WES — Western Midstream Partners, LP

Summary of Western Midstream Partners (WES) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Adjusted EBITDA: $636 million for Q4 2025, a sequential increase of approximately 5% (would have been $665 million without negative revenue adjustments).
• Net Income: $187 million, impacted by $120 million in transaction costs from the Aris acquisition.
• Free Cash Flow: $341 million for Q4; full-year free cash flow reached a record $1.53 billion.
• Capital Expenditures: Totaled $722 million in 2025, within guidance of $625 million to $775 million.
• Distributions: Declared $0.91 per unit for Q4, totaling $3.64 per unit for 2025, consistent with guidance.

2. Strategic Updates and Business Highlights

• Acquisition of Aris Water Solutions: Enhanced capabilities in produced water management and expanded presence in New Mexico, contributing significantly to throughput and adjusted EBITDA.
• Operational Efficiency: Achieved $40 million in targeted cost synergies from the Aris acquisition, with integration ahead of schedule.
• Record Throughput: 2025 saw throughput growth across all products, particularly in the Delaware and DJ Basins.
• Cost Reduction Initiatives: Continued focus on reducing operating expenses, with a notable decrease in operations and maintenance costs excluding Aris.

3. Forward Guidance and Outlook

• 2026 Adjusted EBITDA Guidance: Expected to range from $2.5 billion to $2.7 billion, implying a midpoint growth of approximately 5% year-over-year.
• Capital Expenditures for 2026: Revised down to a range of $850 million to $1 billion, reflecting a more disciplined approach to spending in response to producer activity levels.
• Distribution Guidance: Anticipating a slight increase to at least $3.70 per unit for 2026, representing a 3% increase over the previous year.

4. Bad News, Challenges, or Points of Concern

• Declining Activity Levels: Producers are expected to reduce activity in the Delaware Basin, impacting throughput growth. Natural gas throughput is projected to be flat, while crude oil and NGL throughput is expected to decline by low to mid-single digits.
• Waha Hub Pricing Volatility: Ongoing pricing pressure affecting natural gas throughput due to third-party curtailments linked to low Waha hub pricing.
• 2026 as a Transition Year: The company anticipates a more challenging environment in the DJ and Powder River Basins, with expected throughput declines.
• Cost of Service Contracts: Limited remaining contracts in this category, but ongoing adjustments may be needed to optimize revenue recognition.

5. Notable Q&A Insights

• M&A Strategy: CEO Oscar Brown reaffirmed a disciplined approach to M&A, focusing on bolt-on acquisitions that provide synergies and align with existing operations.
• Water Business Growth: Water solutions are expected to grow faster than gas and oil segments, with a strong emphasis on beneficial reuse and enhanced oil recovery (EOR) opportunities.
• Commodity Price Sensitivity: The company is closely monitoring commodity price trends, particularly in the Powder River Basin, which is highly sensitive to price fluctuations.
• Egress Solutions: WES is exploring commercial solutions to mitigate Waha pricing impacts, including potential involvement in egress projects.

Overall, while WES reported strong financial results for 2025, the company faces challenges in 2026 due to reduced producer activity and pricing pressures, necessitating a cautious approach to capital expenditures and strategic initiatives.