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 98.2% partnership interest in WES Operating, as of June 30, 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 1.8%, 1.9%, and 2.0% limited partner interest in WES Operating as of June 30, 2026, March 31, 2026, and June 30, 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).
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As of June 30, 2026, our assets and investments consisted of the following:
Wholly
Owned and
Operated Operated
Interests Non-Operated
Interests Equity
Interests
Gathering systems
16 2 1 —
Treating facilities 43 3 — —
Processing plants/trains
30 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 six months ended June 30, 2026, included the following:
• On June 11, 2026, we closed on the acquisition of Brazos Delaware for cash and equity consideration. See Note 3—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
• During the second quarter of 2026, WES Operating issued $700.0 million in aggregate principal amount of 5.700% Senior Notes due 2036 and retired its 4.650% Senior Notes due 2026. See Note 9—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q
• Our second-quarter 2026 per-unit distribution is unchanged from the first-quarter 2026 per-unit distribution of $0.930.
• Executed an amendment to one of our West Texas complex gas-gathering agreements to replace cost-of-service fees with fixed fees and add new minimum volume commitments 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 Six Months Ended
June 30, 2026 March 31, 2026 Inc/
(Dec) June 30, 2026 June 30, 2025 Inc/
(Dec)
Throughput for natural-gas assets (MMcf/d)
Delaware Basin 2,140 2,035 5 % 2,088 2,040 2 %
DJ Basin 1,547 1,520 2 % 1,534 1,426 8 %
Powder River Basin 398 396 1 % 397 471 (16) %
Equity investments 494 464 6 % 480 562 (15) %
Other 939 978 (4) % 957 863 11 %
Total throughput for natural-gas assets 5,518 5,393 2 % 5,456 5,362 2 %
Throughput for crude-oil and NGLs assets (MBbls/d)
Delaware Basin 265 272 (3) % 268 263 2 %
DJ Basin 94 97 (3) % 96 95 1 %
Powder River Basin 27 25 8 % 26 27 (4) %
Equity investments 108 102 6 % 105 107 (2) %
Other 39 35 11 % 37 36 3 %
Total throughput for crude-oil and NGLs assets 533 531 — % 532 528 1 %
Throughput for produced-water assets (MBbls/d)
Delaware Basin 2,993 2,848 5 % 2,921 1,216 140 %
Total throughput for produced-water assets 2,993 2,848 5 % 2,921 1,216 140 %
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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 six months ended June 30, 2026, ranged from a low of $55.99 per barrel in January 2026 to a high of $112.95 per barrel in April 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 six months ended June 30, 2026, ranged from a low of ($9.52) per MMBtu in April 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. Tariff rates applicable to our operations have changed multiple times in 2026 and may continue to change, including as a result of ongoing trade negotiations, legal challenges to tariff authority, and periodic adjustments by the administration. 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
On June 11, 2026, the Partnership closed on the acquisition of Brazos Delaware and in the fourth quarter of 2025, we closed on the acquisition of Aris. 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 Six Months Ended
thousands June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Total revenues and other (1)
$ 1,224,719 $ 1,123,579 $ 2,348,298 $ 1,859,438
Equity income, net – related parties 21,536 14,776 36,312 47,563
Total operating expenses (1)
714,954 662,795 1,377,749 1,047,141
Gain (loss) on divestiture and other, net (4,598) (6,367) (10,965) (5,578)
Operating income (loss) 526,703 469,193 995,896 854,282
Interest expense (108,984) (113,390) (222,374) (192,463)
Gain (loss) on early extinguishment of debt (150) — (150) —
Other income (expense), net 2,834 6,730 9,564 11,169
Income (loss) before income taxes 420,403 362,533 782,936 672,988
Income tax expense (benefit) 5,152 3,501 8,653 5,674
Net income (loss) 415,251 359,032 774,283 667,314
Net income (loss) attributable to noncontrolling interests 11,699 8,756 20,455 16,627
Net income (loss) attributable to Western Midstream Partners, LP (2)
$ 403,552 $ 350,276 $ 753,828 $ 650,687
_________________________________________________________________________________________
(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 “for the three months ended June 30, 2026” refer to the comparison of the three months ended June 30, 2026, to the three months ended March 31, 2026; and any increases or decreases “for the six months ended June 30, 2026” refer to the comparison of the six months ended June 30, 2026, to the six months ended June 30, 2025.
