Annual Statements Open main menu
  1. Annual Statements
  2. » Companies
  3. » Western Midstream Partners, LP
  4. » Quarter Report: 2022 March (Form 10-Q)

Western Midstream Partners, LP - Quarter Report: 2022 March (Form 10-Q)


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022

Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to      
WESTERN MIDSTREAM PARTNERS, LP
WESTERN MIDSTREAM OPERATING, LP
(Exact name of registrant as specified in its charter)
Commission file number:State or other jurisdiction of incorporation or organization:I.R.S. Employer Identification No.:
Western Midstream Partners, LP001-35753Delaware46-0967367
Western Midstream Operating, LP001-34046Delaware26-1075808
Address of principal executive offices:Zip Code:Registrant’s telephone number, including area code:
Western Midstream Partners, LP9950 Woodloch Forest Drive, Suite 2800The Woodlands,Texas77380(346)786-5000
Western Midstream Operating, LP9950 Woodloch Forest Drive, Suite 2800The Woodlands,Texas77380(346)786-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of exchange
on which registered
Common units outstanding as of May 2, 2022:
Western Midstream Partners, LPCommon unitsWESNew York Stock Exchange403,333,810
Western Midstream Operating, LPNoneNoneNoneNone
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Western Midstream Partners, LPYes
þ
No
¨
Western Midstream Operating, LPYes
þ
No
¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Western Midstream Partners, LPYes
þ
No
¨
Western Midstream Operating, LPYes
þ
No
¨



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Western Midstream Partners, LPLarge Accelerated FilerAccelerated FilerNon-accelerated FilerSmaller Reporting CompanyEmerging Growth Company
þ☐☐☐☐
Western Midstream Operating, LPLarge Accelerated FilerAccelerated FilerNon-accelerated FilerSmaller Reporting CompanyEmerging Growth Company
☐☐þ☐☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Western Midstream Partners, LP¨
Western Midstream Operating, LP¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Western Midstream Partners, LPYes☐No
þ
Western Midstream Operating, LPYes☐
No
þ

FILING FORMAT

This quarterly report on Form 10-Q is a combined report being filed by two separate registrants: Western Midstream Partners, LP and Western Midstream Operating, LP. Western Midstream Operating, LP is a consolidated subsidiary of Western Midstream Partners, LP that has publicly traded debt, but does not have any publicly traded equity securities. Information contained herein related to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrant.

Part I, Item 1 of this quarterly report includes separate financial statements (i.e., consolidated statements of operations, consolidated balance sheets, consolidated statements of equity and partners’ capital, and consolidated statements of cash flows) for Western Midstream Partners, LP and Western Midstream Operating, LP. The accompanying Notes to Consolidated Financial Statements, which are included under Part I, Item 1 of this quarterly report, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is included under Part I, Item 2 of this quarterly report, are presented on a combined basis for each registrant, with any material differences between the registrants disclosed separately.



TABLE OF CONTENTS
PAGE
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 6.
3
Table of Contents
COMMONLY USED TERMS AND DEFINITIONS

Unless the context otherwise requires, references to “we,” “us,” “our,” “WES,” “the Partnership,” or “Western Midstream Partners, LP” refer to Western Midstream Partners, LP (formerly Western Gas Equity Partners, LP) and its subsidiaries. As used in this Form 10-Q, the terms and definitions below have the following meanings:
AESC: Anadarko Energy Services Company, a subsidiary of Occidental.
Anadarko: Anadarko Petroleum Corporation and its subsidiaries, excluding our general partner, which became a wholly owned subsidiary of Occidental upon closing of the Occidental Merger on August 8, 2019.
Barrel or Bbl: 42 U.S. gallons measured at 60 degrees Fahrenheit.
Bbls/d: Barrels per day.
Board: The board of directors of WES’s general partner.
Cactus II: Cactus II Pipeline LLC.
Chipeta: Chipeta Processing, LLC.
Condensate: A natural-gas liquid with a low vapor pressure compared to drip condensate, mainly composed of propane, butane, pentane, and heavier hydrocarbon fractions.
Cryogenic: The process by which liquefied gases are used to bring natural-gas volumes to very low temperatures (below approximately -238 degrees Fahrenheit) to separate natural-gas liquids from natural gas. Through cryogenic processing, more natural-gas liquids are extracted as compared to traditional refrigeration methods.
DBM: Delaware Basin Midstream, LLC.
DBM water systems: DBM’s produced-water gathering and disposal systems in West Texas.
DJ Basin complex: The Platte Valley system, Wattenberg system, Lancaster plant, Latham plant, and Wattenberg processing plant.
EBITDA: Earnings before interest, taxes, depreciation, and amortization. For a definition of “Adjusted EBITDA,” see Key Performance Metrics under Part I, Item 2 of this Form 10-Q.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Fixed-Rate Senior Notes: WES Operating’s fixed-rate 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050, issued in January 2020.
Floating-Rate Senior Notes: WES Operating’s floating-rate Senior Notes due 2023.
Fort Union: Fort Union Gas Gathering, LLC.
Fractionation: The process of applying various levels of high pressure and low temperature to separate a stream of natural-gas liquids into ethane, propane, normal butane, isobutane, and natural gasoline for end-use sale.
FRP: Front Range Pipeline LLC.
GAAP: Generally accepted accounting principles in the United States.
General partner: Western Midstream Holdings, LLC, the general partner of the Partnership.
Hydraulic fracturing: The high-pressure injection of fluids into the wellbore to create fractures in rock formations, stimulating the production of oil or gas.
4
Table of Contents
Imbalance: Imbalances result from (i) differences between gas and NGLs volumes nominated by customers and gas and NGLs volumes received from those customers and (ii) differences between gas and NGLs volumes received from customers and gas and NGLs volumes delivered to those customers.
LIBOR: London Interbank Offered Rate.
Marcellus Interest: The 33.75% interest in the Larry’s Creek, Seely, and Warrensville gas-gathering systems and related facilities located in northern Pennsylvania.
MBbls/d: Thousand barrels per day.
Mcf: Thousand cubic feet.

MGR: Mountain Gas Resources, LLC.
MGR assets: The Red Desert complex and the Granger straddle plant.
Mi Vida: Mi Vida JV LLC.
MLP: Master limited partnership.
MMcf: Million cubic feet.
MMcf/d: Million cubic feet per day.
Mont Belvieu JV: Enterprise EF78 LLC.
Natural-gas liquid(s) or NGL(s): The combination of ethane, propane, normal butane, isobutane, and natural gasolines that, when removed from natural gas, become liquid under various levels of pressure and temperature.
NYMEX: New York Mercantile Exchange.
Occidental: Occidental Petroleum Corporation and, as the context requires, its subsidiaries, excluding our general partner.
Occidental Merger: Occidental’s acquisition by merger of Anadarko pursuant to the Agreement and Plan of Merger, dated as of May 9, 2019, by and among Occidental, Baseball Merger Sub 1, Inc., and Anadarko, which closed on August 8, 2019.
Panola: Panola Pipeline Company, LLC.
Produced water: Byproduct associated with the production of crude oil and natural gas that often contains a number of dissolved solids and other materials found in oil and gas reservoirs.
Ranch Westex: Ranch Westex JV LLC.
RCF: WES Operating’s $2.0 billion senior unsecured revolving credit facility that matures in February 2025.
Red Bluff Express: Red Bluff Express Pipeline, LLC.
Red Desert complex: The Patrick Draw and Red Desert processing plants, which are currently inactive, associated gathering lines, and related facilities.
Related parties: Occidental, the Partnership’s equity interests (see Note 6—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q), and the Partnership and WES Operating for transactions that eliminate upon consolidation.
Rendezvous: Rendezvous Gas Services, LLC.
Residue: The natural gas remaining after the unprocessed natural-gas stream has been processed or treated.
5
Table of Contents
Saddlehorn: Saddlehorn Pipeline Company, LLC.
SEC: U.S. Securities and Exchange Commission.
Services Agreement: That certain amended and restated Services, Secondment, and Employee Transfer Agreement, dated as of December 31, 2019, by and among Occidental, Anadarko, and WES Operating GP.
Springfield system: The Springfield gas-gathering system and Springfield oil-gathering system.
TEFR Interests: The interests in TEP, TEG, and FRP.
TEG: Texas Express Gathering LLC.
TEP: Texas Express Pipeline LLC.
WES Operating: Western Midstream Operating, LP, formerly known as Western Gas Partners, LP, and its subsidiaries.
WES Operating GP: Western Midstream Operating GP, LLC, the general partner of WES Operating.
West Texas complex: The DBM complex and DBJV and Haley systems.
WGRAH: WGR Asset Holding Company LLC.
WGRI: Western Gas Resources, Inc., a subsidiary of Occidental.
White Cliffs: White Cliffs Pipeline, LLC.
Whitethorn LLC: Whitethorn Pipeline Company LLC.
Whitethorn: A crude-oil and condensate pipeline, and related storage facilities, owned by Whitethorn LLC.
$1.0 billion Purchase Program: In February 2022, we announced a buyback program of up to $1.0 billion of our common units through December 31, 2024. The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions.
$250.0 million Purchase Program: In November 2020, we announced a buyback program of up to $250.0 million of our common units through December 31, 2021. The common units were purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. As of December 31, 2021, the entire $250.0 million authorized program had been fulfilled.
6
Table of Contents
PART I.  FINANCIAL INFORMATION (UNAUDITED)

Item 1.  Financial Statements

WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended 
March 31,
thousands except per-unit amounts20222021
Revenues and other
Service revenues – fee based$631,598 $572,275 
Service revenues – product based40,867 31,652 
Product sales85,589 70,805 
Other243 242 
Total revenues and other (1)
758,297 674,974 
Equity income, net – related parties49,607 52,165 
Operating expenses
Cost of product72,848 88,969 
Operation and maintenance128,976 140,332 
General and administrative48,602 45,116 
Property and other taxes18,442 14,384 
Depreciation and amortization134,582 130,553 
Long-lived asset and other impairments
— 14,866 
Total operating expenses (2)
403,450 434,220 
Gain (loss) on divestiture and other, net370 (583)
Operating income (loss)404,824 292,336 
Interest expense(85,455)(98,493)
Gain (loss) on early extinguishment of debt— (289)
Other income (expense), net106 (1,207)
Income (loss) before income taxes319,475 192,347 
Income tax expense (benefit)1,805 1,112 
Net income (loss)317,670 191,235 
Net income (loss) attributable to noncontrolling interests8,953 5,444 
Net income (loss) attributable to Western Midstream Partners, LP$308,717 $185,791 
Limited partners’ interest in net income (loss):
Net income (loss) attributable to Western Midstream Partners, LP$308,717 $185,791 
General partner interest in net (income) loss(6,783)(3,993)
Limited partners’ interest in net income (loss) (3)
301,934 181,798 
Net income (loss) per common unit – basic (3)
$0.75 $0.44 
Net income (loss) per common unit – diluted (3)
$0.75 $0.44 
Weighted-average common units outstanding – basic (3)
403,254 413,104 
Weighted-average common units outstanding – diluted (3)
404,460 413,446 
_________________________________________________________________________________________
(1)Total revenues and other includes related-party amounts of $428.7 million and $378.3 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5.
(2)Total operating expenses includes related-party amounts of $(17.6) million and $39.9 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5.
(3)See Note 4.

7
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
thousands except number of unitsMarch 31,
2022		December 31,
2021
ASSETS
Current assets
Cash and cash equivalents$248,249 $201,999 
Accounts receivable, net601,647 436,513 
Other current assets56,397 46,252 
Total current assets906,293 684,764 
Property, plant, and equipment
Cost12,930,358 12,846,078 
Less accumulated depreciation4,455,162 4,333,171 
Net property, plant, and equipment8,475,196 8,512,907 
Goodwill4,783 4,783 
Other intangible assets736,825 744,742 
Equity investments1,163,069 1,167,187 
Other assets (1)
159,707 158,696 
Total assets (2)
$11,445,873 $11,273,079 
LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL
Current liabilities
Accounts and imbalance payables$395,893 $326,061 
Short-term debt
718,153 505,932 
Accrued ad valorem taxes62,833 44,955 
Accrued liabilities160,247 263,249 
Total current liabilities1,337,126 1,140,197 
Long-term liabilities
Long-term debt
6,188,750 6,400,616 
Deferred income taxes13,557 12,425 
Asset retirement obligations297,187 298,275 
Other liabilities338,446 325,806 
Total long-term liabilities
6,837,940 7,037,122 
Total liabilities (3)
8,175,066 8,177,319 
Equity and partners’ capital
Common units (403,333,810 and 402,993,919 units issued and outstanding at March 31, 2022, and December 31, 2021, respectively)
3,134,018 2,966,955 
General partner units (9,060,641 units issued and outstanding at March 31, 2022, and December 31, 2021)
(5,062)(8,882)
Total partners’ capital3,128,956 2,958,073 
Noncontrolling interests141,851 137,687 
Total equity and partners’ capital3,270,807 3,095,760 
Total liabilities, equity, and partners’ capital$11,445,873 $11,273,079 
________________________________________________________________________________________
(1)Other assets includes $14.6 million and $9.8 million of NGLs line-fill inventory as of March 31, 2022, and December 31, 2021, respectively. Other assets also includes $51.9 million and $56.2 million of materials and supplies inventory as of March 31, 2022, and December 31, 2021, respectively.
(2)Total assets includes related-party amounts of $1.5 billion and $1.4 billion as of March 31, 2022, and December 31, 2021, respectively, which includes related-party Accounts receivable, net of $274.2 million and $180.2 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5.
(3)Total liabilities includes related-party amounts of $275.7 million and $270.5 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5.

See accompanying Notes to Consolidated Financial Statements.
8
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL
(UNAUDITED)
Partners’ Capital
thousandsCommon
Units		General Partner
Units		Noncontrolling
Interests		Total
Balance at December 31, 2021$2,966,955 $(8,882)$137,687 $3,095,760 
Net income (loss)301,934 6,783 8,953 317,670 
Distributions to Chipeta noncontrolling interest owner— — (1,984)(1,984)
Distributions to noncontrolling interest owner of WES Operating— — (2,805)(2,805)
Distributions to Partnership unitholders(131,786)(2,963)— (134,749)
Unit repurchases (1)
(5,149)— — (5,149)
Contributions of equity-based compensation from Occidental
1,949 — — 1,949 
Equity-based compensation expense
5,794 — — 5,794 
Net contributions from (distributions to) related parties409 — — 409 
Other(6,088)— — (6,088)
Balance at March 31, 2022$3,134,018 $(5,062)$141,851 $3,270,807 
_________________________________________________________________________________________
(1)See Note 4.

Partners’ Capital
thousandsCommon
Units		General Partner
Units		Noncontrolling
Interests		Total
Balance at December 31, 2020$2,778,339 $(17,208)$134,081 $2,895,212 
Net income (loss)181,798 3,993 5,444 191,235 
Distributions to Chipeta noncontrolling interest owner— — (276)(276)
Distributions to noncontrolling interest owner of WES Operating— — (2,551)(2,551)
Distributions to Partnership unitholders(128,447)(2,818)— (131,265)
Unit repurchases (1)
(16,241)— — (16,241)
Contributions of equity-based compensation from Occidental
3,210 — — 3,210 
Equity-based compensation expense
3,524 — — 3,524 
Net contributions from (distributions to) related parties1,627 — — 1,627 
Other(2,355)— — (2,355)
Balance at March 31, 2021$2,821,455 $(16,033)$136,698 $2,942,120 
_________________________________________________________________________________________
(1)See Note 4.

