Is Western Midstream Partners (WES) Still a Buy After a 600%+ Multi-Year Rally?

Western Midstream Partners, LP (WES) has surged over 600% since the early 2020s, driven by its dominance in the Delaware Basin and strategic expansion in midstream energy. Yet, as the sector matures and valuations rise, investors must ask: does WES still offer compelling upside? This analysis evaluates WES's valuation attractiveness, long-term growth potential, and risks in a shifting energy landscape.

Valuation Attractiveness: A Discounted Cash Flow (DCF) Perspective

WES's trailing price-to-earnings (PE) ratio of 12.20 and forward PE of 11.11 as of January 2026 appear modest for a midstream MLP, particularly given its robust cash flow generation. For context, the S&P 500's average PE ratio hovers around 23x, while energy infrastructure peers often trade at 15x or higher. This suggests WES is priced for stability rather than aggressive growth.

A DCF analysis further supports this. WES generated $397.4 million in Free Cash Flow during Q3 2025, with full-year 2025 FCF expected to exceed $1.475 billion. The acquisition of Aris Water Solutions in October 2025, valued at $2.0 billion, is projected to add $40 million in annualized cost synergies and boost 2026 FCF per unit. Assuming a conservative 5% perpetual growth rate and a 9% discount rate, WES's intrinsic value exceeds its current price, even after accounting for the acquisition's capital outlay.

The company's balance sheet also supports valuation optimism. With a net leverage ratio of 3.0x as of Q3 2025, WES maintains flexibility to fund growth projects like the North Loving II and Pathfinder expansions. Its 9.27% dividend yield, supported by a $3.61 annualized payout, further enhances total return potential, though investors should monitor payout ratios to ensure sustainability.

Long-Term Growth: Aris Acquisition and Market Position

The Aris Water Solutions acquisition is a transformative catalyst. By integrating Aris's 790 miles of produced-water pipeline and 1,800 MBbls/d capacity, WES has solidified its position as a "one-stop shop" in the Delaware Basin, offering comprehensive natural gas, crude oil, and water management services. This diversification reduces exposure to commodity price swings and creates recurring revenue streams.

The acquisition's strategic value extends beyond infrastructure. Aris's footprint in New Mexico opens new growth avenues, including industrial water and desalination opportunities. Management estimates $40 million in annualized cost synergies by 2026, with additional long-term gains from system buildouts. These synergies, combined with WES's record Adjusted EBITDA of $633.8 million in Q3 2025, position the company to outperform peers in a sector increasingly focused on operational efficiency.

Risks and Sector Dynamics

While WES's fundamentals are strong, risks persist. The midstream sector is maturing, with U.S. shale production growth slowing and renewable energy transitions pressuring demand. Regulatory scrutiny of midstream EBITDA growth could also constrain margins. Additionally, the Aris acquisition's $2.0 billion price tag-equivalent to 7.5x 2026 EBITDA-requires disciplined execution to justify its cost.

However, WES's integrated model and scale provide a buffer. Its ability to generate $1.324 billion in FCF during 2024-despite macroeconomic headwinds-demonstrates resilience. The company's focus on fee-based contracts and toll-like revenue structures further insulates it from commodity volatility.

Conclusion: A Buy for Income and Growth

Despite its 600% rally, WES remains attractively valued relative to its cash flow potential and growth trajectory. The Aris acquisition enhances its competitive moat, while a disciplined balance sheet and high-yield dividend cater to income-focused investors. While sector-wide challenges exist, WES's operational excellence and strategic diversification make it a compelling long-term hold.

For those seeking entry, the current valuation offers a balance of income and capital appreciation, provided the company executes its integration plans and maintains FCF growth. In a maturing midstream sector, WES's blend of stability and innovation stands out.