Western Midstream Partners, LP

Morning, my name is Chihuana and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners Second Quarter 2025 Earnings Conference Call. My lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star followed by the number two. Thank you. I would now like to turn the conference over to Daniel Jenkins, Director of Investor Relations. Please go ahead.

Thank you. I'm glad you could join us today for Western Midstream's Second Quarter 2025 Conference Call. I'd like to remind you that today's call, the accompanying slide deck in yesterday's earnings release and the ARIES Acquisition Press Release and slide deck contain important disclosures regarding forward-looking statements and non-GAAP reconciliations. Please reference Western Midstream's most recent Form 10-K and 10-Q and other public filings for a description of risk factors that could cause actual results to differ materially from any forward-looking statements we discussed today. Relevant reference materials are posted on our website. You will also note that due to the pending ARIES Water Solutions Transaction, today's discussion is subject to certain additional securities laws. And so we refer you to the slides in the ARIES Acquisition slide deck titled, Board-Looking Statements and Ownership Structure and Additional Disclaimers that are posted in the Events and Presentations section of WESA's corporate website. With me today are Oscar Brown, our Chief Executive Officer, Danny Holderman, our Chief Operating Officer, Kristen Schultz, our Chief Financial Officer, and John Vandenbrand, our Senior Vice President of Commercial. I'll now turn the call over to Oscar. Thank you, Daniel,

and good morning, everyone. The Second Quarter was both eventful and highly successful for WESA. Yesterday afternoon, we reported strong Second Quarter operational and financial results, highlighted by sequential improvement in adjusted gross margin and the highest quarterly adjusted EBITDA in our partnership's history. In addition, continued strong activity levels and high system operability contributed to increased throughput across all core operating assets and product lines. Notably, we achieved record-breaking natural gas, crude oil and NGLs, and produced water throughput in the Delaware Basin. While our quarterly results were noteworthy, it is our steadfast commitment to and effective execution of our prudent growth strategy that truly distinguishes this quarter's performance. This is exemplified by our recent announcement of an agreement to acquire Eris Water Solutions and the sanctioning of a second train at our north-loving natural gas processing plant. These actions will enable us to further strengthen our footprint in the Delaware Basin, expand our service offerings, and deliver enhanced flow assurance to all our producing customers. Turning first to the Eris announcement, this secretive bolt-on acquisition enables us to optimize the value of our existing asset base and leverage our operational expertise to generate incremental value for our unit holders, which are both core principles of our M&A strategy. By integrating Eris's water disposal, water solutions, and beneficial reuse capabilities with WES's existing produce water business, including our under-construction Pathfinder Pipeline, this acquisition establishes WES as a -in-class inter-basin produce water system provider. With a differentiated Texas and New Mexico water system, WES will continue to deliver exceptional flow assurance and sustainable service offerings to customers for years to come. The ability to transport water throughout the basin has become increasingly important considering the volume of produced water generated in the Delaware Basin and the recent Texas Railroad Commission regulations pertaining to the permitting of new salt water disposal wells. After the close of this transaction, WES's pro forma produced water disposal capacity will be more than 3.8 million barrels per day. Additionally, Eris's recent purchase of the McNeil Ranch, which straddles New Mexico and Texas between the Delaware Basin and the Central Basin platform, provides significant long-term optionality with incremental access to pore space and other surface use opportunities. Next, this transaction further diversifies WES's customer base and contributes to WES's already strong midstream contract portfolio. Through Eris's long-term contracts, material acreage dedications that consist of more than 625,000 acres, and minimum volume commitments with investment-grade counterparties, adding Eris to our portfolio will provide additional support for our distribution. The transaction also significantly expands our footprint in New Mexico, unlocking new opportunities to potentially grow our natural gas and crude oil gathering and processing businesses. At $25 per share, the acquisition values Eris at $2 billion, including the assumption of Eris's net debt and other liabilities, before transaction costs. This implies approximately 7.5 times 2026 consensus EBITDA, inclusive of $40 million of estimated cost synergies. Based on this, the acquisition is expected to be accretive to 2026 free cash flow per unit. By financing the transaction with up to 28% cash and 72% WES units, we expect our industry-leading net leverage position to remain at approximately 3 times on the pro forma basis. Over the past several years, we have prioritized strengthening our balance sheet through debt reduction, enhancing operational efficiencies, reducing costs, and growing adjusted EBITDA. These actions have positioned our partnership to successfully execute this strategic, bolt-on acquisition from a position of strength. Tipping to our recently announced organic growth opportunities, we have also sanctioned an additional train at our existing North Loving Plant in the Delaware Basin. This 300 million cubic feet per day natural gas processing train will increase the North Loving Plant capacity to 550 million cubic feet per day and take our total West Texas Complex processing capacity to approximately 2.5 billion cubic feet per day by early in the second quarter of 2027. After evaluating multi-year throughput forecasts and conducting numerous discussions with our producing customers in West Texas, we strongly believe that the volume of natural gas and produced water will be substantial for years to come. Our North Loving Train 1 reached full capacity within just one month of its late February 2025 startup, and we are still relying on offloads at times to manage our customers' throughput profile. The offload market today is tighter than in 2022 when we put these original offloads into place. Therefore, we see a need for additional owned processing capacity at our West Texas Complex. We think it is in our partnership's best interest to be well prepared to receive more natural gas and produce water volumes as the gas to oil and the water to oil ratios experienced by our customers continue to increase over time. In addition to these actions, the teams at West have maintained a sharp focus on enhancing productivity and efficiency to strengthen our cost structure and sharpen our competitive edge. During the first quarter, we implemented new initiatives to optimize operational processes and improve resource allocation, both of which drive meaningful efficiencies in operating performance, improve our ability to compete for new business, and advance high-value organic growth initiatives. Tristan will provide additional details on these accomplishments in a moment. These actions, coupled with our Pathfinder pipeline and the recently commissioned North Loving Train 1, advance our strategy of prioritizing capital-efficient growth that generates strong returns for West's unit holders and aligns with our continued focus on sustaining and growing the distribution over time. Collectively, these efforts will help accelerate growth over the coming years, and I look forward to our teams' continued strong execution as we strive to deliver excellent service and increased flow assurance for our customers. With that, I will turn the call over to our Chief Operating Officer, Danny Holderman, to discuss our operational performance during the second quarter. Danny?

