Western Midstream Partners, LP Common Units (WES) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates positive elements such as increased adjusted gross margin, decreased operation and maintenance expenses, and strong cash flow. The Q&A section reveals sustainable cost management initiatives and potential for distribution step-ups, enhancing investor confidence. The acquisition of Aris Water Solutions and the expansion plans in New Mexico further support growth prospects. Despite some uncertainties, the overall sentiment is positive, likely leading to a stock price increase in the short term.
Key Financial Performance
Net Income $332 million for the third quarter, with no year-over-year comparison provided.
Adjusted EBITDA $634 million for the third quarter, with no year-over-year comparison provided.
Adjusted Gross Margin for Natural Gas Decreased by $0.05 per Mcf on a sequential quarter basis due to lower excess natural gas liquids volumes and lower pricing in the Delaware Basin, partially offset by higher throughput in the DJ Basin.
Adjusted Gross Margin for Crude Oil and NGLs Increased by $0.08 per barrel on a sequential quarter basis due to increased efficiency fees on certain contracts in the Delaware Basin.
Operation and Maintenance Expense Decreased by 5% or $12 million quarter-over-quarter due to less asset maintenance, repair, and chemical expenses.
Cash Flow from Operating Activities $570 million for the third quarter, with no year-over-year comparison provided.
Free Cash Flow $397 million for the third quarter, with no year-over-year comparison provided.
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Operating Highlights
Acquisition of Aris Water Solutions: Completed acquisition of Aris Water Solutions on October 15, solidifying WES' position as a leading 3-stream midstream flow assurance provider in the Delaware Basin. This acquisition includes recycling and beneficial reuse assets and solutions, with targeted $40 million of annual run rate synergies.
North Loving II Project: Sanctioned the North Loving II natural gas processing plant to support throughput growth in the Delaware Basin.
Delaware Basin Expansion: Achieved record natural gas throughput in the Delaware Basin, with low double-digit year-over-year growth expected for natural gas and low to mid-single-digit growth for crude oil and NGLs in 2026.
DJ Basin Growth: Expecting low to mid-single-digit throughput growth for crude oil and NGLs in 2026, driven by new wells coming online.
Cost Reduction Initiatives: Achieved significant cost reductions, including a 5% decrease in operation and maintenance expenses in Q3. Despite increased throughput, operation and maintenance expenses and G&A are expected to remain flat for 2025 compared to 2024, excluding Aris acquisition costs.
Operational Efficiency: Achieved the highest level of asset operability in WES' history during Q3, while reducing operational costs.
Produced Water Midstream Solutions: Positioned as a leader in produced water gathering, transportation, disposal, recycling, and reuse in the Delaware Basin, following the Aris acquisition.
Pathfinder Pipeline Project: Executed an agreement for incremental disposal capacity to support the Pathfinder pipeline project in the Delaware Basin, optimizing the pipeline's route and enhancing returns.
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Risk or Challenges
Produced Water Challenges: The challenges associated with produced water tied to crude oil and natural gas development in the Delaware Basin are significant. Federal and state regulators have raised concerns, and addressing the growing volume of produced water will require comprehensive solutions.
Powder River Basin Throughput Decline: Due to commodity price weakness throughout 2025, there has been a decline in customer activity levels, leading to lower natural gas throughput. This has also resulted in the deferral of certain expansion projects in the region.
Intermittent Volume Curtailments: In the Delaware Basin, intermittent volume curtailments due to downstream maintenance are expected to slightly impact the rate of natural gas throughput growth in the fourth quarter.
DJ Basin Throughput Decline: Lower activity levels in the DJ Basin in 2025 relative to 2024 are expected to result in a modest decline in overall throughput in 2026.
Increased Costs from Aris Acquisition: The acquisition of Aris Water Solutions will lead to increased operation and maintenance expenses and G&A costs in the fourth quarter, with a 20%-25% rise expected compared to the third quarter.
Commodity Price Weakness: Continued commodity price weakness could lead to select rig drops or temporary rig relocations, particularly in the Powder River Basin, potentially impacting throughput in 2026.
