Western Midstream Partners (WES) said pre-market Tuesday it has renegotiated contracts with Occidental Petroleum (OXY) related to its Delaware Basin assets, replacing the legacy cost-of-service structure of the gathering contract with a simplified, fixed-fee structure, which will continue to be supported by an acreage dedication.
As part of the deal, Occidental (OXY) will transfer 15.3M common units worth ~$610M back to Western Midstream (WES), which would reduce its ownership stake to ~40% from ~42% previously.
Western Midstream (WES) also said it signed a new natural gas gathering and processing agreement with ConocoPhillips (COP) related to part of Conoco’s Delaware Basin natural gas production, further diversifying its revenues by reducing total related-party revenue by more than 10%.
Western Midstream (WES) said it expects ongoing distribution savings from the unit redemption, combined with previously announced cost reduction initiatives, will fully offset the reduction in free cash flow after distributions resulting from the transactions and the transition to a fixed-fee structure.