See accompanying Notes to Consolidated Financial Statements.
9
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended 
March 31,
thousands20222021
Cash flows from operating activities
Net income (loss)$317,670 $191,235 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization134,582 130,553 
Long-lived asset and other impairments
— 14,866 
Non-cash equity-based compensation expense
7,743 6,734 
Deferred income taxes1,132 557 
Accretion and amortization of long-term obligations, net
1,782 2,088 
Equity income, net – related parties(49,607)(52,165)
Distributions from equity-investment earnings – related parties
45,870 49,048 
(Gain) loss on divestiture and other, net(370)583 
(Gain) loss on early extinguishment of debt— 289 
Other— 11 
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net(165,134)(30,182)
Increase (decrease) in accounts and imbalance payables and accrued liabilities, net(14,292)(16,467)
Change in other items, net(2,918)(35,600)
Net cash provided by operating activities276,458 261,550 
Cash flows from investing activities
Capital expenditures (1)
(83,971)(61,783)
Contributions to equity investments – related parties(2,070)(86)
Distributions from equity investments in excess of cumulative earnings – related parties9,925 12,141 
Proceeds from the sale of assets to third parties383 — 
(Increase) decrease in materials and supplies inventory and other4,116 3,256 
Net cash used in investing activities(71,617)(46,472)
Cash flows from financing activities
Borrowings, net of debt issuance costs — 100,000 
Repayments of debt — (531,085)
Increase (decrease) in outstanding checks(7,088)(22,017)
Distributions to Partnership unitholders (2)
(134,749)(131,265)
Distributions to Chipeta noncontrolling interest owner(1,984)(276)
Distributions to noncontrolling interest owner of WES Operating(2,805)(2,551)
Net contributions from (distributions to) related parties409 1,627 
Unit repurchases(5,149)(16,241)
Other(7,225)(1,816)
Net cash provided by (used in) financing activities(158,591)(603,624)
Net increase (decrease) in cash and cash equivalents46,250 (388,546)
Cash and cash equivalents at beginning of period201,999 444,922 
Cash and cash equivalents at end of period$248,249 $56,376 
Supplemental disclosures
Interest paid, net of capitalized interest$149,289 $153,979 
Income taxes paid (reimbursements received)905 932 
Accrued capital expenditures36,821 22,964 
_________________________________________________________________________________________
(1)Includes purchases from related parties of $2.0 million for the three months ended March 31, 2021. See Note 5.
(2)See Note 5.
See accompanying Notes to Consolidated Financial Statements.
10
Table of Contents
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended 
March 31,
thousands 20222021
Revenues and other
Service revenues – fee based$631,598 $572,275 
Service revenues – product based40,867 31,652 
Product sales85,589 70,805 
Other243 242 
Total revenues and other (1)
758,297 674,974 
Equity income, net – related parties49,607 52,165 
Operating expenses
Cost of product72,848 88,969 
Operation and maintenance128,976 140,332 
General and administrative47,861 44,230 
Property and other taxes18,442 14,384 
Depreciation and amortization134,582 130,553 
Long-lived asset and other impairments
— 14,866 
Total operating expenses (2)
402,709 433,334 
Gain (loss) on divestiture and other, net370 (583)
Operating income (loss)405,565 293,222 
Interest expense(85,455)(98,493)
Gain (loss) on early extinguishment of debt— (289)
Other income (expense), net103 (1,210)
Income (loss) before income taxes320,213 193,230 
Income tax expense (benefit)1,805 1,112 
Net income (loss)318,408 192,118 
Net income (loss) attributable to noncontrolling interest2,636 1,633 
Net income (loss) attributable to Western Midstream Operating, LP$315,772 $190,485 
________________________________________________________________________________________
(1)Total revenues and other includes related-party amounts of $428.7 million and $378.3 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5.
(2)Total operating expenses includes related-party amounts of $(16.7) million and $40.4 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5.


See accompanying Notes to Consolidated Financial Statements.
11
Table of Contents
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
thousands except number of unitsMarch 31,
2022		December 31,
2021
ASSETS
Current assets
Cash and cash equivalents$244,213 $195,598 
Accounts receivable, net601,647 436,513 
Other current assets55,023 44,421 
Total current assets900,883 676,532 
Property, plant, and equipment
Cost12,930,358 12,846,078 
Less accumulated depreciation4,455,162 4,333,171 
Net property, plant, and equipment8,475,196 8,512,907 
Goodwill4,783 4,783 
Other intangible assets736,825 744,742 
Equity investments1,163,069 1,167,187 
Other assets (1)
158,795 158,696 
Total assets (2)
$11,439,551 $11,264,847 
LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL
Current liabilities
Accounts and imbalance payables$412,221 $374,443 
Short-term debt
718,153 505,932 
Accrued ad valorem taxes62,833 44,955 
Accrued liabilities132,309 210,693 
Total current liabilities1,325,516 1,136,023 
Long-term liabilities
Long-term debt
6,188,750 6,400,616 
Deferred income taxes13,557 12,425 
Asset retirement obligations297,187 298,275 
Other liabilities337,647 324,842 
Total long-term liabilities
6,837,141 7,036,158 
Total liabilities (3)
8,162,657 8,172,181 
Equity and partners’ capital
Common units (318,675,578 units issued and outstanding at March 31, 2022, and December 31, 2021)
3,246,865 3,063,289 
Total partners’ capital3,246,865 3,063,289 
Noncontrolling interest30,029 29,377 
Total equity and partners’ capital3,276,894 3,092,666 
Total liabilities, equity, and partners’ capital$11,439,551 $11,264,847 
_________________________________________________________________________________________
(1)Other assets includes $14.6 million and $9.8 million of NGLs line-fill inventory as of March 31, 2022, and December 31, 2021, respectively. Other assets also includes $51.9 million and $56.2 million of materials and supplies inventory as of March 31, 2022, and December 31, 2021, respectively.
(2)Total assets includes related-party amounts of $1.5 billion and $1.4 billion as of March 31, 2022, and December 31, 2021, respectively, which includes related-party Accounts receivable, net of $274.2 million and $180.2 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5.
(3)Total liabilities includes related-party amounts of $292.3 million and $318.7 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5.
See accompanying Notes to Consolidated Financial Statements.
12
Table of Contents
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL
(UNAUDITED)
thousandsCommon
Units		Noncontrolling
Interest		Total
Balance at December 31, 2021$3,063,289 $29,377 $3,092,666 
Net income (loss)315,772 2,636 318,408 
Distributions to Chipeta noncontrolling interest owner— (1,984)(1,984)
Distributions to WES Operating unitholders(140,217)— (140,217)
Contributions of equity-based compensation from Occidental
1,949 — 1,949 
Contributions of equity-based compensation from WES
5,663 — 5,663 
Net contributions from (distributions to) related parties409 — 409 
Balance at March 31, 2022$3,246,865 $30,029 $3,276,894 

thousandsCommon
Units		Noncontrolling
Interest		Total
Balance at December 31, 2020$2,831,199 $29,552 $2,860,751 
Net income (loss)190,485 1,633 192,118 
Distributions to Chipeta noncontrolling interest owner— (276)(276)
Distributions to WES Operating unitholders(127,470)— (127,470)
Contributions of equity-based compensation from Occidental
3,210 — 3,210 
Contributions of equity-based compensation from WES
10,826 — 10,826 
Net contributions from (distributions to) related parties1,627 — 1,627 
Balance at March 31, 2021$2,909,877 $30,909 $2,940,786 

See accompanying Notes to Consolidated Financial Statements.
13
Table of Contents
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended 
March 31,
thousands20222021
Cash flows from operating activities
Net income (loss)$318,408 $192,118 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization134,582 130,553 
Long-lived asset and other impairments
— 14,866 
Non-cash equity-based compensation expense
7,612 14,036 
Deferred income taxes1,132 557 
Accretion and amortization of long-term obligations, net
1,782 2,088 
Equity income, net – related parties(49,607)(52,165)
Distributions from equity-investment earnings – related parties
45,870 49,048 
(Gain) loss on divestiture and other, net(370)583 
(Gain) loss on early extinguishment of debt— 289 
Other— 11 
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net(165,134)(50,540)
Increase (decrease) in accounts and imbalance payables and accrued liabilities, net(21,864)(3,748)
Change in other items, net(2,294)(36,028)
Net cash provided by operating activities270,117 261,668 
Cash flows from investing activities
Capital expenditures (1)
(83,971)(61,783)
Contributions to equity investments – related parties(2,070)(86)
Distributions from equity investments in excess of cumulative earnings – related parties9,925 12,141 
Proceeds from the sale of assets to third parties383 — 
(Increase) decrease in materials and supplies inventory and other4,116 3,256 
Net cash used in investing activities(71,617)(46,472)
Cash flows from financing activities
Borrowings, net of debt issuance costs— 100,000 
Repayments of debt — (531,085)
Increase (decrease) in outstanding checks(6,953)(22,209)
Distributions to WES Operating unitholders (2)
(140,217)(127,470)
Distributions to Chipeta noncontrolling interest owner(1,984)(276)
Net contributions from (distributions to) related parties409 1,627 
Other(1,140)(1,816)
Net cash provided by (used in) financing activities(149,885)(581,229)
Net increase (decrease) in cash and cash equivalents48,615 (366,033)
Cash and cash equivalents at beginning of period195,598 418,537 
Cash and cash equivalents at end of period$244,213 $52,504 
Supplemental disclosures
Interest paid, net of capitalized interest$149,289 $153,979 
Income taxes paid (reimbursements received)905 932 
Accrued capital expenditures36,821 22,964 
________________________________________________________________________________________
(1)Includes purchases from related parties of $2.0 million for the three months ended March 31, 2021. See Note 5.
(2)See Note 5.
See accompanying Notes to Consolidated Financial Statements.
14
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

General. Western Midstream Partners, LP is a Delaware master limited partnership formed in September 2012. Western Midstream Operating, LP (together with its subsidiaries, “WES Operating”) is a Delaware limited partnership formed in 2007 to acquire, own, develop, and operate midstream assets. Western Midstream Partners, LP owns, directly and indirectly, a 98.0% limited partner interest in WES Operating, and directly owns all of the outstanding equity interests of Western Midstream Operating GP, LLC, which holds the entire non-economic general partner interest in WES Operating.
For purposes of these consolidated financial statements, the “Partnership” refers to Western Midstream Partners, LP in its individual capacity or to Western Midstream Partners, LP and its subsidiaries, including Western Midstream Operating GP, LLC and WES Operating, as the context requires. “WES Operating GP” refers to Western Midstream Operating GP, LLC, individually as the general partner of WES Operating. The Partnership’s general partner, Western Midstream Holdings, LLC (the “general partner”), is a wholly owned subsidiary of Occidental Petroleum Corporation. “Occidental” refers to Occidental Petroleum Corporation, as the context requires, and its subsidiaries, excluding the general partner. “Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding Western Midstream Holdings, LLC. Anadarko became a wholly owned subsidiary of Occidental as a result of Occidental’s acquisition by merger of Anadarko on August 8, 2019. “Related parties” refers to Occidental (see Note 5), the Partnership’s investments accounted for under the equity method of accounting (see Note 6), and the Partnership and WES Operating for transactions that eliminate upon consolidation (see Note 5).
The Partnership is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural-gas liquids (“NGLs”), and crude oil; and gathering and disposing of produced water. In its capacity as a natural-gas processor, the Partnership also buys and sells natural gas, NGLs, and condensate on behalf of itself and as an agent for its customers under certain contracts. As of March 31, 2022, the Partnership’s assets and investments consisted of the following:
Wholly
Owned and
Operated		Operated
Interests		Non-Operated
Interests		Equity
Interests
Gathering systems (1)
17 2 3 1 
Treating facilities37 3 — — 
Natural-gas processing plants/trains
24 3 — 5 
NGLs pipelines2 — — 5 
Natural-gas pipelines
5 — — 1 
Crude-oil pipelines
3 1 — 4 
_________________________________________________________________________________________
(1)Includes the DBM water systems.

These assets and investments are located in Texas, New Mexico, the Rocky Mountains (Colorado, Utah, and Wyoming), and North-central Pennsylvania.

15
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Basis of presentation. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of the Partnership and entities in which it holds a controlling financial interest, including WES Operating, WES Operating GP, proportionately consolidated interests, and equity investments (see table below). All significant intercompany transactions have been eliminated.
The following table outlines the ownership interests and the accounting method of consolidation used in the consolidated financial statements for entities not wholly owned:
Percentage Interest
Full consolidation
Chipeta (1)
75.00 %
Proportionate consolidation (2)
Springfield system50.10 %
Marcellus Interest systems33.75 %
Equity investments (3)
Mi Vida JV LLC (“Mi Vida”)50.00 %
Ranch Westex JV LLC (“Ranch Westex”)50.00 %
Front Range Pipeline LLC (“FRP”)33.33 %
Red Bluff Express Pipeline, LLC (“Red Bluff Express”)30.00 %
Enterprise EF78 LLC (“Mont Belvieu JV”)25.00 %
Rendezvous Gas Services, LLC (“Rendezvous”)22.00 %
Texas Express Pipeline LLC (“TEP”)20.00 %
Texas Express Gathering LLC (“TEG”)20.00 %
Whitethorn Pipeline Company LLC (“Whitethorn LLC”)20.00 %
Saddlehorn Pipeline Company, LLC (“Saddlehorn”)20.00 %
Cactus II Pipeline LLC (“Cactus II”)15.00 %
Panola Pipeline Company, LLC (“Panola”)15.00 %
White Cliffs Pipeline, LLC (“White Cliffs”)10.00 %
_________________________________________________________________________________________
(1)The 25% third-party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements. See Noncontrolling interests below.
(2)The Partnership proportionately consolidates its associated share of the assets, liabilities, revenues, and expenses attributable to these assets.
(3)Investments in non-controlled entities over which the Partnership exercises significant influence are accounted for under the equity method of accounting. “Equity-investment throughput” refers to the Partnership’s share of average throughput for these investments.

Certain information and note disclosures commonly included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying consolidated financial statements and notes should be read in conjunction with the Partnership’s 2021 Form 10-K, as filed with the SEC on February 23, 2022. Management believes that the disclosures made are adequate to make the information not misleading.

16
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The consolidated financial results of WES Operating are included in the Partnership’s consolidated financial statements. Throughout these notes to consolidated financial statements, and to the extent material, any differences between the consolidated financial results of the Partnership and WES Operating are discussed separately. The Partnership’s consolidated financial statements differ from those of WES Operating primarily as a result of (i) the presentation of noncontrolling interest ownership (see Noncontrolling interests below), (ii) the elimination of WES Operating GP’s investment in WES Operating with WES Operating GP’s underlying capital account, (iii) the general and administrative expenses incurred by the Partnership, which are separate from, and in addition to, those incurred by WES Operating, (iv) the inclusion of the impact of Partnership equity balances and Partnership distributions, and (v) transactions between the Partnership and WES Operating that eliminate upon consolidation.

Presentation of the Partnership’s assets. The Partnership’s assets include assets owned and ownership interests accounted for by the Partnership under the equity method of accounting, through its 98.0% partnership interest in WES Operating, as of March 31, 2022 (see Note 6). The Partnership also owns and controls the entire non-economic general partner interest in WES Operating GP, and the Partnership’s general partner is owned by Occidental.

Use of estimates. In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, using historical experience and other reasonable methods. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Effects on the business, financial condition, and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information included herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements, and certain prior-period amounts have been reclassified to conform to the current-year presentation.

Noncontrolling interests. The Partnership’s noncontrolling interests in the consolidated financial statements consist of (i) the 25% third-party interest in Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating. WES Operating’s noncontrolling interest in the consolidated financial statements consists of the 25% third-party interest in Chipeta. See Note 4.

Segments. The Partnership’s operations continue to be organized into a single operating segment, the assets of which gather, compress, treat, process, and transport natural gas; gather, stabilize, and transport condensate, NGLs, and crude oil; and gather and dispose of produced water in the United States.

Equity-based compensation. During the three months ended March 31, 2022, the Partnership issued 565,246 common units under its long-term incentive plans. Compensation expense was $5.8 million and $3.5 million for the three months ended March 31, 2022 and 2021, respectively.

