Western Midstream Partners Q1 2026 Earnings Call - Record EBITDA Driven by Aris Integration and $1.6B Brazos Acquisition

Abby, Conference Operator: Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Daniel Jenkins, Director of Investor Relations. Please go ahead.

Daniel Jenkins, Director of Investor Relations, Western Midstream Partners: Thank you for joining us today for Western Midstream’s first quarter 2026 conference call. I’d like to remind you that today’s call, the accompanying slide deck, and last night’s press releases contain important disclosures regarding forward-looking statements and non-GAAP reconciliations. Please reference Western Midstream’s most recent Form 10-K and 10-Q and other public filings for a description of risk factors that could cause actual results to differ materially from any forward-looking statements we discuss today. Relevant reference materials are posted on our website. With me today are Oscar Brown, our Chief Executive Officer, Danny Holderman, our Chief Operating Officer, and Kristen Shults, our Chief Financial Officer. I’ll now turn the call over to Oscar.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Thank you, Daniel, and good morning, everyone. Yesterday, we reported record adjusted EBITDA of $683 million, increasing 7% sequentially and 15% compared to the prior year period. Our 1st quarter outperformance reflects the full quarter contribution from the Aris acquisition, per day throughput growth across all 3 product lines, and successful cost reduction efforts. Additionally, as crude oil prices rose in March, we captured incremental benefits from skim oil recoveries on our produced water system and from our fixed recovery natural gas processing contracts. Yesterday, we also announced the $1.6 billion acquisition of Brazos Delaware II.

This strategic bolt-on exemplifies our programmatic M&A philosophy, transactions that enhance the value of our existing assets, diversify and enhance our high-quality customer base, and generate incremental adjusted EBITDA and strong free cash flow for our unit holders, which is completely aligned with our philosophy of only deploying capital if it sustains or grows the distribution. While we are not currently updating our annual guidance ranges, as we have not yet received formal changes to our producers’ drilling plans for this year, we do expect to be towards the high end of both the adjusted EBITDA and distributable cash flow ranges without taking into account the impact of the Brazos transaction. This improved outlook is due to increased commercial discussions, the very favorable commodity price environment, and our improving operating leverage due to our successful and ongoing cost competitiveness efforts.

With that said, we intend to reevaluate our 2026 guidance ranges in conjunction with our 2Q results after the scheduled close of the Brazos transaction. Additionally, one of our largest producers in the Powder River Basin recently informed us they would accelerate activity levels in the 2H of 2026 in order to increase volumes earlier in 2027. This, in combination with our expectation of improved Waha natural gas pricing in the 2H of this year, gives us growing confidence in 2027’s potential, certainly if the current elevated commodity price environment holds. Taking a closer look at the Brazos acquisition, the assets include natural gas and crude oil gathering systems that are highly complementary to our existing Texas Delaware Basin footprint. Integration creates a larger, more scalable midstream system in the core of the premier basin in North America.

These assets fit well within our portfolio for several reasons. This acquisition materially strengthens and expands our Delaware Basin asset base. The Brazos system is contiguous to our existing West Texas complex with over 470,000 dedicated acres and more than 900 miles of pipeline and approximately 460 million cubic feet per day of processing capacity, immediately increasing our West Texas dedicated acreage by 49% and our gas processing capacity by 20%. The Brazos Comanche processing complex has approximately 125 million cubic feet per day of unused capacity, which is crucial as our West Texas volumes continue to grow and will enable us to optimize the performance of our overall processing complex.

Additionally, there are approximately 3,500 drilling locations at $65 per barrel, and nearly all drilling locations on the dedicated acreage are within 2 miles of the low-pressure gathering system, which limits ongoing capital requirements and supports strong free cash flow conversion. The systems also provide exposure to additional geologic formations, including the growing Woodford Shale play. Second, the transaction adds long-term, stable contract structures that are foundational to WES’s strategy. Brazos Delaware’s recently extended contracts have a weighted average remaining contract life of approximately 9.2 years and align with the fee-based framework that underpins WES’s cash flow durability. Third, this acquisition meaningfully diversifies our customer base. Brazos adds several new, high-quality third-party customers to the WES portfolio. It also deepens our relationships with certain existing third-party customers and further diversifies WES’s revenue stream and reduces producer concentration risk. Fourth, the transaction is financially attractive and accretive.

At a $1.6 billion purchase price composed of approximately $800 million of cash and approximately $800 million of WES common units, the transaction is valued at approximately 8x 2027 estimated EBITDA, declining to approximately 7.5x with the commercialization of available processing capacity and other identified synergies. We expect the transaction to close at the end of the second quarter and to contribute approximately $100 million of incremental adjusted EBITDA in 2026. Further, the transaction is immediately accretive to 2026 distributable cash flow per unit. Finally, our strong balance sheet made this possible.

By financing the transaction with a combination of cash and equity, we expect to maintain net leverage of approximately 3 times on a pro forma basis throughout 2026, consistent with our conservative leverage philosophy and preserving the flexibility to continue funding our organic growth program and capital return framework. In summary, Brazos expands our Delaware Basin footprint, adds durable fee-based earnings from a diversified set of top-tier customers, and is accretive to distributable cash flow on a per unit basis. We look forward to integrating Brazos’s assets and team into the WES portfolio and updating you on our progress over the coming quarters. Turning to our record quarterly results, the Delaware Basin continues to perform exceptionally well.

