Western Midstream Partners, LP 10-Q

Item 1. Financial Statements WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, thousands except per-unit amounts 2020 2019 2020 2019 Revenues and other Service revenues – fee based $ 636,522 $ 587,965 $ 1,980,546 $ 1,761,483 Service revenues – product based 12,316 9,476 35,237 45,530 Product sales 30,106 68,248 108,491 214,850 Other 100 338 838 1,101 Total revenues and other (1) 679,044 666,027 2,125,112 2,022,964 Equity income, net – related parties 61,026 53,893 176,788 175,483 Operating expenses Cost of product 31,739 97,800 153,611 334,740 Operation and maintenance 132,293 176,572 436,670 467,832 General and administrative 41,578 30,769 118,466 83,640 Property and other taxes 19,392 15,281 57,263 45,848 Depreciation and amortization 132,564 127,914 384,688 362,977 Long-lived asset and other impairments 34,640 3,107 200,575 4,294 Goodwill impairment — — 441,017 — Total operating expenses (2) 392,206 451,443 1,792,290 1,299,331 Gain (loss) on divestiture and other, net ( 768 ) 248 ( 3,651 ) ( 1,403 ) Operating income (loss) 347,096 268,725 505,959 897,713 Interest income – Anadarko note receivable 3,286 4,225 11,736 12,675 Interest expense ( 95,571 ) ( 78,524 ) ( 278,811 ) ( 223,872 ) Gain (loss) on early extinguishment of debt 1,632 — 10,372 — Other income (expense), net (3) 720 ( 67,894 ) 612 ( 161,577 ) Income (loss) before income taxes 257,163 126,532 249,868 524,939 Income tax expense (benefit) 3,028 1,309 3,792 12,679 Net income (loss) 254,135 125,223 246,076 512,260 Net income (loss) attributable to noncontrolling interests 7,524 4,006 ( 17,045 ) 102,789 Net income (loss) attributable to Western Midstream Partners, LP $ 246,611 $ 121,217 $ 263,121 $ 409,471 Limited partners’ interest in net income (loss): Net income (loss) attributable to Western Midstream Partners, LP $ 246,611 $ 121,217 $ 263,121 $ 409,471 Pre-acquisition net (income) loss allocated to Anadarko — — — ( 29,279 ) General partner interest in net (income) loss ( 5,132 ) — ( 5,462 ) — Limited partners’ interest in net income (loss) (4) 241,479 121,217 257,659 380,192 Net income (loss) per common unit – basic and diluted (4) $ 0.55 $ 0.27 $ 0.58 $ 0.94 Weighted-average common units outstanding – basic and diluted 438,857 453,021 442,255 402,421 _________________________________________________________________________________________ (1) Total revenues and other includes related-party amounts of $ 455.6 million and $ 1.4 billion for the three and nine months ended September 30, 2020, respectively, and $ 398.8 million and $ 1.2 billion for the three and nine months ended September 30, 2019, respectively. See Note 6 . (2) Total operating expenses includes related-party amounts of $ 10.4 million and $ 161.5 million for the three and nine months ended September 30, 2020, respectively, and $ 128.2 million and $ 369.9 million for the three and nine months ended September 30, 2019, respectively. See Note 6 . (3) Other income (expense), net includes losses associated with the interest-rate swap agreements for the three and nine months ended September 30, 2019. See Note 11. (4) See Note 5. See accompanying Notes to Consolidated Financial Statements. 8 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED BALANCE SHEETS (UNAUDITED) thousands except number of units September 30, 2020 December 31, 2019 ASSETS Current assets Cash and cash equivalents $ 138,045 $ 99,962 Accounts receivable, net 451,784 260,512 Other current assets 54,104 41,938 Total current assets 643,933 402,412 Anadarko note receivable — 260,000 Property, plant, and equipment Cost 12,633,144 12,355,671 Less accumulated depreciation 3,808,005 3,290,740 Net property, plant, and equipment 8,825,139 9,064,931 Goodwill 4,783 445,800 Other intangible assets 784,326 809,391 Equity investments 1,242,557 1,285,717 Other assets (1) 188,937 78,202 Total assets (2) $ 11,689,675 $ 12,346,453 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 164,417 $ 293,128 Short-term debt 438,762 7,873 Accrued ad valorem taxes 58,335 35,160 Accrued liabilities 175,915 149,793 Total current liabilities 837,429 485,954 Long-term liabilities Long-term debt 7,440,394 7,951,565 Deferred income taxes 21,292 18,899 Asset retirement obligations 327,285 336,396 Other liabilities 272,819 208,346 Total long-term liabilities 8,061,790 8,515,206 Total liabilities (3) 8,899,219 9,001,160 Equity and partners’ capital Common units ( 416,196,092 and 443,971,409 units issued and outstanding at September 30, 2020, and December 31, 2019, respectively) 2,674,682 3,209,947 General partner units ( 9,060,641 units issued and outstanding at September 30, 2020, and December 31, 2019) (4) ( 20,032 ) ( 14,224 ) Total partners’ capital 2,654,650 3,195,723 Noncontrolling interests 135,806 149,570 Total equity and partners’ capital 2,790,456 3,345,293 Total liabilities, equity, and partners’ capital $ 11,689,675 $ 12,346,453 ________________________________________________________________________________________ (1) Other assets includes $ 3.9 million and $ 4.5 million of NGLs line-fill inventory as of September 30, 2020, and December 31, 2019, respectively. Other assets also includes $ 80.9 million of materials and supplies inventory as of September 30, 2020. See Note 1 . (2) Total assets includes related-party amounts of $ 1.6 billion and $ 1.7 billion as of September 30, 2020, and December 31, 2019, respectively, which includes related-party Accounts receivable, net of $ 292.9 million and $ 113.3 million as of September 30, 2020, and December 31, 2019, respectively. See Note 6 . (3) Total liabilities includes related-party amounts of $ 136.8 million and $ 108.8 million as of September 30, 2020, and December 31, 2019, respectively. See Note 6 . (4) See Note 1 . See accompanying Notes to Consolidated Financial Statements. 9 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) Partners’ Capital thousands Common Units General Partner Units Noncontrolling Interests Total Balance at December 31, 2019 $ 3,209,947 $ ( 14,224 ) $ 149,570 $ 3,345,293 Net income (loss) ( 251,396 ) ( 5,131 ) ( 32,873 ) ( 289,400 ) Distributions to Chipeta noncontrolling interest owner — — ( 1,738 ) ( 1,738 ) Distributions to noncontrolling interest owner of WES Operating — — ( 5,807 ) ( 5,807 ) Distributions to Partnership unitholders ( 276,151 ) ( 5,635 ) — ( 281,786 ) Acquisitions from related parties ( 3,987 ) — 3,987 — Contributions of equity-based compensation from Occidental 4,105 — — 4,105 Equity-based compensation expense 1,129 — — 1,129 Net contributions from (distributions to) related parties (1) 489 — 20,000 20,489 Balance at March 31, 2020 $ 2,684,136 $ ( 24,990 ) $ 133,139 $ 2,792,285 Net income (loss) 267,576 5,461 8,304 281,341 Distributions to Chipeta noncontrolling interest owner — — ( 1,037 ) ( 1,037 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,869 ) ( 2,869 ) Distributions to Partnership unitholders ( 138,075 ) ( 2,818 ) — ( 140,893 ) Contributions of equity-based compensation from Occidental 3,562 — — 3,562 Equity-based compensation expense 2,115 — — 2,115 Net contributions from (distributions to) related parties 1,343 — — 1,343 Other ( 330 ) — — ( 330 ) Balance at June 30, 2020 $ 2,820,327 $ ( 22,347 ) $ 137,537 $ 2,935,517 Net income (loss) 241,479 5,132 7,524 254,135 Distributions to Chipeta noncontrolling interest owner — — ( 1,148 ) ( 1,148 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,869 ) ( 2,869 ) Distributions to Partnership unitholders ( 138,083 ) ( 2,817 ) — ( 140,900 ) Unit exchange with Occidental (2) ( 256,640 ) — ( 5,238 ) ( 261,878 ) Contributions of equity-based compensation from Occidental 3,488 — — 3,488 Equity-based compensation expense 2,128 — — 2,128 Net contributions from (distributions to) related parties 842 — — 842 Other 1,141 — — 1,141 Balance at September 30, 2020 $ 2,674,682 $ ( 20,032 ) $ 135,806 $ 2,790,456 ________________________________________________________________________________________ (1) See December 2019 Agreements—Services, Secondment, and Employee Transfer Agreement within Note 1. (2) See Note 6 . See accompanying Notes to Consolidated Financial Statements. 10 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) Partners’ Capital thousands Net Investment by Anadarko Common Units Noncontrolling Interests Total Balance at December 31, 2018 $ 1,388,018 $ 951,888 $ 2,552,777 $ 4,892,683 Net income (loss) 29,116 89,544 93,319 211,979 Cumulative impact of the Merger transactions (1) — 3,169,800 ( 3,169,800 ) — Above-market component of swap agreements with Anadarko (2) — 7,407 — 7,407 WES Operating equity transactions, net (3) — ( 752,796 ) 752,796 — Distributions to Chipeta noncontrolling interest owner — — ( 1,935 ) ( 1,935 ) Distributions to noncontrolling interest owners of WES Operating — — ( 100,999 ) ( 100,999 ) Distributions to Partnership unitholders — ( 131,910 ) — ( 131,910 ) Acquisitions from related parties (4) ( 2,141,827 ) 106,856 27,470 ( 2,007,501 ) Contributions of equity-based compensation from Anadarko — 1,840 — 1,840 Net pre-acquisition contributions from (distributions to) related parties 451,591 — — 451,591 Adjustments of net deferred tax liabilities 273,102 ( 4,375 ) — 268,727 Other — ( 332 ) ( 9 ) ( 341 ) Balance at March 31, 2019 $ — $ 3,437,922 $ 153,619 $ 3,591,541 Net income (loss) 163 169,431 5,464 175,058 Distributions to Chipeta noncontrolling interest owner — — ( 1,858 ) ( 1,858 ) Distributions to noncontrolling interest owner of WES Operating — — ( 5,667 ) ( 5,667 ) Distributions to Partnership unitholders — ( 276,324 ) — ( 276,324 ) Acquisitions from related parties (4) ( 5,510 ) 4,493 1,017 — Contributions of equity-based compensation from Anadarko — 2,768 — 2,768 Net pre-acquisition contributions from (distributions to) related parties 5,347 — — 5,347 Other — 356 ( 11 ) 345 Balance at June 30, 2019 $ — $ 3,338,646 $ 152,564 $ 3,491,210 Net income (loss) — 121,217 4,006 125,223 WES Operating equity transactions, net (3) — ( 2,401 ) 2,401 — Distributions to Chipeta noncontrolling interest owner — — ( 1,407 ) ( 1,407 ) Distributions to noncontrolling interest owner of WES Operating — — ( 5,764 ) ( 5,764 ) Distributions to Partnership unitholders — ( 279,959 ) — ( 279,959 ) Acquisitions from related parties (4) ( 1,881 ) 1,523 358 — Contributions of equity-based compensation from Occidental — 3,355 — 3,355 Net pre-acquisition contributions from (distributions to) related parties 1,881 — — 1,881 Other — 536 — 536 Balance at September 30, 2019 $ — $ 3,182,917 $ 152,158 $ 3,335,075 _________________________________________________________________________________________ (1) See Note 1 . (2) See Note 6 . (3) The $ 752.8 million and $ 2.4 million decrease to partners’ capital for the three months ended March 31,2019, and September 30, 2019, respectively, together with net income (loss) attributable to Western Midstream Partners, LP, totaled $( 634.1 ) million and $ 118.8 million, respectively. (4) The amounts allocated to common unitholders and noncontrolling interests represent a non-cash investing activity related to the assets and liabilities assumed in the AMA acquisition. See Note 3 . See accompanying Notes to Consolidated Financial Statements. 