What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-26 compared with 2020-02-27 · 1054 added, 886 removed, 909 unchanged (68% of the section changed)

Financial Statements and Supplementary Data

Financial Statements

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

16 unchanged sentences

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies and Basis of Presentation

Revenue from Contracts with Customers

2 unchanged sentences

Equity and Partners’ Capital

Transactions with Affiliates

Property, Plant, and Equipment

Goodwill and Intangibles

Related-Party Transactions

Equity Investments

Components of Working Capital

Property, Plant, and Equipment

Goodwill and Other Intangibles

Selected Components of Working Capital

Asset Retirement Obligations

Debt and Interest Expense

Equity-Based Compensation

Commitments and Contingencies

Subsequent Events

Supplemental Quarterly Information

WESTERN MIDSTREAM PARTNERS, LP

17 unchanged sentences

/s/ Michael P.

President and Chief Executive Officer

Western Midstream Holdings, LLC

(as general partner of Western Midstream Partners, LP)

/s/ Michael C.

Senior Vice President and Chief Financial Officer

President, Chief Executive Officer and Chief Financial Officer

Western Midstream Holdings, LLC

2 unchanged sentences

/s/ Michael P.

President and Chief Executive Officer

Western Midstream Operating GP, LLC

(as general partner of Western Midstream Operating, LP)

/s/ Michael C.

Senior Vice President and Chief Financial Officer

President, Chief Executive Officer and Chief Financial Officer

Western Midstream Operating GP, LLC

3 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) and Unitholders of Western Midstream Partners, LP:

To the Board of Directors of

Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) and Unitholders

Western Midstream Partners, LP:

Opinion on Internal Control Over Financial Reporting

23 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) and Unitholders of Western Midstream Partners, LP:

To the Board of Directors of

Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) and Unitholders

Western Midstream Partners, LP:

Opinion on the Consolidated Financial Statements

3 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2021 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Partnership has changed its method of accounting for revenue recognition effective January 1, 2018, due to the adoption of Revenue from Contracts with Customers (ASC Topic 606).

Basis for Opinion

10 unchanged sentences

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the cumulative catch-up revenue adjustment related to gas-gathering, oil-gathering, and oil-stabilization revenue contracts with customers.

As discussed in Notes 1 and 2 in the Notes to Consolidated Financial Statements, certain of the Partnership’s midstream services agreements have minimum-volume commitment demand fees and fees that require periodic rate redeterminations based on the related midstream facility cost-of-service.

The Partnership is contractually required to redetermine the cost of service rate charged to certain of its customers annually, and as a result, a cumulative catch-up revenue adjustment related to services may be recorded.

The cumulative catch-up adjustment is estimated using actual amounts for prior years and forecasted cash flows based on forecasted receipt volumes over the remaining contract term.

The volatility of oil and natural-gas prices could negatively impact customers’ production activity and near-term drilling programs, which impacts the future producer volumes to be processed by the Partnership.

We identified the assessment of the cumulative catch-up revenue adjustment related to gas-gathering, oil-gathering, and oil-stabilization revenue contracts with customers as a critical audit matter.

Specifically, the evaluation of the assumptions related to forecasted receipt volumes used in the forecasted cash flows to estimate the cumulative catch-up revenue adjustment required subjective auditor judgment as there is inherent uncertainty in forecasting receipt volumes over a long period of time.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Partnership’s assessment of the forecasted cash flows, including controls related to the forecasted receipt volumes.

We analyzed the status of the production activity and near-term drilling programs of the Partnership’s customers using evidence from publicly available information such as press releases and company filings with the U.S.

Securities and Exchange Commission and compared that information to the forecasted receipt volumes.

We analyzed forecasted oil and natural-gas prices using publicly available information and compared it to the trend in the forecasted receipt volumes.

In addition, we compared historical receipt volume forecasts to actual results to assess the Partnership’s ability to accurately forecast.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment assessment of long-lived assets

As discussed in Note 9 to the consolidated financial statements, the Partnership’s consolidated property, plant, and equipment balance was $8.7 billion as of December 31, 2020.

During the year ended December 31, 2020, the Partnership recognized long-lived asset and other impairment charges of $203.9 million, a portion of which related

to impairment of a specific long-lived asset group located in Wyoming and Utah.

On at least a quarterly basis, management reviews its asset groups for indicators of impairment that would indicate the carrying value of an asset group might not be recoverable.

If an asset group displays an indicator of impairment, it is tested for recoverability by comparing the sum of the estimated future undiscounted cash flows attributable to the asset group to the carrying value of the asset group.

An impairment loss is determined if the carrying value of the asset group is not recoverable and is measured as the excess of the carrying value over the asset group’s fair value.

We identified the evaluation of the impairment assessment for a specific long-lived asset group in Wyoming and Utah as a critical audit matter.

Subjective auditor judgment was required to evaluate the Partnership’s estimate of the fair value of the asset group, specifically the assessment of the projected throughput and discount rate assumptions.

Specialized skills and knowledge were required to evaluate the discount rate used in the valuation model.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Partnership’s long-lived asset impairment process.

This included certain controls over the determination of the forecasted throughput and the discount rate.

We compared historical forecasted volumes to actual volumetric results to assess the Partnership’s ability to forecast.

