China chip stocks fall as US considers allowing Nvidia H200 sales
Western Midstream Partners LP (NYSE:WES) released its third-quarter 2025 presentation on November 5, showcasing record operational performance despite a slight earnings miss. The midstream energy company reported record natural gas throughput and adjusted EBITDA while emphasizing its strategic expansion in water management infrastructure.
Quarterly Performance Highlights
Western Midstream achieved record total natural gas throughput of 5.5 Bcf/d in Q3 2025, representing a 2% increase from the previous quarter. The company also reported record adjusted EBITDA of $634 million, up 3% quarter-over-quarter, and Delaware Basin natural gas throughput reached a record 2.1 Bcf/d. System operability hit an all-time high of 99.6%.
As shown in the following performance summary:
Despite these operational achievements, WES reported net income of $332 million, with earnings per share of $0.87, slightly below the forecast of $0.88. Revenue came in at $952.48 million, missing analyst projections of $962.47 million by approximately 1%. Following the earnings release, the stock showed a modest premarket decline of 0.35%, trading at $37.21.
The company's financial performance showed steady improvement from the previous quarter:
Operating cash flow increased from $564.0 million in Q2 to $570.2 million in Q3, while cash capital investments slightly decreased to $172.8 million. Free cash flow improved to $397.4 million, up from $388.4 million in the previous quarter. Cash distributions paid remained constant at $355.3 million, resulting in free cash flow after distributions of $42.2 million, an increase from $33.1 million in Q2.
Strategic Initiatives & Growth Projects
Western Midstream's presentation emphasized two major growth initiatives: the North Loving II processing train and the Pathfinder Pipeline project. These strategic investments aim to address capacity constraints and water management challenges in the Delaware Basin.
The company provided details on these expansion projects:
The North Loving II project involves a 300 MMcf/d cryogenic processing train expected to be in service by Q2 2027. This expansion will increase WES's total Delaware Basin processing capacity to 2.5 Bcf/d, addressing strong customer demand as the North Loving I facility is already operating above 100% capacity.
The Pathfinder Pipeline represents a significant investment in water management infrastructure, with capacity to transport approximately 800 MBbls/d of produced water. The project is supported by firm commitments from Occidental (NYSE:OXY) and includes additional water infrastructure construction, with an expected in-service date of Q1 2027.
Western Midstream highlighted the strategic importance of water management in the Delaware Basin:
The company noted that the Delaware Basin has the highest water-to-oil ratios of any U.S. shale play, with an average ratio of 4.5x-5.5x resulting in more than 18 MMBbls/d of produced water requiring management. With pore space becoming increasingly constrained, recycling and beneficial reuse are becoming more critical to sustainable operations.
Financial Outlook & Guidance
Western Midstream maintained its 2025 financial guidance, projecting adjusted EBITDA between $2,350 million and $2,550 million. The company expects free cash flow between $1,275 million and $1,475 million, representing approximately 4% year-over-year growth at the midpoint. Total capital expenditures are projected between $625 million and $775 million.
The detailed financial outlook is presented below:
For 2025, WES anticipates low-single-digit growth in crude oil and NGLs throughput, mid-single-digit growth in natural gas throughput, and approximately 40% growth in produced water throughput. The company's sensitivity to commodity prices remains relatively low, with a $10/Bbl change in crude oil prices estimated to impact adjusted EBITDA by approximately $30 million.
The company's 2025 capital expenditures guidance shows a strategic focus on expansion:
Approximately 67% of capital expenditures are allocated to expansion projects, with 70% directed toward the Delaware Basin. The guidance includes approximately $60 million in expansion capital for the North Loving Train II project. The remaining capital is allocated across well connections (14%), maintenance and regulatory requirements (18%), and other investments.
Distribution Growth & Capital Allocation
Western Midstream emphasized its commitment to returning capital to unitholders while maintaining financial flexibility for growth investments. The company has significantly increased distributions since 2021, with total distribution growth of 152% from 2021 to 2024.
The distribution growth trajectory is illustrated below:
For 2025, WES has guided to a per-unit cash distribution of at least $3.64, continuing its trend of mid-to-low single-digit annual growth. The company's capital allocation priorities focus on executing expansion opportunities that meet or exceed mid-teens unlevered rates of return, pursuing accretive acquisitions, and growing distributions.
During the earnings call, CEO Oscar Brown expressed optimism about the company's future, particularly regarding the expanded produced water business. He emphasized the importance of solving water management challenges, which remain critical for development in the Delaware Basin.
With net leverage at approximately 3.0x, Western Midstream appears well-positioned to pursue its growth initiatives while maintaining its distribution growth trajectory. However, the company faces potential challenges from regulatory focus on water management and commodity price fluctuations, which could impact future performance.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.