Good morning. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Western Midstream Partners Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 Fourth Quarter 2025 Conference Call. I'd like to remind you that today's call, the accompanying slide deck and last night's earnings release contain important disclosures regarding forward-looking statements and non-GAAP reconciliations. Please reference Western Midstream's most recent Form 10-K and other public filings for a description of risk factors that could cause actual results to differ materially from what we discuss today. Relevant reference materials are posted on our website. I'm pleased to inform you that the Western Midstream Partners K-1 will be available via our website beginning Wednesday, March 11. Hard copies will be mailed out the following week. With me today are Oscar Brown, our Chief Executive Officer; Danny Holderman, our Chief Operating Officer; and Kristen Shults, our Chief Financial Officer. I will now turn the call over to Oscar.

Thank you, Daniel, and good morning, everyone. 2025 was another incredibly successful and strategically meaningful year for Western Midstream that can be defined by record adjusted EBITDA and free cash flow generation, primarily driven by throughput growth across all products and from the Delaware and DJ Basins while focusing on cost competitiveness to support our long-term growth plans. Throughout the year, the Delaware and DJ Basins set multiple quarterly throughput records, enabling WES to meet or exceed our annual throughput expectations and full year financial guidance ranges. Additionally, the Aris acquisition in late 2025 further enhanced our asset base by expanding our produced water solutions capabilities and establishing a more substantial presence in New Mexico. Taken together, our 2025 achievements, including successful organic growth projects, accretive M&A, efficiency gains and cost reduction successes as well as contract renegotiations, all strengthen our operating leverage and position us for sustainable growth while maintaining a strong balance sheet and low leverage profile. As we progress later into 2025 and now into 2026, macroeconomic and commodity price-driven volatility have increased. Kristen will provide more details on our 2026 guidance metrics shortly, but based on recent discussions with our producing customers and taking into account their updated forecast, it has become clear that many of our producers will reduce previously expected activity levels on acreage that we service, including portions of the Delaware Basin. This, in combination with lower adjusted gross margin per unit for our natural gas assets, driven by changes in contract mix and lower commodity prices are expected to result in more moderate rates of growth for overall throughput and adjusted EBITDA in 2026 relative to our initial expectations. While we had already anticipated and communicated lower activity levels and declining production in the DJ and Powder River Basins, Oxy has recently…

Thank you, Oscar, and good morning, everyone. Our fourth quarter natural gas throughput decreased by 4% on a sequential quarter basis as a result of lower volumes from the Delaware Basin due to certain customers curtailing volumes in response to low Waha Hub pricing and lower volumes from the Powder River Basin. These decreases were partially offset by record throughput from the DJ Basin. Our fourth quarter crude oil and NGLs throughput decreased slightly on a sequential quarter basis, primarily due to decreased throughput from the DJ Basin, which was mostly offset by increased throughput from the Delaware Basin as expected wells came online in the fourth quarter. Our fourth quarter produced water throughput increased 121% on a sequential quarter basis as a result of 2.5 months contribution from the Aris acquisition. Our fourth quarter per Mcf adjusted gross margin for our natural gas assets decreased by $0.01 compared to the prior quarter, mostly due to contract mix associated with Delaware Basin volumes and lower overall throughput from the basin. Going forward, we expect our first quarter per Mcf adjusted gross margin to decline modestly, and we now expect our average natural gas adjusted gross margin to be approximately $1.22 per Mcf in 2026, driven mostly by a change in contract mix in the Delaware Basin and lower overall commodity pricing. Our fourth quarter per barrel adjusted gross margin for our crude oil and NGLs assets decreased by $0.33 compared to the prior quarter, mostly due to an unfavorable revenue recognition cumulative adjustment recorded in the fourth quarter associated with lower cost of service rates at our DJ Basin oil system and South Texas system. Going forward, we expect our first quarter per barrel adjusted gross margin to range between $3.05 and $3.10 and our average crude oil and NGLs…

