425: WES to Acquire Aris Water in $1.5B Deal

Western Midstream Partners, LP will acquire Aris Water Solutions, Inc. in a $1.5 billion equity-and-cash transaction, creating a leading Delaware Basin produced-water system.

Summary

• Western Midstream Partners, LP (WES) will acquire Aris Water Solutions, Inc. (Aris) in an equity-and-cash transaction valued at approximately $1.5 billion.
• Aris shareholders will receive 0.625 common units of WES for each Aris share, with an option to elect $25.00 per share in cash, subject to proration with a maximum total cash consideration of $415 million.
• Based on WES's closing price on August 5, 2025, the transaction represents a premium of 10% to Aris's 30-day VWAP and 23% to Aris's closing price on August 5, 2025.
• The total enterprise value of the transaction is approximately $2.0 billion before transaction costs.
• The merger agreement was unanimously approved by the Boards of Directors of both companies and is expected to close in the fourth quarter of 2025, subject to customary closing conditions, regulatory approvals, and Aris shareholder approval.
• Upon closing, assuming maximum cash consideration, Aris shareholders are expected to own approximately 7% of WES's outstanding common units.
• WES will leave outstanding Aris's debt of $500 million of senior notes as of March 31, 2025.
• Support agreements have been entered into with Aris shareholders representing approximately 42% of Aris's outstanding common stock, who have agreed to vote in favor of the transaction.
• Aris will not hold an earnings conference call for its second-quarter results, scheduled for August 11, 2025, due to the transaction announcement.

Sentiment

Score: 8

Explanation: The merger is presented as highly strategic and financially accretive, creating a larger, more diversified, and integrated entity with significant synergy potential and a strong financial profile. The terms offer a substantial premium to Aris shareholders.

Positives

• Creates a differentiated Delaware Basin produced-water system, enhancing WES's ability to compete for new business development opportunities.
• The combined infrastructure establishes a fully integrated produced-water value chain, including gathering, disposal, recycle/reuse, beneficial reuse (desalination and mineral extraction), industrial water, and long-haul transport via the Pathfinder pipeline.
• Significantly expands WES's New Mexico footprint, unlocking new opportunities for its natural-gas, crude-oil, and NGLs gathering and processing businesses.
• The acquisition of McNeill Ranch provides access to significant pore space and other surface use opportunities adjacent to a fast-growing area in the Permian Basin.
• Diversifies WES's customer base through Aris's long-term contracts, acreage dedications, and minimum-volume commitments with investment-grade counterparties.
• The transaction is expected to be accretive to 2026 Free Cash Flow per unit.
• Represents an approximate 7.5x multiple on consensus 2026 EBITDA, inclusive of estimated cost synergies.
• Targeting $40 million of estimated annualized cost synergies, with further system buildout and incremental commercial opportunities expected to deliver additional long-term synergies.
• WES expects pro forma net leverage to remain at approximately 3.0x, indicating financial stability.

Risks

• The expected timing and likelihood of completion of the transaction, including the timing, receipt, and terms of required governmental and regulatory approvals, could reduce anticipated benefits or cause the parties to abandon the transaction.
• The ability to successfully integrate the businesses of WES and Aris is not guaranteed, and problems may arise, resulting in the combined company not operating as effectively and efficiently as expected.
• The occurrence of any event, change, or other circumstances could give rise to the termination of the merger agreement.
• There is a possibility that Aris stockholders may not approve the merger agreement.
• The parties may not be able to satisfy the conditions under the merger agreement in a timely manner or at all.
• The transaction could disrupt management time from ongoing business operations.
• Announcements relating to the transaction could have adverse effects on the market price of WES's common units or Aris's Class A common stock.
• The transaction and its announcement could adversely affect the ability of WES or Aris to retain customers and key personnel, and maintain relationships with suppliers and customers.
• The pending transaction could distract management of both entities and lead to substantial costs.
• The combined company may be unable to achieve expected synergies or it may take longer than expected to achieve those synergies.

Future Outlook

The combined company is expected to create a leading produced-water gathering, disposal, and recycling business capable of meeting the flow assurance needs of customers with decades of drilling inventory. It will expand WES's commercial relationships, particularly in New Mexico, and accelerate the research and advancement of beneficial reuse and desalination technologies. The transaction is anticipated to be accretive to 2026 Free Cash Flow per unit and is targeting $40 million in estimated annualized cost synergies, with further long-term synergies expected from system buildout and incremental commercial opportunities.

