Executive Summary

Q2 2025 delivered record Adjusted EBITDA of $617.9M and strong cash flow, with revenue up year-over-year, though diluted EPS was below prior-year due to mix and equity income dynamics; sequential EBITDA and adjusted gross margin improved on Delaware Basin throughput strength .
Results were a mixed print versus consensus: revenue modestly missed, while diluted EPS beat; the mix of fee-based contracts and efficiency gains supported profitability despite lower NGL pricing and equity distributions vs Q1 . Q2 2025 revenue vs consensus: $942.3M vs $944.6M*; diluted EPS vs consensus: $0.87 vs $0.824*.
Strategic catalysts: definitive agreement to acquire Aris Water Solutions (EV ≈ $2.0B) and sanctioning North Loving Train II (300 MMcf/d), reinforcing Delaware Basin scale, New Mexico expansion, and multi-stream integration; pro forma net leverage expected ≈3.0x and cost synergies targeted at ~$40M .
Guidance was reaffirmed for FY 2025 (Adjusted EBITDA $2.35–$2.55B, Capex $625–$775M, FCF $1.275–$1.475B); distribution held at $0.910 per unit, with management signaling distribution growth to trail earnings to build coverage, a supportive stance for valuation and capital allocation discipline .
Near-term stock reaction catalysts include regulatory/process milestones for Aris, continued Delaware Basin throughput execution, and visibility into 2026 capital plan (≥$1.1B) tied to short-cycle, mid-teens return projects that drive 2027 EBITDA inflection .

What Went Well and What Went Wrong

What Went Well
- “Highest quarterly adjusted EBITDA in our partnership’s history” with sequential adjusted gross margin improvement, driven by record Delaware Basin natural gas, crude oil/NGLs, and produced water throughput .
- Strategic M&A: Aris transaction strengthens produced water platform, expands New Mexico footprint, diversifies contracts with long tenors/MVCs; pro forma net leverage ≈3.0x and ~$40M cost synergies targeted .
- Operational execution: North Loving Train I reached full capacity within a month; Train II sanctioned to meet rising GORs and flow assurance needs; ongoing cost optimization delivered ~$50M annual run-rate savings .
What Went Wrong
- Revenue slightly missed consensus despite operational strength; equity investment distributions were lower vs Q1, and per-unit margins for crude/NGLs softened due to timing and mix .
- Year-over-year diluted EPS declined versus Q2 2024 ($0.87 vs $0.97) amid lower equity income and mix, even as revenue rose YoY .
- Higher O&M expected in Q3 due to summer electricity costs (partially reimbursed), and continued margin normalization noted across products vs Q1’s NGL uplift .

Financial Results

Revenue and EPS – YoY and QoQ

Metric	Q2 2024	Q1 2025	Q2 2025
Total Revenues and Other ($USD Millions)	$905.6	$917.1	$942.3
Net Income per Common Unit – Diluted ($)	$0.97	$0.79	$0.87

Q2 2025 vs Wall Street Consensus (S&P Global)

Metric	Consensus Q2 2025	Actual Q2 2025
Revenue ($USD Millions)	$944.6*	$942.3
Diluted EPS ($)	$0.824*	$0.87

Quarterly cash generation and investment

Metric	Q1 2025	Q2 2025
Adjusted EBITDA ($USD Millions)	$593.6	$617.9
Cash Flows Provided by Operating Activities ($USD Millions)	$530.8	$564.0
Free Cash Flow ($USD Millions)	$399.4	$388.4
Capital Expenditures ($USD Millions)	$142.4	$178.6

Throughput by Basin and Product (operated)

Metric	Q1 2025	Q2 2025
Delaware Basin Natural Gas (Bcf/d)	2.0	2.1
Delaware Basin Crude & NGLs (MBbls/d)	256	269
Delaware Basin Produced Water (MBbls/d)	1,190	1,242

Per-unit margins

Metric	Q1 2025	Q2 2025
Per-Mcf Adjusted Gross Margin – Natural Gas ($)	1.34	1.32
Per-Bbl Adjusted Gross Margin – Crude & NGLs ($)	3.17	3.02
Per-Bbl Adjusted Gross Margin – Produced Water ($)	0.94	0.94

Segment mix and equity investments (context): Equity investment throughput increased for crude/NGLs in Q2 (9% QoQ), but distribution timing and lower per-barrel margins in equity investments weighed on crude/NGLs margins; natural gas and water per-unit margins were broadly “in line” sequentially .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA ($USD Billions)	FY 2025	—	2.350–2.550	Maintained (explicitly reaffirmed)
Free Cash Flow ($USD Billions)	FY 2025	—	1.275–1.475	Maintained (explicitly reaffirmed)
Total Capital Expenditures ($USD Millions)	FY 2025	625–775	625–775	Maintained
Quarterly Distribution ($/unit)	Q2 2025	$0.910 (Q1)	$0.910	Maintained
2026 Capital Expenditures ($USD Billions)	FY 2026	—	≥1.1	New disclosure (planning outlook)

Notes: Management reiterated 2025 ranges (no change post-Aris announcement) and highlighted that distribution growth is expected to trail earnings growth to increase coverage; third-quarter per-unit margins are expected broadly in line with Q2 .

