Western Midstream Partners, LP (WES): SWOT Analysis [Nov-2025 Updated]

You need to cut through the noise on Western Midstream Partners, LP (WES) and see the real story for 2025. Simply put, WES has rock-solid cash flow, backed by a massive anchor relationship and a projected distribution coverage near 1.4x, which is defintely a strength. But honestly, that stability comes with a huge catch: nearly all their operational success is tied to Occidental Petroleum, making their $350 million estimated growth CapEx a high-stakes bet on one key partner. Dive into the full SWOT to see the precise actions that mitigate this single-customer risk.

Western Midstream Partners, LP (WES) - SWOT Analysis: Strengths

You are looking for a clear picture of Western Midstream Partners, LP's (WES) core financial and operational advantages, and the takeaway is simple: this is a stable, high-quality midstream business anchored by premium assets and a rock-solid contract structure. Their cash flow is defintely more predictable than most energy sector peers.

Extensive, high-quality asset footprint in core basins (Permian, DJ).

WES owns and operates a massive, strategically located infrastructure network, primarily focused on the most prolific U.S. basins. This isn't just a collection of pipes; it's a fully integrated, three-stream service provider for natural gas, crude oil/natural gas liquids (NGLs), and produced water. The sheer scale helps them capture virtually all volumes from their dedicated acreage.

The Permian Basin's Delaware sub-basin and the Denver-Julesburg (DJ) Basin drive the financials. For the 2025 fiscal year, the Delaware Basin is projected to contribute about 55% of the company's Adjusted EBITDA, with the DJ Basin adding another 30%. The Delaware Basin is a major growth engine, with natural-gas throughput hitting a record 2.1 Bcf/d in the second quarter of 2025, supported by the recent expansion of the West Texas complex to approximately 2.2 Bcf/d of operated, nameplate processing capacity.

• Total pipeline network spans approximately 14,000 miles.
• Operates 77 processing and treating facilities.
• Delaware Basin is the largest contributor to 2025 EBITDA.

Strong distribution coverage, projected at approximately 1.4x for 2025, ensuring payout stability.

For an MLP, distribution coverage is the ultimate metric for payout security, and WES's projected coverage ratio is robust. Analysts project the distribution coverage ratio to be around 1.4x for the 2025 fiscal year. This means the company is generating significantly more cash flow than it needs to pay its base distribution, providing a substantial buffer against operational hiccups or market swings.

The stability is further underlined by the consistent base distribution. The quarterly cash distribution for 2025 has been maintained at $0.910 per unit, equating to an annualized payout of $3.64 per unit. This excess cash flow, or retained distributable cash flow, is then available to fund growth capital expenditures or be returned to unitholders via enhanced distributions, which is a smart capital allocation strategy.

Fee-based contracts provide revenue stability, insulating cash flow from commodity price volatility.

The midstream model works because it shifts risk away from commodity prices, and WES has built a best-in-class contract portfolio. This structure is the primary reason the cash flow is so stable. Over 70% of WES's cash flows are protected by cost-of-service agreements, minimum volume commitments (MVCs), and/or are linked to the Consumer Price Index (CPI).

This fee-based model essentially turns WES into a utility-like business, charging a fee for the service of gathering, processing, and transporting hydrocarbons, regardless of the final sales price. To put a finer point on it, for the year ended December 31, 2024, 100% of the crude-oil and produced-water throughput, and 95% of the wellhead natural-gas volume, were serviced under these fee-based contracts. This is why you can sleep at night even when crude oil futures are volatile.

Anchor relationship with Occidental Petroleum (Oxy), securing substantial throughput volume.

The relationship with Occidental Petroleum (Oxy) is a double-edged sword, but overwhelmingly a strength, as it guarantees a baseline of substantial throughput volume. Occidental Petroleum is WES's largest customer, and their production underpins a significant portion of WES's revenue and volume commitments. Occidental Petroleum currently holds a significant stake in WES, around 44.8%, and controls the general partner.

