Western Midstream Partners, LP (WES) Earnings Call Transcript

Good morning, and welcome to Western Midstream's Second Quarter 2026 fireside chat with our Chief Financial Officer and Senior Vice President, Kristen Shults.

Kristen, WES reported another quarter of record adjusted EBITDA. What are the drivers of this quarter's performance? And how does this position WES for the second half of the year?

Thanks, Daniel. Really great second quarter results for us. Adjusted EBITDA of $737 million, which is up 8% quarter-over-quarter. And if you look at the same second quarter in 2025, we're up 19% year-over-year. A few things behind that outperformance for the second quarter. First of all, water throughput up 5% quarter-over-quarter. So great performance on the water side. We saw some volumes that have been taken off for recycling come back on the system. Also just where the producers are drilling and some of the water cuts in those areas got a little bit more water on the system. Delaware Basin gas was up 5% quarter-over-quarter. A bunch of that is really the Brazos acquisition that we just closed on in mid-June. So you have a little more than 2 weeks' worth of activity that's embedded in that adjusted EBITDA, and that's in that Delaware Basin gas throughput there. And the DJ Basin has been doing a good job for the first half of the year, too, 2% up quarter-over-quarter. We still expect to see a decline in the DJ Basin in the second half of this year, but it's done a nice job of hanging in there. The overall commodity price environment is still favorable. And so that's, of course, playing into our NGLs and the fixed recovery contracts that we have. And the plants are also operating really well. And so when that happens, we're able to produce more excess natural gas liquids volumes. And at the higher commodity prices, that really benefits our bottom line. So those are really the drivers behind the second quarter versus first quarter results. And then we restated our 2026 guidance for the full year. Of course, the first half outperformance played into that restatement. But also just looking at the remainder of the year, we see commodity prices being higher just based on strip for the remainder of the year. The average price that we used was $71 per WTI for the second half of the year and then averages to $77 for the full year of 2026. So once we take into account the incremental adjusted EBITDA from Brazos, the higher commodity price environment, the favorable throughput results we're seeing this year, as well as just how well the assets are recovering and performing, we were able to move that midpoint up by $250 million. And then you see that trickle through the rest of free cash flow and the discretionary cash flow. We moved those midpoints of $200 million, got a little extra interest expense and maintenance CapEx after the Brazos acquisition, but still a good movement.

WES is now pointing to the top end of the guidance range for capital expenditures in 2026. What are the drivers of this increase? And how should investors think about incremental spend versus our original budget?

There's a lot of puts and takes within our capital budget this year. We've had some projects roll out of the capital budget, but we've had a lot more projects and true expansion growth projects roll into the capital budget this year. So -- some of that's caused by the producer shifting some of their drilling activity into '26 that we weren't expecting until 2027, predominantly in the Delaware Basin and in the PRB. We've also obviously acquired Brazos. And so we've got a little bit more capital in there now for Brazos to finish out the year. And then we mentioned on the call that we signed the 2 new gathering and process agreements in the PRB, and we're going to start spending money this year for those agreements as well. North Loving II and Pathfinder are still on track. They're still on budget, actually below budget, should be coming online in the first half of next year. But as we really ramp up building out those facilities in the pipeline, you'll see an increase in Q3 capital and then we'll start to taper down a little bit in Q4 just as those projects are ending or getting near their end point.