11 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, thousands 2020 2019 Cash flows from operating activities Net income (loss) $ 246,076 $ 512,260 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 384,688 362,977 Long-lived asset and other impairments 200,575 4,294 Goodwill impairment 441,017 — Non-cash equity-based compensation expense 16,527 9,489 Deferred income taxes 2,393 6,601 Accretion and amortization of long-term obligations, net 6,482 6,499 Equity income, net – related parties ( 176,788 ) ( 175,483 ) Distributions from equity-investment earnings – related parties 187,816 182,337 (Gain) loss on divestiture and other, net 3,651 1,403 (Gain) loss on early extinguishment of debt ( 10,372 ) — (Gain) loss on interest-rate swaps — 162,974 Cash paid to settle interest-rate swaps ( 19,181 ) — Other 192 236 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 192,338 ) ( 9,750 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net 37,814 ( 69,390 ) Change in other items, net 3,341 32,238 Net cash provided by operating activities 1,131,893 1,026,685 Cash flows from investing activities Capital expenditures ( 372,262 ) ( 947,266 ) Acquisitions from related parties — ( 2,007,501 ) Acquisitions from third parties — ( 93,303 ) Contributions to equity investments - related parties ( 19,017 ) ( 108,118 ) Distributions from equity investments in excess of cumulative earnings – related parties 21,750 21,203 Proceeds from the sale of assets to third parties — 342 Additions to materials and supplies inventory and other ( 57,141 ) — Net cash used in investing activities ( 426,670 ) ( 3,134,643 ) Cash flows from financing activities Borrowings, net of debt issuance costs (1) 3,681,173 3,950,750 Repayments of debt (2) ( 3,780,390 ) ( 1,467,595 ) Increase (decrease) in outstanding checks 691 ( 9,204 ) Registration expenses related to the issuance of Partnership common units — ( 855 ) Distributions to Partnership unitholders (3) ( 563,579 ) ( 688,193 ) Distributions to Chipeta noncontrolling interest owner ( 3,923 ) ( 5,200 ) Distributions to noncontrolling interest owners of WES Operating ( 11,545 ) ( 112,430 ) Net contributions from (distributions to) related parties 22,674 458,819 Above-market component of swap agreements with Anadarko (3) — 7,407 Finance lease payments (4) ( 12,241 ) ( 253 ) Net cash provided by (used in) financing activities ( 667,140 ) 2,133,246 Net increase (decrease) in cash and cash equivalents 38,083 25,288 Cash and cash equivalents at beginning of period 99,962 92,142 Cash and cash equivalents at end of period $ 138,045 $ 117,430 Supplemental disclosures Non-cash unit exchange with Occidental (3) $ ( 261,878 ) $ — Interest paid, net of capitalized interest 307,713 232,147 Taxes paid (reimbursements received) ( 384 ) 96 Accrued capital expenditures 20,275 154,080 _________________________________________________________________________________________ (1) For the nine months ended September 30, 2019, includes an $ 11.0 million borrowing under the APCWH Note Payable. (2) For the nine months ended September 30, 2019, includes a $ 439.6 million repayment to settle the APCWH Note Payable. See Note 6 . (3) See Note 6 . (4) For the nine months ended September 30, 2020, includes related-party payments of $ 6.4 million. See accompanying Notes to Consolidated Financial Statements. 12 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, thousands 2020 2019 2020 2019 Revenues and other Service revenues – fee based $ 636,522 $ 587,965 $ 1,980,546 $ 1,761,483 Service revenues – product based 12,316 9,476 35,237 45,530 Product sales 30,106 68,248 108,491 214,850 Other 100 338 838 1,101 Total revenues and other (1) 679,044 666,027 2,125,112 2,022,964 Equity income, net – related parties 61,026 53,893 176,788 175,483 Operating expenses Cost of product 31,739 97,800 153,611 334,740 Operation and maintenance 132,293 176,572 436,670 467,832 General and administrative 41,483 29,072 115,783 77,733 Property and other taxes 19,392 15,281 57,263 45,848 Depreciation and amortization 132,564 127,914 384,688 362,977 Long-lived asset and other impairments 34,640 3,107 200,575 4,294 Goodwill impairment — — 441,017 — Total operating expenses (2) 392,111 449,746 1,789,607 1,293,424 Gain (loss) on divestiture and other, net ( 768 ) 248 ( 3,651 ) ( 1,403 ) Operating income (loss) 347,191 270,422 508,642 903,620 Interest income – Anadarko note receivable 3,286 4,225 11,736 12,675 Interest expense ( 95,571 ) ( 78,524 ) ( 278,811 ) ( 223,627 ) Gain (loss) on early extinguishment of debt 1,632 — 10,372 — Other income (expense), net (3) 718 ( 67,902 ) 606 ( 161,648 ) Income (loss) before income taxes 257,256 128,221 252,545 531,020 Income tax expense (benefit) 3,028 1,309 3,792 12,679 Net income (loss) 254,228 126,912 248,753 518,341 Net income attributable to noncontrolling interest 2,488 1,497 ( 22,471 ) 5,318 Net income (loss) attributable to Western Midstream Operating, LP $ 251,740 $ 125,415 $ 271,224 $ 513,023 Limited partners’ interest in net income (loss): Net income (loss) attributable to Western Midstream Operating, LP $ 251,740 $ 125,415 $ 271,224 $ 513,023 Pre-acquisition net (income) loss allocated to Anadarko — — — ( 29,279 ) Common and Class C limited partners’ interest in net income (loss) (4) 251,740 125,415 271,224 483,744 ________________________________________________________________________________________ (1) Total revenues and other includes related-party amounts of $ 455.6 million and $ 1.4 billion for the three and nine months ended September 30, 2020, respectively, and $ 398.8 million and $ 1.2 billion for the three and nine months ended September 30, 2019, respectively. See Note 6 . (2) Total operating expenses includes related-party amounts of $ 11.1 million and $ 162.2 million for the three and nine months ended September 30, 2020, respectively, and $ 127.4 million and $ 368.2 million for the three and nine months ended September 30, 2019, respectively. See Note 6 . (3) Other income (expense), net includes losses associated with the interest-rate swap agreements for the three and nine months ended September 30, 2019. See Note 11. (4) See Note 5. See accompanying Notes to Consolidated Financial Statements. 13 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED BALANCE SHEETS (UNAUDITED) thousands except number of units September 30, 2020 December 31, 2019 ASSETS Current assets Cash and cash equivalents $ 136,602 $ 98,122 Accounts receivable, net 415,423 260,748 Other current assets 51,659 39,914 Total current assets 603,684 398,784 Anadarko note receivable — 260,000 Property, plant, and equipment Cost 12,633,144 12,355,671 Less accumulated depreciation 3,808,005 3,290,740 Net property, plant, and equipment 8,825,139 9,064,931 Goodwill 4,783 445,800 Other intangible assets 784,326 809,391 Equity investments 1,242,557 1,285,717 Other assets (1) 188,937 78,202 Total assets (2) $ 11,649,426 $ 12,342,825 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 164,672 $ 293,128 Short-term debt 438,762 7,873 Accrued ad valorem taxes 58,335 35,160 Accrued liabilities 142,844 149,639 Total current liabilities 804,613 485,800 Long-term liabilities Long-term debt 7,440,394 7,951,565 Deferred income taxes 21,292 18,899 Asset retirement obligations 327,285 336,396 Other liabilities 272,819 208,346 Total long-term liabilities 8,061,790 8,515,206 Total liabilities (3) 8,866,403 9,001,006 Equity and partners’ capital Common units ( 318,675,578 units issued and outstanding at September 30, 2020, and December 31, 2019) 2,750,231 3,286,620 Total partners’ capital 2,750,231 3,286,620 Noncontrolling interest 32,792 55,199 Total equity and partners’ capital 2,783,023 3,341,819 Total liabilities, equity, and partners’ capital $ 11,649,426 $ 12,342,825 _________________________________________________________________________________________ (1) Other assets includes $ 3.9 million and $ 4.5 million of NGLs line-fill inventory as of September 30, 2020, and December 31, 2019, respectively. Other assets also includes $ 80.9 million of materials and supplies inventory as of September 30, 2020. See Note 1 . (2) Total assets includes related-party amounts of $ 1.6 billion and $ 1.7 billion as of September 30, 2020, and December 31, 2019, respectively, which includes related-party Accounts receivable, net of $ 256.5 million and $ 113.6 million as of September 30, 2020, and December 31, 2019, respectively. See Note 6 . (3) Total liabilities includes related-party amounts of $ 136.8 million and $ 108.8 million as of September 30, 2020, and December 31, 2019, respectively. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 14 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) Partners’ Capital thousands Common Units Noncontrolling Interest Total Balance at December 31, 2019 $ 3,286,620 $ 55,199 $ 3,341,819 Net income (loss) ( 260,330 ) ( 27,665 ) ( 287,995 ) Distributions to Chipeta noncontrolling interest owner — ( 1,738 ) ( 1,738 ) Distributions to WES Operating unitholders ( 290,314 ) — ( 290,314 ) Acquisitions from related parties ( 3,987 ) 3,987 — Contributions of equity-based compensation from Occidental 4,105 — 4,105 Net contributions from (distributions to) related parties (1) 20,489 — 20,489 Balance at March 31, 2020 $ 2,756,583 $ 29,783 $ 2,786,366 Net income (loss) 279,814 2,706 282,520 Distributions to Chipeta noncontrolling interest owner — ( 1,037 ) ( 1,037 ) Distributions to WES Operating unitholders ( 143,404 ) — ( 143,404 ) Contributions of equity-based compensation from Occidental 3,562 — 3,562 Net contributions from (distributions to) related parties 1,343 — 1,343 Balance at June 30, 2020 $ 2,897,898 $ 31,452 $ 2,929,350 Net income (loss) 251,740 2,488 254,228 Distributions to Chipeta noncontrolling interest owner — ( 1,148 ) ( 1,148 ) Distributions to WES Operating unitholders ( 143,404 ) — ( 143,404 ) Contributions of equity-based compensation from Occidental 3,488 — 3,488 Unit exchange with Occidental (2) ( 261,878 ) — ( 261,878 ) Net contributions from (distributions to) related parties 842 — 842 Other 1,545 — 1,545 Balance at September 30, 2020 $ 2,750,231 $ 32,792 $ 2,783,023 _________________________________________________________________________________________ (1) See December 2019 Agreements—Services, Secondment, and Employee Transfer Agreement within Note 1 . (2) See Note 6 . See accompanying Notes to Consolidated Financial Statements. 15 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) Partners’ Capital thousands Net Investment by Anadarko Common Units Class C Units General Partner Units Noncontrolling Interest Total Balance at December 31, 2018 $ 1,388,018 $ 2,475,540 $ 791,410 $ 206,862 $ 57,767 $ 4,919,597 Net income (loss) 29,116 170,847 10,636 1,997 1,854 214,450 Cumulative impact of the Merger transactions (1) — 926,236 ( 802,588 ) ( 123,648 ) — — Above-market component of swap agreements with Anadarko (2) — 7,407 — — — 7,407 Amortization of beneficial conversion feature of Class C units — ( 542 ) 542 — — — Distributions to Chipeta noncontrolling interest owner — — — — ( 1,935 ) ( 1,935 ) Distributions to WES Operating unitholders — ( 178,128 ) — ( 85,230 ) — ( 263,358 ) Acquisitions from related parties (3) ( 2,141,827 ) 134,326 — — — ( 2,007,501 ) Contributions of equity-based compensation from Anadarko — 1,819 — 19 — 1,838 Net pre-acquisition contributions from (distributions to) related parties 451,591 — — — — 451,591 Adjustments of net deferred tax liabilities 273,102 ( 4,375 ) — — — 268,727 Other — 268 — — — 268 Balance at March 31, 2019 $ — $ 3,533,398 $ — $ — $ 57,686 $ 3,591,084 Net income (loss) 163 174,849 — — 1,967 176,979 Distributions to Chipeta noncontrolling interest owner — — — — ( 1,858 ) ( 1,858 ) Distributions to WES Operating unitholders — ( 283,271 ) — — — ( 283,271 ) Acquisitions from related parties (3) ( 5,510 ) 5,510 — — — — Contributions of equity-based compensation from Anadarko — 2,765 — — — 2,765 Net pre-acquisition contributions from (distributions to) related parties 5,347 — — — — 5,347 Balance at June 30, 2019 $ — $ 3,433,251 $ — $ — $ 57,795 $ 3,491,046 Net income (loss) — 125,415 — — 1,497 126,912 Distributions to Chipeta noncontrolling interest owner — — — — ( 1,407 ) ( 1,407 ) Distributions to WES Operating unitholders — ( 288,083 ) — — — ( 288,083 ) Acquisitions from related parties (3) ( 1,881 ) 1,881 — — — — Contributions of equity-based compensation from Occidental — 3,352 — — — 3,352 Net pre-acquisition contributions from (distributions to) related parties 1,881 — — — — 1,881 Balance at September 30, 2019 $ — $ 3,275,816 $ — $ — $ 57,885 $ 3,333,701 _________________________________________________________________________________________ (1) See Note 1 . (2) See Note 6 . (3) The amount allocated to common unitholders represents a non-cash investing activity related to the assets and liabilities assumed in the AMA acquisition. See Note 3 . See accompanying Notes to Consolidated Financial Statements. 