[WES] Western Midstream Thesis 2026: Permian Gathering Cycle Drives DJ Basin Cash Distribution

Key Takeaways

• Western Midstream Partners LP (NYSE: WES) FY2025 revenue ~$3.5-3.8B (+3-7% YoY) with adj. EBITDA ~$2.3-2.5B and adj. EPS ~$3.40-3.75 reflecting continued post-2024 ~5+ Bcf/d aggregate natural gas gathering throughput + ~1.0M+ Bbl/d aggregate produced water + crude oil gathering throughput (selected primary Permian Delaware Basin gathering footprint) plus selected continued post-2024 ~$0.75-0.80 quarterly base distribution + selected enhanced distributions plus selected post-2024 Occidental Petroleum (NYSE: OXY) ~50%+ unitholder governance under continued President + CEO Oscar Brown (~2-year tenure since June 2023; ex-Occidental Senior Vice President + Strategy + Business Development 2018-2023 + ex-various roles + ~30+-year industry career; succeeded Michael Ure 2020-June 2023 retired who led Western Midstream through post-2020 Occidental restructure + post-2023 Permian gathering cycle expansion).
• Permian Delaware gathering cycle: Western Midstream selected primary ~70%+ aggregate cash flow exposure to Permian Delaware Basin gathering (selected ~5+ Bcf/d aggregate natural gas + 1.0M+ Bbl/d aggregate produced water + crude oil gathering throughput); selected continued post-2024 Permian Delaware drilling activity + selected various Occidental + selected various third-party producer dedicated acreage + selected continued post-2024 produced water gathering capacity expansion ($200-300M aggregate annual maintenance + selected various growth capex).
• DJ Basin + selected various other basins: Western Midstream selected ~30%+ aggregate cash flow exposure to DJ Basin (Colorado) + selected various Powder River + selected various Marcellus + Utica + selected various Mid-Continent + selected various basin gathering operations; selected continued post-2024 DJ Basin Occidental + selected various producer drilling activity supporting selected continued cash flow stability.
• Capital return: $3.00-3.20 annual base distribution FY2025 ($0.75-0.80/quarter; selected post-2024 ~+0-3% growth post-2024 $3.20 annual base distribution); selected enhanced distributions ($0.10-0.20 aggregate annual enhanced distribution potential post-2024 distribution coverage above ~1.5x); selected continued post-2024 $3.0-3.5B aggregate FY2025 capital return ($2.5-3B aggregate base distribution + selected various enhanced distribution + selected modest unit repurchases); selected post-2024 net debt-to-adj. EBITDA ~3.0-3.5x; investment-grade Baa3/BBB- credit rating; FY2026 catalyst: continued Permian gathering throughput + selected potential post-2024 distribution growth acceleration.

Company Background

Western Midstream Partners LP (NYSE: WES) is one of the largest US midstream master limited partnerships (MLPs) with FY2025 revenue ~$3.5-3.8B (+3-7% YoY) and adj. EBITDA ~$2.3-2.5B reflecting continued post-2024 Permian Delaware Basin + DJ Basin + selected various other basin gathering operations + selected ~50%+ Occidental Petroleum unitholder governance. The company employs ~1,400+ globally with operations across selected primary US Permian Delaware Basin (Texas + New Mexico) + DJ Basin (Colorado) + selected various Powder River + Marcellus + Utica + Mid-Continent gathering footprint.

Founded 2007 as Western Gas Partners LP via Anadarko Petroleum dropdown (selected post-2007 Anadarko Petroleum subsidiary spinoff for natural gas gathering + processing); selected post-2007 NYSE listing IPO; selected post-2018 ~$3.5B aggregate Western Gas Equity + Western Gas Partners merger creating Western Midstream Partners LP; selected post-August 2019 ~$57B Anadarko Petroleum + Occidental Petroleum acquisition transition (selected Occidental ~50%+ unitholder governance succession); selected post-2020 Michael Ure CEO appointment + selected post-2020 Anadarko legacy operational integration + selected various restructure; selected post-June 2023 Oscar Brown CEO appointment + selected post-2023 Permian gathering cycle expansion + selected various continued cash flow growth focus.

