Why Brazos, why now, and what makes it unique?

Kristen Shults explained Brazos is a high-quality, contiguous bolt-on asset adjacent to existing operations in the Delaware Basin. It adds 470,000 dedicated acres and 460 MMcf/d of natural gas processing capacity. The asset's 3,500 drilling locations are close to existing infrastructure, limiting incremental capital. Contracts are long-term fixed fee with a 9+ year weighted average life. The timing is opportune due to a constructive M&A environment and strong balance sheet. “Brazos is exactly the kind of asset WES has been looking for, high-quality, contiguous bolt-on that amplifies the value of our existing asset base.”

Valuation, accretion, and return profile relative to cost of capital.

Kristen Shults stated the $1.6 billion purchase price is 8x 2027 estimated EBITDA, compressing to 7.5x with commercialization of available processing capacity (Comanche complex running at 73% utilization). The transaction is immediately accretive to estimated 2026 DCF per unit, contributing approximately $100 million incremental adjusted EBITDA in 2026. Returns are expected to be meaningfully above the weighted average cost of capital. “The $1.6 billion purchase price represents approximately 8x 2027 estimated EBITDA on a stand-alone basis.”

How does WES balance capital deployment with financial discipline, and what's the outlook for guidance and distributions?

Oscar Brown emphasized maintaining a strong balance sheet, with total liquidity over $2.5 billion and pro forma net leverage of approximately 3x post-Brazos. He indicated full-year adjusted EBITDA and DCF guidance would likely be at the high end of the current ranges, with formal updates after the Brazos close. The 2026 capital budget of $850M-$1B is largely for Pathfinder and North Loving II. The distribution strategy is to grow distributions slightly below adjusted EBITDA growth to increase coverage. “We have a strong balance sheet, and we intend to keep it that way.”

WES

Western Midstream (WES) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Energy· May 12, 2026

Source: earnings call transcript

Executive summary

Western Midstream Q1 FY26 — Strong Performance Driven by Aris Integration and Brazos Acquisition

This fireside chat highlights Western Midstream's strong Q1 FY26 performance, driven by the successful integration of the Aris acquisition and robust throughput growth across all product lines. The company announced the strategic $1.6 billion acquisition of Brazos Delaware II, expected to be immediately accretive and further solidify its Delaware Basin footprint. Management emphasized financial discipline with maintained leverage targets and a clear distribution growth strategy.

Highlights

Adjusted EBITDA increased by 15% year-over-year to $683 million in Q1 FY26.
Record crude oil and NGL throughput of 272,000 barrels per day, up 6% year-over-year.
Record produced water throughput of 2.8 million barrels per day, up 4% sequentially.
Acquisition of Brazos Delaware II for $1.6 billion, immediately accretive to 2026 DCF per unit.
Reduced operation and maintenance expense by 7% year-over-year (excluding Aris acquisition).

Concerns

Natural gas throughput negatively impacted by WAHA-driven curtailments during Q1 FY26.

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EBITDA	towards the high end of $2.5 billion to $2.7 billion high materiality	FY26	High
Distributable Cash Flow	towards the high end of $1.85 billion to $2.05 billion high materiality	FY26	High
Capital Budget	$850 million to $1 billion medium materiality	FY26	High
Distribution	at least $3.70 or $3.72 on a run rate basis high materiality	FY26	High
Pathfinder Project In-Service Date	first quarter 2027 medium materiality	Q1 · FY27	High
North Loving II Project In-Service Date	second quarter 2027 medium materiality	Q2 · FY27	High
Brazos Acquisition Close	by the end of the second quarter high materiality	Q2 · FY26	High
Delaware Basin Natural Gas Processing Capacity	just over 3 billion cubic feet per day medium materiality	Q2 · FY27	High

Deals & partnerships

Aris Integration of previously acquired assets

Integration is complete and assets are performing well, contributing to Q1 FY26 outperformance. Contracts provide upside from skim oil volumes when crude oil prices are elevated.

Brazos Delaware II Acquisition of a privately held gathering and processing platform in the Delaware Basin $1.6 billion

Acquisition for $1.6 billion, financed 50% cash and 50% WES common units. Adds approximately 470,000 dedicated acres and 460 million cubic feet per day of natural gas processing capacity (Comanche complex). Existing contracts are long-term fixed fee with a weighted average remaining life of over 9 years. Maintains pro forma net leverage of approximately 3x throughout 2026.