Natural gas throughput in the basin increased 3% sequentially to slightly over 2 billion cubic feet per day, and we achieved record crude oil and NGL throughput of 272,000 barrels per day, which increased 4% sequentially and 6% year-over-year. Our produced water business achieved record throughput as well, increasing 4% sequentially to approximately 2.8 million barrels per day, primarily driven by the full quarter contribution from the Arris acquisition. This occurred despite higher Waha-driven curtailments in the basin, which we expect will persist through the 2Q. Additionally, relative to our throughput expectations, both the DJ and the Powder River Basins outperformed this quarter.

In addition to our throughput performance, we benefited from elevated commodity prices in March, which drove adjusted gross margin outperformance, particularly on excess natural gas liquids volumes and increased skim oil volumes driven by the Aris acquisition. Aris’s long-term contracts share the fee-based foundation that defines West’s broader portfolio, but also provide for meaningful value creation in favorable commodity pricing environments due to the retention of skim oil volumes. This, combined with our efficiency and successful cost reduction actions, has materially improved our operating leverage and the earnings power of West, as reflected in our first quarter results. With that, I’ll turn the call over to our Chief Operating Officer, Danny Holderman, to discuss our operational performance in the first quarter. Danny?

Danny Holderman, Chief Operating Officer, Western Midstream Partners: Thank you, Oscar, and good morning, everyone. Our first quarter natural gas throughput increased by 1% on a sequential-quarter basis, primarily driven by increased throughput from the Delaware Basin despite curtailments. During the quarter, equity investment volumes declined mostly due to lower throughput at the Movida plant in West Texas. Our crude oil and NGLs throughput increased by 3% on a sequential-quarter basis, mostly due to increased throughput from the Delaware Basin due to the timing of wells that came to market during the quarter. Additionally, our produced water throughput increased by 4% on a sequential-quarter basis, driven by the full quarterly impact from the Aris acquisition and continued growth in the legacy West water business. Our first quarter per Mcf adjusted gross margin for our natural gas assets increased by $0.06 on a sequential-quarter basis.

This was due to higher overall commodity pricing on excess Natural Gas Liquids volumes under our fixed recovery contracts, specifically in the month of March, and decreased revenues in the fourth quarter of 2025 associated with the annual cumulative catch-up adjustment in South Texas. Going forward, we expect our second quarter per Mcf adjusted gross margin to be in line with the first quarter due to elevated commodity pricing. Additionally, we now expect our average adjusted gross margin to be approximately $1.28 per Mcf in 2026, which implies moderation in the second half relative to the first as our forecast reflects a more normalized commodity pricing environment for the full year average.

Our first quarter per barrel adjusted gross margin for our crude oil and NGLs assets increased by $0.30 compared to the prior quarter, mostly due to the unfavorable revenue recognition cumulative adjustments that were recorded in the fourth quarter of 2025 for the DJ Basin in South Texas that did not reoccur in the first quarter. Our first quarter performance was in line with our previous expectations of between $3.05 and $3.10 per unit that we communicated in our prior earnings call. We expect our second quarter per barrel adjusted gross margin to be slightly higher than the first quarter and for our average adjusted gross margin to still range between $3.10 and $3.15 per barrel for 2026.

Our first quarter per barrel adjusted gross margin for our produced water assets increased by $0.07 due to the full quarter impact from the Aris acquisition and increased skim oil recoveries at higher commodity pricing. Going forward, we now expect our second quarter per barrel adjusted gross margin to average approximately $0.93 and for our adjusted gross margin to average approximately $0.91 for the year, especially if the current crude oil strip for 2026 is realized. Turning our attention to the remainder of the year, we continue to expect our portfolio-wide average year-over-year throughput to remain relatively flat for natural gas, decline low to mid-single digits for crude oil and NGLs, and increase by approximately 80% for produced water. We still expect average year-over-year throughput in the Delaware Basin to increase by low to mid-single digits for natural gas.

With the first quarter crude oil outperformance, we now expect crude oil to remain relatively flat in 2026 compared to 2025. Despite higher crude oil prices since mid-March, we are still witnessing certain customers curtail throughput in the Delaware Basin due to stubbornly low and sometimes negative Waha natural gas pricing. We expect Waha pricing to remain volatile throughout the second quarter as maintenance is performed downstream of our operations and the basin waits for the next tranche of basin takeaway capacity to come into service in the third and fourth quarters of this year. In the DJ Basin, throughput outperformed in the first quarter due to the timing of wells that came to market. This outperformance slightly improves our full-year expectations for both natural gas and crude oil and NGLs throughput.

While we still expect the overall number of wells that come to market to decline this year, we now expect mid-single-digit declines on average year-over-year versus mid to high single digit declines we expected initially. Additionally, the first pad in Occidental’s Bronco Pad development began flowing in late April, and by our next quarterly call, we should have further clarity regarding 2026 throughput expectations. In the Powder River Basin, we continue to expect throughput to decline on average by approximately 10%-15% year-over-year. We continue to have discussions with our producing customers in the basin, and we still expect higher activity levels in 2027 as more rigs return to the basin.

One of our largest producers in the Powder River Basin recently informed us they would accelerate activity levels in the back half of 2026 in order to increase volumes earlier in 2027. Softness in Rocky Mountain natural gas pricing over the past several months has driven some curtailments and deferred completions. That said, we still expect throughput growth of mid-single digits from our other natural gas assets driven by a full year’s contribution from Williams’ MountainWest pipeline expansion, the tie-in of Kinder Morgan’s Ultima pipeline into our Chipeta processing plant in Utah in 2025, and steady throughput levels at our Posada plant in South Texas. With that, I’ll turn our call over to Kristen to discuss our financial performance during the quarter.