16 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, thousands 2020 2019 Cash flows from operating activities Net income (loss) $ 248,753 $ 518,341 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 384,688 362,977 Long-lived asset and other impairments 200,575 4,294 Goodwill impairment 441,017 — Non-cash equity-based compensation expense 11,155 8,234 Deferred income taxes 2,393 6,601 Accretion and amortization of long-term obligations, net 6,482 6,479 Equity income, net – related parties ( 176,788 ) ( 175,483 ) Distributions from equity-investment earnings – related parties 187,816 182,337 (Gain) loss on divestiture and other, net 3,651 1,403 (Gain) loss on early extinguishment of debt ( 10,372 ) — (Gain) loss on interest-rate swaps — 162,974 Cash paid to settle interest-rate swaps ( 19,181 ) — Other 192 236 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 155,008 ) ( 12,219 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net 4,836 ( 68,277 ) Change in other items, net 3,763 34,232 Net cash provided by operating activities 1,133,972 1,032,129 Cash flows from investing activities Capital expenditures ( 372,262 ) ( 947,266 ) Acquisitions from related parties — ( 2,007,501 ) Acquisitions from third parties — ( 93,303 ) Contributions to equity investments – related parties ( 19,017 ) ( 108,118 ) Distributions from equity investments in excess of cumulative earnings – related parties 21,750 21,203 Proceeds from the sale of assets to third parties — 342 Additions to materials and supplies inventory and other ( 57,141 ) — Net cash used in investing activities ( 426,670 ) ( 3,134,643 ) Cash flows from financing activities Borrowings, net of debt issuance costs (1) 3,681,173 3,950,750 Repayments of debt (2) ( 3,780,390 ) ( 1,439,595 ) Increase (decrease) in outstanding checks 1,007 ( 9,204 ) Distributions to WES Operating unitholders (3) ( 577,122 ) ( 834,712 ) Distributions to Chipeta noncontrolling interest owner ( 3,923 ) ( 5,200 ) Net contributions from (distributions to) related parties 22,674 458,819 Above-market component of swap agreements with Anadarko (3) — 7,407 Finance lease payments (4) ( 12,241 ) ( 253 ) Net cash provided by (used in) financing activities ( 668,822 ) 2,128,012 Net increase (decrease) in cash and cash equivalents 38,480 25,498 Cash and cash equivalents at beginning of period 98,122 90,448 Cash and cash equivalents at end of period $ 136,602 $ 115,946 Supplemental disclosures Non-cash unit exchange with Occidental (3) $ ( 261,878 ) $ — Interest paid, net of capitalized interest 307,713 231,913 Taxes paid (reimbursements received) ( 384 ) 96 Accrued capital expenditures 20,275 154,080 _________________________________________________________________________________________ (1) For the nine months ended September 30, 2019, includes an $ 11.0 million borrowing under the APCWH Note Payable. (2) For the nine months ended September 30, 2019, includes a $ 439.6 million repayment to settle the APCWH Note Payable. See Note 6 . (3) See Note 6. (4) For the nine months ended September 30, 2020, includes related-party payments of $ 6.4 million. See accompanying Notes to Consolidated Financial Statements. 17 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION General. Western Midstream Partners, LP is a Delaware master limited partnership formed in September 2012. Western Midstream Operating, LP (together with its subsidiaries, “WES Operating”) is a Delaware limited partnership formed by Anadarko Petroleum Corporation in 2007 to acquire, own, develop, and operate midstream assets. Western Midstream Partners, LP owns, directly and indirectly, a 98.0 % limited partner interest in WES Operating, and directly owns all of the outstanding equity interests of Western Midstream Operating GP, LLC, which holds the entire non-economic general partner interest in WES Operating. “Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding Western Midstream Holdings, LLC. Anadarko became a wholly owned subsidiary of Occidental Petroleum Corporation as a result of Occidental Petroleum Corporation’s acquisition by merger of Anadarko on August 8, 2019. For purposes of these consolidated financial statements, the “Partnership” refers to Western Midstream Partners, LP in its individual capacity or to Western Midstream Partners, LP and its subsidiaries, including Western Midstream Operating GP, LLC and WES Operating, as the context requires. “WES Operating GP” refers to Western Midstream Operating GP, LLC, individually as the general partner of WES Operating. The Partnership’s general partner, Western Midstream Holdings, LLC (the “general partner”), is a wholly owned subsidiary of Occidental Petroleum Corporation. “Occidental” refers to Occidental Petroleum Corporation, as the context requires, and its subsidiaries, excluding the general partner. “Related parties” refers to Occidental and the Partnership’s equity interests in Fort Union Gas Gathering, LLC (“Fort Union”), White Cliffs Pipeline, LLC (“White Cliffs”), Rendezvous Gas Services, LLC (“Rendezvous”), Enterprise EF78 LLC (“Mont Belvieu JV”), Texas Express Pipeline LLC (“TEP”), Texas Express Gathering LLC (“TEG”), Front Range Pipeline LLC (“FRP”), Whitethorn Pipeline Company LLC (“Whitethorn LLC”), Cactus II Pipeline LLC (“Cactus II”), Saddlehorn Pipeline Company, LLC (“Saddlehorn”), Panola Pipeline Company, LLC (“Panola”), Mi Vida JV LLC (“Mi Vida”), Ranch Westex JV LLC (“Ranch Westex”), and Red Bluff Express Pipeline, LLC (“Red Bluff Express”). The interests in TEP, TEG, and FRP are referred to collectively as the “TEFR Interests.” “MGR assets” refers to the Red Desert complex and the Granger straddle plant. The “West Texas complex” refers to the Delaware Basin Midstream, LLC (“DBM”) complex and DBJV and Haley systems. The Partnership is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural-gas liquids (“NGLs”), and crude oil; and gathering and disposing of produced water. In its capacity as a natural-gas processor, the Partnership also buys and sells natural gas, NGLs, and condensate on behalf of itself and as an agent for its customers under certain contracts. As of September 30, 2020, the Partnership’s assets and investments consisted of the following: Wholly Owned and Operated Operated Interests Non-Operated Interests Equity Interests Gathering systems (1) 17 2 3 2 Treating facilities 39 3 — 3 Natural-gas processing plants/trains 25 3 — 5 NGLs pipelines 2 — — 4 Natural-gas pipelines 5 — — 1 Crude-oil pipelines 3 1 — 3 _________________________________________________________________________________________ (1) Includes the DBM water systems. These assets and investments are located in the Rocky Mountains (Colorado, Utah, and Wyoming), North-central Pennsylvania, Texas, and New Mexico. Latham Train II, a cryogenic train at the DJ Basin complex, commenced operations during the first quarter of 2020. Loving ROTF Trains III and IV, oil-stabilization trains at the DBM oil system, commenced operations during the first and third quarters of 2020, respectively. 18 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED) December 2019 Agreements. On December 31, 2019, (i) the Partnership and certain of its subsidiaries, including WES Operating and WES Operating GP, entered into the below-described agreements with Occidental and/or certain of its subsidiaries, including Anadarko, and (ii) WES Operating entered into the below-described amendments to its debt agreements (collectively, the “ December 2019 Agreements ”). • Exchange Agreement. Western Gas Resources, Inc. (“WGRI”), the general partner, and the Partnership entered into a partnership interests exchange agreement (the “Exchange Agreement”), pursuant to which the Partnership canceled the non-economic general partner interest in the Partnership and simultaneously issued a 2.0 % general partner interest to the general partner in exchange for which WGRI transferred 9,060,641 common units to the Partnership, which immediately canceled such units on receipt. • Services, Secondment, and Employee Transfer Agreement. Occidental, Anadarko, and WES Operating GP entered into an amended and restated Services, Secondment, and Employee Transfer Agreement (the “Services Agreement”), pursuant to which Occidental, Anadarko, and their subsidiaries (i) seconded certain personnel employed by Occidental to WES Operating GP, in exchange for which WES Operating GP pays a monthly secondment and shared services fee to Occidental equivalent to the direct cost of the seconded employees until their transfer to the Partnership and (ii) agreed to continue to provide certain administrative and operational services to the Partnership for up to a two-year transition period. In January 2020, pursuant to the Services Agreement, Occidental made a one-time cash contribution of $ 20.0 million to WES Operating for anticipated transition costs required to establish stand-alone human resources and information technology functions. The Services Agreement also includes provisions governing the transfer of certain employees to the Partnership and the assumption by the Partnership of liabilities relating to those employees at the time of their transfer. In late March 2020, seconded employees’ employment was transferred to the Partnership. • RCF amendment. WES Operating entered into an amendment to its $ 2.0 billion senior unsecured revolving credit facility (“RCF”) to, among other things, (i) effective on February 14, 2020, exercise the final one-year extension option to extend the maturity date of the RCF to February 14, 2025, for the extending lenders, and (ii) modify the change of control definition to provide, among other things, that, subject to certain conditions, if the limited partners of the Partnership elect to remove the general partner as the general partner of the Partnership in accordance with the terms of the partnership agreement, then such removal will not constitute a change of control under the RCF. • Term loan facility amendment. WES Operating entered into an amendment to its $ 3.0 billion senior unsecured credit facility (“Term loan facility”) to, among other things, modify the change of control definition to provide, among other things, that, subject to certain conditions, if the limited partners of the Partnership elect to remove the general partner as the general partner of the Partnership in accordance with the terms of the partnership agreement, then such removal will not constitute a change of control under the Term loan facility. See Note 11 . • Termination of debt-indemnification agreements. WES Operating GP and certain wholly owned subsidiaries of Occidental mutually terminated the debt-indemnification agreements related to certain indebtedness incurred by WES Operating. • Termination of omnibus agreements. The Partnership and WES Operating entered into agreements with Occidental to terminate the WES and WES Operating omnibus agreements. See Note 6 . 19 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED) Merger transactions . On February 28, 2019, the Partnership, WES Operating, Anadarko, and certain of their affiliates completed the transactions contemplated by the Contribution Agreement and Agreement and Plan of Merger (the “Merger Agreement”), dated November 7, 2018, pursuant to which, among other things, (i) Clarity Merger Sub, LLC, a wholly owned subsidiary of the Partnership, merged with and into WES Operating, with WES Operating continuing as the surviving entity and as a subsidiary of the Partnership (the “Merger”), and (ii) WES Operating acquired the Anadarko Midstream Assets (“AMA”). See Note 3 . Basis of presentation. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements include the accounts of the Partnership and entities in which it holds a controlling financial interest, including WES Operating and WES Operating GP. All significant intercompany transactions have been eliminated. The following table outlines the ownership interests and the accounting method of consolidation used in the consolidated financial statements for entities not wholly owned: Percentage Interest Full consolidation Chipeta (1) 75.00 % Proportionate consolidation (2) Springfield system 50.10 % Marcellus Interest systems 33.75 % Equity investments (3) Mi Vida 50.00 % Ranch Westex 50.00 % FRP 33.33 % Red Bluff Express 30.00 % Mont Belvieu JV 25.00 % Rendezvous 22.00 % TEP 20.00 % TEG 20.00 % Whitethorn LLC 20.00 % Saddlehorn 20.00 % Cactus II 15.00 % Panola 15.00 % Fort Union (4) 14.81 % White Cliffs 10.00 % _________________________________________________________________________________________ (1) The 25 % third-party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements. See Noncontrolling interests below. (2) The Partnership proportionately consolidates its associated share of the assets, liabilities, revenues, and expenses attributable to these assets. (3) Investments in non-controlled entities over which the Partnership exercises significant influence are accounted for under the equity method of accounting. “Equity-investment throughput” refers to the Partnership’s share of average throughput for these investments. (4) See Note 3 . 