Western Midstream Partners, LP (WES): Business Model Canvas [11-2024 Updated]

Discover the strategic framework that drives Western Midstream Partners, LP (WES) in the competitive energy sector. This blog post delves into the Business Model Canvas of WES, highlighting key elements such as partnerships, activities, and revenue streams. Uncover how WES delivers value through its extensive infrastructure and customer-centric approach, ensuring reliability and sustainability in midstream services. Read on to explore the intricate details that make WES a pivotal player in the oil and gas industry.

Western Midstream Partners, LP (WES) - Business Model: Key Partnerships

Occidental Petroleum Corporation (general partner)

Occidental Petroleum Corporation (OXY) serves as the general partner of Western Midstream Partners, LP, holding a 42.5% limited partner interest and a 2.3% general partner interest as of September 30, 2024. This partnership structure allows WES to leverage Occidental's extensive operational expertise and resources in the oil and gas sector. For the nine months ended September 30, 2024, WES reported total revenues and other of $1.6 billion from related-party transactions, predominantly driven by services provided to Occidental.

Various oil and gas producers

WES collaborates with numerous oil and gas producers for its gathering, processing, and transportation services. The throughput for natural gas assets reached 5,189 MMcf/d for the three months ended September 30, 2024, reflecting the partnership's robust engagement with producers. The company's service revenues for the same period amounted to $883.4 million, with fee-based revenues contributing significantly. This diverse producer network enhances WES's operational capacity and market reach.

Local and state regulatory bodies

Western Midstream maintains critical relationships with local and state regulatory bodies to ensure compliance with environmental and operational regulations. This collaboration is essential for obtaining necessary permits and adhering to safety standards. The company incurred property and other taxes totaling $43.98 million for the nine months ended September 30, 2024, underlining the financial implications of regulatory adherence. Such partnerships are vital for mitigating operational risks and maintaining a license to operate in various jurisdictions.

Equipment suppliers and service providers

WES relies on a network of equipment suppliers and service providers to support its operational needs. As of September 30, 2024, the company's total assets were valued at $12.98 billion, including significant investments in property, plant, and equipment amounting to $9.70 billion. The operational efficiency of WES is partially attributed to these partnerships, which provide essential technology and maintenance services necessary for the functionality of its infrastructure.

Partnership Type	Key Metrics	Financial Impact
General Partner	OXY - 42.5% limited partner interest	Total revenues from related parties: $1.6 billion
Oil and Gas Producers	Throughput: 5,189 MMcf/d	Service revenues: $883.4 million
Regulatory Bodies	Tax Compliance	Property and other taxes: $43.98 million
Equipment Suppliers	Total Assets: $12.98 billion	Property, Plant & Equipment: $9.70 billion

Western Midstream Partners, LP (WES) - Business Model: Key Activities

Gathering, compressing, treating, and transporting natural gas

For the three months ended September 30, 2024, Western Midstream Partners (WES) reported total throughput for natural gas assets of 5,016 million cubic feet per day (MMcf/d), reflecting a 1% increase from 4,988 MMcf/d in the previous quarter and a significant 17% increase from 4,283 MMcf/d during the same period in 2023. The adjusted gross margin for natural gas assets averaged $1.29 per Mcf, down from $1.33 per Mcf in the previous quarter.

Processing and transporting crude oil and NGLs

During the same reporting period, the total throughput for crude oil and natural gas liquids (NGLs) was 506 thousand barrels per day (MBbls/d), a slight decrease of 2% from the previous quarter's 515 MBbls/d, but a notable decrease of 17% from 635 MBbls/d year-over-year. The adjusted gross margin for crude oil and NGLs was reported at $2.88 per barrel for Q3 2024, compared to $2.96 per barrel in the previous quarter.

Managing produced water disposal

WES managed a throughput of 1,099 MBbls/d for produced water during the three months ended September 30, 2024, which represented a 2% increase from 1,102 MBbls/d in the previous quarter and an 11% increase year-over-year. The adjusted gross margin for produced water was approximately $0.96 per barrel, consistent with the previous quarter's margin.