We evaluated the forecasted throughput included in the valuation model by comparing it to external market and industry data related to producer drilling activity in the relevant basin.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rate used in the valuation model by developing a range of independent estimates that was determined using publicly available market data for comparable entities, and comparing the discount rate selected by management to the range of independently developed estimates.

Goodwill impairment assessment for the gathering and processing reporting unit

As discussed in Note 10 to the consolidated financial statements, the Partnership recognized a goodwill impairment of $441.0 million related to the gathering and processing reporting unit during the first quarter of 2020.

The Partnership conducts an impairment test annually on October 1 and when events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

An impairment charge will be recognized to the extent that the fair value of a reporting unit is less than its carrying value.

The fair value of the reporting unit is estimated using both the market approach and the income approach.

The market approach estimates fair value by applying a market multiple, determined by reference to market multiples for comparable publicly traded companies, to the expected earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of the gathering and processing reporting unit.

The income approach is based on forecasted future cash flows that are discounted to present value using a discount rate that considers timing and risk of future cash flows.

We identified the evaluation of the goodwill impairment assessment for the gathering and processing reporting unit as a critical audit matter.

A higher degree of subjective auditor judgment was required to evaluate the fair value of the gathering and processing reporting unit based on the market and income approaches.

Specifically, subjective auditor judgment and specialized skills and knowledge were required to evaluate the Partnership’s estimate of EBITDA multiples for comparable publicly traded companies and the discount rate used in determining the fair value of the reporting unit.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Partnership’s goodwill impairment process.

This included certain controls over the determination of the EBITDA multiples and discount rate used in the estimation of the fair value of the gathering and processing reporting unit.

We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the EBITDA multiples used by management in the valuation, including examining the guideline public companies used to determine the market multiples and rationale for selected multiples used by management in the valuation analysis.

Further, the valuation professionals assisted in evaluating the discount rate used in the discounted cash flow model by developing a range of independent estimates that was determined using publicly available market data for comparable entities and comparing the discount rate selected by management to the range of independently developed estimates.

We tested the reconciliation of the aggregate estimated fair value of the reporting units to the market capitalization of the Partnership.

Estimated constraint on variable consideration related to a certain gas-gathering revenue contract and oil-gathering revenue contract with a customer

As discussed in Notes 1 and 2 to the consolidated financial statements, certain of the Partnership’s midstream services agreements have minimum-volume commitment demand fees and fees that require periodic rate redeterminations based on the related midstream facility cost-of-service rate provisions.

Annual adjustments are made to the cost-of-service rates charged to certain of its customers, and as a result, a cumulative catch-up revenue adjustment related to services already provided may be recorded.

The Partnership assesses whether a significant reversal of the cumulative catch-up revenue adjustment is probable of occurring and if so, the variable consideration may be constrained up to the amount of the probable significant reversal.

We identified the assessment of the estimated constraint on variable consideration related to one gas-gathering contract and one oil-gathering revenue contract as a critical audit matter.

A high degree of challenging auditor judgment was required to evaluate the probability of a significant reversal in the amount of variable consideration recognized due to the uncertainty related to ongoing legal proceedings and commercial negotiations with the counterparties to the contracts.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Partnership’s annual re-determination of the cost-of-service rate.

This included certain controls over the determination of the constraint on the variable consideration expected to be received under the contracts.

We evaluated responses received from external legal counsel to our audit inquiry on the progress of the Partnership’s legal proceedings with the counterparties to the contracts.

We examined publicly available court filings to assess the development of the legal proceedings.

We made inquiries of management and inspected information available regarding the status of negotiations with the counterparties and the resulting impact on the determination of the estimated constraint on variable consideration.

We evaluated the accuracy of the data used by the Partnerships to calculate the variable consideration constraint.

We have served as the Partnership’s auditor since 2012.

5 unchanged sentences

thousands except per-unit amounts 2020 2019 2018

Revenues and other – affiliates

Service revenues – fee based

Service revenues – product based

Product sales

Total revenues and other – affiliates

Revenues and other – third parties

Revenues and other

Service revenues – fee based

$ 2,584,323 $ 2,388,191 $ 1,905,728

Service revenues – product based

48,369 70,127 88,785

Product sales 138,559 286,388 303,020

Total revenues and other – third parties

Other 1,341 1,468 2,125

Total revenues and other (1)

Equity income, net – affiliates

2,772,592 2,746,174 2,299,658

Equity income, net – related parties 226,750 237,518 195,469

Operating expenses

4 unchanged sentences

Depreciation and amortization 491,086 483,255 389,164

Long-lived asset and other impairments 203,889 6,279 230,584

Goodwill impairment 441,017 — —

Total operating expenses (2)

2,129,063 1,750,943 1,635,157

Gain (loss) on divestiture and other, net 8,634 ( 1,406 ) 1,312

Proceeds from business interruption insurance claims

Operating income (loss) 878,913 1,231,343 861,282

Interest income – affiliates

Interest income – Anadarko note receivable 11,736 16,900 16,900

Interest expense ( 380,058 ) ( 303,286 ) ( 183,831 )

Gain (loss) on early extinguishment of debt 11,234 — —

Other income (expense), net (3)

1,025 ( 123,785 ) ( 4,763 )

Income (loss) before income taxes 522,850 821,172 689,588

8 unchanged sentences

Limited partners’ interest in net income (loss) (4)

515,908 662,325 369,429

Net income (loss) per common unit – basic and diluted (4)

$ 1.18 $ 1.59 $ 1.69

Weighted-average common units outstanding – basic and diluted 435,554 415,794 218,936

Cost of product includes product purchases from affiliates (as defined in Note 1 ) of $ 254.8 million , $ 168.5 million , and $ 74.6 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

Operation and maintenance includes charges from affiliates of $ 147.0 million , $ 115.9 million , and $ 82.2 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

General and administrative includes charges from affiliates of $ 101.5 million , $ 49.7 million , and $ 43.2 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

Includes losses related to an incident at the DBM complex for the year ended December 31, 2017.