Thank you, Oscar, and good morning, everyone. Our second quarter natural gas throughput increased by 3% on a sequential quarter basis, primarily due to increased throughput across all of our core operating basins. The Delaware basin outperformed in the second quarter, primarily due to numerous wells coming online early in the second quarter. This increase was partially offset by lower throughput from our other assets, specifically in South Texas, due to plant turnaround activities during the quarter. Our crude oil and NGLs throughput increased by 6% on a sequential quarter basis, due to increased throughput across all of our core operating basins and new wells in the Delaware basin that came on early in the quarter. We also experienced increased throughput from our equity investments. Additionally, our produced water throughput increased by 4% on a sequential quarter basis, due to new wells in the Delaware basin coming online early in the quarter. Our second quarter per MCF adjusted gross margin for natural gas decreased by 2 cents on a sequential quarter basis, which was in line with our prior expectations coming into the quarter. This decrease was primarily driven by lower excess natural gas liquids volumes in conjunction with reduced NGL pricing and changes in contract mix. Going forward, we expect our third quarter per MCF adjusted gross margin to be in line with the second quarter. Our second quarter per barrel adjusted gross margin for crude oil and NGLs decreased by 15 cents compared to the prior quarter, which was in line with our prior expectations coming into the quarter. This decrease was primarily due to more normalized timing of distribution payments and increased throughput from our equity investments, which have a lower than average per barrel margin as compared to our other crude oil and NGL assets. On an operated basis, our per barrel adjusted gross margin remained relatively flat. We expect our third quarter per barrel adjusted gross margin to be in line with the second quarter. Our second quarter per barrel adjusted gross margin for produced water was unchanged and in line with our prior expectations coming into the quarter. Going forward, we expect our third quarter per barrel adjusted gross margin to be in line with the second quarter. Turning our attention to the remainder of the year, we continue to expect our portfolio-wide average -over-year throughput to increase by mid single digits percentage growth for both natural gas and produced water and low single digits percentage growth for crude oil and NGLs. For -over-year comparative purposes, these expectations exclude the volumes associated with the non-core asset sales that closed in early 2024. In the Delaware basin, we continue to expect modest -over-year increases in average throughput across all three product lines, reaffirming the basin's role as our primary growth engine in 2025. During the second quarter, Delaware basin throughput benefited from new wells coming online early in the quarter. Going forward, and based on current producer forecasts, the cadence of wells that come to market is expected to remain fairly consistent throughout the second half of the year, although we currently forecast this activity to be more heavily weighted towards the fourth quarter. As a result, our latest forecast shows that our third quarter Delaware basin volumes for all three products will remain flat compared to the second quarter levels. In the DJ basin, we continue to expect average -over-year throughput to remain fairly flat for both natural gas and for crude oil and NGLs. During the first half of the year in the Powder River basin, we benefited from offloads from certain piers that experienced temporary downtime due to asset maintenance or repairs. Even though those trains returned to service by the end of the second quarter and the volumes from those offloads decreased, we still anticipate modest -over-year increases in average throughput for both natural gas and crude oil and NGLs for 2025 due to offsetting customer-driven organic growth projects. Finally, we still expect meaningful natural gas throughput growth from our other assets, specifically in the Uinta basin, to commence in the second half of the year driven by increased volumes from Williams Mountain West pipeline expansion and the tie-in of Kinder Morgan's Altamont pipeline to our Chapita plant in September. With that, I'll turn the call over to Kristen to discuss our financial performance during the second quarter. Thank

