Western Midstream 2025 Q2 Earnings Net Income Falls 9.5% Despite Revenue Growth

Western Midstream reported mixed results in its fiscal 2025 Q2 earnings, with revenue up year-over-year but net income declining slightly. The company reaffirmed its 2025 guidance, and no major changes were made to its outlook.

Revenue
Revenues for the quarter rose 4.1% to $942.14 million, driven by robust performance in service-based operations. Fee-based services contributed $851.42 million, forming the largest revenue segment, while product-based services added $50.44 million. Product sales and other income totaled $40.28 million and $181,000, respectively, rounding out total revenue at $942.32 million.

Earnings/Net Income
Despite the revenue gain, earnings were weaker, with EPS dropping 9.3% to $0.88 and net income falling 9.5% to $350.76 million from the prior-year period.

Price Action
WES shares rose 0.88% on the latest trading day, though they dipped 0.40% over the previous full week. Month-to-date, the stock is up 4.02%.

Post Earnings Price Action Review
The strategy of purchasing WES shares following a revenue increase quarter-over-quarter has shown strong performance, delivering a 63.78% return over the past three years—15.19% above the benchmark. The approach features an impressive CAGR of 18.57% and a Sharpe ratio of 0.63, with no maximum drawdown recorded, underscoring its favorable risk-adjusted returns and low volatility.

CEO Commentary
Oscar Brown, President and CEO, highlighted a successful second quarter, with record Adjusted EBITDA of $617.9 million and increased throughput across products. He emphasized continued growth in infrastructure and operations, including the North Loving Train II, and expressed confidence in the company's position in the Delaware Basin. The acquisition of Aris is expected to boost Free Cash Flow in 2026 and expand water services capabilities.

Guidance
WES reiterated its 2025 guidance, with Adjusted EBITDA expected between $2.350 billion and $2.550 billion, capital expenditures projected at $625 million to $775 million, and Free Cash Flow of $1.275 billion to $1.475 billion. The Aris acquisition is anticipated to close in Q4 2025 and add approximately $40 million in annualized cost synergies. North Loving Train II is expected to begin operations in Q2 2027, boosting processing capacity to 2.5 Bcf/d in the Delaware Basin.

Additional News
Western Midstream announced a $1.5 billion acquisition of Aris Water Solutions in a cash-and-stock deal, marking a major expansion into the growing water treatment sector in the Permian Basin. The transaction offers Aris shareholders 0.625 shares of Western Midstream or $25 in cash per share, a 23% premium to its closing price on Tuesday. The maximum cash payout could reach $415 million. Aris operates 790 miles of wastewater pipelines in the Permian, capable of handling 1.8 million barrels of wastewater daily. Given the Permian's high rate of water generation—five barrels for every barrel of oil produced—water management has become a critical component of the energy value chain. The deal is expected to strengthen Western Midstream’s position in this growing market, particularly as water disposal volumes in the basin have surged over sevenfold in the past 15 years.