Western Midstream Partners, LP Common Units (WES) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects a positive outlook with strong throughput growth driven by the Aris acquisition, cost reduction initiatives, and steady distribution increases. The Q&A section highlighted disciplined M&A strategies, proactive solutions for pricing volatility, and significant interest in new projects like Pathfinder. Despite some vague responses, the overall sentiment is positive, with optimistic growth projections in key areas and strategic initiatives that are likely to boost the stock price.
Key Financial Performance
Adjusted EBITDA (Q4 2025) $636 million, representing a 5% sequential quarter increase. This was driven by increased crude oil and NGL throughput in the Delaware Basin, contribution from the Aris acquisition, and reduced operation and maintenance expense from legacy assets.
Adjusted EBITDA (Full Year 2025) $2.48 billion, a 6% year-over-year increase. This was driven by increased throughput across all products, record throughput in the Delaware and DJ Basins, cost reduction initiatives, and contribution from the Aris acquisition.
Free Cash Flow (Full Year 2025) $1.53 billion, exceeding the high end of the guidance range. This was driven by strong adjusted EBITDA performance, diligent working capital management, and capital expenditures coming closer to the midpoint of the guidance range.
Natural Gas Throughput (Full Year 2025) 5.2 billion cubic feet per day, a 4% year-over-year increase. This was driven by throughput records in the Delaware and DJ Basins.
Crude Oil and NGL Throughput (Full Year 2025) 514,000 barrels per day, a 1% year-over-year increase. This was driven by throughput records in the Delaware and DJ Basins.
Produced Water Throughput (Full Year 2025) 1.6 million barrels per day, a 40% year-over-year increase. This was driven by the Aris acquisition and a 7% increase in legacy asset throughput.
Operation and Maintenance Expense (Full Year 2025) Decreased by 2% year-over-year. Excluding Aris and utility costs, the expense decreased by more than $100 million from Q1 to Q4 2025 due to cost reduction initiatives.
General and Administrative Expense (Full Year 2025) Flat year-over-year at approximately $235 million, excluding acquisition-related costs. This was achieved despite the increased size of the business and retention of select personnel from Aris.
Net Income Attributable to Limited Partners (Full Year 2025) $1.15 billion. This was impacted by $120 million of transaction costs from the Aris acquisition.
Distribution (Full Year 2025) $3.64 per unit, consistent with the guidance. This reflects a 4% year-over-year increase.
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Operating Highlights
Aris Acquisition: Enhanced asset base by expanding produced water solutions capabilities and establishing a stronger presence in New Mexico.
North Loving Train I: Brought online ahead of schedule and under budget, expanding processing capacity by 250 million cubic feet per day.
Delaware and DJ Basins: Set multiple quarterly throughput records, driving growth in adjusted EBITDA and free cash flow.
New Mexico Expansion: Aris acquisition established a stronger foothold in the produced water gathering and disposal market.
Cost Reduction Initiatives: Achieved $40 million in targeted cost synergies, with 85% realized by Q1 2026.
Operational Efficiency: Reduced operation and maintenance expenses by over $100 million in 2025.
Long-term Growth Strategy: Maintained mid- to low single-digit adjusted EBITDA growth outlook despite market volatility.
Contract Renegotiations: Restructured Oxy Delaware Basin natural gas gathering contract to align with market conditions.
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Risk or Challenges
Macroeconomic and Commodity Price Volatility: Increased macroeconomic and commodity price-driven volatility is expected to result in more moderate rates of growth for overall throughput and adjusted EBITDA in 2026 relative to initial expectations.
Producer Activity Levels: Many producers are reducing previously expected activity levels on acreage serviced by the company, including portions of the Delaware Basin, impacting throughput growth.
Contract Mix and Commodity Prices: Lower adjusted gross margin per unit for natural gas assets is driven by changes in contract mix and lower commodity prices, affecting financial performance.
Waha Hub Pricing: Persistent industry-wide challenge with low Waha Hub pricing has led to throughput curtailments in the Delaware Basin, impacting natural gas throughput.
DJ and Powder River Basins Decline: Anticipated lower activity levels and declining production in the DJ and Powder River Basins are expected to result in throughput declines.
Capital Expenditure Adjustments: The company has reduced its 2026 capital expenditure program to align with revised producer activity levels, which may limit expansion opportunities.