you, Dani, and good morning, everyone. During the second quarter, we generated net income attributable to limited partners of $334 million and adjusted EBITDA of $618 million. Relative to the first quarter, our adjusted gross margin increased by $18 million. This was primarily driven by increased throughput and improved gross margin contribution from the Delaware basin, which was partially offset by less gross margin contribution from the excess natural gas liquid volumes in combination with lower NGLs. And lower distributions from our equity investments. Our operations and maintenance expense decreased slightly -over-quarter. Going forward, we anticipate higher operation and maintenance expense during the third quarter, resulting from increased utility expense during the hotter summer months associated with higher estimated electricity pricing. As a reminder, we are reimbursed for approximately 75% of our utility cost portfolio-wide from our producing customers. Turning to cash flow, our second quarter cash flow from operating activities totaled $564 million, generating free cash flow of $388 million. Free cash flow after our first quarter 2025 distribution payment in May was $33 million. Focusing on capital markets activities, we retired $337 million of senior notes upon their maturity in early June with cash on hand, and we were able to maintain our top tier net leverage ratio of 2.9 times at quarter end. In July, we declared a quarterly distribution of 91 cents per unit, which is in line with the prior quarter's distribution and will be paid on August 14th to unit holders of record on August 1st. At this time, we are not making any changes to our 2025 financial guidance ranges, considering the estimated ARIS acquisition close date, which we expect to be during the fourth quarter after the regulatory review process and the ARIS shareholder meeting is complete. Additionally, as Oscar previously mentioned, during the first quarter, we implemented new initiatives to optimize our operational processes and improve resource allocation, which has yielded meaningful efficiencies and cost reductions across the partnership. Through targeted optimization of field level operations, procurement practices, and maintenance and turnaround procedures, we have successfully reduced downtime, increased efficiencies, and identified permanent annual run rate cost savings of approximately $50 million. We are already realizing the benefits of these improvements, which are expected to help us better manage and offset rising variable costs and higher operation and maintenance expense as our operations continue to grow. These are ongoing initiatives that we expect to continue yielding results and additional improvements in both 2025 and 2026. With regard to capital spending, we still expect to remain within the 2025 guidance range, but with the addition of North Leving 2, coupled with the expected ARIS acquisition close date during the fourth quarter, we now expect West to be towards the high end of our previous guidance range of $625 million to $775 million. Looking ahead to 2026 and recognizing that the majority of expenditures related to Pathfinder and North Leving 2 will be incurred during that year, we now expect 2026 capital expenditures to be at least $1.1 billion. Given that both Pathfinder and North Leving 2 are short cycle capital projects with expected returns of at least mid-teens on an unlevered basis, we expect these investments to drive substantial EBITDA growth beginning in 2027. Over the coming months, we will continue to receive updated forecasts from our producers, which will allow us to continue developing our 2026 forecast. Even with elevated levels of capital spending next year and the capital needed to close the ARIS acquisition, we would still expect net leverage to remain at approximately three times. With that said, based on our recent conversations with our customers and updated throughput forecast, we would expect to grow average -over-year throughput across all three product lines again in 2026, even before you incorporate the positive contribution from ARIS. With a growing asset base, the inclusion of ARIS, and net leverage at approximately three times, we are confident we have plenty of financial flexibility to fund a more robust capital expenditure program that will generate higher throughput in 2027 and beyond. We remain committed to generating strong returns for West Unit holders to sustain and grow the base distribution over time. However, in light of our strong current yield, we intend for distribution growth to trail earnings growth in order to increase our distribution coverage and provide greater cash flow certainty. With that, I will now turn the call over to Oscar for closing remarks.

