Good day, and welcome to the Western Midstream Partners second quarter 2021 earnings conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Kristen Shults, Senior Vice President, Finance and Communication. Please go ahead, ma'am. Thank you. I'm glad you could join us today for Western Midstream's second quarter 2021 conference call. I'd 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-K and 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 Craig Collins, our Chief Operating Officer. I'll now turn the call over to Michael. Thank you, Kristen, and good afternoon, everyone. Yesterday, we reported second quarter 2021 net income of $226 million and adjusted EBITDA of $491 million, an 11% increase over prior quarter's adjusted EBITDA. With strong producer activity levels and Winter Storm Uri behind us, both the DJ and Delaware Basins outperformed our second quarter expectations and generated increased throughput across all products in the portfolio. We continue to generate significant free cash flow by remaining disciplined in our costs and capital spending. For the second quarter, we generated $380 million of free cash flow and $247 million of free cash flow after distributions. We also increased our second quarter distribution to $0.00319 per unit, representing a 1.3% increase over the previous quarter, which is in line with our commitment to an annualized distribution growth of 5%. In a few moments, Craig will provide additional color on producer activity levels. We did, however, want to quickly comment on the second quarter impacts that drove higher than anticipated O&M expense and our thoughts on G&A going forward. Related to O&M, we incurred $6 million in additional utility charges that were invoiced by our providers related to Winter Storm Uri. The majority of these utility expenses are contractually passed through in gross margin, and therefore had a minimal impact on adjusted EBITDA for the quarter. We also recognized $4 million for a one-time environmental liability recorded in June. This relates to an incident that occurred several years ago, and the asset has since been decommissioned. As these charges subside, we expect O&M expense to normalize during the third quarter. Despite these one-time events, our O&M as a percentage of adjusted gross margin decreased compared to the prior quarter. We also saw a year-over-year increase in G&A for the three months ended June 30, 2021, from costs associated with contract and consulting, primarily related to IT services and fees associated with the transition and transformation of our IT infrastructure. This increase was embedded in our 2021 guidance, and we expect G&A to remain at this level as we fully absorb the cost of being a standalone enterprise. Turning to the second half of the year, we're seeing increased producer activity, specifically in the Delaware Basin, and we've been successful in attracting incremental third-party business. To prepare for increased throughput, we now expect to be at or above the high end of our 2021 CapEx range of $275 million-$375 million. We've reduced our cost structure and enhanced our operational efficiencies, and we expect increased capital spend to be dedicated to gathering these incremental volumes. While we expect these capital-efficient dollars to generate a modest increase in 2021 adjusted EBITDA, this uptick in activity gives us optimism on 2022 throughput levels and thus 2022 EBITDA. Coupled with our 2nd quarter outperformance, we now expect to be near the high end of our 2021 adjusted EBITDA range of $1.825 billion-$1.925 billion, despite the $30 million adjusted EBITDA impact of Winter Storm Uri during the 1st quarter. We are still fully committed to maintaining our leverage target at or below 4.0 times at the end of this year and at or below 3.5 times at year-end 2022. By retiring near-term maturities and generating incremental EBITDA, we can more quickly reach these targets, allowing us greater optionality and flexibility to adapt to evolving market conditions. Our performance through the 1st half of the year has enabled us to enhance stakeholder value. To recap, as of today, we have already retired the entire $431 million senior notes due in 2021. Through the unit buyback program and Anadarko note exchange, we have repurchased 31.34 million units, which represents over 7% of our outstanding units. We intend to opportunistically employ our previously authorized $250 million unit repurchase program, of which we have approximately $200 million remaining. Along with our planned increase to our quarterly distribution, we look forward to using these multiple paths to return value to stakeholders as conditions dictate. With that, I'll turn the call over to Craig to discuss our operations in the second quarter. Craig? Thank you, Michael. Before we get into this quarter's operational performance, I would like to take a moment to discuss the Crestone deal announced in our earnings release. During the second quarter, we executed a long-term gas gathering and processing agreement with Crestone Peak Resources. As part of the deal, Crestone dedicated approximately 74,000 acres in the Watkins area, located in Adams, Arapahoe, and Elbert Counties in Colorado to us, as well as up to 148,000 additional acres that may be acquired and connected to its gas gathering system in the future. I want to thank our operations, engineering, and commercial teams for their continued dedication and success in growing our third-party business. The deal demonstrates our ability to remain competitive by leveraging our expansive backbone infrastructure and focusing on cost and operational