued $750 million of senior notes to refinance existing revolver borrowings and to enhance our liquidity position. This was our first debt issuance since early 2020 and I'm very pleased, it was well received by the market. In addition, we executed an amendment with our bank group that extends the maturity of our credit facility to 2028 and solidifies $2 billion of commitments. These capital market transactions have fortified our liquidity position, improved our debt maturity profile and enable us to be opportunistic regarding future capital allocation decisions, which is a real strength when considering today's volatile and uncertain market conditions. Finally, the Board approved the payment of $140 million or approximately $0.36 per unit in an enhanced distribution that will be paid in conjunction with our first quarter base distribution of $0.50 per unit for a total of approximately $0.86 per unit. We view our capital allocation strategy and especially our ability to pay an enhanced distribution as a way to build long-term value for our unitholders and to further differentiate WES relative to our peers. With that, I will turn it over to Kristen to discuss our operational and financial performance.

Thank you, Michael, and good afternoon, everyone. Our first quarter natural gas throughput decreased by 3% on a sequential quarter basis. This was primarily due to lower throughput from our other assets, specifically in Utah and Wyoming, mostly due to record snowfall in the Rockies throughout the first quarter. We also experienced lower throughput from our natural gas equity investments during the quarter. Our crude oil and NGLs throughput decreased by 6% on a sequential quarter basis. This was primarily due to the divestiture of Cactus II in 2022 and expected declines in the DJ Basin. Excluding the Cactus II sale, our crude oil and NGL throughput would have decreased by 2% sequentially. Produced water throughput increased by 12% on a sequential quarter basis, primarily due to continued strong producer activity levels and new customer connections in the Delaware Basin. Our per Mcf adjusted gross margin for our natural gas assets increased by $0.03 compared to the prior quarter. This was primarily driven by higher throughput in the Delaware Basin, which has a higher-than-average per Mcf margin as compared to our other natural gas assets. This increase was partially offset by an annual cost of service rate adjustment that increased revenue in the fourth quarter of 2022 from our assets in South Texas. Excluding the impact of the cost of service rate adjustment in the fourth quarter, our per Mcf adjusted gross margin would have increased by approximately $0.08. We expect our second quarter natural gas per Mcf adjusted gross margin to decrease slightly as we more fully utilize offloads to service increasing throughput in the Delaware Basin. Our per barrel adjusted gross margin for our crude oil and NGL assets increased by $0.12 compared to the prior quarter, primarily due to an annual cost of service rate adjustment that…

Thank you, Kristen. Before we open it up for Q&A, I would like to take a few minutes to discuss valuation and reiterate why we believe WES and its unitholders continue to be extremely well positioned. Overall, WES screens very well relative to comparable sectors of the S&P 500. When considering the data, WES generates the highest free cash flow yield yet trades at the lowest valuation. When you take into account the stable, long-term contract structures, the fee-based nature of the business, continued growth associated with strong producer activity levels and the tremendous amount of free cash flow generation, WES has a differentiated investment profile relative to comparable sectors of the S&P 500. We continue to be a market leader in generating a superior total capital return yield when taking into account distribution increases, unit buybacks and debt reduction. We have done this while being one of the leaders in generating strong returns on capital employed. As we look to the future WES is very well-insulated from market and commodity price volatility with almost all of our throughput service under fee-based contracts, supported by either minimum volume or cost of service commitments. WES is also on very strong financial footing given our strong liquidity position, investment-grade balance sheet and minimal dependency on the capital markets given our favorable maturity profile and robust free cash flow expectations. We will continue to focus on all three pillars of our balanced capital allocation strategy to advance our reputation as the leader in generating substantial value for stakeholders in terms of total capital return. As I often do, I would like to close the call by thanking the entire WES workforce for living our values and for all of their hard work and dedication to our business objectives. Our first quarter performance provides a solid start to the year and our teams have already achieved an impressive list of accomplishments through the first three months of 2023. I look forward to updating you on additional progress throughout the year. With that, we'll open the line for questions.

[Operator Instructions] Your first question comes from the line of Spiro Dounis with Citi. Your line is open.

Thanks, operator. Afternoon guys. First one, I want to just go to some of the commercial activities. It looks like over the last year or so, you've all firmed up about I think it was 950 million cubic feet a day of interruptible volumes into MVCs. Curious how much more headroom is there for you guys to do that going forward? And what do you sense is the appetite among customers to keep doing that?

Thanks Spiro. This is Michael. I can't specifically comment as it relates to upside potential in terms of specific metrics. What I would say is that typically producers will not go up to the total maximum amount of volumes they expect to come online in terms of firm commitments. There's usually just a little bit of excess that they expect to deliver in excess of that firm commitment level. And so as you progress through the years and as there's incremental tightness in our system as well as the basin as a whole. And as those incremental volumes become a little bit stronger and firmer in their expectations then that's usually when they sign up those incremental firm commitments. And so we would hope and expect that what we've seen over the past year will continue in terms of the robustness and confidence level overall in terms of the volumes coming through. And hopefully, that will result in incremental firm commitments overall.