Engaging in equity investments in midstream assets

As of September 30, 2024, WES reported total equity investments contributing $23.977 million in income for the three months ended September 30, 2024, compared to $27.431 million in the previous quarter. The partnership's total revenues and other for the nine months ended September 30, 2024, amounted to $2.676 billion, a substantial increase from $2.248 billion in the same period of 2023.

Activity	Q3 2024 Throughput	Q3 2024 Adjusted Gross Margin	Year-over-Year Change
Natural Gas Gathering	5,016 MMcf/d	$1.29 per Mcf	+17%
Crude Oil and NGLs	506 MBbls/d	$2.88 per barrel	-17%
Produced Water	1,099 MBbls/d	$0.96 per barrel	+11%
Equity Investments Income	N/A	$23.977 million	-13%

Western Midstream Partners, LP (WES) - Business Model: Key Resources

Extensive pipeline and processing facility network

Western Midstream Partners, LP operates a comprehensive network of pipelines and processing facilities, which are critical to its business model. As of September 30, 2024, the company reported a total property, plant, and equipment cost of $15.34 billion, with net property, plant, and equipment valued at $9.70 billion. The company’s throughput capabilities include:

Asset Type	Throughput (MMcf/d or MBbls/d)	Period
Natural Gas	5,016 MMcf/d	Q3 2024
Crude Oil and NGLs	506 MBbls/d	Q3 2024
Produced Water	1,099 MBbls/d	Q3 2024

Skilled workforce with industry expertise

Western Midstream prides itself on having a skilled workforce that brings extensive industry expertise. This workforce is essential for the operation of its complex systems and ensuring compliance with regulatory standards. The company’s focus on human capital is reflected in its investment in training and development programs, which enhance operational efficiency and safety protocols.

Strong financial backing from equity and debt financing

As of September 30, 2024, Western Midstream reported total liabilities of $9.60 billion and total equity of $3.38 billion, indicating a solid capital structure. The company has utilized both equity and debt financing effectively, highlighted by:

• Outstanding debt of $7.93 billion
• Recent issuance of $800 million in Senior Notes due 2034
• Cash and cash equivalents amounting to $1.12 billion as of September 30, 2024

Strategic geographic locations in Texas, New Mexico, and Rocky Mountains

Western Midstream's operations are strategically located in key areas such as Texas, New Mexico, and the Rocky Mountains, allowing the company to efficiently service major oil and gas production regions. This geographic advantage supports its logistical operations and enhances its ability to respond to market demands swiftly.

The company’s revenue from its service offerings for the nine months ended September 30, 2024, totaled $2.68 billion, reflecting its strong market position.

Western Midstream Partners, LP (WES) - Business Model: Value Propositions

Reliable midstream services for natural gas and oil

Western Midstream Partners, LP (WES) operates an extensive midstream network across key regions in the United States, primarily focusing on natural gas, crude oil, and produced water. As of September 30, 2024, the company reported total throughput of 5,016 million cubic feet per day (MMcf/d) for natural gas assets and 506 thousand barrels per day (MBbls/d) for crude oil and NGLs. The reliability of these services is underscored by a significant increase in throughput, with a 17% year-over-year growth in natural gas throughput.

Commitment to safety and environmental sustainability

WES emphasizes a strong commitment to safety and environmental sustainability in its operations. The company has invested significantly in enhancing its safety culture and environmental protection measures. This commitment is reflected in its operational practices and is crucial for maintaining regulatory compliance and industry standards. For instance, WES's capital expenditures for the nine months ended September 30, 2024, totaled approximately $595.1 million, predominantly directed toward expansion, construction, and asset integrity projects.

Flexible solutions tailored to customer needs

WES offers flexible solutions that cater to the diverse needs of its customer base. The company provides customized service agreements and adapts its operations based on client requirements. This flexibility is evidenced by the increase in service revenues for fee-based services, which rose by 19% year-over-year to $2.39 billion for the nine months ended September 30, 2024. This adaptability not only enhances customer satisfaction but also fosters long-term partnerships.