efficiencies. The competitive advantages we provide to producers like Crestone is only made possible by our dedication to safe, sustainable, and efficient operations. We're excited about our partnership with Crestone and look forward to supporting their development plans in the DJ Basin for years to come. Turning back to the second quarter, our throughput increased across all products as we experienced a full quarter with strong producer activity and without the market disruptions from Winter Storm Uri in the first quarter. As a result, our gas, oil, and water throughput in the Delaware Basin increased by about 10%, 14%, and 16%, respectively, from the prior quarter. In the DJ Basin, our gas and oil throughput outperformed our expectations in the quarter, increasing about 5% and 20%, respectively, from the prior quarter. The increase in rig activity early in the year, coupled with the continued completion of DUC inventory, resulted in producer outperformance during the second quarter and led to record gas throughput of 1.43 billion cubic feet per day in May. We expect DJ throughput levels to decrease in the third quarter as fewer wells are expected to come online in the back half of the year. We expect the recently announced Crestone deal to help offset these declines beginning in 2022. Across the portfolio, gas throughput increased by about 5% or 220 million cubic feet per day on a sequential quarter basis. Our water throughput increased by about 93,000 barrels per day, representing a 16% sequential quarter increase. Throughput from our crude oil and natural gas liquids assets were up about 14% or approximately 83,000 barrels per day from the previous quarter. Our per MCF adjusted natural gas gross margin increased by $0.02 on a sequential quarter basis to $1.21 due to increased throughput and a higher average gathering fee in the DJ Basin. Our per-barrel adjusted gross margin for crude oil and NGL assets decreased by $0.05 on a sequential quarter basis to $2.40 as a result of lower gross margin contributions from equity investments. Looking ahead, as Michael said earlier, the spike in commodity prices has helped to increase our producers' activity, and we're seeing this more so in the Delaware. Most of this movement is from our private producers. In fact, based on our current Delaware Basin forecast, we expect private producers to account for approximately 58% of our non-affiliate gas throughput in 2022 as compared to 50% of our non-affiliate gas throughput in 2021. Our public producers continue to spend capital relatively in line with their original 2021 budgets. Permian, and specifically the Delaware Basin where we operate, continues to see the highest activity levels among the U.S. basins. As a result of our top-tier position in the basin, we expect these companies, private and public, to continue to devote large portions of their capital programs to our acreage. These are strong tailwinds for our business, and they are the reasons that we're optimistic regarding the rest of 2021 and looking forward to 2022. At the beginning of the year, we expected to exit 2021 with relatively flat gas throughput, a percentage increase in oil by high single digits, and water rates by low double digits versus 2020 exit rates. Today, we expect similar oil exit rates of high single digits, but now have higher expectations for gas to increase by the mid-single digits and water to increase by the high teens. I'll now turn it back over to Michael for closing remarks. Thanks, Craig. As we've stated in our prior calls, our staff continues its hard work towards our goals in safety, asset integrity, and being strong stewards of our environment through minimizing our environmental footprint. We look forward to issuing our second ESG report ahead of our third quarter call, where we'll highlight the tremendous progress we've made in the first 18 months as a standalone company and discuss our embedded ESG goals for the future. I want to close by expressing my thanks to our employees and contractors. They spent our first six quarters as a standalone company establishing the foundation for WES, enhancing safety and protecting the environment, creating sustainable cost efficiencies, and ensuring the reliability and performance of our system. We again see the fruits of our labor with the Crestone deal and our ability to facilitate the accelerated producer activity we see today. With our talented workforce and upward trend in the commodity environment, I'm proud of the tremendous potential we have at WES as we enter the second half of the year. With that, we'll open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Kyle May at Capital One. Please go ahead. Hey, good afternoon, everyone. Afternoon, Kyle. I was wondering if we could start by talking a little bit more about the Crestone dedication and see if you could give us a sense of when those volumes will be additive and maybe the potential size of the volume contribution. Yeah, thanks, Kyle. The way that we expect that to impact us is we'll have minimal capital in 2021 with the volumes really to hit our system starting in 2022. The biggest impact from a cash flow standpoint starting in 2022 and beyond. Got it. Okay. That's helpful. Previously, I believe you had suggested that CapEx in 2022 would be similar to the budget for 2021. Now that you're looking to be near the upper end of the guidance range this year, can you give us any preliminary thoughts about the budget for next year? Yeah, I wouldn't draw conclusions as it relates to 2022 as it relates to the expected increase in capital for 2021. What we saw in 2021 was an increase in activity levels