Thanks, Kristen. Before we open it up for Q&A, I would like to emphasize how our premier asset portfolio, steadfast commitment to financial discipline, and resilient business model distinguish us as an industry leader and positions us to capitalize on compelling growth opportunities, all while delivering industry-leading return of capital to our investors and sustain long-term value to our stakeholders. First, the ARIS acquisition significantly strengthens West's position as a midstream water services leader and allows West to provide elevated levels of flow assurance to our customers that further de-risk their core exploration and production businesses. The increased scale and expanded service offerings that the acquisition provides will better position West to compete for incremental natural gas and crude oil and NGL's business over the long term, and especially in New Mexico. Second, the ARIS acquisition and the sanctioning of our second train at the North Loving Plant were driven by continued strong producer activity levels in the Delaware Basin that greatly support our growth outlook and strategy in 2026 and beyond. Despite experiencing volatile market conditions early in the second quarter, we have not experienced any substantial changes in our customers' expected production outlooks, and we remain on track to execute our overall growth strategy. Finally, West's long-term contract portfolio, strong balance sheet, and investment-grade credit ratings provide the financial flexibility necessary to support our multi-year expansion projects. Our contract structures, supported by minimum volume commitments and cost of service protections, further enhance the stability and predictability of our future profitability and potential free cash flow generation. By maintaining low net leverage and generating strong free cash flow, we are well positioned to maintain our disciplined capital allocation framework, increase distribution coverage, and return more capital to unit holders over time. Our strong second quarter results have kept us on track to achieving our 2025 operational financial goals in the Pathfinder Pipeline and North Loving II organic growth projects, as well as the ARIS acquisition, urgently accelerate our growth plans for 2026, 2027, and beyond. We will remain focused on providing excellent customer service for our producing customers, and we look forward to leveraging our leading midstream water services position to drive additional growth in our natural gas and crude oil gathering and processing businesses. Thank you to the entire West workforce for your hard work and dedication to our partnership. And with that, we'll open the call up for questions.

Thank you. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Keith Stanley at Wolf Research. Your line is open.

Hi, good morning. Wanted to start on the funding for ARIS. So you're issuing over a billion of equity for the deal in a leverage neutral way. You know, the company has excess balance sheet capacity today. So can you talk to that financing decision, I guess, especially with the stock at yielding 9%. You know, I think you'd get a lot more accretion if you use more cash on the deal.

Thanks for that, Oscar. So when we look at this, we had the opportunity to do a transaction that's immediately accretive to really our metrics and the per unit basis and the finance that leverage the neutral. We think that gives us the kind of capability to lean into one, our organic growth projects, which are increasing as we talked about, but also the position is for additional consolidation opportunities and gas and oil as they arise. So given the metrics here, we thought it was a great opportunity to preserve the balance sheet and

set itself for additional opportunities in the near term.

Okay, great. Thanks for that. Second one, I guess, just from a business mix perspective, you make the point on the slides that, you know, water is still only 16% of EBITDA with the transaction. It's a big part of your growth strategy and capital plan though. So where do you see water kind of as a percentage of the company going forward? And is there any limit or mix that you're going for?

I don't think we have a specific target mix. We firmly believe the water business has evolved into a midstream, a clear midstream type of business, just like gathering and processing for oil and gas. If you look at the commercial contracts that they have, the dedications and the MVCs, it looks just like the rest of our business. So commercially, you know, we're sort of happy, you know, with any of the three streams that we support. And it really helps us with our customers and helps them with overall integrated flow assurance. In terms of the business mix, you know, we kind of like this 15% range. You know, when we're highly successful on a pathfinder, it will creep up a little bit closer to 20%. We're probably pretty happy

with that mix. Thank you. Thank you. Your next question

comes from the line of Gabriel Maureen at Mizzouho. Your line is now open.

