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Western Midstream Partners, LP - Quarter Report: 2024 March (Form 10-Q)

Meritage Midstream Services II, LLC, which was acquired by the Partnership on October 13, 2023.
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.
Occidental Petroleum Corporation and, as the context requires, its subsidiaries, excluding our general partner.
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.
Red Bluff Express Pipeline, LLC, in which we own a 30% interest.
The Springfield gas-gathering system and Springfield oil-gathering system.
The $1.25 billion buyback program ending 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.

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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 amounts
20242023
Revenues and other
Service revenues – fee based$ $ 
Service revenues – product based  
Product sales  
Other  
Total revenues and other (1)
  
Equity income, net – related parties  
Operating expenses
Cost of product  
Operation and maintenance  
General and administrative  
Property and other taxes  
Depreciation and amortization  
Long-lived asset and other impairments (2)
  
Total operating expenses (3)
  
Gain (loss) on divestiture and other, net ()
Operating income (loss)  
Interest expense()()
Gain (loss) on early extinguishment of debt  
Other income (expense), net  
Income (loss) before income taxes  
Income tax expense (benefit)  
Net income (loss)  
Net income (loss) attributable to noncontrolling interests  
Net income (loss) attributable to Western Midstream Partners, LP$ $ 
Limited partners’ interest in net income (loss):
Net income (loss) attributable to Western Midstream Partners, LP$ $ 
General partner interest in net (income) loss()()
Limited partners’ interest in net income (loss) (4)
  
Net income (loss) per common unit – basic (4)
$ $ 
Net income (loss) per common unit – diluted (4)
$ $ 
Weighted-average common units outstanding – basic (4)
  
Weighted-average common units outstanding – diluted (4)
  
thousands except number of unitsMarch 31,
2024December 31,
2023ASSETSCurrent assetsCash and cash equivalents$ $ Accounts receivable, net  Other current assets  Total current assets  Property, plant, and equipmentCost  Less accumulated depreciation  Net property, plant, and equipment  Goodwill  Other intangible assets  Equity investments  
Other assets (1)
  
Total assets (2)
$ $ LIABILITIES, EQUITY, AND PARTNERS’ CAPITALCurrent liabilitiesAccounts and imbalance payables$ $ 
Short-term debt
  Accrued ad valorem taxes  Accrued liabilities  Total current liabilities  Long-term liabilities
Long-term debt
  Deferred income taxes  Asset retirement obligations  Other liabilities  
Total long-term liabilities
  
Total liabilities (3)
  Equity and partners’ capital
Common units ( and units issued and outstanding at March 31, 2024, and December 31, 2023, respectively)
  
General partner units ( units issued and outstanding at March 31, 2024, and December 31, 2023)
  Total partners’ capital  Noncontrolling interests  Total equity and partners’ capital  Total liabilities, equity, and partners’ capital$ $ 
________________________________________________________________________________________
(1) million and $ million of NGLs line-fill inventory as of March 31, 2024, and December 31, 2023, respectively. Other assets also includes $ million and $ million of materials and supplies inventory as of March 31, 2024, and December 31, 2023, respectively.
(2) million and $ billion as of March 31, 2024, and December 31, 2023, respectively, which includes related-party Accounts receivable, net of $ million and $ million as of March 31, 2024, and December 31, 2023, respectively. See Note 6.
(3) million and $ million as of March 31, 2024, and December 31, 2023, respectively. See Note 6.

See accompanying Notes to Consolidated Financial Statements.
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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, 2023$ $ $ $ 
Net income (loss)    
Distributions to Chipeta noncontrolling interest owner— — ()()
Distributions to noncontrolling interest owner of WES Operating— — ()()
Distributions to Partnership unitholders()()— ()
Equity-based compensation expense
 — —  
Other()— — ()
Balance at March 31, 2024$ $ $ $ 

Partners’ Capital
thousandsCommon
Units		General Partner
Units		Noncontrolling
Interests		Total
Balance at December 31, 2022$ $ $ $ 
Net income (loss)    
Distributions to Chipeta noncontrolling interest owner— — ()()
Distributions to noncontrolling interest owner of WES Operating— — ()()
Distributions to Partnership unitholders()()— ()
Unit repurchases (1)
()— — ()
Equity-based compensation expense
 — —  
Other()— — ()
Balance at March 31, 2023$ $ $ $ 
_________________________________________________________________________________________
(1)
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended 
March 31,
thousands 20242023
Revenues and other
Service revenues – fee based$ $ 
Service revenues – product based  
Product sales  
Other  
Total revenues and other (1)
  
Equity income, net – related parties  
Operating expenses
Cost of product  
Operation and maintenance  
General and administrative  
Property and other taxes  
Depreciation and amortization  
Long-lived asset and other impairments (2)
  
Total operating expenses (3)
  
Gain (loss) on divestiture and other, net ()
Operating income (loss)  
Interest expense()()
Gain (loss) on early extinguishment of debt  
Other income (expense), net  
Income (loss) before income taxes  
Income tax expense (benefit)  
Net income (loss)  
Net income (loss) attributable to noncontrolling interest  
Net income (loss) attributable to Western Midstream Operating, LP$ $ 
________________________________________________________________________________________
(1) million and $ million for the three months ended March 31, 2024 and 2023, respectively. See Note 6.
(2)
(3)) million and $() million for the three months ended March 31, 2024 and 2023, respectively, all primarily related to changes in imbalance positions. See Note 6.

See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
thousands except number of unitsMarch 31,
2024		December 31,
2023
ASSETS
Current assets
Cash and cash equivalents$ $ 
Accounts receivable, net  
Other current assets  
Total current assets  
Property, plant, and equipment
Cost  
Less accumulated depreciation  
Net property, plant, and equipment  
Goodwill  
Other intangible assets  
Equity investments  
Other assets (1)
  
Total assets (2)
$ $ 
LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL
Current liabilities
Accounts and imbalance payables$ $ 
Short-term debt
  
Accrued ad valorem taxes  
Accrued liabilities  
Total current liabilities  
Long-term liabilities
Long-term debt
  
Deferred income taxes  
Asset retirement obligations  
Other liabilities  
Total long-term liabilities
  
Total liabilities (3)
  
Equity and partners’ capital
Common units ( units issued and outstanding at March 31, 2024, and December 31, 2023)
  
Total partners’ capital  
Noncontrolling interest  
Total equity and partners’ capital  
Total liabilities, equity, and partners’ capital$ $ 
_________________________________________________________________________________________
(1) million and $ million of NGLs line-fill inventory as of March 31, 2024, and December 31, 2023, respectively. Other assets also includes $ million and $ million of materials and supplies inventory as of March 31, 2024, and December 31, 2023, respectively.
(2) million and $ billion as of March 31, 2024, and December 31, 2023, respectively, which includes related-party Accounts receivable, net of $ million and $ million as of March 31, 2024, and December 31, 2023, respectively. See Note 6.
(3) million and $ million as of March 31, 2024, and December 31, 2023, respectively. See Note 6.
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL
(UNAUDITED)
thousandsCommon
Units		Noncontrolling
Interest		Total
Balance at December 31, 2023$ $ $ 
Net income (loss)   
Distributions to Chipeta noncontrolling interest owner— ()()
Distributions to WES Operating unitholders()— ()
Contributions of equity-based compensation from WES
 —  
Balance at March 31, 2024$ $ $ 

thousandsCommon
Units		Noncontrolling
Interest		Total
Balance at December 31, 2022$ $ $ 
Net income (loss)   
Distributions to Chipeta noncontrolling interest owner— ()()
Distributions to WES Operating unitholders()— ()
Contributions of equity-based compensation from WES
 —  
Balance at March 31, 2023$ $ $ 
_________________________________________________________________________________________
(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.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 %
Proportionate consolidation (2)
Springfield system %Marcellus Interest systems %
Equity investments (3)
Mi Vida JV LLC (“Mi Vida”) %Front Range Pipeline LLC (“FRP”) %Red Bluff Express Pipeline, LLC (“Red Bluff Express”) %Rendezvous Gas Services, LLC (“Rendezvous”) %Texas Express Pipeline LLC (“TEP”) %Texas Express Gathering LLC (“TEG”) %White Cliffs Pipeline, LLC (“White Cliffs”) %
_________________________________________________________________________________________
(1)The % 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 2023 Form 10-K, as filed with the SEC on February 21, 2024. Management believes that the disclosures made are adequate to make the information not misleading.
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.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
% partnership interest in WES Operating, as of March 31, 2024 (see Note 7). 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.


