8-K: WES to Acquire Aris Water, Boosts Permian Presence

Western Midstream Partners, LP will acquire Aris Water Solutions, Inc. for approximately $1.5 billion in an equity-and-cash transaction, expanding its Delaware Basin water services.

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, with a total enterprise value of approximately $2.0 billion before transaction costs.
• Aris shareholders can elect to receive 0.625 WES common units or $25.00 in cash per share, subject to proration, with a maximum total cash consideration of $415 million.
• The transaction is expected to result in a consideration mix of approximately 72% equity and 28% cash, with Aris shareholders owning approximately 7% of WES's outstanding common units post-closing (assuming maximum cash consideration).
• WES reported second-quarter 2025 Net income attributable to limited partners of $333.8 million, or $0.87 per common unit (diluted).
• Second-quarter 2025 Adjusted EBITDA totaled a record $617.9 million.
• Cash flows provided by operating activities for Q2 2025 were $564.0 million, generating Free Cash Flow of $388.4 million.
• WES's capital expenditures for Q2 2025 totaled $170.5 million.
• A second-quarter distribution of $0.910 per unit ($3.64 annualized) will be paid on August 14, 2025.
• WES retired $337 million of senior notes in June 2025 using cash on hand.
• WES sanctioned a new 300 MMcf/d cryogenic natural-gas processing train (North Loving Train II) in the Delaware Basin, with an expected in-service date in early second quarter of 2027.
• Aris's assets include 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.
• Aris's produced-water and water solutions volumes are supported by average contract tenors of approximately ten and eight years, respectively, and include approximately 100 MBbls/d of produced-water minimum-volume commitments (MVC).
• The Tax Receivable Agreement (TRA) with Majority TRA Holders was amended, fixing the aggregate termination payment at $80,000,000 in cash, significantly less than the estimated $183.4 million that would have been triggered by the Change of Control.

Sentiment

Score: 8

Explanation: The filing announces a strategic acquisition expected to be accretive, generate significant synergies, and expand market presence, alongside strong Q2 financial results and reaffirmed guidance. This indicates a positive strategic direction and operational strength.

Positives

• The acquisition 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 water gathering, disposal, recycling, beneficial reuse (desalination and mineral extraction), industrial water, and long-haul transport via the Pathfinder pipeline.
• The transaction significantly expands WES's New Mexico footprint, unlocking new opportunities to be a 'one-stop shop' for customers and to grow its natural-gas, crude-oil, and NGLs gathering and processing businesses in the area.
• The acquisition diversifies WES's customer base through Aris's long-term contracts, acreage dedications, and minimum-volume commitments with investment-grade counterparties.
• Aris's recent purchase of the McNeill Ranch provides access to significant long-term pore space and other surface use opportunities, adjacent to one of the fastest-growing areas in the Permian Basin.
• The transaction is expected to be accretive to 2026 Free Cash Flow per unit and targets approximately $40 million of estimated annualized cost synergies.
• WES expects pro forma net leverage to remain at approximately 3.0x, maintaining a strong balance sheet and investment-grade credit ratings.
• WES achieved its highest quarterly Adjusted EBITDA in the partnership's history, totaling $617.9 million in Q2 2025.
• WES reported sequential throughput growth across all products: 3% for natural gas, 6% for crude oil and NGLs, and 4% for produced water.
• Record Delaware Basin natural-gas throughput of 2.1 Bcf/d (7% sequential increase) and record crude-oil and NGLs throughput of 269 MBbls/d (5% sequential increase) were achieved.
• Record Delaware Basin produced-water throughput of 1,242 MBbls/d (4% sequential increase) was reported.
• The sanctioning of North Loving Train II will increase WES's West Texas complex processing capacity to approximately 2.5 Bcf/d, solidifying its position as a top natural-gas processor in the Delaware Basin.
• The amendment to the Tax Receivable Agreement reduces the early termination payment from an estimated $183.4 million to a fixed $80 million cash payment.