20 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED) 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 and Note 5 ), (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) the senior secured revolving credit facility (“WGP RCF”) until its repayment in March 2019. See Note 11 . Presentation of the Partnership’s assets. The Partnership’s assets include assets owned and ownership interests accounted for by the Partnership under the equity method of accounting, through its 98.0 % partnership interest in WES Operating as of September 30, 2020 (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. Use of estimates. In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, using historical experience and other reasonable methods. Changes in facts and circumstances or additional information may result in revised estimates and actual results may differ from these estimates. Effects on the business, financial condition, and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information included herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements, and certain prior-period amounts have been reclassified to conform to the current-year presentation. Noncontrolling interests. For periods subsequent to Merger completion, the Partnership’s noncontrolling interests in the consolidated financial statements consist of (i) the 25 % third-party interest in Chipeta and (ii) the 2.0 % Occidental subsidiary-owned limited partner interest in WES Operating. For periods prior to Merger completion, the Partnership’s noncontrolling interests in the consolidated financial statements consisted of (i) the 25 % third-party interest in Chipeta, (ii) the publicly held limited partner interests in WES Operating, (iii) the common units issued by WES Operating to subsidiaries of Anadarko as part of the consideration paid for prior-period acquisitions from Anadarko, and (iv) the Class C units issued by WES Operating to a subsidiary of Anadarko as part of the funding for the acquisition of DBM. For all periods presented, WES Operating’s noncontrolling interest in the consolidated financial statements consists of the 25 % third-party interest in Chipeta. See Note 5. When WES Operating issues equity, the carrying amount of the noncontrolling interest reported by the Partnership is adjusted to reflect the noncontrolling ownership interest in WES Operating. The resulting impact of such noncontrolling interest adjustment on the Partnership’s interest in WES Operating is reflected as an adjustment to the Partnership’s partners’ capital. Inventory. The cost of NGLs inventory is determined by the weighted-average cost method on a location-by-location basis. Inventory is stated at the lower of weighted-average cost or net realizable value. NGLs inventory is reported in Other current assets and NGLs line-fill inventory is reported in Other assets on the consolidated balance sheets. Materials and supplies inventory is valued at weighted-average cost and is reviewed periodically for obsolescence. Beginning with the second quarter of 2020, materials and supplies inventory, previously reported in Other current assets, is prospectively reported in Other assets on the consolidated balance sheets. See Note 10 . 21 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED) Shutdown of gathering systems. In May 2018, after assessing a number of factors, and with the safety of the community and the protection of the environment as primary factors, the Partnership permanently ceased operations at the Kitty Draw gathering system in Wyoming (part of the Hilight system) and the Third Creek gathering system in Colorado (part of the DJ Basin complex). An accrual of $ 10.9 million for anticipated costs associated with system shutdowns was recorded in 2018 as a reduction in related-party Product sales in the consolidated statements of operations. During the nine months ended September 30, 2019, $ 6.1 million of the accrual related to the Kitty Draw gathering system was reversed due to producer settlements being less than their initial estimates. Segments. The Partnership’s operations continue to be organized into a single operating segment, the assets of which gather, compress, treat, process, and transport natural gas; gather, stabilize, and transport condensate, NGLs, and crude oil; and gather and dispose of produced water in the United States. Equity-based compensation. On February 10, 2020, the Board of Directors approved awards of phantom units (the “Awards”) to the Partnership’s executive officers under the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan (“WES LTIP”). The Awards include (i) an award of time-vested phantom units that vest ratably over a three-year period (“Time-Based Awards”), (ii) a market award that vests after a three-year performance period based on the Partnership’s relative total unitholder return as compared to a group of peer companies (“TUR Awards”), and (iii) a performance award that vests based on the Partnership’s average return on assets over a three-year performance period (“ROA Awards”). At vesting, the value of the TUR Awards and the ROA Awards will be determined in accordance with the terms of the respective Award Agreements that provide for payout percentages ranging from 0 % to 200 % based on results achieved over the applicable performance period. At vesting, the Awards generally will be settled in Partnership common units. Prior to vesting, the Awards pay in-kind distributions in the form of Partnership common units. During the nine months ended September 30, 2020, the Partnership issued 80,081 common units as in-kind distributions under such Awards. In addition, phantom units are awarded under the WES LTIP to non-executive employees and independent directors of the Partnership from time to time, which vest ratably over a three-year period and one year from the grant date, respectively. Prior to vesting, the awards to non-executive employees and independent directors pay distribution equivalents in cash. The equity-based compensation expense attributable to these awards is amortized over the vesting periods applicable to the awards using the straight-line method. Expense is recognized based on the grant-date fair value and recorded, net of any forfeitures, as General and administrative expense in the consolidated statements of operations. The fair value of the Time-based Awards, ROA Awards, and non-executive awards is based on the observable market price of the Partnership’s units on the grant date of the award. The fair value of the TUR Awards is determined using a Monte Carlo simulation at the grant date of the award. For ROA Awards, all performance-related fair-value changes are recognized in compensation expense during the performance period. Compensation expense for the WES LTIP was $ 2.1 million and $ 5.4 million for the three and nine months ended September 30, 2020, respectively, and $ 0.6 million and $ 1.0 million for the three and nine months ended September 30, 2019, respectively. Defined-contribution plan. Beginning in the first quarter of 2020, employees of the Partnership are eligible to participate in the Western Midstream Savings Plan, a defined-contribution benefit plan maintained by the Partnership. All regular employees may participate in the plan by making elective contributions that are matched by the Partnership, subject to certain limitations. The Partnership also makes other contributions based on plan guidelines. The Partnership recognized expense related to the plan of $ 3.8 million and $ 8.2 million for the three and nine months ended September 30, 2020, respectively, recorded as General and administrative expense in the consolidated statements of operations. 22 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED) Recently adopted accounting standards. Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326) significantly changes the accounting and disclosure requirements related to credit losses on financial assets. Under the new standard, entities are now required to estimate lifetime expected credit losses for trade receivables, loans, and other financial instruments as of the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, resulting in earlier recognition of credit losses. There was no impact to the consolidated financial statements with the Partnership’s adoption of the standard on January 1, 2020. The Partnership has implemented the necessary changes to its processes and controls to support accounting and disclosure requirements under this ASU. Accounts receivable and contract assets. Accounts receivable represent contractual rights for services performed, with, on average, 30-day payment terms from the date of invoice. Contract assets primarily relate to revenue accrued but not yet billed under cost-of-service contracts and accrued deficiency fees. As of September 30, 2020, there have been no negative indications regarding the collectability of significant receivables as it relates to impacts from the global outbreak of the coronavirus (“COVID-19”) and the oil-market disruption resulting from significantly lower global demand and corresponding oversupply of crude oil. The Partnership will continue to monitor the credit quality of its customer base and assess collectability of these assets as appropriate. 2. REVENUE FROM CONTRACTS WITH CUSTOMERS The following table summarizes revenue from contracts with customers: Three Months Ended September 30, Nine Months Ended September 30, thousands 2020 2019 2020 2019 Revenue from customers Service revenues – fee based $ 582,725 $ 587,965 $ 1,806,097 $ 1,761,483 Service revenues – product based 12,316 9,476 35,237 45,530 Product sales 30,106 68,248 108,491 215,517 Total revenue from customers 625,147 665,689 1,949,825 2,022,530 Revenue from other than customers Lease revenue (1) 53,797 — 174,449 — Net gains (losses) on commodity-price swap agreements — — — ( 667 ) Other 100 338 838 1,101 Total revenues and other $ 679,044 $ 666,027 $ 2,125,112 $ 2,022,964 _________________________________________________________________________________________ (1) For the three and nine months ended September 30, 2020, includes fixed- and variable-lease revenue from an operating and maintenance agreement entered into with Occidental. See Operating lease within Note 6. 23 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED) Contract balances. Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $ 459.1 million and $ 362.6 million as of September 30, 2020, and December 31, 2019, respectively. Contract assets primarily relate to revenue accrued but not yet billed under cost-of-service contracts with fixed and variable fees and accrued deficiency fees the Partnership expects to charge customers once the related performance periods are completed. The following table summarizes current-period activity related to contract assets from contracts with customers: thousands Balance at December 31, 2019 $ 67,357 Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period (1) ( 2,743 ) Additional estimated revenues recognized (2) 14,536 Balance at September 30, 2020 $ 79,150 Contract assets at September 30, 2020 Other current assets $ 20,152 Other assets 58,998 Total contract assets from contracts with customers $ 79,150 _________________________________________________________________________________________ (1) Includes $( 0.2 ) million for the three months ended September 30, 2020. (2) Includes $ 4.9 million for the three months ended September 30, 2020. Contract liabilities primarily relate to (i) fees that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of customer benefit, (ii) fixed and variable fees under cost-of-service contracts that are received from customers for which revenue recognition is deferred, and (iii) aid-in-construction payments received from customers that must be recognized over the expected period of customer benefit. The following table summarizes current-period activity related to contract liabilities from contracts with customers: thousands Balance at December 31, 2019 $ 222,274 Cash received or receivable, excluding revenues recognized during the period (1) 34,922 Revenues recognized that were included in the contract liability balance at the beginning of the period (2) ( 12,186 ) Balance at September 30, 2020 $ 245,010 Contract liabilities at September 30, 2020 Accrued liabilities $ 9,312 Other liabilities 235,698 Total contract liabilities from contracts with customers $ 245,010 _________________________________________________________________________________________ (1) Includes $ 11.0 million for the three months ended September 30, 2020. (2) Includes $( 1.7 ) million for the three months ended September 30, 2020. 