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Throughput
Three Months Ended Six Months Ended
June 30, 2026 March 31, 2026 Inc / (Dec) June 30, 2026 June 30, 2025 Inc / (Dec)
Throughput for natural-gas assets (MMcf/d)
Gathering, treating, and transportation 427 430 (1) % 428 362 18 %
Processing 4,597 4,499 2 % 4,548 4,438 2 %
Equity investments (1)
494 464 6 % 480 562 (15) %
Total throughput 5,518 5,393 2 % 5,456 5,362 2 %
Throughput attributable to noncontrolling interests 175 184 (5) % 189 181 4 %
Total throughput attributable to WES for natural - gas assets
5,343 5,209 3 % 5,267 5,181 2 %
Throughput for crude-oil and NGLs assets (MBbls/d)
Gathering, treating, and transportation 425 429 (1) % 427 421 1 %
Equity investments (1)
108 102 6 % 105 107 (2) %
Total throughput 533 531 — % 532 528 1 %
Throughput attributable to noncontrolling interests 10 10 — % 10 10 — %
Total throughput attributable to WES for crude - oil and NGLs assets
523 521 — % 522 518 1 %
Throughput for produced-water assets (MBbls/d)
Gathering, disposal, and water solutions 2,993 2,848 5 % 2,921 1,216 140 %
Throughput attributable to noncontrolling interests 54 53 2 % 52 24 117 %
Total throughput attributable to WES for produced - water assets (2)
2,939 2,795 5 % 2,869 1,192 141 %
_________________________________________________________________________________________
(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 134 MMcf/d for the three months ended June 30, 2026, primarily due to (i) throughput from the acquisition of the Comanche complex and (ii) higher throughput at the DJ Basin complex due to increased production in the area and higher onloaded volumes.
Total throughput attributable to WES for natural - gas assets increased by 86 MMcf/d for the six months ended June 30, 2026, primarily due to (i) higher throughput at the DJ Basin and Chipeta complexes and (ii) throughput from the acquisition of the Comanche complex. 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.
Produced-water assets
Total throughput attributable to WES for produced - water assets increased by 144 MBbls/d and 1,677 MBbls/d for the three and six months ended June 30, 2026, respectively, due to higher throughput at the DBM water systems, including the acquisition of Aris for the six months ended June 30, 2026.
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Revenues
Three Months Ended Six Months Ended
thousands except percentages and per-
unit amounts June 30, 2026 March 31, 2026 Inc/(Dec) June 30, 2026 June 30, 2025 Inc/(Dec)
Service revenues – fee based $ 980,096 $ 933,302 5 % $ 1,913,398 $ 1,674,616 14 %
Other revenues from customers
Service revenues – product based $ 112,641 $ 88,767 27 % $ 201,408 $ 109,694 84 %
Product sales 124,763 99,616 25 % 224,379 74,749 200 %
Total other revenues from customers
$ 237,404 $ 188,383 26 % $ 425,787 $ 184,443 131 %
Per - unit gross average sales price:
Natural gas (per Mcf) $ (1.29) $ (0.20) NM $ (0.74) $ 1.56 (147) %
NGLs (per Bbl) 31.58 23.19 36 % 27.39 26.74 2 %
Skim-oil (per Bbl) 93.17 66.93 39 % 80.05 66.20 21 %
_________________________________________________________________________________________
NM - Not meaningful
Service revenues – fee based
Service revenues – fee based increased by $46.8 million for the three months ended June 30, 2026, primarily due to increases of (i) $31.3 million at the DBM water systems due to increased throughput and disposal-fee revenue, (ii) $9.1 million due to the acquisition of the Comanche complex, and (iii) $7.7 million at the DJ Basin complex due to increased throughput.
Service revenues – fee based increased by $238.8 million for the six months ended June 30, 2026, primarily due to increases of (i) $234.0 million at the DBM water systems due to the acquisition of Aris and increased throughput, (ii) $13.4 million at the DJ Basin complex due to increased throughput, (iii) $9.1 million due to the acquisition of the Comanche complex, and (iv) $7.3 million at the DBM oil system due to increased throughput and deficiency fees on certain contracts with increasing throughput minimums. These increases were offset partially by decreases of (i) $9.5 million at the West Texas complex due to decreased deficiency fees on certain contracts with throughput minimums and (ii) $9.4 million at the Powder River Basin complex due to decreased throughput.