for the back half of this year and into 2022. As we think about capital, the back half of this year wouldn't deem it as indicative of what we might expect in 2022. A lot of that will be a little bit dependent on what the activity levels are expected to be going into 2023 and beyond. What we saw and the reason for the increase is additional well connects, hookups, and directly production-oriented capital that will accrue into the system into 2022. We'll come back with expectations on capital for 2022, but would not read into this increase as being indicative of what we might expect into future periods. Got it. Okay. That's helpful. Thanks, Michael. Our next question today comes from Jeremy Tonet at JP Morgan. Please go ahead. Hi, good afternoon. Afternoon. Just wanted to start off, I guess, on capital allocation philosophy. I was wondering if we could peel back the onion maybe a little bit more. When it comes to the 5% distribution growth versus de-leveraging versus unit repurchases, just wanted to see if there might be anything more specific as far as how you think about where to allocate capital. Any kind of rules of thumb or any other thoughts you could share on how you guys are thinking about capital allocation philosophy specifically going forward at this point? Yeah, it's a great question. Primary focus is that we want to exit this year, again, at or below four times and exit 2022 at or below three and a half times. That's the primary focus for us. Related to that is the near-term maturity that's coming due first part of 2022 that we're going to pay off using free cash flow, as well as the maturity in 2023 that we're going to utilize paying off free cash flow. As a result, those being the first major tenets for us, and the use of that capital. Plan to continue to opportunistically look for buyback opportunities. As it relates to the distribution, at least for the period of reference when we increased the distribution and the annual target rate, it was really in relation to the amount of savings that we were able to achieve from the buyback of units as well as the debt reduction. As we start seeing the fruits of our labors in overall leverage reduction, then we'll revisit that mix. Primarily, for now, it's focused on getting us to a leverage level that we feel is putting us in an optimal place to be able to return capital to stakeholders and give us greater certainty as to the sustainability of the business going forward. Got it. That's helpful. Thanks for that. Looking forward to 2022, I know you talked a bit about producer activities, just wondering what we might be able to extrapolate at this point with commodity prices moving up a bit higher here, although they've retreated recently. Just what you see for producer activity into 2022, because it takes six-nine months plus for CapEx to materialize into production. Just wondering if there's any kind of sensitivities that you could provide us for how next year could shake out at this point relative to this year. Yeah, I would just direct a couple of comments related to that. As we came into 2021, we were on a downward slope as it relates to volume, so headwinds coming into the year. What we're now pointing to are tailwinds exiting the year. Pretty high growth overall across the portfolio as it relates to exit to exit 2021 over 2020. In addition to that, the increase in capital, if you actually look at where that is being directed, it's towards connecting volumes, direct production-oriented capital, i.e., well connects, material increase relative to what we were expecting in the first quarter. That is to bring on volumes that we're going to reap the rewards of really into 2022. Again, you're exiting the year with tailwinds relative to 2020 exit. The increase in capital is so that we can get volumes online to really reap the rewards of that in 2022. All very positive as we think about the impact on volumes and what we're seeing in the business. Got it. I'll leave it there. Thank you. Our next question today comes from Derek Walker at Bank of America. Please go ahead. Hi, good afternoon, guys. Maybe just two quick ones from me. Craig, I think you talked about contributions from privates, I think relative to this year, next year increasing. Can you just kind of elaborate sort of how that compares to some of Oxy's commentary from its earnings call where I think it affects a similar production profile to 2021. I guess, do you see privates continue to increase and does that commentary that you alluded to in 2022 factor in Oxy's commentary. Thanks. Yeah. I think what we've outlined is that the mix of our non-affiliate volumes is increasing amongst the privates relative to our public producers through the uptick in activity that we've seen throughout 2021. As for what to expect in 2022 and beyond, particularly from the public companies that we have tied into our systems, we're really going to need to take a look and see where they come out with their budgets for 2022. We continue to have dialogue with them and say in those conversations, we've got pretty good line of sight for a number of these private producers that have signaled an increase in activity. Thus, the acceleration of capital, as Michael's alluded to, on well connects and with some compression included in that as well to get ready for that growth in 2022 volumes. as for what that mix will be in 2022 and beyond, we'll really just need to see how the '22 budgets get worked out for the rest of our producers. Got it. Appreciate it. Mike- Sorry. Go ahead. Just one additional comment on that is that Oxy obviously has a very attractive and vast portfolio of