Headquartered in The Woodlands Texas; ~1,400+ employees globally with ~$3.5-3.8B revenue. Three primary asset segments: Natural Gas Assets (~50% revenue ~$1.7-1.9B — selected ~5+ Bcf/d aggregate natural gas gathering + ~3+ Bcf/d aggregate gas processing capacity across Permian + DJ + selected various basins), Crude Oil + NGL Assets (~30% ~$1.1-1.2B — selected ~600K+ Bbl/d aggregate crude oil gathering + ~200K+ Bbl/d aggregate NGL operations), Produced Water Assets (~20% ~$0.7-0.8B — selected ~1.0M+ Bbl/d aggregate Permian Delaware produced water gathering + disposal capacity). Geographic + basin mix: Permian Delaware ~70%+ ($2.5-2.7B aggregate revenue) + DJ Basin Colorado ~20% ($0.7-0.8B) + selected various Powder River + Marcellus + Utica + Mid-Continent ~10% ($0.3-0.4B).

President + CEO Oscar Brown since June 2023 (~2-year tenure); succeeded Michael Ure (CEO 2020-June 2023 retired who led Western Midstream through post-2020 Occidental restructure); Brown ex-Occidental Senior Vice President + Strategy + Business Development 2018-2023 + ex-various Occidental roles + ~30+-year industry career; selected continued strategic priorities include Permian Delaware gathering throughput growth + selected continued post-2024 produced water gathering expansion + selected various distribution coverage expansion. CFO Kristen Shults (since post-2020; ex-various Western Midstream roles + ~25-year industry career). Selected post-2024 various Occidental Petroleum (NYSE: OXY) ~50%+ unitholder governance.

Permian Delaware Gathering Cycle

Western Midstream Permian Delaware Basin gathering footprint:

• Natural gas gathering: ~5+ Bcf/d aggregate Permian Delaware natural gas gathering throughput; ~3+ Bcf/d aggregate gas processing capacity
• Crude oil + NGL gathering: ~600K+ Bbl/d aggregate Permian Delaware crude oil gathering + ~200K+ Bbl/d aggregate NGL
• Produced water gathering: ~1.0M+ Bbl/d aggregate Permian Delaware produced water gathering + disposal capacity (selected one of the largest US produced water gathering networks)
• Selected acreage dedicated: selected continued post-2024 Occidental Petroleum + selected various third-party producer dedicated acreage long-term contracts
• Selected continued post-2024 capacity expansion: continued post-2024 ~$200-300M aggregate annual maintenance + selected various growth capex
• Permian revenue mix: 70%+ aggregate cash flow exposure ($2.5-2.7B aggregate revenue)

FY2026 catalyst: continued Permian gathering throughput + ~$0.10-0.20 incremental annual EPS contribution.

DJ Basin + Other Basins

Western Midstream DJ Basin (Colorado) + selected various other basin operations:

• DJ Basin (Colorado): 20% revenue ($0.7-0.8B); selected continued post-2024 DJ Basin Occidental + selected various producer drilling activity
• Powder River + Marcellus + Utica + Mid-Continent: 10% revenue ($0.3-0.4B); selected continued post-2024 various basin gathering operations
• Selected ~50%+ Occidental unitholder governance: continued post-August 2019 Anadarko + Occidental acquisition Occidental Petroleum (NYSE: OXY) ~50%+ aggregate unitholder governance influence
• Selected continued post-2024 cash flow stability: selected continued post-2024 producer drilling activity + selected various long-term contracts supporting selected continued cash flow stability

FY2026 catalyst: continued DJ + various basin operations + ~$0.05-0.10 incremental EPS contribution.

Capital Return + Distribution Framework

Western Midstream capital return policy targets continued post-2024 distribution stability + enhanced distribution potential:

• Base distribution: $3.00-3.20 annual FY2025 ($0.75-0.80/quarter; selected post-2024 ~+0-3% growth post-2024 ~$3.20 annual base distribution)
• Enhanced distributions: ~$0.10-0.20 aggregate annual enhanced distribution potential post-2024 distribution coverage above ~1.5x
• Aggregate capital return: $3.0-3.5B FY2025 ($2.5-3B aggregate base distribution + selected various enhanced distribution + selected modest unit repurchases)
• Net leverage: net debt-to-adj. EBITDA ~3.0-3.5x FY2025 (selected post-2024 deleveraging post-2018 partnership formation)
• Selected post-2024 ~50%+ Occidental unitholder governance: continued Occidental Petroleum (NYSE: OXY) ~50%+ aggregate unitholder governance

FY2026 catalyst: continued capital return + distribution growth + selected potential post-2024 enhanced distribution acceleration.

