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    WES
    Earnings call· Jun 2026(Q2 FY26)

    Western Midstream Partners Q2 FY26 earnings call WES

    Aug 6, 2026 Source

    Executive summary

    Western Midstream Partners Q2 FY26 — Record EBITDA and Raised Full-Year Guidance

    Western Midstream Partners delivered record Q2 FY26 adjusted EBITDA, driven by strong Delaware Basin throughput and the Brazos acquisition, leading to a significant raise in full-year guidance for EBITDA, DCF, and FCF. The company is focused on integrating Brazos, advancing key organic projects like Pathfinder and North Loving II, and exploring beneficial water reuse, while maintaining a strong balance sheet and commitment to shareholder returns.

    Highlights

    5

    • Achieved record adjusted EBITDA of $737 million, an increase of 19% compared to the prior year period.

    • Raised full-year 2026 adjusted EBITDA guidance by $250 million at the midpoint, now targeting $2.85 billion.

    • Increased full-year 2026 distributable cash flow guidance by $200 million at the midpoint, now targeting $2.15 billion.

    • Increased full-year 2026 free cash flow guidance by $200 million at the midpoint, now targeting $1.2 billion.

    • Closed the Brazos Delaware II acquisition, expected to contribute approximately $100 million of adjusted EBITDA in H2 2026.

    Concerns

    4

    • Third quarter per Mcf adjusted gross margin for natural gas assets expected to be slightly lower than Q2 due to moderated commodity prices.

    • Third quarter per barrel adjusted gross margin for crude oil and NGLs assets expected to be slightly lower than Q2.

    • Third quarter per barrel adjusted gross margin for produced water assets expected to be slightly lower than Q2.

    • Operation and maintenance expense expected to increase in the high single-digit percentage range in Q3, driven by Brazos full run rate and asset maintenance.