This relationship provides a clear line of sight into future volumes, especially in the Delaware Basin, where Occidental Petroleum is a dominant producer. For 2024, Occidental Petroleum's production accounted for 60% of WES's total revenues and other. This anchor tenant status is a huge competitive advantage, giving WES a clear runway for expansion projects like the Pathfinder produced-water system, which is underpinned by a long-term water agreement with Occidental Petroleum.

Your next step should be to look at the other side of this relationship-the concentration risk-as we move into the Weaknesses section.

Western Midstream Partners, LP (WES) - SWOT Analysis: Weaknesses

High Customer Concentration Risk: Occidental Petroleum

You can't talk about Western Midstream Partners, LP (WES) without talking about Occidental Petroleum (Oxy). This relationship is a critical weakness because it creates a high concentration risk that limits WES's operational independence and revenue diversification. Simply put, a large portion of WES's cash flow is tied to the drilling and production decisions of a single customer.

Oxy is not just a major customer; it's a controlling entity. As of April 30, 2025, Oxy held approximately 43.4% of WES's common units and owns the general partner, which means the general partner's directors and officers have duties to manage WES in a manner beneficial to Oxy. For the 2023 fiscal year, a significant 59% of WES's total revenues were attributable to production owned or controlled by Oxy. This level of dependence is a single point of failure; if Oxy cuts its capital spending or shifts its focus away from WES's core operating areas, WES's throughput and profitability would defintely suffer.

Here's the quick math on the customer concentration:

Master Limited Partnership (MLP) Structure Complicates Taxes

The Master Limited Partnership (MLP) structure is what gives WES its attractive, tax-deferred yield, but it comes with a major administrative headache for investors. Instead of the simple Form 1099-DIV you get from a regular stock, you receive a Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.). This K-1 is notorious for being delivered late, often well into March, which complicates tax preparation and can delay filing your personal return.

The complexity stems from the fact that the partnership's income, gains, losses, deductions, and credits flow directly through to you, the unitholder, who must report them on your individual tax return. For investors who hold WES units across multiple states where WES operates, you might even have to file multiple state tax returns. This is a significant barrier for novice and even many experienced investors, limiting the pool of potential buyers for WES units.

• Receive Schedule K-1, not Form 1099-DIV.
• Tax packages are typically distributed in early March for the prior calendar year.
• Distributions are often considered a return of capital, which lowers your cost basis.
• May trigger state-level tax filing obligations in multiple jurisdictions.

Limited Organic Growth Outside of Key Basins

WES's asset footprint is concentrated in a few highly productive basins, primarily the Delaware Basin and the DJ Basin. While these are top-tier areas, the heavy reliance on them means organic growth is geographically constrained and highly dependent on the drilling programs of a small number of producers, chiefly Oxy. You need diversification to truly de-risk a midstream business.

Management has explicitly stated that the Delaware Basin is their primary growth engine in 2025, which reinforces the geographic concentration risk. While they are pursuing projects in other areas, like the Uinta Basin, the growth there is often contingent on third-party pipeline expansions, such as the tie-in of Kinder Morgan's Ultimat pipeline. This reliance on external factors for non-core growth highlights the limited number of internally driven, large-scale expansion opportunities outside of their established Permian and DJ positions.

Substantial Growth Capital Expenditure (CapEx) for 2025

To keep the growth engine running, WES must spend substantial capital, and this spending is a necessary drain on current free cash flow. For the 2025 fiscal year, the company's total capital expenditures guidance is projected to range between $625 million and $775 million. This is a significant outlay. The company is allocating approximately 66% of this total CapEx toward expansion projects, which translates to a growth capital expenditure range of roughly $412.5 million to $511.5 million for 2025.

This expansion CapEx is substantial because it includes major projects like the North Loving Train II in the Delaware Basin and the Pathfinder trunkline, which is a large produced water project with an estimated capital cost of $400 million to $450 million over its full development cycle. While these investments are expected to drive substantial earnings before interest, taxes, depreciation, and amortization (EBITDA) growth starting in 2027, they represent a considerable upfront financial commitment that temporarily reduces the cash available for further distribution increases or unit buybacks in the near term.