% third-party interest in Chipeta and (ii) the % limited partner interest in WES Operating owned by an Occidental subsidiary. WES Operating’s noncontrolling interest in the consolidated financial statements consists of the % third-party interest in Chipeta. See Note 5.


Equity-based compensation. During the three months ended March 31, 2024, the Partnership issued common units under its long-term incentive plans. Compensation expense was $ million and $ million for the three months ended March 31, 2024 and 2023, respectively.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 $ Service revenues – product based  Product sales  Total revenue from customers Revenue from other than customersOther  Total revenues and other$ $ 

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, 2024, are presented in the table below. 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.
 2025 2026 2027 2028 Thereafter Total$ 

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
% interest in Enterprise EF78 LLC (the “Mont Belvieu JV”), (ii) the % interest in Whitethorn Pipeline Company LLC (“Whitethorn LLC”), (iii) the % interest in Panola Pipeline Company, LLC (“Panola”), and (iv) the % interest in Saddlehorn Pipeline Company, LLC (“Saddlehorn”). The combined proceeds received in the first quarter of 2024 of $ million includes $ million in pro-rata distributions through closing, resulting in a net gain on sale of $ million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statement of operations. The sale of the interests in the Mont Belvieu JV and Whitethorn LLC also resolved outstanding legal proceedings associated with those assets.

Marcellus Interest systems. In April 2024, the Partnership closed on the sale of its % interest in the Marcellus Interest systems for proceeds of $ million, resulting in an estimated net gain on sale of approximately $ million that will be recorded as Gain (loss) on divestiture and other, net in the consolidated statement of operations during the second quarter of 2024. As of March 31, 2024, the Marcellus Interest systems satisfied criteria to be considered held for sale. At March 31, 2024, the consolidated balance sheet included current assets of $ million, long-term assets of $ million, current liabilities of $ million, and long-term liabilities of $ million associated with assets held for sale.

Meritage. On October 13, 2023, the Partnership closed on the acquisition of Meritage Midstream Services II, LLC (“Meritage”) for $ million (subject to certain customary post-closing adjustments) funded with cash, including proceeds from the Partnership’s $ million senior note issuance in September 2023 (see Note 10) and borrowings on the senior unsecured revolving credit facility (“RCF”). The cash purchase price, adjusted for working capital and certain customary post-closing adjustments and reduced by the $ million of cash acquired (as presented in the table below), was $ million.
The assets acquired, located in Converse, Campbell, and Johnson counties, Wyoming, include approximately 1,500 miles of high- and low-pressure natural-gas gathering pipelines, approximately 380 MMcf/d of natural-gas processing capacity, and the Thunder Creek NGL pipeline, which is a 120 mile, 38 MBbls/d FERC-regulated NGL pipeline that connects to the processing facility. The acquisition expands the Partnership’s existing Powder River Basin asset base, increasing total natural-gas processing capacity in that region to 440 MMcf/d.
The Meritage acquisition has been accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed in the Meritage acquisition were recorded in the consolidated balance sheet at their estimated fair values as of the acquisition date. Results of operations attributable to the Meritage acquisition were included in the Partnership’s consolidated statements of operations beginning on the acquisition date in the fourth quarter of 2023.

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Accounts receivable, net Other current assets Property, plant, and equipment Other assets Total assets acquired Liabilities assumed:
Accounts payable and accrued liabilities
 Other current liabilities Asset retirement obligation Other liabilities 
Total liabilities assumed
 Net assets acquired$ 

The acquisition-date fair values are based on an assessment of the fair value of the assets acquired and liabilities assumed in the Meritage acquisition using inputs that are not observable in the market and thus represent Level 3 inputs. The fair values of the processing plants, gathering system, and related facilities and equipment are based on market and cost approaches.

days following each quarter’s end. 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.


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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 $ May 15, 2023May 1, 2023June 30  August 14, 2023July 31, 2023September 30  November 13, 2023November 1, 2023December 31  February 13, 2024February 1, 20242024March 31$ $ May 15, 2024May 1, 2024
_________________________________________________________________________________________
(1)Includes the regular quarterly distribution of $ per unit, or $ million, as well as the Enhanced Distribution of $ per unit discussed below.

To facilitate the distribution of available cash, during 2022 the Partnership adopted a financial policy that provided for an additional distribution (“Enhanced Distribution”) to be paid in conjunction with the regular first-quarter distribution of the following year (beginning in 2023), in a target amount equal to Free cash flow generated in the prior year after subtracting Free cash flow used for the prior year’s debt repayments, regular-quarter distributions, and unit repurchases. In April 2023, the Board approved an Enhanced Distribution of $ per unit, or $ million, related to the Partnership’s 2022 performance, which was paid in conjunction with the regular first-quarter 2023 distribution on May 15, 2023.

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 5.
 May 2023June 30 August 2023September 30 November 2023December 31 February 20242024March 31$ May 2024
_________________________________________________________________________________________
(1)Includes amounts related to the Enhanced Distribution discussed above.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
common units, representing a % limited partner interest in the Partnership, and through its ownership of the general partner, Occidental indirectly held general partner units, representing a % general partner interest in the Partnership. The public held common units, representing a % limited partner interest in the Partnership.

Partnership equity repurchases. In 2022, the Board authorized the Partnership to buy back up to $ billion of the Partnership’s common units through December 31, 2024 (the “$1.25 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, 2024, there were no common units repurchased. During the three months ended March 31, 2023, the Partnership repurchased common units for an aggregate purchase price of $ million. The units were canceled immediately upon receipt. As of March 31, 2024, the Partnership had an authorized amount of $ million remaining under the program.

Holdings of WES Operating equity. As of March 31, 2024, (i) the Partnership, directly and indirectly through its ownership of WES Operating GP, owned a % limited partner interest and the entire non-economic general partner interest in WES Operating and (ii) Occidental, through its ownership of WGRAH, owned a % limited partner interest in WES Operating, which is reflected as a noncontrolling interest within the consolidated financial statements of the Partnership (see Note 1).

 $ Weighted-average common units outstandingBasic  Dilutive effect of non-vested phantom units  Diluted  Excluded due to anti-dilutive effect  Net income (loss) per common unitBasic$ $ Diluted$ $ 2023Revenues and other $   )     Operating expenses)()    )()
_________________________________________________________________________________________
(1)See Note 7.
(2)Includes related-party natural-gas and NGLs imbalances.