Thank you, Danny, and good morning, everyone. During the fourth quarter, we generated net income attributable to limited partners of $187 million and adjusted EBITDA of $636 million. Our net income was negatively impacted by $120 million of transaction costs from the Aris acquisition that were added back to adjusted EBITDA for comparability purposes and due to the onetime nature of those costs. Relative to the third quarter, our adjusted gross margin increased by $60 million. This was primarily driven by the incremental gross margin contributed from the Aris acquisition, which was partially offset by the recording of approximately $30 million of unfavorable noncash revenue recognition cumulative adjustments associated with redetermined cost of service rates on certain contracts associated with our assets in South Texas and at our DJ Basin oil system. In fact, without these fourth quarter adjustments, we would have recorded adjusted EBITDA of $665 million, a 5% increase relative to the prior quarter. Our operation and maintenance expense increased by $40 million or 19% sequentially, which was primarily driven by the inclusion of 2.5 months of Aris. When excluding Aris, our fourth quarter operation and maintenance expense decreased by 12% compared to the fourth quarter of the prior year, and our full year operation and maintenance expense decreased by 2% on average year-over-year, demonstrating the success of our cost reduction plan that we commenced in the second quarter of 2025. In fact, excluding Aris and utility costs, the majority of which are reimbursed through producer contracts, operation and maintenance expense decreased by more than $100 million from the first quarter to the fourth quarter of 2025 based on the difference between the first and fourth quarter annualized run rates. As we transition into 2026, we estimate further year-over-year reductions in operation and maintenance expense related to our…

Thanks, Kristen. In closing, our 2025 achievements, which included organic growth, accretive M&A, meaningful efficiency gains and cost reductions and constructive contract renegotiations, all strengthen our operating leverage and reinforce the durability of our business. Our performance reflects the strength and resilience of our diversified asset base, the dedication of our teams, the execution of our strategic growth plan and our commitment to disciplined capital allocation and operational excellence. Despite near-term activity shifts, our long-term strategy of mid- to low single-digit growth remains firmly intact supported by producers' development plans and the depth of undrilled inventory on acreage that we service. In short, our strategy hasn't changed. The Aris acquisition will meaningfully contribute to 2026 results. Our reduced cost structure will inure to our benefit. Our balance sheet remains a source of strength and issuing equity for a portion of the Aris consideration preserve the flexibility needed to continue pursuing value-accretive opportunities and creative commercial solutions. With an expanded footprint in New Mexico, we now service some of the most economically attractive acreage in the Delaware Basin, and we will continue to see this basin grow within our portfolio, while the DJ Basin continues to generate strong free cash flow. Additionally, as natural gas demand rises, particularly to meet growing power generation and LNG demand, we expect to call on natural gas production from basins beyond the Permian and Haynesville, which should result in increased capital allocation and throughput growth in the Powder River Basin in the years ahead. WES's leading position as the #1 gatherer and processor in the basin, in combination with a large inventory of undrilled locations, all provide a strong foundation for future throughput growth and success. Combined with the progress we have made on cost reductions, WES is a leaner, more resilient organization and is well positioned to capture operational leverage as activity recovers. With that said, I am confident in our ability to deliver sustainable value for our stakeholders over time, and I look forward to another year of growth and operational success. I would also like to thank the entire WES workforce for all their continued hard work and dedication to our partnership, which enabled us to achieve landmark accomplishments in 2025. I look forward to seeing what we can achieve in 2026 and updating our stakeholders on our progress toward our goals on our first quarter call in May. With that, we will open up the line for questions.

[Operator Instructions] Your first question comes from the line of Gabe Moreen with Mizuho.

Just had a quick question, I guess, in terms of -- in light of the cost of service restructurings, the foray into water, your balance sheet and where it stands right now, just how you're thinking about M&A and inorganic growth as it stands currently?