Western Midstream Partners, LP (WES) - SWOT Analysis: Opportunities

Increased natural gas volume from the Permian Basin, where WES has capacity to handle over 3,000 MMcf/d.

The core opportunity is tied directly to the Permian Basin's relentless production growth, which is a defintely reliable source of volume for your infrastructure. In the Delaware Basin, WES gathered a record natural-gas throughput of 2.0 Bcf/d (billion cubic feet per day) in the first quarter of 2025. This demand is outstripping capacity, forcing you to expand.

The West Texas complex's operated, nameplate natural-gas processing capacity sits at approximately 2,190 MMcf/d (million cubic feet per day) after the North Loving Plant came online in Q1 2025. To meet future demand, you have already sanctioned North Loving Train II, a new 300 MMcf/d cryogenic processing train, which will boost the complex's total processing capacity to approximately 2.5 Bcf/d (or 2,500 MMcf/d). The long-term potential to handle volumes well over 3,000 MMcf/d across your gathering and processing footprint remains a clear runway for growth.

Here's the quick math on Permian capacity expansion:

Potential for accretive bolt-on acquisitions to diversify geographic and customer base.

Your disciplined financial position, with net leverage below 3.0-times, puts you in a great spot to execute on synergistic acquisitions. The most concrete example is the acquisition of Aris Water Solutions, announced in 2025 with an enterprise value of approximately $2.0 billion. This move is a major win for diversification.

The deal immediately expands your service offering from a three-stream provider (gas, oil, NGLs) to a fully integrated water management leader in the Delaware Basin. Management forecasts this acquisition will increase the share of associated water in your Adjusted EBITDA from 10% to 16% by the end of 2025. This is a strategic hedge, shifting your revenue mix toward more stable, fee-based water services, plus it targets approximately $40 million in annualized cost synergies by 2026. This is how you use a strong balance sheet to buy stability.

Decarbonization initiatives in the midstream sector, like Carbon Capture and Storage (CCS), could open new revenue streams.

The energy transition isn't just a risk; it's a new business line. Your largest customer, Occidental Petroleum (Oxy), has a clear focus on carbon management, which creates a direct opportunity for WES. The companies signed a Letter of Intent to explore joint CO2 capture, transportation, utilization, and sequestration (CCS) opportunities in the Delaware and DJ Basins.

Occidental is backing this strategy with capital, allocating $450 million of its $7.0 billion to $7.2 billion 2025 capital plan to low-carbon ventures, including the STRATOS Direct Air Capture (DAC) project. Your role is the critical midstream link: WES would explore providing the CO2 transportation services from both WES's natural gas plants and Occidental's upstream facilities to the sequestration sites. This positions you to become a fee-for-service provider for a new commodity: captured carbon dioxide.

Continued strong commodity prices could incentivize Oxy to accelerate drilling, boosting WES's throughput.

Occidental Petroleum, your primary customer and majority equity interest holder, is maintaining a robust capital program, which is the key driver for your throughput. For 2025, Occidental has planned a substantial capital investment of $7.0 billion to $7.2 billion, focusing on high-return assets, mostly in the Permian Basin.

While crude oil prices are projected to remain in a tight, stable range of $58 to $62 per barrel through 2026, and Henry Hub natural gas is projected to average $3.60/MMBtu in 2025, these prices are sufficient to incentivize steady Permian activity. Occidental is also driving efficiency, projecting a 7% reduction in drilling and completion costs and a 10% improvement in time to market in 2025. This means they can maintain or even increase production volumes with a lower rig count, which still translates to sustained, high-volume throughput for WES under your firm-commitment contracts.

The sustained drilling activity is expected to drive the following 2025 throughput growth for WES:

• Natural Gas Throughput: Mid-single-digit growth.
• Crude Oil and NGLs Throughput: Low-single-digit growth.
• Produced Water Throughput: Approximately 40% growth (driven by the Aris acquisition).

Finance: draft a detailed five-year CapEx plan for the CCS transportation segment by Q1 2026.

