Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion analyzes our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements, wherein WES Operating is fully consolidated, and which are included under Part I, Item 1 of this quarterly report, and the historical consolidated financial statements, and the notes thereto, which are included under Part II, Item 8 of the 2025 Form 10-K as filed with the SEC on February 18, 2026.
The Partnership’s assets include assets owned and ownership interests accounted for by us under the equity method of accounting, through our 98.1% partnership interest in WES Operating, as of March 31, 2026. Amounts attributable to noncontrolling interests presented in this Item 2 consist of (i) the 25% third-party interest in Chipeta for all periods presented, and only for natural-gas assets for throughput attributable to WES, and (ii) the 1.9%, 1.9%, and 2.0% limited partner interest in WES Operating as of March 31, 2026, December 31, 2025, and March 31, 2025, respectively, owned by an Occidental subsidiary. See Note 1—Description of Business and Basis of Presentation and Note 7—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q. We also own and control the entire non-economic general partner interest in WES Operating GP, and our general partner is owned by Occidental.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made in this Form 10-Q, and may make in other public filings, press releases, and statements by management, forward - looking statements concerning our operations, economic performance, and financial condition. These forward - looking statements include statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” or similar expressions or variations on such expressions. These statements discuss future expectations, contain projections of results of operations or financial condition, or include other “forward - looking” information.
Although we and our general partner believe that the expectations reflected in our forward - looking statements are reasonable, neither we nor our general partner can provide any assurance that such expectations will prove correct. These forward - looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from expectations include, but are not limited to, the following:
• our ability to pay distributions to our unitholders and the amount of such distributions;
• our assumptions about the energy market;
• future throughput (including Occidental production) that is gathered or processed by, or transported through, our assets;
• our operating results;
• competitive conditions;
• technology;
• the availability of capital resources to fund acquisitions, capital expenditures, and other contractual obligations, and our ability to access financing through the debt or equity capital markets;
• the supply of, demand for, and price of oil, natural gas, NGLs, and related products or services;
• commodity - price risks inherent in percent - of - proceeds, percent - of - product, keep - whole, and fixed-recovery processing contracts;
• weather and natural disasters;
• inflation;
• the availability of goods and services;
• general economic conditions, internationally, domestically, or in the jurisdictions in which we are doing business;
• federal, state, and local laws and state - approved voter ballot initiatives, including those laws or ballot initiatives that limit producers’ hydraulic - fracturing activities or other oil and natural - gas development or operations;
• environmental liabilities;
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• legislative or regulatory changes, including changes affecting our status as a partnership for federal income tax purposes;
• changes in the financial or operational condition of Occidental;
• the creditworthiness of Occidental or our other counterparties, including financial institutions, operating partners, and other parties;
• changes in Occidental’s capital program, corporate strategy, or other desired areas of focus;
• our commitments to capital projects;
• our ability to access liquidity under the RCF and commercial paper program;
• our ability to repay debt;
• the resolution of litigation or other disputes;
• conflicts of interest among us and our general partner and its related parties, including Occidental, with respect to, among other things, the allocation of capital and operational and administrative costs, and our future business opportunities;
• our ability to maintain and/or obtain rights to operate our assets on land owned by third parties;
• our ability to acquire assets on acceptable terms from third parties;
• non - payment or non - performance of significant customers, including under gathering, processing, transportation, and disposal agreements;
• the timing, amount, and terms of future issuances of equity and debt securities;
• the outcome of pending and future regulatory, legislative, or other proceedings or investigations, and continued or additional disruptions in operations that may occur as we and our customers comply with any regulatory orders or other state or local changes in laws or regulations;
• cyber-attacks or security breaches; and
• other factors discussed below, in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in the 2025 Form 10 - K, in our quarterly reports on Form 10 - Q, and in our other public filings and press releases.
Risk factors and other factors noted throughout or incorporated by reference in this Form 10-Q could cause actual results to differ materially from those contained in any forward - looking statement. Except as required by law, we undertake no obligation to publicly update or revise any forward - looking statements, whether as a result of new information, future events, or otherwise.
EXECUTIVE SUMMARY
We are a midstream energy company organized as a publicly traded partnership, engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, NGLs, and crude oil; and gathering, transporting, recycling, treating, supplying, and disposing of produced water. In our capacity as a natural - gas processor, we also buy and sell residue, NGLs, and condensate on behalf of ourselves and our customers under certain contracts. To provide superior midstream service, we focus on ensuring the reliability and performance of our systems, creating sustainable cost efficiencies, enhancing our safety culture, and protecting the environment. We own or have investments in assets located in Texas, New Mexico, and the Rocky Mountains (Colorado, Utah, and Wyoming). As of March 31, 2026, our assets and investments consisted of the following:
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Wholly
Owned and
Operated Operated
Interests Non-Operated
Interests Equity
Interests
Gathering systems
13 2 1 —
Treating facilities 43 3 — —
Processing plants/trains
27 3 — 1
Produced-water gathering, treating, recycling, and disposal systems 8 — — —
NGLs pipelines 2 — — 4
Natural - gas pipelines
6 — — 1
Crude - oil pipelines
2 1 — 1
Significant financial and operational events during the three months ended March 31, 2026, included the following:
• Our first-quarter 2026 per-unit distribution of $0.930 increased $0.02 from the fourth-quarter 2025 per-unit distribution of $0.910.
• Executed an amendment to one of our West Texas complex gas-gathering agreements to replace cost-of-service fees with fixed fees and add a new minimum-volume commitment through 2027, in exchange for the redemption of WES common units. See Note 6—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
The following table provides additional information on throughput for the periods presented below:
Three Months Ended
March 31, 2026 December 31, 2025 Inc/
(Dec) March 31, 2025 Inc/
(Dec)
Throughput for natural-gas assets (MMcf/d)
Delaware Basin 2,035 1,974 3 % 1,975 3 %
DJ Basin 1,520 1,530 (1) % 1,404 8 %
Powder River Basin 396 383 3 % 463 (14) %
Equity investments 464 525 (12) % 550 (16) %
Other 978 931 5 % 899 9 %
Total throughput for natural-gas assets 5,393 5,343 1 % 5,291 2 %
Throughput for crude-oil and NGLs assets (MBbls/d)
Delaware Basin 272 261 4 % 256 6 %
DJ Basin 97 95 2 % 94 3 %
Powder River Basin 25 26 (4) % 25 — %
Equity investments 102 99 3 % 103 (1) %
Other 35 37 (5) % 36 (3) %
Total throughput for crude-oil and NGLs assets 531 518 3 % 514 3 %
Throughput for produced-water assets (MBbls/d)
Delaware Basin 2,848 2,744 4 % 1,190 139 %
Total throughput for produced-water assets 2,848 2,744 4 % 1,190 139 %
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OUTLOOK
We expect our business to be affected by the below - described key trends and uncertainties. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions about, or interpretations of, available information prove incorrect, our actual results may vary materially from expected results.