Other revenues from customers
Other revenues from customers increased by $49.0 million for the three months ended June 30, 2026, primarily due to increases of (i) $16.0 million at the DJ Basin complex due to increased average prices and volumes sold, (ii) $12.7 million at the West Texas complex due to increased average prices, partially offset by lower volumes sold, (iii) $9.9 million at the Chipeta complex due to increased volumes sold, and (iv) $7.1 million due to the acquisition of the Comanche complex.
Other revenues from customers increased by $241.3 million for the six months ended June 30, 2026, primarily due to increases of (i) $102.3 million at the DBM water systems due to the acquisition of Aris, including increased skim-oil volumes sold, and average prices, (ii) $100.3 million at the West Texas complex due to higher average prices and volumes sold, (iii) $18.0 million and $10.2 million at the DJ Basin and Chipeta complexes, respectively, due to increased volumes sold and average prices, and (iv) $7.1 million due to the acquisition of the Comanche complex.
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Equity Income, Net – Related Parties
Three Months Ended Six Months Ended
thousands except percentages June 30, 2026 March 31, 2026 Inc / (Dec) June 30, 2026 June 30, 2025 Inc / (Dec)
Equity income, net – related parties $ 21,536 $ 14,776 46 % $ 36,312 $ 47,563 (24) %
Equity income, net – related parties increased by $6.8 million for the three months ended June 30, 2026, primarily due to increases of $2.5 million and $1.7 million at FRP and TEP, respectively.
Equity income, net – related parties decreased by $11.3 million for the six months ended June 30, 2026, primarily due to a decrease of $8.2 million at Mi Vida.
Cost of Product and Operation and Maintenance Expenses
Three Months Ended Six Months Ended
thousands except percentages June 30, 2026 March 31, 2026 Inc / (Dec) June 30, 2026 June 30, 2025 Inc / (Dec)
Natural-gas purchases
$ 10,304 $ 7,957 29 % $ 18,261 $ 19,197 (5) %
Crude oil and NGLs purchases 102,363 96,146 6 % 198,509 123,719 60 %
Other 4,773 (1,219) NM 3,554 (58,743) 106 %
Cost of product 117,440 102,884 14 % 220,324 84,173 162 %
Operation and maintenance 285,353 264,241 8 % 549,594 451,143 22 %
Total Cost of product and Operation and maintenance expenses $ 402,793 $ 367,125 10 % $ 769,918 $ 535,316 44 %
Crude oil and NGLs purchases
Crude oil and NGLs purchases increased by $6.2 million for the three months ended June 30, 2026, primarily due to $3.7 million attributable to the acquisition of the Comanche complex.
Crude oil and NGLs purchases increased by $74.8 million for the six months ended June 30, 2026, primarily due to increases of (i) $51.0 million at the DBM water systems due to the acquisition of Aris, including increased skim-oil volumes, and higher average prices, and (ii) $10.3 million at the DJ Basin complex due to increased volumes and higher average prices.
Other items
Other items increased by $6.0 million and $62.3 million for the three and six months ended June 30, 2026, respectively, 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 $21.1 million for the three months ended June 30, 2026, primarily due to increases of (i) $10.6 million in water-disposal costs and (ii) $6.2 million in chemicals and treating costs.
Operation and maintenance expense increased by $98.5 million for the six months ended June 30, 2026, primarily due to increases of (i) $115.5 million related to the Aris acquisition and (ii) $5.3 million in land-related costs. These increases were offset partially by a decrease of $26.6 million in equipment and maintenance costs.
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Other Operating Expenses
Three Months Ended Six Months Ended
thousands except percentages June 30, 2026 March 31, 2026 Inc / (Dec) June 30, 2026 June 30, 2025 Inc / (Dec)
General and administrative $ 85,929 $ 75,150 14 % $ 161,079 $ 132,932 21 %
Property and other taxes 19,736 19,486 1 % 39,222 35,631 10 %
Depreciation and amortization 205,945 200,426 3 % 406,371 342,573 19 %
Long-lived asset and other impairments 551 608 (9) % 1,159 689 68 %
Total other operating expenses $ 312,161 $ 295,670 6 % $ 607,831 $ 511,825 19 %
General and administrative expenses
General and administrative expenses increased by $10.8 million for the three months ended June 30, 2026, primarily due to an increase of $8.0 million in corporate expenses, primarily related to transaction costs for the Brazos Delaware acquisition.
