The Daley Note

Western Midstream (WES), rumored to be on the prowl for a Permian deal, will acquire Brazos Midstream’s Delaware assets for $1.6B. The purchase price represents an 8x multiple on expected 2027 EBITDA, WES said, which East Daley Analytics views as an attractive multiple given the assets’ location in a growing basin and the high-quality producers behind the system.

The purchase, announced concurrently with Western’s 1Q26 earnings on May 6, likely signals the end of a potential tie-up with Kinetik Energy (KNTK). WES reportedly approached KNTK in February with a buyout offer, but that deal appears to have fizzled. Neither management team has publicly commented on the rumored merger, originally reported in the Financial Times, and WES has now committed to a different Delaware operator. The company expects to fund the Brazos purchase 50/50 with cash and equity.

Operationally, WES highlighted potential synergies from the 460 MMcf/d Comanche plant, which has 125 MMcf/d of spare processing capacity. The estimate of latent capacity lines up with East Daley’s models, as shown below for the Brazos Delaware system in Energy Data Studio. WES said it expects to fill the plant after the acquisition closes.

WES also disclosed the largest producers on the system, which align with our counterparty data for the Brazos system. Diamondback Energy (FANG), Permian Resources (PR), ExxonMobil (XOM), U.S. Energy Development, APA Corp. and Continental Resources were among the producers highlighted.

Using plant data from Energy Data Studio, East Daley estimates the Comanche plant is currently processing gas with 7.02 gallons per Mcf (GPM) of NGLs (see figure). Charting the implied GPM over time shows the NGL content is steadily rising, a common theme highlighted by midstream operators in the Permian.

The Brazos system produced an average 48 Mb/d of NGLs in the trailing 12 months prior to October 2025, the latest reported data available on the system. Extrapolating the most recent GPM forward, WES could see an incremental 20 Mb/d of NGLs if it is able to fill the remaining 125 MMcf/d of capacity in the Comanche plant. The acquisition also provides WES with more acreage and production to feed its various product lines (crude oil, natural gas, NGLs and water).

WES stated on its earnings call that it will need minimal capital to integrate Brazos into the WES footprint, making the acquisition largely bolt-on. The transaction is expected to close at some point in 2Q26, with Brazos contributing fully to earnings starting in 3Q26.

Bottom Line:  The WES-Brazos merger is a good deal at an attractive multiple, providing Western the opportunity to realize operational synergies and boost production across all product lines.

However, WES still faces a long-term problem, which East Daley highlighted in our appraisal of the rumored Kinetik merger. In the midstream space, operators have been focusing on integrating from the wellhead to the water. The Brazos acquisition expands WES’ footprint in the premier US oil basin, but the company still lacks the ability to move products to downstream assets, whether fractionators or export docks, in which it also owns an interest. Over the long term, WES needs to begin allocating capital further downstream, or risks losing out to more integrated operators. – London Spivey Tickers: APA, FANG, KNTK, PR, WES, XOM.