Kristen Shults, Chief Financial Officer, Western Midstream Partners: Thank you, Danny. Good morning, everyone. During the first quarter, we generated net income attributable to limited partners of $342 million, record adjusted EBITDA of $683 million, and distributable cash flow of $509 million. Relative to the fourth quarter of 2025, our adjusted gross margin increased by $56 million, which was primarily driven by a full quarter’s contribution from the Aris acquisition, higher commodity pricing on excess Natural Gas Liquids and increased skim oil volumes, and $30 million of unfavorable non-cash revenue recognition cumulative adjustments recorded in the fourth quarter associated with redetermined cost of service rates on certain contracts at South Texas and in the DJ Basin, which did not reoccur in the first quarter.

Our operation and maintenance expense increased approximately 5% quarter-over-quarter, mostly driven by the full quarter contribution from the Aris acquisition. Inclusive of the legacy Aris assets, we still expect our operation and maintenance expense to increase by only approximately 10%-15%, which represents a meaningful reduction on a combined company basis as we continue to see success in our cost reduction efforts. As is typical with our business, we expect operation and maintenance expense to increase slightly in the second and third quarters, primarily due to increased asset maintenance and repair work and higher utility costs. As a reminder, we are reimbursed for approximately 65% of our utility costs portfolio-wide from our producing customers.

Turning to cash flow, our first quarter cash flow from operating activities totaled $470 million, a decrease of $88 million relative to the fourth quarter of 2025, primarily driven by the Delaware Basin Natural Gas Gathering contract renegotiation with Occidental that became effective on January 1st and included the redemption of $610 million of WES units held by Oxy. Our operating cash flow resulted in $242 million of free cash flow generation, and free cash flow after our fourth quarter 2025 distribution that was paid on February 16th was a use of cash of $137 million. Turning to the balance sheet, we ended the quarter with more than $2.5 billion in total liquidity and a trailing 12-month net leverage ratio of approximately 3.1 times.

In early April, we retired $441 million of 4.65% senior notes due in 2026 with proceeds from the senior notes issued in the fourth quarter of 2025. On April 20th, we declared a quarterly distribution of $0.93 per unit, which was in line with our prior commentary of 2.2% increase over the prior quarter’s distribution. Our first quarter distribution will be paid on May 15th to unit holders of record as of May 1st. Turning to guidance, WES is well-positioned with strong fee-based contract structures that provide protected cash flows throughout the commodity pricing cycles.

As Oscar previously mentioned, we now expect our results to be towards the high end of our previously announced adjusted EBITDA guidance range of $2.5 billion-$2.7 billion and distributable cash flow guidance range of $1.85 billion-$2.5 billion before taking the Brazos transaction into account. This is due to new commercial discussions, the favorable commodity price environment, and our improving operating leverage related to our continued cost competitiveness efforts. Additionally, we continue to expect our free cash flow to range between $900 million and $1.1 billion. We still expect our 2026 capital expenditures to range between $850 million-$1 billion.

Approximately half of the 2026 capital spending is directed towards the construction of the Pathfinder produced water pipeline and associated systems and the North Loving Two, both of which are still expected to come online in the 1st and 2nd quarters of 2027, respectively. Turning to the distribution, the 1st quarter distribution of $0.93 per unit or $3.72 annualized keeps us on track towards our full year guidance of at least $3.70 per unit, which includes distributions paid within calendar year 2026. We remain focused on growing adjusted EBITDA mid to low single digits and growing the distribution at a rate slightly less than that in order to increase distribution coverage over time. With that, I will now turn the call back over to Oscar for closing remarks.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Thanks, Kristen. Before we open it up for Q&A, I wanted to leave you with a few key takeaways.

First, we have a growth strategy that provides WES several ways to win. We have a consistent track record of throughput and adjusted EBITDA growth, coupled with strong cash flow generation. Our combination of strategic bolt-on acquisitions and high returning organic growth projects, including the Pathfinder Pipeline and North Loving Two, provides multiple pathways to grow. Focusing on 2026, we are well on our way towards achieving our targeted 5%-9% adjusted EBITDA growth rate before taking into account any benefit from the Brazos acquisition. Looking further ahead, produced water beneficial reuse, behind the meter power generation, and CO2 related services represent meaningful optionality that our team continues to develop. Second, we operate in the best basins in the country.

We are a leading 3-stream provider in the Delaware Basin, the most prolific basin in North America, with a differentiated and growing position in New Mexico following the Aris acquisition. Additionally, favorable gas oil ratios and rising produced water rates in the Delaware Basin will support throughput growth for years to come. Our DJ Basin assets continue to generate substantial free cash flow, and our expanded Powder River Basin position provides additional upside, all of which is underpinned by our long-term fixed fee contracts, supported by minimum volume commitments and substantial acreage dedications that deliver durable cycle resilient cash flows. Third, the Brazos acquisition is a natural extension of our strategy. It deepens our Delaware Basin footprint and alongside Pathfinder and North Loving Two, further solidifies WES as one of the largest gatherers and processors in the basin.

