WES - NYSE

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 reallocated a portion of their activity from acreage that we service in the Delaware Basin. Based on Oxy's most recent forecast, we expect a portion of that activity to begin returning to our acreage starting in 2027, although scenarios are still being evaluated and will continue to maintain flexibility. This activity shift moderates our expected 2026 throughput growth in the Delaware Basin relative to earlier expectations, and we now expect partnership-wide natural gas throughput to be flat and crude oil and NGL throughput to decline by low to mid-single digits on average year-over-year. With that said, our long-term outlook of mid- to low single-digit adjusted EBITDA growth remains intact as evidenced by our 6% adjusted EBITDA growth reported in 2025 and our expectation of 5% adjusted EBITDA growth in 2026 at the midpoint of our guidance range. We remain confident in our producers' long-term development plans, especially when you consider the fact that the majority of undrilled inventory within Oxy's Delaware Basin portfolio remains located on acreage that we service. While 2026 is proving to be more of a transition year than we initially anticipated, our business remains underpinned by stable long-term contract structures, many of which include minimum volume commitments that support financial stability in a lower activity environment. As you can see from the reduction in our 2026 capital expenditure program from at least $1.1 billion in prior communications to $925 million at the midpoint of our updated guidance range, we are able to quickly modify our capital program to align our spending with revised producer activity levels. In short, our long-term growth strategy is unchanged. The Aris acquisition will contribute meaningfully to adjusted EBITDA in 2026. And by issuing equity for a portion of the Aris consideration, we preserve the financial flexibility necessary to continue pursuing value-accretive opportunities and commercially creative solutions such as the restructuring of our Oxy Delaware Basin natural gas gathering contract in exchange for WES units. Additionally, our cost reduction initiatives are making WES a leaner, more efficient organization, positioning us to better compete for new business and to benefit from operational leverage when activity levels recover, especially considering extremely bullish power-driven natural gas demand fundamentals expected in the coming years. Returning to our recent accomplishments and focusing specifically on the fourth quarter, we generated record adjusted EBITDA of $636 million, even after $29.5 million of negative noncash cumulative revenue recognition adjustments. Excluding these adjustments, we would have recorded adjusted EBITDA of $665 million, representing an approximate 5% sequential quarter increase. Our fourth quarter performance was primarily driven by increased crude oil and NGL throughput in the Delaware Basin, the contribution of 2.5 months of produced water volumes from the Aris acquisition and reduced operation and maintenance expense from legacy WES's assets, which excludes the impact of Aris. The Delaware Basin remained our primary growth engine during the quarter with crude oil and NGL volumes rebounding as more wells came online and produced water volumes increased driven by the Aris acquisition. However, this was mostly offset by lower natural gas volumes in the Delaware Basin, largely due to third-party curtailments tied to low Waha hub pricing throughout the quarter as well as expected volume declines in the Powder River Basin and lower crude oil and NGL volumes in the DJ Basin. Waha Hub pricing remains a persistent industry-wide challenge affecting producers and midstream providers. While WES's direct commodity price exposure to Waha is limited, some of our third-party producers are more directly tied to Waha pricing, which led to throughput curtailments throughout the fourth quarter. These curtailments have continued intermittently in the first quarter of this year and near-term Waha pricing remains volatile. We expect continued pricing pressure through at least the first half of 2026 which will likely impact Delaware Basin natural gas throughput over the next 2 quarters. However, we expect new egress coming into service in the second half of the year to begin alleviating some of this pricing pressure. With that said, our marketing team is actively working with our producing customers to identify more diversified near-term pricing exposure to maintain economic production as well as to secure longer-term solutions, including long-haul capacity to the Gulf Coast. For full year 2025, throughput increased across all 3 products and was driven by throughput records in both the Delaware