General and administrative expenses increased by $28.1 million for the six months ended June 30, 2026, primarily due to increases of (i) $14.0 million in corporate expenses, primarily related to transaction costs for the Brazos Delaware acquisition and higher legal expenses, and (ii) $10.0 million in salaries and wages.
Depreciation and amortization expense
Depreciation and amortization expense increased by $5.5 million for the three months ended June 30, 2026, primarily due to $4.0 million related to the acquisition of the Comanche complex.
Depreciation and amortization expense increased by $63.8 million for the six months ended June 30, 2026, primarily due to (i) $53.4 million related to the Aris acquisition and (ii) $8.9 million at the West Texas complex from new assets placed in service.
Interest Expense
Three Months Ended Six Months Ended
thousands except percentages June 30, 2026 March 31, 2026 Inc / (Dec) June 30, 2026 June 30, 2025 Inc / (Dec)
Long-term and short-term debt $ (113,715) $ (115,532) (2) % $ (229,247) $ (189,408) 21 %
Finance lease liabilities (238) (296) (20) % (534) (1,140) (53) %
Commitment fees and amortization of debt-related costs (1,744) (1,868) (7) % (3,612) (6,246) (42) %
Capitalized interest 6,713 4,306 56 % 11,019 4,331 154 %
Interest expense $ (108,984) $ (113,390) (4) % $ (222,374) $ (192,463) 16 %
Interest expense decreased by $4.4 million for the three months ended June 30, 2026, primarily due to a decrease of $5.3 million due to the repayment of the 4.650% Senior Notes due 2026 during the second quarter of 2026.
Interest expense increased by $29.9 million for the six months ended June 30, 2026, primarily due to increases of (i) $31.7 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) $15.1 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 decreases of (i) $6.7 million due to higher capitalized interest, (ii) $6.0 million due to the repayment of the 3.950% Senior Notes due in 2025 during the second quarter of 2025, and (iii) $5.3 million due to the repayment of the 4.650% Senior Notes due 2026 during the second quarter of 2026. See Liquidity and Capital Resources—Debt and credit facilities within this Item 2.
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Income Tax Expense (Benefit)
Three Months Ended Six Months Ended
thousands except percentages June 30, 2026 March 31, 2026 Inc / (Dec) June 30, 2026 June 30, 2025 Inc / (Dec)
Income (loss) before income taxes $ 420,403 $ 362,533 16 % $ 782,936 $ 672,988 16 %
Income tax expense (benefit) 5,152 3,501 47 % 8,653 5,674 53 %
Effective tax rate 1 % 1 % — % 1 % 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, and certain business activities operated through corporate subsidiaries are subject to federal and state income taxes.
Income tax expense increased by $1.7 million for the three months ended June 30, 2026, primarily due to changes in provision for Texas margin tax liabilities.
Income tax expense increased by $3.0 million for the six months ended June 30, 2026, primarily due to federal and state income tax resulting from the operations of our corporate subsidiaries, partially offset by changes in provision 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 Six Months Ended
thousands June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Reconciliation of Gross margin to Adjusted Gross Margin
Total revenues and other $ 1,224,719 $ 1,123,579 $ 2,348,298 $ 1,859,438
Less:
Cost of product 117,440 102,884 220,324 84,173
Depreciation and amortization 205,945 200,426 406,371 342,573
Gross margin 901,334 820,269 1,721,603 1,432,692
Add:
Distributions from equity investments 24,630 25,652 50,282 65,466
Depreciation and amortization 205,945 200,426 406,371 342,573
Less:
Reimbursed electricity-related charges recorded as revenues 33,410 33,488 66,898 59,260
Adjusted Gross Margin attributable to noncontrolling interests 23,978 22,204 46,182 41,620
Adjusted Gross Margin
$ 1,074,521 $ 990,655 $ 2,065,176 $ 1,739,851
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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 Six Months Ended
thousands except per-unit amounts June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Gross margin
Gross margin for natural - gas assets (1)
$ 567,265 $ 533,518 $ 1,100,783 $ 1,066,606
Gross margin for crude - oil and NGLs assets (1)
116,084 106,212 222,296 208,114
Gross margin for produced - water assets (1)
216,927 187,779 404,706 173,917