Finally, WES offers one of the most compelling return profiles in the midstream sector. 12%-14% potential annual equity return is underpinned by an almost 9% current cash yield and a 4%-5% long-term adjusted EBITDA annual growth that drives further upside. Additionally, our investment-grade balance sheet continues to provide support for our capital allocation decisions, and we remain committed to maintaining net leverage of approximately 3 times, growing the distribution over time while increasing our distribution coverage and preserving our peer-leading total capital return. In closing, WES is operating from a position of strength. Aris is fully integrated. We expect the Brazos acquisition to close in the second quarter, and two large organic growth projects are well underway.

Our successful track record, from the Meritage and Aris integrations to the successful construction of Mentone 3 and North Loving One, gives me great confidence in our team’s ability to execute and create incremental value for our unit holders in the quarters ahead. We’ve had a very strong start to 2026. I look forward to updating you in the second quarter on our progress on our organic growth projects and our initiatives to continue to enhance our cost competitiveness and returns. I want to thank the entire Western Midstream workforce for their hard work and dedication to our partnership. With that, we’ll open the call for questions.

Abby, Conference Operator: Thank you. At this time, I would like to remind everyone in order to ask a question, press star and then the number 1 on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Keith Stanley with Wolfe Research. Your line is open.

Keith Stanley, Analyst, Wolfe Research: Hi. Good morning, and congrats on the deal. Wanted to look forward a little bit. So the company’s acquired Aris in October. You’re acquiring Brazos in June. As you look forward, how do you think about the organizational capability to continue to pursue incremental deals over the next year as you digest these 2? Relatedly, you’ve talked in the past about interest in scaling up in New Mexico to integrate with Aris. Is that something that’s still of interest?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Thanks a lot, Keith. It’s Oscar. So in terms of our capacity, you know, we’ve completed the integration of Aris, so we’re confident we can shift our focus now once we close Brazos Delaware to the integration of that asset. That one will be much simpler as opposed to, you know, 250-plus people, a corporate entity, you know, public company acquisition that Aris was, which we executed really, really well on. You know, Brazos is more of an asset deal. We’ll only have sort of 60 to 70 folks come over, most of them field-based, and so it should be a pretty straightforward integration that we can execute quite quickly. We have a lot of confidence in the team.

That said, I think there’s a fairness to your comment that we need to sort of pace, sort of our acquisition sort of opportunities. As you know, a lot of this, we can’t control timing of often. We like the programmatic M&A strategy. We like sort of these size transactions that we can sort of handle efficiently. We’ll continue to look for those, but we’ll be cautious. We are cognizant, we talk about it a lot as a leadership team about, you know, what our, you know, what our broader organization can handle and what pace we can move. As you know, we’re also executing 2 major growth projects, that’s on our mind as well. Again, I think we’ll be measured.

You know, we’ll stick to our strategy on M&A and our discipline, and we’ll just be cautious with what the team can handle. So far, really excellent execution on Aris, and I think we’re gonna do a great job. We like our counterparty here. The Brazos Midstream team’s a great team and think they’ll be super helpful in that transition as well.

Keith Stanley, Analyst, Wolfe Research: Thanks for that. Second question, wanted to pick up, I think you mentioned in the concluding remarks and the slides reference, potential growth in behind the meter power generation and CO2 services as part of the growth strategy. Can you elaborate a little on what you’re looking at there and how near-term these opportunities could be?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Thanks, Keith Stanley. We established a new ventures business group about a year ago to really focus on longer term adjacencies to our core competencies in our footprint where we could, you know, add value and ensure we find a way to participate in sort of megatrends going on today. We made a lot of progress there. Certainly, the near term opportunities exist on the produced water beneficial reuse side. We’ll be talking more next quarter about, you know, where we are. We’ve commissioned a 10-fold upsizing to our pilot plant desal plant right on the Texas-New Mexico border. That’s happening kind of literally as we speak. You know, we’re confident we’ll get to commercial plant operations very soon. That one we’re very excited about.

We think we can supply water to all sorts of industrial offsets, to freshwater sources that, you know, should be reserved for humans. That’s everything from, you know, power plant cooling, data centers, golf courses, you know, cotton, you name it. It’s a big opportunity. It’ll take years to build out, but that’s the one we’re on the precipice of sort of commerciality. On the CO2 side, I think there’s a lot of options there. It’s certainly right down the fairway of what we can manage in terms of plant pressures, pipelines, compression, et cetera. I think that it’s longer term, I believe. We’re particularly excited about the potential for CO2 shale enhanced oil recovery. We talked before about a number of our big customers who’ve been working on those projects.

We always think there’s potential to support, you know, CO2 sequestration and other assets because again, that just comes down to pipelines and pressure and compression. Those are things we do really well. Behind the meter power, you know, what we’ve found as we move through the market is, you know, while we have the skill set to handle electricity all the time, and we have people that have built power facilities, WES itself hasn’t built a major power plant project. We’d like to, you know, do that where we can find the economic returns.

That could come in a number of forms, you know, in ways that people talk about across the industry already supporting, you know, all the build out in terms of power needs that everybody’s talking about. Also given the state of the grid in West Texas, I think there’s an opportunity there for sort of self-help on our own power generation for our own base load and some of our key partners as well. That’s probably a little bit behind, you know, more news on beneficial reuse, but not too far. Those are our major sort of initiatives. There’s other things we’re looking at, but those are the key ones.

The idea there is we’ve got a pretty good line of sight to growth, over the next couple years, and we’re just building the foundation, for that longer term, growth, you know, sort of outlook so we can keep delivering, you know, kind of on average over time through cycle, that kind of 4% or 5% enterprise growth that we’re looking for.

Keith Stanley, Analyst, Wolfe Research: Thank you. Appreciate all the details.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Yes.