17
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table summarizes revenue from contracts with customers:
 Three Months Ended 
March 31,
thousands20222021
Revenue from customers
Service revenues – fee based$631,598 $529,413 
Service revenues – product based40,867 31,652 
Product sales85,589 70,805 
Total revenue from customers758,054 631,870
Revenue from other than customers
Lease revenue (1)
— 42,862 
Other243 242 
Total revenues and other$758,297 $674,974 
_________________________________________________________________________________________
(1)Includes fixed- and variable-lease revenue from an operating and maintenance agreement entered into with Occidental. See Operating leases within Note 5.

Contract balances. Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $589.5 million and $424.6 million as of March 31, 2022 and December 31, 2021, respectively.
Contract assets primarily relate to (i) revenue accrued but not yet billed under cost-of-service contracts with fixed and variable fees and (ii) accrued deficiency fees the Partnership expects to charge customers once the related performance periods are completed. The following table summarizes activity related to contract assets from contracts with customers:
thousands
Contract assets balance at December 31, 2021
$22,557 
Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period(208)
Additional estimated revenues recognized6,553 
Contract assets balance at March 31, 2022
$28,902 
Contract assets at March 31, 2022
Other current assets$10,897 
Other assets18,005 
Total contract assets from contracts with customers$28,902 

18
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract liabilities primarily relate to (i) fixed and variable fees under cost-of-service contracts that are received from customers for which revenue recognition is deferred, (ii) aid-in-construction payments received from customers that must be recognized over the expected period of customer benefit, and (iii) fees that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of customer benefit. The following table summarizes activity related to contract liabilities from contracts with customers:
thousands
Contract liabilities balance at December 31, 2021
$313,146 
Cash received or receivable, excluding revenues recognized during the period8,245 
Revenues recognized that were included in the contract liability balance at the beginning of the period(11,241)
Contract liabilities balance at March 31, 2022
$310,150 
Contract liabilities at March 31, 2022
Accrued liabilities$8,924 
Other liabilities301,226 
Total contract liabilities from contracts with customers$310,150 

Transaction price allocated to remaining performance obligations. Revenues expected to be recognized from certain performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2022, are presented in the following table. The Partnership applies the optional exemptions in Revenue from Contracts with Customers (Topic 606) and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Therefore, the following table represents only a portion of expected future revenues from existing contracts as most future revenues from customers are dependent on future variable customer volumes and, in some cases, variable commodity prices for those volumes.
thousands
Remainder of 2022$824,085 
20231,047,028 
20241,021,224 
2025937,443 
2026809,384 
Thereafter2,177,567 
Total$6,816,731 

19
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. PARTNERSHIP DISTRIBUTIONS

Partnership distributions. Under its partnership agreement, the Partnership distributes all of its available cash (beyond proper reserves as defined in its partnership agreement) to unitholders of record on the applicable record date within 55 days following each quarter’s end. The Board of Directors of the general partner (the “Board”) declared the following cash distributions to the Partnership’s unitholders for the periods presented:
thousands except per-unit amounts
Quarters Ended
Total Quarterly
Per-unit
Distribution		Total Quarterly
Cash Distribution		Distribution
Date		Record
Date
2021
March 31$0.31500 $132,969 May 14, 2021April 30, 2021
June 300.31900 134,662 August 13, 2021July 30, 2021
September 300.32300 134,862 November 12, 2021November 1, 2021
December 310.32700 134,749 February 14, 2022January 31, 2022
2022
March 31$0.50000 $206,197 May 13, 2022May 2, 2022

Available cash. The amount of available cash (beyond proper reserves as defined in the partnership agreement) generally is all cash on hand at the end of the quarter, plus, at the discretion of the general partner, working capital borrowings made subsequent to the end of such quarter, less the amount of cash reserves established by the general partner to provide for the proper conduct of the Partnership’s business, including (i) to fund future capital expenditures; (ii) to comply with applicable laws, debt instruments, or other agreements; or (iii) to provide funds for unitholder distributions for any one or more of the next four quarters. Working capital borrowings generally include borrowings made under a credit facility or similar financing arrangement and are intended to be repaid or refinanced within 12 months. In all cases, working capital borrowings are used solely for working capital purposes or to fund unitholder distributions.

WES Operating partnership distributions. WES Operating makes quarterly cash distributions to the Partnership and WGR Asset Holding Company LLC (“WGRAH”), a subsidiary of Occidental, in proportion to their share of limited partner interests in WES Operating. See Note 4. WES Operating made the following cash distributions to its limited partners for the periods presented:
thousands
Quarters Ended
Total Quarterly
Cash Distribution		Distribution
Date
2021
March 31$137,030 May 2021
June 30140,217 August 2021
September 30140,217 November 2021
December 31140,217 February 2022
2022
March 31$213,513 May 2022



20
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. EQUITY AND PARTNERS’ CAPITAL

Holdings of Partnership equity. The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” As of March 31, 2022, Occidental held 200,281,578 common units, representing a 48.6% limited partner interest in the Partnership, and through its ownership of the general partner, Occidental indirectly held 9,060,641 general partner units, representing a 2.2% general partner interest in the Partnership. The public held 203,052,232 common units, representing a 49.2% limited partner interest in the Partnership.
In March 2021, an affiliate of Occidental sold 11,500,000 of the Partnership’s common units it held through an underwritten offering, including 1,500,000 common units pursuant to the full exercise of the underwriters’ over-allotment option. The Partnership did not receive any proceeds from the public offering.

Partnership equity repurchases. In February 2022, the Board authorized the Partnership to buy back up to $1.0 billion of the Partnership’s common units through December 31, 2024 (the “$1.0 billion Purchase Program”). The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2022, the Partnership repurchased 225,355 common units on the open market for an aggregate purchase price of $5.1 million. The units were canceled immediately upon receipt. As of March 31, 2022, the Partnership had an authorized amount of $994.9 million remaining under the program.
In November 2020, the Board authorized the Partnership to buy back up to $250.0 million of the Partnership’s common units through December 31, 2021 (the “$250.0 million Purchase Program”). The common units were purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2021, the Partnership repurchased 1,115,808 common units on the open market for an aggregate purchase price of $16.2 million. The units were canceled by the Partnership immediately upon receipt. As of December 31, 2021, the entire $250.0 million authorized program had been fulfilled.

Holdings of WES Operating equity. As of March 31, 2022, (i) the Partnership, directly and indirectly through its ownership of WES Operating GP, owned a 98.0% limited partner interest and the entire non-economic general partner interest in WES Operating and (ii) Occidental, through its ownership of WGRAH, owned a 2.0% limited partner interest in WES Operating, which is reflected as a noncontrolling interest within the consolidated financial statements of the Partnership (see Note 1).

Partnership’s net income (loss) per common unit. The common and general partner unitholders’ allocation of net income (loss) attributable to the Partnership was equal to their cash distributions plus their respective allocations of undistributed earnings or losses in accordance with their weighted-average ownership percentage during each period using the two-class method.
The Partnership’s basic net income (loss) per common unit is calculated by dividing the limited partners’ interest in net income (loss) by the weighted-average number of common units outstanding during the period. Diluted net income (loss) per common unit includes the effect of outstanding units issued under the Partnership’s long-term incentive plans.

21
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. EQUITY AND PARTNERS’ CAPITAL

The following table provides a reconciliation between basic and diluted net income (loss) per common unit:
 Three Months Ended 
March 31,
thousands except per-unit amounts20222021
Net income (loss)
Limited partners’ interest in net income (loss)$301,934 $181,798 
Weighted-average common units outstanding
Basic403,254 413,104 
Dilutive effect of non-vested phantom units1,206 342 
Diluted404,460 413,446 
Excluded due to anti-dilutive effect469 404 
Net income (loss) per common unit
Basic$0.75 $0.44 
Diluted$0.75 $0.44 

WES Operating’s net income (loss) per common unit. Net income (loss) per common unit for WES Operating is not calculated because it has no publicly traded units.

5. RELATED-PARTY TRANSACTIONS

Summary of related-party transactions. The following tables summarize material related-party transactions included in the Partnership’s consolidated financial statements:
Consolidated statements of operations
 Three Months Ended 
March 31,
thousands20222021
Revenues and other
Service revenues – fee based$414,899 $367,475 
Service revenues – product based2,243 4,505 
Product sales11,567 6,271 
Total revenues and other428,709 378,251 
Equity income, net – related parties (1)
49,607 52,165 
Operating expenses
Cost of product (2)
(19,543)17,647 
Operation and maintenance(59)18,122 
General and administrative (3)
1,975 4,093 
Total operating expenses(17,627)39,862 
_________________________________________________________________________________________
(1)See Note 6.
(2)Includes related-party natural-gas and NGLs imbalances.
(3)Includes (i) amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 5) and (ii) equity-based compensation expense allocated to the Partnership by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 5).


22
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

Consolidated balance sheets
thousandsMarch 31,
2022		December 31,
2021
Assets
Accounts receivable, net$274,222 $180,205 
Other current assets28,847 12,490 
Equity investments (1)
1,163,069 1,167,187 
Other assets46,531 45,494 
Total assets1,512,669 1,405,376 
Liabilities
Accounts and imbalance payables47,281 49,242 
Accrued liabilities4,476 13,914 
Other liabilities223,972 207,365 
Total liabilities275,729 270,521 
_________________________________________________________________________________________
(1)See Note 6.

Consolidated statements of cash flows
Three Months Ended 
March 31,
thousands20222021
Distributions from equity-investment earnings – related parties
$45,870 $49,048 
Capital expenditures— (2,000)
Contributions to equity investments – related parties(2,070)(86)
Distributions from equity investments in excess of cumulative earnings – related parties9,925 12,141 
Distributions to Partnership unitholders (1)
(65,492)(66,642)
Distributions to WES Operating unitholders (2)
(2,805)(2,551)
Net contributions from (distributions to) related parties409 1,627 
_________________________________________________________________________________________
(1)Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 3 and Note 4).
(2)Represents distributions paid to Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement (see Note 3 and Note 4).

23
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

The following tables summarize material related-party transactions for WES Operating (which are included in the Partnership’s consolidated financial statements) to the extent the amounts differ from the Partnership’s consolidated financial statements:
Consolidated statements of operations
 Three Months Ended 
March 31,
thousands20222021
General and administrative (1)
$2,948 $4,587 
_________________________________________________________________________________________
(1)Includes (i) amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 5), (ii) equity-based compensation expense allocated to WES Operating by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 5), and (iii) an intercompany service fee between the Partnership and WES Operating.

Consolidated balance sheets
thousandsMarch 31,
2022		December 31,
2021
Other assets$45,619 $45,494 
Accounts and imbalance payables (1)
64,211 97,749 
Accrued liabilities4,159 13,597 
_________________________________________________________________________________________
(1)Includes balances related to transactions between the Partnership and WES Operating.

Consolidated statements of cash flows
Three Months Ended 
March 31,
thousands20222021
Distributions to WES Operating unitholders (1)
$(140,217)$(127,470)
_________________________________________________________________________________________
(1)Represents distributions paid to the Partnership and Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement. See Note 3 and Note 4.

Related-party revenues. Related-party revenues include amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental.

Gathering and processing agreements. The Partnership has significant gathering, processing, and produced-water disposal arrangements with affiliates of Occidental on most of its systems. While Occidental is the contracting counterparty of the Partnership, these arrangements with Occidental include not just Occidental-produced volumes, but also, in some instances, the volumes of other working-interest owners of Occidental who rely on the Partnership’s facilities and infrastructure to bring their volumes to market. Natural-gas throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 36% and 35% for the three months ended March 31, 2022 and 2021, respectively. Crude-oil and NGLs throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 89% and 88% for the three months ended March 31, 2022 and 2021, respectively. Produced-water throughput attributable to production owned or controlled by Occidental was 84% and 86% for the three months ended March 31, 2022 and 2021, respectively.
The Partnership is currently involved in a dispute with Occidental regarding the calculation of the cost-of-service rates under an oil-gathering contract related to the Partnership’s DJ Basin oil-gathering system. If such dispute is resolved in a manner adverse to the Partnership, such resolution could have a negative impact on the Partnership’s financial condition and results of operations, including a reduction in rates and a non-cash charge to earnings.

24
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

In connection with the sale of its Eagle Ford assets in 2017, Anadarko remained the primary counterparty to the Partnership’s Brasada gas processing agreement and entered into an agency relationship with Sanchez Energy Corporation (“Sanchez”), now Mesquite Energy, Inc. (“Mesquite”), that allows Mesquite to process gas under such agreement. In December 2021, the Brasada gas processing agreement was assigned from Anadarko to Mesquite effective July 1, 2023. For this reason, Anadarko continues to be liable under the Brasada gas processing agreement until June 30, 2023, to the extent Mesquite does not perform. For all periods presented, Mesquite has performed Anadarko’s obligations under the Brasada gas processing agreement pursuant to its agency arrangement with Anadarko.
Further, in connection with the sale of its Uinta Basin assets in 2020, Kerr McGee Oil & Gas Onshore LP, a subsidiary of Occidental, retained the deficiency payment obligations under a gas processing agreement at the Chipeta plant. This contingent payment obligation extends through the earlier of October 1, 2022, or the termination of the processing agreement.

Marketing Transition Services Agreement. Effective December 31, 2019, certain subsidiaries of Anadarko entered into a transition services agreement (the “Marketing Transition Services Agreement”) to provide marketing-related services to certain of the Partnership’s subsidiaries through December 31, 2020, subject to the option to extend such services for an additional six-month period. The Marketing Transition Services Agreement was terminated on December 31, 2020. While the Partnership still has some marketing agreements with affiliates of Occidental, the Partnership began marketing and selling substantially all of its natural gas and NGLs directly to third parties beginning on January 1, 2021.

Operating leases. As a result of the surface-use and salt-water disposal agreements being amended under the CUA (see Related-party commercial agreement below), these agreements are now classified as operating leases and a $30.0 million right-of-use (“ROU”) asset, included in Other assets on the consolidated balance sheets, was recognized during the first quarter of 2021. The ROU asset will be amortized to Operation and maintenance expense over the remaining term of the agreements.
Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership, the lessor, entered into an operating and maintenance agreement pursuant to which Occidental provided operational and maintenance services with respect to a crude-oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021. The agreement and underlying contracts included (i) fixed consideration, which was measured as the minimum-volume commitment for both gathering and treating, and (ii) variable consideration, which consisted of all volumes above the minimum-volume commitment. In April 2021, the Partnership exercised its option to terminate the operating and maintenance agreement with Occidental effective December 31, 2021. For the three months ended March 31, 2021, the Partnership recognized fixed-lease revenue of $43.9 million and variable-lease revenue of $(1.1) million related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations.

Related-party expenses. Operation and maintenance expense includes amounts accrued for or paid to related parties for field-related costs provided by related parties at certain of the Partnership’s assets. A portion of general and administrative expense is paid by Occidental, which results in related-party transactions pursuant to the reimbursement provisions of the Partnership’s and WES Operating’s agreements with Occidental. Cost of product expense includes amounts related to certain continuing marketing arrangements with affiliates of Occidental, related-party imbalances, and transactions with affiliates accounted for under the equity method of accounting. See Marketing Transition Services Agreement in the sections above. Related-party expenses do not bear a direct relationship to related-party revenues, and third-party expenses do not bear a direct relationship to third-party revenues.

25
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

Services Agreement. General and administrative expense includes costs incurred pursuant to the agreement dated as of December 31, 2019, by and among Occidental, Anadarko, and WES Operating GP, under which Occidental has performed certain centralized corporate functions for the Partnership and WES Operating (“Services Agreement”). Most of the administrative and operational services previously provided by Occidental fully transitioned to the Partnership by December 31, 2021, with certain limited transition services remaining in place pursuant to the terms of the Services Agreement.