Impact of producer activity. Our business is primarily driven by the level of production of crude oil and natural gas by producers in our areas of operation. This activity, however, can be impacted by, among other things, commodity-price fluctuations and operational challenges. Fluctuating crude - oil, natural - gas, and NGLs prices can impact the level of our customers’ activities and change the allocation of capital within their own asset portfolios. Such fluctuations can also impact us directly to the extent we take ownership of and sell certain volumes at the tailgate of our plants for our own account. The New York Mercantile Exchange West Texas Intermediate crude - oil daily settlement prices during the three months ended March 31, 2026, ranged from a low of $55.99 per barrel in January 2026 to a high of $102.88 per barrel in March 2026, and prices during 2025 ranged from a low of $55.27 per barrel in December 2025 to a high of $80.04 per barrel in January 2025. The Waha Hub natural-gas prices during the three months ended March 31, 2026, ranged from a low of ($7.79) per MMBtu in March 2026 to a high of $14.47 per MMBtu in January 2026, and prices during 2025 ranged from a low of ($8.82) per MMBtu in October 2025 to a high of $7.50 per MMBtu in January 2025. The extent and duration of commodity - price volatility, and the associated direct and indirect impact on our business, cannot be predicted. To address the risks posed by fluctuating commodity prices, we intend to continue evaluating the relevant price environments and adjust our capital spending plans to reflect our customers’ anticipated activity levels, while maintaining appropriate liquidity and financial flexibility.
Additionally, even in favorable commodity-price environments, our customers face operational challenges such as severe weather disruptions, oil and gas takeaway constraints, produced water recycling and disposal limitations, seismicity concerns, new regulatory requirements, and optimizing large, complex drilling programs. Our producers’ ability to mitigate or manage such challenges can significantly impact the volumes available for us to service in the short term. For this reason, we strive to work proactively with our customers whenever possible to provide high levels of reliability on our systems and help them meet these operational challenges as they arise.
Impact of inflation and tariffs. High inflation in the U.S. has raised our costs for steel products, automation components, power supply, labor, materials, fuel, and services, raising operating costs and capital expenditures. Additionally, the Trump administration has imposed significant import tariffs, including on imports of steel and aluminum, and may impose further tariffs on other U.S. trading partners. These tariffs could substantially increase our operating and capital costs. While future inflation and tariff impacts are uncertain, higher operating and capital costs could materially and negatively affect financial results. To the extent permitted by regulations and escalation provisions in certain of our existing agreements, we have the ability to recover a portion of increased costs in the form of higher fees.
Impact of interest rates. Interest rates can be volatile, affecting our interest expense on RCF and commercial paper borrowings. Future increased interest rates would likely result in additional increases in financing costs. As with other yield-oriented securities, our unit price could be impacted by our implied distribution yield relative to market interest rates. Therefore, changes in interest rates may affect investor yield requirements. A rising interest-rate environment could have an adverse impact on our unit price and ability to issue equity to make acquisitions, to reduce debt, or for other purposes. However, we expect our cost of capital to remain competitive, as our peers face similar interest-rate dynamics.
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ACQUISITIONS AND DIVESTITURES
During the fourth quarter of 2025, we closed on the acquisition of Aris by merger in a transaction valued at $2.0 billion. See Note 3—Acquisitions and Divestitures, Note 5—Equity and Partners’ Capital, and Note 9—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
RESULTS OF OPERATIONS
OPERATING RESULTS
The following tables and discussion present a summary of our results of operations:
Three Months Ended
thousands March 31, 2026 December 31, 2025 March 31, 2025
Total revenues and other (1)
$ 1,123,579 $ 1,031,481 $ 917,116
Equity income, net – related parties 14,776 21,378 20,435
Total operating expenses (1)
662,795 744,234 523,081
Gain (loss) on divestiture and other, net (6,367) (3,065) (4,667)
Operating income (loss) 469,193 305,560 409,803
Interest expense (113,390) (105,674) (97,293)
Other income (expense), net 6,730 3,706 7,477
Income (loss) before income taxes 362,533 203,592 319,987
Income tax expense (benefit) 3,501 7,323 3,435
Net income (loss) 359,032 196,269 316,552
Net income (loss) attributable to noncontrolling interests 8,756 5,588 7,545
Net income (loss) attributable to Western Midstream Partners, LP (2)
$ 350,276 $ 190,681 $ 309,007
_________________________________________________________________________________________
(1) Total revenues and other includes amounts earned from services provided to related parties and from the sale of natural gas, condensate, NGLs, and water solutions volumes to related parties. Total operating expenses includes amounts charged by related parties for services received. See Note 6—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
(2) For reconciliations to comparable consolidated results of WES Operating, see Items Affecting the Comparability of Financial Results with WES Operating within this Item 2.
For purposes of the following discussion, any increases or decreases refer to the comparison of the three months ended March 31, 2026, to the three months ended December 31, 2025, or to the three months ended March 31, 2025, as applicable.
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Throughput
Three Months Ended
March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
Throughput for natural-gas assets (MMcf/d)
Gathering, treating, and transportation 430 381 13 % 371 16 %
Processing 4,499 4,437 1 % 4,370 3 %
Equity investments (1)
464 525 (12) % 550 (16) %
Total throughput 5,393 5,343 1 % 5,291 2 %
Throughput attributable to noncontrolling interests 184 181 2 % 181 2 %
Total throughput attributable to WES for natural - gas assets
5,209 5,162 1 % 5,110 2 %
Throughput for crude-oil and NGLs assets (MBbls/d)
Gathering, treating, and transportation 429 419 2 % 411 4 %
Equity investments (1)
102 99 3 % 103 (1) %
Total throughput 531 518 3 % 514 3 %
Throughput attributable to noncontrolling interests 10 10 — % 11 (9) %
Total throughput attributable to WES for crude - oil and NGLs assets
521 508 3 % 503 4 %
Throughput for produced-water assets (MBbls/d)
Gathering, disposal, and water solutions 2,848 2,744 4 % 1,190 139 %
Throughput attributable to noncontrolling interests 53 51 4 % 24 121 %
Total throughput attributable to WES for produced - water assets (2)
2,795 2,693 4 % 1,166 140 %
_________________________________________________________________________________________
(1) Represents our share of average throughput for investments accounted for under the equity method of accounting.
(2) Water solutions volumes include groundwater and gathered produced water that is treated and recycled.
Natural-gas assets
Total throughput attributable to WES for natural - gas assets increased by 47 MMcf/d compared to the three months ended December 31, 2025, primarily due to higher throughput at the West Texas complex due to increased production in the area.