Abby, Conference Operator: Our next question comes from the line of Jeremy Tonet with JPMorgan. Your line is open.

Francina, Analyst (on behalf of Jeremy Tonet), JPMorgan: Good morning. This is Francina on for Jeremy. Thank you so much for taking questions. Just wanted to kind of build on the insight that you’ve given for the recent acquisition of Brazos and whether you can provide any more clarity on kind of those contributions, the cadence of when they will be realized given the quick turnaround in integration here. Also just the underlying drivers for that $100 million estimate as well. Thank you.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Sure. The numbers that we put in the press release are really just the base Brazos Delaware business. We think we’ll get to that kind of forward 7.5 times-ish multiple once we’re able to fully commercialize and utilize the Comanche gas processing complex, which we think we can in pretty short order. We are utilizing offloads today, once we get a hold of the system and sort of connect it up, I think we can utilize that space in reasonably short order. There’s other opportunities, I think, with the systems integrated around hydraulics and field level cost savings and synergies. Those will take a little bit longer. In terms of other upside, those are more on the commercial front.

Just, you know, and some operationally, but that’ll be a little bit, you know, sort of further down the road too. I think in, you know, the $100 million is just sort of taking on the asset and taking ownership in sort of the back half of this year. And we expect the upside, you know, sort of that we identify around the synergies over the next, you know, kind of 12 months, something like that. In terms of the speed of integration, it’s really just a commentary on sort of the, you know, the contiguous nature of the assets and just that it’s a simple asset transaction. From a people and systems integration, we should be able to, you know, move on that pretty quickly.

Francina, Analyst (on behalf of Jeremy Tonet), JPMorgan: That’s very helpful. Thank you. Not to get it too ahead of ourselves, but it looks like you guys have a pretty constructive growth runway here through 2027 with North Loving Two and Pathfinder coming online then, and the PRB producer commentary, kind of sounding like it leans into 2027 as well, and Waha volatility, kind of easing by then also. With all of those drivers, would you say that that’s a fair characterization or any other, big things here that we’re missing?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: I think that’s fair. I think, well, we’ve got a lot of confidence in the Permian. We keep an eye on the DJ in terms of its ability to grow, you know, or decline. You know, we’ve gotten pretty cautious, sort of producer feedback, you know, for the next year or so. That said, all that was provided, you know, sort of in the January-February timeframe, before all the recent events and the changes and shifts in the global commodity market. We’ll keep an eye on that in particular in terms of, you know, how that impacts the sort of aggregate portfolio. You know, post Brazos, we should be about 65% of our EBITDA, something like that, Delaware Basin.

We’ve got a lot of confidence there, and it’s the biggest contributor to our sort of earnings and cash flow. Again, with the Aris position in New Mexico and the optionality around, you know, both organic and inorganic, in that part of the world. Indeed, we feel pretty good about the longer term outlook for growth, particularly again, if we’re in an environment that’s anything better than we had originally budgeted around the $57 WTI, you know, back in the last quarter timeframe.

Francina, Analyst (on behalf of Jeremy Tonet), JPMorgan: That’s super helpful. Thank you.

Abby, Conference Operator: Our next question comes from the line of Spiro Dounis with Citi. Your line is open.

Danny Holderman, Chief Operating Officer, Western Midstream Partners0: Thank you, operator. Morning, everybody. Wanna start with the outlook for 2026, and really just trying to understand a little bit more what’s underwriting the current guidance view that you’re gonna be towards the high end and acknowledge that this is all likely gonna change with deal close. You sort of referenced the current commodity environment, and so just curious, does that current strip just sort of get you to that high end? You also referenced producers leaning in here, and so just curious if you do get an acceleration in activity midway through the year, apples to apples, deal notwithstanding, does that sort of maybe put you above?

Kristen Shults, Chief Financial Officer, Western Midstream Partners: Yeah, I think that’s right, Spiro. When we took a look at Q1 results and just the increase that we saw in the commodity prices for March, you can really see it come through in the gross margin per Mcf and the gross margin per barrel on the gas and the water side respectively. To your point, we’re just running that strip out through the remainder of the year, and that’s what’s really propelling us to be near the high end of guidance for 2026. There’s definitely been just a lot more commercial conversations right now, but nothing that we’ve gotten from a producer that makes us increase our volume throughput or our volume expectations yet for 2026.

If we do get something, we might see it in the very last part of 2026, but it will really be more of an impact into 2027 on the volume side. Obviously, just depending on what happens with Waha pricing at the end of the year, that may impact our throughput expectations from a gas perspective as well.

Danny Holderman, Chief Operating Officer, Western Midstream Partners0: Got it. It’s helpful, Kristen. Second question, maybe just going to Pathfinder. Was just hoping for maybe an update on where you are in commercializing the remaining open space on that pipeline. Your comments and comments from some of your peers are really pointing to an acceleration in activity, and I have to think that water is coming along with that. Yeah, just curious, should we be expecting more activity on the commercial side in the coming months related to Pathfinder?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Yeah, thanks for that. It’s Oscar again. Indeed, I think our part of what Kristen’s talking about in the increase of our commercial conversations and activity, a big portion of that is around water. The shift in the conversation has been significant over the last even 6 months in terms of, particularly the larger independent oil and gas companies and the majors, starting to look at water in the Permian, and in particular the Delaware Basin, as a basin-wide sort of challenge to manage. Which plays right into, you know, our fully integrated, you know, New Mexico-Texas system, you know, with basically a header system right down the middle in terms of Pathfinder Pipeline.