24 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED) Transaction price allocated to remaining performance obligations. Revenues expected to be recognized from certain performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2020, are presented in the following table. The Partnership applies the optional exemptions in Topic 606 and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Therefore, the following table represents only a portion of expected future revenues from existing contracts as most future revenues from customers are dependent on future variable customer volumes and, in some cases, variable commodity prices for those volumes. thousands Remainder of 2020 $ 201,409 2021 788,814 2022 1,044,194 2023 988,776 2024 959,799 Thereafter 3,569,832 Total $ 7,552,824 3. ACQUISITIONS AND DIVESTITURES AMA acquisition. In February 2019, WES Operating acquired AMA from Anadarko, which is comprised of (i) the DJ Basin oil system and Wattenberg processing plant located in the DJ basin; (ii) the DBM oil system, APC water systems, a 50 % interest in Mi Vida, and a 50 % interest in Ranch Westex, located in West Texas; (iii) the Wamsutter pipeline located in Wyoming; (iv) a 20 % interest in Saddlehorn, a crude-oil and condensate pipeline that originates in Laramie County, Wyoming and terminates in Cushing, Oklahoma; and (v) a 15 % interest in Panola, an NGLs pipeline that originates in Panola County, Texas, and terminates in Mont Belvieu, Texas. AMA was acquired in exchange for aggregate consideration of $ 2.0 billion of cash, less the outstanding amount payable pursuant to an intercompany note (the “APCWH Note Payable”) assumed by WES Operating in connection with the transfer, and 45,760,201 WES Operating common units. These WES Operating common units, less 6,375,284 WES Operating common units retained by WGR Asset Holding Company LLC (“WGRAH”), converted into the right to receive common units of the Partnership at Merger completion. Red Bluff Express acquisition. In January 2019, the Partnership acquired a 30 % interest in Red Bluff Express, which owns a third-party-operated natural-gas pipeline connecting processing plants in Reeves and Loving Counties, Texas, to the WAHA hub in Pecos County, Texas. The Partnership acquired its 30 % interest from a third party via an initial net investment of $ 92.5 million, which represented a 30% share of costs incurred up to the date of acquisition. The initial investment was funded with cash on hand and the interest in Red Bluff Express is accounted for under the equity method of accounting. Fort Union and Bison facilities. In October 2020, the Partnership (i) sold its 14.81 % interest in Fort Union, which was accounted for under the equity method of accounting, and (ii) entered into an option agreement to sell the Bison treating facility during the first quarter of 2021, located in Northeast Wyoming, to a third party. The Partnership received combined proceeds of $ 27.0 million, resulting in a net gain on sale of $ 21.0 million related to the Fort Union interest that will be recorded in the fourth quarter of 2020. A gain related to the option agreement and potential sale of the Bison treating facility will be recognized in the first quarter of 2021 if the option is exercised or expires. 25 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. PARTNERSHIP DISTRIBUTIONS Partnership distributions. The partnership agreement requires the Partnership to distribute all of its available cash (as defined in its partnership agreement) to unitholders of record on the applicable record date within 55 days following each quarter’s end. The Board of Directors of the general partner (the “Board of Directors”) declared the following cash distributions to the Partnership’s unitholders for the periods presented: thousands except per-unit amounts Quarters Ended Total Quarterly Per-unit Distribution Total Quarterly Cash Distribution Distribution Date 2019 March 31 $ 0.61000 $ 276,324 May 2019 June 30 0.61800 279,959 August 2019 September 30 0.62000 280,880 November 2019 December 31 0.62200 281,786 February 2020 2020 March 31 $ 0.31100 $ 140,893 May 2020 June 30 0.31100 140,900 August 2020 September 30 (1) 0.31100 132,255 November 2020 _________________________________________________________________________________________ (1) The Board of Directors declared a cash distribution to the Partnership’s unitholders for the third quarter of 2020 of $ 0.31100 per unit, or $ 132.3 million in aggregate. The cash distribution is payable on November 13, 2020 to unitholders of record at the close of business on October 30, 2020, including the general partner units that were issued on December 31, 2019 (see Note 1 ). Following the transactions contemplated by the Exchange Agreement, the general partner units are entitled to all quarterly distributions beginning with the cash distribution declared for the fourth quarter of 2019. Available cash. The amount of available cash (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 reserves to fund future capital expenditures; to comply with applicable laws, debt instruments, or other agreements; or 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. Working capital borrowings generally are intended to be repaid or refinanced within 12 months. In all cases, working capital borrowings are used solely for working capital purposes or to fund unitholder distributions. WES Operating partnership distributions. Immediately prior to the closing of the Merger, the WES Operating incentive distribution rights (“IDRs”) and general partner units were converted into WES Operating common units and a non-economic general partner interest in WES Operating, and at Merger completion, all WES Operating common units held by the public and subsidiaries of Anadarko (other than common units held by the Partnership, WES Operating GP, and 6.4 million common units held by a subsidiary of Anadarko) were converted into common units of the Partnership. Beginning with the first quarter of 2019, WES Operating has made cash distributions to the Partnership and WGRAH, a subsidiary of Occidental, in respect of their proportionate share of limited partner interests in WES Operating. See Note 5 . 26 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. PARTNERSHIP DISTRIBUTIONS (CONTINUED) WES Operating made the following cash distributions to its limited partners for the periods presented: thousands Quarters Ended Total Quarterly Cash Distribution 2019 March 31 $ 283,271 June 30 288,083 September 30 289,676 December 31 290,314 2020 March 31 $ 143,404 June 30 143,404 September 30 143,404 5. EQUITY AND PARTNERS’ CAPITAL Holdings of Partnership equity. The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” On September 11, 2020, the Partnership assigned its 98 % interest in the 30-year $ 260.0 million note established in May 2008 between WES Operating and Anadarko (the “Anadarko note receivable”) to Anadarko, which Anadarko canceled and retired immediately upon receipt, in exchange for which Occidental caused certain of its subsidiaries to transfer an aggregate of 27,855,398 common units representing limited partner interests in the Partnership to the Partnership. The units were canceled by the Partnership immediately upon receipt. See Note 6. As of September 30, 2020, Occidental held 214,281,578 common units, representing a 50.4 % limited partner interest in the Partnership, and through its ownership of the general partner, Occidental indirectly held 9,060,641 general partner units, representing a 2.1 % general partner interest in the Partnership (see Note 1 ). The public held 201,914,514 common units, representing a 47.5 % limited partner interest in the Partnership. Holdings of WES Operating equity. As of September 30, 2020, (i) the Partnership, directly and indirectly through its ownership of WES Operating GP, owned a 98.0 % limited partner interest and the entire non-economic general partner interest in WES Operating and (ii) Occidental, through its ownership of WGRAH, owned a 2.0 % limited partner interest in WES Operating, which is reflected as a noncontrolling interest within the consolidated financial statements of the Partnership (see Note 1 ). WES Operating Class C units. In November 2014, WES Operating issued 10,913,853 Class C units to APC Midstream Holdings, LLC (“AMH”), pursuant to a Unit Purchase Agreement with Anadarko and AMH. The Class C units were issued to partially fund the acquisition of DBM. All outstanding Class C units converted into WES Operating common units on a one -for-one basis immediately prior to the closing of the Merger (see Note 1 ). 27 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. EQUITY AND PARTNERS’ CAPITAL (CONTINUED) Partnership’s net income (loss) per common unit. Following the transactions contemplated by the Exchange Agreement, the common and general partner unitholders’ allocation of net income (loss) attributable to the Partnership was equal to their cash distributions plus their respective allocations of undistributed earnings or losses using the two-class method. Specifically, net income equal to the amount of available cash (as defined by the partnership agreement) was allocated to the common and general partner unitholders consistent with actual cash distributions and capital account allocations. Undistributed earnings (net income in excess of distributions) or undistributed losses (available cash in excess of net income (loss)) were then allocated to the common and general partner unitholders in accordance with their weighted-average ownership percentage during each period. The Partnership’s basic net income (loss) per common unit is calculated by dividing the limited partners’ interest in net income (loss) by the weighted-average number of common units outstanding during the period. Net income (loss) attributable to assets acquired from Anadarko for periods prior to the acquisition of such assets was not allocated to the limited partners when calculating net income (loss) per common unit. WES Operating’s net income (loss) per common unit. For periods subsequent to the closing of the Merger, net income (loss) per common unit for WES Operating is not calculated because no publicly traded units remained outstanding subsequent to the closing of the Merger. 6. RELATED-PARTY TRANSACTIONS Summary of related-party transactions. The following tables summarize material related-party transactions included in the Partnership’s consolidated financial statements: Consolidated statements of operations Three Months Ended September 30, Nine Months Ended September 30, thousands 2020 2019 2020 2019 Revenues and other Service revenues – fee based $ 436,405 $ 360,011 $ 1,344,326 $ 1,030,137 Service revenues – product based 2,544 84 6,690 2,070 Product sales 16,692 38,658 60,452 130,167 Total revenues and other 455,641 398,753 1,411,468 1,162,374 Equity income, net – related parties (1) 61,026 53,893 176,788 175,483 Operating expenses Cost of product 1,483 61,066 85,353 185,463 Operation and maintenance 1,303 39,459 35,660 110,918 General and administrative (2) 7,607 27,724 40,456 73,510 Total operating expenses 10,393 128,249 161,469 369,891 Interest income – Anadarko note receivable 3,286 4,225 11,736 12,675 Interest expense — ( 59 ) ( 43 ) ( 1,912 ) _________________________________________________________________________________________ (1) See Note 7 . (2) Includes amounts charged by Occidental pursuant to the shared services agreements (see Shared services agreements within this Note 6 ). Also see Incentive Plans within this Note 6. 