WES — Western Midstream Partners, LP

Summary of Western Midstream Partners Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $332 million attributable to limited partners.
• Adjusted EBITDA: $634 million, marking a record for the second consecutive quarter.
• Cash Flow from Operating Activities: $570 million, with free cash flow of $397 million.
• Distribution: Declared a quarterly distribution of $0.91 per unit, consistent with the previous quarter.
• Operational and Maintenance Expense: Decreased by 5% ($12 million) quarter-over-quarter, attributed to cost reduction initiatives.
• Adjusted Gross Margin: Relatively flat; per Mcf for natural gas decreased by $0.05, while crude oil and NGLs increased by $0.08.

2. Strategic Updates and Business Highlights

• Acquisition of Aris Water Solutions: Completed on October 15, enhancing WES's capabilities in produced water management in the Delaware Basin, with expected annual run rate synergies of $40 million.
• Record Throughput: Achieved highest total natural gas throughput in the partnership's history, driven by strong performance in the Delaware and DJ Basins.
• New Agreements: Executed an agreement for incremental disposal capacity to support the Pathfinder pipeline project, optimizing its route and enhancing returns.
• Cost Reduction Initiatives: Ongoing efforts to streamline operations and reduce costs, with expectations for continued improvements in 2026.

3. Forward Guidance and Outlook

• 2025 Adjusted EBITDA Guidance: Expected to be at the high end of the range ($2.35 billion to $2.55 billion), including contributions from Aris.
• 2025 Free Cash Flow Guidance: Anticipated to exceed the high end of the range ($1.275 billion to $1.475 billion).
• 2026 Outlook: Projecting mid-single-digit growth for natural gas throughput and low single-digit growth for crude oil and NGLs, with a significant increase in produced water throughput (approximately 40% year-over-year).
• Capital Expenditures: Expected to be at least $1.1 billion in 2026, with ongoing evaluations based on producer forecasts.

4. Bad News, Challenges, or Points of Concern

• Decreased Throughput in Certain Areas: Notable declines in the Powder River Basin due to reduced customer activity and commodity price weakness.
• Operational Challenges: Anticipated intermittent volume curtailments due to downstream maintenance, which may impact natural gas throughput growth.
• Commodity Price Sensitivity: Continued weakness in commodity prices may affect customer activity levels, particularly in the Powder River Basin and DJ Basin.
• Regulatory Environment: Increased regulatory scrutiny and potential new regulations could pose challenges for operations in the Delaware Basin.

5. Notable Q&A Insights

• Sustainability of Cost Reductions: Management expressed confidence that the reduced operational and maintenance expenses are sustainable, with further improvements expected.
• Distribution Growth: Future distribution increases may be considered based on successful project completions and market conditions, with a focus on maintaining a balanced approach to capital allocation.
• Pathfinder Project Efficiency: The acquisition of additional pore space is expected to enhance project efficiency and returns, with ongoing positive trends in contracting and regulatory engagement.
• Expansion in New Mexico: Plans for organic and inorganic growth in New Mexico, focusing on gas and water infrastructure, with an emphasis on addressing challenges related to sour gas.

Overall, WES demonstrated strong financial performance and strategic positioning through the Aris acquisition and ongoing operational efficiencies, while also acknowledging potential headwinds related to commodity prices and regulatory challenges.