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Western Midstream Posts 99% YoY Increase in Q3 Earnings, Announces $250 Million Buyback Program

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Shares of Western Midstream Partners traded 23% higher after the company reported Q3/20 financial results that included a nearly 100% growth in net income. The firm also provided FY/21 guidance and announced a $250 million buyback program.

Western Midstream Partners LP (WES:NYSE) yesterday announced third-quarter 2020 operating and financial results for the period ended September 30, 2020.

The company reported that in Q3/20 net income available to limited partners totaled $241.5 million, or $0.55 per common unit (diluted), compared to $121.2 million, or $0.27 per common unit (diluted) in Q3/19.

The firm indicated that in Q3/20 adjusted EBITDA was $518.4 million, Cash flows from operating activities totaled $392.9 million, and free cash flow amounted to $339.2 million. These results compared favorably with $410.2 million, $340.2 million, and $70.7 million reported, respectively, in Q3/19.

Western Midstream's President, CEO and CFO Michael Ure commented, "As evidenced by our outstanding third-quarter and year-to-date financial and operational results, the WES team continues to surpass expectations as we adapt and respond to market challenges...Producer outperformance, the pursuit of operational efficiencies and sustainable cost savings, and continued commercial achievements contributed to the highest quarterly Adjusted EBITDA in WES's history. As a result of the incredible outperformance achieved thus far and anticipated continued success, we expect full-year Adjusted EBITDA above the high-end of our originally issued guidance range of $1.875 billion to $1.975 billion and capital expenditures meaningfully below the low-end of our previously updated 2020 guidance range of $400 million to $450 million."

"Notwithstanding the significant challenges faced this year, we expect to realize approximately $175 million in sustainable annual operating cost and G&A savings compared to our originally issued guidance," Ure added.

The company provided some preliminary full-year 2021 guidance. Western Midstream advised that for FY/21 it expects adjusted EBITDA will be between $1.825 billion and 1.925 billion. The firm estimates total capital expenditures of $275-375 million, which is $100 million less than the midpoint of the firm's previously reported guidance.

Western Midstream stated that it estimates that FY/21 distributions will be at least $1.24 per unit and that it will be in a position to repay 2021 debt maturity by utilizing free cash flow.

The company additionally announced that "the board of directors of the Partnership's general partner has authorized the Partnership to commence a buyback program of up to $250 million of the Partnership's common units through December 31, 2021."

Western Midstream Partners is a master limited partnership (MLP) that was established to acquire, own, develop and operate midstream assets. The firm stated that its assets are located in New Mexico, North-central Pennsylvania, Texas and the Rocky Mountains. The company's business operations entail "the 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." The firm is also engaged on its own account and serves as an agent for its customers in buying and selling of natural gas, natural-gas liquids and condensate.

Western Midstream started the day with a market cap of around $4.0 billion with approximately 444 million shares outstanding. WES shares opened almost 9% higher today at $9.90 (+$0.81, +8.92%) over yesterday's $9.09 closing price. The stock has traded today between $9.85 and $11.18 per share and is currently trading at $11.22 (+$2.13, +23.43%).

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