Western Midstream Partners, LP

Good morning, my name is Tina and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners second quarter 2026 earnings conference call. All 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 star 1 again. Thank you. I would now like to turn the conference over to Daniel Jenkins, Director of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Western Midstream's second quarter 2026 conference call. Today's call, the accompanying slide deck, and last night's press release 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. With me today are Oscar Brown, our Chief Executive Officer, Danny Holderman, our Chief Operating Officer, and Kristen Shults, our Chief Financial Officer. I'll now turn the call over to Oscar.

Thank you, Daniel, and good morning, everyone. Yesterday we reported record adjusted EBITDA of $737 million, an increase of 8% sequentially and 19% compared to the prior year period. Our strong second quarter results reflect record throughput from our natural gas and produced water businesses in the Delaware Basin, approximately two and a half weeks of contribution from the Brazos acquisition, and the benefit of our fixed recovery natural gas processing contracts in conjunction with higher overall commodity pricing. In mid-June, we closed the $1.6 billion acquisition of Brazos Delaware II, funded with approximately $800 million in cash and $800 million of West Common Units, Based on the volume weighted average unit price at the time the acquisition agreement was signed. The Brazos acquisition expands our gathering and processing footprint in the Delaware Basin and reflects our discipline of only deploying capital that sustains or grows the distribution over time. It is accretive to per unit metrics, protects the partnership's balance sheet and investment grade credit ratings, and diversifies our customer base and ownership. The integration is off to a strong start. Our teams are focused on optimizing the legacy Brazos system and connecting it to the legacy WES system, which we expect to be completed by year end. This will enable us to direct more volumes to Brazos' processing plants that have spare capacity, enabling us to process more volumes internally and offload fewer volumes, thus creating more value for WES unit holders. We also expect to capture approximately $15 to $20 million of cost synergies over the coming quarters in connection with the Brazos acquisition, primarily through general and administrative cost elimination and reduced operation and maintenance expense from supply chain efficiencies. Additionally, we have recently seen a number of wells previously planned for 2027 move into the second half of 2026 from several customers on the Brazos acreage. We will continue to remain in close contact with these new customers regarding their near-term plans, but we would expect these developments to result in increased throughput relative to our initial underwriting assumptions when we consummated the deal. For the remainder of the year, higher commodity prices continue to incentivize our customers to increase activity, particularly in the Delaware and Powder River basins, positioning us for incremental throughput growth in 2027. In the Delaware basin, multiple customers have communicated that they intend to accelerate activity into the second half of the year, which should drive throughput growth as we exit 2026 and into 2027. We also recently entered into new gathering and processing agreements with two of the most active producers in the Powder River basin. These long-term agreements increase dedications to West by approximately 270,000 acres, which contain over 1,000 remaining drilling locations and are backed by substantial minimum volume commitments. These agreements, plus the associated volume commitments, demonstrate producers' increasing focus on the Powder River Basin as they begin to more fully develop their vast acreage positions in the basin. Based on the strength of our first half results, continued elevated commodity prices, and the Brazos acquisition, We are raising the midpoints of our full-year 2026 adjusted EBITDA, distributable cash flow, and free cash flow guidance ranges by 10%, 10%, and 20%, respectively. We now expect 2026 adjusted EBITDA to be between $2.75 billion and $2.95 billion, implying a midpoint of $2.85 billion, an increase of $250 million compared to our original guidance range. Additionally, we now expect 2026 distributable cash flow to be between $2.05 billion and $2.25 billion, and 2026 free cash flow between $1.1 billion and $1.3 billion, which represents increases of $200 million at the midpoints.