Includes affiliate amounts of $( 2.0 ) million , $( 6.7 ) million , and $( 0.2 ) million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

See Note 1 and Note 13 .

Includes losses associated with the interest-rate swap agreements for the years ended December 31, 2019 and 2018.

_________________________________________________________________________________________

(1) Total revenues and other includes related-party amounts of $ 1.8 billion, $ 1.6 billion, and $ 1.4 billion for the years ended December 31, 2020, 2019, and 2018, respectively.

(2) Total operating expenses includes related-party amounts of $ 182.7 million, $ 503.2 million, and $ 334.2 million for the years ended December 31, 2020, 2019, and 2018, respectively.

(3) Other income (expense), net includes losses associated with the interest-rate swap agreements for the years ended December 31, 2019 and 2018.

(4) See Note 5.

8 unchanged sentences

Total current assets 943,064 402,412

Note receivable – Anadarko

Anadarko note receivable — 260,000

Property, plant, and equipment

Cost 12,641,745 12,355,671

Less accumulated depreciation 3,931,800 3,290,740

Net property, plant, and equipment 8,709,945 9,064,931

Goodwill 4,783 445,800

Other intangible assets 776,409 809,391

1 unchanged sentence

Other assets (1)

171,013 78,202

Total assets (2)

$ 11,830,027 $ 12,346,453

LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL

7 unchanged sentences

Long-term debt 7,415,832 7,951,565

APCWH Note Payable (6)

Deferred income taxes 22,195 18,899

3 unchanged sentences

Total liabilities (3)

8,934,815 9,001,160

Equity and partners’ capital

Common units ( 413,839,863 and 443,971,409 units issued and outstanding at December 31, 2020 and 2019, respectively)

General partner units (9,060,641 and zero units issued and outstanding at December 31, 2019 and 2018, respectively) (8)

Net investment by Anadarko

2,778,339 3,209,947

General partner units ( 9,060,641 units issued and outstanding at December 31, 2020 and 2019) (4)

( 17,208 ) ( 14,224 )

Total partners’ capital 2,761,131 3,195,723

2 unchanged sentences

Total liabilities, equity, and partners’ capital $ 11,830,027 $ 12,346,453

Accounts receivable, net includes amounts receivable from affiliates (as defined in Note 1 ) of $ 113.3 million and $ 72.6 million as of December 31, 2019 and 2018, respectively.

Other current assets includes affiliate amounts of $ 5.0 million and $ 3.7 million as of December 31, 2019 and 2018, respectively.

Other assets includes affiliate amounts of $ 60.2 million and $ 42.2 million as of December 31, 2019 and 2018, respectively.

Other assets also includes $ 4.5 million and $ 5.3 million of NGLs line fill as of December 31, 2019 and 2018, respectively.

As of December 31, 2019 , all amounts are considered affiliate.

________________________________________________________________________________________

(1) Other assets includes $ 4.2 million and $ 4.5 million of NGLs line-fill inventory as of December 31, 2020 and 2019, respectively.

Other assets also includes $ 71.9 million of materials and supplies inventory as of December 31, 2020.

(2) Total assets includes related-party amounts of $ 1.6 billion and $ 1.7 billion as of December 31, 2020 and 2019, respectively, which includes related-party Accounts receivable, net of $ 291.3 million and $ 113.3 million as of December 31, 2020 and 2019, respectively.

(3) Total liabilities includes related-party amounts of $ 164.7 million and $ 108.8 million as of December 31, 2020 and 2019, respectively.

(4) See Note 1 .

Accrued liabilities includes affiliate amounts of $ 3.1 million and $ 2.2 million as of December 31, 2019 and 2018, respectively.

See Note 1 and Note 6 .

Other liabilities includes affiliate amounts of $ 97.8 million and $ 47.8 million as of December 31, 2019 and 2018, respectively.

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

Partners’ Capital

General Partner

Noncontrolling

thousands Net

by Anadarko Common

Units General

Units Noncontrolling

Interests Total

Balance at December 31, 2017 $ 1,050,171 $ 1,061,125 $ — $ 2,883,754 $ 4,995,050

Cumulative effect of accounting change (1)

629 ( 14,200 ) — ( 30,179 ) ( 43,750 )

Net income (loss) 182,142 369,429 — 79,083 630,654

Above-market component of swap agreements with Anadarko (2)

— 51,618 — — 51,618

WES Operating equity transactions, net (3)

— ( 19,577 ) — 19,577 —

Distributions to Chipeta noncontrolling interest owner — — — ( 13,529 ) ( 13,529 )

1 unchanged sentence

Distributions to Partnership unitholders — ( 502,457 ) — — ( 502,457 )

Acquisitions from affiliates

Revision to Deferred purchase price obligation – Anadarko (3)