Incentive Plans. General and administrative expense includes non-cash equity-based compensation expense allocated to the Partnership by Occidental for awards granted to the executive officers of the general partner and to other employees prior to their employment with the Partnership under (i) the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated, (ii) Occidental’s 2015 Long-Term Incentive Plan, and (iii) Occidental’s Phantom Share Unit Award Plan (collectively referred to as the “Incentive Plans”). General and administrative expense includes costs related to the Incentive Plans of $1.9 million and $3.2 million for the three months ended March 31, 2022 and 2021, respectively. These amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital.

Construction reimbursement agreements and purchases from related parties. From time to time, the Partnership enters into construction reimbursement agreements with Occidental providing that the Partnership will manage the construction of certain midstream infrastructure for Occidental in the Partnership’s areas of operation. Such arrangements generally provide for a reimbursement of costs incurred by the Partnership on a cost or cost-plus basis.
Additionally, from time to time, in support of the Partnership’s business, the Partnership purchases equipment, inventory, and other miscellaneous assets from Occidental or its affiliates.

Related-party commercial agreement. During the first quarter of 2021, an affiliate of Occidental and certain wholly owned subsidiaries of the Partnership entered into a Commercial Understanding Agreement (“CUA”). Under the CUA, certain West Texas surface-use and salt-water disposal agreements were amended to reduce usage fees owed by the Partnership in exchange for the forgiveness of certain deficiency fees owed by Occidental and other unrelated contractual amendments. The present value of the reduced usage fees under the CUA was $30.0 million at the time the agreement was executed.

Customer concentration. Occidental was the only customer from which revenues exceeded 10% of consolidated revenues for all periods presented in the consolidated statements of operations.

26
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. EQUITY INVESTMENTS

The following table presents the financial statement impact of the Partnership’s equity investments for the three months ended March 31, 2022:

thousandsBalance at December 31, 2021Equity
income, net		ContributionsDistributions
Distributions
in excess of
cumulative
earnings (1)
Balance at March 31, 2022
White Cliffs$40,753 $231 $— $(86)$(899)$39,999 
Rendezvous22,075 (703)— (112)(651)20,609 
Mont Belvieu JV96,728 7,891 — (7,986)(1,907)94,726 
TEG16,116 1,482 — (1,363)— 16,235 
TEP188,925 10,086 — (10,149)(882)187,980 
FRP196,632 9,997 — (10,220)(1,304)195,105 
Whitethorn LLC149,690 260 255 2,575 (882)151,898 
Cactus II171,294 3,575 — (3,617)(2,412)168,840 
Saddlehorn110,441 5,471 — (5,354)(180)110,378 
Panola20,044 571 — (571)(171)19,873 
Mi Vida51,763 4,218 — (3,823)— 52,158 
Ranch Westex979 3,862 — (2,498)— 2,343 
Red Bluff Express101,747 2,666 1,815 (2,666)(637)102,925 
Total$1,167,187 $49,607 $2,070 $(45,870)$(9,925)$1,163,069 
_________________________________________________________________________________________
(1)Distributions in excess of cumulative earnings, classified as investing cash flows in the consolidated statements of cash flows, are calculated on an individual-investment basis.

27
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. PROPERTY, PLANT, AND EQUIPMENT

A summary of the historical cost of property, plant, and equipment is as follows:
thousandsEstimated Useful LifeMarch 31,
2022		December 31,
2021
LandN/A$10,955 $10,955 
Gathering systems – pipelines30 years5,429,779 5,386,003 
Gathering systems – compressors15 years2,203,895 2,172,953 
Processing complexes and treating facilities25 years3,380,819 3,375,317 
Transportation pipeline and equipment
6 to 45 years
169,380 169,356 
Produced-water disposal systems
20 years885,265 882,527 
Assets under constructionN/A91,268 98,473 
Other
3 to 40 years
758,997 750,494 
Total property, plant, and equipment12,930,358 12,846,078 
Less accumulated depreciation4,455,162 4,333,171 
Net property, plant, and equipment$8,475,196 $8,512,907 

The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet placed into productive service as of the respective balance sheet date.

Long-lived asset and other impairments. During the three months ended March 31, 2021, the Partnership recognized impairments of $14.9 million, primarily attributable to $13.5 million of impairments at the DJ Basin complex due to cancellation of projects.

28
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. SELECTED COMPONENTS OF WORKING CAPITAL

A summary of accounts receivable, net is as follows:
The PartnershipWES Operating
thousandsMarch 31,
2022		December 31,
2021		March 31,
2022		December 31,
2021
Trade receivables, net$601,640 $436,513 $601,640 $436,513 
Other receivables, net7 — 7 — 
Total accounts receivable, net$601,647 $436,513 $601,647 $436,513 

A summary of other current assets is as follows:
The PartnershipWES Operating
thousandsMarch 31,
2022		December 31,
2021		March 31,
2022		December 31,
2021
NGLs inventory$1,953 $3,370 $1,953 $3,370 
Imbalance receivables34,757 25,309 34,757 25,309 
Prepaid insurance5,792 10,369 4,418 8,538 
Contract assets10,897 5,307 10,897 5,307 
Other2,998 1,897 2,998 1,897 
Total other current assets$56,397 $46,252 $55,023 $44,421 

A summary of accrued liabilities is as follows:
The PartnershipWES Operating
thousandsMarch 31,
2022		December 31,
2021		March 31,
2022		December 31,
2021
Accrued interest expense$65,562 $131,177 $65,562 $131,177 
Short-term asset retirement obligations
12,337 9,934 12,337 9,934 
Short-term remediation and reclamation obligations
8,316 7,454 8,316 7,454 
Income taxes payable2,190 1,516 2,190 1,516 
Contract liabilities8,924 27,763 8,924 27,763 
Other62,918 85,405 34,980 32,849 
Total accrued liabilities$160,247 $263,249 $132,309 $210,693 


29
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. DEBT AND INTEREST EXPENSE

WES Operating is the borrower for all outstanding debt and is expected to be the borrower for all future debt issuances. The following table presents the outstanding debt:
 March 31, 2022December 31, 2021
thousandsPrincipalCarrying
Value
Fair
Value (1)
PrincipalCarrying
Value
Fair
Value (1)
Short-term debt
4.000% Senior Notes due 2022
$502,246 $502,192 $502,250 $502,246 $502,138 $505,153 
Floating-Rate Senior Notes due 2023
213,138 212,760 212,425 — — — 
Finance lease liabilities3,201 3,201 3,201 3,794 3,794 3,794 
Total short-term debt
$718,585 $718,153 $717,876 $506,040 $505,932 $508,947 
Long-term debt
Floating-Rate Senior Notes due 2023
$— $— $— $213,138 $212,642 $213,072 
3.100% Senior Notes due 2025
732,106 728,404 728,061 732,106 728,096 764,815 
3.950% Senior Notes due 2025
399,163 396,149 402,063 399,163 395,928 418,506 
4.650% Senior Notes due 2026
474,242 471,761 485,982 474,242 471,629 516,473 
4.500% Senior Notes due 2028
400,000 396,281 407,380 400,000 396,145 437,673 
4.750% Senior Notes due 2028
400,000 397,037 413,219 400,000 396,938 444,550 
4.050% Senior Notes due 2030
1,200,000 1,190,584 1,201,380 1,200,000 1,190,339 1,323,595 
5.450% Senior Notes due 2044
600,000 593,769 609,529 600,000 593,733 717,804 
5.300% Senior Notes due 2048
700,000 687,321 694,990 700,000 687,265 844,223 
5.500% Senior Notes due 2048
350,000 342,689 347,087 350,000 342,659 418,907 
5.250% Senior Notes due 2050
1,000,000 983,765 982,278 1,000,000 983,709 1,183,514 
Finance lease liabilities990 990 990 1,533 1,533 1,533 
Total long-term debt
$6,256,501 $6,188,750 $6,272,959 $6,470,182 $6,400,616 $7,284,665 
_________________________________________________________________________________________
(1)Fair value is measured using the market approach and Level-2 fair value inputs.

30
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. DEBT AND INTEREST EXPENSE

Debt activity. The following table presents the debt activity for the three months ended March 31, 2022:
thousandsCarrying Value
Balance at December 31, 2021$6,906,548 
Finance lease liabilities(1,135)
Other1,490 
Balance at March 31, 2022$6,906,903 

WES Operating Senior Notes. In mid-January 2020, WES Operating issued the Fixed-Rate 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050 (collectively referred to as the “Fixed-Rate Senior Notes”) and the Floating-Rate Senior Notes due 2023 (the “Floating-Rate Senior Notes”). Including the effects of the issuance prices, underwriting discounts, and interest-rate adjustments, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 3.790%, 4.671%, and 5.869%, respectively, at March 31, 2022, and were 4.542%, 5.424%, and 6.629%, respectively, at March 31, 2021. The interest rate on the Floating-Rate Senior Notes was 1.84% and 2.33% at March 31, 2022 and 2021, respectively. The effective interest rate of these notes is subject to adjustment from time to time due to a change in credit rating.
During the first quarter of 2021, WES Operating redeemed the total principal amount outstanding of the 5.375% Senior Notes due 2021 at par value, pursuant to the optional redemption terms in WES Operating’s indenture.
As of March 31, 2022, the 4.000% Senior Notes due 2022 and the Floating-Rate Senior Notes were classified as short-term debt on the consolidated balance sheet. Subsequent to March 31, 2022, WES Operating redeemed the 4.000% Senior Notes due 2022 at par value on April 1, 2022, pursuant to the optional redemption terms in WES Operating’s indenture. At March 31, 2022, WES Operating was in compliance with all covenants under the relevant governing indentures.

Revolving credit facility. WES Operating’s $2.0 billion senior unsecured revolving credit facility (“RCF”) is expandable to a maximum of $2.5 billion, and matures in February 2025 for each extending lender. The non-extending lender’s commitments mature in February 2024 and represent $100.0 million out of $2.0 billion of total commitments from all lenders.
As of March 31, 2022, there were no outstanding borrowings and $5.1 million of outstanding letters of credit, resulting in $2.0 billion of available borrowing capacity under the RCF. As of March 31, 2022 and 2021, the interest rate on any outstanding RCF borrowings was 1.95% and 1.61%, respectively. The facility-fee rate was 0.25% at March 31, 2022 and 2021. At March 31, 2022, WES Operating was in compliance with all covenants under the RCF.

Finance lease liabilities. During the first quarter of 2020, the Partnership entered into finance leases with third parties for equipment and vehicles. Certain of these equipment leases were amended during the third quarter of 2021 requiring reassessment of lease classification. As a result, these leases were classified as operating leases. The Partnership has future payments for its finance leases of $4.3 million as of March 31, 2022.
31
Table of Contents
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. DEBT AND INTEREST EXPENSE

Interest expense. The following table summarizes the amounts included in interest expense:
 Three Months Ended 
March 31,
thousands20222021
Long-term and short-term debt
$(83,428)$(95,722)
Finance lease liabilities(42)(298)
Commitment fees and amortization of debt-related costs(3,032)(3,338)
Capitalized interest 1,047 865 
Interest expense$(85,455)$(98,493)

10. COMMITMENTS AND CONTINGENCIES

Environmental obligations. The Partnership is subject to various environmental-remediation obligations arising from federal, state, and local regulations regarding air and water quality, hazardous and solid waste disposal, and other environmental matters. As of March 31, 2022 and December 31, 2021, the consolidated balance sheets included $9.8 million and $10.1 million, respectively, of liabilities for remediation and reclamation obligations. The current portion of these amounts is included in Accrued liabilities, and the long-term portion of these amounts is included in Other liabilities. The majority of payments related to these obligations are expected to be made over the next year.

Litigation and legal proceedings. From time to time, the Partnership is involved in legal, tax, regulatory, and other proceedings in various forums regarding performance, contracts, and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which the final disposition could have a material adverse effect on the Partnership’s financial condition, results of operations, or cash flows.

Other commitments. The Partnership has payment obligations, or commitments, that include, among other things, a revolving credit facility, other third-party long-term debt, obligations related to the Partnership’s capital spending programs, pipeline commitments, and various operating and finance leases. The payment obligations related to the Partnership’s capital spending programs, the majority of which is expected to be paid in the next 12 months, primarily relate to construction, expansion, and asset-integrity projects at the West Texas complex, DBM water systems, DBM oil system, and DJ Basin complex.

32
Table of Contents

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements, wherein WES Operating is fully consolidated, and which are included under Part I, Item 1 of this quarterly report, and the historical consolidated financial statements, and the notes thereto, which are included under Part II, Item 8 of the 2021 Form 10-K as filed with the SEC on February 23, 2022.
The Partnership’s assets include assets owned and ownership interests accounted for by us under the equity method of accounting, through our 98.0% partnership interest in WES Operating, as of March 31, 2022 (see Note 6—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q). We also own and control the entire non-economic general partner interest in WES Operating GP, and our general partner is owned by Occidental.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made in this Form 10-Q, and may make in other public filings, press releases, and statements by management, forward-looking statements concerning our operations, economic performance, and financial condition. These forward-looking statements include statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” or similar expressions or variations on such expressions. These statements discuss future expectations, contain projections of results of operations or financial condition, or include other “forward-looking” information.
Although we and our general partner believe that the expectations reflected in our forward-looking statements are reasonable, neither we nor our general partner can provide any assurance that such expectations will prove correct. These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from expectations include, but are not limited to, the following:

•our ability to pay distributions to our unitholders;

•our assumptions about the energy market;

•future throughput (including Occidental production) that is gathered or processed by, or transported through, our assets;

•our operating results;

•competitive conditions;

•technology;

•the availability of capital resources to fund acquisitions, capital expenditures, and other contractual obligations, and our ability to access financing through the debt or equity capital markets;

•the supply of, demand for, and price of oil, natural gas, NGLs, and related products or services;

•commodity-price risks inherent in percent-of-proceeds, percent-of-product, and keep-whole contracts;

•weather and natural disasters;

•inflation;

•the availability of goods and services;

•general economic conditions, internationally, domestically, or in the jurisdictions in which we are doing business;

33
Table of Contents

•federal, state, and local laws and state-approved voter ballot initiatives, including those laws or ballot initiatives that limit producers’ hydraulic-fracturing activities or other oil and natural-gas development or operations;

•environmental liabilities;

•legislative or regulatory changes, including changes affecting our status as a partnership for federal income tax purposes;

•changes in the financial or operational condition of Occidental;

•the creditworthiness of Occidental or our other counterparties, including financial institutions, operating partners, and other parties;

•changes in Occidental’s capital program, corporate strategy, or other desired areas of focus;

•our commitments to capital projects;

•our ability to access liquidity under the RCF;

•our ability to repay debt;

•the resolution of litigation or other disputes;

•conflicts of interest among us and our general partner and its related parties, including Occidental, with respect to, among other things, the allocation of capital and operational and administrative costs and our future business opportunities;

•our ability to maintain and/or obtain rights to operate our assets on land owned by third parties;

•our ability to acquire assets on acceptable terms from third parties;

•non-payment or non-performance of significant customers, including under gathering, processing, transportation, and disposal agreements;

•the timing, amount, and terms of future issuances of equity and debt securities;

•the outcome of pending and future regulatory, legislative, or other proceedings or investigations, and continued or additional disruptions in operations that may occur as we and our customers comply with any regulatory orders or other state or local changes in laws or regulations;

•the economic uncertainty from the worldwide outbreak of the coronavirus (“COVID-19”);

•cyber attacks or security breaches; and

•other factors discussed below, in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in the 2021 Form 10-K, in our quarterly reports on Form 10-Q, and in our other public filings and press releases.