Got it. Okay. Understood. Thanks for that, Michael. Second one, just going to this need for sort of more processing capacity going forward. It sounds like you're sort of having that deliberation internally now. But curious on two fronts. So one is, what is the deciding factor here in terms of the timing of the decision to announce another processing plant? Is this really kind of customer driven? Are you looking at more offload opportunities potentially? And then the second part of that question is, I understand that that might impact free cash flow and CapEx. But I guess in terms of an EBITDA impact, I guess that there's really nothing that would occur this year on that front. And so, as you guys think about EBITDA compared to where you provided the guidance earlier in the year Kristen, you had a lot of puts and takes there in your commentary. Are you sort of still tracking within that range? It sounds like yes, but I just want to put a point on it.

Yes, Spiro. So, any decision that we would have with regards to the plant would not have an impact on 2023 EBITDA. And so, what it is that we're doing right now as we've done over the past couple of years, we take a really [Technical Difficulty] to add that incremental capacity and make sure that we have our t's crossed and i's dotted before it is that we go ahead and announce something like that. So, we're in the midst of that process right now going through the full stack what our needs might be. And then assessing all of our various opportunities, so that we can come up with the best solution for our unitholders that's going to be the most cost efficient and drive the best results for the company.

Got it. Helpful color as always. Thanks, Michael. Thanks, team.

Thank you.

Your next question comes from the line of Jeremy Tonet with JPMorgan. Your line is open.

Hi there everyone. This is Eli on for Jeremy. Just wanted to touch on unit repurchases. You guys repurchased $7 million in the first quarter. It seemed like a slight step down from historical levels. So, framing less financial flexibility, how should we be thinking about the cadence of share repurchases throughout the remainder of the year? And like, what could move the needle there a bit?

Yes. Eli, it's a great question. So, we've had the same logic and perspective around unit repurchases that we always have. It's on an opportunistic basis. Up to this point, we had already -- we've already largely fulfilled about half of our original buyback authorization amount. We're about 40% of the total. So we've obviously executed on that commitment over time. And so, in any one given quarter, it's just dependent on whether or not we see dislocations and opportunities to repurchase units. So, I couldn't specifically forecast what that's going to look like on a quarter-to-quarter basis, because it's really dependent on what the market conditions might drive us towards during that particular quarter.

Understood. That's helpful. Thanks. And then maybe switching gears a little bit. I wanted to get some more color on CapEx. We recognize Mentone III is coming on in 4Q, but maybe beyond that, how should we be thinking about return parameters for kind of incremental projects or general thoughts around future spend?

Yes, our return parameters have been consistent and will continue to be consistent. We always look for a solid return profile before we sanction projects and capital. So, as it relates to Mentone, thus far, we're still on track from a timing and capital perspective. It's really positive or really pleased with where we sit on that. And then any incremental capital and in particular with regards to additional processing capacity would still be under the same logic that we've held around driving returns overall. And the timing or requirement of that will be dependent on when it is that we can feel comfortable that that's a project that would meet those return thresholds that we've already established.

Got it. That’s helpful. Thanks, guys.

Your next question comes from the line of Keith Stanley with Wolfe Research. Your line is open.

Hi. Thank you. Can you quantify, how the volumes are tracking across the products versus what you guided to last quarter on the percentage change basis? I imagine there's some impact just from the weather in Q1.

Yes. Overall, we're still tracking to the same numbers that you saw last quarter. You had a little bit of noise this quarter just with the storms, we saw in Wyoming and Utah, but nothing that materially impacted, where we're seeing it just from an average year-over-year perspective.

Got it. And then separate just technical question. As you amend contracts with Oxy to add firm volume commitments. Should we assume that the processing rate under the amended contracts for the expanded capacity is similar to what the existing contract rate is, or does this vary deal to deal as you move forward and add volumes?

Yes. Typically with the amendments, it's really more around the service level that we're offering up with regards to those incremental volumes. So, in other words, going from interruptible to firm.

Okay, got it. Thank you.

[Operator Instructions] Your next question comes from the line of Gabe Moreen with Mizuho. Your line is open.

Hey, good afternoon everyone. I know this may be the wrong question to ask after obtaining investment-grade, but I'm curious about the 3.2% kind of target that you're driving towards the year-end and as it pertains to unit repurchases. Should we really consider that 3.2% kind of a line in the sand just because I think Michael you're comments about being opportunistic on the unit repurchases and all the slides talking about the free cash flow yields and quite frankly, all the volatility out there in the market. I'm just wondering how much you're willing to put your balance sheet to work to work should the opportunities arise for more unit repurchases?

Yes. No, it's a great question Gabe. The 3.2% is again a target as we look at what that threshold might yield in terms of a potential enhanced distribution. We've always held overall though that we're intending to be opportunistic around both capital projects some of which again we've talked about on this call as well as unit repurchases and really only at the end of the year if we've met that leverage threshold and there's still incremental free cash flow available to us. In other words, we haven't been able to use that capital in other means whether it's on the unit repurchase or project side then we would pay the enhanced distribution. And so we would -- we will still definitely look for opportunities on the unit repurchase program irrespective of that leverage threshold. And if we're able to utilize the buyback program and it takes us above that all that means is that we wouldn't then be paying out an enhanced distribution. So, we still have the flexibility to do all of the capital projects and unit repurchases that we think are going to be enhancing overall to our stakeholders throughout the year.

Fair enough. Thanks Michael.

Thanks Gabe.

There are no further questions at this time. Mr. Ure I turn the call back over to you.

Thank you everyone for joining. Excited about the first start of the year and about the future quarters for the year. We look forward to speaking to everyone next quarter. Thank you very much.

This concludes today's conference call. Thank you for attending. You may now disconnect.