Contributions of equity-based compensation from Anadarko — 5,741 — — 5,741

Net pre-acquisition contributions from (distributions to) Anadarko

Net contributions from (distributions to) Anadarko of other assets

Net pre-acquisition contributions from (distributions to) related parties 97,755 — — — 97,755

Net contributions from (distributions to) related parties 58,835 — — — 58,835

Adjustments of net deferred tax liabilities ( 1,514 ) — — — ( 1,514 )

Other — 209 — 397 606

Balance at December 31, 2018 $ 1,388,018 $ 951,888 $ — $ 2,552,777 $ 4,892,683

Cumulative effect of accounting change (4)

Net income (loss) 29,279 662,325 5,637 110,459 807,700

Cumulative impact of the Merger transactions (4)

— 3,169,800 — ( 3,169,800 ) —

Issuance of general partner units (5)

— 19,861 ( 19,861 ) — —

Above-market component of swap agreements with Anadarko (2)

— 7,407 — — 7,407

WES Operating equity transactions, net (3)

— ( 755,197 ) — 755,197 —

Distributions to Chipeta noncontrolling interest owner — — — ( 9,663 ) ( 9,663 )

1 unchanged sentence

Distributions to Partnership unitholders — ( 969,073 ) — — ( 969,073 )

Contributions of equity-based compensation from Anadarko

Net pre-acquisition contributions from (distributions to) Anadarko

Net contributions from (distributions to) Anadarko of other assets

Acquisitions from related parties (6)

( 2,149,218 ) 112,872 — 28,845 ( 2,007,501 )

Contributions of equity-based compensation from Occidental — 13,968 — — 13,968

Net pre-acquisition contributions from (distributions to) related parties 458,819 — — — 458,819

Net contributions from (distributions to) related parties — ( 90 ) — — ( 90 )

Adjustments of net deferred tax liabilities 273,102 ( 4,375 ) — — 268,727

Other — 561 — ( 20 ) 541

Balance at December 31, 2019 $ — $ 3,209,947 $ ( 14,224 ) $ 149,570 $ 3,345,293

Net income (loss) — 515,908 11,104 ( 10,160 ) 516,852

Cumulative impact of the Merger transactions (5)

Issuance of general partner units (5)

Above-market component of swap agreements with Anadarko (1)

WES Operating equity transactions, net (2)

Distributions to Chipeta noncontrolling interest owner — — — ( 8,644 ) ( 8,644 )

Distributions to noncontrolling interest owners of WES Operating

— — — ( 15,434 ) ( 15,434 )

Distributions to Partnership unitholders — ( 681,746 ) ( 14,088 ) — ( 695,834 )

Acquisitions from affiliates (6)

Unit exchange with Occidental (2)

— ( 256,640 ) — ( 5,238 ) ( 261,878 )

Unit repurchases (5)

— ( 32,535 ) — — ( 32,535 )

Acquisitions from related parties — ( 3,987 ) — 3,987 —

Contributions of equity-based compensation from Occidental — 14,604 — — 14,604

Net pre-acquisition contributions from (distributions to) Anadarko

Net contributions from (distributions to) Occidental of other assets

Adjustments of net deferred tax liabilities

Equity-based compensation expense — 7,857 — — 7,857

Net contributions from (distributions to) related parties (7)

— 4,466 — 20,000 24,466

Other — 465 — — 465

Balance at December 31, 2020 $ — $ 2,778,339 $ ( 17,208 ) $ 134,081 $ 2,895,212

For the years ended December 31, 2019, 2018, and 2017, the $( 755.2 ) million , $( 19.6 ) million , and $ 6.6 million increase ( decrease ) to partners’ capital, respectively, together with net income (loss) attributable to Western Midstream Partners, LP, totaled $( 58.0 ) million , $ 532.0 million , and $ 547.4 million , respectively.

_________________________________________________________________________________________

(1) Includes the adoption of Revenue from Contracts with Customers (Topic 606) on January 1, 2018.

(2) See Note 6 .

(3) For the years ended December 31, 2019 and 2018, the $ 755.2 million and $ 19.6 million decrease to partners’ capital, respectively, together with net income (loss) attributable to Western Midstream Partners, LP, totaled $( 58.0 ) million and $ 532.0 million, respectively.

(4) See Note 1 .

(5) See Note 5 .

(6) 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.

(7) See December 2019 Agreements—Services, Secondment, and Employee Transfer Agreement within Note 1.

See accompanying Notes to Consolidated Financial Statements.

2 unchanged sentences

Year Ended December 31,

thousands 2020 2019 2018

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization 491,086 483,255 389,164

Long-lived asset and other impairments 203,889 6,279 230,584

Goodwill impairment 441,017 — —

Non-cash equity-based compensation expense 22,462 15,494 6,431

1 unchanged sentence

Accretion and amortization of long-term obligations, net 8,654 8,441 5,943

Equity income, net – affiliates

Distributions from equity-investment earnings – affiliates

Equity income, net – related parties ( 226,750 ) ( 237,518 ) ( 195,469 )

Distributions from equity-investment earnings – related parties 246,637 234,572 187,392

(Gain) loss on divestiture and other, net ( 8,634 ) 1,406 ( 1,312 )

(Gain) loss on early extinguishment of debt ( 11,234 ) — —

(Gain) loss on interest-rate swaps — 125,334 7,972

Cash paid to settle interest-rate swaps ( 25,621 ) ( 107,685 ) —

Lower of cost or market inventory adjustments

Other 193 236 752

Changes in assets and liabilities:

5 unchanged sentences

Capital expenditures ( 423,091 ) ( 1,188,829 ) ( 1,948,595 )

Contributions in aid of construction costs from affiliates

Acquisitions from affiliates

Acquisitions from related parties — ( 2,007,926 ) ( 254 )

Acquisitions from third parties ( 511 ) ( 93,303 ) ( 161,858 )

Investments in equity affiliates

Distributions from equity investments in excess of cumulative earnings – affiliates

Contributions to equity investments – related parties ( 19,388 ) ( 128,393 ) ( 133,629 )

Distributions from equity investments in excess of cumulative earnings – related parties 32,160 30,256 29,585

Proceeds from the sale of assets to third parties 20,333 342 3,938

Proceeds from property insurance claims

Additions to materials and supplies inventory and other ( 57,757 ) — —

Net cash used in investing activities ( 448,254 ) ( 3,387,853 ) ( 2,210,813 )

1 unchanged sentence

Borrowings, net of debt issuance costs (1)

3,681,173 4,169,695 2,671,337

Repayments of debt (2)

Settlement of the Deferred purchase price obligation – Anadarko (4)

( 3,803,888 ) ( 1,467,595 ) ( 1,040,000 )

Increase (decrease) in outstanding checks 20,699 1,571 ( 3,206 )

Proceeds from the issuance of WES Operating common units, net of offering expenses

Registration expenses related to the issuance of Partnership common units — ( 855 ) —

Distributions to Partnership unitholders (3)

( 695,834 ) ( 969,073 ) ( 502,457 )

Distributions to Chipeta noncontrolling interest owner ( 8,644 ) ( 9,663 ) ( 13,529 )

Distributions to noncontrolling interest owners of WES Operating ( 15,434 ) ( 118,225 ) ( 386,326 )

Net contributions from (distributions to) Anadarko

Net contributions from (distributions to) related parties 24,466 458,819 97,755

Above-market component of swap agreements with Anadarko (3)

Finance lease payments – affiliates

— 7,407 51,618

Finance lease payments (4)

( 14,207 ) ( 508 ) —

Unit repurchases ( 32,535 ) — —

Net cash provided by (used in) financing activities ( 844,204 ) 2,071,573 875,192

3 unchanged sentences

Supplemental disclosures

Accretion expense and revisions to the Deferred purchase price obligation – Anadarko (4)

Non-cash unit exchange with Occidental (3)

$ ( 261,878 ) $ — $ —

Net distributions to (contributions from) Anadarko of other assets — 90 ( 58,835 )

2 unchanged sentences

Accrued capital expenditures 25,126 140,954 274,632

Fair value of properties and equipment from non-cash third-party transactions (4)

Includes losses related to an incident at the DBM complex for the year ended December 31, 2017.

_________________________________________________________________________________________

(1) For the years ended December 31, 2019 and 2018, includes $ 11.0 million and $ 321.8 million of borrowings, respectively, under the APCWH Note Payable.

(2) For the year ended December 31, 2019, includes a $ 439.6 million repayment to settle the APCWH Note Payable.

(3) See Note 6 .

(4) For the year ended December 31, 2020, includes related-party payments of $ 6.4 million.

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Board of Directors

To the Board of Directors of

Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP):

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Western Midstream Operating, LP and subsidiaries (the Partnership) as of December 31, 2019 and 2018 , the related consolidated statements of operations, equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2019 , and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2019 and 2018 , and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019 , in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Western Midstream Operating, LP and subsidiaries (WES Operating) as of December 31, 2020 and 2019, the related consolidated statements of operations, equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of WES Operating as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

Change in Accounting Principle

Basis for Opinion

These consolidated financial statements are the responsibility of the Partnership’s management.

These consolidated financial statements are the responsibility of WES Operating’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to WES Operating in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

1 unchanged sentence

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting.

WES Operating is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of WES Operating’s internal control over financial reporting.

Accordingly, we express no such opinion.

3 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

We have served as the Partnership’s auditor since 2007.

Critical Audit Matters

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Impairment assessment of long-lived assets

As discussed in Note 9 to the consolidated financial statements, WES Operating’s consolidated property, plant, and equipment balance was $8.7 billion as of December 31, 2020.

During the year ended December 31, 2020, WES Operating recognized long-lived asset and other impairment charges of $203.9 million, a portion of which related to impairment of a specific long-lived asset group located in Wyoming and Utah.

On at least a quarterly basis,

management reviews its asset groups for indicators of impairment that would indicate the carrying value of an asset group might not be recoverable.

An impairment loss is determined if the carrying value of the asset group is not recoverable and is measured as the excess of the carrying value over the asset group’s fair value.

We identified the evaluation of the impairment assessment for a specific long-lived asset group in Wyoming and Utah as a critical audit matter.

Subjective auditor judgment was required to evaluate WES Operating’s estimate of the fair value of the asset group, specifically the assessment of the projected throughput and discount rate assumptions.

Specialized skills and knowledge were required to evaluate the discount rate used in the valuation model.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over WES Operating’s long-lived asset impairment process.

This included certain controls over the determination of the forecasted throughput and the discount rate.

We compared historical forecasted volumes to actual volumetric results to assess WES Operating’s ability to forecast.

We evaluated the forecasted throughput included in the valuation model by comparing it to external market and industry data related to producer drilling activity in the relevant basin.