Management Comments

• Oscar Brown (President and CEO of WES): "We are excited to announce the strategic combination with Aris, which aligns with our strategy of acquiring high-quality midstream assets that complement and expand our existing network."
• Oscar Brown (President and CEO of WES): "The combination of our assets creates a leading produced-water gathering, disposal, and recycling business that can meet the flow assurance needs of customers as they execute on their decades worth of drilling inventory."
• Oscar Brown (President and CEO of WES): "The addition of the Aris assets better positions WES to provide enhanced flow assurance to our producing customers in West Texas while expanding WES’s commercial relationships with some of the top E&P operators in the New Mexico portion of the Delaware Basin, providing significant customer diversification and incremental opportunities for business development."
• Oscar Brown (President and CEO of WES): "Aris has valuable expertise in beneficial reuse and desalination technologies, and we are excited to be able to accelerate the research and advancement of these evolving technologies with greater access to efficient capital and economies of scale."
• Amanda Brock (President and CEO of Aris): "Today’s transaction marks a significant milestone in Aris’s journey, and we are excited to join forces with WES."
• Amanda Brock (President and CEO of Aris): "The combination of Aris and WES creates a premier midstream water-solutions provider of scale that is better positioned to deliver a variety of water services, provide critical flow assurance for natural-gas and crude-oil production activities, and generate strong returns for our shareholders through WES’s leading distribution policy and attentive focus on executing accretive growth projects."

Industry Context

This merger represents a significant consolidation in the produced-water management sector within the Permian Basin, particularly strengthening capabilities in the Delaware Basin. It aligns with a broader industry trend towards integrated midstream solutions and enhanced environmental services, as E&P operators increasingly seek comprehensive water handling, recycling, and disposal services. The combined entity's expanded footprint and diversified customer base position it as a more competitive and resilient player in the evolving energy landscape, offering a 'one-stop shop' for critical water infrastructure needs.

Comparison to Industry Standards

• The combined infrastructure creates a fully integrated produced-water value chain, encompassing water gathering, disposal, recycle/reuse, beneficial reuse (including desalination and mineral extraction), industrial water, and long-haul transport via the Pathfinder pipeline, positioning the entity as a premier midstream water-solutions provider of scale.
• Aris's assets contribute approximately 790 miles of produced-water pipeline, 1,800 MBbls/d of produced-water handling capacity, 1,400 MBbls/d of water recycling capacity, and 625,000 dedicated acres from investment grade counterparties.
• WES's existing produced-water business adds approximately 830 miles of pipeline and total disposal capacity of 2,035 MBbls/d, complemented by the previously announced Pathfinder pipeline project.
• The combined entity's ability to meet flow assurance needs for customers with 'decades worth of drilling inventory' suggests a strong competitive position relative to other regional water service providers.
• The acquisition multiple of approximately 7.5x on consensus 2026 EBITDA, inclusive of estimated cost synergies, provides a valuation benchmark for similar strategic acquisitions in the midstream water sector.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders of Aris Water Solutions are expected to benefit from a significant premium on their shares (10% to 30-day VWAP, 23% to prior day close) and will gain ownership in a larger, more diversified, and financially stable entity.
• Shareholders of Western Midstream Partners are expected to benefit from the transaction being accretive to 2026 Free Cash Flow per unit, the realization of significant cost synergies, and the strategic expansion and diversification of the company's asset base and customer relationships.
• Employees of Aris Water Solutions will continue with business as usual in the near term, with compensation and benefits remaining unchanged until the merger closes. Post-closing, they will transition to WES's programs, which are described as competitive or better. While job security is a concern, WES is committed to a thoughtful transition, talent retention, and providing severance for impacted roles. The combined company will be headquartered in The Woodlands, Texas.
• Customers of both companies are expected to benefit from enhanced flow assurance, a broader range of integrated water services, and the creation of a 'one-stop shop' for their produced-water management needs in the Delaware Basin.
• Suppliers and vendors are advised that it is business as usual until the transaction closes, and any questions about the post-closing combined company should be directed to Western Midstream.

Next Steps

• The transaction is subject to customary closing conditions, regulatory approvals, and Aris shareholder approval.
• WES intends to file a registration statement on Form S-4 that will include a proxy statement of Aris and constitute a prospectus of WES.
• The transaction will be submitted to Aris's stockholders for their consideration.
• Aris will publish its second-quarter earnings results on Monday, August 11, 2025, but will not hold an earnings conference call.
• A dedicated Integration Team will begin work to plan a smooth transition between the two companies.
• The Integration Team will evaluate how to best support operations going forward, including potential changes to Aris office locations or facilities.
• Western Midstream will evaluate roles, teams, and organizational needs with a goal of retaining talent and positioning the merged organization for long-term success.

Key Dates

Recommendation

The acquisition of Aris Water Solutions by Western Midstream is a highly strategic move that creates a dominant player in the Delaware Basin's produced-water management sector. The transaction is expected to be accretive to WES's 2026 Free Cash Flow per unit and targets significant annualized cost synergies of $40 million, indicating strong financial benefits. The pro forma net leverage remaining at approximately 3.0x suggests a disciplined approach to financing the deal, maintaining a healthy balance sheet. For Aris shareholders, the offer represents a substantial premium, making it an attractive exit. The combined entity's expanded footprint, diversified customer base, and integrated value chain, including advanced recycling and beneficial reuse technologies, position it for long-term growth and enhanced competitive advantage in a critical energy infrastructure segment. This merger strengthens WES's market position and future earnings potential, making it a compelling investment.

Keywords

Midstream, Water Solutions, Produced Water, Delaware Basin, Permian Basin, Merger, Acquisition, Energy Infrastructure, Oil and Gas, Recycling, Disposal, Pipeline, Western Midstream, Aris Water Solutions