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Guidance & Outlook
Natural Gas Throughput: Expected to increase in the fourth quarter of 2025, with mid-single digits percentage growth year-over-year. Delaware Basin to see low double-digit growth in 2025 and continue as the primary engine of throughput growth in 2026.
Crude Oil and NGLs Throughput: Expected low single digits percentage growth year-over-year in 2025. Delaware Basin to see low to mid-single-digit growth in 2025. DJ Basin to experience low to mid-single digits growth in 2025, but overall throughput to decline modestly in 2026.
Produced Water Throughput: Expected to increase by approximately 40% year-over-year in 2025, with average fourth quarter throughput of 2.6 to 2.7 million barrels per day. Growth driven by Aris acquisition.
Adjusted Gross Margin: Fourth quarter per Mcf adjusted gross margin for natural gas expected to be slightly lower than the third quarter. Per barrel adjusted gross margin for crude oil and NGLs expected to remain in line with the third quarter. Combined fourth quarter per barrel adjusted gross margin for produced water expected to range between $0.85 and $0.90.
Capital Expenditures: 2025 capital expenditures expected to be towards the high end of $625 million to $775 million. 2026 capital expenditures projected to be at least $1.1 billion, driven by organic growth and Aris acquisition.
Free Cash Flow: 2025 free cash flow expected to exceed the high end of the guidance range of $1.275 billion to $1.475 billion, with incremental contributions from Aris assets.
Adjusted EBITDA: 2025 adjusted EBITDA expected to be towards the high end of $2.35 billion to $2.55 billion, including $45 million to $50 million from Aris assets.
Powder River Basin Throughput: Expected to decline in the fourth quarter of 2025 and into 2026 due to commodity price weakness and lower customer activity levels.
DJ Basin Throughput: Overall throughput expected to decline modestly in 2026, but Oxy's development of Bronco CAP area in early 2026 may provide incremental volumes.
Delaware Basin Growth: Continued throughput growth expected in 2026, supported by Aris acquisition and organic growth initiatives like North Loving II.
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Shareholder Return Plan
Quarterly Distribution: In October, a quarterly distribution of $0.91 per unit was declared, consistent with the prior quarter's distribution. This will be paid on November 14 to unitholders of record on October 31.
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Key Q&A
Q:Can you talk about the implementation of the cost management initiative and the sustainability of Q3 O&M expenses?
A:Oscar Brown explained that the cost management initiative started in March, focusing on updating processes, streamlining efforts, and zero-basing activities to be more cost-competitive. The Q3 O&M expenses are sustainable, and further improvements are expected through 2026. Daniel Holderman added examples such as rationalizing maintenance programs, rental fleets, and contract workforce, debottlenecking facilities, and renegotiating contracts. These efforts have been achieved alongside record operability.
Q:Are discrete distribution step-ups still on the table with major projects or M&A?
A:Oscar Brown confirmed that discrete distribution step-ups are possible with major projects or M&A. The company aims for mid-single-digit distribution growth but will consider step-ups if opportunities arise. The decision depends on the yield, capital deployment opportunities, and the economic environment.
Q:What does the additional pore space acquisition mean for the Pathfinder project, and is there an update on third-party contracting?
A:Oscar Brown stated that the additional pore space acquisition adds capacity, improves system flexibility, and saves capital by rerouting a portion of the pipeline. Contracting is progressing well, with the Aris acquisition enabling better coordination. The combined company and regulatory environment are expected to enhance contracting dynamics and pricing strength in the Delaware Basin.
Q:What are the plans for expanding gas and oil infrastructure in New Mexico?
A:Oscar Brown mentioned plans for both organic and inorganic growth in New Mexico, leveraging Aris' footprint. The company aims to build on its success in Texas with two- and three-stream contracts and sees water infrastructure as a critical issue for development, providing leverage for organic growth.
Q:Are there any portfolio gaps WES is looking to address through inorganic deals?
A:Oscar Brown stated that the financial parameters for deals remain unchanged. The company prefers opportunities with synergies, particularly in New Mexico and gas-related assets. Stepping into other basins is possible but challenging without a significant stand-alone business.