Consolidated balance sheets
thousandsMarch 31,
2024		December 31,
2023
Assets
Accounts receivable, net$ $ 
Other current assets  
Equity investments (1)
  
Other assets  
Total assets  
Liabilities
Accounts and imbalance payables  
Accrued liabilities  
Other liabilities (2)
  
Total liabilities  
_________________________________________________________________________________________
(1)See Note 7.
(2)Includes contract liabilities from contracts with customers. See Note 2.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 $ Contributions to equity investments – related parties ()Distributions from equity investments in excess of cumulative earnings – related parties  
Distributions to Partnership unitholders (1)
()()
Distributions to WES Operating unitholders (2)
()()
_________________________________________________________________________________________
(1)Represents common and general partner unit distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5).
(2)Represents distributions paid to Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5).

 $ 
_________________________________________________________________________________________
(1)Includes an intercompany service fee between the Partnership and WES Operating.

Consolidated balance sheets
thousandsMarch 31,
2024		December 31,
2023
Accounts receivable, net (1)
$ $ 
Other current assets  
Other assets  
Accounts and imbalance payables
  
Accrued liabilities  
_________________________________________________________________________________________
(1)Includes balances related to transactions between the Partnership and WES Operating.

Consolidated statements of cash flows
2023
()$()
))))))))))()$()$()$ 
_________________________________________________________________________________________
(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.
(2)See Note 3.

During the first quarter of 2024, the Partnership closed on the sale of the following equity investments to third parties: (i) the % interest in Mont Belvieu JV, (ii) the % interest in Whitethorn LLC, (iii) the % interest in Panola, and (iv) the % interest in Saddlehorn. See Note 3.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 $ Gathering systems – pipelines years  Gathering systems – compressors years  Processing complexes and treating facilities years  Transportation pipeline and equipment
to years
  
Produced-water disposal systems
years  Assets under constructionN/A  Other
to years
  Total property, plant, and equipment  Less accumulated depreciation  Net property, plant, and equipment$ $ 

“Assets under construction” represents property that is not yet placed into productive service as of the respective balance sheet date and is excluded from capitalized costs being depreciated.

 million for assets located in the Rockies due to a reduction in estimated future cash flows resulting from a contract termination notice received in the first quarter of 2023. This asset was impaired to its estimated fair value of $ million. The fair value was measured using the income approach and Level-3 fair value inputs. The income approach was based on the Partnership’s projected future EBITDA and free cash flows, which requires significant assumptions including, among others, future throughput volumes based on current expectations of producer activity and operating costs.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 $ $ $ Other receivables, net    Total accounts receivable, net$ $ $ $ 

 $ $ $ Imbalance receivables    Prepaid insurance    Contract assets    Other    Total other current assets$ $ $ $ 

 $ $ $ 
Short-term asset retirement obligations
    
Short-term remediation and reclamation obligations
    Income taxes payable    Contract liabilities    Accrued payroll and benefits    Other    Total accrued liabilities$ $ $ $ 
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 $ $ $ $ $ Finance lease liabilities      
Total short-term debt
$ $ $ $ $ $ 
Long-term debt
% Senior Notes due 2025
$ $ $ $ $ $ 
% Senior Notes due 2025
      
% Senior Notes due 2026
      
% Senior Notes due 2028
      
% Senior Notes due 2028
      
% Senior Notes due 2029
      
% Senior Notes due 2030
      
% Senior Notes due 2033
      
% Senior Notes due 2044
      
% Senior Notes due 2048
      
% Senior Notes due 2048
      
% Senior Notes due 2050
      Finance lease liabilities      
Total long-term debt
$ $ $ $ $ $ 
_________________________________________________________________________________________
(1)Fair value is measured using the market approach and Level-2 fair value inputs.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
Commercial paper borrowings (repayments), net (1)
()
Repayment of % Senior Notes due 2025
()
Repayment of % Senior Notes due 2025
()
Repayment of % Senior Notes due 2028
()
Repayment of % Senior Notes due 2028
()
Repayment of % Senior Notes due 2030
()Finance lease liabilities Other Balance at March 31, 2024$ 
________________________________________________________________________________________
(1)Net of borrowings and repayments related to commercial paper notes with original maturities of 90 days or less.

WES Operating Senior Notes. WES Operating issued the Fixed-Rate % Senior Notes due 2025, % Senior Notes due 2030, % Senior Notes due 2050, and the Floating-Rate Senior Notes due 2023 in January 2020. 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 %, %, and %, respectively, at March 31, 2024, and were %, %, and %, respectively, at March 31, 2023. The effective interest rate of these notes is subject to adjustment from time to time due to a change in credit rating.
During the three months ended March 31, 2024, WES Operating purchased and retired $ million of certain of its senior notes via open-market repurchases with cash from operations (see Debt activity above) and a gain of $ million was recognized for the early retirement of portions of these notes. As of March 31, 2024, the % Senior Notes due 2025 were classified as long-term debt on the consolidated balance sheet as WES Operating has the ability and intent to refinance these obligations using long-term debt. Subsequent to March 31, 2024, WES Operating purchased and retired $ million of certain of its senior notes via open-market repurchases.
During the third quarter of 2023, WES Operating completed the public offering of $ million in aggregate principal amount of % Senior Notes due 2029. Net proceeds from the offering were used to fund a portion of the aggregate purchase price for the Meritage acquisition (see Note 3), to pay related costs and expenses, and for general partnership purposes. During the second quarter of 2023, WES Operating completed the public offering of $ million in aggregate principal amount of % Senior Notes due 2033. Net proceeds from the offering were used to repay borrowings under the RCF and for general partnership purposes. In addition, during 2023, WES Operating purchased and retired $ million of certain of its senior notes via open-market repurchases and redeemed the total principal amount outstanding on the Floating-Rate Senior Notes due 2023 at par value with cash on hand.
As of March 31, 2024, WES Operating was in compliance with all covenants under the relevant governing indentures.

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
% Senior Notes due 2033 offering, and (ii) entered into an amendment to its RCF to, among other things, extend the maturity date to April 2028 and provide for a maximum borrowing capacity up to $ billion, expandable to a maximum of $ billion, through the maturity date.
As of March 31, 2024, there were outstanding borrowings and $ million of outstanding letters of credit, resulting in $ billion in effective borrowing capacity under the RCF, after taking into account the $ million of outstanding commercial paper borrowings (see below), for which we maintain availability under the RCF as support for WES Operating’s commercial paper program. As of March 31, 2024 and 2023, the interest rate on any outstanding RCF borrowings was % and %, respectively. The facility-fee rate was % at March 31, 2024 and 2023. As of March 31, 2024, WES Operating was in compliance with all covenants under the RCF.

Commercial paper program. In November 2023, WES operating entered into an unsecured commercial paper program under which it may issue (and have outstanding at any one time) an aggregate principal amount up to $ billion. WES Operating intends to maintain a minimum aggregate available borrowing capacity under the RCF equal to the aggregate amount of outstanding commercial paper borrowings. The maturities of the notes may vary, but may not exceed days. As of March 31, 2024, there were $ million aggregate principal amount of short-term notes outstanding under the commercial paper program at a weighted-average interest rate of % and weighted-average maturity of .

Interest expense.
)$())())()  ()$()

million and $ 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.