Per - Mcf Gross margin for natural - gas assets (2)
1.13 1.10 1.11 1.10
Per - Bbl Gross margin for crude - oil and NGLs assets (2)
2.39 2.22 2.31 2.18
Per - Bbl Gross margin for produced - water assets (2)
0.80 0.73 0.77 0.79
Adjusted Gross Margin
Adjusted Gross Margin for natural - gas assets (3)
$ 658,322 $ 618,809 $ 1,277,131 $ 1,247,545
Adjusted Gross Margin for crude - oil and NGLs assets (3)
153,071 144,193 297,264 289,603
Adjusted Gross Margin for produced - water assets (3)
257,257 227,190 484,447 202,703
Per - Mcf Adjusted Gross Margin for natural - gas assets (4)
1.35 1.32 1.34 1.33
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets (4)
3.21 3.07 3.14 3.09
Per - Bbl Adjusted Gross Margin for produced - water assets (4)
0.96 0.90 0.93 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 Six Months Ended
thousands June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Reconciliation of Net income (loss) to Adjusted EBITDA
Net income (loss) $ 415,251 $ 359,032 $ 774,283 $ 667,314
Add:
Distributions from equity investments 24,630 25,652 50,282 65,466
Non-cash equity-based compensation expense 13,507 10,854 24,361 18,961
Interest expense 108,984 113,390 222,374 192,463
Income tax expense 5,152 3,501 8,653 5,674
Depreciation and amortization 205,945 200,426 406,371 342,573
Long-lived asset and other impairments 551 608 1,159 689
Other expense 329 — 329 233
Less:
Gain (loss) on divestiture and other, net (4,598) (6,367) (10,965) (5,578)
Gain (loss) on early extinguishment of debt (150) — (150) —
Equity income, net – related parties 21,536 14,776 36,312 47,563
Other income 2,834 6,734 9,568 11,169
Items impacting comparability
Acquisition-related expenses and other, net 476 (119) 357 —
Adjusted EBITDA attributable to noncontrolling interests 17,719 15,302 33,021 28,771
Adjusted EBITDA (1)
$ 736,532 $ 683,137 $ 1,419,669 $ 1,211,448
Reconciliation of Net cash provided by operating activities to Adjusted EBITDA
Net cash provided by operating activities $ 534,736 $ 469,903 $ 1,004,639 $ 1,094,770
Interest expense 108,984 113,390 222,374 192,463
Accretion and amortization of long-term obligations, net (734) (882) (1,616) (4,234)
Current income tax expense (benefit) 3,515 2,880 6,395 3,662
Other (income) expense, net (2,834) (6,730) (9,564) (11,169)
Distributions from equity investments in excess of cumulative earnings – related parties 18 9,889 9,907 14,047
Changes in assets and liabilities:
Accounts receivable, net 47,756 50,226 97,982 2,791
Accounts and imbalance payables and accrued liabilities, net (6,425) 28,316 21,891 15,645
Other items, net 69,711 31,328 101,039 (67,756)
Acquisition-related expenses and other, net (476) 119 (357) —
Adjusted EBITDA attributable to noncontrolling interests (17,719) (15,302) (33,021) (28,771)
Adjusted EBITDA (1)
$ 736,532 $ 683,137 $ 1,419,669 $ 1,211,448
Cash flow information
Net cash provided by operating activities $ 534,736 $ 469,903 $ 1,004,639 $ 1,094,770
Net cash used in investing activities (1,107,346) (234,877) (1,342,223) (314,764)
Net cash provided by (used in) financing activities 29,881 (407,022) (377,141) (1,740,738)
_________________________________________________________________________________________
(1) Includes non-cash revenue of $45.4 million and $55.1 million for the three months ended June 30, 2026, and March 31, 2026, respectively, and $100.6 million and $9.6 million for the six months ended June 30, 2026 and 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 Six Months Ended
thousands June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Reconciliation of Net income (loss) to Distributable Cash Flow
Net income (loss) $ 415,251 $ 359,032 $ 774,283 $ 667,314
Add:
Distributions from equity investments 24,630 25,652 50,282 65,466
Non-cash equity-based compensation expense 13,507 10,854 24,361 18,961
Income tax expense 5,152 3,501 8,653 5,674
Depreciation and amortization 205,945 200,426 406,371 342,573
Long-lived asset and other impairments 551 608 1,159 689
Other expense 329 — 329 233
Less:
Recognized service revenues - fee based in excess of (less than) customer billings 52,810 48,081 100,891 (63,718)
Gain (loss) on divestiture and other, net (4,598) (6,367) (10,965) (5,578)
Gain (loss) on early extinguishment of debt (150) — (150) —
Equity income, net - related parties 21,536 14,776 36,312 47,563
Items impacting comparability 476 (119) 357 —
Cash paid for maintenance capital expenditures 26,681 27,704 54,385 38,379