and DJ Basins, which resulted in some of the highest levels of adjusted EBITDA and free cash flow in our partnership's history. Other key operational and financial milestones include the sanctioning of the Pathfinder Pipeline and the execution of long-term produced water gathering and disposal agreements, the completion of North Loving Train I, which was brought online ahead of schedule and under budget in the first quarter and expanded our West Texas complex processing capacity by 250 million cubic feet per day to approximately 2.2 billion cubic feet per day. The sanctioning of North Loving Train II, which is still expected to commence operations early in the second quarter of 2027, the acquisition of Aris Water Solutions, which materially increased our produced water solutions capabilities, established a more substantial presence in New Mexico and provided a much stronger foothold in the produced water gathering and disposal, recycling and treating for beneficial use businesses. A 4% year-over-year increase in the distribution, which allowed WES to maintain a strong capital return profile and leading total capital return yield and maintaining our strong balance sheet with net leverage around 3x throughout 2025, including the financing of the Aris acquisition. Focusing specifically on the Aris acquisition, integration has progressed exceptionally well and is ahead of schedule and mostly complete. The acquisition has strengthened our commercial organization, expanded our capabilities and increased direct engagement from our producing customers now that the platform has been fully brought under the WES umbrella. WES now has one of the largest and most integrated water footprints in the Delaware Basin with the ability to provide all of today's water solutions, including freshwater, recycling, gathering, long-haul transportation and disposal as well as a leading position in the emerging beneficial reuse treatment technology business. We have also achieved $40 million of targeted cost synergies and approximately 85% of those savings should be realized by the end of the first quarter, with the remainder by year-end 2026 as legacy contract and license terms expire. To date, we have completed several major integration milestones including the full consolidation of ERP and purchasing systems, the consolidation of operations and project management systems, vendor contract harmonization and the complete integration of IT and HR systems, which includes the migration to WES's payroll and benefit plans. I would like to extend my sincere appreciation to all teams across both WES and Aris. This was an extremely complex undertaking, and our teams rose to the challenge with tremendous professionalism and dedication. In addition to the successful integration of Aris and the associated cost savings, we made substantial progress enacting process efficiency improvements across the organization under our multiyear cost reduction initiatives. Kristen will provide more details later, but when excluding the Aris acquisition impact, we achieved 3 consecutive quarters of declining operations and maintenance expense in 2025. In fact, when excluding mostly reimbursable utility costs and the Aris acquisition impact, operations and maintenance expense decreased by more than $100 million when annualizing the first quarter of 2025 relative to the fourth quarter of 2025. Additionally, excluding acquisition-related expenses and noncash equity-based compensation, 2025 general and administrative expense would have been flat year-over-year even after strategically retaining select personnel and functions from Aris, like beneficial reuse and commercial operations and taking routine annual compensation growth into account. Our engineering and construction team has also reevaluated certain facility designs, which will lower a portion of our expansion capital outlay in 2026 and beyond. This demonstrates the continued commitment from all teams to lower costs while pursuing our growth mandate and maintaining operational excellence. You will continue to see the benefits of our cost reduction efforts throughout this year as our teams fully execute on already identified initiatives and advance the next set of opportunities. As the legacy WES and Aris operations, engineering and construction teams continue to integrate, we expect to unlock additional efficiencies beyond the previously communicated $40 million of targeted synergies. The teams have already identified several incremental opportunities across both produced water systems, and we will continue evaluating and prioritizing these throughout the first half of 2026. With that, I'll turn the call over to our Chief Operating Officer, Danny Holderman, to discuss our operational performance in the fourth quarter.