Competitive pricing through efficient operations

WES maintains a competitive pricing strategy through operational efficiencies. The adjusted gross margin for natural-gas assets averaged $1.29 per Mcf, while the gross margin for crude-oil and NGLs assets averaged $2.88 per barrel. The company’s focus on cost management and efficiency has enabled it to offer competitive rates, which is vital in attracting and retaining customers in the highly competitive midstream sector.

Metric	Q3 2024	Q3 2023	Change (%)
Natural Gas Throughput (MMcf/d)	5,016	4,283	17%
Crude Oil & NGLs Throughput (MBbls/d)	506	635	-17%
Service Revenues (Fee Based, $ billion)	2.39	2.00	19%
Adjusted Gross Margin - Natural Gas ($/Mcf)	1.29	1.27	3%
Adjusted Gross Margin - Crude Oil ($/Bbl)	2.88	2.49	17%

Western Midstream Partners, LP (WES) - Business Model: Customer Relationships

Long-term contracts with major customers

Western Midstream Partners, LP (WES) relies significantly on long-term contracts to ensure stable revenue streams. As of September 30, 2024, the company's total revenues from customers reached $2.68 billion for the nine months, with service revenues from fee-based contracts amounting to $2.39 billion. This demonstrates a strong reliance on contractual agreements with major customers to provide consistent cash flows.

Regular communication and support for operational needs

WES emphasizes regular communication with its customers to address operational needs effectively. The company maintains a proactive approach in managing customer relationships, which is reflected in its service revenues. For the three months ended September 30, 2024, service revenues were reported at $883.1 million, showcasing an increase from $775.6 million in the same period of the previous year. This growth is attributed to enhanced support and communication strategies that align operational capabilities with customer demands.

Commitment to high service standards and safety

WES is committed to high service standards and safety protocols, which are integral to its customer relationship strategy. The company operates 26 natural-gas processing plants and has invested in safety training and protocols, ensuring reliable service delivery. The operational metrics indicate that WES processed 4,298 MMcf/d of natural gas for the three months ended September 30, 2024, reflecting the operational efficiency and safety measures in place.

Customer-centric approach to service delivery

The customer-centric approach of WES is evident in its focus on customized service offerings. The company has adapted its service delivery to meet the specific needs of its clients, which has resulted in increased throughput and customer satisfaction. For instance, the total throughput for natural-gas assets for the three months ended September 30, 2024, was 5,189 MMcf/d, representing a 1% increase from the previous quarter.

Metric	Q3 2024	Q3 2023	Change (%)
Total Revenues from Customers	$883.1 million	$775.6 million	13.9%
Service Revenues – Fee Based	$814.3 million	$695.5 million	17.0%
Total Throughput (MMcf/d)	5,189	4,439	16.9%

Overall, Western Midstream Partners, LP's customer relationships are built on long-term contracts, effective communication, a commitment to high service standards, and a customer-centric approach, all contributing to its robust financial performance in 2024.

Western Midstream Partners, LP (WES) - Business Model: Channels

Direct contracts with oil and gas producers

Western Midstream Partners, LP (WES) maintains direct contracts with various oil and gas producers, which are crucial for securing a steady revenue stream. The company reported total service revenues of approximately $2.68 billion for the nine months ended September 30, 2024. This figure represents a significant increase compared to the $2.25 billion reported for the same period in 2023. The direct contracts often include fee-based service agreements that provide predictable cash flows, enhancing financial stability.

Online platforms for service information and updates

WES utilizes online platforms to communicate service updates and provide information to its clients. These platforms facilitate efficient communication and allow customers to access real-time data regarding service availability and operational updates. As of September 30, 2024, WES had an operating income of $1.54 billion, up from $987.6 million in the prior year, indicating effective use of digital channels to enhance operational efficiency.

