WES

Western Midstream Partners, LP - 10-Q Summary (Q1 2026)

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026, 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, crude oil, NGLs, and produced water. The company operates primarily in Texas, New Mexico, and the Rocky Mountains. As of March 31, 2026, Occidental Petroleum Corporation held a 37.3% limited partner interest in WES and owned the general partner.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 22.5% year-over-year to $1.12 billion, driven by the full-quarter impact of the Aris Water Solutions acquisition (closed Oct 2025) and increased throughput in the Delaware Basin.
• Profitability: Net income attributable to WES rose 13.4% to $350.3 million. Adjusted EBITDA increased 15.1% to $683.1 million.
• Cost Increases: Cost of product rose 148% year-over-year to $102.9 million, primarily due to higher NGL purchases and volumes from the Aris acquisition. Operation and maintenance expenses increased 17% to $264.2 million.
• Capital Spending: Capital expenditures increased 65.5% to $235.7 million, largely due to expansion projects at the DBM water systems (Pathfinder pipeline) and the West Texas complex (North Loving Train II).
• Cash Flow: Free Cash Flow decreased 39% to $242.3 million due to higher capital expenditures and a decrease in operating cash flow driven by changes in working capital and higher interest expense.

Guidance, Outlook, and Risks

• Distribution: The Board declared a quarterly distribution of $0.930 per unit for Q1 2026, an increase of $0.02 from the prior quarter. Payment is scheduled for May 15, 2026.
• Acquisitions: On May 6, 2026, WES announced a definitive agreement to acquire Brazos Delaware II, LLC for $1.6 billion (approx. $800 million cash and $800 million equity). Closing is expected in Q2 2026.
• Related Party Transactions: Occidental remains the primary customer, accounting for significant revenue. A new gas gathering agreement amendment replaced cost-of-service fees with fixed fees and added minimum volume commitments through 2027, partially funded by a $610 million unit redemption from Occidental in February 2026.
• Risks: Key risks include commodity price volatility (WTI crude ranged $55.99–$102.88 in Q1 2026), inflation impacting steel and labor costs, potential tariffs on imports, and credit risk associated with Occidental's performance.
• Liquidity: The company maintains a $2.0 billion revolving credit facility (RCF) with no outstanding borrowings as of March 31, 2026, providing significant liquidity headroom.

Investor Verification Checklist

• Unit Redemption Impact: Verify the dilution/accretion impact of the $610 million unit redemption with Occidental and the subsequent $1.6 billion Brazos Delaware acquisition.
• Throughput Sustainability: Confirm if the 139% year-over-year increase in produced-water throughput is sustainable given the Aris acquisition integration.
• Free Cash Flow Coverage: Assess the coverage ratio of Distributable Cash Flow ($508.9M) against the quarterly distribution ($374.6M) and the impact of rising capital expenditures on future coverage.
• Debt Maturity Profile: Review the maturity schedule of the $8.64 billion debt load, noting the 4.650% Senior Notes due 2026 classified as short-term.
• Related-Party Concentration: Evaluate the financial dependency on Occidental, which controls the general partner and represents a significant portion of throughput volumes.