28 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS (CONTINUED) Consolidated balance sheets thousands September 30, 2020 December 31, 2019 Assets Accounts receivable, net (1) $ 292,895 $ 113,345 Other current assets 17,196 4,982 Anadarko note receivable — 260,000 Equity investments (2) 1,242,557 1,285,717 Other assets 58,967 60,221 Total assets 1,611,615 1,724,265 Liabilities Accounts and imbalance payables 2,050 — Short-term debt (3) — 7,873 Accrued liabilities 5,410 3,087 Other liabilities 129,312 97,800 Total liabilities 136,772 108,760 _________________________________________________________________________________________ (1) Increase attributable to the timing of certain related-party cash receipts. The Partnership received $ 74.8 million of the September 30, 2020, Accounts receivable, net balance by October 7, 2020. (2) See Note 7 . (3) Includes amounts related to finance leases (see Note 11 ) . Consolidated statements of cash flows Nine Months Ended September 30, thousands 2020 2019 Distributions from equity-investment earnings – related parties $ 187,816 $ 182,337 Acquisitions from related parties — ( 2,007,501 ) Contributions to equity investments - related parties ( 19,017 ) ( 108,118 ) Distributions from equity investments in excess of cumulative earnings – related parties 21,750 21,203 APCWH Note Payable borrowings — 11,000 Repayment of APCWH Note Payable — ( 439,595 ) Distributions to Partnership unitholders (1) ( 301,219 ) ( 411,125 ) Distributions to WES Operating unitholders (2) ( 11,545 ) ( 13,973 ) Net contributions from (distributions to) related parties 22,674 458,819 Above-market component of swap agreements with Anadarko — 7,407 Finance lease payments ( 6,382 ) ( 253 ) _________________________________________________________________________________________ (1) Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5 ). (2) Represents distributions paid to certain subsidiaries of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ). 29 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS (CONTINUED) The following tables summarize material related-party transactions for WES Operating (which are included in the Partnership’s consolidated financial statements) to the extent the amounts differ from the Partnership’s consolidated financial statements: Consolidated statements of operations Three Months Ended September 30, Nine Months Ended September 30, thousands 2020 2019 2020 2019 General and administrative (1) $ 8,314 $ 26,915 $ 41,220 $ 71,793 _________________________________________________________________________________________ (1) Includes amounts charged by Occidental pursuant to the shared services agreements (see Shared services agreements within this Note 6 ). Also see Incentive Plans within this Note 6. Consolidated balance sheets thousands September 30, 2020 December 31, 2019 Accounts receivable, net $ 256,518 $ 113,581 Consolidated statements of cash flows Nine Months Ended September 30, thousands 2020 2019 Distributions to WES Operating unitholders (1) $ ( 577,122 ) $ ( 736,256 ) _________________________________________________________________________________________ (1) Represents distributions paid to the Partnership and certain subsidiaries of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ). For the nine months ended September 30, 2019, includes distributions to the Partnership and a subsidiary of Occidental related to the repayment of the WGP RCF (see Note 11 ). Related-party revenues. Related-party revenues include (i) income from the Partnership’s investments accounted for under the equity method of accounting (see Note 7 ) and (ii) amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental. Gathering and processing agreements. The Partnership has significant gathering and processing arrangements with affiliates of Occidental on most of its systems. These arrangements with Occidental include Occidental-produced volumes and in some instances, the volumes of other working-interest owners of Occidental where the joint partnership collectively gathers, processes, and/or markets volumes. These volumes are considered owned and controlled by Occidental, which is the contracting counterparty of the Partnership. Natural-gas throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 41 % and 42 % for the three and nine months ended September 30, 2020, respectively, and 38 % and 37 % for the three and nine months ended September 30, 2019, respectively. Crude-oil and NGLs throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 87 % and 88 % for the three and nine months ended September 30, 2020, respectively, and 85 % and 84 % for the three and nine months ended September 30, 2019, respectively. Produced-water throughput attributable to production owned or controlled by Occidental was 87 % and 88 % for the three and nine months ended September 30, 2020, respectively, and 80 % and 81 % for the three and nine months ended September 30, 2019, respectively. 30 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS (CONTINUED) Commodity purchase and sale agreements. The Partnership sells a significant amount of its natural gas and NGLs to Anadarko Energy Services Company (“AESC”), Occidental’s marketing affiliate. Prior to April 1, 2020, AESC acted as an agent on behalf of either the Partnership or the Partnership’s customers for third-party sales. Where AESC sold natural gas and NGLs on the Partnership’s customers’ behalf, the Partnership recognized associated service revenues and cost of product expense for the marketing services performed by AESC. When product sales were on the Partnership’s behalf, the Partnership recognized product sales revenues based on Occidental’s sales price to the third party and recorded the associated cost of product expense associated with the marketing activities provided by AESC. Effective April 1, 2020, changes to marketing-contract terms with AESC terminated AESC’s prior status as an agent of the Partnership for third-party sales and established AESC as a customer of the Partnership. Accordingly, the Partnership no longer recognizes service revenues and/or product sales revenues and the equivalent cost of product expense for the marketing services performed by AESC. This change has no impact to Operating income (loss), Net income (loss), the balance sheets, cash flows, or any non-GAAP metric used to evaluate the Partnership’s operations (see Key Performance Metrics under Part I, Item 2 of this Form 10-Q). In addition, the Partnership purchases natural gas from AESC pursuant to purchase agreements. Marketing Transition Services Agreement. Effective December 31, 2019, certain subsidiaries of Anadarko entered into a transition services agreement (the “Marketing Transition Services Agreement”) to provide marketing-related services to certain of the Partnership’s subsidiaries through December 31, 2020. Additionally, under the terms of the Marketing Transition Services Agreement, the Partnership is liable for certain downstream transportation commitments through December 31, 2020. In October 2020, the Partnership entered into a three-year NGLs marketing agreement with AESC for the sale of certain of the Partnership’s NGLs volumes processed at the DJ Basin complex. The agreement is effective January 1, 2021. Operating lease. Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership entered into an operating and maintenance agreement pursuant to which Occidental provides operational and maintenance services with respect to a crude-oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021. The agreement and underlying contracts include (i) fixed consideration, which is measured as the minimum-volume commitment for both gathering and treating, and (ii) variable consideration, which consists of all volumes above the minimum-volume commitment. Subsequent to the initial two-year term, the agreement provides for automatic one-year extensions, unless either party exercises its option to terminate the lease with advance notice. For the three and nine months ended September 30, 2020, the Partnership recognized fixed-lease revenue of $ 44.0 million and $ 131.8 million, respectively, and variable-lease revenue of $ 9.8 million and $ 42.6 million, respectively, related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations. Related-party expenses. Operation and maintenance expense includes amounts accrued for or paid to related parties for the operation of the Partnership’s assets and for services provided to related parties, including field labor, measurement and analysis, and other disbursements. A portion of general and administrative expense is paid by Occidental, which results in related-party transactions pursuant to the reimbursement provisions of the Partnership’s and WES Operating’s agreements with Occidental. Related-party expenses do not bear a direct relationship to related-party revenues, and third-party expenses do not bear a direct relationship to third-party revenues. 31 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS (CONTINUED) Shared services agreements. Pursuant to the agreements discussed below, Occidental performs certain centralized corporate functions for the Partnership and WES Operating. • Services Agreement. Pursuant to the Services Agreement, which was amended and restated on December 31, 2019, specified employees of Occidental were seconded to WES Operating GP to provide, under the direction, supervision, and control of the general partner, (i) operating and routine maintenance service and (ii) corporate, administrative, and other services, with respect to the assets owned and operated by the Partnership. Occidental is reimbursed for the services provided by the seconded employees. In late March 2020, seconded employees’ employment was transferred to the Partnership. Further, Occidental continues to provide certain administrative and operational services to the Partnership. In January 2020, pursuant to the Services Agreement, Occidental made a one-time cash contribution of $ 20.0 million to WES Operating for anticipated transition costs required to establish stand-alone human resources and information technology functions. For additional information on the Services Agreement, see Note 1 . • WES and WES Operating omnibus agreements. Prior to December 31, 2019, the Partnership had an omnibus agreement with Occidental and the general partner and WES Operating had a separate omnibus agreement with Occidental and WES Operating GP. These agreements governed, among other things, the obligation to reimburse Occidental for expenses incurred or payments made on the Partnership’s and WES Operating’s behalf in conjunction with general and administrative services provided by Occidental. The omnibus agreements were terminated as part of the December 2019 Agreements (see Note 1 ). Incentive Plans. General and administrative expense includes equity-based compensation expense allocated to the Partnership by Occidental for awards granted to the executive officers of the general partner and to other employees prior to their employment with the Partnership under (i) the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated, (ii) Occidental’s 2015 Long-Term Incentive Plan, and (iii) Occidental’s Phantom Share Unit Award Plan (collectively referred to as the “Incentive Plans”). General and administrative expense includes costs related to the Incentive Plans of $ 3.5 million and $ 11.2 million for the three and nine months ended September 30, 2020, respectively, and $ 3.5 million and $ 9.3 million for the three and nine months ended September 30, 2019, respectively. Portions of these amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital. December 2019 Agreements. As discussed in more detail in Note 1 , on December 31, 2019, the Partnership and certain of its subsidiaries, including WES Operating and WES Operating GP, entered into agreements with Occidental and/or certain of its subsidiaries, including Anadarko. Merger transactions. As discussed in more detail in Note 1 , on February 28, 2019, the Partnership, WES Operating, Anadarko, and certain of their affiliates completed the Merger and the other transactions contemplated in the Merger Agreement, which included the acquisition of AMA from Anadarko. See Note 3. Anadarko note receivable. In May 2008, WES Operating loaned $ 260.0 million to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50 %, payable quarterly and classified as interest income in the consolidated statements of operations. On September 11, 2020, the Partnership and Occidental entered into a Unit Redemption Agreement, pursuant to which (i) WES Operating transferred and assigned its interest in the Anadarko note receivable to its limited partners on a pro-rata basis, transferring 98 % to the Partnership and 2 % to WGRAH, a subsidiary of Occidental, (ii) the Partnership subsequently assigned its 98% interest in (and accrued interest owed under) the Anadarko note receivable to Anadarko, which Anadarko canceled and retired immediately upon receipt, in exchange for which Occidental caused certain of its subsidiaries to transfer an aggregate of 27,855,398 common units of the Partnership to the Partnership, and (iii) the Partnership canceled the units immediately upon receipt. Purchases from related parties. During the third quarter of 2019, the Partnership purchased $ 18.4 million of materials and supplies inventory from Occidental. See Note 1 . 