Western Midstream Partners, LP (WES) - SWOT Analysis: Threats

You're looking for a clear-eyed view of the risks facing Western Midstream Partners, LP, and honestly, the biggest threats aren't operational-they're structural and political. While WES benefits from fee-based contracts, the sheer size of its parent company's potential divestiture and the volatility of the regulatory landscape are the two non-negotiable risks you need to map to your investment thesis.

Regulatory changes, particularly those affecting pipeline permitting or environmental standards.

The regulatory environment is a constant headache, but the political shift in 2025 has created a specific, two-sided threat. On one hand, the Trump administration blocked the controversial methane fee program in March 2025, a major win that relieves a financial burden on WES's key Permian Basin producers. That's a huge cost-avoidance for your customers.

But that doesn't mean the risk is gone. The Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA) released a rule in January 2025 to amend federal pipeline safety regulations to reduce methane emissions from new and existing gas transmission pipelines. This directly increases WES's compliance costs for its approximately 14,000 miles of pipelines.

Plus, the U.S. Environmental Protection Agency (EPA) issued an interim final rule in July 2025 to extend compliance deadlines for the new source performance standards (NSPS), a move that creates regulatory uncertainty and invites litigation from environmental groups. Stricter laws or enforcement could increase WES's operational or compliance costs, and those of its customers, which would reduce demand for WES's services.

A strategic shift or major divestiture by Occidental Petroleum that reduces their dedicated volume commitment.

The relationship with Occidental Petroleum (Oxy) is the most immediate structural threat. Oxy, which holds a 44.7% stake in WES as of the second quarter of 2025, has been exploring a sale of its interest. This potential divestiture is part of Oxy's strategy to reduce its debt, which stood at around $18.5 billion following the CrownRock acquisition. A full sale could value WES at more than $20 billion, including debt.

While WES operates as an independent company and much of its cash flow is secured by long-term acreage dedications and minimum volume commitments (MVCs) from Oxy, a change in ownership introduces significant strategic uncertainty. A new owner, especially a private equity firm, might prioritize short-term cash flow over long-term capital investment, or they may have a different view on the pace of drilling and development in the core Permian and DJ Basins. That's a new layer of execution risk.

Sustained low natural gas prices could pressure producers, leading to reduced drilling activity in WES's areas.

It's easy to look at WES's fee-based contracts and dismiss commodity price risk, but that misses the point. The real threat is a sustained drop in the price of oil, not just natural gas, because most of the gas WES handles in the Permian is associated gas-a byproduct of oil drilling. The U.S. Energy Information Administration (EIA) has projected oil prices to be low, forecasting oil at $48 per barrel by 2026, which is below the estimated $60 per barrel break-even price for new drilling in the Permian.

If oil producers cut their capital expenditures (CAPEX) and slow down drilling, WES's throughput volumes will eventually suffer, regardless of MVCs. Here's the quick math on their current protection: WES's sensitivity analysis indicates that a $1.00 change in natural gas price from the $3.44 assumption would impact 2025 Adjusted EBITDA by only approximately $1 million, but a $10.00 change in crude oil price from the $70.00 assumption would impact Adjusted EBITDA by approximately $30 million. That's a 30x higher exposure to oil price volatility.

Rising interest rates increase the cost of capital, potentially hindering future growth projects.

WES is in a good financial position, but the rising interest rate environment still creates a headwind for financing future growth. They are actively managing their debt, retiring $664 million of senior notes in the first quarter of 2025. Still, as of November 2025, the estimated Weighted Average Cost of Capital (WACC) for WES is 7.7%. The current risk-free rate (10-Year Treasury Constant Maturity Rate) is 4.071%. Any upward pressure on rates makes the cost of debt, currently calculated at 4.9858% (based on a TTM Interest Expense of $371.613 million and Book Value of Debt of $7,453.4862 million as of September 2025), more expensive.

Higher interest expense directly impacts the profitability of new expansion projects, like the North Loving II plant or the Pathfinder pipeline, which are part of the company's planned $625.0 million to $775.0 million in total capital expenditures for 2025. You have to be defintely sure the returns on those new assets outpace the rising cost of the capital used to build them.