Risk factors and other factors noted throughout or incorporated by reference in this Form 10-Q could cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

34
Table of Contents

EXECUTIVE SUMMARY

We are a midstream energy company organized as a publicly traded partnership, engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, NGLs, and crude oil; and gathering and disposing of produced water. In our capacity as a natural-gas processor, we also buy and sell natural gas, NGLs, and condensate on behalf of ourselves and as an agent for our customers under certain contracts. To provide superior midstream service, we focus on ensuring the reliability and performance of our systems, creating sustainable cost efficiencies, enhancing our safety culture, and protecting the environment. We own or have investments in assets located in Texas, New Mexico, the Rocky Mountains (Colorado, Utah, and Wyoming), and North-central Pennsylvania. As of March 31, 2022, our assets and investments consisted of the following:
Wholly
Owned and
Operated		Operated
Interests		Non-Operated
Interests		Equity
Interests
Gathering systems (1)
17 2 3 1 
Treating facilities37 3 — — 
Natural-gas processing plants/trains
24 3 — 5 
NGLs pipelines2 — — 5 
Natural-gas pipelines
5 — — 1 
Crude-oil pipelines
3 1 — 4 
_________________________________________________________________________________________
(1)Includes the DBM water systems.

Significant financial and operational events during the three months ended March 31, 2022, included the following:

•We repurchased 225,355 common units on the open market for an aggregate purchase price of $5.1 million.

•Our first-quarter 2022 per-unit distribution of $0.50000 increased $0.17300 from the fourth-quarter 2021 per-unit distribution of $0.32700.

•Natural-gas throughput attributable to WES totaled 4,058 MMcf/d for the three months ended March 31, 2022, representing a 3% decrease compared to the three months ended December 31, 2021, and no change compared to the three months ended March 31, 2021.

•Crude-oil and NGLs throughput attributable to WES totaled 675 MBbls/d for the three months ended March 31, 2022, representing a 4% decrease and a 12% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively.

•Produced-water throughput attributable to WES totaled 751 MBbls/d for the three months ended March 31, 2022, representing a 5% decrease and a 26% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively.

•Gross margin was $550.9 million for the three months ended March 31, 2022, representing a 10% increase and a 21% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively. See Key Performance Metrics within this Item 2.

•Adjusted gross margin for natural-gas assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $1.34 per Mcf for the three months ended March 31, 2022, representing a 6% increase and a 13% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively.

35
Table of Contents

•Adjusted gross margin for crude-oil and NGLs assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $2.44 per Bbl for the three months ended March 31, 2022, representing a 37% increase compared to the three months ended December 31, 2021, and no change compared to the three months ended March 31, 2021.

•Adjusted gross margin for produced-water assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $1.00 per Bbl for the three months ended March 31, 2022, representing a 9% increase compared to the three months ended December 31, 2021, and March 31, 2021.

The following table provides additional information on throughput for the periods presented below:
Three Months Ended
March 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Throughput for natural-gas assets (MMcf/d)
Delaware Basin1,326 1,370 (3)%1,133 17 %
DJ Basin1,321 1,349 (2)%1,344 (2)%
Equity investments479 513 (7)%439 9 %
Other1,084 1,127 (4)%1,279 (15)%
Total throughput for natural-gas assets
4,210 4,359 (3)%4,195 — %
Throughput for crude-oil and NGLs assets (MBbls/d)
Delaware Basin192 199 (4)%162 19 %
DJ Basin88 92 (4)%82 7 %
Equity investments374 393 (5)%337 11 %
Other35 32 9 %35 — %
Total throughput for crude-oil and NGLs assets
689 716 (4)%616 12 %
Throughput for produced-water assets (MBbls/d)
Delaware Basin766 808 (5)%607 26 %
Total throughput for produced-water assets
766 808 (5)%607 26 %

OUTLOOK

We expect our business to continue to be affected by the below-described key trends and uncertainties. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions about, or interpretations of, available information prove incorrect, our actual results may vary materially from expected results.

Impact of crude-oil, natural-gas, and NGLs prices. Crude-oil, natural-gas, and NGLs prices can fluctuate significantly, and have done so over time. Commodity-price fluctuations affect the level of our customers’ activities and our customers’ allocations of capital within their own asset portfolios. During 2020, oil and natural-gas prices were negatively impacted by the worldwide macroeconomic downturn that followed the global outbreak of COVID-19. In 2021, prices began to increase and in the first quarter of 2022, commodity prices increased significantly in connection with the war in Ukraine. For example, NYMEX West Texas Intermediate crude-oil daily settlement prices during 2021 ranged from a low of $47.62 per barrel in January 2021 to a high of $84.65 per barrel in October 2021, and prices during the first quarter of 2022 ranged from a low of $76.08 per barrel in January 2022 to a high of $123.70 per barrel in March 2022. The extent and duration of the recent commodity-price volatility cannot be predicted.

36
Table of Contents

To the extent producers continue with development plans in our areas of operation, we intend to continue to connect new wells or production facilities to our systems to maintain or increase throughput on our systems and mitigate the impact of production declines. However, our success in connecting additional wells or production facilities is dependent on the activity levels of our customers, any capacity constraints, and the availability of downstream-takeaway alternatives. In some cases, we take ownership of volumes at the tailgate of our plants based on certain contractual arrangements with our producer customers, which introduces additional commodity-price exposure. Additionally, we intend to continue to evaluate the crude-oil, NGLs, and natural-gas price environments and adjust our capital spending plans to reflect our customers’ anticipated activity levels, while maintaining appropriate liquidity and financial flexibility.

Impact of inflation and supply-chain disruptions. Although inflation in the United States has been relatively low in recent years, the U.S. economy currently is experiencing significant inflation relative to historical precedent, from, among other things, supply-chain disruptions caused by, or governmental stimulus or fiscal policies adopted in response to, the COVID-19 crisis and in connection with the war in Ukraine. More specifically, the bottlenecks and disruptions from the lingering effects of the COVID-19 crisis have caused difficulties within the U.S. and global supply chains, creating logistical delays along with labor shortages. Continued increases in inflation will raise our costs for labor, materials, and services, which will increase our operating costs and capital expenditures materially and negatively impact our financial results. To the extent permitted by regulations and escalation provisions in certain of our existing agreements, we have the ability to recover a portion of increased costs in the form of higher fees.

Impact of interest rates. Overall, short- and long-term interest rates increased during 2021 and continued to increase during the first quarter of 2022. Any future increases in interest rates likely will result in an increase in financing costs. Additionally, as with other yield-oriented securities, our unit price could be impacted by our implied distribution yield relative to market interest rates. Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our units, and a rising interest-rate environment could have an adverse impact on our unit price and our ability to issue additional equity, or increase the cost of issuing equity, to make acquisitions, to reduce debt, or for other purposes. However, we expect our cost of capital to remain competitive, as our competitors face similar interest-rate dynamics.

ACQUISITIONS AND DIVESTITURES

Bison facilities. In October 2020, we entered into an option agreement to sell the Bison treating facility, located in Northeast Wyoming, to a third party. During the second quarter of 2021, the third party exercised its option to purchase the Bison treating facility and the sale closed.

37
Table of Contents

RESULTS OF OPERATIONS

OPERATING RESULTS

The following tables and discussion present a summary of our results of operations:
Three Months Ended
thousandsMarch 31, 2022December 31,
2021		March 31, 2021
Total revenues and other (1)
$758,297 $719,210 $674,974 
Equity income, net – related parties49,607 45,308 52,165 
Total operating expenses (1)
403,450 438,563 434,220 
Gain (loss) on divestiture and other, net370 (234)(583)
Operating income (loss)404,824 325,721 292,336 
Interest expense(85,455)(89,472)(98,493)
Gain (loss) on early extinguishment of debt— — (289)
Other income (expense), net106 390 (1,207)
Income (loss) before income taxes319,475 236,639 192,347 
Income tax expense (benefit)1,805 (14,210)1,112 
Net income (loss)317,670 250,849 191,235 
Net income (loss) attributable to noncontrolling interests8,953 7,332 5,444 
Net income (loss) attributable to Western Midstream Partners, LP (2)
$308,717 $243,517 $185,791 
_________________________________________________________________________________________
(1)Total revenues and other includes amounts earned from services provided to related parties and from the sale of natural gas, condensate, and NGLs to related parties. Total operating expenses includes amounts charged by related parties for services received. See Note 5—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
(2)For reconciliations to comparable consolidated results of WES Operating, see Items Affecting the Comparability of Financial Results with WES Operating within this Item 2.

For purposes of the following discussion, any increases or decreases refer to the comparison of the three months ended March 31, 2022, to the three months ended December 31, 2021, or to the three months ended March 31, 2021, as applicable.

38
Table of Contents

Throughput
Three Months Ended
March 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Throughput for natural-gas assets (MMcf/d)
Gathering, treating, and transportation406 437 (7)%519 (22)%
Processing3,325 3,409 (2)%3,237 3 %
Equity investments (1)
479 513 (7)%439 9 %
Total throughput4,210 4,359 (3)%4,195 — %
Throughput attributable to noncontrolling interests (2)
152 155 (2)%150 1 %
Total throughput attributable to WES for natural-gas assets
4,058 4,204 (3)%4,045 — %
Throughput for crude-oil and NGLs assets (MBbls/d)
Gathering, treating, and transportation315 323 (2)%279 13 %
Equity investments (3)
374 393 (5)%337 11 %
Total throughput689 716 (4)%616 12 %
Throughput attributable to noncontrolling interests (2)
14 14 — %12 17 %
Total throughput attributable to WES for crude-oil and NGLs assets
675 702 (4)%604 12 %
Throughput for produced-water assets (MBbls/d)
Gathering and disposal766 808 (5)%607 26 %
Throughput attributable to noncontrolling interests (2)
15 16 (6)%12 25 %
Total throughput attributable to WES for produced-water assets
751 792 (5)%595 26 %
_________________________________________________________________________________________
(1)Represents the 22% share of average Rendezvous throughput, 50% share of average Mi Vida and Ranch Westex throughput, and 30% share of average Red Bluff Express throughput.
(2)For all periods presented, includes (i) the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating and (ii) for natural-gas assets, the 25% third-party interest in Chipeta, which collectively represent WES’s noncontrolling interests.
(3)Represents the 10% share of average White Cliffs throughput; 25% share of average Mont Belvieu JV throughput; 20% share of average TEG, TEP, Whitethorn, and Saddlehorn throughput; 33.33% share of average FRP throughput; and 15% share of average Panola and Cactus II throughput.

Natural-gas assets

Gathering, treating, and transportation throughput decreased by 31 MMcf/d compared to the three months ended December 31, 2021, primarily due to decreased production in areas around the Marcellus Interest systems.
Gathering, treating, and transportation throughput decreased by 113 MMcf/d compared to the three months ended March 31, 2021, primarily due (i) decreased volumes at the Bison treating facility, which was sold to a third party during the second quarter of 2021 and (ii) production declines in areas around the Marcellus Interest systems.
Processing throughput decreased by 84 MMcf/d compared to the three months ended December 31, 2021, primarily due to (i) lower volumes at the West Texas complex due to production declines in the area and the impacts of inclement weather in the first quarter of 2022 and (ii) lower volumes at the DJ Basin and Granger complexes due to production declines in the areas.
Processing throughput increased by 88 MMcf/d compared to the three months ended March 31, 2021, primarily due to higher volumes at the West Texas complex resulting from the impact of winter storm Uri during the first quarter of 2021, partially offset by lower volumes at the DJ Basin, Granger, and Brasada complexes due to production declines in the areas.

39
Table of Contents

Equity-investment throughput decreased by 34 MMcf/d compared to the three months ended December 31, 2021, primarily due to decreased volumes at the Mi Vida and Ranch Westex plants and on Red Bluff Express.
Equity-investment throughput increased by 40 MMcf/d compared to the three months ended March 31, 2021, primarily due to increased volumes on Red Bluff Express and at the Mi Vida plant resulting from the impact of winter storm Uri during the first quarter of 2021. These increases were offset partially by (i) decreased volumes at the Rendezvous system due to production declines in the area and (ii) decreased volumes at Ranch Westex plant.

Crude-oil and NGLs assets

Gathering, treating, and transportation throughput decreased by 8 MBbls/d compared to the three months ended December 31, 2021, primarily due to lower volumes at the DBM oil system resulting from the impacts of inclement weather in the first quarter of 2022.
Gathering, treating, and transportation throughput increased by 36 MBbls/d compared to the three months ended March 31, 2021, primarily due (i) higher volumes at the DBM oil system resulting from the impact of winter storm Uri during the first quarter of 2021 and (ii) increased production in areas around the DJ Basin oil system.
Equity-investment throughput decreased by 19 MBbls/d compared to the three months ended December 31, 2021, primarily due to decreased volumes on the Whitethorn pipeline.
Equity-investment throughput increased by 37 MBbls/d compared to the three months ended March 31, 2021, primarily due to (i) increased volumes on FRP and the Saddlehorn pipeline resulting from increased pipeline commitments and (ii) increased volumes on the Whitethorn pipeline.

Produced-water assets

Gathering and disposal throughput decreased by 42 MBbls/d compared to the three months ended December 31, 2021, due to decreased volumes at the DBM water systems resulting from lower production and the impacts of inclement weather in the first quarter of 2022.
Gathering and disposal throughput increased by 159 MBbls/d compared to the three months ended March 31, 2021, due to (i) new third-party connections brought online during the fourth quarter of 2021 and (ii) the impact of winter storm Uri during the first quarter of 2021.


40
Table of Contents

Service Revenues
Three Months Ended
thousands except percentagesMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Service revenues – fee based$631,598 $621,093 2 %$572,275 10 %
Service revenues – product based40,867 34,317 19 %31,652 29 %
 Total service revenues$672,465 $655,410 3 %$603,927 11 %

Service revenues – fee based

Service revenues – fee based increased by $10.5 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $28.7 million at the DJ Basin oil system due to an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2021, partially offset by decreased throughput, (ii) $7.6 million at the DBM oil system due to the treatment of lease revenue under the operating and maintenance agreement with Occidental that was terminated effective December 31, 2021, partially offset by decreased throughput, and (iii) $3.1 million at the Marcellus Interest systems due to an increase in the average gathering fee effective January 1, 2022, partially offset by decreased throughput. These increases were offset partially by decreases of (i) $18.8 million at the West Texas complex due to a lower cost-of-service rate effective January 1, 2022, and decreased throughput, (ii) $4.9 million at the DJ Basin complex due to decreased throughput, and (iii) $4.8 million at the Springfield system due to an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2021, in addition to a lower cost-of-service rate effective January 1, 2022.
Service revenues – fee based increased by $59.3 million compared to the three months ended March 31, 2021, primarily due to increases of (i) $22.1 million at the West Texas complex due to increased throughput, including the impact of winter storm Uri during the first quarter of 2021, partially offset by a lower cost-of-service rate effective January 1, 2022, and (ii) $17.5 million at the DBM water systems and $15.7 million at the DBM oil system due to increased throughput, including the impact of winter storm Uri during the first quarter of 2021.

Service revenues – product based

Service revenues – product based increased by $6.6 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $2.7 million at the West Texas complex due to increased volumes and prices for certain third-party contracts and (ii) $2.3 million at the DJ Basin complex and $0.7 million at the Chipeta complex due to increased prices.
Service revenues – product based increased by $9.2 million compared to the three months ended March 31, 2021, primarily due to increases of (i) $3.9 million at the DJ Basin complex, $2.3 million at the Chipeta complex, and $1.4 million at the Granger complex due to increased prices, and (ii) $1.4 million at the DBM water systems due to increased prices and volumes.


41
Table of Contents

Product Sales
Three Months Ended
thousands except percentages and per-unit amountsMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Natural-gas sales
$19,071 $15,337 24 %$21,419 (11)%
NGLs sales66,518 48,251 38 %49,386 35 %
Total Product sales$85,589 $63,588 35 %$70,805 21 %
Per-unit gross average sales price:
Natural gas (per Mcf)$4.38 $4.60 (5)%$5.98 (27)%
NGLs (per Bbl)46.48 42.05 11 %28.42 64 %

Natural-gas sales

Natural-gas sales increased by $3.7 million compared to the three months ended December 31, 2021, primarily due to an increase of $2.3 million at the West Texas complex due to increased volumes sold as a result of throughput increases on certain third-party contracts.