Thanks, Gabe. That's a shocking question. But I appreciate the query. So yes, I guess, number one, nothing's changed. As I said in our -- in the prepared remarks, our strategy is unchanged, and that goes for the way we think about M&A. So again, our capital deployment strategy is clear and it's tight. We only deploy capital, whether it's organic or inorganic to sustain or grow the distribution. We have demonstrated that discipline clearly last year. It is unchanged going forward. So I'm a little annoyed that people seem to be questioning that a little bit by virtue of what's happening in the marketplace. But second, the way we think about M&A, again, is really our preference is bolt-on M&A where we have opportunities for synergies. So it fits with our assets, our geographies. We have some way a reason and competency for owning the asset. So that's unchanged. And especially as a relatively new CEO, I guess I'm kind of popular. We have had -- I've met every CEO, private and public in this space. I'm pretty sure I haven't missed anybody. If somebody wants to buy me coffee and tell their story, they're welcome to do it. We'll listen. So we have an obvious strategy in terms of how we intend to grow the business. I hope you'll agree with the Aris acquisition, we did it in a very disciplined fashion. We took a little grief for issuing equity in that transaction given it was a bolt-on. But if you look at the big picture of the last 16 months, I hope you can see it all came together. We were able to claw back 15.3 million units of the 26.6 million we issued based on the Aris transaction relative to the contract renegotiations that gave us…

Very comprehensive. And maybe if I can just pivot to 2 follow-ups around, one is Waha. I think you mentioned sort of trying to ameliorate some of the negative pricing impacts. Can you maybe just elaborate on that a little bit more? And would that also imply down the line that maybe you feel WES needs to participate in some of the egress solutions coming out of the basins for commercial reasons? And then just wondering if I can get an update in terms of further commercialization on Pathfinder with additional third-party interest.

Yes. No, those are perfect. Thanks, Gabe. Yes, on the Waha situation, again, I think we're aligned with the market and believing that the egress that's coming in the second half and then beyond that should help immensely with sort of at least dampen down some of the volatility in Waha pricing. Again, the majority of our customers, we tend to serve very large and often public integrated oil types and large independents. Most of those folks have found solutions along the way in either bypassing or getting exposure to other pricing hubs, et cetera. So we do have some other companies that do have direct Waha exposure, and that's where you've seen some of the production sort of the shut-ins and the volatility. We do think the Waha solution, if this is it, in the second half, is going to be great for everybody in the basin. I think it just taps down uncertainty whether you have exposure there or not. And then in terms of what we're doing, we're -- we've been working with those customers that still have significant exposure and coming up with sort of commercial solutions where we can help them commit to downstream solutions where they might not be comfortable doing it themselves, if we can aggregate the right situation or bundle the right services for the right number of customers that WES is willing to sort of support them in commitments in aggregate that maybe they can't do on their own. So we're working on those kind of solutions to help our customers in the near term and ensure whether this egress is enough over the next 5 years that there's backup plans related to that for our customers. With respect to Pathfinder. Yes, it's been interesting, right? I think we had a…

Your next question comes from the line of Jeremy Tonet with JPMorgan.

Just wanted to dive into the water side, maybe a little bit more, but thank you for all that color. I was wondering, you talked about for the business, low to mid-single-digit EBITDA growth. But if you parsed out the water side, what would that look like?

Probably the lower end, right? So in terms of the core, like that part of the business, long-term growth, I mean, we're going to closely follow just general basin growth given our size and our footprint, and we're kind of in the core areas. So barring any sort of producer-specific movement, I would think the long-term growth when we sort of combine gas and oil assets is a couple of 2%, 3% sort of on average over time. We're going to have cyclicality and all that related to it. Again, gas will be higher than oil. But we do believe water is for at least the next several years is going to have a higher growth rate than both those businesses. The wildcard, of course, and I think what you're seeing in the general exuberance of the market for infrastructure here in the last few weeks is sort of the realization that the gas pull demand is going to be real. And so that may change the dynamic, especially as we have sort of solutions for Waha and things like that. So if gas demand really does pick up meaningfully, there will be a producer response. So you might see gas do a little better than even we think in that sort of blended hydrocarbon throughput growth rate. But water will follow that along as well because you're going to get lots of water with that production, too. I don't know if that's your question, but I hope it helps.

That is helpful. And just pivoting here, looking at the industry as a whole, we've seen a lot of midstream consolidation over the years here. And I was just wondering, how do you feel WES stacks up given a lot of competitors have significant scale at this point? Would it make sense for WES to scale up more to be -- to compete more effectively with larger players? Or do you feel like you're at a good size?

