Western Midstream Partners, LP - 2025 Q2 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2025, for Western Midstream Partners, LP (WES) and its consolidated subsidiary, Western Midstream Operating, LP (WES Operating). WES is a master limited partnership engaged in gathering, compressing, treating, processing, and transporting natural gas, NGLs, condensate, and crude oil, as well as produced water disposal. Operations are concentrated in Texas, New Mexico, and the Rocky Mountains. The filing is a combined report for both registrants.
Key Financial Metrics (Six Months Ended June 30, 2025)
- Revenue: Total revenues and other were $1.86 billion, an increase of 3.7% compared to $1.79 billion in the prior year period.
- Net Income: Net income attributable to WES was $650.7 million, down from $951.5 million in the prior year, primarily due to the absence of significant divestiture gains recorded in 2024.
- Adjusted EBITDA: Adjusted EBITDA was $1.21 billion, an increase of 2.1% year-over-year.
- Free Cash Flow: Defined as operating cash flow less capital expenditures plus distributions from equity investments, Free Cash Flow was $787.8 million, up 21% from the prior year.
- Cash Flow from Operations: Net cash provided by operating activities was $1.09 billion.
- Capital Expenditures: Cash capital expenditures totaled $321.0 million, a decrease of $84.6 million compared to the prior year.
- Debt: Total carrying value of debt was approximately $6.94 billion ($13.2 million short-term, $6.92 billion long-term). No borrowings were outstanding under the $2.0 billion revolving credit facility (RCF) or commercial paper program.
- Liquidity: Cash and cash equivalents were $129.7 million at period end. Working capital surplus was $210.2 million.
- Distributions: The quarterly distribution per unit was maintained at $0.910.
Material Changes vs. Prior Period
- Divestiture Gains: The prior year period included a net gain on divestiture of approximately $299 million (related to the sale of Marcellus Interest and other equity stakes). The current period recorded a net loss of $5.6 million on divestitures, significantly impacting Net Income comparability.
- Throughput: Total natural gas throughput attributable to WES increased by 4% year-over-year to 5,181 MMcf/d, driven by higher volumes in the West Texas, Powder River Basin, and Chipeta complexes. Crude oil and NGLs throughput decreased by 4% due to prior-year divestitures.
- Debt Repayment: WES Operating retired $1.0 billion in senior notes during the first half of 2025 (3.100% notes due 2025 and 3.950% notes due 2025), funded by cash on hand and proceeds from a 2024 bond issuance.
- Operating Expenses: Operation and maintenance expenses increased by 8% ($32.9 million) year-over-year due to higher utility, equipment, and labor costs.
Outlook, Risks, and Unusual Items
- Acquisition: On August 6, 2025 (subsequent event), WES agreed to acquire Aris Water Solutions Inc. in a transaction valued at $1.5 billion plus $500 million of assumed debt. The deal is expected to close in Q4 2025.
- Buyback Program: A $250 million share repurchase program was authorized in February 2025. No units were repurchased during the first half of 2025.
- Related Party Concentration: Occidental Petroleum remains the primary customer, accounting for a significant portion of revenues (36% of natural gas throughput and 92% of crude/NGL throughput attributable to Occidental). Management is discussing contractual interpretations regarding cost-of-service rates with Occidental.
- Risks: Key risks include commodity price volatility, inflation impacting capital and operating costs, potential tariffs on steel and aluminum, and credit risk associated with Occidental's performance.
Investor Verification Checklist
- Verify the impact of the Aris Water Solutions acquisition on future leverage ratios and capital allocation.
- Monitor the resolution of the contractual discussions with Occidental regarding DJ Basin oil-gathering cost-of-service rates.
- Assess the sustainability of Free Cash Flow generation given the reduction in capital expenditures and the upcoming acquisition funding needs.
- Review the divestiture gain in the prior year to understand the true operating earnings trend, as current Net Income is lower due to the lack of such one-time gains.
- Confirm the status of the $250 million buyback program and whether any repurchases will occur in the second half of 2025.