I think from our original vision, which was more, asset-specific, just putting volumes directly, contracting that onto Pathfinder, I think we’ve got a couple additional ways that Pathfinder can add value, which is more, you know, as we’ve extended the, you know, our gathering system and disposal system, with the combination. You know, now we’ve got the ability to bid on an integrated water basis, You know, we’re the, I believe, the only ones that kind of today can provide all the current solutions from, produced water to recycling, gathering, disposal, long-haul transport. We’ve got whatever you need, and we can integrate those, sort of services as you need.

Again, some of our customers are even becoming very specific and wanna understand exactly where we’re moving the water and where it’ll be disposed over, you know, some great distances. Again, that plays right into our strength. We’re also the only ones, I think, that are, you know, on the precipice of being able to build commercial future solutions around beneficial reuse. A lot of more conversation. There is still certainly a tendency among producers, and this is true of literally every service that many of our producers, like from oil service to midstream, is sort of waiting till the last minute, and, you know, taking advantage of whatever localized disposal options they still have left. We’ll be here when they’re ready to solve their problems.

I think Pathfinder will be a key part of it. We’re really confident in the returns of that asset. We’ve managed the capital extremely well. It’s still on the timeline that we’ve talked about. We think the returns, you know, frankly, are going nowhere but up on that asset.

Danny Holderman, Chief Operating Officer, Western Midstream Partners0: Great. I’ll leave it there. Thanks, everyone.

Abby, Conference Operator: Our next question comes from the line of Ivan Scotto with UBS Financial. Your line is open.

Ivan Scotto, Analyst, UBS Financial: Hi, team. Congrats on the quarter. Just turning to cost-saving optimization efforts, what parts of the business are you seeing these most in? What parts of the business do you think there’s still more to be done in?

Kristen Shults, Chief Financial Officer, Western Midstream Partners: Yeah, we’ve seen a lot of great efforts, and I might have Danny chime into this too, but on the operations side, in our operation and maintenance expense. I say it’s in every category, whether it’s really taking a deep dive into our maintenance and repairs programs, looking at spans and layers on the people side and the salaries and wages side. Contractor spend quite a bit, bringing those contractors into the business as well. It’s across the board, G&A as well.

Danny Holderman, Chief Operating Officer, Western Midstream Partners: I don’t have anything to add. Labor intensity and M&R processes have been the primary driver so far. We’ll be looking at our price book going forward.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Yeah. We’ve seen a lot of efficiencies on the supply chain side. And some of our other operating processes where we’ve been able to revisit zero base and just, you know, sort of optimize those. We’re getting more experience and a little bit better in terms of understanding, you know, all of our equipment across the plants, as well as compression and everything else in terms of again, that maintenance and repair timing, and where we can stretch without additional risk and that sort of thing. And as Kristen Shults said, we’ll continue to focus on both, you know, those kind of opportunities, but also on the G&A side.

You know, we’re looking at a lot of different tools to improve the sort of efficiency of sort of the corporate side of the house and having people spend more time on, you know, some more complex problems than sort of the day-to-day, you know, simple management of the repetitive part of the business. They’ll come and things over the long term, like AI and everything else. The impacts will be more marginal in our business as we’re an asset-heavy, intensive, you know, kind of business with physical product as opposed to just data, et cetera.

Ivan Scotto, Analyst, UBS Financial: Okay. Got it. Super helpful. Just in terms of growth CapEx, how are you thinking about that number more on a long-term run rate basis?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: I think our, I guess I’ll answer it this way. Our sort of, kind of volume and kind of cash flow, sustainable capital is still pretty much as we’ve talked about before, in this sort of $400 million-$600 million range. It’s sort of a range because it just depends on the nature of the wells that, you know, that are brought online, and sort of their production and decline, initial production and decline curves. That’s the purpose there. When you think about sort of sustaining capital, it’s in that zone. In terms of growth capital from here, I think it’ll be more like what we’re seeing with Pathfinder North Loving Two, in terms of either that’ll be a good capital range, that $400 million-$600 million in sort of a normalized year.

If we can find high return organic growth projects, we’ll have those chunky pieces. Again, as we’ve talked about, we’ve committed to helping the street sort of track those chunky projects away from the just more typical well connects and compression and the things that just sort of sustain the cash flow throughput of the business. In terms of sort of achieving that 4% to 5% sort of consistent growth rate through time, you know, that probably is a higher number, probably approaching $1 billion. Again, that’ll come in a mix, right? Either some of these projects and/or some of these programmatic M&A opportunity. That’s why how we capitalize those is really important.

We sort of aim for that, you know, sort of trifecta of, you know, per unit accretion, keeping the leverage, you know, under control, and sort of a natural fit, you know, with our business. You know, this acquisition of Brazos Delaware, you know, provides a pretty, you know, significant sort of free cash flow, post-financing costs, sort of adder to our distribution coverage, which is something that we’re pretty, you know, excited about. We’ll continue to, whether that’s organic or inorganic, look to deploy capital that way. Again, it won’t be, you know, straight line year to years we’re seeing. We kind of grew 6% last year. You know, we’re now looking at more like 5%-9% this year.

Next year it’ll be, you know, something different, potentially higher, you know, with Brazos combined with sort of the environment and the other activity we talked about. I hope that helps. It’s, you know, it’s hard to say just because, you know, there’s a lot of different projects that we could pursue, some of that just depends on the timing and how those sort of are able to be commercialized.