Total throughput attributable to WES for natural - gas assets increased by 99 MMcf/d compared to the three months ended March 31, 2025, primarily due to (i) higher throughput at the DJ Basin, West Texas, and Chipeta complexes due to increased production in the areas, and (ii) higher throughput on the Red Bluff Express pipeline due to the addition of a new receipt point into the pipeline beginning in the fourth quarter of 2025. These increases were offset partially by (i) lower throughput at the Powder River Basin complex due to decreased production in the area and (ii) lower throughput at the Mi Vida plant.
Crude-oil and NGLs assets
Total throughput attributable to WES for crude - oil and NGLs assets increased by 13 MBbls/d compared to the three months ended December 31, 2025, primarily due to (i) higher throughput at the DBM oil system due to increased production in the area and (ii) higher throughput on the FRP pipeline.
Total throughput attributable to WES for crude - oil and NGLs assets increased by 18 MBbls/d compared to the three months ended March 31, 2025, primarily due to higher throughput at the DBM oil system due to increased production in the area.
Produced-water assets
Total throughput attributable to WES for produced - water assets increased by 102 MBbls/d and 1,629 MBbls/d compared to the three months ended December 31, 2025, and March 31, 2025, respectively, due to higher throughput at the DBM water systems, including the acquisition of Aris.
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Revenues
Three Months Ended
thousands except percentages and per-unit amounts
March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
Service revenues – fee based $ 933,302 $ 910,183 3 % $ 823,197 13 %
Other revenues from customers
Service revenues – product based $ 88,767 $ 50,253 77 % $ 59,252 50 %
Product sales 99,616 69,803 43 % 34,469 189 %
Total other revenues from customers
$ 188,383 $ 120,056 57 % $ 93,721 101 %
Per - unit gross average sales price:
Natural gas (per Mcf) $ (0.20) $ (0.19) 5 % $ 2.06 (110) %
NGLs (per Bbl) 23.19 20.84 11 % 29.75 (22) %
Skim-oil (per Bbl) 66.93 54.41 23 % 69.96 (4) %
Service revenues – fee based
Service revenues – fee based increased by $23.1 million compared to the three months ended December 31, 2025, primarily due to increases of (i) $26.7 million at the Springfield systems and DJ Basin oil system primarily due to annual cumulative catch-up adjustments for cost-of-service changes that decreased revenue during the fourth quarter of 2025 and (ii) $5.5 million at the DBM water systems due to the acquisition of Aris and increased throughput. These increases were offset partially by a decrease of $7.1 million at the DJ Basin complex due to decreased throughput.
Service revenues – fee based increased by $110.1 million compared to the three months ended March 31, 2025, primarily due to increases of (i) $103.6 million at the DBM water systems due to the acquisition of Aris and increased throughput, partially offset by lower average fees, and (ii) $5.4 million at the DBM oil system due to increased throughput and deficiency fees on certain contracts with increasing throughput minimums.
Other revenues from customers
Other revenues from customers increased by $68.3 million compared to the three months ended December 31, 2025, primarily due to increases of (i) $37.8 million at the West Texas complex due to increased net volumes sold and net average prices and (ii) $26.9 million at the DBM water systems due to the acquisition of Aris, including increased skim-oil volumes and average prices.
Other revenues from customers increased by $94.7 million compared to the three months ended March 31, 2025, primarily due to increases of (i) $49.2 million at the DBM water systems due to the acquisition of Aris, including increased skim-oil volumes, and (ii) $47.1 million at the West Texas complex due to increased net volumes sold and as a result of changes in contract mix.
Equity Income, Net – Related Parties
Three Months Ended
thousands except percentages March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
Equity income, net – related parties $ 14,776 $ 21,378 (31) % $ 20,435 (28) %
Equity income, net – related parties decreased by $6.6 million compared to the three months ended December 31, 2025, primarily due to decreases of $3.9 million and $3.2 million at FRP and TEP, respectively.
Equity income, net – related parties decreased by $5.7 million compared to the three months ended March 31, 2025, primarily due to a decrease of $4.5 million at Mi Vida.
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Cost of Product and Operation and Maintenance Expenses
Three Months Ended
thousands except percentages March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
Natural-gas purchases
$ 7,957 $ 7,534 6 % $ 14,017 (43) %
NGLs purchases 96,146 65,544 47 % 60,418 59 %
Other (1,219) (1,460) 17 % (32,943) 96 %
Cost of product 102,884 71,618 44 % 41,492 148 %
Operation and maintenance 264,241 252,368 5 % 226,514 17 %
Total Cost of product and Operation and maintenance expenses $ 367,125 $ 323,986 13 % $ 268,006 37 %
Natural-gas purchases
Natural-gas purchases decreased by $6.1 million compared to the three months ended March 31, 2025, primarily due to lower average prices at the West Texas complex.
NGLs purchases
NGLs purchases increased by $30.6 million compared to the three months ended December 31, 2025, primarily due to increases of (i) $13.3 million at the DBM water systems due to the acquisition of Aris, including increased skim-oil volumes and higher average prices, and (ii) $10.7 million and $4.9 million at the West Texas and DJ Basin complexes, respectively, due to higher purchased volumes and increased average prices.
NGLs purchases increased by $35.7 million compared to the three months ended March 31, 2025, primarily due to increases of (i) $24.5 million at the DBM water systems due to the acquisition of Aris, including increased skim-oil volumes, and (ii) $8.8 million at the West Texas complex due to higher purchased volumes.
Other items
Other items increased by $31.7 million compared to the three months ended March 31, 2025, primarily due to changes in imbalance positions at the West Texas and DJ Basin complexes.
Operation and maintenance expense
Operation and maintenance expense increased by $11.9 million compared to the three months ended December 31, 2025, primarily due to increases of (i) $5.6 million in salaries and wages costs, (ii) $2.6 million in utility expense, and (iii) $2.4 million in land-related costs.
Operation and maintenance expense increased by $37.7 million compared to the three months ended March 31, 2025, primarily due to an increase of $54.6 million related to the acquisition of Aris, partially offset by $15.4 million in equipment maintenance and repair costs.
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Other Operating Expenses
Three Months Ended
thousands except percentages March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
General and administrative $ 75,150 $ 201,871 (63) % $ 66,786 13 %
Property and other taxes 19,486 17,986 8 % 17,826 9 %
Depreciation and amortization 200,426 197,882 1 % 170,460 18 %
Long-lived asset and other impairments 608 2,509 (76) % 3 NM
Total other operating expenses $ 295,670 $ 420,248 (30) % $ 255,075 16 %
_________________________________________________________________________________________
NM — Not meaningful
General and administrative expenses
General and administrative expenses decreased by $126.7 million compared to the three months ended December 31, 2025, primarily due to $120.5 million in acquisition-related expenses associated with the Aris transaction in the fourth quarter of 2025, including $104.6 million in severance payments and $15.9 million in professional services for financial advisory, legal, and other professional fees.