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 and offload 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 expansion, construction, and asset-integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, Powder River Basin complex, and DBM oil system.
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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 2023 Form 10-K as filed with the SEC on February 21, 2024.
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, 2024 (see Note 7—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 and the amount of such distributions;

•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, keep-whole, and fixed-recovery processing 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;
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•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 and commercial paper program;

•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;

•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 2023 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.
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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 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, 2024, our assets and investments consisted of the following:
Wholly
Owned and
Operated		Operated
Interests		Non-Operated
Interests		Equity
Interests
Gathering systems (1)
18 2 3 1 
Treating facilities38 3 — — 
Natural-gas processing plants/trains
24 3 — 1 
NGLs pipelines3 — — 4 
Natural-gas pipelines
6 — — 1 
Crude-oil pipelines
3 1 — 1 
_________________________________________________________________________________________
(1)Includes the DBM water systems.

Significant financial and operational events during the three months ended March 31, 2024, included the following:

•During the first quarter of 2024, we (i) closed on the sale of several equity investments to third parties for combined proceeds of $588.6 million, which included $5.9 million in pro-rata distributions through closing, and (ii) entered into a definitive agreement for the divestment of our 33.75% interest in the Marcellus Interest systems, which closed in April 2024. See Acquisitions and Divestitures within this Item 2 for additional information.

•WES Operating purchased and retired $15.1 million of certain of its senior notes via open-market repurchases.

•Our first-quarter 2024 per-unit distribution of $0.875 increased $0.300 from the fourth-quarter 2023 per-unit distribution of $0.575.

•Natural-gas throughput attributable to WES totaled 4,990 MMcf/d for the three months ended March 31, 2024, representing a 2% increase and a 21% increase compared to the three months ended December 31, 2023, and March 31, 2023, respectively.

•Crude-oil and NGLs throughput attributable to WES totaled 565 MBbls/d for the three months ended March 31, 2024, representing a 20% decrease and an 8% decrease compared to the three months ended December 31, 2023, and March 31, 2023, respectively.

•Produced-water throughput attributable to WES totaled 1,126 MBbls/d for the three months ended March 31, 2024, representing a 7% increase and an 18% increase compared to the three months ended December 31, 2023, and March 31, 2023, respectively.

•Gross margin was $683.7 million for the three months ended March 31, 2024, representing a 5% increase and a 27% increase compared to the three months ended December 31, 2023, and March 31, 2023, respectively. See Reconciliation of Non-GAAP Financial Measures within this Item 2.

•Adjusted gross margin for natural-gas assets (as defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2) averaged $1.32 per Mcf for the three months ended March 31, 2024, representing a 2% increase compared to the three months ended December 31, 2023, and March 31, 2023.
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•Adjusted gross margin for crude-oil and NGLs assets (as defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2) averaged $2.92 per Bbl for the three months ended March 31, 2024, representing a 20% increase and a 10% increase compared to the three months ended December 31, 2023, and March 31, 2023, respectively.

•Adjusted gross margin for produced-water assets (as defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2) averaged $0.95 per Bbl for the three months ended March 31, 2024, representing a 10% increase and a 17% increase compared to the three months ended December 31, 2023, and March 31, 2023, respectively.

The following table provides additional information on throughput for the periods presented below:
Three Months Ended
Inc/
(Dec)
12 %
5 %
NM
20 %
22 %
22 %
10 %
26 %
NM
(36)%
11 %
(8)%
18 %
18 %
_________________________________________________________________________________________
NM—Not meaningful
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OUTLOOK

We expect our business 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 producer activity. Our business is primarily driven by the level of production of crude oil and natural gas by producers in our areas of operation. This activity, however, can be impacted negatively by, among other things, commodity-price fluctuations and operational challenges. Fluctuating crude-oil, natural-gas, and NGLs prices can reduce the level of our customers’ activities and change the allocation of capital within their own asset portfolios. Such fluctuations can also impact us directly to the extent we take ownership of and sell certain volumes at the tailgate of our plants for our own account. 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, the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate crude-oil daily settlement prices during 2023 ranged from a low of $66.74 per barrel in March 2023 to a high of $93.68 per barrel in September 2023, and prices during the three months ended March 31, 2024, ranged from a low of $70.38 per barrel in January 2024 to a high of $83.47 per barrel in March 2024. Similar disruptions could occur as a consequence of the current conflict in the Middle East. The extent and duration of commodity-price volatility, and the associated direct and indirect impact on our business, cannot be predicted. To address the risks posed by fluctuating commodity prices, we intend to continue evaluating the relevant price environments and adjust our capital spending plans to reflect our customers’ anticipated activity levels, while maintaining appropriate liquidity and financial flexibility.
Additionally, even when the commodity-price environments are favorable, our customers must manage numerous operational challenges, including severe weather disruptions, downstream and produced-water takeaway constraints, seismicity concerns, new regulatory requirements, and the ability to optimize the efficiency and results of large, complex drilling programs. Our producers’ ability to mitigate or manage such challenges can have a significant impact on the volumes available for us to service in the short term. For this reason, we strive to work proactively with our customers whenever possible to provide high levels of reliability on our systems and help them meet these operational challenges as they arise.

Impact of inflation and supply-chain disruptions. The U.S. economy has recently experienced 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 continued bottlenecks and disruptions have caused difficulties within the U.S. and global supply chains, creating logistical delays along with labor shortages. Continued inflation has raised our costs for steel products, automation components, power supply, labor, materials, fuel, and services, which has increased our operating costs and capital expenditures. Increases in inflationary pressure could 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. Short- and long-term interest rates can be volatile, resulting in immediate changes to interest expense on RCF borrowings and commercial paper borrowings. Any future increases in interest rates likely will result in additional increases in financing costs. 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.
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ACQUISITIONS AND DIVESTITURES

Mont Belvieu JV, Whitethorn LLC, Panola, and Saddlehorn. During the first quarter of 2024, we closed on the sale of the following equity investments to third parties: (i) the 25.00% interest in Mont Belvieu JV, (ii) the 20.00% interest in Whitethorn LLC, (iii) the 15.00% interest in Panola, and (iv) the 20.00% interest in Saddlehorn. The combined proceeds received in the first quarter of 2024 of $588.6 million includes $5.9 million in pro-rata distributions through closing, resulting in a net gain on sale of $239.7 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statement of operations. The sale of the interests in the Mont Belvieu JV and Whitethorn LLC also resolved outstanding legal proceedings associated with those assets.

Marcellus Interest systems. In April 2024, we closed on the sale of our 33.75% interest in the Marcellus Interest systems for proceeds of $206.2 million, resulting in an estimated net gain on sale of approximately $65.0 million that will be recorded as Gain (loss) on divestiture and other, net in the consolidated statement of operations during the second quarter of 2024. As of March 31, 2024, the Marcellus Interest systems satisfied criteria to be considered held for sale. At March 31, 2024, the consolidated balance sheet included current assets of $6.6 million, long-term assets of $142.7 million, current liabilities of $5.9 million, and long-term liabilities of $2.1 million associated with assets held for sale.

Meritage. In October 2023, we closed on the acquisition of Meritage for $885.0 million (subject to certain customary post-closing adjustments) funded with cash, including proceeds from our $600.0 million senior note issuance in September 2023 and borrowings on the RCF.

See Note 3—Acquisitions and Divestitures and Note 10—Debt and Interest Expense under Part I, Item 1 of this Form 10-Q.