Earnings Call Themes & Trends

Topic	Q4 2024 (prior)	Q1 2025 (prior)	Q2 2025 (current)	Trend
Delaware Basin growth	Record NG throughput; Mentone III start; pathfinder announced with OXY MVCs	North Loving plant startup ahead of schedule; Delaware record NG of 2.0 Bcf/d	Records across NG, crude/NGLs, water; Train II sanctioned; throughput strength persists	Strengthening
Produced water strategy & regulation	Pathfinder pipeline FID; long-term disposal capacity build	Planning steel orders to mitigate tariffs (Pathfinder)	Aris acquisition integrates recycle/beneficial reuse; Texas RRC permit backdrop highlights interbasin transport value	Scaling/integration
Cost structure & efficiency	Base distribution framework; leverage at 3.0x target	Optimization initiatives begin; distribution up 4%	~$50M run-rate cost savings identified and ongoing	Improving
Capital allocation & leverage	Returned $1.246B to unitholders; net leverage 3.0x	Liquidity and fee-based stability cited	Aris financed ~72% equity/28% cash to stay ~3.0x; distribution coverage prioritized	Prudent stance
Technology/beneficial reuse	—	—	Mineral extraction/desalination & industrial water seen as long-term upside; maintain midstream core focus	Expanding optionality
Tariffs/supply chain	—	Domestic steel order for Pathfinder to minimize tariff impacts	Execution on 2027 in-service timeframes; strong producer visibility	Managed

Management Commentary

“Highest quarterly adjusted EBITDA in our partnership’s history…record-breaking natural gas, crude oil and NGLs, and produced water throughput in the Delaware Basin.”
On Aris: “Accretive bolt-on… establishes WES as a best-in-class interbasin produced water system provider… pro forma produced water disposal capacity will be more than 3.8 million barrels per day.”
Funding mix: “We… finance leverage neutral… preserve the balance sheet and set us up for additional opportunities.”
Distribution stance: “Distribution growth to trail earnings growth… increase distribution coverage and provide greater cash flow certainty.”
Synergies: “The $40 million is all G&A… low hanging fruit… we have not counted any revenue synergies.”

Q&A Highlights

Financing choice: Equity-heavy mix maintains leverage ≈3x to enable organic projects and optionality for future consolidation; accretive on per-unit metrics .
Business mix: Water targeted ~15–20% of EBITDA post-Pathfinder; viewed as “clear midstream” with dedications/MVCs similar to gas/oil .
Regulatory: Comfortable operating in New Mexico; cross-state water movement enhances optimization and commercial opportunities, including Pathfinder .
North Loving II ramp: Strong contract visibility and offload connectivity underpin “substantial day-one volumes” at start-up in early Q2 2027 .
Capex cadence: Majority of Pathfinder and North Loving II spend in 2026, normalizing in 2027 barring changes to project set .

Estimates Context

Q2 2025 revenue modest miss; diluted EPS beat. Expectation reset likely modest given stable fee-based profile and reaffirmed FY guidance ranges. Consensus prior/next quarter context shown below.

Metric	Q1 2025 Consensus	Q1 2025 Actual	Q2 2025 Consensus	Q2 2025 Actual	Q3 2025 Consensus
Revenue ($USD Millions)	926.6*	917.1	944.6*	942.3	964.5*
Diluted/Primary EPS ($)	0.843*	0.79	0.824*	0.87	0.87*

Note: EPS definitions can differ (Primary EPS vs reported diluted EPS); management’s reported diluted EPS is used for “Actual” comparisons with consensus means shown for context.*

Key Takeaways for Investors

Operational momentum remains robust: Q2 EBITDA and throughput set records; Delaware Basin continues to be the growth engine, supporting stable per-unit margins and cash generation .
Aris acquisition is strategically additive: diversified long-tenor contracts, integrated water value chain, expanded New Mexico presence—positioning WES as a scaled three-stream midstream leader; expect ~$40M cost synergies with potential revenue synergies not yet in case .
Capital plan visibility: Short-cycle, mid-teens return projects (Pathfinder, North Loving II) drive a 2026 capex peak and 2027 EBITDA uplift; pro forma leverage targeted at ~3.0x supports funding flexibility without pressuring distributions .
Distribution policy is disciplined: Management will prioritize coverage over near-term increases; combined with fee-based stability and contractual protections, this supports payout sustainability through cycle .
Near-term trading setup: Modest top-line miss offset by EPS beat and strategic catalysts; watch regulatory milestones (HSR/process) and customer activity cadence—particularly Delaware/Pathfinder commercialization—to gauge estimate revisions and sentiment .
Risks/considerations: NGL pricing and equity investment distribution timing can affect per-unit margins; summer O&M (electricity) is seasonally higher, though ~75% reimbursed, muting cash flow impact .
Monitor 2026 planning updates: Producer forecasts into late 2025/early 2026 will refine capital and throughput trajectories; look for confirmation of ≥$1.1B capex translating to 2027 EBITDA step-up .

Footnote: Values with asterisks were retrieved from S&P Global and reflect analyst consensus estimates. *

Western Midstream Partners, LP (WES)·Q2 2025 Earnings Summary