Western Midstream Partners has been upgraded to a strong buy, according to a recent analyst note that puts the midstream operator’s Western Midstream 2027 growth prospects at the center of the case. The note projects that the partnership’s expansion projects and recent guidance increases will support materially higher earnings and cash flow by 2027, even as units continue to offer a sector-leading yield near 9%.
A diversified midstream base
Western Midstream operates a diversified midstream business, with significant exposure to natural gas and a strong position in the Delaware Basin. That footprint was reinforced by the Brazos Delaware acquisition, which the analyst cites as part of the partnership’s strengthened asset base. The combination gives the company multiple touchpoints across gathering, processing and related services rather than reliance on a single commodity or region.
Two projects set to start up in 2027
The analyst identifies two key catalysts that are expected to drive results in 2027. The Pathfinder Pipeline is slated to come online in the first quarter of 2027, while North Loving II is scheduled to begin in the second quarter. Together, these projects underpin the note’s estimates of $3.2 billion in EBITDA and $2.3 billion in distributable cash flow for 2027.
Those figures represent the core of the upgrade thesis. The analyst expects the projects to convert into higher volumes and cash generation as they ramp, supporting both the distribution and the partnership’s financial flexibility.
Distribution and valuation
On the distribution side, the note projects a quarterly payout of $0.96 per unit, with coverage of 1.44x. That coverage level suggests room to fund the distribution without stretching the balance sheet. The analyst also points to controlled leverage as a supporting factor for the yield, which stands out relative to much of the midstream sector.
Using those assumptions, the note arrives at a fair value of $51 per unit. The combination of a high yield, projected distribution growth and the 2027 project start-ups forms the basis for the strong buy rating.
What to watch
The investment case depends on the Pathfinder Pipeline and North Loving II reaching operation on schedule and on the partnership delivering the EBITDA and distributable cash flow the analyst projects. Guidance raises cited in the note provide some support for that trajectory, but the 2027 estimates remain forward-looking. For income-focused investors, the key variables are distribution coverage, leverage and the pace at which the new projects contribute to cash flow.
