Western Midstream Partners Units Have 23% Upside Potential
The year started out slow for the energy sector, but as history shows, that momentum can change in an instant. And that’s exactly what happened in late February, with the start of the war in Iran, or “conflict” if you prefer.
On January 1, 2026, West Texas Intermediate was trading hands at around $57.00 per barrel. On April 8, crude hit a multi-year high of $109.00 per barrel. It’s currently trading at around $90 per barrel.
An end to the war in Iran should see oil and gas prices recede but no-one really thinks it will go back to where it was at the start of the year.
Now, instead of losing sleep over ongoing volatility in the energy sector and worrying about where oil and gas prices are, it might be a good idea to look at one industry in the energy sector that doesn’t really care about the price of oil and gas, and that’s Oil & Gas Midstream companies like Western Midstream Partners, LP (NYSE:WES).
As midstream companies, energy LPs manage the storage and transportation of oil or natural gas. They don’t need to worry about the price of crude oil because they don’t need to drill new wells.
Because the company earns a fee for each barrel shipped, this results in reliable cash flow and dividends. On top of that, they don’t have to pay corporate taxes as long as they earn at least 90% of their income from activities involving the transportation of commodities in the U.S. This extra money allows them to pay some of the best dividends on Wall Street.
About Western Midstream Partners LP
Western Midstream Partners, L.P. is involved in gathering, compression, treating, processing, and transporting natural gas. It gathers, stabilizes, and transports condensate, natural gas liquids (NGLs), and crude oil and gathers and disposes of produced water. It also buys and sells natural gas, NGLs, and condensate. (Source: “First-Quarter 2026 Review,” Western Midstream Partners, L.P., November 4, 2025.)
Its core assets provide midstream services for customers in some of the most active and productive basins in the United States: the Delaware Basin in West Texas and New Mexico; the DJ Basin in northeastern Colorado; and the Powder River Basin in Northeast Wyoming. The majority of its revenue (58%) comes from the Delaware Basin with 29% coming from the DJ Basin.
It has additional assets and investments in Texas, Utah, and Wyoming.
WES’s current infrastructure includes:
- 16 Gathering Systems
- 77 Processing & Treating Facilities
- 7 Natural-Gas Pipelines
- 11 Crude-Oil/NGLs Pipelines
- 15,000+ Pipeline Miles
While energy prices can be volatile, 95% of its gas contracts are fee-based and 100% of its liquids contracts are fee based. This provides it with direct commodity exposure protection.
Major Acquisitions
Western Midstream is always looking to expand its footprint through strategic acquisitions.
In October 2025, it completed the $2.0 billion acquisition of Aris Water Solutions. This marks a big step in helping Western Midstream consolidate the water midstream sector in Texas’s Permian Basin. (Source: “Western Midstream To Acquire Aris Solutions,” Western Midstream Partners, LP, August 6, 2025.)
This past May the Partnership announced it entered into a definitive agreement to acquire all of the outstanding equity interests of Brazos Delaware II, LLC for approximately $1.6 billion. Under the terms of the agreement, WES will pay approximately $800 million in cash and issue approximately $800 million in WES common units. The transaction is expected to close late in the second quarter of 2026. (Source: “Western Midstream Announces Acquisition of Brazos Delaware,” Western Midstream Partners, LP, May 6, 2026.)
Brazos is one of the largest privately held gathering and processing platforms in the Texas Delaware Basin. The company’s assets include approximately 900 miles of pipeline, 460 million cubic feet per day (MMcf/d) of natural-gas processing capacity, and approximately 470,000 dedicated acres under long-term, fixed-fee contracts.
In 2025, the Brazos business processed an average of 336 MMcf/d of natural gas and 25 thousand barrels of oil per day (MBbls/d) of crude oil.
Record Q1 Results
For the first quarter ended March 31, Western Midstream reported net income of $342.4 million, or $0.85 per unit, with record first quarter adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $683.1 million, and distributable cash flow of $508.9 million. (Source: “Western Midstream Announces First-Quarter 2026 Results,” Western Midstream Partners, LP, May 6, 2026.)
Cash flows provided by operating activities came in at $469.9 million, which resulted in free cash flow of $242.3 million.
Commenting on the results, Oscar Brown, President and CEO, said “WES delivered record Adjusted EBITDA of $683.1 million in the first-quarter of 2026, increasing 7-percent sequentially and 15-percent compared to the prior-year period, which was primarily driven by a full quarter’s contribution from the Aris acquisition.”
“Looking ahead, our fee-based contract structures, supported by substantial minimum-volume commitments and acreage dedications, provide durable, protected cash flows across commodity cycles.”
Increases Quarterly Distribution to $0.93/Unit
Dating back to 2008, Western Midstream has a long history of paying a reliable distribution. More recently, it has also been increasing its annual payout.
Most recently, in May it paid a first quarter distribution of $0.93 per unit, a 2.2% increase over the prior quarter’s distribution. This works out to an annual payout of $3.72 per unit for a forward dividend yield of approximately 8.5%. (Source: “Western Midtream Announces Fourth-Quarter Distribution And Earnings Conference Call,” Western Midstream Partners LP, January 23, 2026.)
Western Midstream’s reliably growing dividend is due to a steady stream of income that includes 97% fee-based gas contracts and 100% fee-based liquids contracts, which provides it with both direct exposure protection and predictable income.
WES Unit Hits Record High
Consistently strong financial results have been helping juice WES units. On May 20, WES units hit a record high of $48.01 per unit. They continue to trade near that level, up:
- 8% over the last month
- 18% over the last six months
- 28% year over year
WES units may be trading near record levels, but Wall Street thinks it will hit fresh record highs over the coming quarters. Analyst’s have provided a 12-month share price forecast range of $44.73 to $54.00 per share. This points to potential upside of up to 23%.
Chart courtesy of StockCharts.com
The Lowdown on Western Midstream Partners, LP
Western Midstream Partners, LP is a great energy company with a robust balance sheet, reporting strong financial results.
On the passive income front, Western Midstream has paid a reliable dividend since 2008 and recently increased its annual payout to $0.93 per unit. While WES units recently high a record high, Wall Street remains bullish on WES units and expects them to hit fresh highs over the next 12 months.
That’s good news for common unit holders and the 400 institutions that hold 42.45% of all outstanding shares. Three of the biggest holders include Alps Advisors Inc., Invesco Ltd, and Goldman Sachs Group Inc. (Source: “Western Midstream Partners, LP (WES),” Yahoo! Finance, last accessed June 9, 2026.)
Insiders hold an impressive 38.39% of all shares, which should incentivize them to see WES units perform well.