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 adjusted gross margin to range between $3.10 and $3.15 per barrel in 2026. Our fourth quarter per barrel adjusted gross margin for our produced water assets decreased $0.11 compared to the prior quarter, driven by 2.5 months contribution from the Aris acquisition. We expect our first quarter per barrel adjusted gross margin to increase slightly and our average produced water adjusted gross margin to be approximately $0.85 per barrel in 2026 due to increased throughput expectations and associated contract mix. Turning to our full year results. For the second consecutive year, average throughput across all 3 products increased year-over-year, adjusting for the sale of several noncore assets that closed in the first half of 2024. For full year 2025, natural gas throughput averaged 5.2 billion cubic feet per day, representing a 4% year-over-year increase, in line with our expectations of mid-single digits growth. For full year 2025, crude oil and NGLs throughput averaged 514,000 barrels per day, representing a 1% year-over-year increase, in line with our expectations of low single digits growth. Full year 2025 produced water throughput averaged 1.6 million barrels per day, an increase of 40% compared to full year 2024, driven by 2.5 months contribution from the Aris acquisition. Produced water throughput from WES' legacy assets averaged 1.2 million barrels per day, representing a 7% year-over-year increase and in line with our original expectations of mid-single-digit growth. Turning our attention to 2026. We expect that most of our throughput growth will occur in the Delaware Basin and will be driven by the Aris acquisition. As Oscar discussed, due to lower overall customer activity levels across our asset base, we now expect our growth rates for crude oil and NGLs and natural gas in the Delaware Basin to moderate to low to mid-single digit average year-over-year growth in 2026. Overall throughput decreases in the DJ and Powder River Basins are now expected to result in portfolio-wide average crude oil and NGLs throughput to decline by low to mid-single digits and natural gas throughput to remain relatively flat year-over-year. For produced water, we estimate that the throughput will increase by over 80% year-over-year, driven by the Aris acquisition. More specifically, in the Delaware Basin, even though we expect the number of rigs to decline year-over-year and the resulting number of wells that we expect to come to market to decrease by a little more than 1/3, we still anticipate throughput growth mostly due to drilling efficiencies that continue to be achieved by our producing customers. As we mentioned on our third quarter call, we expect a more challenging environment in the DJ Basin that should result in average year-over-year throughput declining for both natural gas and crude oil and NGLs in the mid- to high single digits range as we expect the overall number of wells that come to market to decline. With that said, we expect natural gas throughput to be supported by steady onload activity from Phillips 66. We also expect Oxy's Bronco CAP development to offset basin-wide crude oil and NGLs throughput declines with volumes that are expected to come to market in the second quarter of 2026. Once we begin to see results from the initial production of the Bronco CAP, we will be in a better position to provide a clearer view of year-over-year trends in the basin in 2026 relative to 2025. Also, as previously discussed, we expect average year-over-year throughput for natural gas in the Powder River Basin to decline in the range of 10% to 15% based on the most recent producer forecast. The Powder River Basin tends to be more commodity price sensitive, but several of our producing customers have indicated the return of rigs to the basin in 2027. We will remain in close contact with our producing customers and continue monitoring the commodity price environment before making any decisions to allocate additional growth capital back into the Powder River Basin. Finally, we expect average natural gas throughput for our other assets to increase in the mid-single digits range year-over-year. This is mostly due to a full year's contribution from Williams Mountain West Pipeline expansion, the tie-in of Kinder Morgan's Altamont pipeline into our Chipita processing plant in Utah in early 2025 and steady throughput levels at our Versad plant in South Texas. With that, I will turn the call over to Kristen to discuss our financial performance during the quarter.