NGLs sales

NGLs sales increased by $18.3 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $8.6 million at the West Texas complex due to increases in average prices and volumes sold and (ii) $5.4 million at the DJ Basin complex and $4.2 million at the Chipeta complex due to an increase in average prices.
NGLs sales increased by $17.1 million compared to the three months ended March 31, 2021, primarily due to increases of (i) $8.1 million at the Chipeta complex, $1.4 million at the DBM water systems, and $1.2 million at the Hilight complex attributable to increases in average prices and volumes sold, and (ii) $2.8 million at the Granger complex and $2.0 million at the DJ Basin complex due to an increase in average prices.

Equity Income, Net – Related Parties
Three Months Ended
thousands except percentagesMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Equity income, net – related parties$49,607 $45,308 9 %$52,165 (5)%

Equity income, net – related parties increased by $4.3 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $1.7 million at Whitethorn LLC related to commercial activities and (ii) $1.2 million at Mi Vida related to decreases in certain expenses during the current period.
Equity income, net – related parties decreased by $2.6 million compared to the three months ended March 31, 2021, primarily due to decreases of (i) $3.0 million at Saddlehorn Pipeline related to contracts with higher tariff rates expiring in August 2021 and (ii) $2.7 million at Cactus II related to a decrease in trunk revenues. These decreases were offset partially by an increase of $2.2 million at Mi Vida due to higher volumes.












42
Table of Contents

Cost of Product and Operation and Maintenance Expenses
Three Months Ended
thousands except percentagesMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Residue purchases$34,992 $38,471 (9)%$55,745 (37)%
NGLs purchases70,404 62,578 13 %30,907 128 %
Other(32,548)(29,009)12 %2,317 NM
Cost of product72,848 72,040 1 %88,969 (18)%
Operation and maintenance128,976 147,102 (12)%140,332 (8)%
Total Cost of product and Operation and maintenance expenses$201,824 $219,142 (8)%$229,301 (12)%
_________________________________________________________________________________________
NM—Not meaningful

Residue purchases

Residue purchases decreased by $3.5 million compared to the three months ended December 31, 2021, primarily due to a decrease of $2.0 million at the West Texas complex attributable to decreased volumes for certain third-party contracts.
Residue purchases decreased by $20.8 million compared to the three months ended March 31, 2021, primarily due to decreases of $13.2 million at the West Texas complex, $3.3 million at the DJ Basin complex, and $3.0 million at the Hilight system attributable to decreases in average prices.

NGLs purchases

NGLs purchases increased by $7.8 million compared to the three months ended December 31, 2021, primarily due to an increase of $5.1 million at the West Texas complex attributable to an increase in average prices.
NGLs purchases increased by $39.5 million compared to the three months ended March 31, 2021, primarily due to increases of $19.0 million at the West Texas complex, $12.3 million at the DJ Basin complex, and $3.6 million at the Chipeta complex attributable to increases in average prices.

Other items

Other items decreased by $3.5 million compared to the three months ended December 31, 2021, primarily due to decreases of $3.7 million at the West Texas complex and $3.0 million at the DJ Basin complex, primarily due to changes in imbalance positions, partially offset by an increase of $3.2 million at the Chipeta complex due to a change in imbalance positions.
Other items decreased by $34.9 million compared to the three months ended March 31, 2021, primarily due to decreases of $29.3 million at the West Texas complex and $6.9 million at the DJ Basin complex, primarily due to changes in imbalance positions.

Operation and maintenance expense

Operation and maintenance expense decreased by $18.1 million compared to the three months ended December 31, 2021, primarily due to decreases of (i) $14.1 million at the West Texas complex attributable to a sales tax accrual in the fourth quarter of 2021 on compressor rentals and reduced utilities and salaries and wages expense, (ii) $7.3 million at the DJ Basin complex due to lower utilities expense and surface maintenance and plant repairs, and (iii) $4.3 million at the DBM water systems attributable to lower surface-use fees and utilities expense. These decreases were offset partially by an increase of $3.1 million at the DBM oil system, primarily due to an increase in salaries and wages.
Operation and maintenance expense decreased by $11.4 million compared to the three months ended March 31, 2021, primarily due to decreases of $5.0 million at the DBM oil system and $4.4 million at the West Texas complex attributable to reduced utilities expense and contract and consulting costs.

43
Table of Contents

Other Operating Expenses
Three Months Ended
thousands except percentagesMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
General and administrative$48,602 $55,576 (13)%$45,116 8 %
Property and other taxes18,442 18,275 1 %14,384 28 %
Depreciation and amortization134,582 144,225 (7)%130,553 3 %
Long-lived asset and other impairments
— 1,345 (100)%14,866 (100)%
Total other operating expenses$201,626 $219,421 (8)%$204,919 (2)%

General and administrative expenses

General and administrative expenses decreased by $7.0 million compared to the three months ended December 31, 2021, primarily due to decreases in consulting costs and corporate expenses primarily related to information technology services and legal fees.
General and administrative expenses increased by $3.5 million compared to the three months ended March 31, 2021, primarily due to increases of $3.3 million in personnel costs, including increased bonus-related expenses and equity-based compensation expense.

Property and other taxes

Property and other taxes increased by $4.1 million compared to the three months ended March 31, 2021, primarily due to ad valorem tax increases at the DJ Basin complex due to higher rates, partially offset by favorable differences between actual and estimated tax payments related to the 2021 fiscal year.

Depreciation and amortization expense

Depreciation and amortization expense decreased by $9.6 million compared to the three months ended December 31, 2021, primarily due to decreases of $5.0 million and $4.8 million at the Hilight system and the MGR assets, respectively, due to revisions in cost estimates related to asset retirement obligations made in the fourth quarter of 2021.
Depreciation and amortization expense increased by $4.0 million compared to the three months ended March 31, 2021, primarily due to an increase of $3.2 million at a Wyoming asset primarily as a result of a change in estimate for asset retirement obligations in the comparative prior period.

Long-lived asset and other impairment expense

Long-lived asset and other impairment expense for the three months ended March 31, 2021, was primarily due to $13.5 million of impairments at the DJ Basin complex due to cancellation of projects.
For further information on Long-lived asset and other impairment expense, see Note 7—Property, Plant, and Equipment in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


44
Table of Contents

Interest Expense
Three Months Ended
thousands except percentagesMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Long-term and short-term debt
$(83,428)$(87,448)(5)%$(95,722)(13)%
Finance lease liabilities(42)(53)(21)%(298)(86)%
Commitment fees and amortization of debt-related costs(3,032)(3,041)— %(3,338)(9)%
Capitalized interest1,047 1,070 (2)%865 21 %
Interest expense$(85,455)$(89,472)(4)%$(98,493)(13)%

Interest expense

Interest expense decreased by $4.0 million compared to the three months ended December 31, 2021, primarily due to decreases of $3.8 million for credit-rating related interest rate changes on the Fixed-Rate Senior Notes and Floating-Rate Senior Notes.
Interest expense decreased by $13.0 million compared to the three months ended March 31, 2021, primarily due to decreases of (i) $4.1 million due to the redemption of the total principal amount outstanding of the 5.375% Senior Notes due 2021 on March 1, 2021, (ii) $4.1 million due to credit-rating related interest rate changes and lower outstanding balances on the 3.100% Senior Notes due 2025 and Floating-Rate Senior Notes, (iii) $2.3 million due to credit-rating related interest rate changes on the 4.050% Senior Notes due 2030 and 5.250% Senior Notes due 2050, and (iv) $2.1 million due to lower outstanding balances on the 3.950% Senior Notes due 2025, 4.000% Senior Notes due 2022, and 4.650% Senior Notes due 2026, portions of which were repaid during the third quarter of 2021.
See Liquidity and Capital Resources—Debt and credit facilities within this Item 2.

Income Tax Expense (Benefit)
Three Months Ended
thousands except percentagesMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Income (loss) before income taxes$319,475$236,63935 %$192,34766 %
Income tax expense (benefit)1,805(14,210)(113)%1,11262 %
Effective tax rate1 %NM1 %

We are not a taxable entity for U.S. federal income tax purposes; therefore, our federal statutory rate is zero percent. However, income apportionable to Texas is subject to Texas margin tax.
For the three months ended March 31, 2022 and 2021, the variance from the federal statutory rate was primarily due to our Texas margin tax liability.
For the three months ended December 31, 2021, the variance from the federal statutory rate was primarily impacted by a state margin rate reduction associated with Occidental’s settlement of state audit matters and our Texas margin tax liability.

45
Table of Contents

KEY PERFORMANCE METRICS
Three Months Ended
thousands except percentages and per-unit amountsMarch 31, 2022December 31,
2021		Inc/
(Dec)		March 31, 2021Inc/
(Dec)
Adjusted gross margin for natural-gas assets
$488,909 $488,220 — %$432,389 13 %
Adjusted gross margin for crude-oil and NGLs assets
148,247 114,733 29 %133,145 11 %
Adjusted gross margin for produced-water assets
67,594 67,296 — %49,090 38 %
Adjusted gross margin704,750 670,249 5 %614,624 15 %
Per-Mcf Adjusted gross margin for natural-gas assets (1)
1.34 1.26 6 %1.19 13 %
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets (2)
2.44 1.78 37 %2.45 — %
Per-Bbl Adjusted gross margin for produced-water assets (3)
1.00 0.92 9 %0.92 9 %
Adjusted EBITDA539,050 480,874 12 %443,110 22 %
Free cash flow200,342 576,499 (65)%211,822 (5)%
_________________________________________________________________________________________
(1)Average for period. Calculated as Adjusted gross margin for natural-gas assets, divided by total throughput (MMcf/d) attributable to WES for natural-gas assets.
(2)Average for period. Calculated as Adjusted gross margin for crude-oil and NGLs assets, divided by total throughput (MBbls/d) attributable to WES for crude-oil and NGLs assets.
(3)Average for period. Calculated as Adjusted gross margin for produced-water assets, divided by total throughput (MBbls/d) attributable to WES for produced-water assets.

Adjusted gross margin. We define Adjusted gross margin attributable to Western Midstream Partners, LP (“Adjusted gross margin”) as total revenues and other (less reimbursements for electricity-related expenses recorded as revenue), less cost of product, plus distributions from equity investments, and excluding the noncontrolling interest owners’ proportionate share of revenues and cost of product. We believe Adjusted gross margin is an important performance measure of our operations’ profitability and performance as compared to other companies in the midstream industry. Cost of product expenses include (i) costs associated with the purchase of natural gas and NGLs pursuant to our percent-of-proceeds, percent-of-product, and keep-whole contracts, (ii) costs associated with the valuation of gas and NGLs imbalances, and (iii) costs associated with our obligations under certain contracts to redeliver a volume of natural gas to shippers, which is thermally equivalent to condensate retained by us and sold to third parties. The electricity-related expenses included in our Adjusted gross margin definition relate to pass-through expenses that are reimbursed by certain customers (recorded as revenue with an offset recorded as Operation and maintenance expense).
To facilitate investor and industry analyst comparisons between us and our peers, we also disclose per-Mcf Adjusted gross margin for natural-gas assets, per-Bbl Adjusted gross margin for crude-oil and NGLs assets, and per-Bbl Adjusted gross margin for produced-water assets.
Adjusted gross margin increased by $34.5 million compared to the three months ended December 31, 2021, primarily due to (i) an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2021 at the DJ Basin oil system, partially offset by decreased throughput, (ii) the treatment of lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system that was terminated effective December 31, 2021, partially offset by decreased throughput, and (iii) strong plant performance and contract mix at the West Texas and DJ Basin complexes leading to increased product recoveries and higher commodity prices, partially offset by lower throughput. These increases were offset partially by (i) an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2021 at the Springfield system and (ii) a decrease in distributions from Whitethorn LLC.
Adjusted gross margin increased by $90.1 million compared to the three months ended March 31, 2021, primarily due to (i) increased throughput, partially offset by a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2022, at the West Texas complex, (ii) increased throughput at the DBM water systems and DBM oil system, and (iii) a higher average gathering and processing fee and increased deficiency fees on certain contracts at the DJ Basin complex. These increases were offset partially by a decrease in distributions from Whitethorn LLC.
46
Table of Contents

Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.08 compared to the three months ended December 31, 2021, primarily due to strong plant performance and contract mix at the West Texas and DJ Basin complexes leading to increased product recoveries, coupled with higher commodity prices and lower throughput.
Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.15 compared to the three months ended March 31, 2021, primarily due to increased throughput at the West Texas complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets.
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.66 compared to the three months ended December 31, 2021, primarily due to (i) an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2021 at the DJ Basin oil system and (ii) the treatment of lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system that was terminated effective December 31, 2021. These increases were offset partially by a decrease in distributions from Whitethorn LLC.
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets decreased by $0.01 compared to the three months ended March 31, 2021, primarily due to a decrease in distributions from Whitethorn LLC and Saddlehorn. These decreases were offset partially by increased throughput at the DBM oil system, which has a higher-than-average per-Bbl margin as compared to our other crude-oil and NGLs assets
Per-Bbl Adjusted gross margin for produced-water assets increased by $0.08 compared to the three months ended December 31, 2021 and March 31, 2021, primarily due to deficiency fees recorded in the first quarter of 2022.

Adjusted EBITDA. We define Adjusted EBITDA attributable to Western Midstream Partners, LP (“Adjusted EBITDA”) as net income (loss), plus (i) distributions from equity investments, (ii) non-cash equity-based compensation expense, (iii) interest expense, (iv) income tax expense, (v) depreciation and amortization, (vi) impairments, and (vii) other expense (including lower of cost or market inventory adjustments recorded in cost of product), less (i) gain (loss) on divestiture and other, net, (ii) gain (loss) on early extinguishment of debt, (iii) income from equity investments, (iv) interest income, (v) income tax benefit, (vi) other income, and (vii) the noncontrolling interest owners’ proportionate share of revenues and expenses. We believe the presentation of Adjusted EBITDA provides information useful to investors in assessing our financial condition and results of operations and that Adjusted EBITDA is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures, and make distributions. Adjusted EBITDA is a supplemental financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, commercial banks, and rating agencies, use, among other measures, to assess the following:

•our operating performance as compared to other publicly traded partnerships in the midstream industry, without regard to financing methods, capital structure, or historical cost basis;

•the ability of our assets to generate cash flow to make distributions; and

•the viability of acquisitions and capital expenditures and the returns on investment of various investment opportunities.

Adjusted EBITDA increased by $58.2 million compared to the three months ended December 31, 2021, primarily due to (i) a $39.1 million increase in total revenues and other, (ii) an $18.1 million decrease in operation and maintenance expenses, and (iii) a $7.9 million decrease in general and administrative expenses excluding non-cash equity-based compensation expense. These amounts were offset partially by a $4.3 million decrease in distributions from equity investments.
Adjusted EBITDA increased by $95.9 million compared to the three months ended March 31, 2021, primarily due to (i) an $83.3 million increase in total revenues and other, (ii) a $16.1 million decrease in cost of product (net of lower of cost or market inventory adjustments), and (iii) an $11.4 million decrease in operation and maintenance expenses. These amounts were offset partially by (i) a $5.4 million decrease in distributions from equity investments, (ii) a $4.1 million increase in property taxes, and (iii) a $2.5 million increase in general and administrative expenses excluding non-cash equity-based compensation expense.

