Western Midstream will build the 42-mile Pathfinder Pipeline in the Delaware Basin to move produced water as the industry pushes to move water from high-activity regions to areas where there is more pore space for disposal.

Western, which is controlled by Occidental Petroleum, is investing up to $450 million to expand its produced water infrastructure over the next two years, the MLP said Feb. 26. The 30-inch, long-haul pipeline in the Delaware would transport over 800,000 bbl/d of produced water to disposal facilities in Loving County, Texas.

Western said Pathfinder is the first of its kind and will transport the water volumes away from high-activity areas where pore pressures are high.

Western said it “leveraged its existing infrastructure and strategic landowner partnerships to secure access to existing pore space in eastern Loving County and to better facilitate produced-water disposal in the basin. Pathfinder's construction enhances our ability to meet customers' needs, expand the business by aggregating produced water from throughout the Delaware Basin, and efficiently transport and responsibly dispose of volumes in a sustainable manner."

Western also agreed to new long-term produced water agreements with Occidental that are supported by minimum-volume commitments for gathering, transportation and disposal.

Western will build several larger, regional produced-water gathering facilities and export terminals for a total incremental capacity of approximately 280,000 bbl/d, as well as nine saltwater disposal facilities in Loving with an effective disposal capacity of 220,000 bbl/d.

The new infrastructure is expected to be in-service by January 2027.

Western Midstream amended its legacy produced water agreements in the Delaware with Occidental to better support Occidental’s long-term development plans at the same cost-of-service and fixed-fee components of the original agreements, President and CEO Oscar Brown said in the announcement’s press release.

And in the Denver-Julesburg Basin, Western Midstream and Occidental added up to 10 years to certain minimum volume commitments for natural gas processing.

"As we look to the future, we expect that the expansion of our produced-water system, coupled with Pathfinder, will be the first of many organic projects to support continued partnership-wide growth, as our strong free cash flow profile and investment-grade balance sheet enable us to continue capitalizing on incremental opportunities and growing the base distribution over time," Brown said.

Western expects total capex in 2025 to be between $625 million and $725 million, which includes the initial cost of the Pathfinder construction and expansion of its produced water gathering and disposal facilities, the company said in its press release outlining its 2025 financial guidance. Free cash flow is expected to be between approximately $1.28 billion and $1.38 billion.

"Given our recent produced-water success and the sanctioning of new organic growth projects, we now have a much greater need to allocate capital towards organic expansion opportunities that will generate strong returns for WES,” said CFO Kristen Shults.

Western will not be paying an enhanced distribution in 2025 to simplify the company’s capital allocation framework and focus on sustainable distribution growth, Shults said.

“Our capital allocation strategy will prioritize organic growth projects and synergistic bolt-on acquisitions to drive gradual distribution increases over time. We believe these decisions will better enable growth while maintaining our strong, investment-grade balance sheet and drive incremental value creation for stakeholders," Shults said.

Comments