assets, and really only a fraction of that. You need to take into consideration when they're making comments as it relates to the totality of their portfolio, that we're just a fraction of that. When you see the impact on us, it's more specific to where they're directing that capital as opposed to the total portfolio. Appreciate that, Mike and Crai g. Maybe just a quick follow-up here. Just on the margin commentary, you talked about oil being down just relative to higher contribution from equity investments. On the gas margin, I think that was just an increase due to the DJ. How should we think about the margin going forward or margin per barrel going forward? You have the deal in the Colorado they just announced. Should we expect that to be a similar margin on the gas side? On the oil side, should we expect that similar to 2Q run rate? Thanks. Yeah. As it relates to the margin, actually, pretty limited variability, frankly, when you look at it quarter-over-quarter. Q1 for natural gas was $1.19, in second quarter is $1.21. Crude oil and NGL is $2.45, and then $2.40 for second quarter, and $0.92 for water, quarter-over-quarter for both quarters. Actually pretty limited variability when you look at it. You're always going to see a little bit of that variance depending on the contribution from equity method investments as well as where the volumes are coming from within our contract portfolio, where there are different rates associated with it. As it relates to Crestone, again, we don't actually give specifics related to contracts. The expectation of when those volumes are going to come online is really more 2022 and beyond. wouldn't derive any indication as to what that might mean for gross margin in 2021. I would just add that going from one year to the next, the cost of service rate resets can have an impact on what those gross margins look like. I wouldn't necessarily extrapolate too far out into the future. In the near term, yeah, don't expect a whole lot of variability. Great. Thanks, Mike. Thanks, Craig. Appreciate all of it there. Thank you. Our next question today comes from Shneur Gershuni with UBS. Please go ahead. Hi. Good afternoon, everyone. Just a few follow-ups to some of the answers that you gave previously. Maybe to start on the capital allocation question. I fully understand that the distribution increase in 2021 was sort of a function of the amount of units that you would reduce through the buyback program, and that the priority is the next maturity in the tower. I was kind of wondering, what are the other options that you're thinking about? I guess it's kind of a high-class problem, but it sort of seems like you'll end up at a suboptimal leverage ratio towards the end of next year. Would you consider something similar to what one of your peers recently did with a buyback from the sponsor as well as a one-time special step-up in the distribution? Yeah, Shneur, it's a great question, and highlights the opportunity that we have as we get into the more attractive leverage levels. I definitely would concur that certain leverage point, the utility of additional debt reduction actually is reduced certainly. Thankfully, we're getting to a place where the leverage is of a very attractive level where those other opportunities are available and open to us. The answer is yes, we're definitely open to considering the best ways in which we'd be able to return incremental capital to stakeholders. The good part is that there are a lot of opportunities available to us at that point. Primary focus for us in the near term, however, is to get to that ideal leverage level wherein we can assess those options, and that's been our focus up to this point. No, great. Appreciate the color there. Maybe as a follow-up on the CapEx side for '22, can you sort of share with us what you're thinking about or what the makeup would be? I understand you can't give us a final number at this point. Do you need to build a new processing plant, or do you have plenty of capital-light options as well as well connect capital, and that really is the majority of the makeup of how you're thinking about spend for '22? Yep, that's a great question. For us, we're currently expecting the mix to be pretty similar to the way that you've seen it in 2021. As we've mentioned before, we would first look if we have needs outside of our 100% owned assets to look for off loads or other arrangements so that we can utilize the capacity that exists in the areas in which we operate. Our current expectation for 2022 would be a similar mix of capital to what we see today, very quick cycle, volume-oriented CapEx that we would expect in 2022 relative to 2021. just to clarify, given that you're expecting a similar type of mix, then the delta should just really be a more function of what your expected volumes are for '21 versus your expected volumes for '22, and sort of, kind of adjust it that way. Is that kind of a good roadmap? Yeah. Very activity dependent type structure. Exactly. Sure. Perfect. All right. Thank you very much. Really appreciate the call today. Our next question today comes from Robert Mosca with Mizuho. Please go ahead. Hi, everyone. Thanks for taking my questions. Just wondering if you have any early indications of how cost of service adjustments could shake out in the fourth quarter, maybe relative to 2020. You've pointed towards the higher end of the CapEx range and been somewhat deliberate in messaging that volume growth could be more of a '22 feature. Just curious if the activity in CapEx associated with that growth will be captured in your rates for this year's adjustment or for possibly next