    Guidance & targets

    23
    CategoryTargetConfidence
    Full-year 2026 Adjusted EBITDA
    $2.75 billion - $2.95 billion (midpoint $2.85 billion)
    high materiality
    High
    Full-year 2026 Distributable Cash Flow (DCF)
    $2.05 billion - $2.25 billion (midpoint $2.15 billion)
    high materiality
    High
    Full-year 2026 Free Cash Flow (FCF)
    $1.1 billion - $1.3 billion (midpoint $1.2 billion)
    high materiality
    High
    Full-year 2026 Operation and Maintenance (O&M) Expense
    20%-25% increase
    medium materiality
    High
    Q3 2026 Operation and Maintenance (O&M) Expense
    high single-digit percentage range increase
    medium materiality
    High
    Full-year 2026 Natural Gas Adjusted Gross Margin
    ~$1.30 per Mcf
    medium materiality
    High
    Full-year 2026 Crude Oil and NGLs Adjusted Gross Margin
    $3.10 - $3.15 per barrel
    medium materiality
    High
    Full-year 2026 Produced Water Adjusted Gross Margin
    ~$0.91 per barrel
    medium materiality
    High
    Full-year 2026 Portfolio-wide Average Year-over-Year Throughput (Natural Gas)
    mid-single digits increase
    medium materiality
    High
    Full-year 2026 Portfolio-wide Average Year-over-Year Throughput (Crude Oil & NGLs)
    low single digits decline
    medium materiality
    High
    Full-year 2026 Average Produced Water Throughput
    ~85% increase
    medium materiality
    High
    Full-year 2026 Delaware Basin Average Year-over-Year Throughput (Natural Gas)
    low to mid-teens percentage growth
    medium materiality
    High
    Full-year 2026 Delaware Basin Average Year-over-Year Throughput (Crude Oil & NGLs)
    low single-digit percentage growth
    medium materiality
    High
    Full-year 2026 DJ Basin Average Year-over-Year Throughput (Natural Gas)
    low single-digit decline
    medium materiality
    High
    Full-year 2026 DJ Basin Average Year-over-Year Throughput (Crude Oil & NGLs)
    mid-single-digits decline
    medium materiality
    High
    Full-year 2026 Powder River Basin Average Year-over-Year Throughput
    mid- to high single digits decline
    medium materiality
    High
    Full-year 2026 Other Natural Gas Assets Throughput
    mid-single-digit percentage throughput growth
    low materiality
    High
    Full-year 2026 Capital Expenditure
    $850 million - $1 billion (toward high end)
    high materiality
    High
    Full-year 2026 Distribution
    at least $3.70 per unit
    high materiality
    High
    Brazos Acquisition Adjusted EBITDA Contribution
    ~$100 million
    medium materiality
    High
    Pathfinder Pipeline In-service Date
    Q1 2027
    medium materiality
    High
    North Loving II Natural Gas Processing Train In-service Date
    Q2 2027
    medium materiality
    High
    Brazos Acquisition Cost Synergies
    $15 million - $20 million
    medium materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Natural Gas Assets
    Q2 sequential increase driven by 2.5 weeks of Brazos contribution and record throughput from DJ Basin. Q2 per Mcf adjusted gross margin increase primarily driven by higher commodity pricing on excess NGLs volumes and Brazos contribution. Full-year 2026 throughput expected to increase by mid-single digits year-over-year.
    Per Mcf Adjusted Gross Margin (Q2): $0.03 increase QoQFull-year 2026 Per Mcf Adjusted Gross Margin: ~$1.30
    		—mid-single digits increase3% increase$0.03 per Mcf increase
    Crude Oil & NGLs Assets
    Q2 per barrel adjusted gross margin increase primarily driven by higher deficiency fees in the Delaware Basin. Full-year 2026 throughput expected to decline by low single digits year-over-year.
    Per Barrel Adjusted Gross Margin (Q2): $0.14 increase QoQFull-year 2026 Per Barrel Adjusted Gross Margin: $3.10-$3.15
    		—low single digits declineslightly increased$0.14 per barrel increase
    Produced Water Assets
    Q2 sequential increase driven by higher throughput. Q2 per barrel adjusted gross margin increase primarily driven by higher throughput. Full-year 2026 throughput expected to increase by approximately 85% year-over-year, driven by Aris acquisition and strong legacy business performance.
    Per Barrel Adjusted Gross Margin (Q2): $0.06 increase QoQFull-year 2026 Per Barrel Adjusted Gross Margin: ~$0.91
    		—85% increase5% increase$0.06 per barrel increase
    Delaware Basin
    Record throughput from natural gas and produced water businesses. Multiple customers intend to accelerate activity into H2 2026. Full-year 2026 average year-over-year throughput for natural gas expected to increase by low to mid-teens percentage, and for crude oil and NGLs to increase by low single-digit percentage, primarily driven by the Brazos acquisition. Experienced Q2 curtailments due to negative Waha pricing, but exited Q2 with no curtailments.
    		—low to mid-teens percentage growth (natural gas), low single-digit percentage growth (crude oil & NGLs)——
    DJ Basin
    Throughput outperformed in H1, driven by strong well performance and higher onloads. Full-year 2026 average year-over-year throughput for natural gas expected to decline by low single digits, and for crude oil and NGLs by mid-single-digits.
    Natural Gas Throughput: Record
    		—low single-digit decline (natural gas), mid-single-digits decline (crude oil & NGLs)——
    Powder River Basin
    Full-year 2026 average year-over-year throughput expected to decline by mid- to high single digits. Recently signed long-term gathering and processing agreements with 2 large producers, increasing dedications by ~270,000 acres with over 1,000 remaining drilling locations, backed by multiyear minimum volume commitments. Customers plan to increase activity in H2 2026, driving volume growth into 2027.
    Dedicated Acres: ~270,000 addedRemaining Drilling Locations: >1,000
    		—mid- to high single digits decline——
    Other Natural Gas Assets
    Regional natural gas pricing improved in the Rocky Mountains. Expected mid-single-digit percentage throughput growth driven by full year contribution from Williams Mountain West Pipeline expansion, tie-in of Kinder Morgan's Altamont Pipeline and Chipeta processing plant in Utah (2025), and steady throughput at Brasada plant in South Texas.
    		—mid-single-digit percentage growth——

    Operational metrics

    22
    Adjusted EBITDA
    $737 million8% sequential increase, 19% compared to prior year
    Q2 FY26

    Record adjusted EBITDA.

    Net income attributable to limited partners
    $395 million
    Q2 FY26
    Distributable cash flow
    $537 million
    Q2 FY26
    Total liquidity
    >$1.8 billion
    end of Q2 FY26
    Net leverage ratio
    ~3.15x
    trailing 12-month
    10-year senior notes spread
    123 basis points
    June

    Tightest 10-year spread for any WES 10-year senior note issuance in partnership's history.

    Quarterly distribution
    $0.93 per unitunchanged from prior quarter
    Q2 FY26

    Declared July 20, to be paid August 14 to unitholders of record as of July 31.

    Annualized run rate distribution
    $3.72 per unit
    FY26

    Reflects increased distribution rate of $0.93 per unit that commenced with Q1 2026 distribution.

