Western Midstream Partners (WES) Q2 FY26 earnings call: guidance and Q&A

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

Asked about the contracting strategy for Pathfinder beyond the anchor customer and how the growth in the water business translates to Pathfinder.

Oscar Brown stated Pathfinder is going better than planned, with reduced capital costs and increased expected returns (from high single digits/10% to closer to 15%, potentially 20% when full). The base Oxy contract uses less than 1/3 capacity. They are winning incremental gathering and disposal opportunities that will utilize Pathfinder. The water business is improving faster than anticipated, and Pathfinder acts as a header system for their integrated water system.

“So right now, we're looking at returns have moved up about our expected returns by about 500 basis points from high single digits, 10% on this asset to closer to 15%, which you'd expect with all the work we've done. And then as we continue to fill that pipe into the next year or so, once it comes online, we expect returns to get into the 20% range.”

asked by Gabriel Moreen · answered by Oscar Brown

Inquired about the main drivers for the $200 million guidance increase and the expected shaping of results through year-end, particularly regarding Q3 O&M increase.

Kristen Shults confirmed Brazos ($100M H2 contribution), commodity prices (approx. $80M from $20 WTI change), and increased throughput/asset recovery contributed to the $250M adjusted EBITDA midpoint increase. Q3 OpEx is expected to increase due to full Brazos run rate, asset maintenance, and higher utility costs, while DJ Basin volumes are expected to decline in H2.

“When we revised guidance, the thought processes that came in for establishing the new midpoint has to do with Brazos, the $100 million you referenced. And then if you're using our commodity price sensitivity that we've got within our deck, we've had about a $20 change in WTI from when we first set budget. So that's about $80 million of incremental commodities that we're seeing through all of 2026.”

asked by Francina Kolluri · answered by Kristen Shults

Asked about the opportunity set for inorganic growth and whether the strategy favors bolt-ons or larger acquisitions.

Oscar Brown stated their M&A strategy is unchanged, focusing on "programmatic M&A" that sustains/grows distribution, protects the balance sheet/investment-grade ratings, and diversifies customer/ownership. They prioritize organic growth due to higher returns and lower risk but remain opportunistic for bolt-ons that leverage their existing footprint. Valuations outside the Permian can be more reasonable.

“Our strong preference is always to grow organically where we can deploy capital generally at higher returns with less risk in terms of execution, and we're certainly seeing that in our 2 big projects that we've been executing well on here recently.”

asked by Francina Kolluri · answered by Oscar Brown

Inquired about the company's focus on the Permian for bolt-on M&A and if going outside the Permian has a higher bar.

Oscar Brown confirmed their love for the Permian as the best long-term basin, but they will consider opportunities in other basins if they meet their M&A criteria (accretive to per-unit metrics, balance sheet protection, etc.). He noted that valuations outside the Permian can be more reasonable.

“Yes. I guess what we've seen is we certainly love the Permian and all the data says it continues to be sort of the best long-term basin in the United States. And so we're we continue to be super fans there and like transactions there.”

asked by Burke Sansiviero · answered by Oscar Brown

Asked about the timeline for sanctioning a stand-alone WES water treating project and potential capital deployment for this opportunity.

Oscar Brown highlighted beneficial reuse as a key component of their next growth stage. Their large footprint and Pathfinder pipe provide scale optionality. JIP 2 (10x capacity of JIP 1) is working out kinks and scaling opportunities to reduce costs. They hope to announce commercialization of a plant in the "not-too-distant future."

“So we hope to be announcing something in the not-too-distant future in terms of commercializing that piece of the puzzle.”

asked by Burke Sansiviero · answered by Oscar Brown