Western Midstream Partners, LP (WES) Earnings & Analysis

Latest quarter

Western Midstream reported second-quarter revenue of $1.2 billion, above the $1.1 billion consensus, and adjusted earnings per unit of $0.99, above the $0.90 consensus. Revenue rose from $942.3 million a year earlier. Diluted earnings per unit increased to $0.99 from $0.87.

The company’s filing said higher throughput at its DBM water systems, including the acquisition of Aris, contributed to increased fee-based service revenue in the first half. For the second quarter, compared with the first, the filing attributed higher natural-gas throughput partly to the Comanche complex acquisition and increased production and onloaded volumes at the DJ Basin complex.

Western Midstream’s gross margin declined to 90.4% from 95.5% a year earlier, while its operating margin fell to 43.0% from 47.2%. Free cash flow declined to $246.9 million from $387.0 million. For the first half, the filing attributed lower free cash flow primarily to increased capital expenditures and reduced operating cash flow.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Oscar Brown said higher commodity prices were encouraging customers to increase activity, particularly in the Delaware and Powder River basins. He said several customers on the acquired Brazos acreage had moved wells previously planned for 2027 into the second half of 2026, and he expected that to increase throughput relative to the company’s initial deal assumptions.

Brown said Western Midstream had entered long-term gathering and processing agreements with two Powder River Basin producers. The agreements add approximately 270,000 acres of dedications and are backed by minimum-volume commitments, he said. He also said the Brazos acquisition expanded the company’s Delaware Basin gathering and processing footprint.

The company expects to connect the acquired Brazos system to its existing network by year-end, Brown said. He said the connection would let Western Midstream direct more volumes to Brazos processing plants with spare capacity and rely less on outside processing. He also expects approximately $15 to $20 million of cost synergies over the coming quarters, primarily from eliminating administrative costs and reducing operating and maintenance expense through supply-chain efficiencies.

CFO Kristen Shults said adjusted gross margin increased by $84 million from the first quarter, driven primarily by produced-water throughput, approximately two and a half weeks of Brazos throughput and higher commodity prices on excess natural-gas liquids volumes. She said operating and maintenance expense rose approximately 8% quarter over quarter, mostly because of disposal and land fees associated with water throughput, and higher chemical and treating costs.

For the third quarter, Shults expects operating and maintenance expense to increase in the high single digits percentage range, reflecting a full quarter of Brazos operations, maintenance and repair work, and higher utility costs. She said the company expects 2026 capital spending toward the high end of its existing range, partly because of new expansion opportunities in the Delaware and Powder River basins. Brown said the JIP2 water-treatment demonstration facility was placed in service during the second quarter and was delivering approximately 1,000 barrels per day of reclaimed freshwater.

Guidance

Western Midstream raised its 2026 adjusted EBITDA guidance to $2.75 billion to $2.95 billion, distributable cash flow guidance to $2.05 billion to $2.25 billion, and free cash flow guidance to $1.1 billion to $1.3 billion. CEO Oscar Brown attributed the revisions to first-half results, elevated commodity prices and the Brazos acquisition. The company also expects average natural-gas throughput to increase by mid-single digits year over year in 2026.