Core Viewpoint - The U.S. stock market has been volatile in 2025, but Western Midstream Partners (WES) stands out with a robust 9.4% yield supported by a durable and inflation-resistant business model [1] Business Model - Western Midstream has a vast infrastructure across major oil and gas basins, including over 14,000 miles of pipeline, enabling it to process, transport, and store various energy products [3] - The company operates predominantly on a fee-based model, with approximately 95% of natural gas contracts and 100% of liquids contracts being fee-based, providing low exposure to commodity price fluctuations [4] Geopolitical Context - The ongoing geopolitical tensions, particularly the war in Ukraine, have led to a significant reduction in the EU's reliance on Russian pipeline gas, dropping from over 40% in 2021 to about 11% in 2024, while U.S. LNG exports to the EU surged from 26% in 2021 to 70% in the first half of 2025 [5] - Western Midstream's infrastructure in the Permian basin and Rocky Mountains positions it as a key player in the U.S. natural gas system, benefiting from these geopolitical shifts [6] Financial Performance - In Q1, Western Midstream reported $594 million in adjusted EBITDA and $399 million in free cash flow, with a cash balance of $2.4 billion and guidance for free cash flows between $1.275 billion and $1.475 billion for 2025 [7] - The company had a dividend coverage ratio of 1.6 times in Q1, indicating net income was 60% higher than dividends distributed, and it increased its quarterly dividend by 4% for 2025 [8] Business Expansion - Western Midstream completed its North Loving natural gas processing plant ahead of schedule, increasing processing capacity in West Texas by approximately 13% or 250 million cubic feet per day [10] - The company is also developing the Pathfinder pipeline, expected to transport 800,000 barrels per day of produced water, with a long-term agreement already in place with Occidental Petroleum, reducing execution risk [11] Valuation - Trading at an enterprise-value-to-EBITDA ratio of 9.8, Western Midstream appears discounted compared to peers, despite concerns over business concentration risk, as Occidental Petroleum accounted for nearly 60% of total revenues in 2024 [12] - The market may be overestimating the risks associated with Occidental, which is financially healthy and holds a 44.8% ownership stake in Western Midstream [12] Investment Appeal - Western Midstream offers a unique combination of a 9% yield, inflation protection, and exposure to a strong U.S. energy sector, making it an attractive investment option [13]