General and administrative expenses increased by $8.4 million compared to the three months ended March 31, 2025, primarily due to increases of (i) $4.3 million in salaries and wages costs and (ii) $3.5 million in corporate-related costs.
Depreciation and amortization expense
Depreciation and amortization expense increased by $30.0 million compared to the three months ended March 31, 2025, primarily due to $26.3 million related to the acquisition of Aris.
Interest Expense
Three Months Ended
thousands except percentages March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
Long-term and short-term debt $ (115,532) $ (106,845) 8 % $ (96,060) 20 %
Finance lease liabilities (296) (509) (42) % (583) (49) %
Commitment fees and amortization of debt-related costs (1,868) (1,838) 2 % (3,201) (42) %
Capitalized interest 4,306 3,518 22 % 2,551 69 %
Interest expense $ (113,390) $ (105,674) 7 % $ (97,293) 17 %
Interest expense increased by $7.7 million compared to the three months ended December 31, 2025, primarily due to an increase of $11.1 million of interest incurred on the 4.800% Senior Notes due in 2031 and 5.500% Senior Notes due in 2035 that were issued during the fourth quarter of 2025, partially offset by a decrease of $3.5 million due to no borrowings on the commercial paper program during the first quarter of 2026.
Interest expense increased by $16.1 million compared to the three months ended March 31, 2025, primarily due to increases of (i) $15.9 million of interest incurred on the 4.800% Senior Notes due in 2031 and 5.500% Senior Notes due in 2035 that were issued during the fourth quarter of 2025 and (ii) $7.6 million of interest incurred on the 7.250% Senior Notes due in 2030 that were assumed as part of the acquisition of Aris during the fourth quarter of 2025. These increases were offset partially by a decrease of $3.6 million due to the repayment of the 3.950% Senior Notes during the second quarter of 2025. See Liquidity and Capital Resources—Debt and credit facilities within this Item 2.
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Income Tax Expense (Benefit)
Three Months Ended
thousands except percentages March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
Income (loss) before income taxes $ 362,533 $ 203,592 78 % $ 319,987 13 %
Income tax expense (benefit) 3,501 7,323 (52) % 3,435 2 %
Effective tax rate 1 % 4 % (75) % 1 % — %
We are not a taxable entity for U.S. federal income tax purposes; therefore, our federal statutory rate is zero percent. However, income apportionable to Texas is subject to Texas margin tax. Income tax expense decreased by $3.8 million compared to the three months ended December 31, 2025, primarily due to changes in provisions for Texas margin tax liabilities.
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted Gross Margin. We define Adjusted Gross Margin attributable to Western Midstream Partners, LP (“Adjusted Gross Margin”) as total revenues and other (less reimbursements for electricity - related expenses recorded as revenue), less cost of product, plus distributions from equity investments, and excluding the noncontrolling interest owners’ proportionate share of revenues and cost of product. We believe Adjusted Gross Margin is an important performance measure of our operations’ profitability and performance as compared to other companies in the midstream industry. Cost of product expenses include (i) costs associated with the purchase of natural gas and NGLs pursuant to our percent - of - proceeds, percent - of - product, and keep - whole contracts, (ii) costs associated with the valuation of gas and NGLs imbalances, (iii) costs associated with our obligations under certain contracts to redeliver a volume of natural gas to shippers, which is thermally equivalent to condensate retained by us and sold to third parties, and (iv) costs associated with our offload commitments with third parties providing firm-processing capacity. The electricity-related expenses included in our Adjusted Gross Margin definition relate to pass-through expenses that are recorded as operation and maintenance expense with an offset recorded as revenue for the reimbursement by certain customers.
Adjusted EBITDA. We define Adjusted EBITDA attributable to Western Midstream Partners, LP (“Adjusted EBITDA”) as net income (loss), plus (i) distributions from equity investments, (ii) non - cash equity - based compensation expense, (iii) interest expense, (iv) income tax expense, (v) depreciation and amortization, (vi) impairments, and (vii) other expense (including lower of cost or market inventory adjustments recorded in cost of product), less (i) gain (loss) on divestiture and other, net, (ii) gain (loss) on early extinguishment of debt, (iii) income from equity investments, (iv) income tax benefit, (v) other income, (vi) other items impacting comparability with our core operating performance, and (vii) the noncontrolling interest owners’ proportionate share of revenues and expenses. We believe the presentation of Adjusted EBITDA provides information useful to investors in assessing our financial condition and results of operations and that Adjusted EBITDA is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures, and make distributions. Adjusted EBITDA is a supplemental financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, commercial banks, and rating agencies, use, among other measures, to assess the following:
• our operating performance as compared to other publicly traded partnerships in the midstream industry, without regard to financing methods, capital structure, or historical cost basis;
• the ability of our assets to generate cash flow to make distributions; and
• the viability of acquisitions and capital expenditures and the returns on investment of various investment opportunities.
Distributable Cash Flow. We define Distributable Cash Flow (“DCF”) as Adjusted EBITDA, less total revenues and other recognized in Adjusted EBITDA in excess of (less than) customer billings; net cash paid for (i) interest expense (net of interest income recorded in other income (expense) and non-cash capitalized interest), (ii) maintenance capital expenditures, (iii) income taxes; and Distributable Cash Flow attributable to noncontrolling interests to the extent such amounts are not excluded from Adjusted EBITDA.
Free Cash Flow. We define “Free Cash Flow” as net cash provided by operating activities less total capital expenditures and contributions to equity investments, plus distributions from equity investments in excess of cumulative earnings. Management considers Free Cash Flow an appropriate metric for assessing capital discipline, cost efficiency, and balance - sheet strength. Although Free Cash Flow is the metric used to assess our ability to make distributions to unitholders, this measure should not be viewed as indicative of the actual amount of cash that is available for distributions or planned for distributions for a given period. Instead, Free Cash Flow represents the amount of cash that is available in aggregate for distributions, debt repayments, and other general partnership purposes.
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Adjusted Gross Margin, Adjusted EBITDA, Distributable Cash Flow, and Free Cash Flow are not defined in GAAP. The GAAP measure that is most directly comparable to Adjusted Gross Margin is gross margin. Net income (loss) and net cash provided by operating activities are the GAAP measures that are most directly comparable to Adjusted EBITDA. The GAAP measure that is most directly comparable to Distributable Cash Flow is net income (loss). The GAAP measure that is most directly comparable to Free Cash Flow is net cash provided by operating activities. Our non - GAAP financial measures (i) should not be considered as alternatives to the comparable GAAP measures or any other measure of financial performance presented in accordance with GAAP, (ii) have important limitations as analytical tools because they exclude some, but not all, items that affect the comparable GAAP measures, (iii) should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, and (iv) may not be comparable to similarly titled measures of other companies in our industry, thereby diminishing their utility as comparative measures.