Goodwill impairment assessment for the gathering and processing reporting unit

As discussed in Note 10 to the consolidated financial statements, WES Operating recognized a goodwill impairment of $441.0 million related to the gathering and processing reporting unit during the first quarter of 2020.

WES Operating conducts an impairment test annually on October 1 and when events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

An impairment charge will be recognized to the extent that the fair value of a reporting unit is less than its carrying value.

The fair value of the reporting unit is estimated using both the market approach and the income approach.

The income approach is based on forecasted future cash flows that are discounted to present value using a discount rate that considers timing and risk of future cash flows.

We identified the evaluation of the goodwill impairment assessment for the gathering and processing reporting unit as a critical audit matter.

A higher degree of subjective auditor judgment was required to evaluate the fair value of the gathering and processing reporting unit based on the market and income approaches.

Specifically, subjective auditor judgment and specialized skills and knowledge were required to evaluate WES Operating’s estimate of EBITDA multiples for comparable publicly traded companies and the discount rate used in determining the fair value of the reporting unit.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over WES Operating’s goodwill impairment process.

This included certain controls over the determination of the EBITDA multiples and discount rate used in the estimation of the fair value of the gathering and processing reporting unit.

We tested the reconciliation of the aggregate estimated fair value of the reporting units to the market capitalization of Western Midstream Partners, LP.

Estimated constraint on variable consideration related to a certain gas-gathering revenue contract and oil-gathering revenue contract with a customer

As discussed in Notes 1 and 2 to the consolidated financial statements, certain of WES Operating’s midstream services agreements have minimum-volume commitment demand fees and fees that require periodic rate redeterminations based on the related midstream facility cost-of-service rate provisions.

WES Operating assesses whether a significant reversal of the cumulative catch-up revenue adjustment is probable of occurring and if so, the variable consideration may be constrained up to the amount of the probable significant reversal.

We identified the assessment of the estimated constraint on variable consideration related to one gas-gathering contract and one oil-gathering revenue contract as a critical audit matter.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over WES Operating’s annual re-determination of the cost-of-service rate.

This included certain controls over the determination of the constraint on the variable consideration expected to be received under the contracts.

We evaluated responses received from external legal counsel to our audit inquiry on the progress of WES Operating’s legal proceedings with the counterparties to the contracts.

We examined publicly available court filings to assess the development of the legal proceedings.

We evaluated the accuracy of the data used by WES Operating to calculate the variable consideration constraint.

We have served as WES Operating’s auditor since 2007.

Houston, Texas

4 unchanged sentences

thousands except per-unit amounts 2020 2019 2018

Revenues and other – affiliates

Service revenues – fee based

Service revenues – product based

Product sales

Total revenues and other – affiliates

Revenues and other – third parties

Revenues and other

Service revenues – fee based $ 2,584,323 $ 2,388,191 $ 1,905,728

1 unchanged sentence

Product sales 138,559 286,388 303,020

Total revenues and other – third parties

Other 1,341 1,468 2,125

Total revenues and other (1)

Equity income, net – affiliates

2,772,592 2,746,174 2,299,658

Equity income, net – related parties 226,750 237,518 195,469

Operating expenses

4 unchanged sentences

Depreciation and amortization 491,086 483,255 389,164

Long-lived asset and other impairments 203,889 6,279 230,584

Goodwill impairment 441,017 — —

Total operating expenses (2)

2,125,511 1,744,124 1,631,128

Gain (loss) on divestiture and other, net 8,634 ( 1,406 ) 1,312

Proceeds from business interruption insurance claims

Operating income (loss) 882,465 1,238,162 865,311

Interest income – affiliates

Interest income – Anadarko note receivable 11,736 16,900 16,900

Interest expense ( 380,058 ) ( 303,041 ) ( 181,796 )

Gain (loss) on early extinguishment of debt 11,234 — —

Other income (expense), net (3)

1,008 ( 123,864 ) ( 4,955 )

Income (loss) before income taxes 526,385 828,157 695,460

1 unchanged sentence

Net income (loss) 520,387 814,685 636,526

Net income attributable to noncontrolling interest

Net income (loss) attributable to noncontrolling interest ( 20,990 ) 7,095 8,609

Net income (loss) attributable to Western Midstream Operating, LP $ 541,377 $ 807,590 $ 627,917

2 unchanged sentences

Pre-acquisition net (income) loss allocated to Anadarko — ( 29,279 ) ( 182,142 )

Series A Preferred units interest in net (income) loss (5)

General partner interest in net (income) loss (4)

— — ( 346,538 )

Common and Class C limited partners’ interest in net income (loss) (4)

541,377 778,311 99,237

Net income (loss) per common unit – basic and diluted (4)

Operation and maintenance includes charges from affiliates of $ 147.0 million , $ 115.9 million , and $ 82.2 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

General and administrative includes charges from affiliates of $ 99.6 million , $ 48.8 million , and $ 42.4 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

Includes losses related to an incident at the DBM complex for the year ended December 31, 2017.

Includes affiliate amounts of $( 2.0 ) million , $( 6.7 ) million , and $( 0.2 ) million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

See Note 1 and Note 13 .

Includes losses associated with the interest-rate swap agreements for the years ended December 31, 2019 and 2018.