Negatives

• The acquisition involves a significant cash component of $415 million and the issuance of approximately 26.6 million common units, which could lead to dilution for existing WES unitholders.
• The transaction will incur substantial costs for both entities, including transaction costs and potential integration expenses.
• There is a risk that the parties may not be able to satisfy the conditions under the merger agreement in a timely manner or at all, including obtaining required governmental and regulatory approvals and Aris shareholder approval.
• Aris will not be holding an earnings conference call for its second-quarter results due to the transaction announcement.

Risks

• The expected timing and likelihood of completion of the Transaction, including the timing, receipt, and terms and conditions of any 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, potentially resulting in the combined company not operating as effectively and efficiently as expected.
• There is a risk that the combined company may be unable to achieve the targeted synergies or that it may take longer than expected to achieve those synergies.
• The occurrence of any event, change, or other circumstances could give rise to the termination of the Merger Agreement.
• There is a possibility that stockholders of Aris may not approve the Merger Agreement.
• The Transaction could disrupt management time from ongoing business operations.
• Any announcements relating to the Transaction could have adverse effects on the market price of WES's common units or Aris Class A common stock.
• The Transaction and its announcement could have an adverse effect on the ability of WES and Aris to retain customers and key personnel and maintain relationships with their suppliers and customers, impacting operating results and businesses generally.
• The pending Transaction could distract management of both entities and lead to substantial incurred costs.
• General risks detailed in WES's and Aris's Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K could cause actual results to differ materially from forward-looking statements.

Future Outlook

WES reaffirmed its 2025 financial guidance ranges for Adjusted EBITDA ($2.350 billion to $2.550 billion), total capital expenditures ($625 million to $775 million), and Free Cash Flow ($1.275 billion to $1.475 billion). The impact of the Aris acquisition will be incorporated into WES's 2026 guidance projections, which are expected to be announced in late February 2026. The Aris acquisition, the North Loving Train II expansion, and other organic expansion projects, such as the Pathfinder pipeline, are expected to significantly support WES's growth outlook in 2026, 2027, and beyond.

Management Comments

• Oscar Brown, President and Chief Executive Officer of WES, stated, 'WES had a successful second quarter as we generated the highest quarterly Adjusted EBITDA in our partnerships history, delivered increased throughput across all core operating basins and across all products, and executed on numerous significant growth initiatives.'
• Mr. Brown also commented, 'Our strategic focus on productivity and efficiency has resulted in cost reductions and process improvements, which should help WES remain competitive and better execute on our near-term growth plans.'
• Regarding the acquisition, Mr. Brown said, '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.'
• Mr. Brown further noted, '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.'
• Mr. Brown highlighted, 'Additionally, we firmly believe this transaction will enhance our ability to compete for new business across our natural-gas, crude-oil, and produced-water businesses, adding meaningful scale, marking our entrance further into New Mexico, and making WES the largest three-stream midstream service provider in the Delaware Basin.'
• Amanda Brock, President and CEO of Aris, commented, 'Today’s transaction marks a significant milestone in Aris’s journey, and we are excited to join forces with WES.'
• Ms. Brock added, '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

The acquisition of Aris Water Solutions by Western Midstream Partners reinforces WES's position as a leading midstream water services provider in the Delaware Basin, a key U.S. shale play. This move aligns with broader industry trends of consolidation and vertical integration within the midstream sector, particularly as companies seek to offer more comprehensive 'three-stream' services (natural gas, crude oil/NGLs, and produced water) to E&P operators. The emphasis on water recycling, beneficial reuse, and desalination technologies also reflects a growing industry focus on environmental sustainability and efficient water management in energy production.

Comparison to Industry Standards

• The acquisition represents an approximate 7.5x multiple on consensus 2026 EBITDA, inclusive of estimated cost synergies, which can be compared to other midstream or water infrastructure transactions in the Permian Basin.
• The filing mentions that the expansion of the West Texas complex to approximately 2.5 Bcf/d processing capacity further solidifies WES's position as one of the top natural-gas processors in the Delaware Basin, implying a competitive standing against other major processors in the region.