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RESULTS OF OPERATIONS

OPERATING RESULTS

The following tables and discussion present a summary of our results of operations:
Three Months Ended
733,982 
203,645 
_________________________________________________________________________________________
(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 6—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, 2024, to the three months ended December 31, 2023, or to the three months ended March 31, 2023, as applicable.
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Throughput
Three Months Ended
Inc/
(Dec)
64 %
17 %
20 %
22 %
25 %
21 %
21 %
(36)%
(8)%
(8)%
(8)%
18 %
15 %
18 %
_________________________________________________________________________________________
(1)Represents our share of average throughput for investments accounted for under the equity method of accounting.
(2)Includes (i) the 2.0% limited partner interest in WES Operating owned by an Occidental subsidiary and (ii) for natural-gas assets, the 25% third-party interest in Chipeta, which collectively represent WES’s noncontrolling interests.

Natural-gas assets
Total throughput attributable to WES for natural-gas assets increased by 114 MMcf/d compared to the three months ended December 31, 2023, primarily due to (i) higher volumes at the West Texas and DJ Basin complexes due to increased production in the areas, (ii) higher volumes at the Powder River Basin complex due to the Meritage acquisition, and (iii) higher volumes on the Red Bluff Express pipeline due to the addition of a new receipt point into the pipeline. These increases were offset partially by lower volumes at the Granger complex due to a contract expiration in the fourth quarter of 2023.
Total throughput attributable to WES for natural-gas assets increased by 883 MMcf/d compared to the three months ended March 31, 2023, primarily due to (i) higher volumes at the Powder River Basin complex due to the Meritage acquisition, (ii) higher volumes at the West Texas and DJ Basin complexes due to increased production in the areas, (iii) higher volumes at the MIGC and Marcellus Interest systems and the Chipeta and Brasada complexes, (iv) higher volumes on the Red Bluff Express pipeline due to the addition of a new receipt point into the pipeline, and (v) higher volumes at the Springfield gas-gathering system due to new third-party production. These increases were offset partially by lower volumes at the Granger complex due to a contract expiration in the fourth quarter of 2023.

Crude-oil and NGLs assets
Total throughput attributable to WES for crude-oil and NGLs assets decreased by 137 MBbls/d compared to the three months ended December 31, 2023, primarily due to the divestiture of Whitethorn LLC, Mont Belvieu JV, Saddlehorn, and Panola in the first quarter of 2024.

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Total throughput attributable to WES for crude-oil and NGLs assets decreased by 46 MBbls/d compared to the three months ended March 31, 2023, primarily due to the divestiture of Whitethorn LLC, Mont Belvieu JV, Saddlehorn, and Panola in the first quarter of 2024. These decreases were offset partially by (i) higher volumes on the Thunder Creek NGL pipeline which was acquired as part of the Meritage acquisition and (ii) higher volumes at the DBM and DJ Basin oil systems resulting from increased production in the areas.

Produced-water assets
Total throughput attributable to WES for produced-water assets increased by 72 MBbls/d and 169 MBbls/d compared to the three months ended December 31, 2023, and March 31, 2023, respectively, due to higher production.

Service Revenues
Three Months Ended
Inc/
(Dec)
647,867 21 %
43 %
694,677 22 %

Service revenues – fee based
Service revenues – fee based increased by $17.4 million compared to the three months ended December 31, 2023, primarily due to increases of (i) $16.5 million at the West Texas complex as a result of a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, increased throughput, and increased deficiency fees on certain contracts with increasing throughput minimums, (ii) $13.4 million at the DBM water systems due to a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased throughput, (iii) $6.3 million at the Powder River Basin complex as a result of increased throughput attributable to the acquisition of Meritage, and (iv) $5.9 million at the DJ Basin complex due to increased throughput. These increases were offset partially by decreases of (i) $12.6 million at the Springfield system primarily due to an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2023, (ii) $7.4 million at the DJ Basin oil system primarily due to an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2023, partially offset by increased throughput, and (iii) $2.3 million at the Granger complex primarily due to a contract expiration in the fourth quarter of 2023.
Service revenues – fee based increased by $133.4 million compared to the three months ended March 31, 2023, primarily due to increases of (i) $48.9 million at the Powder River Basin complex attributable to the acquisition of Meritage, (ii) $45.8 million at the West Texas complex as a result of increased throughput, a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased deficiency fees on certain contracts with increasing throughput minimums, (iii) $26.0 million at the DBM water systems as a result of increased throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, (iv) $20.4 million at the DJ Basin complex due to increased throughput, and (v) $6.7 million at the DBM oil system as a result of increased throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024. These increases were offset partially by decreases of (i) $6.6 million at the Brasada complex due to a change in contract terms effective July 1, 2023, (ii) $2.8 million at the DJ Basin oil system primarily due to decreased deficiency fees on demand volumes, partially offset by increased throughput, and (iii) $2.3 million at the Granger complex primarily due to a contract expiration in the fourth quarter of 2023.

Service revenues – product based
Service revenues – product based increased by $17.2 million compared to the three months ended December 31, 2023, primarily due to increases of $12.4 million at the West Texas complex as a result of increased volumes sold and $2.4 million at the DJ Basin complex due to increased average prices.
Service revenues – product based increased by $19.9 million compared to the three months ended March 31, 2023, primarily due to increases of $14.8 million at the West Texas complex primarily due to increased volumes sold and $2.4 million at the DBM water systems due to increased volumes sold and average prices.
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Product Sales
Three Months Ended
Inc/
(Dec)
2,775 15 %
— %
39,025 1 %
Per-unit gross average sales price:
1.75 (29)%
7 %

Natural-gas sales
Natural-gas sales decreased by $11.0 million compared to the three months ended December 31, 2023, primarily due to decreases of (i) $8.3 million at the West Texas complex as a result of decreased volumes sold and average prices and (ii) $2.8 million at the DJ Basin complex as a result of decreased volumes sold.
Natural-gas sales increased by $0.4 million compared to the three months ended March 31, 2023, primarily due to an increase of $2.7 million at the DJ Basin complex as a result of increased average prices, partially offset by decreased volumes sold. This increase was offset partially by a decrease of $2.2 million at the West Texas complex due to decreased average prices, partially offset by increased volumes sold.

NGLs sales

NGLs sales increased by $5.6 million compared to the three months ended December 31, 2023, primarily due to increases of (i) $3.7 million and $1.6 million at the DJ Basin and Chipeta complexes, respectively, due to increased average prices and (ii) $2.4 million at the Powder River Basin complex as a result of increased volumes sold attributable to the acquisition of Meritage. These increases were offset partially by a decrease of $8.2 million at the West Texas complex due to a mix in contract structures, partially offset by increased average prices.
NGLs sales decreased by $0.2 million compared to the three months ended March 31, 2023, primarily due to decreases of $7.7 million and $5.8 million at the DJ Basin and West Texas complexes, respectively, due to decreased average prices, partially offset by increased volumes sold. These decreases were offset partially by increases of (i) $6.4 million at the Powder River Basin complex attributable to the acquisition of Meritage, (ii) $2.5 million at the DBM water systems due to increased skim-oil volumes sold and average prices, and (iii) $2.4 million at the Chipeta complex due to increased volumes sold.

Equity Income, Net – Related Parties
Three Months Ended
Inc/
(Dec)
39,021 (16)%

Equity income, net – related parties decreased by $3.3 million compared to the three months ended December 31, 2023, primarily due to decreases of $6.9 million at Mont Belvieu JV and $2.2 million at Saddlehorn due to the divestment of our interests in the first quarter of 2024. These decreases were partially offset by an increase of $4.8 million at Whitethorn LLC due to commercial activities prior to the divestment of our interest in the first quarter of 2024.
Equity income, net – related parties decreased by $6.2 million compared to the three months ended March 31, 2023, primarily due to decreases of $6.8 million at Mont Belvieu JV due to the divestment of our interest in the first quarter of 2024 and $2.9 million at TEP. These decreases were partially offset by increases of $1.9 million and $1.8 million at Red Bluff Express and FRP, respectively.

