01—Abstract
Summary
Summary of the 10-K filed February 23, 2022. Cited figures are marked; the original filing is the authoritative source.
Western Midstream Partners, LP (NYSE: WES) reported its annual results for the year ended December 31, 2021 in this Form 10-K filed February 23, 2022.
The Partnership is a midstream master limited partnership that gathers, compresses, treats, processes and transports natural gas, gathers and transports condensate, NGLs and crude oil, and gathers and disposes of produced water, with assets in Texas, New Mexico, the Rocky Mountains and North-central Pennsylvania. Occidental Petroleum owns the general partner and held 49.7% of common units as of December 31, 2021, and Occidental accounted for 57% of total revenues and other for the year. Total revenues and other were $2.88 billiona in 2021 versus $2.77 billion in 2020, and net income attributable to the Partnership was $916.3 million versus $527.0 million.
Adjusted EBITDA was $1.95 billionb, down from $2.03 billion, and free cash flow rose to $1.49 billion from $1.23 billion. Balance sheet and capital allocation were central to 2021. Total assets were $11.27 billion and long-term debt was $6.40 billion, with the 4.000% Senior Notes due 2022 ($502.1 million) classified as short-term and producing a $455.4 million working capital deficit.
The Partnership redeemed $431.1 millionc of 5.375% Senior Notes due 2021, repurchased $500.0 million of senior notes via tender offer, and completed a $250.0 million unit buyback, then authorized a new buyback of up to $1.0 billion through December 31, 2024 in February 2022. The quarterly distribution for the fourth quarter of 2021 was $0.32700 per unit, and 2022 capital expenditures are estimated at $375.0 million to $475.0 million. S&P upgraded WES Operating's long-term debt to BBB- in January 2022.
The filing also discloses risks investors should weigh, including dependence on Occidental, exposure to producer activity levels in the Delaware and DJ Basins, a material weakness-free internal control assessment by KPMG, an impairment-related critical audit matter, and an ongoing dispute with Occidental over DJ Basin oil-gathering cost-of-service rates. Weather from winter storm Uri reduced net income and Adjusted EBITDA by approximately $30 milliond in 2021.
02—Key points
Key Highlights
- Total revenues and other of $2.88 billion for 2021, up from $2.77 billion in 2020; net income attributable to Western Midstream Partners, LP of $916.3 million versus $527.0 million in 2020.
- Adjusted EBITDA of $1.95 billion, down from $2.03 billion in 2020, while free cash flow increased 21% to $1.49 billion.
- Occidental accounted for 57% of total revenues and other in 2021 and holds 49.7% of outstanding common units; the general partner is wholly owned by Occidental.
- Capital returns: $1.0 billion unit buyback authorized in February 2022 through December 31, 2024, after completing a $250.0 million program in 2021; quarterly distribution of $0.32700 per unit for Q4 2021.
- Debt reduction: $431.1 million of 5.375% Senior Notes redeemed and $500.0 million of senior notes repurchased in 2021; total carrying value of debt was $6.9 billion at year-end, with the $502.1 million 4.000% Notes due 2022 classified as short-term.
- Credit upgrades: S&P raised WES Operating's long-term debt rating to BBB- in January 2022, and annualized borrowing costs are expected to decrease by $23.6 million as a result.
- Winter storm Uri and a March 2021 Colorado blizzard reduced net income and Adjusted EBITDA by approximately $30 million in 2021; 2022 capital expenditure guidance is $375.0 million to $475.0 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 23, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $2.88B$2.77B | +3.8% |
| Operating Expenses | $1.75B$2.13B | −18.0% |
| Operating Income | $1.34B$878.91M | +52.0% |
| Interest Expense | $376.51M$380.06M | −0.9% |
| Net Income | $916.29M$527.01M | +73.9% |
| EPS (Basic) | $2.18$1.18 | +84.7% |
| EPS (Diluted) | $2.18$1.18 | +84.7% |
05—Questions
Frequently Asked Questions
How much did Western Midstream Partners earn in 2021 and how did it compare with 2020?
Net income attributable to Western Midstream Partners, LP was $916.3 million in 2021, compared with $527.0 million in 2020. Total revenues and other rose to $2.88 billion from $2.77 billion, and operating income increased to $1.34 billion from $878.9 million, which included a $441.0 million goodwill impairment in 2020.
How dependent is the Partnership on Occidental Petroleum?
Heavily. For 2021, Occidental accounted for 57% of total revenues and other, 36% of natural-gas throughput, 89% of crude-oil and NGLs throughput, and 87% of produced-water throughput, excluding equity investments. Occidental also owns the general partner and held 49.7% of outstanding common units as of December 31, 2021, and the filing states Occidental is under no contractual obligation to maintain production volumes dedicated to the Partnership.
What are the Partnership's main debt maturities and liquidity sources?
Total carrying value of debt was $6.9 billion at December 31, 2021. The 4.000% Senior Notes due 2022 ($502.1 million) are short-term and drove a $455.4 million working capital deficit. The Partnership had $2.0 billion available under its revolving credit facility, which matures in February 2025 for extending lenders. Future interest and RCF fee payments were estimated at $342.6 million for 2022.
What shareholder returns did the Partnership provide in 2021 and what is planned for 2022?
In 2021 the Partnership paid $533.8 million of distributions to unitholders and repurchased 8,707,869 common units on the open market for $167.2 million plus 2,500,000 units from Occidental for $50.2 million, completing a $250.0 million program. The Q4 2021 distribution was $0.32700 per unit, up from $0.32300 in Q3. In February 2022 the Board authorized a buyback of up to $1.0 billion through December 31, 2024, which the filing states does not obligate the Partnership to purchase any specific amount.
What key risks are highlighted in the filing?
The filing highlights dependence on Occidental, sustained low commodity prices reducing producer activity, COVID-19 effects, credit-rating sensitivity (with $3.1 billion of senior notes whose coupons adjust to rating changes), limited geographic diversification across its operating areas, environmental and pipeline-safety regulation including FERC indexing changes effective March 1, 2022, and a dispute with Occidental over DJ Basin oil-gathering cost-of-service rates that could reduce rates and result in a non-cash charge if resolved adversely.
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