Q:How is the business trending for 2026, especially with the Aris acquisition?
A:Kristen Shults highlighted expected product growth across all three streams, with some basins like PRB and DJ potentially declining due to commodity price sensitivity. The Delaware Basin and water transport/disposal are expected to grow significantly. Cost-cutting initiatives will also contribute to 2026 performance.
Q:How does WES plan to address the AGI component for expanding gas infrastructure in New Mexico?
A:Oscar Brown acknowledged the challenges of sour gas and AGI in New Mexico but expressed confidence in WES' skill set to handle these issues. The company is open to inorganic opportunities that include AGI capabilities or permits.
Q:When will the benefits of being a three-stream operator start to show commercially?
A:Oscar Brown stated that commercial benefits are already being discussed but may take time to materialize due to customer timelines and organic growth opportunities. Synergies from the Aris acquisition are expected to accelerate growth, with some revenue synergies likely to appear next year.
Q:What is the confidence level in achieving $40 million in synergies from the Aris acquisition, and are there additional opportunities?
A:Oscar Brown expressed high confidence in achieving the $40 million synergy target, primarily from overhead savings. Additional operating synergies are expected, with updates likely in February. The integration process has been smooth, and further opportunities are being explored.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numbers for the cost savings from the additional pore space acquisition and the exact timeline for realizing commercial benefits from being a three-stream operator. They also did not quantify the operating synergies beyond the $40 million target from the Aris acquisition.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Basin margin
Basin throughput
Bronco CAP
CEO Director
Director Western
Holdings LLC
Loving II
Midstream Holdings
NGLs throughput
NGLs timing
Powder River
President CEO
VP
acreage
asset plant
basis gas
contribution legacy
cost reduction
curtailment
digit throughput
employee
expense GA
gas digit
legacy asset
month contribution
plant Utah
price weakness
pricing Delaware
recycling reuse
relative
throughput DJ
throughput Delaware
throughput Powder
throughput gas
throughput oil
timing well
well market
WES Transcript
Western Midstream Partners, LP Common Units (WES) Q1 2026 Earnings Call Transcript
Positive5-12
The earnings call highlights strong financial performance with a 10% revenue increase and a 15% rise in net income, indicating operational efficiency. The Q&A section confirms the positive trajectory with successful integration of the Aris acquisition, contributing to EBITDA growth. Despite the absence of discussions on strategic initiatives or risks, the financial metrics and optimistic guidance suggest a positive market reaction.
Western Midstream Partners, LP Common Units (WES) Q1 2026 Earnings Call Transcript
Unknown5-9
The earnings call summary shows mixed signals: moderate growth in EBITDA, reduced capital expenditures, and a slight increase in distribution. However, throughput declines in key basins and cautious acquisition pacing offset these positives. The Q&A session reveals management's confidence in strategic projects but lacks clarity on timing and financial impacts of initiatives, which could lead to investor uncertainty. Overall, the sentiment is balanced by optimistic guidance and strategic growth plans, but tempered by operational challenges and lack of guidance specifics, resulting in a neutral stock price outlook.
Western Midstream Partners, LP Common Units (WES) Q4 2025 Earnings Call Transcript
Positive2-19
The earnings call reflects a positive outlook with strong throughput growth driven by the Aris acquisition, cost reduction initiatives, and steady distribution increases. The Q&A section highlighted disciplined M&A strategies, proactive solutions for pricing volatility, and significant interest in new projects like Pathfinder. Despite some vague responses, the overall sentiment is positive, with optimistic growth projections in key areas and strategic initiatives that are likely to boost the stock price.
Western Midstream Partners, LP Common Units (WES) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call summary indicates positive elements such as increased adjusted gross margin, decreased operation and maintenance expenses, and strong cash flow. The Q&A section reveals sustainable cost management initiatives and potential for distribution step-ups, enhancing investor confidence. The acquisition of Aris Water Solutions and the expansion plans in New Mexico further support growth prospects. Despite some uncertainties, the overall sentiment is positive, likely leading to a stock price increase in the short term.
WES Slides
WES Report
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