Corporate Governance

Legal Proceedings

• The Company and Parent Parties commit to cooperating and using reasonable best efforts to contest and resist any litigation, administrative, or judicial actions challenging the Mergers or the transactions contemplated by the Agreement.
• They will also seek to have any stay or temporary restraining order entered by any Governmental Entity vacated or reversed that prohibits, prevents, or restricts consummation of the transactions.

Related Party Transactions

• A Tax Receivable Agreement (TRA) Amendment was entered into simultaneously with the Merger Agreement by Aris, WES, and certain 'Majority TRA Holders' (as defined in the original TRA).
• The TRA Amendment provides for the termination of the Tax Receivable Agreement in consideration for a fixed payment of $80,000,000 in cash to the TRA Holders.
• This payment replaces an estimated Early Termination Payment of approximately $183.4 million that would have been triggered by the Change of Control resulting from the merger.

Stakeholder Impact

• **Shareholders (Aris)**: Will receive a premium for their shares (10% to 30-day VWAP, 23% to prior day closing price) and will become unitholders in WES, expected to own approximately 7% of WES's outstanding common units, benefiting from WES's distribution policy and accretive growth projects.
• **Shareholders (WES)**: Will experience dilution from the issuance of approximately 26.6 million new common units but are expected to benefit from the acquisition's accretive nature to 2026 Free Cash Flow per unit, $40 million in annualized cost synergies, expanded market presence, and diversified customer base.
• **Employees (Aris)**: Continuing employees will have their equity awards assumed by WES with similar terms, and unvested awards will immediately vest upon involuntary termination without cause or death/disability within 12 months post-closing. Non-continuing employees' equity awards will be cashed out. Continuing employees will receive no less favorable base salary/wage and target short-term cash incentive, and substantially comparable aggregate employee benefits for one year. Severance benefits are provided for involuntary termination without cause.
• **Customers**: Expected to benefit from enhanced flow assurance and a broader range of integrated water services, including water gathering, disposal, recycling, beneficial reuse, and long-haul transport, positioning WES as a 'one-stop shop' for their midstream needs.
• **Creditors**: Aris's existing $500 million senior notes will remain outstanding. WES expects to maintain a strong balance sheet with pro forma net leverage remaining at approximately 3.0x, which should be favorable for creditors.

Next Steps

• WES intends to file a registration statement on Form S-4 with the SEC, which will include a proxy statement of Aris and a prospectus of WES.
• The transaction will be submitted to Aris's stockholders for their consideration and approval.
• The closing of the transaction is expected in the fourth quarter of 2025, subject to customary closing conditions, regulatory approvals, and Aris shareholder approval.
• WES will host a conference call on August 7, 2025, to discuss its second-quarter results.
• Aris is scheduled to publish its second-quarter earnings results after market close on August 11, 2025 (without a conference call).
• WES will pay its second-quarter 2025 per-unit distribution on August 14, 2025.
• WES will incorporate the impact of the Aris acquisition into its 2026 guidance projections, to be announced in late February 2026.
• The North Loving Train II cryogenic natural-gas processing train is expected to be in-service early in the second quarter of 2027.

Key Dates

Recommendation

The acquisition of Aris Water Solutions by Western Midstream Partners is a strategically sound move that is expected to be accretive to Free Cash Flow per unit in 2026 and generate significant cost synergies. It expands WES's footprint in the high-growth Delaware Basin, diversifies its customer base with investment-grade counterparties, and creates a more integrated and competitive midstream water services platform. Coupled with WES's strong Q2 2025 financial performance, reaffirmed guidance, and commitment to maintaining a healthy balance sheet, the transaction positions the combined entity for sustained growth and enhanced value creation for unitholders. The reduction in the TRA termination payment also represents a favorable financial outcome. While there is some equity dilution, the strategic benefits and expected accretion outweigh this, making it an attractive investment.

Keywords

Midstream, Water Solutions, Delaware Basin, Permian Basin, Merger, Acquisition, Natural Gas Processing, Crude Oil Gathering, NGLs, Produced Water, WES, ARIS, Western Midstream, Aris Water Solutions, Energy Infrastructure, Oil & Gas, MLP