N/A N/A $ 0.55

________________________________________________________________________________________

(1) Total revenues and other includes related-party amounts of $ 1.8 billion, $ 1.6 billion, and $ 1.4 billion for the years ended December 31, 2020, 2019, and 2018, respectively.

(2) Total operating expenses includes related-party amounts of $ 184.0 million, $ 501.4 million, and $ 333.3 million for the years ended December 31, 2020, 2019, and 2018, respectively.

(3) Other income (expense), net includes losses associated with the interest-rate swap agreements for the years ended December 31, 2019 and 2018.

(4) See Note 5.

See Note 5 for the calculation of net income (loss) per common unit.

See accompanying Notes to Consolidated Financial Statements.

WESTERN MIDSTREAM OPERATING, LP

6 unchanged sentences

Total current assets 869,330 398,784

Note receivable – Anadarko

Anadarko note receivable — 260,000

Property, plant, and equipment

Cost 12,641,745 12,355,671

Less accumulated depreciation 3,931,800 3,290,740

Net property, plant, and equipment 8,709,945 9,064,931

Goodwill 4,783 445,800

Other intangible assets 776,409 809,391

1 unchanged sentence

Other assets (1)

171,013 78,202

Total assets (2)

$ 11,756,293 $ 12,342,825

LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL

7 unchanged sentences

Long-term debt 7,415,832 7,951,565

APCWH Note Payable (6)

Deferred income taxes 22,195 18,899

3 unchanged sentences

Total liabilities (3)

8,895,542 9,001,006

Equity and partners’ capital

Common units (318,675,578 and 152,609,285 units issued and outstanding at December 31, 2019 and 2018, respectively)

Class C units (zero and 14,372,665 units issued and outstanding at December 31, 2019 and 2018, respectively) (8)

General partner units (zero and 2,583,068 units issued and outstanding at December 31, 2019 and 2018, respectively) (8)

Net investment by Anadarko

Common units ( 318,675,578 units issued and outstanding at December 31, 2020 and 2019)

2,831,199 3,286,620

Total partners’ capital 2,831,199 3,286,620

2 unchanged sentences

Total liabilities, equity, and partners’ capital $ 11,756,293 $ 12,342,825

Accounts receivable, net includes amounts receivable from affiliates (as defined in Note 1 ) of $ 113.6 million and $ 72.8 million as of December 31, 2019 and 2018, respectively.

Other current assets includes affiliate amounts of $ 5.0 million and $ 3.7 million as of December 31, 2019 and 2018, respectively.

Other assets includes affiliate amounts of $ 60.2 million and $ 42.2 million as of December 31, 2019 and 2018, respectively.

Other assets also includes $ 4.5 million and $ 5.3 million of NGLs line fill as of December 31, 2019 and 2018, respectively.

As of December 31, 2019 , all amounts are considered affiliate.

See Note 14 .

Accrued liabilities includes affiliate amounts of $ 3.1 million and $ 2.2 million as of December 31, 2019 and 2018, respectively.

See Note 1 and Note 6 .

Other liabilities includes affiliate amounts of $ 97.8 million and $ 47.8 million as of December 31, 2019 and 2018, respectively.

Immediately prior to the closing of the Merger (as defined in Note 1 ), all outstanding general partner units converted into a non-economic general partner interest in WES Operating and WES Operating common units and all outstanding Class C units converted into WES Operating common units on a one -for-one basis.

See accompanying Notes to Consolidated Financial Statements.

_________________________________________________________________________________________

(1) Other assets includes $ 4.2 million and $ 4.5 million of NGLs line-fill inventory as of December 31, 2020 and 2019, respectively.

Other assets also includes $ 71.9 million of materials and supplies inventory as of December 31, 2020.

(2) Total assets includes related-party amounts of $ 1.5 billion and $ 1.7 billion as of December 31, 2020 and 2019, respectively, which includes related-party Accounts receivable, net of $ 246.1 million and $ 113.6 million as of December 31, 2020 and 2019, respectively.

(3) Total liabilities includes related-party amounts of $ 164.3 million and $ 108.8 million as of December 31, 2020 and 2019, respectively.

WESTERN MIDSTREAM OPERATING, LP

1 unchanged sentence

Partners’ Capital

Series A Preferred Units

Noncontrolling

thousands Net

by Anadarko Common

Units Class C

Units General

Units Noncontrolling

Interest Total

Balance at December 31, 2017 $ 1,050,171 $ 2,950,010 $ 780,040 $ 179,232 $ 61,729 $ 5,021,182

Cumulative effect of accounting change (1)

629 ( 41,108 ) ( 3,533 ) ( 696 ) 958 ( 43,750 )

Net income (loss) 182,142 87,581 11,656 346,538 8,609 636,526

Above-market component of swap agreements with Anadarko (2)

Conversion of Series A Preferred units into common units (2)

Amortization of beneficial conversion feature of Class C units and Series A Preferred units

— 51,618 — — — 51,618

Amortization of beneficial conversion feature of Class C units — ( 3,247 ) 3,247 — — —

Distributions to Chipeta noncontrolling interest owner — — — — ( 13,529 ) ( 13,529 )

Distributions to WES Operating unitholders — ( 575,323 ) — ( 318,326 ) — ( 893,649 )

Acquisitions from affiliates

Revision to Deferred purchase price obligation – Anadarko (3)

Contributions of equity-based compensation from Anadarko — 5,613 — 114 — 5,727

Net pre-acquisition contributions from (distributions to) Anadarko

Net contributions from (distributions to) Anadarko of other assets

Net pre-acquisition contributions from (distributions to) related parties 97,755 — — — — 97,755