Ivan Scotto, Analyst, UBS Financial: That makes sense. Thank you.

Abby, Conference Operator: Our next question comes from the line of Ned Baramov with Wells Fargo. Your line is open.

Ned Baramov, Analyst, Wells Fargo: Hi. Good morning. Thanks for taking the questions. A two-part one on the cash flow conversion potential from the Brazos deal. First, what is a good annual maintenance CapEx run rate for these assets? Second, how are you thinking about filling up the 125 of available capacity? Will this require additional capital to connect to your current system and redirect some of these current offloads, or are you looking for producers to gradually grow into this capacity as they ramp up their production?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Yeah. On the first part, on your EBITDA cash conversion for Brazos Delaware has been pretty high the last few years, sort of in that 90-plus percent range. You know, we hope to maintain that. The incremental capital to connect the systems is pretty minimal. You know, if you look at the map again, it’s especially the part that connects the Comanche, the Comanche gas processing complex. It’s all right there. That part’s pretty minimal. We also believe, again, that we hold the Brazos Midstream team in high regard and believe they’ve done a great job with this asset. We don’t believe there’s sort of as much of a typical private equity to public corporate capital catch-up that you often see, and we certainly saw in the Meritage transaction. We’re more confident on that front.

It feels like this one is probably again, we’ll refine this by the second quarter. Probably in the something like $20 million on average kind of, you know, maintenance capital kind of range. Again, there’s capacity both on the system and as you point out, in the processing plant, which means there shouldn’t be a lot of big chunky capital going forward in the next couple of years for that asset. As I mentioned before, we’re currently utilizing offloads, a number of offloads with third-party gas processing companies, to support our existing gas volumes and our maintenance turnarounds, et cetera.

In terms of where that volume can come from, we can do a lot of work just by utilizing, you know, taking those volumes that we’ve been offloading onto the system. We also anticipate the gas throughput growth in the Brazos asset themselves. Pretty soon we’re gonna fill that. For better or for worse, doesn’t really move our mindset or position or needle in terms of when North Loving Two comes online, we’re gonna have that plant pretty full reasonably quickly as well by, you know, kind of middle of next year. Again, given the geographies, I think there’s some logic to that as well.

Ned Baramov, Analyst, Wells Fargo: Thanks for this. I like the 90-plus conversion rate there. I guess part of your solid performance in the first quarter was driven by strong commodity prices in March, resulting in higher contributions from excess NGLs and also skim oil from your water operations. I guess with commodity prices remaining elevated here into the second quarter, could you talk about volume trends for these excess NGLs and skim oil? I presume weather could impact excess NGL volumes, while skim oil volumes could vary based on how producers handle the water volumes before handing off to West.

Kristen Shults, Chief Financial Officer, Western Midstream Partners: Yeah, I think you’re right about that. I mean, we are expecting our water volumes to tick up just a little bit in second quarter relative to first quarter. To your point, what comes along with that will be a little bit of increased skim oil. It does vary month to month. We tweak. It does vary how much skim oil we’re getting in that flow. I do expect, and it’s part of what we were mentioning on the call around our Q2 expectations for gross margin per barrel and the gross margin for NCF, for that to be incorporated in our second quarter results. On the recovery side of the NGLs, yes, expect the same there too. It’ll just flow along with the throughput expectations there. We do have some turnarounds that we’ve been working specifically in the second quarter.

We’ve been utilizing some of our offloads a little bit more. All that kind of just plays into where we think we’ll fall out from a gross margin per Mcf for second quarter too. Definitely as we’re seeing increased commodity prices, for April, May, June, that’ll be dialed into those equity barrels that we get to keep.

Ned Baramov, Analyst, Wells Fargo: That’s great. Thank you.

Abby, Conference Operator: Our final question comes from the line of Elvira Scotto with RBC Capital Markets. Your line is open.

Elvira Scotto, Analyst, RBC Capital Markets: Hey, thanks. Good morning, everyone. As we see sort of the Delaware Basin, you know, growing as a % of EBITDA, you talked about the DJ Basin as a cash generator and the PRB, you know, you could see some growth there. Can you talk about some of the other natural gas assets that you have and the strategic importance of those assets? Could those be assets that could be monetized at some point?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Yeah. No, we certainly like all our other positions as well. As Danny mentioned in his script, you know, we’ve got a lot of capacity in the Uinta, the Chipeta gas processing plant. We see with the Kinder and William connections, upside there. There’s certainly been a lot more activity among the customers in the broader Uinta Basin. We like that asset. South Texas has been great to us and been an important part of our history, and we’re working very hard with our customer there to improve what we have, sort of a JV in a JV kind of structure there. We’re continuing to, you know, to try to improve that asset as well.

We’ve had a long history going all the way back to the Anadarko days in Southwest Wyoming. We have, we do have still a couple other minority interests in long-haul pipes, you know, we monetized sort of the ones where we thought we were misaligned with our partners there, and we’ve kept the ones where we see continued sort of good performance and good partnership. We’re pretty happy with what we have now. The way to think about any potential divestitures for us is, you know, it’s hard as an MLP to divest assets, as many of you know, have been around, you know, for a long time.

We certainly would need a place to redeploy the capital at higher returns and, you know, and that sort of thing to, you know, almost immediately to sort of make that work. It’s something that we look at. We always review sort of our portfolio and how everything fits. It’s not something that, you know, we spend, you know, a terrible amount of time on in terms of reviewing. We don’t need the capital today. Our balance sheet’s in really, really good shape. As we do sort of these chunky organic projects or some of the programmatic M&A, you know, we’ll continue to stay disciplined on the balance sheet there too. Not an urgent priority.