    Brazos acquisition adjusted EBITDA contribution
    ~$100 million
    H2 2026
    Brazos acquisition cost synergies
    $15 million - $20 million
    coming quarters

    Primarily through G&A elimination and reduced O&M from supply chain efficiencies.

    JIP 2 reclaimed freshwater volume
    ~1,000 barrels per day10x JIP 1 volume
    Q2 FY26

    Second produced water treatment demonstration facility placed into service.

    Portfolio-wide utility cost reimbursements
    ~60%
    future

    Pro forma for the Brazos acquisition.

    Average oil price for H2 2026 guidance
    $71 per barrel
    H2 2026

    Used for guidance modeling, reflecting recent moderation in commodity prices.

    Full-year average oil price for 2026 guidance
    ~$77 per barrel
    FY26
    Pathfinder pipeline expected returns
    ~15%up 500 bps from high single digits/10%
    current

    Returns improved due to reduced capital costs and commercial work.

    Pathfinder pipeline capacity
    800,000 barrels per day
    future
    Pathfinder pipeline anchor contract utilization
    <1/3
    future
    Total annual equity return potential
    12%-14%
    annual

    Underpinned by current cash yield and long-term adjusted EBITDA growth.

    Current cash yield
    7%-9%
    current
    Long-term adjusted EBITDA growth rate
    4%-5%
    long-term

    Company expects continued outperformance in 2026, generating total returns well above 14%.

    Adjusted gross margin increase
    $84 millionQoQ
    Q2 FY26

    Driven primarily by strong throughput growth from produced water, Brazos acquisition, and higher commodity prices.

    Operation and maintenance expense increase
    8%QoQ
    Q2 FY26

    Mostly driven by higher disposal and land fees for produced water and higher chemicals/treating expense.

    Industry KPIs

    7
    MetricValueDetails
    D c efficiency rig activity>1,000locations
    Pipeline throughput storagemid-single digits increase (natural gas), low single digits decline (crude oil & NGLs)%
    Sanctioned expansion backlog~270,000acres
    Basin level production volumelow to mid-teens percentage growth (Delaware natural gas), low single-digit percentage growth (Delaware crude oil & NGLs), low single-digit decline (DJ natural gas), mid-single-digits decline (DJ crude oil & NGLs), mid- to high single digits decline (Powder River Basin)%
    FCF shareholder distributions$1.1B-$1.3BUSD
    Take or pay contract structuremultiyearyears
    Distributable cash flow per unit share$2.05B-$2.25BUSD

    Orderbook & backlog

    2
    Powder River Basin dedicated acres~270,000 acresQ2 FY26

    Added through new long-term gathering and processing agreements with 2 large producers, backed by multiyear minimum volume commitments.

    Powder River Basin remaining drilling locations>1,000 locationsQ2 FY26

    Contained within the newly dedicated acreage from new long-term gathering and processing agreements.

    Deals & partnerships

    3
    Brazos Delaware IIAcquisition of gathering and processing assets in the Delaware Basin.$1.6 billion ($800M cash, $800M WES common units)

    Funded with cash and WES common units based on volume-weighted average unit price at agreement signing. Closed in mid-June.

    Two large producersLong-term gathering and processing agreements in the Powder River Basin.multiyear minimum volume commitments

    Agreements demonstrate producers' increasing focus on the Powder River Basin.

    ArisAcquisition of assets, providing technical advantage in beneficial reuse.

    Mentioned as 'legacy Aris assets' in the context of O&M and water strategy.

    Capital programs

    2
    Pathfinder pipelineunderway
    Period spend: portion of 2026 capex

    Benefit: 800,000 barrels per day produced water capacity (expandable to >1 million bbl/d)

    Progressing better than planned, total capital costs reduced, expected returns improved from high single digits/10% to ~15%, with potential for 20% when fully utilized. Over half of 2026 capital program directed towards this project.

    North Loving II natural gas processing trainunderway
    Period spend: portion of 2026 capex

    Progressing on schedule. Over half of 2026 capital program directed towards this project.

    Risks & headwinds

    3
    Moderation of commodity pricesQ3 2026 and beyond

    Average oil price for H2 2026 modeled at $71 per barrel, full year average ~$77 per barrel.

    Mitigation: Benefit from fixed recovery natural gas processing contracts.

    Increased Operation and Maintenance (O&M) expenseFull year 2026, specifically Q3 2026

    Full year 2026 O&M expected to increase by 20%-25% YoY (inclusive of Aris/Brazos); Q3 O&M expected to increase in high single-digit percentage range QoQ.