Yes. Sorry, I got you [indiscernible]. No, I think -- look I think we're at a good size. We can always grow. Given the consolidations on our customers, right, and then the consolidation in the midstream space, scale is going to continue to matter. I mean one reason we're going to continue to be the leader, for example, in the water business is we're an order of magnitude, 10x the size of our next meaningful competitor as an enterprise in the business, and it allows us to go after projects that would strain their systems in terms of size that they can't compete with. So there's an analogy across the streams that we compete in, in that. So scale matters for sure. But I think our enterprise value, it's not -- we're not going to get bigger just to get bigger. We're going to continue to execute sort of the strategy that we've laid out in terms of our growth. I think where we're constrained, we don't compete. We're a G&P company, so we're not competing in long-haul pipe and the like. So if you think about the kinds of projects that fall naturally in our wheelhouse in terms of gathering systems, new compression, gas processing plants, hopefully, we expand more into the business of CO2. We'll have a solution on power at some point, et cetera. Beneficial reuse, even all those projects that will sort of drive our growth just in what is in our competency today are all absolutely manageable at our current size. North Loving II is a great example, right? We told everybody last summer that we were leaning in a little bit on that plant. We weren't doing our usual way to build up a portfolio -- a plant size portfolio of offloads, then sanction a plant, then take 18 months to build it, et cetera, that we had enough view of our customers and sort of our processing stack that we could go ahead and start building that plant. And if we were on time, great, if we're a little early, fine, $200 million to $300 million project, which is what most of our projects are in the box. Even on the water side, the $25 billion enterprise can probably handle if we're a quarter or 2 early on some of those.

Your next question comes from the line of Keith Stanley with Wolfe Research.

First question, now that you've modified the Permian G&P cost of service contract with Oxy, are there other contracts that you're interested in amending at all in the near term? Or is that not a priority at this point?

Yes. In terms of -- well, one, we don't have any left. As you'll recall, something like 8% or 9% of our revenues post that restructuring are cost of service contracts. So it's pretty small. Ironically, right, the cost of service revenue recognition noncash adjustment we had this year, 2025 of $29.5 million. When you compare that to $3.8 billion of revenues, it's about proportional sadly. So I think these are -- it would be nice that if those were simplified if we could find an economic way. But given it's pretty small now, and there's a lot of effort, as you can imagine, for all parties involved. It's not necessarily something that is high on the priority list. Then again, everybody likes to do forecasts to the last dollar, but these things are pretty small in the grand scheme, and they certainly don't impact sort of the important stuff. So a little bit low on the list.

Got it. And then wanted to follow up on distribution coverage. So the strategic recontracting with Oxy cleaned up contracts and dealt with an overhang, but came with an upfront cash flow headwind. And now you're in a bit of a down cycle this year. So how are you thinking about distribution coverage right now? And how would you kind of characterize some of the levers you can use to improve upon your distribution coverage over time?

Yes. No, that's a good point. So I mean, we talked about distribution coverage now for more than a year in terms of our plan to sort of grow our distribution a bit behind our EBITDA growth in particular. So I think the outlook that we're going to recommend to the Board, the go-forward outlook with the $0.08 increase kind of nails it in a way, right? So we're expecting 5% EBITDA growth this year. On a go-forward basis, sort of run rate to run rate, it's a bit over a 2% increase. So we got 300 basis points of spread. Normally, we probably wouldn't have that much spread necessarily. But as you say, it's a bit of an uncertain market. But I think that all of this sort of kind of proves the model works taken holistically, right? So we had -- growth was a little bit lighter than we thought. So our distribution growth, we pulled that back a little bit. We have low leverage. We're in good shape and a lot of confidence for the future so we can continue that forward. But we also, as you noted in your note, we pulled back in response to sort of the activity, we pulled back a bit on our capital where we were originally guiding for in excess or at least $1.1 billion. We're now at the midpoint of $925 million. And so it just underscores the flexibility of the model. So again, we're -- the levers you have, of course, are how you deploy capital, CapEx, et cetera, our success or not on the commercial side in terms of organic growth. And then if you can supplement that with other kind of growth, inorganic or otherwise that, again, can build up the distribution coverage, which is sustaining the distribution or even better grow the distribution, then we'll do that. So everything we did in 2025 set us up for a resilient model kind of going forward and really sort of was an attempt to give you the visibility that while we might hit a speed bump here and there, that we should be able to deliver this on average sort of kind of mid-ish single-digit growth rate.