Integration and Cost Synergies: While integration of the Aris acquisition is progressing well, achieving full cost synergies and operational efficiencies remains a challenge.
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Guidance & Outlook
2026 Adjusted EBITDA: Expected to range between $2.5 billion to $2.7 billion, implying a midpoint of $2.6 billion, representing approximately 5% year-over-year growth at the midpoint.
2026 Capital Expenditures: Expected to range between $850 million and $1 billion, with a midpoint of $925 million, significantly reduced from the previous estimate of at least $1.1 billion.
2026 Free Cash Flow: Expected to range between $900 million and $1.1 billion, with a midpoint of $1 billion.
2026 Distributable Cash Flow (DCF): Expected to range between $1.85 billion to $2.05 billion, implying a midpoint of $1.95 billion, or $4.59 to $5.08 per unit.
2026 Distribution: Guided to a full-year distribution of at least $3.70 per unit, representing an approximate 3% increase compared to the prior year's annual distribution.
Delaware Basin Throughput Growth: Expected to moderate to low to mid-single digit average year-over-year growth in 2026, driven by the Aris acquisition and drilling efficiencies.
DJ Basin Throughput: Expected to decline in the mid- to high single digits range year-over-year for natural gas and crude oil and NGLs in 2026.
Powder River Basin Throughput: Expected to decline in the range of 10% to 15% year-over-year in 2026, with potential rig returns in 2027.
Produced Water Throughput: Estimated to increase by over 80% year-over-year in 2026, driven by the Aris acquisition.
Natural Gas Throughput: Expected to remain relatively flat year-over-year in 2026.
Crude Oil and NGL Throughput: Expected to decline by low to mid-single digits on average year-over-year in 2026.
Natural Gas Adjusted Gross Margin: Expected to average approximately $1.22 per Mcf in 2026, driven by changes in contract mix and lower commodity pricing.
Crude Oil and NGL Adjusted Gross Margin: Expected to range between $3.10 and $3.15 per barrel in 2026.
Produced Water Adjusted Gross Margin: Expected to average approximately $0.85 per barrel in 2026, due to increased throughput expectations and associated contract mix.
Expansion Projects: Pathfinder produced water pipeline and North Loving II are expected to come online in the first and second quarters of 2027, respectively.
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Shareholder Return Plan
Distribution increase: Western Midstream intends to recommend a distribution increase of $0.02 per unit starting with the first quarter distribution to be paid in May 2026. This will result in a full-year distribution of at least $3.70 per unit, representing an approximate 3% increase compared to the prior year's annual distribution of $3.61 per unit.
2025 Distributions: Western Midstream declared distributions totaling $3.64 per unit for 2025, in line with the full-year distribution guidance of $3.61 per unit.
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Key Q&A
Q:How is Western Midstream Holdings LLC thinking about M&A and inorganic growth?
A:Western Midstream's strategy for M&A remains unchanged, focusing on disciplined capital deployment to sustain or grow distribution. They prefer bolt-on M&A opportunities that align with their assets and geographies. The company highlighted the disciplined approach in the Aris acquisition and emphasized their long-term growth guidance of around 5% annually. They also noted that their organic projects, such as Pathfinder and North Loving II, are setting up for strong growth in 2027.
Q:Can you elaborate on the Waha pricing impacts and potential egress solutions?
A:Western Midstream believes that upcoming egress solutions in the second half of the year will help reduce Waha pricing volatility. They are working with customers to provide commercial solutions, such as bundling services and aggregating commitments, to address exposure to Waha pricing. They are also ensuring backup plans for customers over the next five years.
Q:What is the update on further commercialization of Pathfinder with additional third-party interest?
A:Interest in Pathfinder has increased significantly, with more integrated solutions and commitments to the pipeline. The company has optimized the project's costs, leading to improved returns. They are also seeing higher interest from customers and peers in the pipeline.
Q:What is the growth outlook for the water business compared to other segments?
A:The water business is expected to grow at a higher rate than gas and oil over the next several years. The core business, including gas and oil, is projected to grow at around 2-3% on average over time, with gas growing faster than oil.
Q:How does Western Midstream view its scale compared to competitors, and does it plan to scale up?