Capital programs

Pathfinder on schedule

One of two high confidence projects in the core of the Delaware Basin, underpinned by volume commitments. Roughly half of the $850M-$1B 2026 capital budget is directed towards Pathfinder and North Loving II.

North Loving II on schedule

Benefit:processing capacity (adds to just over 3 Bcf/d in the basin)

Risks & headwinds

WAHA-driven curtailments Q1 FY26

negatively impacted natural gas throughput

Mitigation:Not explicitly stated, but company achieved 3% natural gas throughput growth despite this, indicating resilience or other offsetting factors.

What to watch in Q2 FY26

Updated full-year guidance

After Brazos close (Q2 FY26 results)

Current High end of $2.5B-$2.7B Adj. EBITDA and $1.85B-$2.05B DCF (pre-Brazos)

Target Formal updated ranges including Brazos contribution

Why it matters

Will provide a clearer picture of the combined entity's financial outlook and the full impact of the Brazos acquisition.

We plan to provide updated guidance in conjunction with our second quarter results after the Brazos close.

Find out whether WES delivers this. Inve re-checks your case every morning.

Q&A highlights

What drove the 15% YoY increase in adjusted EBITDA and what does it imply for the rest of the year?

Oscar Brown attributed the outperformance to the full quarter contribution from the Aris acquisition, per day throughput growth across all three product lines, and continued cost reduction efforts. He noted the benefit from increased crude oil prices in March through skim oil recoveries. The Delaware Basin is the primary growth driver, with record crude oil, NGL, and produced water throughputs.

“It was truly a great quarter for us, and the results reflect the cumulative impact of several strategic decisions we've made over the past 18 months.”

asked by Daniel Jenkins · answered by Oscar Brown

2 min read 5 chapters

Detailed narrative

Q1 Performance Drivers

Western Midstream reported a strong Q1 FY26, with adjusted EBITDA increasing 15% year-over-year to $683 million. This outperformance was primarily driven by the full quarter contribution from the Aris acquisition, robust per day throughput growth across all three product lines, and continued cost reduction efforts.

The company also benefited from a meaningful increase in crude oil prices in March, capturing incremental value through skim oil recoveries.

Brazos Acquisition Rationale

The company announced the acquisition of Brazos Delaware II for $1.6 billion, describing it as a high-quality, contiguous bolt-on asset that amplifies its existing Delaware Basin footprint. The acquisition adds approximately 470,000 dedicated acres and 460 million cubic feet per day of natural gas processing capacity. The asset's 3,500 identified drilling locations are strategically located near existing infrastructure, minimizing future capital requirements.

Financial Mechanics of Brazos Deal

The $1.6 billion purchase price for Brazos represents approximately 8x 2027 estimated EBITDA, with an expectation for this multiple to compress to 7.5x through commercialization of available processing capacity and identified synergies. The Comanche complex, part of Brazos, is currently operating at 73% utilization.

The transaction is immediately accretive to estimated 2026 DCF per unit and is expected to contribute approximately $100 million of incremental adjusted EBITDA in 2026. The deal is structured as 50% cash and 50% WES common units, allowing the company to maintain pro forma net leverage of approximately 3x throughout 2026.

Capital Deployment and Distribution Strategy

Western Midstream emphasized its commitment to financial discipline, ending Q1 with over $2.5 billion in total liquidity and trailing 12-month net leverage of 3.1x. The company expects to maintain pro forma net leverage of approximately 3x post-Brazos. The 2026 capital budget of $850 million to $1 billion is largely allocated to the Pathfinder and North Loving II projects, both on schedule for 2027 in-service dates.

The distribution strategy aims to grow distributions slightly below adjusted EBITDA growth to steadily increase coverage over time, with Q1 distribution at $0.93 per unit, up 2.2% sequentially.

Investment Thesis and Future Outlook

Management highlighted WES's position of strength, with record Q1 adjusted EBITDA and successful project execution. The Delaware Basin is central to its growth strategy, expected to contribute over 60% of 2026 adjusted EBITDA, with decades of throughput growth visibility. The company projects a compelling return profile for investors, including a potential 12% to 14% annual equity return, underpinned by a nearly 9% current cash yield and a 4% to 5% long-term adjusted EBITDA annual growth rate.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.