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Cost of Product and Operation and Maintenance Expenses
Three Months Ended
Inc/
(Dec)
15,638 (41)%
36 %
(110)%
(10)%
12 %
225,698 7 %

Residue purchases
Residue purchases decreased by $6.4 million compared to the three months ended March 31, 2023, primarily due to decreases of (i) $5.1 million at the Granger complex due to a contract expiration in the fourth quarter of 2023 and (ii) $1.9 million at the West Texas complex due to lower average prices.

NGLs purchases
NGLs purchases increased by $10.1 million compared to the three months ended December 31, 2023, primarily due to increased volumes purchased at the West Texas complex.
NGLs purchases increased by $18.6 million compared to the three months ended March 31, 2023, primarily due to increases of (i) $16.7 million at the West Texas complex attributable to increased volumes purchased, (ii) $2.4 million at the Powder River Basin complex attributable to the acquisition of Meritage, and (iii) $2.3 million at the DBM water systems due to increased skim-oil volumes and average prices. These increases were offset partially by a decrease of $5.2 million at the DJ Basin complex primarily due to a change in contract mix during the first quarter of 2024.

Other items
Other items decreased by $6.1 million compared to the three months ended December 31, 2023, primarily due to a decrease of $10.3 million at the West Texas complex due to changes in imbalance positions, partially offset by an increase of $4.2 million at the Powder River Basin complex due to changes in imbalance positions.
Other items decreased by $17.6 million compared to the three months ended March 31, 2023, primarily due to decreases of (i) $13.7 million at the West Texas complex due to changes in imbalance positions, partially offset by higher offload costs, and (ii) $2.7 million and $2.6 million at the Chipeta and DJ Basin complexes, respectively, attributable to changes in imbalance positions.

Operation and maintenance expense
Operation and maintenance expense decreased by $5.5 million compared to the three months ended December 31, 2023, primarily due to decreases of (i) $2.4 million in equipment rental costs, (ii) $2.0 million in each of utility expense and equipment maintenance and repair expense, (iii) $1.8 million in mechanical-integrity costs, and (iv) $1.7 million in land-related costs. These decreases were offset partially by an increase of $5.9 million in salaries and wages costs.
Operation and maintenance expense increased by $20.7 million compared to the three months ended March 31, 2023, primarily due to increases of (i) $11.4 million in salaries and wages costs, (ii) $4.6 million in utility expense, (iii) $2.9 million in chemical and treating services, and (iv) $2.9 million in land-related costs.

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Other Operating Expenses
Three Months Ended
Inc/
(Dec)
51,117 33 %
104 %
9 %
(100)%
254,975 (6)%

General and administrative expenses
General and administrative expenses decreased by $5.2 million compared to the three months ended December 31, 2023, primarily due to a decrease of $6.2 million in contract labor and consulting costs, partially offset by an increase of $1.1 million in personnel costs.
General and administrative expenses increased by $16.7 million compared to the three months ended March 31, 2023, primarily due to increases of (i) $7.1 million in personnel costs, (ii) $5.5 million in information technology costs, and (iii) $1.6 million in contract labor and consulting expense.

Property and other taxes
Property and other taxes decreased by $2.6 million compared to the three months ended December 31, 2023, primarily due to a decrease in the ad valorem property tax accrual related to the finalization of 2023 assessments at the DJ Basin complex.
Property and other taxes increased by $7.1 million compared to the three months ended March 31, 2023, primarily due to a lower ad valorem property tax accrual recorded during the first quarter of 2023 related to the finalization of 2022 assessments at the DJ Basin complex.

Depreciation and amortization expense
Depreciation and amortization expense decreased by $7.2 million compared to the three months ended December 31, 2023, primarily due to decreases of (i) $2.9 million at the DJ Basin complex due to updated salvage values and (ii) $1.7 million and $1.2 million at the Red Desert and Powder River Basin complexes, respectively, due to asset retirement obligation revisions.
Depreciation and amortization expense increased by $13.4 million compared to the three months ended March 31, 2023, primarily due to increases of (i) $15.1 million at the Powder River Basin complex attributable to the acquisition of Meritage and (ii) $4.8 million and $3.1 million at the West Texas complex and DBM water systems, respectively, primarily related to capital projects being placed into service. These increases were offset partially by a decrease of $7.9 million at the DJ Basin complex primarily due to acceleration of depreciation expense during 2023 and updated salvage values.

Long-lived asset and other impairment expense
Long-lived asset and other impairment expense for the three months ended March 31, 2023, was primarily due to a $52.1 million impairment for assets located in the Rockies.
For further information on Long-lived asset and other impairment expense, see Note 8—Property, Plant, and Equipment in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

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Interest Expense
Three Months Ended
Inc/
(Dec)
(81,151)18 %
NM
11 %
111 %
(81,670)16 %

Interest expense decreased by $3.1 million compared to the three months ended December 31, 2023, primarily due to a decrease of $5.7 million resulting from no outstanding borrowings under the RCF during the first quarter of 2024, partially offset by an increase of $2.7 million due to borrowings on the commercial paper program that was established during the fourth quarter of 2023.
Interest expense increased by $12.8 million compared to the three months ended March 31, 2023, primarily due to increases of (i) $11.7 million of interest incurred on the 6.150% Senior Notes due 2033 that were issued during the second quarter of 2023, (ii) $9.8 million of interest incurred on the 6.350% Senior Notes due 2029 that were issued during the third quarter of 2023, and (iii) $5.7 million due to borrowings on the commercial paper program that was established during the fourth quarter of 2023. These increases were offset partially by decreases of (i) $4.5 million due to credit-rating related interest rate changes and lower outstanding balances on certain senior notes, (ii) $7.0 million due to no outstanding borrowings under the RCF during the first quarter of 2024, and (iii) $2.8 million due to higher capitalized interest. See Liquidity and Capital Resources—Debt and credit facilities within this Item 2.

Income Tax Expense (Benefit)

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.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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, (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, and (iv) costs associated with our offload commitments with third parties providing firm-processing capacity. The electricity-related expenses included in our Adjusted gross margin definition relate to pass-through expenses that are recorded as Operation and maintenance expense with an offset recorded as revenue for the reimbursement by certain customers.

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.

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 represents the amount of cash that is available in aggregate for distributions, debt repayments, and other general partnership purposes.


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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
Reconciliation of Gross margin to Adjusted gross margin
733,982 
Less:
Add:
Less:
695,155 
_________________________________________________________________________________________
(1)Includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% limited partner interest in WES Operating owned by an Occidental subsidiary, which collectively represent WES’s noncontrolling interests.


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To facilitate investor and industry analysis, 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.
Three Months Ended
Gross margin
393,673 
Adjusted gross margin
480,009 
_________________________________________________________________________________________
(1)Excludes corporate-level depreciation and amortization.
(2)Average for period. Calculated as Gross margin for natural-gas assets, crude-oil and NGLs assets, or produced-water assets, divided by the respective total throughput (MMcf or MBbls) for natural-gas assets, crude-oil and NGLs assets, or produced-water assets.
(3)Average for period. Calculated as Adjusted gross margin for natural-gas assets, crude-oil and NGLs assets, or produced-water assets, divided by the respective total throughput (MMcf or MBbls) attributable to WES for natural-gas assets, crude-oil and NGLs assets, or produced-water assets.