Management compensates for the limitations of our non-GAAP measures as analytical tools by reviewing the comparable GAAP measures, understanding the differences, and incorporating this knowledge into its decision - making processes. We believe that investors benefit from having access to the same financial measures that our management considers in evaluating our operating results.
The following tables present reconciliations of the GAAP measures to our non-GAAP measures:
Three Months Ended
thousands March 31, 2026 December 31, 2025 March 31, 2025
Reconciliation of Gross margin to Adjusted Gross Margin
Total revenues and other $ 1,123,579 $ 1,031,481 $ 917,116
Less:
Cost of product 102,884 71,618 41,492
Depreciation and amortization 200,426 197,882 170,460
Gross margin 820,269 761,981 705,164
Add:
Distributions from equity investments 25,652 27,147 34,344
Depreciation and amortization 200,426 197,882 170,460
Less:
Reimbursed electricity-related charges recorded as revenues 33,488 31,488 29,004
Adjusted Gross Margin attributable to noncontrolling interests 22,204 20,719 20,181
Adjusted Gross Margin
$ 990,655 $ 934,803 $ 860,783
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To facilitate investor and industry analysis, we also disclose per-Mcf Adjusted Gross Margin for natural-gas assets, per-Bbl Adjusted Gross Margin for crude-oil and NGLs assets, and per-Bbl Adjusted Gross Margin for produced-water assets .
Three Months Ended
thousands except per-unit amounts March 31, 2026 December 31, 2025 March 31, 2025
Gross margin
Gross margin for natural - gas assets (1)
$ 533,518 $ 506,811 $ 527,144
Gross margin for crude - oil and NGLs assets (1)
106,212 91,220 101,275
Gross margin for produced - water assets (1)
187,779 170,747 84,576
Per - Mcf Gross margin for natural - gas assets (2)
1.10 1.03 1.11
Per - Bbl Gross margin for crude - oil and NGLs assets (2)
2.22 1.91 2.19
Per - Bbl Gross margin for produced - water assets (2)
0.73 0.68 0.79
Adjusted Gross Margin
Adjusted Gross Margin for natural - gas assets (3)
$ 618,809 $ 599,775 $ 618,452
Adjusted Gross Margin for crude - oil and NGLs assets (3)
144,193 129,395 143,475
Adjusted Gross Margin for produced - water assets (3)
227,190 205,633 98,856
Per - Mcf Adjusted Gross Margin for natural - gas assets (4)
1.32 1.26 1.34
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets (4)
3.07 2.77 3.17
Per - Bbl Adjusted Gross Margin for produced - water assets (4)
0.90 0.83 0.94
_________________________________________________________________________________________
(1) Excludes corporate-level depreciation and amortization.
(2) Average for period. Calculated as Gross margin for natural - gas assets, crude - oil and NGLs assets, or produced - water assets, divided by the respective total throughput (MMcf or MBbls) for natural - gas assets, crude - oil and NGLs assets, or produced - water assets.
(3) Excludes certain corporate-level items.
(4) Average for period. Calculated as Adjusted Gross Margin for natural - gas assets, crude - oil and NGLs assets, or produced - water assets, divided by the respective total throughput (MMcf or MBbls) attributable to WES for natural - gas assets, crude - oil and NGLs assets, or produced - water assets.
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Three Months Ended
thousands March 31, 2026 December 31, 2025 March 31, 2025
Reconciliation of Net income (loss) to Adjusted EBITDA
Net income (loss) $ 359,032 $ 196,269 $ 316,552
Add:
Distributions from equity investments 25,652 27,147 34,344
Non-cash equity-based compensation expense (1)
10,854 21,386 8,248
Interest expense 113,390 105,674 97,293
Income tax expense 3,501 7,323 3,435
Depreciation and amortization 200,426 197,882 170,460
Long-lived asset and other impairments 608 2,509 3
Other expense — 17 190
Less:
Gain (loss) on divestiture and other, net (6,367) (3,065) (4,667)
Equity income, net – related parties 14,776 21,378 20,435
Other income 6,734 3,706 7,477
Items impacting comparability
Acquisition-related expenses and other, net (1)
(119) (113,188) —
Adjusted EBITDA attributable to noncontrolling interests 15,302 13,794 13,708
Adjusted EBITDA $ 683,137 $ 635,582 $ 593,572
Reconciliation of Net cash provided by operating activities to Adjusted EBITDA
Net cash provided by operating activities $ 469,903 $ 557,645 $ 530,793
Interest expense 113,390 105,674 97,293
Accretion and amortization of long-term obligations, net (882) (815) (2,202)
Current income tax expense (benefit) 2,880 5,615 1,722
Other (income) expense, net (6,730) (3,706) (7,477)
Distributions from equity investments in excess of cumulative earnings – related parties 9,889 5,391 11,007
Changes in assets and liabilities:
Accounts receivable, net 50,226 (16,853) (28,634)
Accounts and imbalance payables and accrued liabilities, net 28,316 (52,513) 46,684
Other items, net 31,328 (64,250) (41,906)
Acquisition-related expenses and other, net (1)
119 113,188 —
Adjusted EBITDA attributable to noncontrolling interests (15,302) (13,794) (13,708)
Adjusted EBITDA (2)
$ 683,137 $ 635,582 $ 593,572
Cash flow information
Net cash provided by operating activities $ 469,903 $ 557,645 $ 530,793
Net cash used in investing activities (234,877) (608,914) (140,790)
Net cash provided by (used in) financing activities (407,022) 693,472 (1,032,020)
_________________________________________________________________________________________
(1) Non-cash equity-based compensation expense for the three months ended December 31, 2025, includes $7.3 million in acquisition-related severance costs. Acquisition-related expenses for the three months ended March 31, 2026, were $0.5 million. Acquisition-related expenses for the three months ended December 31, 2025, include (i) severance costs of $97.3 million and (ii) third-party consulting and legal fees of $15.9 million.