32 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS (CONTINUED) APCWH Note Payable. In June 2017, APC Water Holdings 1, LLC (“APCWH”) entered into an eight-year note payable agreement with Anadarko, which was repaid in the first quarter of 2019 at the Merger completion date. See Note 11 . Commodity-price swap agreements. WES Operating previously entered into commodity-price swap agreements with Anadarko to mitigate exposure to the commodity-price risk inherent in WES Operating’s percent-of-proceeds, percent-of-product, and keep-whole natural-gas processing contracts. These commodity-price swap agreements expired without renewal on December 31, 2018. Notional volumes for each product-based commodity-price swap agreement were not specifically defined. Instead, the commodity-price swap agreements applied to the actual volumes of natural gas, condensate, and NGLs purchased and sold. The commodity-price swap agreements did not satisfy the definition of a derivative financial instrument and, therefore did not require fair-value measurement. Net gains (losses) on commodity-price swap agreements were zero and $( 0.7 ) million (due to settlement of 2018 activity in 2019) for the three and nine months ended September 30, 2019, respectively, reported in the consolidated statements of operations as related-party Product sales. A capital contribution from Anadarko related to the commodity-price swap agreements of $ 7.4 million was recorded in the consolidated statements of equity and partners’ capital for the three months ended March 31, 2019. Concentration of credit risk. Occidental was the only customer from which revenues exceeded 10% of consolidated revenues for all periods presented in the consolidated statements of operations. 7. EQUITY INVESTMENTS The following table presents the financial statement impact of the Partnership’s equity-investments for the nine months ended September 30, 2020: thousands Balance at December 31, 2019 Other-than-temporary impairment expense (1) Equity income, net Contributions Distributions Distributions in excess of cumulative earnings (2) Balance at September 30, 2020 Fort Union $ ( 610 ) $ — $ ( 554 ) $ — $ — $ — $ ( 1,164 ) White Cliffs 45,877 — 4,852 993 ( 4,791 ) ( 1,199 ) 45,732 Rendezvous 32,964 — 188 — ( 1,644 ) ( 1,353 ) 30,155 Mont Belvieu JV 103,036 — 20,711 — ( 20,740 ) ( 3,435 ) 99,572 TEG 18,199 — 3,382 — ( 3,398 ) ( 1,414 ) 16,769 TEP 203,556 — 26,828 — ( 30,069 ) ( 3,391 ) 196,924 FRP 207,782 — 28,660 3,670 ( 30,135 ) ( 7,399 ) 202,578 Whitethorn LLC 161,665 — 30,485 370 ( 31,218 ) — 161,302 Cactus II 172,165 — 19,137 13,332 ( 22,138 ) — 182,496 Saddlehorn 112,855 — 19,669 — ( 20,804 ) — 111,720 Panola 21,783 — 1,535 — ( 1,535 ) ( 679 ) 21,104 Mi Vida 57,807 — 8,036 — ( 8,810 ) ( 1,143 ) 55,890 Ranch Westex 46,678 ( 29,399 ) 8,240 — ( 8,094 ) ( 705 ) 16,720 Red Bluff Express 101,960 — 5,619 652 ( 4,440 ) ( 1,032 ) 102,759 Total $ 1,285,717 $ ( 29,399 ) $ 176,788 $ 19,017 $ ( 187,816 ) $ ( 21,750 ) $ 1,242,557 _________________________________________________________________________________________ (1) Recorded in Long-lived asset and other impairments in the consolidated statements of operations. (2) 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. 33 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. EQUITY INVESTMENTS (CONTINUED) The investment balance in Ranch Westex at September 30, 2020, was $ 25.3 million less than the Partnership’s underlying equity in Ranch Westex’s net assets primarily due to an impairment loss recognized by the Partnership in the third quarter of 2020. The impairment loss of $ 29.4 million resulted from a decline in value below the carrying value, which was determined to be other than temporary in nature. This investment was impaired to its estimated fair value of $ 16.7 million, using the income approach and Level-3 fair value inputs, due to a reduction in estimated future cash flows resulting from lower forecasted producer throughput. The investment balance in Saddlehorn at September 30, 2020, was $ 14.1 million less than the Partnership’s underlying equity in Saddlehorn’s net assets, primarily due to income from an expansion project that was funded by Saddlehorn’s other owners being disproportionately allocated to the Partnership beginning in the second quarter of 2020. This difference will be amortized to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of the Saddlehorn pipeline. 8. PROPERTY, PLANT, AND EQUIPMENT A summary of the historical cost of property, plant, and equipment is as follows: thousands Estimated Useful Life September 30, 2020 December 31, 2019 Land N/A $ 9,696 $ 9,495 Gathering systems – pipelines 30 years 5,209,559 5,092,004 Gathering systems – compressors 15 years 2,094,961 1,929,377 Processing complexes and treating facilities 25 years 3,420,494 3,237,801 Transportation pipeline and equipment 6 to 45 years 171,069 173,572 Produced-water disposal systems 20 years 824,491 754,774 Assets under construction N/A 197,293 486,584 Other 3 to 40 years 705,581 672,064 Total property, plant, and equipment 12,633,144 12,355,671 Less accumulated depreciation 3,808,005 3,290,740 Net property, plant, and equipment $ 8,825,139 $ 9,064,931 The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet placed into productive service as of the respective balance sheet date. Long-lived asset and other impairments. During the nine months ended September 30, 2020, the Partnership recognized impairments of $ 200.6 million, primarily due to $ 150.2 million of impairments for assets located in Wyoming and Utah. These assets were impaired to estimated fair values of $ 112.2 million. The Partnership assesses whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of assets with impairment triggers were measured using the income approach and Level-3 fair value inputs. The income approach was based on the Partnership’s projected future earnings before interest, taxes, depreciation, and amortization (“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. These impairments were primarily triggered by reductions in estimated future cash flows resulting from lower forecasted producer throughput and lower commodity prices. The remaining impairments of $ 21.0 million were primarily at the DJ Basin complex and DBM water systems due to the cancellation of projects and impairments of rights-of-way. Long-lived asset and other impairments on the consolidated statements of operations also includes a $ 29.4 million other-than-temporary impairment for the nine months ended September 30, 2020, of the Partnership’s investment in Ranch Westex (see Note 7 ). 34 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8. PROPERTY, PLANT, AND EQUIPMENT (CONTINUED) During the year ended December 31, 2019, the Partnership recognized impairments of $ 6.3 million, primarily at the DJ Basin complex due to impairments of rights-of-way and cancellation of projects. Potential future long-lived asset impairments. As of September 30, 2020, it is reasonably possible that prolonged low commodity prices, further commodity-price declines, changes to producers’ drilling plans in response to lower prices, and potential producer bankruptcies could result in future long-lived asset impairments. 9. GOODWILL Goodwill is recorded when the purchase price of a business acquired exceeds the fair market value of the tangible and separately measurable intangible net assets. Goodwill also includes the allocated historic carrying value of midstream goodwill attributed to the Partnership’s assets previously acquired from Anadarko. The Partnership’s goodwill has been allocated to two reporting units: (i) gathering and processing and (ii) transportation. The Partnership evaluates goodwill for impairment annually, as of October 1, or more often as facts and circumstances warrant. An initial qualitative assessment is performed to determine the likelihood of whether goodwill is impaired and if deemed necessary based on this assessment, a quantitative assessment is then performed. If the quantitative assessment indicates that the carrying amount of the reporting unit, including goodwill, exceeds its fair value, a goodwill impairment is recorded for the amount by which the reporting unit’s carrying value exceeds its fair value. During the three months ended March 31, 2020, the Partnership performed an interim goodwill impairment test due to a significant decline in the trading price of the Partnership’s common units, triggered by the combined impacts from the global outbreak of COVID-19 and the oil-market disruption resulting from significantly lower global demand and corresponding oversupply of crude oil. The Partnership primarily used the market approach and Level-3 inputs to estimate the fair value of its two reporting units. The market approach was based on multiples of EBITDA and the Partnership’s projected future EBITDA. The EBITDA multiples were based on current and historic multiples for comparable midstream companies of similar size and business profit to the Partnership. The EBITDA projections require significant assumptions including, among others, future throughput volumes based on current expectations of producer activity and operating costs. The reasonableness of the market approach was tested against an income approach that was based on a discounted cash-flow analysis. Key assumptions in this analysis include the use of an appropriate discount rate, terminal-year multiples, and estimated future cash flows, including estimates of throughput, capital expenditures, operating, and general and administrative costs. The Partnership also reviewed the reasonableness of the total fair value of both reporting units to the market capitalization as of March 31, 2020, and the reasonableness of an implied acquisition premium. Impairment determinations involve significant assumptions and judgments, and differing assumptions regarding any of these inputs could have a significant effect on the valuations. As a result of the interim impairment test, the Partnership recognized a goodwill impairment of $ 441.0 million during the first quarter of 2020, which reduced the carrying amount of goodwill to zero for the gathering and processing reporting unit. Goodwill allocated to the transportation reporting unit of $ 4.8 million as of March 31, 2020, was not impaired. 35 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 10. COMPONENTS OF WORKING CAPITAL A summary of accounts receivable, net is as follows: The Partnership WES Operating thousands September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019 Trade receivables, net $ 451,731 $ 260,458 $ 415,354 $ 260,694 Other receivables, net 53 54 69 54 Total accounts receivable, net $ 451,784 $ 260,512 $ 415,423 $ 260,748 A summary of other current assets is as follows: The Partnership WES Operating thousands September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019 NGLs inventory $ 506 $ 906 $ 506 $ 906 Materials and supplies inventory (1) — 23,444 — 23,444 Imbalance receivables 5,724 4,690 5,724 4,690 Prepaid insurance 11,303 5,676 8,858 3,652 Contract assets 20,152 7,129 20,152 7,129 Other 16,419 93 16,419 93 Total other current assets $ 54,104 $ 41,938 $ 51,659 $ 39,914 _________________________________________________________________________________________ (1) See Note 1 . A summary of accrued liabilities is as follows: The Partnership WES Operating thousands September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019 Accrued interest expense $ 80,365 $ 72,064 $ 80,365 $ 72,064 Short-term asset retirement obligations 27,554 22,472 27,554 22,472 Short-term remediation and reclamation obligations 5,228 3,528 5,228 3,528 Income taxes payable 2,095 697 2,095 697 Contract liabilities 9,312 19,659 9,312 19,659 Other (1) 51,361 31,373 18,290 31,219 Total accrued liabilities $ 175,915 $ 149,793 $ 142,844 $ 149,639 _________________________________________________________________________________________ (1) Includes amounts related to WES Operating’s interest-rate swap agreements as of September 30, 2020, and December 31, 2019 (see Note 11 ). 