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Three Months Ended
208,341 
Add:
Less:
498,695 
302,424 
Changes in assets and liabilities:
498,695 
302,424 
_________________________________________________________________________________________
(1)Includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% limited partner interest in WES Operating owned by an Occidental subsidiary, which collectively represent WES’s noncontrolling interests.

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Three Months Ended
302,424 
Less:
Add:
141,592 
Cash flow information
302,424 

Gross margin. Refer to Operating Results within this Item 2 for a discussion of the components of Gross margin as compared to the prior periods, including Service Revenues, Product Sales, Cost of Product (Residue purchases, NGLs purchases, and Other items), and Other Operating Expenses (Depreciation and amortization expense).
Gross margin increased by $31.4 million compared to the three months ended December 31, 2023, due to (i) a $29.5 million increase in total revenues and other and (ii) a $7.2 million decrease in depreciation and amortization. These amounts were offset partially by a $5.3 million increase in cost of product.
Gross margin increased by $145.8 million compared to the three months ended March 31, 2023, due to (i) a $153.7 million increase in total revenues and other and (ii) a $5.4 million decrease in cost of product. These amounts were offset partially by a $13.4 million increase in depreciation and amortization.

Net income (loss). Refer to Operating Results within this Item 2 for a discussion of the primary components of Net income (loss) as compared to the prior periods.
Net income (loss) increased by $290.5 million compared to the three months ended December 31, 2023, primarily due to (i) a $246.1 million increase in gain (loss) on divestiture and other, net, (ii) a $29.5 million increase in total revenues and other, and (iii) a $15.2 million decrease in total operating expenses.
Net income (loss) increased by $377.9 million compared to the three months ended March 31, 2023, primarily due to (i) a $241.7 million increase in gain (loss) on divestiture and other, net and (ii) a $153.7 million increase in total revenues and other. These amounts were offset partially by (i) a $12.8 million increase in interest expense and (ii) a $6.2 million decrease in equity income, net – related parties.

Net cash provided by operating activities. Refer to Historical cash flow within this Item 2 for a discussion of the primary components of Net cash provided by operating activities as compared to the prior periods.

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KEY PERFORMANCE METRICS
Three Months Ended
Inc/
(Dec)
695,155 22 %
2 %
10 %
17 %
22 %
59 %
_________________________________________________________________________________________
(1)Average for period. Calculated as Adjusted gross margin for natural-gas assets, crude-oil and NGLs assets, or produced-water assets, divided by the respective total throughput (MMcf or MBbls) attributable to WES for natural-gas assets, crude-oil and NGLs assets, or produced-water assets.

Adjusted gross margin. Adjusted gross margin increased by $25.7 million compared to the three months ended December 31, 2023, primarily due to (i) a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, increased throughput, and increased deficiency fees on certain contracts with increasing throughput minimums at the West Texas complex, (ii) a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased throughput at the DBM water systems, (iii) increased throughput at the DJ Basin complex, (iv) commercial activities prior to the divestment of our interest in the first quarter of 2024 at Whitethorn LLC, and (v) increased throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, at the DBM oil system. These increases were offset partially by decreases due to annual cost-of-service rate adjustments that increased revenue during the fourth quarter of 2023 at the Springfield and DJ Basin oil systems.
Adjusted gross margin increased by $149.9 million compared to the three months ended March 31, 2023, primarily due to (i) increased throughput, a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased deficiency fees on certain contracts with increasing throughput minimums at the West Texas complex, (ii) increased throughput at the Powder River Basin complex attributable to the acquisition of Meritage, (iii) a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased throughput at the DBM water systems, and (iv) increased throughput at the DJ Basin complex. These increases were offset partially by (i) decreased processing fees at the Brasada complex resulting from a change in contract terms effective July 1, 2023, and (ii) a decrease in distributions from TEP.
Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.03 compared to the three months ended December 31, 2023, 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, in addition to a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased deficiency fees on certain contracts with increasing throughput minimums. This increase was offset partially by a decrease resulting from an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2023 at the Springfield system.
Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.02 compared to the three months ended March 31, 2023, primarily due to (i) increased throughput at the West Texas complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets, in addition to a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased deficiency fees on certain contracts with increasing throughput minimums, and (ii) increased throughput at the DJ Basin complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets. These increases were offset partially by decreased processing fees at the Brasada complex resulting from a change in contract terms effective July 1, 2023.

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Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.49 compared to the three months ended December 31, 2023, primarily due to the sale of our interests in Whitethorn LLC, Saddlehorn, Panola, and Mont Belvieu JV in the first quarter of 2024, all of which had lower-than-average per-Bbl margins as compared to our other crude-oil and NGLs assets. These increases were offset partially by decreases related to (i) an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2023, partially offset by increased throughput, at the DJ Basin oil system, which has a higher-than-average per-Bbl margin as compared to our other crude-oil and NGLs assets, and (ii) an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2023 at the Springfield system.
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.27 compared to the three months ended March 31, 2023, primarily due to (i) the sale of our interests in Whitethorn LLC, Saddlehorn, Panola, and Mont Belvieu JV in the first quarter of 2024, all of which had lower-than-average per-Bbl margins as compared to our other crude-oil and NGLs assets, and (ii) increased throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, at the DBM oil system, which has a higher-than-average per-Bbl margin as compared to our other crude-oil and NGLs assets. These increases were offset partially by (i) decreased deficiency fees on demand volumes at the DJ Basin oil system and (ii) a decrease in distributions from TEP.
Per-Bbl Adjusted gross margin for produced-water assets increased by $0.09 and $0.14 compared to the three months ended December 31, 2023, and March 31, 2023, respectively, primarily due to increased throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024.

Adjusted EBITDA. Adjusted EBITDA increased by $37.7 million compared to the three months ended December 31, 2023, primarily due to (i) a $29.5 million increase in total revenues and other, (ii) a $5.5 million decrease in operation and maintenance expenses, (iii) a $4.7 million decrease in general and administrative expenses excluding non-cash equity-based compensation expense, and (iv) a $2.6 million decrease in property taxes. These amounts were offset partially by a $5.2 million increase in cost of product (net of lower of cost or market inventory adjustments).
Adjusted EBITDA increased by $109.7 million compared to the three months ended March 31, 2023, primarily due to (i) a $153.7 million increase in total revenues and other and (ii) a $5.3 million decrease in cost of product (net of lower of cost or market inventory adjustments). These amounts were offset partially by (i) a $20.7 million increase in operation and maintenance expenses, (ii) a $14.5 million increase in general and administrative expenses excluding non-cash equity-based compensation expense, (iii) a $7.1 million increase in property and other taxes, and (iv) a $3.6 million decrease in distributions from equity investments.

Free cash flow. Free cash flow decreased by $57.1 million compared to the three months ended December 31, 2023, primarily due to a $73.6 million decrease in net cash provided by operating activities, partially offset by (i) an $11.6 million increase in distributions from equity investments in excess of cumulative earnings and (ii) a $4.9 million decrease in capital expenditures.
Free cash flow increased by $83.4 million compared to the three months ended March 31, 2023, primarily due to (i) a $97.3 million increase in net cash provided by operating activities and (ii) a $6.7 million increase in distributions from equity investments in excess of cumulative earnings. These amounts were offset partially by a $20.7 million increase in capital expenditures.
See Capital Expenditures and Historical Cash Flow within this Item 2 for further information.