(2) Includes non-cash revenue of $55.1 million, $39.7 million, and $5.9 million for three months ended March 31, 2026, December 31, 2025, and March 31, 2025, respectively. See Note 2—Revenue from Contracts with Customers in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
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Three Months Ended
thousands March 31, 2026 December 31, 2025 March 31, 2025
Reconciliation of Net income (loss) to Distributable Cash Flow
Net income (loss) $ 359,032 $ 196,269 $ 316,552
Add:
Distributions from equity investments 25,652 27,147 34,344
Non-cash equity-based compensation expense 10,854 21,386 8,248
Income tax expense 3,501 7,323 3,435
Depreciation and amortization 200,426 197,882 170,460
Long-lived asset and other impairments 608 2,509 3
Other expense — 17 190
Less:
Recognized service revenues - fee based in excess of (less than) customer billings 35,508 (31,627) (30,101)
Gain (loss) on divestiture and other, net (6,367) (3,065) (4,667)
Equity income, net - related parties 14,776 21,378 20,435
Items impacting comparability (119) (113,188) —
Cash paid for maintenance capital expenditures 27,704 36,276 19,178
Capitalized interest 4,306 3,518 2,551
Cash paid for (reimbursement of) income taxes 3,449 806 —
Other income (net of interest income) (86) 87 (6)
Distributable Cash Flow attributable to noncontrolling interests 11,978 11,715 12,085
Distributable Cash Flow $ 508,924 $ 526,633 $ 513,757
Reconciliation of Adjusted EBITDA to Distributable Cash Flow
Adjusted EBITDA $ 683,137 $ 635,582 $ 593,572
Less:
Recognized service revenues - fee based in excess of (less than) customer billings 35,508 (31,627) (30,101)
Capitalized interest 4,306 3,518 2,551
Cash paid for maintenance capital expenditures 27,704 36,276 19,178
Cash paid for (reimbursement of) income taxes 3,449 806 —
Interest expense (net of interest income) 106,570 102,055 89,811
Distributable Cash Flow attributable to noncontrolling interests (3,324) (2,079) (1,624)
Distributable Cash Flow $ 508,924 $ 526,633 $ 513,757
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Three Months Ended
thousands March 31, 2026 December 31, 2025 March 31, 2025
Reconciliation of Net cash provided by operating activities to Free Cash Flow
Net cash provided by operating activities $ 469,903 $ 557,645 $ 530,793
Less:
Capital expenditures 235,726 222,208 142,402
Contributions to equity investments (including capitalized interest) 1,768 — —
Add:
Distributions from equity investments in excess of cumulative earnings — related parties 9,889 5,391 11,007
Free Cash Flow $ 242,298 $ 340,828 $ 399,398
Cash flow information
Net cash provided by operating activities $ 469,903 $ 557,645 $ 530,793
Net cash used in investing activities (234,877) (608,914) (140,790)
Net cash provided by (used in) financing activities (407,022) 693,472 (1,032,020)
Gross margin. Refer to Operating Results within this Item 2 for a discussion of the components of gross margin as compared to the prior periods, including Revenue s, Cost of Product (Natural-gas purchases, NGLs purchases, and Other items), and Other Operating Expenses (Depreciation and amortization expense).
Gross margin increased by $58.3 million compared to the three months ended December 31, 2025, due to a $92.1 million increase in total revenues and other, partially offset by a $31.3 million increase in cost of product.
Gross margin increased by $115.1 million compared to the three months ended March 31, 2025, due to a $206.5 million increase in total revenues and other. This increase was offset partially by increases of (i) $61.4 million in cost of product and (ii) $30.0 million in depreciation and amortization.
Net income (loss). Refer to Operating Results within this Item 2 for a discussion of the primary components of net income (loss) as compared to the prior periods.
Net income (loss) increased by $162.8 million compared to the three months ended December 31, 2025, primarily due to (i) a $92.1 million increase in total revenues and other and (ii) an $81.4 million decrease in total operating expenses.
Net income (loss) increased by $42.5 million compared to the three months ended March 31, 2025, primarily due to a $206.5 million increase in total revenues and other, partially offset by a $139.7 million increase in total operating expenses.
Net cash provided by operating activities. Refer to Historical cash flow within this Item 2 for a discussion of the primary components of net cash provided by operating activities as compared to the prior periods.
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KEY PERFORMANCE METRICS
Three Months Ended
thousands except percentages and per-unit amounts March 31, 2026 December 31, 2025 Inc/(Dec) March 31, 2025 Inc/(Dec)
Adjusted Gross Margin
$ 990,655 $ 934,803 6 % $ 860,783 15 %
Per - Mcf Adjusted Gross Margin for natural - gas assets (1)
1.32 1.26 5 % 1.34 (1) %
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets (1)
3.07 2.77 11 % 3.17 (3) %
Per - Bbl Adjusted Gross Margin for produced - water assets (1)
0.90 0.83 8 % 0.94 (4) %
Adjusted EBITDA 683,137 635,582 7 % 593,572 15 %
Distributable Cash Flow 508,924 526,633 (3) % 513,757 (1) %
Free Cash Flow
242,298 340,828 (29) % 399,398 (39) %
_________________________________________________________________________________________
(1) Average for period. Calculated as Adjusted Gross Margin for natural - gas assets, crude - oil and NGLs assets, or produced - water assets, divided by the respective total throughput (MMcf or MBbls) attributable to WES for natural - gas assets, crude - oil and NGLs assets, or produced - water assets.
Adjusted Gross Margin. Adjusted Gross Margin increased by $55.9 million compared to the three months ended December 31, 2025, primarily due to (i) increased volumes at the DBM water systems, including the acquisition of Aris, and increased average prices, (ii) annual cumulative catch-up adjustments for cost-of-service changes that decreased revenue during the fourth quarter of 2025 at the DJ Basin oil and Springfield systems, and (iii) increased net volumes sold and net average prices at the West Texas complex.
Adjusted Gross Margin increased by $129.9 million compared to the three months ended March 31, 2025, primarily due to increased throughput at the DBM water systems, including the acquisition of Aris.
Per - Mcf Adjusted Gross Margin for natural - gas assets increased by $0.06 compared to the three months ended December 31, 2025, primarily due to (i) increased net volumes sold and net average prices at the West Texas complex and (ii) decreased revenues in the fourth quarter of 2025 associated with the annual cumulative catch-up adjustment for cost-of-service changes at the Springfield gas-gathering system.
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets increased by $0.30 compared to the three months ended December 31, 2025, primarily due to decreased revenues in the fourth quarter of 2025 associated with annual cumulative catch-up adjustments for cost-of-service changes at the DJ Basin oil and Springfield oil-gathering systems.
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets decreased by $0.10 compared to the three months ended March 31, 2025, primarily due to lower distributions from FRP and TEP, partially offset by increased throughput at the DBM oil system, which has a higher-than-average per-Bbl margin as compared to our other crude-oil and NGLs assets, and increased deficiency fees on certain contracts with increasing throughput minimums.
Per - Bbl Adjusted Gross Margin for produced - water assets increased by $0.07 compared to the three months ended December 31, 2025, primarily due to an increase in skim-oil volumes, including an increase due to the acquisition of Aris, and increased average prices.