Hey, good morning, team. I just want to ask about following up sort of on the water deal. And can you just talk about systems around Ares and going to New Mexico here? Are there other privately held systems where you view the opportunity to continue to consolidate around here? And then also from a regulatory standpoint, you're making an entry into New Mexico. Just your views on doing business in that state versus in Texas, particularly on the waterfront, whether it's permitting disposal wells or what have you, what your views are there?

Thanks for that,

Gabe.

So in terms of again,

Ares was our number one sort of focus opportunity, given their sort of midstream structure for us in the water business. And when you look at the map, it really completes our system in the Delaware Basin. So we're pretty happy with the combination here and don't see a lot of need to continue to add to the system from here in an inorganic way. And frankly, the commercial opportunities increase dramatically for both entities with the combination. So I think that'll help us on that front. We've been looking for a way. We operate in a small way in New Mexico today across streams, and we've been looking for a way to grow in New Mexico. So we're comfortable with the regulatory environment. We have experience there, obviously. And so we don't see any concern there with sort of those kind of issues. In fact, we think that the ability to move water across state lines and across the combined systems is going to be a critical feature in optimizing the assets and frankly increases commercial opportunities for Pathfinder in the long run as well. So we really think that this combination gives us a unique position in the space.

Thanks, Oscar. And then maybe if I can pivot to the FID on Loving 2, I think maybe a little bit sooner than some folks were expecting. You talked about still needing some offloads and maybe having that base load some of the plant. In the past, you've also had some commitments from some of your producers to base load new plants. Can you talk about that and also a lot of new plant FIDs? Are you playing a little more offense and being a little more aggressive here in terms of the FID of this plant, maybe relative to some of your historical plant FIDs?

Yeah, I think that's right. So historically, we've taken a very conservative approach and built up an offload portfolio that ultimately puts the size of the plant. And then at that time would take FID and two years later you'd have a plant. We've probably seeded a little market share with that strategy in the past. Here we've spent a lot of time with our existing dedication customers and producers to really understand their medium and long term sort of view on where their gas production was headed. We've also been very confident in the growth in gas with our producers. We're aligned with the direction the basin is going in terms of increasing GORs as well. So we have a lot of confidence and visibility this time and decided to go ahead and move before waiting to have a completely full plant from the

start. Thanks Oscar. Thank you.

The next question comes from the line of Manav Gupta at UPS. Your line is now open.

Good morning. Looks like a great deal. I'm just trying to understand this a little better. You talked about like 40 million in synergy. So how should we think about synergy capital? Would you have to spend anything to actually gain these synergies? And once this transaction closes, how should we think about the long term distribution growth enabled by this transaction?

Thank you for that. Good question. In terms of the synergy capture, the 40 million is all kind of GNA and typical sort of public company consolidation synergies. So low hanging fruit that should be quick to realize. Of course, we've got to wait for this regulatory approval and shareholder vote. So there's a lot of planning we've done and are going to do in the next couple of months into closing. So we should be able to move very quickly on realizing those synergies. As we know, we have not counted any revenue synergies or commercial opportunities that the combination will provide, which we think are significant, including the potential pull through of additional gas and oil gathering and processing based on the new and large footprint. In terms of your second question, distribution growth. Yes. So we continue to stand by our long term mid to single digit distribution growth outlook and plan. And certainly an creative transaction helps support that. Everything we do in terms of deploying capital either sustains or grows or distribution. That's our core strategy. So this falls in line with that. Given where the yield is today, we don't see a lot of need to go above our already indicated distribution growth plans. And as we build distribution coverage, it's the only thing frankly we can identify is any additional risk in our story that we can control. So obviously this transaction sets us up for well in excess of 10% even dog growth next year. And we'll likely stick to something in that single digit range. But of course, that'll be up to the board. And the efficiency of how we close and execute on this transaction before we can make that determination.

Thank you so much for that. You were kind enough to give us some idea of the 2026 CapEx and just from our modeling perspective, should we expect this CapEx pump to be 26 and 27 and then fall off or should we just expect 26 to be elevated and 27 to fall off? If you could help us understand that a little better. Thank you.

Yeah, we've got to honestly, we've got this moment based on what we see in our announced organic growth projects, the biggest of which of course are Pathfinder and North Loving too now. The vast majority of the capital for those projects sits in 2026. So if things remain unchanged, we would expect the CapEx to sort of normalize in the 2027.

