Western Midstream: Why This High-Yield MLP Outperforms Energy Transfer for Total Returns

The midstream energy sector remains a critical component of the U.S. energy infrastructure, with master limited partnerships (MLPs) like Western Midstream Partners (WES) and Energy Transfer (ET) vying for investor attention. While both companies operate in the Permian Basin and other key regions, a closer examination of their financial performance, strategic initiatives, and distribution growth potential reveals why Western Midstream is a superior choice for total returns.

Distribution Growth: Consistency and Scalability

Western Midstream has demonstrated a track record of consistent and scalable distribution growth. For the third quarter of 2025, WES reported record Adjusted EBITDA of $633.8 million, with full-year 2025 guidance suggesting it will likely exceed the upper end of its $2.35 billion to $2.55 billion range. This performance supports a base distribution of $0.875 per unit, maintained quarterly, and a high dividend yield of approximately 9.05%. The company's 2024 results further underscore its strength, with free cash flow rising 37.64% year-over-year to $1.27 billion, enabling unitholder returns of $1.246 billion.

In contrast, Energy Transfer's distribution growth appears more constrained. While ET reported $3.84 billion in Adjusted EBITDA for Q3 2025, this figure fell slightly below the $3.96 billion recorded in the same period in 2024. The company's 2025 EBITDA guidance of $16.1 billion to $16.5 billion, though robust, is expected to fall slightly below previous projections as reported in the same announcement. ET's focus on long-term projects, such as the Desert Southwest pipeline expansion, may delay near-term distribution growth, as these initiatives are slated for completion by late 2029 per the company's latest update. For investors seeking immediate and predictable cash flow, WES's disciplined capital allocation and operational efficiency provide a clearer edge.

Financial Flexibility: Leverage and Free Cash Flow

Western Midstream's financial flexibility is a cornerstone of its competitive advantage. The company's 2024 free cash flow surged to $1.27 billion, a 37.64% increase from 2023, while its gross profit margin expanded to 77.18% in 2024 from 70.15% in 2023 according to financial analysis. For 2025, WES anticipates Free Cash Flow between $1.275 billion and $1.475 billion, with capital expenditures projected at $625 million to $775 million as detailed in Q3 2025 investor slides. This balance of growth and prudence is reflected in its net leverage ratio of approximately 3.0x, a level that provides ample room for expansion without overextending its balance sheet as confirmed in Q2 2025 results.

Energy Transfer, meanwhile, faces greater financial constraints. While ET's 2025 growth capital expenditures are expected to reach $5 billion, the company's Adjusted EBITDA for Q3 2025 fell short of the prior-year period, and its distributable cash flow of $1.90 billion in the same quarter must now fund a larger capital outlay as detailed in the latest earnings release. The absence of explicit debt-to-EBITDA metrics in recent reports raises concerns about leverage management, particularly as ET's Desert Southwest pipeline-a $5.6 billion project-moves toward completion per the company's pipeline update. For investors prioritizing financial stability, WES's disciplined approach to leverage and cash flow management is a significant differentiator.

Strategic Expansion: Proximity to Market and Execution

Western Midstream's strategic expansion projects are not only ambitious but also closely aligned with near-term market demand. The acquisition of Aris Water Solutions in October 2025 solidified WES's position as a leading three-stream midstream provider in the Delaware Basin as announced in Q4 2025 results, while the Pathfinder pipeline-designed to transport produced water and crude oil-is expected to add $150 million in annual EBITDA by early 2027 according to financial projections. Additionally, the company's 300 MMcf/d cryogenic processing train at the North Loving plant, slated for service in early 2027, underscores its commitment to scaling throughput in one of the most active U.S. shale regions as reported in Q2 2025 earnings.

Energy Transfer's expansion strategy, while substantial, is more reliant on long-horizon projects. The Desert Southwest pipeline, now upsized to 2.3 Bcf/d, is a critical infrastructure play but will not deliver returns until late 2029 as detailed in the company's pipeline announcement. While this project addresses growing demand in the Southwest, its delayed in-service date means investors must wait years to see tangible benefits. In contrast, WES's projects are already generating incremental EBITDA and are positioned to capitalize on the Delaware Basin's projected 4-5% CAGR in production over the next decade according to market analysis.

Conclusion: A Clearer Path to Total Returns

For investors seeking a high-yield MLP with superior distribution growth, financial flexibility, and near-term expansion potential, Western Midstream outperforms Energy Transfer on all key metrics. WES's disciplined capital allocation, robust free cash flow, and strategically timed infrastructure projects create a compelling case for total returns. While Energy Transfer's long-term vision is ambitious, its reliance on delayed projects and less transparent leverage metrics makes it a riskier bet in the current market environment. As the energy transition unfolds, Western Midstream's agility and operational excellence position it as the more attractive partner for unitholders prioritizing both income and growth.