A:Western Midstream believes it is at a good size and does not plan to grow just for the sake of scale. They emphasize their competitive advantage in the water business, where they are significantly larger than competitors. They plan to focus on manageable projects within their current size and competency.
Q:Are there any plans to amend other contracts following the Permian G&P cost of service contract modification with Oxy?
A:No, there are no plans to amend other contracts as the remaining cost of service contracts represent a small portion of revenues (8-9%). Modifying these contracts is not a priority due to their minimal impact.
Q:How is Western Midstream addressing distribution coverage and potential improvements?
A:Western Midstream plans to grow its distribution slightly behind EBITDA growth. They have adjusted their capital deployment and pulled back on capital expenditures to maintain flexibility. The company aims to sustain or grow distribution through disciplined capital deployment and organic or inorganic growth.
Q:What is the company's view on the commodity price backdrop and its impact on operations?
A:Western Midstream's budget is based on customer forecasts, which were set in a lower price environment. They acknowledge potential upside if commodity prices increase. Basin-specific dynamics, such as PRB's sensitivity to natural gas prices and Waha price sensitivity in the Delaware Basin, will influence operations.
Q:What are Western Midstream's plans for expanding into CO2 and power solutions?
A:Western Midstream is exploring opportunities in unconventional EOR and CO2 infrastructure, leveraging their relationship with Oxy. They are also considering power generation projects to address Permian grid instability and potential data center demand. However, they will only pursue these ventures if the commercial models align with their business strategy.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on certain topics, such as the exact commercial models for CO2 and power solutions, and the potential impact of commodity price changes on operations. Their responses were often broad and lacked precise data or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Basin gas
Basin oil
Basins cost
DCF
DJ Basins
DJ Powder
Delaware Basin
Holdings LLC
Loving Train
Midstream Holdings
NGLs throughput
Pathfinder
Powder River
River Basins
account
acreage
activity level
adjustment
commodity price
compensation
contract mix
contribution acquisition
cost reduction
day increase
expansion capital
expectation digit
function
increase line
integration
midpoint
month contribution
noncash
portion
pricing
program
quarter
record cash
record throughput
team
throughput Delaware
unit distribution
WES Transcript
Western Midstream Partners, LP Common Units (WES) Q4 2025 Earnings Call Transcript
Positive2-19
The earnings call reflects a positive outlook with strong throughput growth driven by the Aris acquisition, cost reduction initiatives, and steady distribution increases. The Q&A section highlighted disciplined M&A strategies, proactive solutions for pricing volatility, and significant interest in new projects like Pathfinder. Despite some vague responses, the overall sentiment is positive, with optimistic growth projections in key areas and strategic initiatives that are likely to boost the stock price.
Western Midstream Partners, LP Common Units (WES) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call summary indicates positive elements such as increased adjusted gross margin, decreased operation and maintenance expenses, and strong cash flow. The Q&A section reveals sustainable cost management initiatives and potential for distribution step-ups, enhancing investor confidence. The acquisition of Aris Water Solutions and the expansion plans in New Mexico further support growth prospects. Despite some uncertainties, the overall sentiment is positive, likely leading to a stock price increase in the short term.
Western Midstream Partners, LP Common Units (WES) Q2 2025 Earnings Call Transcript
Positive8-7
The earnings call highlights several positive factors: the completion of the North Loving Plant, prudent capital allocation, a 4% distribution increase, and expected throughput growth. The Q&A session further supports a positive outlook with leverage-neutral financing for the Aris deal, strong customer support, and confidence in growth projects. Additionally, the company maintains its 2025 guidance despite a lower commodity price environment, indicating resilience. These factors, combined with optimistic guidance and strategic growth initiatives, suggest a positive sentiment, likely leading to a stock price increase of 2% to 8%.
Western Midstream Partners, LP Common Units (WES) Q1 2025 Earnings Call Transcript
Unknown5-8
The earnings call summary presents a mixed picture. Financial performance shows stability with a 4% distribution increase, but adjusted gross margin decreased. The Q&A highlights potential risks like market volatility and operational delays. Guidance remains unchanged despite lower commodity prices, indicating resilience. However, management's unclear responses on contract specifics and potential CapEx adjustments add uncertainty. Overall, the sentiment is neutral, with no strong positive or negative catalysts evident.
WES Slides
WES Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
