What Western Midstream Partners (WES) Said on Its Q3 Earnings Call

Key Points

• Third-quarter adjusted EBITDA rose 12% year over year to $708 million, while natural gas throughput reached a record 5.9 billion cubic feet per day. EBITDA dipped modestly from the prior quarter amid weaker DJ Basin volumes and contract and pricing mix.
• Western Midstream expects 2026 adjusted EBITDA to exceed the $2.85 billion midpoint of its $2.75 billion–$2.95 billion guidance range. Capital spending is now expected to come in slightly above the $1 billion upper end, driven by customer activity and growth projects.
• Management expects 2027 spending to be roughly in line with 2026, with about 80% directed to the Delaware Basin. Key projects include the Pathfinder produced-water pipeline, expected to start up late in Q4 2026, and the North Loving II processing train, expected late in Q1 2027.

Western Midstream Partners NYSE: WES expects full-year 2026 adjusted EBITDA to exceed the midpoint of its recently raised guidance range, as increased producer activity and stronger commodity prices support its outlook for the fourth quarter.

The partnership reported third-quarter adjusted EBITDA of $708 million, up 12% from a year earlier, alongside record natural gas and produced water throughput. Adjusted EBITDA declined modestly from the second quarter, however, as contract mix, pricing and lower volumes in the DJ Basin weighed on results.

Chief Executive Officer Oscar Brown said a greater number of wells are expected to come online in the fourth quarter than in the third, supporting a stronger finish to the year. Western Midstream also expects capital spending to come in slightly above its previous guidance range as it invests in growth projects.

Throughput Growth and Quarterly Results

Third-quarter net income attributable to limited partners was $325 million, while distributable cash flow was $512 million. Cash flow from operating activities totaled $568 million, and free cash flow was $244 million.

Partnership-wide natural gas throughput rose 8% sequentially to a record 5.9 billion cubic feet per day, Chief Operating Officer Danny Holderman said. Delaware Basin gas throughput increased 20%, with roughly one-third of the growth coming from legacy assets and two-thirds from a full quarter of contribution from the Brazos Delaware acquisition.

Produced water throughput rose approximately 2% from the second quarter to a Delaware Basin record. Crude oil and natural gas liquids throughput also increased slightly.

Chief Financial Officer Kristen Shults said adjusted gross margin fell $35 million from the prior quarter, reflecting factors including contract mix and commodity pricing in West Texas, lower excess natural gas liquids volumes and decreased DJ Basin throughput. A full quarter of Brazos contributions partly offset those pressures.

Guidance and 2027 Spending

Western Midstream expects 2026 adjusted EBITDA above the $2.85 billion midpoint of its $2.75 billion to $2.95 billion guidance range. The partnership raised the midpoints of its adjusted EBITDA and distributable cash flow outlooks by 10%, and its free cash flow outlook by 20%, with its second-quarter results.

Distributable cash flow guidance remains $2.05 billion to $2.25 billion, while free cash flow guidance remains $1.1 billion to $1.3 billion. Shults said the updated outlook assumes an average oil price of approximately $85 per barrel for the second half of 2026.

Capital expenditures are now expected to be slightly above the high end of the $850 million to $1 billion guidance range, reflecting increased customer activity and investment in the Solitude Pipeline System. Management currently expects 2027 spending to be relatively in line with 2026, though it is still working through budgets with producers.

Approximately 80% of next year’s capital is expected to be directed toward the Delaware Basin, including Solitude and completion of the North Loving II processing train. Shults said the vast majority of the remainder would support Powder River Basin growth, including two recently announced gathering and processing agreements.

Projects and Portfolio Changes

Western Midstream expects the Pathfinder produced water pipeline to begin startup late in the fourth quarter of 2026, followed by North Loving II late in the first quarter of 2027. Brown said Pathfinder’s existing anchor commitment supports an approximately 10% return on the asset, with the potential to reach more than 20% as volumes grow over the next one to two years.

The partnership also holds a 7.5% interest in the WhiteWater-operated Solitude joint venture, which plans two natural gas pipelines from the Permian Basin to Katy, Texas. Initial capacity of approximately 2.25 billion cubic feet per day is expected in late 2029, with another 2.25 billion cubic feet per day by the end of 2030. Brown said the investment provides customers with another transportation option and supports flow assurance.

Western Midstream has ordered long-lead-time equipment for another natural gas processing plant it plans to sanction in early 2027. Brown said the company historically has built trains of around 300 million cubic feet per day and is likely to pursue a similar size, although the location and final investment decision remain under consideration.

After the quarter, the partnership agreed to sell its remaining Southwest Wyoming assets for approximately $75 million and acquired a Delaware Basin produced water gathering and disposal company for approximately $98 million. Shults said the Wyoming sale, expected to close by year-end subject to regulatory approvals, should have a minimal effect on adjusted EBITDA.

Distribution and Margin Outlook

Western Midstream declared a quarterly distribution of $0.93 per unit, unchanged from the prior quarter and payable November 13. Brown said it was too early to discuss potential distribution growth, which is a board decision typically considered around February.

For 2027, Holderman expects natural gas adjusted gross margin of $1.25 to $1.30 per thousand cubic feet and crude oil and natural gas liquids margin of $3 to $3.05 per barrel, both slightly lower because of contract mix. Produced water margin is expected to rise to $0.95 to $1 per barrel, supported by Pathfinder’s startup.

About Western Midstream Partners (NYSE:WES)

Western Midstream Partners, LP is a midstream energy company that provides services to oil and natural gas producers. Its operations include gathering, compressing, treating and processing natural gas, as well as gathering, stabilizing and transporting crude oil. The partnership also gathers, transports and disposes of produced water.

Western Midstream owns and operates a network of pipelines, processing plants and other infrastructure, with operations focused primarily on the Delaware Basin in Texas and New Mexico and the DJ Basin in Colorado.

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