Business Overview: Western Midstream Partners, LP (NYSE: WES)

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Executive Summary

Western Midstream Partners is a midstream master limited partnership that gathers, compresses, treats, processes, and transports natural gas; gathers and transports condensate, NGLs, and crude oil; and handles produced water through gathering, recycling, treating, supply, and disposal services. Operations are concentrated in the Delaware Basin (West Texas/southeastern New Mexico), DJ Basin (Colorado), and Powder River Basin (Wyoming), with the 2025 acquisition of Aris Water Solutions (valued at $2.0 billion) meaningfully expanding its produced-water footprint in New Mexico and West Texas.

The partnership's defining structural feature is its relationship with Occidental Petroleum, which owns 39.7% of WES's limited partner interest and a 2.2% general partner interest, and which — excluding equity investments — accounted for about 60% of total revenues in 2025, as well as the large majority of crude-oil, NGL, and produced-water throughput. Nearly all volumes (97% of wellhead natural-gas, 100% of crude-oil and produced-water throughput) are under fee-based contracts, giving WES a stable, contracted revenue base but one deeply intertwined with the fortunes — and strategic choices — of a single corporate parent-like customer.

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1. Core Business Model & How They Work

WES operates fee-based midstream infrastructure connecting upstream production (mostly Occidental's) to downstream markets, earning largely volume- and fee-based revenue regardless of commodity price swings.

  Upstream Producers           WES Midstream Infrastructure         Downstream Markets
  (Occidental ~60% of     ──▶  Gathering → Compression →      ──▶   Natural gas, crude oil,
   total revenue; other         Treating → Processing →               NGL, and water buyers/
   third-party producers)       Transport (gas, crude, NGLs);          disposal destinations
         │                       Produced water: gather →
         │                       recycle → treat → supply →
         ▼                       dispose
  97% of gas volumes,
  100% of crude/water
  volumes under fee-
  based contracts

The 2025 Aris Water Solutions acquisition added significant produced-water infrastructure in New Mexico and West Texas, reinforcing WES's push to diversify and scale its water-handling business alongside its traditional hydrocarbon midstream operations.

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2. Business Segments

WES reports as a single operating segment, organized geographically by basin/complex rather than by product line:

                  Western Midstream Partners, LP
                                │
        ┌─────────────────────────┼─────────────────────────┐
        │                           │                           │
   Delaware Basin             DJ Basin                  Powder River Basin
   (West TX complex,          (DJ Basin complex,          (Northeast Wyoming
   DBM water systems)          Chipeta)                    complex)
        │
        ▼
  + Aris Water Solutions (2025 acquisition,
    $2.0B; expanded NM/West TX produced-water assets)

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3. Product Portfolio

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4. Competitive Landscape

WES names broad competitor categories rather than specific companies:

• Other midstream companies operating in the same basins
• Producers with in-house gathering/processing infrastructure
• Intrastate and interstate pipelines competing for transport volumes

Notably, the filing discloses that Occidental is not restricted from competing with WES — a structural conflict-of-interest risk unusual even among midstream MLPs with sponsor relationships.

              Basin Concentration
                     ▲
   WES (Delaware,     │
   DJ, Powder River     │
   basin-focused)        │
                     │
   ──────────────────┼──────────────────▶ Sponsor/Anchor Customer Dependence
                     │
   Other midstream     │   WES's unique structural
   companies (more       │   feature: Occidental owns
   diversified            │   ~42% total interest AND
   customer bases)         │   is ~60% of revenue

WES's competitive position is less about fending off rival midstream operators and more about managing its deep structural entanglement with Occidental, which is simultaneously its controlling owner, largest customer, and an unrestricted potential competitor.

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5. Strategic Strengths & Risks

Strengths

• Highly contracted, fee-based revenue base: 97% of gas volumes and 100% of crude/water volumes under fee-based contracts, largely insulating cash flow from commodity price swings.
• Scale expansion via the 2025 Aris Water Solutions acquisition ($2.0 billion), growing the produced-water business.
• Strong anchor relationship with Occidental provides predictable, large-scale volume commitments.
• Significant financial flexibility: $2.0 billion effective borrowing capacity and a $250.0 million unit buyback program through year-end 2026.

Risks

• Extreme customer/sponsor concentration: Occidental represented ~60% of total revenue (excluding equity investments) in 2025, and a decline in Occidental's production or a strategic shift could materially hurt WES.
• Conflicts of interest: Occidental and the general partner's interests may diverge from those of public unitholders, and Occidental is explicitly not restricted from competing with WES.
• Environmental and climate regulation: methane/GHG rules (including Colorado state-level requirements) could raise compliance costs.
• Pipeline safety/integrity requirements: ongoing regulatory compliance costs.
• Seismic/regulatory limits on produced-water disposal: could constrain growth in the water business, ironically the same business WES just expanded via Aris.
• Basin concentration: reliance on three basins (Delaware, DJ, Powder River) limits geographic diversification.

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6. Financial Overview

(Revenue, net income, and EBITDA figures were not available in the reviewed filing excerpt, as Item 7 MD&A and the financial statements were not included.)

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Summary Conclusion

Western Midstream Partners' moat comes from its fee-based, heavily contracted infrastructure footprint and its deep structural relationship with Occidental Petroleum — a relationship that is simultaneously the company's greatest strength (predictable, large-scale volume commitments) and its greatest risk (extreme customer concentration, with Occidental free to compete with WES if it chose to). The 2025 Aris Water Solutions acquisition shows a clear strategy of scaling the produced-water business, a sensible diversification within the midstream space even if it doesn't reduce Occidental dependence. Investors in WES are, in practice, making a bet on both the health of Permian/Rockies basin production generally and on Occidental's specific strategic choices as both majority owner and dominant customer.