Capitalized interest 6,713 4,306 11,019 4,331
Cash paid for (reimbursement of) income taxes 10,169 3,449 13,618 2,301
Other income (net of interest income) 495 (86) 409 330
Distributable Cash Flow attributable to noncontrolling interests 14,076 11,744 25,820 25,515
Distributable Cash Flow $ 537,157 $ 496,585 $ 1,033,742 $ 1,051,787
Reconciliation of Adjusted EBITDA to Distributable Cash Flow
Adjusted EBITDA $ 736,532 $ 683,137 $ 1,419,669 $ 1,211,448
Less:
Recognized service revenues - fee based in excess of (less than) customer billings 52,810 48,081 100,891 (63,718)
Capitalized interest 6,713 4,306 11,019 4,331
Cash paid for maintenance capital expenditures 26,681 27,704 54,385 38,379
Cash paid for (reimbursement of) income taxes 10,169 3,449 13,618 2,301
Interest expense (net of interest income) 106,645 106,570 213,215 181,624
Distributable Cash Flow attributable to noncontrolling interests (3,643) (3,558) (7,201) (3,256)
Distributable Cash Flow $ 537,157 $ 496,585 $ 1,033,742 $ 1,051,787
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Three Months Ended Six Months Ended
thousands June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Reconciliation of Net cash provided by operating activities to Free Cash Flow
Net cash provided by operating activities $ 534,736 $ 469,903 $ 1,004,639 $ 1,094,770
Less:
Capital expenditures 270,339 235,726 506,065 321,025
Contributions to equity investments (including capitalized interest) 810 1,768 2,578 —
Add:
Distributions from equity investments in excess of cumulative earnings — related parties 18 9,889 9,907 14,047
Free Cash Flow $ 263,605 $ 242,298 $ 505,903 $ 787,792
Cash flow information
Net cash provided by operating activities $ 534,736 $ 469,903 $ 1,004,639 $ 1,094,770
Net cash used in investing activities (1,107,346) (234,877) (1,342,223) (314,764)
Net cash provided by (used in) financing activities 29,881 (407,022) (377,141) (1,740,738)
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, Crude oil and NGLs purchases, and Other items), and Other Operating Expenses (Depreciation and amortization expense).
Gross margin increased by $81.1 million for the three months ended June 30, 2026, due to a $101.1 million increase in total revenues and other, partially offset by a $14.6 million increase in cost of product.
Gross margin increased by $288.9 million for the six months ended June 30, 2026, due to a $488.9 million increase in total revenues and other. This increase was offset partially by increases of (i) $136.2 million in cost of product and (ii) $63.8 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 $56.2 million for the three months ended June 30, 2026, primarily due to a $101.1 million increase in total revenues and other, partially offset by a $52.2 million increase in total operating expenses.
Net income (loss) increased by $107.0 million for the six months ended June 30, 2026, primarily due to a $488.9 million increase in total revenues and other. This increase was offset partially by (i) a $330.6 million increase in total operating expenses, (ii) a $29.9 million increase in interest expense, and (iii) an $11.3 million decrease in equity income, net – related parties,
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 Six Months Ended
thousands except percentages and per-unit amounts June 30, 2026 March 31, 2026 Inc / (Dec) June 30, 2026 June 30, 2025 Inc / (Dec)
Adjusted Gross Margin
$ 1,074,521 $ 990,655 8 % $ 2,065,176 $ 1,739,851 19 %
Per - Mcf Adjusted Gross Margin for natural - gas assets (1)
1.35 1.32 2 % 1.34 1.33 1 %
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets (1)
3.21 3.07 5 % 3.14 3.09 2 %
Per - Bbl Adjusted Gross Margin for produced - water assets (1)
0.96 0.90 7 % 0.93 0.94 (1) %
Adjusted EBITDA 736,532 683,137 8 % 1,419,669 1,211,448 17 %
Distributable Cash Flow 537,157 496,585 8 % 1,033,742 1,051,787 (2) %
Free Cash Flow
263,605 242,298 9 % 505,903 787,792 (36) %
_________________________________________________________________________________________
(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 $83.9 million for the three months ended June 30, 2026, primarily due to (i) increased throughput and disposal-fee revenue at the DBM water systems, (ii) the acquisition of the Comanche complex, (iii) increased throughput, average prices, and volumes sold at the DJ Basin complex, and (iv) increased average prices and volumes sold at the Powder River Basin and Chipeta complexes.