Risks

• Permian gathering cyclical: continued post-2024 Permian Delaware Basin drilling activity sustainability vs cyclical adjustment
• Occidental + selected various producer concentration: selected continued post-2024 Occidental Petroleum + selected various third-party producer concentration
• Natural gas + crude oil pricing: continued natural gas + crude oil pricing volatility could compress gathering economics
• Selected various basin diversification: continued DJ + selected various basin diversification
• Occidental ~50%+ unitholder governance: selected continued ~50%+ Occidental unitholder governance concentration

Key Core Metrics

Market Evaluation

Western Midstream trades at selected ~9-12x FY2026 EV/adj. EBITDA premium vs Enterprise Products Partners (~10-12x) + MPLX (~9-11x) + Energy Transfer (~8-10x) + Targa Resources (~10-12x) + selected various US midstream peers reflecting selected continued ~70%+ aggregate Permian Delaware Basin gathering exposure + selected ~50%+ Occidental Petroleum unitholder governance + selected continued post-2024 ~$3.0-3.5B aggregate annual capital return + selected continued post-2024 ~3.0-3.5x net leverage. Selected re-rating catalysts include: (1) continued Permian Delaware gathering throughput + ~5+ Bcf/d natural gas + ~1.0M+ Bbl/d produced water; (2) DJ Basin + selected various basin operations + ~30%+ revenue mix; (3) ~$3.00-3.20 base distribution + ~$0.10-0.20 enhanced distribution; (4) post-2024 net leverage normalization toward ~3.0-3.3x; (5) selected potential post-2024 distribution growth acceleration toward ~$3.20-3.40 base distribution FY2026.

Permian Delaware Gathering + Distribution Strategic Differentiation Deep Dive

Western Midstream Permian Delaware Basin gathering franchise + selected ~50%+ Occidental Petroleum unitholder governance represent selected primary strategic differentiation thesis vs traditional US midstream peers (Enterprise Products Partners + MPLX + Energy Transfer + Targa Resources + selected various). Selected ~5+ Bcf/d aggregate Permian Delaware natural gas gathering throughput + ~3+ Bcf/d aggregate gas processing capacity + ~600K+ Bbl/d aggregate crude oil gathering + ~200K+ Bbl/d aggregate NGL operations + 1.0M+ Bbl/d aggregate produced water gathering capacity (selected one of the largest US produced water gathering networks) supports selected primary 70%+ aggregate cash flow exposure to Permian Delaware Basin ($2.5-2.7B aggregate revenue). Selected continued post-2024 Permian Delaware drilling activity + selected various Occidental Petroleum (NYSE: OXY) + selected various third-party producer dedicated acreage long-term contracts + selected continued post-2024 produced water gathering capacity expansion ($200-300M aggregate annual maintenance + selected various growth capex) supports selected continued cash flow growth. Selected ~30%+ aggregate cash flow exposure to DJ Basin (Colorado, ~20% revenue) + selected various Powder River + Marcellus + Utica + Mid-Continent gathering operations supports selected continued post-2024 cash flow diversification. Selected continued post-2024 ~$3.00-3.20 annual base distribution (selected ~$0.75-0.80/quarter; selected post-2024 ~+0-3% growth post-2024 $3.20) + selected enhanced distributions ($0.10-0.20 aggregate annual enhanced distribution potential post-2024 distribution coverage above ~1.5x) + selected continued post-2024 ~$3.0-3.5B aggregate FY2025 capital return supports selected primary high-yield income thesis. Selected post-2024 net debt-to-adj. EBITDA ~3.0-3.5x supports selected continued investment-grade Baa3/BBB- credit rating + selected continued post-2024 distribution coverage. FY2026 catalyst: continued Permian gathering + DJ Basin + ~$0.10-0.20 incremental annual EPS contribution.

FY2026 thesis: Permian Delaware gathering cycle + DJ Basin + selected various basin operations + ~$3.00-3.20 base distribution + ~$0.10-0.20 enhanced distribution + ~$3.0-3.5B aggregate annual capital return + selected post-2024 ~50%+ Occidental Petroleum unitholder governance + selected potential post-2024 distribution growth acceleration.