Thank you so much. Thank you.

Thank you. Again, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from the line of Jeremy Tonette at JP Morgan. Your line is open.

Good morning. This is Eli on for Jeremy. Congrats on the strong quarter. Thanks for taking our question. Maybe just to look at the McNeil Ranch a little bit and understand how that fits into West's long term plans for pore space and surface use opportunities. You know, what kind of opportunities do you see at that asset and you know, that might be different than the way heiress was looking at it.

Thanks.

Thanks for that. We see McNeil is certainly an upside opportunity, a bit of a call option. So we do view this as a longer term upside. As you can see where the ranch sits, it's in a great location between basins and straddling the state line on sort of the east side, but it is a little bit far from the current structure of the systems. So, you know, on the plus side, heiress has already applied for and received permits on the Texas side of that ranch for water disposal. So there's an opportunity there. And certainly as the basin grows, water volumes continue to grow. We see that as a great long term opportunity to expand our disposal business. In terms of surface use, I do think sort of our reach and footprint and many of our partners that we work with give us the opportunity to maybe move a bit more quickly on surface items. And they run the gamut of everything that, frankly, everybody's chasing. So we're pretty excited about having this surface area, this land. I think it's in a good spot and look forward to hopefully generating some value with it in the long run.

Awesome, thanks. And then, you know, maybe just thinking about the impact and some of the feedback you've gotten from Conoco or Chevron. Where do they stand on this? And maybe if you could also just kind of touch a little bit on the pathway to a deal approval from here. I know you talked about a 4Q25 close, but just what kind of hurdles do you see there to kind of get in this thing finished? Thanks.

Yeah, no, thanks for that. So obviously we've gotten support from 42% of Ares' building shareholders in support for the transaction in terms of the largest shareholder and customer that's ConocoPhillips. We obviously already do a lot of business with Conoco today and have a great relationship there and have spent time with them as part of this transaction in making sure they were aligned in what we're trying to do here. So we're very happy with that relationship. And obviously just a week or two ago, Conoco extended their long term contracts and dedication with Ares. So we're super pleased about that. We also, of course, do a lot of work with Chevron, Oxy as well, and MuBird. So we've got some great history with the major customers here. But this does, this transaction does do a nice job of sort of enhancing those business with those third party customers. So it's a big positive. In terms of hurdles, I don't think we see anything. I think the regulatory process should be pretty standard and we'll follow all the rules and move that along as quickly as we can and support that. And again, also support Ares and the filing of their proxy and their shareholder vote. So it's really just, those are just pretty standardized processes. They just take a little time. But again, we're pretty confident that we should be able to close the transaction middle

to late fourth quarter. Thank you. The next question comes from

the line of Zach VanEvrin at TPH. Your line is open.

Thanks for taking my question. Maybe go into the capital program for the remainder of the year. Looks like in the slide, the powder percentage shifted down. Is this just the dynamic of the North Loving plant adding to the the Permian or are you guys spending a little bit less than expected up in the powder?

We are spending a little bit less in the powder. We've seen some projects just shift around from a timing perspective. And so especially as we get towards the latter part of the year, you'll see stuff slip out of 25 and into 26. So yes, you're right. You have seen that shifted down. And then when you add in the incremental capital, as it would relate to North Loving, that's going to increase the Delaware a little bit.

Got it. That makes sense. And then maybe you talk to volumes being up across the board in 26. I know it's still early, but maybe just a quick breakout of where most of that growth will be. I assume Delaware, but you know, is DJ still kind of in that flattest range and then maybe

anywhere else you guys are expecting growth?

Yeah, so for next year for 2026, I agree with you. We'd expect the Delaware to continue to increase from a throughput perspective. And the DJ, we'll see how the rest of this year turns out in terms of wealth coming online. And then obviously we're still waiting for a producers forecast. So lots going to change in the next four months even and into January, February with updated producers forecast. So we'll give some more thoughts and guidance around what 2026 will look like maybe closer to the Q3 into this year and then into next year.

Got it. Appreciate the time. Thanks,

everyone. Thank you.

Thank you. Your next question comes from the line of Elvira Scotto at RBC Capital Markets. Your line is open.

Great. Thank you. Good morning, everyone. I guess a couple of questions from me on just on North Loving Tue. Can you provide a little more detail on how you see that plant ramping when it comes online? Given that you've kind of shifted from doing a lot of offloads before FIP being a plant.