Adjusted Gross Margin increased by $325.3 million for the six months ended June 30, 2026, primarily due to (i) increased throughput at the DBM water systems, including the acquisition of Aris, increased skim-oil volumes sold, and averages prices, (ii) increased throughput, volumes sold, and average prices at the DJ Basin complex, (iii) increased throughput and deficiency fees on certain contracts with increasing throughput minimums at the DBM oil system, and (iv) the acquisition of the Comanche complex.
Per - Mcf Adjusted Gross Margin for natural - gas assets increased by $0.03 for the three months ended June 30, 2026, primarily due to (i) the acquisition of the Comanche complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets, (ii) increased throughput at the DJ Basin complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets, and increased average prices and volumes sold, and (iii) increased average prices and volumes sold at the Powder River Basin and Chipeta complexes.
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets increased by $0.14 for the three months ended June 30, 2026, primarily due to increased deficiency fees on certain contracts with increasing throughput minimums at the DBM oil system, partially offset by lower distributions at FRP and TEP.
Per - Bbl Adjusted Gross Margin for crude - oil and NGLs assets increased by $0.05 for the six months ended June 30, 2026, primarily due to 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. This increase was offset partially by lower distributions at FRP and TEP.
Per - Bbl Adjusted Gross Margin for produced - water assets increased by $0.06 for the three months ended June 30, 2026, primarily due to increased throughput and disposal-fee revenue.
Adjusted EBITDA. Adjusted EBITDA increased by $53.4 million for the three months ended June 30, 2026, primarily due to a $101.1 million increase in total revenues and other, partially offset by (i) a $21.1 million increase in operation and maintenance expenses, (ii) a $14.2 million increase in cost of product (net of lower of cost or market inventory adjustments), and (iii) an $8.1 million increase in general and administrative expenses excluding non - cash equity - based compensation expense.
Adjusted EBITDA increased by $208.2 million for the six months ended June 30, 2026, primarily due to a $488.9 million increase in total revenues and other. This amount was offset partially by (i) a $136.1 million increase in cost of product (net of lower of cost or market inventory adjustments), (ii) a $98.5 million increase in operation and maintenance expenses, (iii) a $22.7 million increase in general and administrative expenses excluding non - cash equity - based compensation expense, and (iv) a $15.2 million decrease in distributions from equity investments.
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Distributable Cash Flow. Distributable Cash Flow increased by $40.6 million for the three months ended June 30, 2026, primarily due to a $53.4 million increase in Adjusted EBITDA. This amount was offset partially by a $6.7 million increase in cash paid for income taxes.
Distributable Cash Flow decreased by $18.0 million for the six months ended June 30, 2026, primarily due to (i) a $164.6 million increase in recognized service revenues - fee based in excess of (less than) customer billings, (ii) a $31.6 million increase in interest expense (net of interest income), (iii) a $16.0 million increase in cash paid for maintenance capital expenditures, (iv) an $11.3 million increase in cash paid for income taxes, and (v) a $6.7 million increase in capitalized interest. These amounts were offset partially by a $208.2 million increase in Adjusted EBITDA.
Free Cash Flow. Free Cash Flow increased by $21.3 million for the three months ended June 30, 2026, primarily due to a $64.8 million increase in net cash provided by operating activities. This amount was offset partially by (i) a $34.6 million increase in capital expenditures and (ii) a $9.9 million decrease in distributions from equity investments in excess of cumulative earnings.
Free Cash Flow decreased by $281.9 million for the six months ended June 30, 2026, primarily due to (i) a $185.0 million increase in capital expenditures and (ii) a $90.1 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 June 30, 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 second quarter of 2026 of $0.930 per unit, or $392.7 million in the aggregate. The cash distribution is payable on August 14, 2026, to our unitholders of record at the close of business on July 31, 2026.
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 six months ended June 30, 2026, the Partnership repurchased no common units. As of June 30, 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.
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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 June 30, 2026, we had a $110.6 million working capital deficit, which we define as the amount by which current liabilities exceed current assets. The effective borrowing capacity under the RCF was $1.8 billion as of June 30, 2026, after taking into account the $163.3 million of outstanding commercial paper borrowings, for which we maintain availability under the RCF as support for our 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.