Industry conferences and trade shows for networking

Participation in industry conferences and trade shows is a key strategy for WES to network with potential clients and partners. In 2024, WES focused on enhancing its visibility in the market through events that connect them with oil and gas producers. Networking at these events has historically led to new contracts, contributing to the reported $883 million in total revenues for the third quarter of 2024.

Partnerships with regulatory bodies for compliance

WES actively engages with regulatory bodies to ensure compliance with industry regulations. This proactive approach not only mitigates risks but also enhances the company’s reputation among stakeholders. As of September 30, 2024, WES reported total liabilities of approximately $9.6 billion, reflecting its commitment to maintaining compliance and operational integrity.

Channel Type	Description	Key Metrics
Direct Contracts	Agreements with oil and gas producers for fee-based services.	Total Service Revenues: $2.68 billion (9M 2024)
Online Platforms	Digital channels for service updates and customer communication.	Operating Income: $1.54 billion (9M 2024)
Industry Conferences	Networking opportunities with potential clients and industry leaders.	Total Revenues: $883 million (Q3 2024)
Regulatory Partnerships	Collaboration with regulatory bodies for compliance.	Total Liabilities: $9.6 billion (Q3 2024)

Western Midstream Partners, LP (WES) - Business Model: Customer Segments

Oil and gas exploration and production companies

Western Midstream Partners, LP (WES) serves a substantial customer base in the oil and gas exploration and production sector. The company’s revenue from service fees for the nine months ended September 30, 2024, amounted to approximately $2.39 billion, an increase from $2.00 billion in the same period of 2023, highlighting the growing demand from exploration and production companies.

WES's operations in various basins, including the Delaware Basin and DJ Basin, are critical for these customers, providing services such as gathering, processing, and transportation of hydrocarbons. The throughput for natural gas assets reached 5,016 MMcf/d for the three months ended September 30, 2024, indicating a 1% increase compared to the prior quarter.

Industrial users of natural gas

WES also caters to industrial users of natural gas, providing a vital supply for various industrial applications. The adjusted gross margin for natural gas assets was $1.29 per Mcf for the three months ended September 30, 2024. The company’s effective service delivery has enabled it to secure long-term contracts with several industrial entities, contributing to a stable revenue stream.

In the nine months ended September 30, 2024, WES reported total revenues from customers of $2.68 billion, demonstrating the significance of industrial contracts in its overall business model.

Utilities and energy providers

Utilities and energy providers are another key customer segment for WES. The partnership offers services that include the transportation of natural gas and NGLs, essential for power generation and heating. The total throughput for crude oil and NGLs assets was 506 MBbls/d for the three months ended September 30, 2024, reflecting a stable demand from utilities.

Revenue from product sales to utilities reached approximately $109 million for the nine months ended September 30, 2024, up from $100 million in the previous year. This growth illustrates the increasing reliance on WES’s infrastructure by energy providers to meet their operational needs.

Local municipalities for water disposal services

WES provides critical water disposal services to local municipalities, particularly in areas with significant oil and gas production activities. The produced-water throughput for WES was 1,099 MBbls/d for the three months ended September 30, 2024, indicating a robust demand for water management solutions.

These services are essential for maintaining environmental compliance and supporting local water management strategies. The adjusted gross margin for produced-water assets averaged $0.96 per Bbl, showcasing the efficiency of WES's operations in this segment.

Customer Segment	Revenue (9M 2024)	Throughput (MMcf/d or MBbls/d)	Adjusted Gross Margin
Oil and Gas Exploration and Production	$2.39 billion	5,016 MMcf/d	N/A
Industrial Users of Natural Gas	$2.68 billion	N/A	$1.29 per Mcf
Utilities and Energy Providers	$109 million	506 MBbls/d	N/A
Local Municipalities (Water Disposal)	N/A	1,099 MBbls/d	$0.96 per Bbl

Western Midstream Partners, LP (WES) - Business Model: Cost Structure

Operational and maintenance costs for facilities

For the nine months ended September 30, 2024, Western Midstream Partners, LP incurred operational and maintenance costs totaling approximately $649.3 million. This represents an increase from $562.1 million for the same period in 2023, highlighting a year-over-year increase of 15.5% due to rising mechanical-integrity costs and salaries and wages expenses.