Per - Bbl Adjusted Gross Margin for produced - water assets decreased by $0.04 compared to the three months ended March 31, 2025, primarily due to the acquisition of Aris, which has lower-than-average per-Bbl margin as compared to our other produced-water assets.
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Adjusted EBITDA. Adjusted EBITDA increased by $47.6 million compared to the three months ended December 31, 2025, primarily due to a $92.1 million increase in total revenues and other, offset partially by a $31.3 million increase in cost of product (net of lower of cost or market inventory adjustments) and an $11.9 million increase in operation and maintenance expenses.
Adjusted EBITDA increased by $89.6 million compared to the three months ended March 31, 2025, primarily due to a $206.5 million increase in total revenues and other. This amount was offset partially by (i) a $61.6 million increase in cost of product (net of lower of cost or market inventory adjustments), (ii) a $37.7 million increase in operation and maintenance expenses, (iii) an $8.7 million decrease in distributions from equity investments, and (iv) a $5.8 million increase in general and administrative expenses excluding non - cash equity - based compensation expense.
Distributable Cash Flow. Distributable Cash Flow decreased by $17.7 million compared to the three months ended December 31, 2025, primarily due to an increase of $67.1 million in recognized service revenues - fee based in excess of (less than) customer billings. This amount was partially offset by a $47.6 million increase in Adjusted EBITDA and an $8.6 million decrease in cash paid for maintenance capital expenditures.
Distributable Cash Flow decreased by $4.8 million compared to the three months ended March 31, 2025, primarily due to (i) a $65.6 million increase in recognized service revenues - fee based in excess of (less than) customer billings, (ii) a $16.8 million increase in interest expense (net of interest income), and (iii) an $8.5 million increase in cash paid for maintenance capital expenditures. These amounts were partially offset by an $89.6 million increase in Adjusted EBITDA.
Free Cash Flow. Free Cash Flow decreased by $98.5 million compared to the three months ended December 31, 2025, primarily due to (i) an $87.7 million decrease in net cash provided by operating activities and (ii) a $13.5 million increase in capital expenditures.
Free Cash Flow decreased by $157.1 million compared to the three months ended March 31, 2025, primarily due to (i) a $93.3 million increase in capital expenditures and (ii) a $60.9 million decrease in net cash provided by operating activities.
See Capital Expenditures and Historical Cash Flow within this Item 2 for further information.
LIQUIDITY AND CAPITAL RESOURCES
Our primary cash uses include equity and debt service, operating expenses, acquisitions, and capital expenditures. Our sources of liquidity as of March 31, 2026, included cash and cash equivalents, cash flows generated from operations, effective borrowing capacity under the RCF, our commercial paper program, and potential issuances of additional equity or debt securities. We believe that cash flows generated from these sources will be sufficient to satisfy our short - term working-capital requirements and long - term capital - expenditure and debt-service requirements.
The amount of future distributions to unitholders will be determined by the Board on a quarterly basis. We distribute all our available cash, as defined in our partnership agreement, within 55 days following each quarter’s end. The Board declared a cash distribution to unitholders for the first quarter of 2026 of $0.930 per unit, or $374.6 million in the aggregate. The cash distribution is payable on May 15, 2026, to our unitholders of record at the close of business on May 1, 2026.
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In February 2025, the Board authorized the 2025 Purchase Program for the repurchase of up to $250.0 million of our common units through December 31, 2026. The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined based on ongoing assessments of capital needs, our financial performance, the market price of our common units, and other factors, including organic growth and acquisition opportunities and general market conditions. The program does not obligate us to acquire any common units, and the program may be suspended or discontinued at our discretion without prior notice. During the three months ended March 31, 2026, the Partnership repurchased no common units. As of March 31, 2026, the Partnership had an authorized amount of $250.0 million remaining under the program.
Management continuously monitors our leverage position and other financial projections to manage the capital structure according to long-term objectives. We may, from time to time, seek to retire, rearrange, or amend some or all of our outstanding debt or financing agreements through cash purchases, exchanges, open - market repurchases, privately negotiated transactions, tender offers, or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity position and requirements, contractual restrictions, and other factors, and the amounts involved may be material. Our ability to generate cash flows is subject to a number of factors, some of which are beyond our control. Read Risk Factors under Part II, Item 1A of this Form 10-Q.
Working capital . Working capital is an indication of liquidity and potential needs for short - term funding. Working capital requirements are driven by changes in accounts receivable and accounts payable and other factors such as credit extended to, and the timing of collections from, our customers, and the level and timing of our spending for acquisitions, maintenance, and other capital activities. As of March 31, 2026, we had a $132.2 million working capital surplus, which we define as the amount by which current assets exceed current liabilities. The effective borrowing capacity under the RCF was $2.0 billion as of March 31, 2026. Any outstanding commercial paper borrowings reduce the effective borrowing capacity under the RCF as WES Operating maintains availability under the RCF as support for its commercial paper program. See Note 8—Selected Components of Working Capital and Note 9—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
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Capital expenditures . Our business is capital intensive, requiring significant investment to maintain and improve existing facilities or to develop new midstream infrastructure. Capital expenditures include (i) maintenance capital expenditures, which include those expenditures required to maintain existing operating capacity and service capability of our assets, such as to replace system components and equipment that have been subject to significant use over time, become obsolete or reached the end of their useful lives, or to remain in compliance with regulatory or legal requirements, and (ii) expansion capital expenditures, which include expenditures to construct new midstream infrastructure and expenditures incurred to reduce costs, increase revenues, or increase system throughput or capacity from current levels. Capital expenditures in the consolidated statements of cash flows reflect capital expenditures on a cash basis, when payments are made. Capital incurred is presented on an accrual basis. Capital expenditures as presented in the consolidated statements of cash flows and capital incurred were as follows:
Three Months Ended
March 31,
thousands 2026 2025
Capital expenditures (1)
$ 235,726 $ 142,402
Capital incurred (1)
253,368 167,212
_________________________________________________________________________________________
(1) For the three months ended March 31, 2026 and 2025, included $4.3 million and $2.6 million, respectively, of capitalized interest.
Capital expenditures increased by $93.3 million for the three months ended March 31, 2026, primarily due to increases of (i) $77.4 million at the DBM water systems related to the Pathfinder pipeline project and the acquisition of Aris and (ii) $29.8 million at the West Texas complex primarily attributable to construction costs associated with the North Loving Train II. These increases were offset partially by a decrease of $18.0 million at the DBM oil system related to decreases in pipeline, oil pumping, and electrical distribution projects.