    Mitigation: Synergy capture and operational cost reduction efforts from Brazos acquisition.

    Negative Waha natural gas pricing and curtailmentsQ2 2026

    Certain customers curtailed Delaware Basin throughput in Q2 due to negative Waha pricing.

    Mitigation: Exited Q2 with no curtailments as long-haul pipes returned from maintenance and GCX expansion/Hugh Brinson Pipeline entered service. Blackcomb Pipeline coming online later this year expected to reduce Waha volatility.

    What to watch in Q3 FY26

    5

    Brazos system integration and volume optimization

    Year-end 2026
    CurrentIntegration "off to a strong start," system connection expected by year-end.
    TargetSystems connected, offloaded volumes directed to Brazos spare capacity.

    Why it matters

    Successful integration and volume optimization are key to realizing Brazos acquisition synergies and throughput growth.

    Our teams are focused on optimizing the legacy Brazos system and connecting it to the legacy WES system, which we expect to be completed by year-end. This will enable us to direct more volumes to Brazos' processing plants that have spare capacity, enabling us to process more volumes internally and offload fewer volumes, thus creating more value for WES unitholders.

    Q&A highlights

    6

    Inquired about revised expectations for filling Brazos spare processing capacity and North Loving, and implications for future processing expansions given accelerated customer activity.

    Oscar Brown stated they are increasingly bullish on gas outlook. Brazos system connection by year-end will allow moving offloaded volumes to its spare capacity. Customer activity is higher than underwritten, so the plant may fill quickly. They are reviewing processing stack and considering where to move plant capacity next, as North Loving is near capacity.

    “We do have excess capacity at Brazos. It will probably take us towards the end of the year to connect the systems. So we won't really be taking advantage of that significantly until that time, and we expect to move a lot of volumes, especially volumes we've been offloading onto the plant. That said, the customer base there is much more active than we expected than we underwrote in the transaction. So we're probably going to see that plant head towards being full pretty quickly.”

    asked by Gabriel Moreen · answered by Oscar Brown

    2 min read6 chapters

    Detailed Narrative

    01

    Brazos Acquisition & Integration

    The $1.6 billion Brazos Delaware II acquisition closed in mid-June, funded with $800 million cash and $800 million WES common units. Integration is progressing well, with system optimization and connection expected by year-end to direct more volumes to Brazos' spare processing capacity. The company anticipates $15 million to $20 million in cost synergies over the coming quarters, primarily from G&A and O&M efficiencies.

    02

    Throughput Growth & Customer Activity

    Record throughput was achieved in natural gas and produced water in the Delaware Basin. Increased customer activity, particularly in the Delaware and Powder River Basins, is expected to drive incremental throughput growth in H2 2026 and into 2027. New long-term gathering and processing agreements in the Powder River Basin add 270,000 dedicated acres and over 1,000 drilling locations, backed by multiyear minimum volume commitments.

    03

    Produced Water Strategy & Beneficial Reuse

    Produced water handling is the fastest-growing product line. JIP 2, a second produced water treatment demonstration facility, was placed into service, delivering 1,000 barrels per day of reclaimed freshwater, 10x JIP 1's volume. This is a critical step towards sanctioning a first commercial-scale facility, aiming to provide solutions for increasing water-to-oil ratios and deepen offerings to producers.

    04

    Pathfinder Pipeline Progress

    The Pathfinder pipeline project is progressing better than planned, with total capital costs reduced and expected returns increasing from high single digits/10% to closer to 15%, with potential for 20% once fully utilized. The pipeline provides significant flexibility for integrated water management across New Mexico and Texas, responding to evolving customer needs for water disposal and tracking.

    05

    Financial Strength & Capital Allocation

    WES reported record adjusted EBITDA of $737 million and ended the quarter with over $1.8 billion in liquidity and a pro forma net leverage ratio of approximately 3.15x. The company issued $700 million of 10-year senior notes at a tight spread to refinance Brazos acquisition funding, demonstrating strong access to capital markets. The target distribution of at least $3.70 per unit for 2026 remains unchanged.

    06

    Strategic Outlook & Equity Returns

    WES expects continued outperformance in 2026, generating total returns well above 14%, underpinned by a 7% to 9% current cash yield and a 4% to 5% long-term adjusted EBITDA growth rate. The company emphasizes its multiple avenues for growth, including organic expansion projects and strategic M&A, while maintaining investment-grade credit ratings.

    AI-generated summary of the company’s earnings call. Not investment advice.