Cost Category	2024 (Nine Months)	2023 (Nine Months)	Year-Over-Year Change (%)
Operational and Maintenance Costs	$649.3 million	$562.1 million	15.5%

Capital expenditures for infrastructure development

Capital expenditures for the nine months ended September 30, 2024, amounted to $595.1 million, compared to $536.4 million for the same period in 2023, indicating an increase of 10.9%. This investment primarily focused on construction, expansion, and asset integrity projects across various facilities, including the West Texas complex and DBM water systems.

Expenditure Type	2024 (Nine Months)	2023 (Nine Months)	Year-Over-Year Change (%)
Capital Expenditures	$595.1 million	$536.4 million	10.9%

Labor and administrative expenses

Labor and administrative expenses for the nine months ended September 30, 2024, totaled $195.5 million, up from $159.6 million in the same period of 2023. This reflects a 22.5% increase, primarily driven by higher personnel costs and IT expenditures.

Expense Type	2024 (Nine Months)	2023 (Nine Months)	Year-Over-Year Change (%)
Labor and Administrative Expenses	$195.5 million	$159.6 million	22.5%

Cost of compliance with regulatory requirements

In 2024, Western Midstream Partners, LP reported compliance costs related to regulatory requirements amounting to approximately $12.6 million for the third quarter alone, representing a 28% decrease from $17.4 million in the previous quarter. The total compliance costs for the nine months ended September 30, 2024, were approximately $43.9 million, compared to $39.9 million for the same period in 2023.

Compliance Cost Type	2024 (Nine Months)	2023 (Nine Months)	Quarterly Change (%)
Compliance Costs	$43.9 million	$39.9 million	10%

Western Midstream Partners, LP (WES) - Business Model: Revenue Streams

Service fees from gathering and processing

For the nine months ended September 30, 2024, Western Midstream Partners generated $2.39 billion in service revenues from gathering and processing activities, reflecting an increase from $2.00 billion during the same period in 2023. The service revenues for the third quarter of 2024 alone amounted to $814.3 million, compared to $695.5 million in the third quarter of 2023.

Product sales of natural gas, crude oil, and NGLs

In terms of product sales, Western Midstream Partners reported total product sales of $109.1 million for the nine months ended September 30, 2024, which is an increase from $100.3 million for the same period in 2023. The breakdown for the third quarter of 2024 shows product sales totaling $19.7 million, a decrease from $31.7 million in the previous year. The average sales prices per Mcf for natural gas were $0.36 for the nine months ended September 30, 2024, down from $1.67 in the same period of 2023.

Revenue from long-term contracts

Western Midstream Partners has significant revenue derived from long-term contracts. As of September 30, 2024, the total revenues and other, which include long-term contract revenues, reached $2.68 billion for the nine months ended, compared to $2.25 billion in the previous year. The company reported contract liabilities of $581.4 million as of September 30, 2024.

Equity income from investments in joint ventures and partnerships

For the nine months ended September 30, 2024, equity income from investments in joint ventures and related parties was $84.2 million, a decrease from $116.8 million during the same period in 2023. The equity income for the third quarter of 2024 was $24.0 million. This decline is attributed to the sale of several equity investments earlier in the year.

Revenue Stream	Q3 2024 Revenue (in millions)	Q3 2023 Revenue (in millions)	YTD 2024 Revenue (in billions)	YTD 2023 Revenue (in billions)
Service Fees	814.3	695.5	2.39	2.00
Product Sales	19.7	31.7	0.11	0.10
Long-Term Contracts	N/A	N/A	2.68	2.25
Equity Income	24.0	N/A	0.084	0.117

Updated on 16 Nov 2024

Resources:

1. Western Midstream Partners, LP (WES) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Western Midstream Partners, LP (WES)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Western Midstream Partners, LP (WES)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.