Elvira Scotto, Analyst, RBC Capital Markets: Okay. Just a little bit on capital allocation. Can you talk about, you know, some of the programmatic M&A versus organic growth opportunities? With M&A, you know, what are some of these areas you’d like to fill? I think you had talked about New Mexico, you know, if you’re seeing some opportunities there. Also related to capital allocation, it looks like West repurchased 15— a little over 15 million units from Oxy in the quarter. Can you talk a little bit about that? You know, do you expect to continue some of these opportunistic buybacks?

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Certainly. On the capital allocation front, again, our sort of methodology is unchanged for a number of years. In this sort of go-forward case, it’s very similar. You know, in terms of where we see potential on the organic side, we’ll continue to build out processing over time in the Permian Basin for sure, given where GORs are going and sort of the trends in the basin and a lot of, I think, in-basin gas use. We just see the gas side of the business as very positive in the Permian.

We do hope to build out additional gas assets one way or another, in New Mexico for sure to complement our Aris footprint, that may or may not require us getting into sour gas, which is again, something our operating team has experience in. Probably, you’ll see over the next 2 years some capital allocated to some of these new venture projects, in particular, on the water beneficial reuse and potentially on the power side. Again, those will have to sort of, you know, adhere to our, you know, sort of target returns that are the same for gas, oil, water or anything else. Those would be sort of returns and project-specific. Really not too much change.

We, you know, there’s potential, I think, to deploy incremental capital for sure in the powder. And I think in terms of the DJ, honestly, it really depends on how sort of the regulatory and political environment evolves there. It’s a fabulous basin, with a lot of oil still in place. We think the state is moderating some, given their power needs and their, you know, 30% of their base load is coal, it’s hard to predict. You know, that is truly a human outcome in the DJ in terms of whether we would deploy material, additional capital in that part of the world. Sorry, I’ve Oh, I lost your last part of the question.

Elvira Scotto, Analyst, RBC Capital Markets: 16. Oh, sorry.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Oh, sorry. Yeah. On the repurchase. No, that was actually an integral part of the contract renegotiation of our Delaware Basin legacy gas contract with Oxy. As part of sort of all the adjustments around that contract, the economic trade-off with that to rebalance that contract was, you know, they contributed those units to West, so we retired those units as part of the economics of the overall trade.

Elvira Scotto, Analyst, RBC Capital Markets: Okay, great. Hey, just if I can sneak one more in. I know you have North Loving Two coming on and then some incremental capacity from Brazos. If you think about processing expansions going forward, how are you managing supply chain? I’m specifically thinking about, you know, compression where lead times have stretched over 150 weeks for Cat engines.

Danny Holderman, Chief Operating Officer, Western Midstream Partners: Yeah. I mean, I can talk about it briefly, but when it comes to compression deliverability relative to cryo units or other processing capacity, it tends to be the electrical equipment and the cryo units themselves, not compression that drive it. It’s just being on top of forecasting for those two long lead components to be able to have it. We maintain kind of relationships and orders. Our supply chain group does a good job of making sure that we have spots in line, that we have options for, so that we can be nimble when it comes to needing compression.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: We’ve, I mean, we constantly review our processing stack and monitor the outlook of our producing customers and where we think GORs are going in particular and that sort of thing. You know, that’s why, you know, in looking at, you know, having North Loving Two underway, but also sort of the benefit of the Brazos extra processing capacity, we have a lot of confidence in that and visibility. You’ll recall we slightly modified our approach to thinking about our stack and how we build out or processing, gas processing capacity in terms of, you know, where we really believe we kind of understood our customers and sort of their habits as well as sort of their geology and what they’re looking at going forward.

You know, we leaned in a little bit on North Loving Two versus what we had done in the past, which was more of build up an entire gas processing plant, so to speak, of offloads, customer driven away from turnarounds, then sanction a plant, then build it. By that time you’re sort of a couple years, you know, behind the market. Again, we have incredible confidence in the Permian, you know, for the very long term. We just wanna make sure we’re not overextending, but we’re managing sort of the multi-year outlook for processing. That does tie into the look on supply chain in terms of when we wanna sanction or maybe order long lead time item equipment.

To Danny’s point, where we had more trouble is more specific equipment around electrical, not really the core of the plant itself. Great. Thank you very much. Thank you.

Abby, Conference Operator: There are no further questions at this time. Mr. Oscar Brown, I will turn the call back over to you.

Oscar Brown, Chief Executive Officer, Western Midstream Partners: Great. Thank you. Thank you to everyone for your interest in Western Midstream and your participation on this call. Our unique portfolio, investment-grade balance sheet, and our scale give us multiple ways to win in the near term as a midstream leader in natural gas, crude oil, and produced water across some of the best basins in the U.S. Add to that over the long term, our emerging water beneficial reuse business and strong potential new ventures in behind-the-meter power generation and CO2-related services. In addition to other business lines closer to our core natural gas business. Stay tuned. I really think, you know, we’re gonna have a lot to talk about. We look forward to speaking with you again at our next earnings call in August. We’ll see many of you at the investor and industry conferences in between.

With that, we’ll close the call. Thanks again, everyone.

Abby, Conference Operator: Ladies and gentlemen, this concludes today’s call, and we thank you for your participation. You may now disconnect.