Welcome to Western Midstream's Fourth Quarter 2024 Post-Earnings Call, Fireside Chat, with our Chief Financial Officer, Kristen Shults, and our Senior Vice President of Commercial, Jon VandenBrand. Kristen, I'll start with you. Can you give us an overview of West's fourth quarter and full-year results?
Sure, Daniel. Fourth quarter was a really strong quarter for West, both from an operational standpoint and a financial standpoint. We had 4% growth on the gas side, 6% growth on the oil side, and 8% growth quarter over quarter on the water side, and so on the water side, it's been a little bit choppy throughout 2024, just as we've had producers take some water off of the system for recycling purposes. We saw that activity decrease some in the fourth quarter, and so you saw those volumes come up a little bit more on the water side, and then both the gas and the oil side of the business did really well because of the DJ and the Delaware growing, so very nice performance by all of our assets in the basin.
On the financial side, our Q4 Adjusted EBITDA was $591 million, and we had strong free cash flow of $309 million for the fourth quarter as well. For the full year, we generated EBITDA of $2.34 billion, which is above the midpoint of the range that we set. The range, if you remember, was $2.2-$2.4 billion. CapEx was slightly above the midpoint, came in at $790 million. Spent the majority of that CapEx, obviously, on the North Loving Plant, which is already up and running and starting to move some product even as we're speaking. And then from a free cash flow perspective, we were above the high end of the free cash flow range as well for 2024, came out at $1.3 billion, really showing just the strong throughput growth that we had throughout the year and a little bit lower CapEx than we were originally thinking.
What can we expect from West in 2025?
All in all, it's going to be another great year for West. We expect strong throughput growth, mid-single digits for gas, mid-single digits for water, and then low single digits for crude and NGLs. The Delaware Basin is going to continue to grow this year. DJ Basin's going to hang in there. We expect it to be relatively flat. We'll see how the producers' actuals come in relative to the expectations we have, but I expect to just kind of teeter around that flat line. And then a little bit of growth in the PRB. When you flip over to the financial side of it, expect Adjusted EBITDA to increase 5% year over year at the midpoint, free cash flow to increase 4% year over year at the midpoint.
Then we also said that we would be recommending to the board a 4% quarter over quarter increase in the base distribution. So if you look at the total amount that we actually paid in 2024 relative to what we expect to pay in 2025, inclusive of the recommendation to increase the base by 4%, that'd be a 13% year over year growth in our paid distributions. For CapEx, this is going to be a little bit lower than it was last year, but a few really exciting projects and items to mention in the CapEx budget. Our range for the year is $625 million-$775 million, implies a $700 million midpoint.
50% of the CapEx is being spent in the Delaware, our major growth engine here at West, and that includes $65 million that we're spending on the Pathfinder Pipeline, which Jon will talk more about shortly. The PRB is taking about $200 million of our capital, about 30% of the budget, and through conversations with the various producers, we are going to be putting in additional gathering and compression facilities this year to prepare us for 2026 growth. On the call, we even mentioned that we're expecting average year over year throughput to grow in the PRB, so that's meaning that we're spending quite a bit of capital this year in order to make way for that growth. When we get into 2026, a few thoughts on that as well.
Pipeline, the majority of the spend for Pathfinder Pipeline will be in 2026, and so then from a budgeting perspective, a capital budget perspective for 2026, the rest of it will really depend on incremental growth that we're seeing in the PRB and how well we do of bringing new customers onto the Pathfinder Pipeline and what infrastructure do we need to build out to get those volumes on that pipeline as well.
Jon, congratulations on your new role in finalizing the Pathfinder and produced water system expansion opportunity. Can you tell us more about this project that West is building out over the next two years? What does it mean when we say first of its kind, and why is this the right project for West?
Thanks, Daniel. We're very excited for the announcement, and we're really excited for the opportunities that the Pathfinder Pipeline will help to bring about for us as we go forward. I'd like to first start by talking about our existing assets and how they're very well positioned, but how Pathfinder will create additional optionality for us and increase our flow assurance that we can provide to our customers over time. We've got a great network of distributed disposal wells all over the Texas side of the Delaware Basin, and we've done a good job of focusing on shallow disposal away from issues and managing our subsurface risk in a way that's really created a robust redundant system for all of our customers in the Delaware Basin.
One of the challenges that's coming up with all the production growth in the Delaware Basin from both New Mexico and Texas. There's a substantial amount of produced water growth alongside of that, and in some cases, that can be magnitudes more than the amount of oil that's being produced. What's happening is it's creating additional strain in the subsurface where we are disposing water, and the Pathfinder project is going to allow us to responsibly take that water from areas where there's high-intensity disposal and move it to areas where there's lower-intensity water away from existing production and then make sure that we dispose of that water over time in a very responsible and rational manner, and that really is the essence of what the project is about.
The project would not have been possible if we didn't have strong relationships with strategic landowners and a lot of significant alignment with the regulatory agencies in terms of how we run this business and manage our risks. We've done a great job of aligning ourselves with landowners that will let us use their land both to transport and dispose of water over time in a responsible manner, and that's helped us unlock and provide access to our customers to responsible pore space over time. Additionally, the way we manage the business, we're very much trying to be on the leading edge of responsible SWD and disposal practices, and we're really trying to work with the regulatory agencies on how we can continue to set that bar very high over time and work proactively and hand-in-hand with them to do things the right way.
Additionally, this project highlights our ability to work with Oxy to come to new contractual arrangements that allow us to support their development over the long term. The corresponding MVCs that we signed support this project's development and ensure that Oxy will have reliable flow assurance for a long-term 10-year period to backstop this project.
What are the expected returns associated with the Pathfinder Pipeline project? What is West expecting from an Adjusted EBITDA, free cash flow, and gross margin per unit impact to its produced water business over time?
It's a great question. We're really attacking this business like we do the rest of our midstream business, and we're targeting midstream appropriate returns over the life of the project. And the great thing about this is that we're making sure those returns are in place with the existing Oxy contract that we've just executed, but we've also strategically upsized the pipeline to ensure that it's placed in front of a massive market opportunity where we can accrete that return significantly higher over time as we fill up the pipeline with more water and align it with appropriate pore space on the end of it.
We're really hoping to make sure that this highlights our commitment to deploying capital on an appropriate risk-adjusted basis consistent with our gas and crude businesses that we already have, and we think that's a real differentiator from the solutions that are already in the market and how people are deploying capital into that space.
Thanks, Jon. Kristen, to close, could you give us an update on West's capital allocation framework priorities as we transition into 2025?
Sure, Daniel. So for us, the first thing that we want to focus on and really spend our capital towards is organic growth projects. I think the activity that we've seen in the PRB, the continued strong activity we see in the Delaware Basin, and then as Jon just talked about, Pathfinder Pipeline in the Delaware Basin, these are great organic opportunities for us that provide us mid-teens type of returns that we're looking for as a midstream company. And so if we have opportunities like that, we would pursue those all day long. From there, we look at the base distribution and how do we continue to grow that at a mid to low single digits annual rate.
Finally, one thing we are retiring that we talked about on the call is the enhanced distribution component of our capital return framework because of the fact that we just feel like there's so much growth that we can pursue within the portfolio. There's other growth opportunities from an inorganic perspective, and there's more value that we can generate for West through the base distribution than through any other means from returning value back to unit holders.
Kristen, Jon, thank you both for joining us today. For our listeners, if you have any additional questions, please feel free to reach out to us. Our contact information is located in the investor relations section of our corporate website at westernmidstream.com.