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. Acquisitions and capital expenditures as presented in the consolidated statements of cash flows and capital incurred were as follows:
Six Months Ended
June 30,
thousands 2026 2025
Acquisitions $ 818,723 $ —
Capital expenditures (1)
506,065 321,025
Capital incurred (1)
567,711 342,094
_________________________________________________________________________________________
(1) For the six months ended June 30, 2026 and 2025, included $11.0 million and $4.3 million, respectively, of capitalized interest.
Acquisitions for the six months ended June 30, 2026, included the acquisition of Brazos Delaware. See Note 3—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
Capital expenditures increased by $185.0 million for the six months ended June 30, 2026, primarily due to increases of (i) $146.6 million at the DBM water systems related to the Pathfinder pipeline project and the acquisition of Aris and (ii) $65.2 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 $30.8 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:
Six Months Ended
June 30,
thousands 2026 2025
Net cash provided by (used in):
Operating activities $ 1,004,639 $ 1,094,770
Investing activities (1,342,223) (314,764)
Financing activities (377,141) (1,740,738)
Net increase (decrease) in cash and cash equivalents $ (714,725) $ (960,732)
Operating activities . Net cash provided by operating activities decreased for the six months ended June 30, 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 six months ended June 30, 2026, primarily included (i) the acquisition of Brazos Delaware, (ii) 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 (iii) distributions received from equity investments in excess of cumulative earnings.
Net cash used in investing activities for the six months ended June 30, 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, DBM oil system, DJ Basin complex, and Chipeta complex, (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 six months ended June 30, 2026, primarily included (i) repayment of the total principal amount outstanding of the 4.650% Senior Notes due 2026, (ii) distributions paid to WES unitholders and noncontrolling interest owners, (iii) issuance of $700.0 million in aggregate principal amount of 5.700% Senior Notes due 2036 and RCF borrowings, and (iv) net commercial paper program borrowings.
Net cash used in financing activities for the six months ended June 30, 2025, primarily included (i) repayment of the total principal amount outstanding of the 3.950% Senior Notes due 2025 and 3.100% Senior Notes due 2025 at par value, (ii) distributions paid to WES unitholders and noncontrolling interest owners, and (iii) a decrease in outstanding checks.
Debt and credit facilities. As of June 30, 2026, (i) the carrying value of outstanding debt was $9.1 billion and (ii) the effective borrowing capacity under WES Operating’s $2.0 billion RCF was $1.8 billion, after taking into account the $163.3 million of outstanding commercial paper borrowings, for which WES Operating maintains availability under the RCF as support for its commercial paper program.
During the six months ended June 30, 2026, WES Operating (i) retired the 4.650% Senior Notes due 2026 on the par call date of April 1, 2026 for $440.5 million with proceeds from the public offerings of $1.2 billion in aggregate principal amount of Senior Notes issued in the fourth quarter of 2025 and (ii) completed the public offering of $700.0 million in aggregate principal amount of 5.700% Senior Notes due 2036.
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 Six Months Ended
thousands June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025
Net income (loss) attributable to WES $ 403,552 $ 350,276 $ 753,828 $ 650,687
Limited partner interest in WES Operating not held by WES (1)
7,781 6,827 14,608 13,283
General and administrative expenses (2)
703 345 1,048 113
Other income (expense), net (74) (90) (164) (95)
Income taxes 1,922 3,375 5,297 —
Net income (loss) attributable to WES Operating $ 413,884 $ 360,733 $ 774,617 $ 663,988
_________________________________________________________________________________________
(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:
Six Months Ended
June 30,
thousands 2026 2025
WES net cash provided by operating activities $ 1,004,639 $ 1,094,770
General and administrative expenses (1)
1,048 113
Non - cash equity - based compensation expense
(386) (254)
Changes in working capital (25,979) (19,693)
Other income (expense), net (164) (95)
Income taxes 46 —
WES Operating net cash provided by operating activities $ 979,204 $ 1,074,841
WES net cash provided by (used in) financing activities $ (377,141) $ (1,740,738)
Distributions to WES unitholders (2)
754,318 696,249
Distributions to WES from WES Operating (3)
(750,089) (696,429)
Increase (decrease) in outstanding checks (2,606) —
Other 28,760 20,042
WES Operating net cash provided by (used in) financing activities $ (346,758) $ (1,720,876)
_________________________________________________________________________________________
(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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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.