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 legacy asset base, acknowledging the normal seasonality we typically see in quarterly spend. Going forward and including the full year's contribution from Aris, we expect our operation and maintenance expense to increase by approximately 10% to 15% on average year-over-year. This is significantly below the combined company's pro forma operation and maintenance expense, reflecting the realization of identified cost reductions and additional efficiencies we continue to capture. On a reported basis, our general and administrative expense increased quarter-over-quarter, primarily due to transaction costs associated with the Aris acquisition. When excluding those costs, the modest quarterly increase mostly pertained to higher personnel costs. Excluding acquisition-related costs, 2025 cash G&A expense would have been approximately $235 million, essentially flat compared to 2024, even after taking into account the increased size of the business and strategically retaining select personnel and functions from Aris, like beneficial reuse and commercial operations. Going forward, we expect our 2026 cash, general and administrative expense to again remain flat year-over-year due to continued cost reduction initiatives even after accounting for a full year of the retained functions from Aris and accounting for routine annual compensation increases. Turning to cash flow. Our fourth quarter cash flow from operating activities totaled $558 million, generating free cash flow of $341 million. Free cash flow after our third quarter 2025 distribution payment in November was a use of cash of approximately $39 million. Distributable cash flow in the fourth quarter was approximately $527 million compared to $547 million in the prior quarter. In January, we declared a distribution of $0.91 per unit, which is consistent with our prior quarter distribution that was paid on February 14 to unitholders of record as of February 3. Turning to our full year results. We recorded $1.15 billion of net income attributable to limited partners, generating record adjusted EBITDA of $2.48 billion, exceeding the midpoint of our 2025 adjusted EBITDA guidance range of $2.35 billion to $2.55 billion. Our record adjusted EBITDA performance was primarily driven by increased throughput across all 3 products, several quarters of record throughput from the Delaware and DJ Basins, successful cost reduction initiatives and 2.5 months of contribution from the Aris acquisition in the fourth quarter. This growth positioned WES to deliver record cash flow from operations of approximately $2.22 billion in 2025. Our capital expenditures totaled $722 million, within our 2025 guidance range of $625 million to $775 million and consisted of capital largely associated with the construction of both North Loving Train I and II, the Pathfinder produced water pipeline and associated systems and other expansion projects to support the growing needs of our customers, primarily in the Delaware Basin and in our other core operating basins, but to a lesser extent. We also generated record free cash flow that totaled $1.53 billion in 2025, exceeding the high end of our guidance range of $1.275 billion to $1.475 billion. This was primarily driven by our strong adjusted EBITDA performance, diligent working capital management and capital expenditures coming closer to the midpoint of the guidance range, less than our most recent expectations from the third quarter. Finally, WES declared distributions that totaled $3.64 per unit for 2025, including our recent fourth quarter distribution of $0.91 per unit. Distributions paid within calendar year 2025 were in line with our full year distribution guidance of $3.61 per unit. Turning to our 2026 financial guidance and taking producer forecast into account, we expect our adjusted EBITDA to range between $2.5 billion to $2.7 billion for the year, implying a midpoint of $2.6 billion, which represents growth of approximately 5% year-over-year at the midpoint. We expect that the Delaware Basin will remain the primary driver of throughput growth, especially considering the full year's contribution from the Aris acquisition and will help offset expected throughput declines in the DJ and Powder River Basins. Our range also includes continued cost reduction initiatives and first quarter winter storm impacts of approximately $10 million to $20 million. We now expect our 2026 capital expenditures to range between $850 million and $1 billion, implying a midpoint of $925 million, which is significantly less than our previous estimate from the third quarter of at least $1.1 billion. Due to the shifting commodity price environment and recent changes in producers' forecast, we have remained disciplined and reduced our expansion-oriented capital expectations for the year. Approximately half of our expected 2026 capital program is directed towards the construction of the Pathfinder produced water pipeline and associated systems and North Loving II, both of which are still expected to come online in the first and second quarters of 2027, respectively. Our actions also demonstrate our ability to materially reduce the remainder of our expansion-oriented capital expenditure program when needed, thereby limiting the impact on free cash flow. As we enter a year with elevated expansion capital spending, we are also providing distributable cash flow or DCF guidance, which we expect will range between $1.85 billion to $2.05 billion in 2026, implying a midpoint of $1.95 billion. On a per unit basis, we expect DCF to range between $4.59 and $5.08 per unit. While we continue to believe that free cash flow is a meaningful indicator of the partnership's financial strength, DCF also provides investors with an additional measure of our capacity to fund the distribution and a substantial portion of our expansion capital program. As such, we will continue to provide both metrics going forward, and we estimate that our 2026 free cash flow will range between $900 million and $1.1 billion, implying a midpoint of $1 billion. Turning to the distribution. We intend to recommend a distribution increase of $0.02 per unit starting with our first quarter distribution to be paid in May. And as such, we are guiding to a full year distribution of at least $3.70 per unit, which includes distributions to be paid within calendar year 2026. This represents an approximate 3% increase compared to our prior year's annual distribution of at least $3.61 per unit, and the distribution increase will equate to approximately $3.72 on an annualized basis. Going forward, we will continue to target mid- to low single-digits annual percentage adjusted EBITDA growth, but we will most likely pursue a rate of growth slightly less for the distribution in order to increase distribution coverage naturally over time. With that, I will now turn the call over to Oscar for closing comments.