36 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. DEBT AND INTEREST EXPENSE WES Operating is the borrower for all outstanding debt and is expected to be the borrower for all future debt issuances. The following table presents the outstanding debt: September 30, 2020 December 31, 2019 thousands Principal Carrying Value Fair Value (1) Principal Carrying Value Fair Value (1) Short-term debt 5.375% Senior Notes due 2021 $ 431,081 $ 430,326 $ 435,023 $ — $ — $ — Finance lease liabilities (2) 8,436 8,436 8,436 7,873 7,873 7,873 Total short-term debt $ 439,517 $ 438,762 $ 443,459 $ 7,873 $ 7,873 $ 7,873 Long-term debt 5.375 % Senior Notes due 2021 $ — $ — $ — $ 500,000 $ 498,168 $ 515,042 4.000 % Senior Notes due 2022 580,917 580,498 585,519 670,000 669,322 689,784 Floating-Rate Senior Notes due 2023 264,463 263,103 246,605 — — — 3.100 % Senior Notes due 2025 1,000,000 992,505 953,152 — — — 3.950 % Senior Notes due 2025 500,000 494,603 472,459 500,000 493,830 504,968 4.650 % Senior Notes due 2026 500,000 496,579 486,814 500,000 496,197 513,393 4.500 % Senior Notes due 2028 400,000 395,488 380,550 400,000 395,113 390,920 4.750 % Senior Notes due 2028 400,000 396,462 386,193 400,000 396,190 400,962 4.050 % Senior Notes due 2030 1,200,000 1,189,180 1,171,500 — — — 5.450 % Senior Notes due 2044 600,000 593,565 516,911 600,000 593,470 533,710 5.300 % Senior Notes due 2048 700,000 686,996 569,571 700,000 686,843 610,841 5.500 % Senior Notes due 2048 350,000 342,514 289,119 350,000 342,432 310,198 5.250 % Senior Notes due 2050 1,000,000 983,463 929,901 — — — RCF — — — 380,000 380,000 380,000 Term loan facility — — — 3,000,000 3,000,000 3,000,000 Finance lease liabilities 25,438 25,438 25,438 — — — Total long-term debt $ 7,520,818 $ 7,440,394 $ 7,013,732 $ 8,000,000 $ 7,951,565 $ 7,849,818 _________________________________________________________________________________________ (1) Fair value is measured using the market approach and Level-2 fair value inputs. (2) Includes related-party amounts as of December 31, 2019. 37 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. DEBT AND INTEREST EXPENSE (CONTINUED) Debt activity. The following table presents the debt activity for the nine months ended September 30, 2020: thousands Carrying Value Balance at December 31, 2019 $ 7,959,438 RCF borrowings 220,000 Issuance of Floating-Rate Senior Notes due 2023 300,000 Issuance of 3.100 % Senior Notes due 2025 1,000,000 Issuance of 4.050 % Senior Notes due 2030 1,200,000 Issuance of 5.250 % Senior Notes due 2050 1,000,000 Finance lease liabilities 26,001 Repayments of RCF borrowings ( 600,000 ) Repayment of Term loan facility borrowings ( 3,000,000 ) Repayment of 5.375 % Senior Notes due 2021 ( 68,919 ) Repayment of 4.000 % Senior Notes due 2022 ( 89,083 ) Repayment of Floating-Rate Senior Notes due 2023 ( 35,537 ) Other ( 32,744 ) Balance at September 30, 2020 $ 7,879,156 WES Operating Senior Notes. In January 2020, WES Operating issued the following notes: • Fixed-Rate 3.100 % Senior Notes due 2025, 4.050 % Senior Notes due 2030, and 5.250 % Senior Notes due 2050, offered to the public at prices of 99.962 %, 99.900 %, and 99.442 %, respectively, of the face amount (collectively referred to as the “Fixed-Rate Senior Notes”). Including the effects of the issuance prices, underwriting discounts, and interest-rate adjustments (described below), the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 4.291 %, 5.173 %, and 6.375 %, respectively, at September 30, 2020, and 3.287 %, 4.168 %, and 5.362 %, respectively, at June 30, 2020. Interest is paid on each such series semi-annually on February 1 and August 1 of each year, beginning August 1, 2020; and • Floating-Rate Senior Notes due 2023 (the “Floating-Rate Senior Notes”). As of September 30, 2020, the interest rate on the Floating-Rate Senior Notes was 2.12 %. Interest is paid quarterly in arrears on January 13, April 13, July 13, and October 13 of each year. Interest is determined at a benchmark rate (which is initially a three-month London Interbank Offered Rate) on the interest determination date plus 0.85 %. Net proceeds from the Fixed-Rate Senior Notes and Floating-Rate Senior Notes were used to repay the $ 3.0 billion in outstanding borrowings under the Term loan facility and outstanding amounts under the RCF, and for general partnership purposes. The interest payable on each of the Fixed-Rate Senior Notes and Floating-Rate Senior Notes is subject to adjustment from time to time if the credit rating assigned to such notes declines below certain specified levels or if credit-rating downgrades are subsequently followed by credit-rating upgrades. In March 2020, Fitch Ratings (“Fitch”) and Standard and Poor’s (“S&P”) downgraded WES Operating’s long-term debt from “BBB-” to “BB+.” In May 2020, Fitch downgraded WES Operating’s long-term debt to “BB” and in June 2020, Moody’s Investors Service downgraded WES Operating’s long-term debt from “Ba1” to “Ba2.” As a result of these downgrades, annualized borrowing costs will increase by $ 34.6 million. 38 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. DEBT AND INTEREST EXPENSE (CONTINUED) During the three and nine months ended September 30, 2020, WES Operating purchased and retired $ 29.0 million and $ 193.5 million, respectively, of certain of its senior notes and Floating-Rate Senior Notes via open-market repurchases. For the three and nine months ended September 30, 2020, gains of $ 1.7 million and $ 12.7 million, respectively, were recognized for the early retirement of these notes. As of September 30, 2020, the 5.375% Senior Notes due 2021 were classified as short-term debt on the consolidated balance sheet. At September 30, 2020, WES Operating was in compliance with all covenants under the relevant governing indentures. WGP RCF. The WGP RCF, which previously was available to purchase WES Operating common units and for general partnership purposes, matured in March 2019 and the $ 28.0 million of outstanding borrowings were repaid. Revolving credit facility. In December 2019, WES Operating entered into an amendment to the RCF, which is expandable to a maximum of $ 2.5 billion, to, among other things, exercise the final one-year extension option to extend the maturity date of the RCF from February 2024 to February 2025, for each extending lender. The maturity date with respect to each non-extending lender, whose commitments represent $ 100.0 million out of $ 2.0 billion of total commitments from all lenders, remains February 2024. See Note 1 . As of September 30, 2020, there were no outstanding borrowings and $ 5.0 million of outstanding letters of credit, resulting in $ 2.0 billion of available borrowing capacity under the RCF. As of September 30, 2020 and 2019, the interest rate on any outstanding RCF borrowings was 1.65 % and 3.34 %, respectively. The facility-fee rate was 0.25 % and 0.20 % at September 30, 2020 and 2019, respectively. At September 30, 2020, WES Operating was in compliance with all covenants under the RCF. As a result of credit-rating downgrades received from Fitch and S&P (see WES Operating Senior Notes above), beginning in the second quarter of 2020, the interest rate on outstanding RCF borrowings increased by 0.20 % and the RCF facility-fee rate increased by 0.05 %, from 0.20 % to 0.25 %. Term loan facility. In December 2018, WES Operating entered into the Term loan facility, the proceeds from which were used to fund substantially all of the cash portion of the consideration under the Merger Agreement and the payment of related transaction costs (see Note 1 ). As of September 30, 2019, the interest rate on the outstanding borrowings was 3.42 %. In January 2020, WES Operating repaid the outstanding borrowings with proceeds from the issuance of the Fixed-Rate Senior Notes and Floating-Rate Senior Notes and terminated the Term loan facility (see WES Operating Senior Notes above). During the first quarter of 2020, a loss of $ 2.3 million was recognized for the early termination of the Term loan facility. Finance lease liabilities. The Partnership subleased equipment from Occidental via finance leases through April 2020. During the first quarter of 2020, the Partnership entered into finance leases with third parties for equipment and vehicles extending through 2029, with future lease payments of $ 39.0 million as of September 30, 2020. APCWH Note Payable. In June 2017, in connection with funding the construction of the APC water systems that were acquired as part of the AMA acquisition, APCWH entered into an eight-year note payable agreement with Anadarko. This note payable had a maximum borrowing limit of $ 500.0 million, including accrued interest. The APCWH Note Payable was repaid at Merger completion. See Note 1 . Interest-rate swaps. In December 2018 and March 2019, WES Operating entered into interest-rate swap agreements with an aggregate notional principal amount of $ 750.0 million and $ 375.0 million, respectively, to manage interest-rate risk associated with anticipated debt issuances. In November and December 2019, WES Operating entered into additional interest-rate swap agreements with an aggregate notional principal amount of $ 1,125.0 million, effectively offsetting the swap agreements entered into in December 2018 and March 2019. 39 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. DEBT AND INTEREST EXPENSE (CONTINUED) In December 2019, all outstanding interest-rate swap agreements were settled. As part of the settlement, WES Operating made cash payments of $ 107.7 million and recorded an accrued liability of $ 25.6 million to be paid quarterly in 2020. For the nine months ended September 30, 2020, WES Operating made cash payments of $ 19.2 million. These cash payments were classified as cash flows from operating activities in the consolidated statements of cash flows. The Partnership did not apply hedge accounting and, therefore, gains and losses associated with the interest-rate swap agreements were recognized in earnings. For the three and nine months ended September 30, 2019, non-cash losses of $ 68.3 million and $ 162.9 million, respectively, were recognized, which are included in Other income (expense), net in the consolidated statements of operations. Interest expense. The following table summarizes the amounts included in interest expense: Three Months Ended September 30, Nine Months Ended September 30, thousands 2020 2019 2020 2019 Third parties Long-term and short-term debt $ ( 94,201 ) $ ( 83,712 ) $ ( 273,620 ) $ ( 233,432 ) Finance lease liabilities ( 369 ) — ( 1,162 ) — Amortization of debt issuance costs and commitment fees ( 3,463 ) ( 3,139 ) ( 10,052 ) ( 9,461 ) Capitalized interest 2,462 8,386 6,066 20,933 Total interest expense – third parties ( 95,571 ) ( 78,465 ) ( 278,768 ) ( 221,960 ) Related parties APCWH Note Payable — — — ( 1,833 ) Finance lease liabilities — ( 59 ) ( 43 ) ( 79 ) Total interest expense – related parties — ( 59 ) ( 43 ) ( 1,912 ) Interest expense $ ( 95,571 ) $ ( 78,524 ) $ ( 278,811 ) $ ( 223,872 ) 12. COMMITMENTS AND CONTINGENCIES 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 short-term payment obligations, or commitments, related to its capital spending programs, and those of its unconsolidated related parties, the majority of which is expected to be paid in the next twelve months. These commitments primarily relate to construction and expansion projects at the West Texas and DJ Basin complexes, DBM water systems, and DBM oil system. 40 Table of Contents