47
Table of Contents

Free cash flow. We define “Free cash flow” as net cash provided by operating activities less total capital expenditures and contributions to equity investments, plus distributions from equity investments in excess of cumulative earnings. Management considers Free cash flow an appropriate metric for assessing capital discipline, cost efficiency, and balance-sheet strength. Although Free cash flow is the metric used to assess WES’s ability to make distributions to unitholders, this measure should not be viewed as indicative of the actual amount of cash that is available for distributions or planned for distributions for a given period. Instead, Free cash flow should be considered indicative of the amount of cash that is available for distributions, debt repayments, and other general partnership purposes.
Free cash flow decreased by $376.2 million compared to the three months ended December 31, 2021, primarily due to a decrease of $385.4 million in net cash provided by operating activities related to working capital fluctuations and timing, partially offset by a decrease of $11.9 million in capital expenditures.
Free cash flow decreased by $11.5 million compared to the three months ended March 31, 2021, primarily due to (i) an increase of $22.2 million in capital expenditures, (ii) a $2.2 million decrease in distributions from equity investments in excess of cumulative earnings, and (iii) an increase of $2.0 million in contributions to equity investments. These amounts were offset partially by an increase of $14.9 million in net cash provided by operating activities.
See Capital Expenditures and Historical Cash Flow within this Item 2 for further information.

48
Table of Contents

Reconciliation of non-GAAP financial measures. Adjusted gross margin, Adjusted EBITDA, and Free cash flow are not defined in GAAP. The GAAP measure that is most directly comparable to Adjusted gross margin is gross margin. Net income (loss) and net cash provided by operating activities are the GAAP measures that are most directly comparable to Adjusted EBITDA. The GAAP measure that is most directly comparable to Free cash flow is net cash provided by operating activities. Our non-GAAP financial measures of Adjusted gross margin, Adjusted EBITDA, and Free cash flow should not be considered as alternatives to the GAAP measures of gross margin, net income (loss), net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP. Adjusted gross margin, Adjusted EBITDA, and Free cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect gross margin, net income (loss), and net cash provided by operating activities. Adjusted gross margin, Adjusted EBITDA, and Free cash flow should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our definitions of Adjusted gross margin, Adjusted EBITDA, and Free cash flow may not be comparable to similarly titled measures of other companies in our industry, thereby diminishing their utility as comparative measures.
Management compensates for the limitations of Adjusted gross margin, Adjusted EBITDA, and Free cash flow as analytical tools by reviewing the comparable GAAP measures, understanding the differences between Adjusted gross margin, Adjusted EBITDA, and Free cash flow compared to (as applicable) gross margin, net income (loss), and net cash provided by operating activities, and incorporating this knowledge into its decision-making processes. We believe that investors benefit from having access to the same financial measures that our management considers in evaluating our operating results.
The following tables present (i) a reconciliation of the GAAP financial measure of gross margin to the non-GAAP financial measure of Adjusted gross margin, (ii) a reconciliation of the GAAP financial measures of net income (loss) and net cash provided by operating activities to the non-GAAP financial measure of Adjusted EBITDA, and (iii) a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non-GAAP financial measure of Free cash flow:
Three Months Ended
thousandsMarch 31, 2022December 31,
2021		March 31, 2021
Reconciliation of Gross margin to Adjusted gross margin
Total revenues and other$758,297 $719,210 $674,974 
Less:
Cost of product72,848 72,040 88,969 
Depreciation and amortization134,582 144,225 130,553 
Gross margin550,867 502,945 455,452 
Add:
Distributions from equity investments55,795 60,054 61,189 
Depreciation and amortization134,582 144,225 130,553 
Less:
Reimbursed electricity-related charges recorded as revenues18,404 19,783 17,312 
Adjusted gross margin attributable to noncontrolling interests (1)
18,090 17,192 15,258 
Adjusted gross margin$704,750 $670,249 $614,624 
Adjusted gross margin for natural-gas assets
$488,909 $488,220 $432,389 
Adjusted gross margin for crude-oil and NGLs assets
148,247 114,733 133,145 
Adjusted gross margin for produced-water assets
67,594 67,296 49,090 
_________________________________________________________________________________________
(1)For all periods presented, includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating, which collectively represent WES’s noncontrolling interests.

49
Table of Contents

Three Months Ended
thousandsMarch 31, 2022December 31,
2021		March 31, 2021
Reconciliation of Net income (loss) to Adjusted EBITDA
Net income (loss)$317,670 $250,849 $191,235 
Add:
Distributions from equity investments55,795 60,054 61,189 
Non-cash equity-based compensation expense
7,743 6,842 6,734 
Interest expense85,455 89,472 98,493 
Income tax expense1,805 — 1,112 
Depreciation and amortization134,582 144,225 130,553 
Impairments— 1,345 14,866 
Other expense— 216 1,218 
Less:
Gain (loss) on divestiture and other, net370 (234)(583)
Gain (loss) on early extinguishment of debt— — (289)
Equity income, net – related parties49,607 45,308 52,165 
Other income106 392 — 
Income tax benefit— 14,210 — 
Adjusted EBITDA attributable to noncontrolling interests (1)
13,917 12,453 10,997 
Adjusted EBITDA$539,050 $480,874 $443,110 
Reconciliation of Net cash provided by operating activities to Adjusted EBITDA
Net cash provided by operating activities$276,458 $661,858 $261,550 
Interest (income) expense, net85,455 89,472 98,493 
Accretion and amortization of long-term obligations, net
(1,782)(1,762)(2,088)
Current income tax expense (benefit)673 (2,165)555 
Other (income) expense, net(106)(390)1,207 
Distributions from equity investments in excess of cumulative earnings – related parties9,925 11,310 12,141 
Changes in assets and liabilities:
Accounts receivable, net165,134 (147,139)30,182 
Accounts and imbalance payables and accrued liabilities, net14,292 (58,392)16,467 
Other items, net2,918 (59,465)35,600 
Adjusted EBITDA attributable to noncontrolling interests (1)
(13,917)(12,453)(10,997)
Adjusted EBITDA$539,050 $480,874 $443,110 
Cash flow information
Net cash provided by operating activities$276,458 $661,858 $261,550 
Net cash used in investing activities(71,617)(70,251)(46,472)
Net cash provided by (used in) financing activities(158,591)(489,470)(603,624)
_________________________________________________________________________________________
(1)For all periods presented, includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner interest in WES Operating, which collectively represent WES’s noncontrolling interests.

50
Table of Contents

Three Months Ended
thousandsMarch 31, 2022December 31,
2021		March 31, 2021
Reconciliation of Net cash provided by operating activities to Free cash flow
Net cash provided by operating activities$276,458 $661,858 $261,550 
Less:
Capital expenditures83,971 95,917 61,783 
Contributions to equity investments – related parties2,070 752 86 
Add:
Distributions from equity investments in excess of cumulative earnings – related parties9,925 11,310 12,141 
Free cash flow$200,342 $576,499 $211,822 
Cash flow information
Net cash provided by operating activities$276,458 $661,858 $261,550 
Net cash used in investing activities(71,617)(70,251)(46,472)
Net cash provided by (used in) financing activities(158,591)(489,470)(603,624)

51
Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash uses include quarterly distributions, debt service, customary operating expenses, and capital expenditures. Our sources of liquidity as of March 31, 2022, included cash and cash equivalents, cash flows generated from operations, available borrowing capacity under the RCF, and potential issuances of additional equity or debt securities. We believe that cash flows generated from these sources will be sufficient to satisfy our short-term working capital requirements and long-term capital-expenditure and debt-service requirements. The amount of future distributions to unitholders will depend on our results of operations, financial condition, capital requirements, and other factors, and will be determined by the Board on a quarterly basis. We may rely on external financing sources, including equity and debt issuances, to fund capital expenditures and future acquisitions. However, we also may use operating cash flows to fund capital expenditures or acquisitions, which could result in borrowings under the RCF to pay distributions or to fund other short-term working capital requirements.
Under our partnership agreement, we distribute all of our available cash (beyond proper reserves as defined in our partnership agreement) within 55 days following each quarter’s end. Our cash flow and resulting ability to make cash distributions are dependent on our ability to generate cash flow from operations. Generally, our available cash is our cash on hand at the end of a quarter after the payment of our expenses and the establishment of cash reserves and cash on hand resulting from working capital borrowings made after the end of the quarter. The general partner establishes cash reserves to provide for the proper conduct of our business, including (i) to fund future capital expenditures, (ii) to comply with applicable laws, debt instruments, or other agreements, or (iii) to provide funds for unitholder distributions for any one or more of the next four quarters. We have made cash distributions to our unitholders each quarter since our initial public offering in 2012. The Board declared a cash distribution to unitholders for the first quarter of 2022 of $0.50000 per unit, or $206.2 million in the aggregate. The cash distribution is payable on May 13, 2022, to our unitholders of record at the close of business on May 2, 2022.
In February 2022, we announced a buyback program of up to $1.0 billion of our common units through December 31, 2024. The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined based on ongoing assessments of capital needs, our financial performance, the market price of our common units, and other factors, including organic growth and acquisition opportunities and general market conditions. The program does not obligate us to purchase any specific dollar amount or number of units and may be suspended or discontinued at any time. During the three months ended March 31, 2022, we repurchased 225,355 common units on the open market for an aggregate purchase price of $5.1 million. The units were canceled immediately upon receipt. As of March 31, 2022, we had an authorized amount of $994.9 million remaining under the program.
For the year ended December 31, 2022, capital expenditures are expected to range between $550.0 million to $600.0 million (accrual-based, includes equity investments, excludes capitalized interest, and excludes capital expenditures associated with the 25% third-party interest in Chipeta), representing a $150.0 million increase to the midpoint of our previously announced guidance. This updated guidance range includes capital expenditures attributable to a portion of Mentone Train III, a new 300 MMcf/d cryogenic processing plant at our West Texas complex that was sanctioned in May 2022, and additional well connect and expansion capital to support accelerated producer activity in the Delaware Basin.
Management continuously monitors our leverage position and coordinates our capital expenditures and quarterly distributions with expected cash inflows and projected debt-service requirements. We will continue to evaluate funding alternatives, including additional borrowings and the issuance of debt or equity securities, to secure funds as needed or to refinance maturing debt balances with longer-term debt issuances. Our ability to generate cash flows is subject to a number of factors, some of which are beyond our control. Read Risk Factors under Part II, Item 1A of this Form 10-Q.

Working capital. Working capital is an indication of liquidity and potential needs for short-term funding. Working capital requirements are driven by changes in accounts receivable and accounts payable and other factors such as credit extended to, and the timing of collections from, our customers, and the level and timing of our spending for acquisitions, maintenance, and other capital activities. As of March 31, 2022, we had a $430.8 million working capital deficit, which we define as the amount by which current liabilities exceed current assets. Our working capital deficit was primarily due to the 4.000% Senior Notes due 2022 and the Floating-Rate Senior Notes being classified as short-term debt on the consolidated balance sheet as of March 31, 2022. As of March 31, 2022, there was $2.0 billion available for borrowing under the RCF. See Note 8—Selected Components of Working Capital and Note 9—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
52
Table of Contents

Capital expenditures. Our business is capital intensive, requiring significant investment to maintain and improve existing facilities or to develop new midstream infrastructure. Capital expenditures include maintenance capital expenditures, which include those expenditures required to maintain existing operating capacity and service capability of our assets, and expansion capital expenditures, which include expenditures to construct new midstream infrastructure and expenditures incurred to reduce costs, increase revenues, or increase system throughput or capacity from current levels.
Capital expenditures in the consolidated statements of cash flows reflect capital expenditures on a cash basis, when payments are made. Capital incurred is presented on an accrual basis. Acquisitions and capital expenditures as presented in the consolidated statements of cash flows and capital incurred were as follows:
Three Months Ended 
March 31,
thousands20222021
Capital expenditures (1)
83,971 61,783 
Capital incurred (1)
85,553 59,565 
_________________________________________________________________________________________
(1)For the three months ended March 31, 2022 and 2021, included $1.0 million and $0.9 million, respectively, of capitalized interest.

Capital expenditures increased by $22.2 million for the three months ended March 31, 2022, primarily due to increases of (i) $29.7 million at the West Texas complex primarily attributable to facility expansion and pipeline projects, and (ii) $4.5 million at the DBM oil system primarily related to an increase in pipeline and well connection projects. These increases were offset partially by decreases of (i) $3.2 million at the DBM water systems primarily due to reduced construction of additional water-disposal facilities and gathering projects, and (ii) $2.8 million at the DJ Basin oil system primarily related to a decrease in pipeline projects.

Historical cash flow. The following table and discussion present a summary of our net cash flows provided by (used in) operating, investing, and financing activities:
Three Months Ended 
March 31,
thousands20222021
Net cash provided by (used in):
Operating activities$276,458 $261,550 
Investing activities(71,617)(46,472)
Financing activities(158,591)(603,624)
Net increase (decrease) in cash and cash equivalents$46,250 $(388,546)

Operating activities. Net cash provided by operating activities increased for the three months ended March 31, 2022, primarily due to (i) higher cash operating income and (ii) lower interest expense. These increases were offset partially by (i) the impact of changes in assets and liabilities and (ii) lower distributions from equity investments. Refer to Operating Results within this Item 2 for a discussion of our results of operations as compared to the prior periods.

Investing activities. Net cash used in investing activities for the three months ended March 31, 2022, primarily included the following:

•$84.0 million of capital expenditures, primarily related to construction, expansion, and asset-integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, and DBM oil system;

•$2.1 million of capital contributions primarily paid to Red Bluff Express;

•$9.9 million of distributions received from equity investments in excess of cumulative earnings; and

•$4.1 million of decreases to materials and supplies inventory.


53
Table of Contents

Net cash used in investing activities for the three months ended March 31, 2021, primarily included the following:

•$61.8 million of capital expenditures, primarily related to construction, expansion, and asset-integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, and DBM oil system;

•$12.1 million of distributions received from equity investments in excess of cumulative earnings; and

•$3.3 million of decreases to materials and supplies inventory.

Financing activities. Net cash used in financing activities for the three months ended March 31, 2022, primarily included the following:

•$134.7 million of distributions paid to WES unitholders;

•$7.1 million of decreases in outstanding checks;

•$5.1 million of unit repurchases;

•$2.8 million of distributions paid to the noncontrolling interest owner of WES Operating; and

•$2.0 million of distributions paid to the noncontrolling interest owner of Chipeta.

Net cash used in financing activities for the three months ended March 31, 2021, primarily included the following:

•$531.1 million to redeem the total principal amount outstanding of WES Operating’s 5.375% Senior Notes due 2021 and repay borrowings under the RCF;

•$131.3 million of distributions paid to WES unitholders;

•$22.0 million of decreases in outstanding checks due mostly to ad valorem tax payments made at the end of 2020;

•$16.2 million of unit repurchases;

•$2.6 million of distributions paid to the noncontrolling interest owner of WES Operating;

•$100.0 million of borrowings under the RCF, which were used for general partnership purposes; and

•$1.6 million of contributions from related parties.

54
Table of Contents

Debt and credit facilities. As of March 31, 2022, the carrying value of outstanding debt was $6.9 billion. See Note 9—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

WES Operating Senior Notes. In mid-January 2020, WES Operating issued the Fixed-Rate 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050 and the Floating-Rate Senior Notes due 2023. Including the effects of the issuance prices, underwriting discounts, and interest-rate adjustments, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 3.790%, 4.671%, and 5.869%, respectively, at March 31, 2022. The interest rate on the Floating-Rate Senior Notes was 1.84% at March 31, 2022. The effective interest rate of these notes is subject to adjustment from time to time due to a change in credit rating. In January 2022, S&P upgraded WES Operating’s long-term debt from “BB+” to “BBB-.” As a result of this upgrade, annualized borrowing costs will decrease by $7.9 million.
As of March 31, 2022, the 4.000% Senior Notes due 2022 and the Floating-Rate Senior Notes were classified as short-term debt on the consolidated balance sheet. Subsequent to March 31, 2022, WES Operating redeemed the 4.000% Senior Notes due 2022 at par value on April 1, 2022, pursuant to the optional redemption terms in WES Operating’s indenture. At March 31, 2022, WES Operating was in compliance with all covenants under the relevant governing indentures.
We may, from time to time, seek to retire, rearrange, or amend some or all of our outstanding debt or debt agreements through cash purchases, exchanges, open-market repurchases, privately negotiated transactions, tender offers, or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity position and requirements, contractual restrictions, and other factors. The amounts involved may be material.