Hey, Elvira, this is John. I think it's a great question.

Like Oscar mentioned, we still continue to have a lot of interconnectivity on the offload side and are utilizing those to the extent we have volumes above the system. You saw the note that the plant reached full operational capacity already. And so we're very positive that as North Loving Tue comes on, we're going to have significant amount of volume day one upon that plant coming on. I think Oscar mentioned that we were just able to make this decision based on the strength of our underlying contracts and frankly the success of the organic business that we've had over the last 12 to 18 months with just new deals that continue to add additional volumes to our system. So across the strength of these existing contracts and those new ones, it gave us the line of sight to not only have the confidence to pull the plant, but to know that there'll be a substantial amount of volumes day one of it coming online.

Okay, great. That's helpful. Thank you. And then just a little bit on capital allocation. So how do you think about organic growth versus additional bolt on opportunities? And then given this expanding your footprint in New Mexico, for continued growth in New Mexico, do you expect that to be more organic or do you think you'll need to do some more bolt on there?

Good question. I think M&A, as we talked about before, really does have to compete with organic growth from both the returns perspective. But we also think from a risk perspective, organic is always in our minds a bit derisked relative to acquisition. So that's to be really competitive. And I think in the case of Eris, we've sort of achieved all those goals and really checked every box in terms of our M&A framework. And what we shoot for and sort of the perfect deal, if you will. In terms of where we go from here, same thing again, we continue to see a significant amount of organic opportunity across all our core basins. So we expect some more success there. It does make us a little more picky on the M&A side. Of course, again, everything we do has to sort of sustain a bit of a distribution. So we've got some pretty good guardrails on how we think about value on acquisitions. And that's why it's really important that when we do these things, we have a real opportunity to add value to a transaction and have synergies as we do in the Eris deal. So it'll be a mix, I think, in terms of New Mexico specifically. I think we have real organic opportunity as a result of this added footprint. But certainly if there's an opportunity to do something that hit all our metrics, as this deal does, we'd be open minded to adding capacity in any of our streams, but particularly gas,

I would say. Thank you. Thank you. Thank you. The next question comes from the line of Wade Suki at Capital One. Your line is open. Wade, your line is open. Please unmute your phone line. Okay. Can you all hear me okay? We can hear you now.

Wonderful. Thank you. Apologize. And I apologize if you already addressed this question on the call. But going back to Eris, as you all are well aware, there's some sort of nontraditional things in here with mineral extraction and thinking about the industrial water business in particular. Are these all areas you all spend on? Retaining, expanding? Are these things that you might consider outsourcing or jettisoning maybe at some point? Maybe give us some color on some of these other pieces of the Eris business if you don't mind.

You bet. Actually, Eris's efforts in the consortium and their other technology, including industrial water, were some of the more appealing parts, exciting parts of the business for the very long term. Obviously, the more options we have in solving our producers' water issues in the Delaware basin, the better. And so initially, obviously, we've been, as an industry, focused on disposal and then recycle. And now other uses for water are becoming really important. So advanced treatment technologies are going to be really, really key. So we're pretty excited about all those features. We see real opportunity in the long term on even industrial water. But again, our core, our love and so forth is the midstream business, the traditional midstream business, and supporting our oil and gas producing customers. So that's our focus. But I will say, I do believe we can bring a lot more resources to this technology effort than they really had access to on a standalone basis. And so we're very excited about it. We think these opportunities are going to be beneficial in the long run.

Great. Thanks so much. Congrats. Thank you. Thank

you. There are no further questions at this time. Mr. Oscar Brown, I turn the call back over to you.

Thank you so much. And thanks, everyone, for your interest in Western Midstream and your participation on this earnings call. We're really glad that we've already been able to see the results of our pre-dent growth strategy by doing two things that are very hard to do at the same time. And that is improve our overall cost structure and process efficiency by executing on growth opportunities. In fact, the former truly enables the success of the latter. And we've only just begun on this journey. We look forward to welcoming Ares and the stakeholders to the West partnership later this year. Thank you again to everyone on the West team for an incredible start to the next phase of our partnerships evolution. There's so much to do and you've already proven that you're all up to the challenge. We look forward to seeing investors and analysts at the upcoming

conferences later this month. And with that, we'll close the call.

Thank you. This concludes today's conference call. You may now disconnect.