WES Raises 2026 EBITDA View $250M on Brazos, Water Growth

Western Midstream Partners raised the midpoint of its 2026 adjusted EBITDA outlook by $250 million to $2.85 billion, reflecting the $1.6 billion Brazos Delaware II acquisition and faster growth in produced-water handling.

CEO Oscar Brown said second-quarter adjusted EBITDA hit $737 million, up 19% from a year earlier and 8% sequentially. The partnership reported net income attributable to limited partners of $395 million and distributable cash flow of $537 million, CFO Kristen Shults said.

The revised guidance sits inside a $2.75 billion to $2.95 billion range. Western Midstream also increased its distributable cash flow outlook to $2.05 billion to $2.25 billion and free cash flow guidance to $1.1 billion to $1.3 billion, raising each midpoint by $200 million.

Brown attributed the lift to the Brazos close in mid-June, stronger first-half commodity pricing, a higher second-half price forecast, and rising customer activity in the Delaware and Powder River basins.

Brazos integration

Western Midstream funded the acquisition with roughly $800 million in cash and $800 million in common units. Brown called it accretive to per-unit metrics and said it broadens the partnership's Delaware Basin gathering and processing position while diversifying its customer base.

The company expects Brazos to contribute about $100 million of adjusted EBITDA in the second half and $15 million to $20 million in cost synergies from general and administrative cuts and supply-chain efficiencies. Brown said the connection between the legacy Brazos and Western Midstream systems should be complete by year-end, redirecting more volumes to Brazos processing plants with available capacity.

Produced water as the growth engine

Produced-water throughput rose about 5% from the prior quarter. The partnership now projects full-year produced-water growth of roughly 85%, up from an earlier forecast of 80%. Brown said produced-water handling has been Western Midstream's fastest-growing product line in recent quarters.

The JIP2 produced-water treatment demonstration facility entered service near Red Bluff Reservoir in Reeves County, Texas. It produces about 1,000 barrels per day of reclaimed fresh water, roughly 10 times the output of its predecessor. Brown said the project is meant to refine operating costs and test reliability before the company sanctions its first commercial-scale beneficial-reuse facility.

Delaware and Powder River activity

Second-quarter natural gas throughput rose 3% sequentially, supported by about two and a half weeks of Brazos volumes and another record quarter in the DJ Basin, COO Danny Holderman said. Crude oil and NGL throughput edged up slightly.

Some customers curtailed Delaware Basin throughput in the second quarter because of negative Waha natural gas pricing, Holderman said. The company exited the quarter with no curtailments after long-haul pipelines returned from maintenance and the GCX expansion and Hugh Rinson pipeline entered service. Western Midstream expects Waha pricing to become less volatile once the Latcom pipeline starts later in 2026.

In the Powder River Basin, Western Midstream signed long-term gathering and processing agreements with two producers covering about 270,000 dedicated acres, more than 1,000 remaining drilling locations, and multiyear minimum volume commitments. Activity from those customers should pick up in the back half of 2026 and support volume growth into 2027.

Margins and spending

Natural gas adjusted gross margin rose $0.03 per Mcf sequentially, driven by commodity prices on excess NGL volumes under fixed-recovery contracts and the initial Brazos contribution. The company expects third-quarter gas margins to slip slightly as commodity prices moderate but kept its full-year outlook near $1.30 per Mcf.

Crude oil and NGL adjusted gross margin rose $0.14 per barrel, largely on higher Delaware Basin deficiency fees. Produced-water adjusted gross margin increased $0.06 per barrel on higher throughput. Western Midstream expects both to ease in the third quarter while maintaining full-year projections of $3.10 to $3.15 per barrel for crude oil and NGL assets and about $0.91 per barrel for produced water.

Western Midstream kept its 2026 capital expenditure range of $850 million to $1 billion but now expects spending near the high end. More than half of the program is allocated to the Pathfinder Produced Water Pipeline and the North Loving II gas processing train, scheduled to enter service in the first and second quarters of 2027.

Liquidity and distribution

Shults said the partnership ended the quarter with more than $1.8 billion of total liquidity and pro forma trailing 12-month net leverage of about 3.15 times. In June, Western Midstream issued $700 million of 10-year senior notes to refinance commercial paper and revolver borrowings used for the Brazos acquisition.

The partnership maintained its quarterly distribution at $0.93 per unit, payable Aug. 14 to unitholders of record on July 31. The target of paying at least $3.70 per unit during 2026 remains unchanged.

Western Midstream's Alpha Score of 65/100 reflects a moderate risk profile. The stock page is at WES.