[Operator Instructions] Your next question comes from the line of Wade Suki with Capital One.

Just wondering if you might be able to comment on sort of the commodity price backdrop here. Obviously, budgets set in a lower price environment than where they are today. So maybe if you could help walk us through how that dynamic might play out this year, if you want to parse it out by basin or operator type, that would be great.

Yes. Maybe I'll let Kristen just sort of reemphasize sort of the basin look in general. But I'd say I agree, right, the budget we've built and responding to are based on customer forecasts that we've got over the last many weeks. It does feel strange because it does feel like at least the sentiment at the moment, is more bullish than that. So there could be upside. But if you want to walk through sort of the basis in terms of.

Yes. I think -- so when you kind of go basin by basin, PRB is obviously your most commodity price-sensitive basin. We talked in the script about thinking about a natural gas decline there from 10% to 15%. I think some of that just depends on -- if you see a little bit of a tick up in commodity prices, maybe you get a little bit more activity on that acreage, but you'd really see throughput coming in, in the back half or the back even quarter of the year, if that's the case. So DJ Basin, we talked about in the script the decrease there. I think the wildcard in the DJ is, as we've discussed previously, Oxy moving into their Bronco CAP area. That's a new area for them. And so whether or not actuals look like their expectations. That's what we're using in our forecasting is their expectations of that area. And so we'll just have to see how that plays out. In the Delaware Basin, specifically, as we mentioned in the prepared remarks, we've got some producers that are just more Waha price sensitive. And so even if you see an uptick in oil, it will really depend on what's going on at Waha and whether or not they curtail volumes, not if they push activity more and the privates are really the more wildcard in the Delaware Basin just because they can accelerate or pull back on capital more quickly. So I hope that helps.

No, that's great. Thanks So much, Kristen. Oscar, you mentioned, you made a couple of comments, I think in passing a couple of questions ago, maybe in Jeremy's question. But I heard you say something about expanding more into CO2. And I think I heard you also say you will have a solution for power at some point. I'm wondering if you could maybe elaborate on those 2 comments, if you don't mind.

You bet. So a year ago, we set up a new ventures group to make sure we were thinking very long term. So we're trying to make sure, as we talked about, addressing the near term, the next several years in terms of visibility on the growth rate, but recognize the oil and gas business is pretty dynamic. And so while we think water is just a core piece of that for obvious reasons, we wanted to make sure we weren't missing other opportunities. So we've definitely been exploring, trying to understand the opportunity set around unconventional EOR. And if that is something that if it turns into kind of the next big thing for shale, so to speak, over the next however many years, are we well positioned to help support and build out that infrastructure. We also, with our obvious relationship with Oxy, who's a leader in CO2, we've always been very interested in figuring out how we could support them or others in terms of anything related to enhanced oil recovery. So it's something that we know how to handle molecules and turn valves and deal with pressure and all that stuff. So CO2 would be a clear core competency for us. So we're definitely encouraged by what we're seeing by Oxy and others in the unconventional EOR space and very hopeful that, that's something that will be a big thing in the Permian in coming years and other basins for that matter. So that's that. On the power side, of course, with all the -- I guess, a couple of things, right? So the Permian grid is notoriously unstable. You add in the dynamic around potential for data centers and other pulls on power. We certainly use a lot of power. We share wires with Oxy.…

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

Great. I want to thank everybody for their interest. Thank our teams for really a great year in 2025, and we're really looking forward to continuing to deliver consistent results for our investors. So we look forward to seeing folks on our next call and on the investor conference service. Thanks again.

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