Revolving credit facility. WES Operating’s $2.0 billion senior unsecured revolving credit facility is expandable to a maximum of $2.5 billion, and matures in February 2025 for each extending lender. The non-extending lender’s commitments mature in February 2024 and represent $100.0 million out of $2.0 billion of total commitments from all lenders. As of March 31, 2022, there were no outstanding borrowings and $5.1 million of outstanding letters of credit, resulting in $2.0 billion of available borrowing capacity under the RCF. As of March 31, 2022, the interest rate on any outstanding RCF borrowings was 1.95% and the facility-fee rate was 0.25%. At March 31, 2022, WES Operating was in compliance with all covenants under the RCF.
The RCF contains certain covenants that limit, among other things, WES Operating’s ability, and that of certain of its subsidiaries, to incur additional indebtedness, grant certain liens, merge, consolidate, or allow any material change in the character of its business, enter into certain related-party transactions and use proceeds other than for partnership purposes. The RCF also contains various customary covenants, certain events of default, and a maximum consolidated leverage ratio as of the end of each fiscal quarter (which is defined as the ratio of consolidated indebtedness as of the last day of a fiscal quarter to Consolidated EBITDA for the most-recent four-consecutive fiscal quarters ending on such day) of 5.0 to 1.0, or a consolidated leverage ratio of 5.5 to 1.0 with respect to quarters ending in the 270-day period immediately following certain acquisitions. As a result of certain covenants contained in the RCF, our capacity to borrow under the RCF may be limited.

Finance lease liabilities. During the first quarter of 2020, WES entered into finance leases with third parties for equipment and vehicles. As of March 31, 2022, we have future finance-lease payments of $2.7 million for the remainder of 2022 and a total of $1.6 million in years thereafter.

55
Table of Contents

Credit risk. We bear credit risk through exposure to non-payment or non-performance by our counterparties, including Occidental, financial institutions, customers, and other parties. Generally, non-payment or non-performance results from a customer’s inability to satisfy payables to us for services rendered, minimum-volume-commitment deficiency payments owed, or volumes owed pursuant to gas-imbalance agreements. We examine and monitor the creditworthiness of customers and may establish credit limits for customers. We are subject to the risk of non-payment or late payment by producers for gathering, processing, transportation, and disposal fees. Additionally, we continue to evaluate counterparty credit risk and, in certain circumstances, are exercising our rights to request adequate assurance.
We expect our exposure to the concentrated risk of non-payment or non-performance to continue for as long as our commercial relationships with Occidental generate a significant portion of our revenues. While Occidental is our contracting counterparty, gathering and processing arrangements with affiliates of Occidental on most of our systems include not just Occidental-produced volumes, but also, in some instances, the volumes of other working-interest owners of Occidental who rely on our facilities and infrastructure to bring their volumes to market. See Note 5—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
Our ability to make cash distributions to our unitholders may be adversely impacted if Occidental becomes unable to perform under the terms of gathering, processing, transportation, and disposal agreements; the contribution agreements; or the Services Agreement.

ITEMS AFFECTING THE COMPARABILITY OF FINANCIAL RESULTS WITH WES OPERATING

Our consolidated financial statements include the consolidated financial results of WES Operating. Our results of operations do not differ materially from the results of operations and cash flows of WES Operating, which are reconciled below.

Reconciliation of net income (loss). The differences between net income (loss) attributable to WES and WES Operating are reconciled as follows:
Three Months Ended
thousandsMarch 31, 2022December 31,
2021		March 31, 2021
Net income (loss) attributable to WES$308,717 $243,517 $185,791 
Limited partner interests in WES Operating not held by WES (1)
6,317 4,986 3,811 
General and administrative expenses (2)
741 726 886 
Other income (expense), net(3)(2)(3)
Income taxes— 6 — 
Net income (loss) attributable to WES Operating$315,772 $249,233 $190,485 
_________________________________________________________________________________________
(1)Represents the portion of net income (loss) allocated to the limited partner interests in WES Operating not held by WES. A subsidiary of Occidental held a 2.0% limited partner interest in WES Operating for all periods presented.
(2)Represents general and administrative expenses incurred by WES separate from, and in addition to, those incurred by WES Operating.

56
Table of Contents

Reconciliation of net cash provided by (used in) operating and financing activities. The differences between net cash provided by (used in) operating and financing activities for WES and WES Operating are reconciled as follows:
Three Months Ended 
March 31,
thousands20222021
WES net cash provided by operating activities$276,458 $261,550 
General and administrative expenses (1)
741 886 
Non-cash equity-based compensation expense
(131)7,302 
Changes in working capital(6,948)(8,067)
Other income (expense), net(3)(3)
WES Operating net cash provided by operating activities$270,117 $261,668 
WES net cash provided by (used in) financing activities$(158,591)$(603,624)
Distributions to WES unitholders (2)
134,749 131,265 
Distributions to WES from WES Operating (3)
(137,412)(124,919)
Increase (decrease) in outstanding checks135 (192)
Unit repurchases5,149 16,241 
Other6,085 — 
WES Operating net cash provided by (used in) financing activities$(149,885)$(581,229)
_________________________________________________________________________________________
(1)Represents general and administrative expenses incurred by WES separate from, and in addition to, those incurred by WES Operating.
(2)Represents distributions to WES common unitholders paid under WES’s partnership agreement. See Note 3—Partnership Distributions and Note 4—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
(3)Difference attributable to elimination in consolidation of WES Operating’s distributions on partnership interests owned by WES. See Note 3—Partnership Distributions and Note 4—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Noncontrolling interest. WES Operating’s noncontrolling interest consists of the 25% third-party interest in Chipeta. See Note 1—Description of Business and Basis of Presentation in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

WES Operating distributions. WES Operating distributes all of its available cash on a quarterly basis to WES Operating unitholders in proportion to their share of limited partner interests in WES Operating. See Note 3—Partnership Distributions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the amounts of assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recognized during the periods reported. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2021.

57
Table of Contents

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Commodity-price risk. Certain of our processing services are provided under percent-of-proceeds and keep-whole agreements. Under percent-of-proceeds agreements, we receive a specified percentage of the net proceeds from the sale of residue and/or NGLs. Under keep-whole agreements, we keep 100% of the NGLs produced, and the processed natural gas, or value of the natural gas, is returned to the producer, and because some of the gas is used and removed during processing, we compensate the producer for the amount of gas used and removed in processing by supplying additional gas or by paying an agreed-upon value for the gas used.
For the three months ended March 31, 2022, 94% of our wellhead natural-gas volume (excluding equity investments) and 100% of our crude-oil and produced-water throughput (excluding equity investments) were serviced under fee-based contracts. A 10% increase or decrease in commodity prices would not have a material impact on our operating income (loss), financial condition, or cash flows for the next 12 months, excluding the effect of the below-described imbalances.
We bear a limited degree of commodity-price risk with respect to settlement of natural-gas and NGLs imbalances that arise from differences in gas volumes received into our systems and gas volumes delivered by us to customers, and for instances where actual liquids recovery or fuel usage varies from contractually stipulated amounts. Natural-gas and NGLs volumes owed to or by us that are subject to monthly cash settlement are valued according to the terms of the contract as of the balance sheet dates and generally reflect market-index prices. Other natural-gas and NGLs volumes owed to or by us are valued at our weighted-average cost as of the balance sheet dates and are settled in-kind. Our exposure to the impact of changes in commodity prices on outstanding imbalances depends on the settlement timing of the imbalances. See Outlook under Part I, Item 2 and Risk Factors under Part II, Item 1A of this Form 10-Q.

Interest-rate risk. The Federal Open Market Committee made no changes to its target range for the federal funds rate in 2021 and increased its target range once during the three months ended March 31, 2022. Any future increases in the federal funds rate likely will result in an increase in short-term financing costs. As of March 31, 2022, we had (i) no outstanding borrowings under the RCF that bear interest at a rate based on LIBOR or an alternative base rate at WES Operating’s option, and (ii) the Floating-Rate Senior Notes that bear interest at a rate based on LIBOR. While a 10% change in the applicable benchmark interest rate would not materially impact interest expense on our outstanding borrowings, it would impact the fair value of the senior notes at March 31, 2022. In addition, the transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”) beginning in 2023 as a result of reference rate reform is not expected to materially impact interest expense on our outstanding borrowings.
Additional variable-rate debt may be issued in the future, either under the RCF or other financing sources, including commercial bank borrowings or debt issuances.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer of WES’s general partner and WES Operating GP (for purposes of this Item 4, “Management”) performed an evaluation of WES’s and WES Operating’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. WES’s and WES Operating’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, Management concluded that WES’s and WES Operating’s disclosure controls and procedures were effective as of March 31, 2022.

Changes in Internal Control Over Financial Reporting. There were no changes in WES’s or WES Operating’s internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, WES’s or WES Operating’s internal control over financial reporting.

58
Table of Contents

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

On July 1, 2020, the U.S. Department of Justice, on behalf of the U.S. Environmental Protection Agency (the “EPA”), and the State of Colorado commenced an enforcement action in the United States District Court for the District of Colorado against Kerr-McGee Gathering LLC (“KMG”), a wholly owned subsidiary of WES, for alleged non-compliance with the leak detection and repair requirements of the federal Clean Air Act (“LDAR requirements”) at its Fort Lupton facility in the DJ Basin complex. KMG previously had been in negotiations with the EPA and the State of Colorado to resolve the alleged non-compliance at the Fort Lupton facility. Per the complaint, plaintiffs pray for injunctive relief, remedial action, and civil penalties. Management cannot reasonably estimate the outcome of this action at this time.
On October 29, 2020, WGR Operating, LP (“WGR”), on behalf of itself and derivatively on behalf of Mont Belvieu JV, filed suit against Enterprise Products Operating, LLC (“Enterprise”) and Mont Belvieu JV (as a nominal defendant) in the District Court of Harris County, Texas. Our lawsuit seeks a declaratory judgment regarding proper revenue allocation as set forth in the Operating Agreement between Mont Belvieu JV (of which WGR is a 25% owner) and Enterprise (the “Operating Agreement”) related to fractionation trains at the Mont Belvieu complex in Chambers County, Texas. Specifically, the Operating Agreement sets forth a revenue allocation structure, whereby revenue would be allocated to the various fracs at the Mont Belvieu complex in sequential order, with Fracs VII and VIII (which are owned by Mont Belvieu JV) following Fracs I through VI, but preceding any “Later Frac Facilities.” Subsequent to the construction of Fracs VII and VIII, Enterprise built Fracs IX, X, and XI, which it wholly owns, and has signaled its intention to treat such subsequent fracs as outside the Mont Belvieu revenue allocation. We do not believe Enterprise’s attempt to bypass the agreed-to revenue allocation is proper under the parties’ agreements and now seek judicial determination. We currently sue only for declaratory judgment to avoid potential future damages. We cannot make any assurances regarding the ultimate outcome of this proceeding and its resulting impact on WGR or WES.
Except as discussed above, we are not a party to any legal, regulatory, or administrative proceedings other than proceedings arising in the ordinary course of business. Management believes that there are no such proceedings for which a final disposition could have a material adverse effect on results of operations, cash flows, or financial condition, or for which disclosure is otherwise required by Item 103 of Regulation S-K.
    
59
Table of Contents

Item 1A.  Risk Factors

Security holders and potential investors in our securities should carefully consider the risk factor included below and those set forth under Part I, Item 1A in our Form 10-K for the year ended December 31, 2021, together with all of the other information included in this document, and in our other public filings, press releases, and public discussions with management. Additionally, for a full discussion of the risks associated with Occidental’s business, see Item 1A under Part I in Occidental’s Form 10-K for the year ended December 31, 2021, Occidental’s quarterly reports on Form 10-Q and Occidental’s other public filings, press releases, and public discussions with Occidental management. We have identified the below risk factors as important factors that could cause our actual results to differ materially from those contained in any written or oral forward-looking statements made by us or on our behalf.

Certain of our natural-gas processing agreements provide our producer customers with contractually specified NGL recoveries that, under expected operating conditions, may generate commodity price exposure and could, under certain circumstances, generate financial or physical-delivery obligations for us.

Under certain of our natural-gas processing agreements, we provide our producer customers with contractually specified NGL recoveries. To the extent actual recoveries exceed the contractually specified recoveries, we retain the excess NGL volumes and sell such volumes for our own account along with NGL and natural-gas volumes retained by us under our percent-of-proceeds and keep-whole processing agreements, bearing commodity-price risk on these volumes.
Conversely, if actual plant recoveries are below the contractually specified recoveries, we would still be obligated to deliver the contractually fixed amount of NGLs (or in some cases, the financial equivalent thereof) to such customers. For this reason, our inability to efficiently operate our natural-gas processing facilities could result in diminished NGL sale proceeds for our account, or could result in losses when we settle shortfalls between actual and contractually specified recoveries with our customers. Accordingly, the failure to achieve operational plant efficiency to support the contractually specified recoveries could negatively impact our profitability and cash flows available for distribution to unitholders.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to repurchases made by WES of its common units in the open market under the $1.0 billion Purchase Program during the first quarter of 2022:
PeriodTotal number of units purchasedAverage price paid per unit
Total number of units purchased as part of publicly announced plans or programs (1)
Approximate dollar value of units that may yet be purchased under the plans or programs (1)
January 1-31, 2022
— $— — 1,000,000,000 
February 1-28, 2022
— — — 1,000,000,000 
March 1-31, 2022
225,355 22.85 225,355 994,851,000 
Total225,355 22.85 225,355 
______________________________________________________________________________________
(1)In February 2022, WES announced the $1.0 billion Purchase Program, pursuant to which we may purchase up to $1.0 billion in aggregate value of our common units through December 31, 2024. See Note 4—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional details.

60
Table of Contents

Item 6.  Exhibits

Exhibits designated by an asterisk (*) are filed herewith and those designated with asterisks (**) are furnished herewith; all exhibits not so designated are incorporated herein by reference to a prior filing as indicated.

Exhibit Index
Exhibit
Number		Description
#2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
4.1
61
Table of Contents

Exhibit
Number		Description
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
62
Table of Contents

Exhibit
Number		Description
4.19
4.20
4.21
4.22
*31.1
*31.2
*31.3
*31.4
**32.1
**32.2
*101.INSXBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
*101.SCHInline XBRL Schema Document
*101.CALInline XBRL Calculation Linkbase Document
*101.DEFInline XBRL Definition Linkbase Document
*101.LABInline XBRL Label Linkbase Document
*101.PREInline XBRL Presentation Linkbase Document
*104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
______________________________________________________________________________________
#Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.
63
Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

WESTERN MIDSTREAM PARTNERS, LP
May 10, 2022
/s/ Michael P. Ure
Michael P. Ure
President and Chief Executive Officer
Western Midstream Holdings, LLC
(as general partner of Western Midstream Partners, LP)
May 10, 2022
/s/ Kristen S. Shults
Kristen S. Shults
Senior Vice President and Chief Financial Officer
Western Midstream Holdings, LLC
(as general partner of Western Midstream Partners, LP)
WESTERN MIDSTREAM OPERATING, LP
May 10, 2022
/s/ Michael P. Ure
Michael P. Ure
President and Chief Executive Officer
Western Midstream Operating GP, LLC
(as general partner of Western Midstream Operating, LP)
May 10, 2022
/s/ Kristen S. Shults
Kristen S. Shults
Senior Vice President and Chief Financial Officer
Western Midstream Operating GP, LLC
(as general partner of Western Midstream Operating, LP)
64