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LIQUIDITY AND CAPITAL RESOURCES

Our primary cash uses include equity and debt service, operating expenses, and capital expenditures. Our sources of liquidity, as of March 31, 2024, included cash and cash equivalents, cash flows generated from operations, effective borrowing capacity under the RCF, our commercial paper program, 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 be determined by the Board on a quarterly basis. 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. The Board declared a cash distribution to unitholders for the first quarter of 2024 of $0.875 per unit, or $340.9 million in the aggregate. The cash distribution is payable on May 15, 2024, to our unitholders of record at the close of business on May 1, 2024.
To facilitate the distribution of available cash, during 2022 we adopted a financial policy that provided for an additional distribution (“Enhanced Distribution”) to be paid in conjunction with the regular first-quarter distribution of the following year (beginning in 2023), in a target amount equal to Free cash flow generated in the prior year after subtracting Free cash flow used for the prior year’s debt repayments, regular-quarter distributions, and unit repurchases. This Enhanced Distribution is subject to Board discretion, the establishment of cash reserves for the proper conduct of our business, and is also contingent on the attainment of prior year-end net leverage thresholds (the ratio of our total principal debt outstanding less total cash on hand as of the end of such period, as compared to our trailing-twelve-months Adjusted EBITDA) after taking the Enhanced Distribution for such prior year into effect. Free cash flow and Adjusted EBITDA are defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2.
In 2022, we announced a common-unit buyback program of up to $1.25 billion 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, 2024, there were no common units repurchased. During the three months ended March 31, 2023, we repurchased 285,688 common units for an aggregate purchase price of $7.1 million. The units were canceled immediately upon receipt. As of March 31, 2024, we had an authorized amount of $627.8 million remaining under the program.
Management continuously monitors our leverage position and other financial projections to manage the capital structure according to long-term objectives. We may, from time to time, seek to retire, rearrange, or amend some or all of our outstanding debt or financing 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, and the amounts involved may be material. 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.

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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, 2024, we had a $358.2 million working capital surplus, which we define as the amount by which current assets exceed current liabilities. As of March 31, 2024, there was $1.9 billion in effective borrowing capacity under the RCF, after taking into account the $100.0 million of outstanding commercial paper borrowings, for which we maintain availability under the RCF as support for our commercial paper program. See Note 9—Selected Components of Working Capital and Note 10—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

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,
thousands20242023
Acquisitions$443 $— 
Capital expenditures (1)
193,789 173,088 
Capital incurred (1)
210,930 181,803 
_________________________________________________________________________________________
(1)For the three months ended March 31, 2024 and 2023, included $5.3 million and $2.5 million, respectively, of capitalized interest.

Capital expenditures increased by $20.7 million for the three months ended March 31, 2024, primarily due to increases of (i) $12.4 million at the West Texas complex, primarily attributable to engineering and equipment milestone payments for the North Loving Plant, (ii) $10.9 million related to the acquisition of Meritage, (iii) $6.2 million at the DJ Basin complex due to the purchase of a field office in the first quarter of 2024 and an increase in well connection and pipeline projects, and (iv) $5.4 million in corporate-level capital expenditures. These increases were offset partially by a decrease of $13.3 million at the DBM water systems due to reduced construction of water-disposal wells and facilities and well-connect projects.
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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,
thousands20242023
Net cash provided by (used in):
Operating activities$399,708 $302,424 
Investing activities396,849 (179,178)
Financing activities(774,098)(297,257)
Net increase (decrease) in cash and cash equivalents$22,459 $(174,011)

Operating activities. Net cash provided by operating activities increased for the three months ended March 31, 2024, primarily due to higher cash operating income, partially offset by lower distributions from equity investments and higher interest expense. 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 provided by investing activities for the three months ended March 31, 2024, primarily included the following:
•$582.7 million of proceeds related to the sale of several equity investments to third parties;

•$19.0 million of distributions received from equity investments in excess of cumulative earnings;

•$193.8 million of capital expenditures, primarily related to expansion, construction, and asset-integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, Powder River Basin complex, and DBM oil system; and

•$10.7 million of increases to materials and supplies inventory.

Net cash used in investing activities for the three months ended March 31, 2023, primarily included the following:
•$173.1 million of capital expenditures, primarily related to construction, expansion, and asset-integrity projects at the West Texas complex, DBM water systems, DBM oil system, and DJ Basin complex;

•$18.3 million of increases to materials and supplies inventory; and

•$12.4 million of distributions received from equity investments in excess of cumulative earnings.

Financing activities. Net cash used in financing activities for the three months ended March 31, 2024, primarily included the following:
•$510.4 million of net repayments under the commercial paper program;

•$229.1 million of distributions paid to WES unitholders and noncontrolling interest owners; and

•$14.5 million to purchase and retire portions of certain of WES Operating’s senior notes via open-market repurchases.

Net cash used in financing activities for the three months ended March 31, 2023, primarily included the following:
•$213.1 million to redeem the total principal amount outstanding on the Floating-Rate Senior Notes due 2023 at par value;

•$203.1 million of distributions paid to WES unitholders and noncontrolling interest owners;

•$100.0 million of repayments of outstanding borrowings under the RCF;
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•$7.1 million of unit repurchases; and

•$220.0 million of borrowings under the RCF, which were used for general partnership purposes.

Debt and credit facilities. As of March 31, 2024, the carrying value of outstanding debt was $7.4 billion and we have $1.9 billion in effective borrowing capacity under WES Operating’s $2.0 billion RCF, after taking into account the $100.0 million of outstanding commercial paper borrowings, for which we maintain availability under the RCF as support for WES Operating’s commercial paper program.
During the three months ended March 31, 2024, WES Operating purchased and retired $15.1 million of certain of its senior notes via open-market repurchases with cash from operations and a gain of $0.5 million was recognized for the early retirement of portions of these notes. As of March 31, 2024, the 3.100% Senior Notes due 2025 were classified as long-term debt on the consolidated balance sheet as WES Operating has ability and intent to refinance these obligations using long-term debt. Subsequent to March 31, 2024, WES Operating purchased and retired $134.9 million of certain of its senior notes via open-market repurchases.
For additional information on our senior notes, RCF, and commercial paper program, see Note 10—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

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- or NGLs-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 contractual rights to request adequate assurance of performance.
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 6—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.

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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
203,645 
208,013 
_________________________________________________________________________________________
(1)Represents the portion of net income (loss) allocated to the limited partner interest 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.

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,
thousands20242023
WES net cash provided by operating activities$399,708 $302,424 
General and administrative expenses (1)
360 232 
Non-cash equity-based compensation expense
(145)(141)
Changes in working capital(19,215)(11,522)
Other income (expense), net(59)(25)
WES Operating net cash provided by operating activities$380,649 $290,968 
WES net cash provided by (used in) financing activities$(774,098)$(297,257)
Distributions to WES unitholders (2)
223,438 196,569 
Distributions to WES from WES Operating (3)
(224,855)(209,242)
Increase (decrease) in outstanding checks(67)(42)
Unit repurchases— 7,061 
Other19,364 11,950 
WES Operating net cash provided by (used in) financing activities$(756,218)$(290,961)
______________________________________________________________________________________
#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.
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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 8, 2024
/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 8, 2024
/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 8, 2024
/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 8, 2024
/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

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