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Historical cash flow . The following table and discussion present a summary of our net cash flows provided by (used in) operating, investing, and financing activities:
Three Months Ended
March 31,
thousands 2026 2025
Net cash provided by (used in):
Operating activities $ 469,903 $ 530,793
Investing activities (234,877) (140,790)
Financing activities (407,022) (1,032,020)
Net increase (decrease) in cash and cash equivalents $ (171,996) $ (642,017)
Operating activities . Net cash provided by operating activities decreased for the three months ended March 31, 2026, primarily due to (i) the impact of changes in assets and liabilities, including as a result of the West Texas complex gas-gathering agreement amendment replacing cost-of-service fees with fixed fees (see Executive Summary within this Item 2), (ii) higher interest expense, and (iii) lower distributions from equity-investment earnings; all partially offset by higher cash operating income. Refer to Operating Results within this Item 2 for a discussion of our results of operations as compared to the prior periods.
Investing activities . Net cash used in investing activities for the three months ended March 31, 2026, primarily included (i) capital expenditures, primarily related to expansion, construction, and asset - integrity projects at the DBM water systems, West Texas complex, Powder River Basin complex, DJ Basin complex, and DJ Basin oil system and (ii) distributions received from equity investments in excess of cumulative earnings.
Net cash used in investing activities for the three months ended March 31, 2025, primarily included (i) capital expenditures, primarily related to expansion, construction, and asset - integrity projects at the West Texas complex, Powder River Basin complex, DBM water systems, DJ Basin complex, and DBM oil system, (ii) increases to materials and supplies inventory and other, and (iii) distributions received from equity investments in excess of cumulative earnings.
Financing activities . Net cash used in financing activities for the three months ended March 31, 2026, primarily included distributions paid to WES unitholders and noncontrolling interest owners.
Net cash used in financing activities for the three months ended March 31, 2025, primarily included (i) retiring the total principal amount outstanding of the 3.100% Senior Notes due 2025 at par value and (ii) distributions paid to WES unitholders and noncontrolling interest owners.
Debt and credit facilities. As of March 31, 2026, (i) the carrying value of outstanding debt is $8.6 billion, (ii) the 4.650% Senior Notes due 2026 are classified as short-term debt on the consolidated balance sheet, and (iii) the effective borrowing capacity under WES Operating’s $2.0 billion RCF is $2.0 billion. Any outstanding commercial paper borrowings reduce the effective borrowing capacity under the RCF as WES Operating maintains availability under the RCF as support for its commercial paper program.
For additional information on our senior notes, RCF, and commercial paper program, see Note 9—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
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Credit risk . We bear credit risk through exposure to non - payment or non - performance by our counterparties (e.g., Occidental and other customers, financial institutions, and other parties), including risks from a customer’s inability to satisfy payables to us for services rendered, minimum - volume - commitment deficiency payments owed, or volumes owed pursuant to gas- or NGLs-imbalance agreements. We examine and monitor the creditworthiness of customers and may establish credit limits for customers. We are subject to the risk of non - payment or late payment by producers for gathering, processing, transportation, and disposal fees. Additionally, we continue to evaluate counterparty credit risk and, in certain circumstances, are exercising our contractual rights to request adequate assurance of performance.
We expect our exposure to the concentrated risk of non - payment or non - performance to continue for as long as our commercial relationships with Occidental generate a significant portion of our revenues. While Occidental is our contracting counterparty, gathering and processing arrangements with affiliates of Occidental on most of our systems include not just Occidental - produced volumes, but also, in some instances, the volumes of other working - interest owners of Occidental who rely on our facilities and infrastructure to bring their volumes to market. See Note 6—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
Our ability to make cash distributions to our unitholders may be adversely impacted if Occidental becomes unable to perform under the terms of gathering, processing, transportation, and disposal agreements.
ITEMS AFFECTING THE COMPARABILITY OF FINANCIAL RESULTS WITH WES OPERATING
Our consolidated financial statements include the consolidated financial results of WES Operating. Our results of operations do not differ materially from the results of operations and cash flows of WES Operating, which are reconciled below.
Reconciliation of net income (loss). The differences between net income (loss) attributable to WES and WES Operating are reconciled as follows:
Three Months Ended
thousands March 31, 2026 December 31, 2025 March 31, 2025
Net income (loss) attributable to WES $ 350,276 $ 190,681 $ 309,007
Limited partner interest in WES Operating not held by WES (1)
6,827 3,611 6,303
General and administrative expenses (2)
345 268 (188)
Other income (expense), net (90) (217) (46)
Income taxes 3,375 2,734 —
Net income (loss) attributable to WES Operating $ 360,733 $ 197,077 $ 315,076
_________________________________________________________________________________________
(1) Represents the portion of net income (loss) allocated to the limited partner interest in WES Operating not held by WES.
(2) Represents general and administrative expenses incurred by WES separate from, and in addition to, those incurred by WES Operating.
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Reconciliation of net cash provided by (used in) operating and financing activities. The differences between net cash provided by (used in) operating and financing activities for WES and WES Operating are reconciled as follows:
Three Months Ended
March 31,
thousands 2026 2025
WES net cash provided by operating activities $ 469,903 $ 530,793
General and administrative expenses (1)
345 (188)
Non - cash equity - based compensation expense
(186) (104)
Changes in working capital (25,440) (18,990)
Other income (expense), net (90) (46)
WES Operating net cash provided by operating activities $ 444,532 $ 511,465
WES net cash provided by (used in) financing activities $ (407,022) $ (1,032,020)
Distributions to WES unitholders (2)
379,675 340,996
Distributions to WES from WES Operating (3)
(378,579) (340,407)
Increase (decrease) in outstanding checks (2,620) (5)
Other 26,895 18,454
WES Operating net cash provided by (used in) financing activities $ (381,651) $ (1,012,982)
_________________________________________________________________________________________
(1) Represents general and administrative expenses incurred by WES separate from, and in addition to, those incurred by WES Operating.
(2) Represents distributions to WES common unitholders paid under WES’s partnership agreement. See Note 4—Partnership Distributions and Note 5—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
(3) Difference attributable to elimination in consolidation of WES Operating’s distributions on WES Operating’s Preferred Units and partnership interests owned by WES. See Note 4—Partnership Distributions and Note 5—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
Noncontrolling interest. WES Operating’s noncontrolling interest consists of the 25% third - party interest in Chipeta.
WES Operating distributions. WES Operating distributes all of its available cash on a quarterly basis to WES Operating unitholders according to the terms of its limited partnership agreement. See Note 4—Partnership Distributions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
CRITICAL ACCOUNTING ESTIMATES
The preparation of consolidated financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the amounts of assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recognized during the periods reported. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2025.
RECENT ACCOUNTING DEVELOPMENTS
See Note 1—Description of Business and Basis of Presentation in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
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