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 that flexibility. And so we'll continue to execute. If you step back a year, I'd also say we were super clear on updating and clarifying our strategy and providing for the first time long-term guidance on our growth. We are not NVIDIA. So we're not growing at crazy rates. We're just trying to post up around 5% every year, plus or minus over the long term. And I think hopefully, you can see how we're setting up for 2026, despite a few headwinds from some customers in terms of their drilling outlook this year and so forth, that the model holds. We'll be able to deliver something like that again this year. And then with our organic projects in terms of Pathfinder and North Loving II, we're setting up for a very strong 2027. The final comment I'll make on all of this is when you look at how we were setting up for sort of giving you the visibility of sort of that consistent growth rate over time, the 2 big organic projects sets up '27 pretty nicely. Aris really gave us at least a 2-, 3-year pretty clear visibility runway on supporting that growth as we believe the water part of the business is going to grow faster than gas. Gas will probably go faster than oil, et cetera. So we've got a pretty good runway. So there's nothing that we need to do to change our strategy in terms of how we deploy capital, and we're going to consistently continue to be disciplined about it. And my final comment is we're not going to take this call to be the opportunity to start participating in the silliness of the rumor mill. So I hope that helps, but happy to answer any questions in terms of anything specific about a shift in how we look at the world or the M&A market in general.

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 little bit of post Aris, our customers and the conversations we've been having kind of changed a little bit because we just have a much larger footprint and now the complete full array of solutions to what you want to do with your water, whether it's recycling or long-haul transport disposal, whatever. And then in the longer run, right, we're a leader in solving the sort of water treatment and desalinization beneficial use opportunity, which is going to be massive, we think, in the coming years. So that all kind of that dynamic kind of changed the conversation. And then when you add in Pathfinder, which is the first long haul to be -- which will be the first one to be completed, the dynamic changed. I think what we're seeing here recently is a significant pickup in interest in both more integrated solutions depending on where you are in sort of New Mexico and Texas that may or may not include a long-haul piece of the solution, where producers want sort of the water to go is becoming more specific, where they want to disposed of, and we can sort of provide that visibility. And then ultimately, just straight up commitments to the pipe, whether it's our customers or even some of our peers, and we have to think through how we manage that. So interest is really high. We're also excited, Gabe, from a capital perspective on that project with the sort of commercial-related transaction that we did late last year, which gave us better access to some of the land opportunities and SWD opportunities. It allowed us to sort of adjust sort of the path of Pathfinder and optimize some of our well costs related to that. So the cost of Pathfinder is coming down meaningfully. So even with the MVCs we already have in place, we see the returns on that project going up. But indeed, we're seeing a lot more interest in that pipe than even in the last couple of months.

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. We have competency in building transformers and the compressor, the turbine, they're all very similar. So again, we feel like the power sort of build, operate, generate business is something that we can certainly participate in. But we're going to -- with all these opportunities, we're going to -- just like with water, we waited for a long time on that to go from our legacy system to building up something new. The commercial models need to move in a direction that makes sense for us in the midstream space and as an MLP. So to the extent we get commercial contracts that support, again, sustained growth and distribution to sort of support our returns requirements and our business model, we'd look to participate in things like CO2 power, et cetera, and other ventures where, again, it's -- it will be clear to you all that it's right down the fairway of our competencies and what we know how to build and operate. But again, that last piece is really important, that commercial aspect that needs to make sense for us before we kind of go chase unicorns in general. The one place we are leaning in on that's still -- it's a scaling challenge, not a technology scale, not a challenge to speak, but scaling as hard as people in the tech business know is that beneficial reuse business. And that's one where, given our size, we can certainly have a real impact there and accelerate what Aris was trying to do.

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.