year. Yeah. A couple things to consider. We don't have an indication yet. It's too early to tell and definitely will be reflective on what activity levels are expected at the time that those assessments do take place. A couple of comments is that, as Craig mentioned, the percentage of non-affiliate gas, for example, is increasing, therefore more third party oriented. As we think about the increase in capital, I wouldn't necessarily derive the conclusion that it is all specific to cost of service type contracts. At this point, we don't have an assessment of what they might look like. would not exactly draw a straight line as it relates to the increase in capital and the impact on cost of service rates that might occur at the end of the year, because a fair amount of that might be activity levels that are not related to the cost of service-oriented contract. Okay, great. That's helpful color. In your prepared remarks, I think you said that the Crestone deal should offset some DJ declines in '22. I'm not sure if I heard that right, but just wondering if your base case expectation on the DJ for next year is declines in your legacy acreage? If you could provide more color there, that'd be helpful. Craig, you want to comment on that? Yeah. Actually, our volumes up in the DJ for next year relative to this year, we see as being relatively flat from where we're going to exit this year. That's due in large part to the incremental volumes that we'll see from the Crestone deal to help offset what would otherwise be natural declines. Okay, got it. That's all I had for me. Thanks. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star then one. Today's next question comes from Sunil Sibal with Seaport Securities. Please go ahead. Yeah. Hi, good afternoon, everybody, and thanks for all the color on the call. since the start of the year WES has done a fairly decent job of managing the debt maturities and also kind of laying out a plan for debt reduction. I'm just curious how your discussions with rating agencies have been on that front. when do you think you would get some credit from them for the actions that you've taken so far? Yeah, it's a great question. As it relates to the credit agencies, we maintain a very constant dialogue with them. Obviously, the positive results that we've seen, the debt reduction overall is received very positively, especially as it relates to actual debt reduction and not just EBITDA growth being the improvement overall in those metrics. As it relates to ratings, however, they've been pretty open with us that there will be some connection of varying degrees, depending on the agency that you're referred to with Occidental and their ratings. We would expect that that would continue despite all the positive debt reduction activities that we've engaged in. I think that's really where it comes out. I look at us as being very much investment grade in our metrics today. View it as an indication of the positive elements of our business, the way that we have been able to reduce debt over time and put ourselves in a very attractive position from a leverage standpoint. From a rating perspective, it will be somewhat dependent on our largest customer, Oxy. Got it. Kind of related to that, could you give us a sense of where third party kind of cash flows would end up in, or ballpark would end up in 2021? since there will be further kind of uptick in the third party numbers or contributions? Yeah, we don't have anything additional disclosed other than what we disclosed in the 10-K as it relates to affiliate versus non-affiliate volumes, which it's in the 60-odd% range from an affiliate revenue perspective. Are you saying that you still expect to be in that ballpark for the next couple of years, or should we just kind of have to wait out to see how those numbers come out? Yeah, we don't actually provide any specific projection or guidance as it relates to where that ratio will go over time. Got it. Thanks for that. Last question from me was on the M&A front. There have been some transactions in the midstream space. I was kind of curious, how do you view your asset positioning and some things that might be available around where you guys are? Yeah, I think it's a great question. A couple of comments as it relates to that. We have seen an uptick and an improvement in terms of the attractiveness of assets like our portfolio. As we think about non-core assets, that puts us in a great position to be able to find opportunities for them if they do exist from a sales perspective as it relates to acquisition targets. Part of the element of us getting ourselves into the best place from a leverage standpoint is that we would be able to opportunistically look out for those M&A opportunities that would be accretive overall to our operational footprint and to our financial footprint as we look forward. We can definitely see with our strong asset base, strong customer relations, and customer base to be able to achieve some synergies if we see opportunities in around where our assets might sit. From a leverage standpoint, putting ourselves in the best position to be able to execute on that has been our goal up to this point, and will continue to be until we get to that optimal range. Okay, thanks, Mike. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any final remarks. Thank you very much for joining us for this quarter's call. Very positive performance by the team. I'd like to thank the entire employee base for all of their efforts up to this point. Look forward to what we can deliver in the future. Thank you all for joining. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.