Western Midstream’s Earnings Call Signals High-Gear Growth

Western Midstream Partners, Lp ((WES)) has held its Q1 earnings call. Read on for the main highlights of the call.

Western Midstream Partners, Lp struck an upbeat tone on its latest earnings call, highlighting record financial results, expanding throughput and a major acquisition that reshapes its Delaware Basin footprint. Management acknowledged a few regional and commodity-driven headwinds, but emphasized strong liquidity, disciplined leverage and cost control as reasons to expect performance near the high end of its 2026 targets.

Record Adjusted EBITDA and Strong Quarterly Financials

Western reported record adjusted EBITDA of $683 million, up 7% from the prior quarter and 15% year over year, underscoring healthy operating leverage as volumes grow. Net income attributable to limited partners reached $342 million, while distributable cash flow rose to $509 million in the first quarter of 2026, reinforcing the partnership’s ability to fund distributions and growth.

Throughput Records and Volume Growth

The Delaware Basin remained the growth engine, with natural gas throughput rising about 3% sequentially to slightly above 2.0 Bcf per day. Crude oil and NGL volumes hit a record 272,000 barrels per day, up 4% quarter over quarter and 6% year over year, while produced water throughput climbed to a record roughly 2.8 million barrels per day, aided by a full-quarter contribution from Aris.

Accretive Brazos Delaware Acquisition

Management spotlighted its $1.6 billion acquisition of Brazos Delaware II, funded roughly half in cash and half in common units, as immediately accretive to 2026 distributable cash flow per unit. The deal is expected to add about $100 million of incremental adjusted EBITDA next year, increase dedicated West Texas acreage by around 49% and boost gas processing capacity by roughly 20%, at a purchase multiple near 8 times 2027 EBITDA that could fall with synergies.

Guidance Updated Toward High End

On the back of strong first-quarter performance and supportive commodity prices, Western now expects results toward the high end of its 2026 adjusted EBITDA and distributable cash flow ranges, even before Brazos contributions. Free cash flow guidance of $900 million to $1.1 billion and capital spending of $850 million to $1.0 billion remain intact, implying ample capacity to fund both distributions and major organic projects.

Balance Sheet Strength and Liquidity

The partnership ended the quarter with more than $2.5 billion of total liquidity and a trailing 12‑month net leverage ratio of about 3.1 times, which is projected to ease to roughly 3.0 times after financing Brazos. Western also retired $441 million of 2026 notes in April and raised its quarterly distribution to $0.93 per unit, a 2.2% sequential increase that annualizes to $3.72.

Operational Execution and Cost Reduction

Management attributed outperformance to full-quarter benefits from the Aris acquisition, steady per-day throughput gains and disciplined operating cost control. Operating and maintenance expense rose only about 5% sequentially, largely due to Aris, and the company expects combined O&M to increase just 10%–15%, signaling meaningful cost synergies and enhanced operating leverage as volumes build.

Visible Organic Growth Pipeline and New Ventures

Western underscored its long-term growth runway with two large organic projects, the Pathfinder produced water pipeline and North Loving II, both on schedule for commercial service in 2027. Beyond core midstream, management is pursuing adjacencies such as produced water beneficial reuse, behind-the-meter power solutions and CO2-related services, with pilot projects already being scaled up in beneficial reuse.

Waha Natural Gas Pricing Weakness and Curtailments

The company acknowledged that persistently weak and sometimes negative Waha natural gas prices prompted customer curtailments in the Delaware Basin, temporarily depressing gas volumes. Management expects these curtailments and price volatility to linger through the second quarter as downstream maintenance and takeaway constraints weigh on flows, but anticipates relief once new takeaway capacity comes online later in the year.

Powder River Basin Near-Term Declines

In contrast to Delaware growth, Western forecast throughput in the Powder River Basin to decline by about 10%–15% year over year in 2026, reflecting localized producer activity trends. One major customer has signaled plans to accelerate activity in the second half of 2026, which could help drive volumes higher as the company moves into 2027.

Operational and Investment Headwinds

Equity investment volumes fell during the quarter, primarily due to lower throughput at the Mi Vida plant in West Texas, illustrating some exposure to regional softness. Management also flagged that typical second-quarter turnarounds and maintenance work will temporarily pressure throughput and margins, creating a seasonal headwind even as the broader growth story remains intact.

Cash Flow Impact from Contract Renegotiation

Operating cash flow slipped to $470 million, down $88 million from the fourth quarter of 2025, largely due to a renegotiated Delaware Basin gas gathering contract with Occidental that also involved redeeming $610 million of units. Free cash flow was $242 million, and after funding the prior quarter’s distribution, the company reported a net use of cash of $137 million for the period.

Commodity-Linked Margin Volatility

First-quarter results benefited from elevated commodity prices in March and stronger skim oil and NGL values, which enhanced per-unit margins. Management cautioned that per-Mcf margins are likely to moderate in the second half of 2026 toward a full-year average, and that month-to-month contribution from skim oil and excess NGLs will remain somewhat volatile, influenced by producer practices and weather.

Supply Chain and Regional Uncertainty

Western noted that supply chain lead times, particularly for electrical gear and compression components, could influence the timing of some projects despite active procurement efforts. The company also pointed to regulatory and political uncertainty in the DJ Basin as a potential constraint on expansion pace, although it is managing these risks through careful planning and engagement.

Forward-Looking Guidance and Outlook

Looking ahead, Western expects to deliver adjusted EBITDA of $2.5–$2.7 billion and distributable cash flow of $1.85–$2.05 billion in 2026, with performance skewed toward the upper ends of both ranges. The company reiterated margin and throughput guidance across gas, crude, NGLs and produced water, while the Brazos acquisition, robust liquidity and a slate of organic projects provide multiple levers to support free cash flow, distributions and long-term growth.

Western Midstream’s latest earnings call painted the picture of a midstream operator balancing record results and a transformative acquisition against localized basin and commodity challenges. For investors, the story hinges on the company’s ability to navigate near-term headwinds while integrating Brazos, executing its organic pipeline and maintaining disciplined leverage, all with a bias toward delivering at the high end of its 2026 financial targets.