Net contributions from (distributions to) related parties 58,835 — — — — 58,835

Adjustments of net deferred tax liabilities ( 1,514 ) — — — — ( 1,514 )

Other — 396 — — — 396

Balance at December 31, 2018 $ 1,388,018 $ 2,475,540 $ 791,410 $ 206,862 $ 57,767 $ 4,919,597

Cumulative effect of accounting change (4)

Net income (loss) 29,279 765,678 10,636 1,997 7,095 814,685

Cumulative impact of the Merger transactions (3)

— 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 — — —

1 unchanged sentence

Distributions to WES Operating unitholders — ( 1,039,158 ) — ( 85,230 ) — ( 1,124,388 )

Contributions of equity-based compensation from Anadarko

Net pre-acquisition contributions from (distributions to) Anadarko

Net contributions from (distributions to) Anadarko of other assets

Acquisitions from related parties (4)

( 2,149,218 ) 141,717 — — — ( 2,007,501 )

Contributions of equity-based compensation from Occidental — 13,938 — 19 — 13,957

Net pre-acquisition contributions from (distributions to) related parties 458,819 — — — — 458,819

Net contributions from (distributions to) related parties — ( 90 ) — — — ( 90 )

Adjustments of net deferred tax liabilities 273,102 ( 4,375 ) — — — 268,727

Other — 269 — — — 269

Balance at December 31, 2019 $ — $ 3,286,620 $ — $ — $ 55,199 $ 3,341,819

Net income (loss) — 541,377 — — ( 20,990 ) 520,387

Cumulative impact of the Merger transactions (5)

Above-market component of swap agreements with Anadarko (1)

Amortization of beneficial conversion feature of Class C units

Distributions to Chipeta noncontrolling interest owner — — — — ( 8,644 ) ( 8,644 )

Distributions to WES Operating unitholders — ( 771,546 ) — — — ( 771,546 )

Acquisitions from affiliates (6)

Acquisitions from related parties — ( 3,987 ) — — 3,987 —

Contributions of equity-based compensation from Occidental — 14,604 — — — 14,604

Net pre-acquisition contributions from (distributions to) Anadarko

Net contributions from (distributions to) Occidental of other assets

Adjustments of net deferred tax liabilities

Unit exchange with Occidental (2)

— ( 261,878 ) — — — ( 261,878 )

Net contributions from (distributions to) related parties (5)

— 24,466 — — — 24,466

Other — 1,543 — — — 1,543

Balance at December 31, 2020 $ — $ 2,831,199 $ — $ — $ 29,552 $ 2,860,751

_________________________________________________________________________________________

(1) Includes the adoption of Revenue from Contracts with Customers (Topic 606) on January 1, 2018.

(2) See Note 6 .

(3) See Note 1 .

(4) The amount allocated to common unitholders represents a non-cash investing activity related to the assets and liabilities assumed in the AMA acquisition.

See accompanying Notes to Consolidated Financial Statements.

(5) See December 2019 Agreements—Services, Secondment, and Employee Transfer Agreement within Note 1 .

WESTERN MIDSTREAM OPERATING, LP

1 unchanged sentence

Year Ended December 31,

thousands 2020 2019 2018

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization 491,086 483,255 389,164

Long-lived asset and other impairments 203,889 6,279 230,584

Goodwill impairment 441,017 — —

Non-cash equity-based compensation expense 14,604 14,235 6,153

1 unchanged sentence

Accretion and amortization of long-term obligations, net 8,654 8,421 5,142

Equity income, net – affiliates

Distributions from equity-investment earnings – affiliates

Equity income, net – related parties ( 226,750 ) ( 237,518 ) ( 195,469 )

Distributions from equity-investment earnings – related parties 246,637 234,572 187,392

(Gain) loss on divestiture and other, net ( 8,634 ) 1,406 ( 1,312 )

(Gain) loss on early extinguishment of debt ( 11,234 ) — —

(Gain) loss on interest-rate swaps — 125,334 7,972

Cash paid to settle interest-rate swaps ( 25,621 ) ( 107,685 ) —

Lower of cost or market inventory adjustments

Other 193 236 752

Changes in assets and liabilities:

1 unchanged sentence

Increase (decrease) in accounts and imbalance payables and accrued liabilities, net

105,352 ( 29,745 ) 44,424

Change in other items, net 24,816 56,044 ( 37,802 )

2 unchanged sentences

Capital expenditures ( 423,091 ) ( 1,188,829 ) ( 1,948,595 )

Contributions in aid of construction costs from affiliates

Acquisitions from affiliates

Acquisitions from related parties — ( 2,007,926 ) ( 254 )

Acquisitions from third parties ( 511 ) ( 93,303 ) ( 161,858 )

Investments in equity affiliates

Distributions from equity investments in excess of cumulative earnings – affiliates

Contributions to equity investments – related parties ( 19,388 ) ( 128,393 ) ( 133,629 )

Distributions from equity investments in excess of cumulative earnings – related parties 32,160 30,256 29,585

Proceeds from the sale of assets to third parties 20,333 342 3,938

Proceeds from property insurance claims

Additions to materials and supplies inventory and other ( 57,757 ) — —

Net cash used in investing activities ( 448,254 ) ( 3,387,853 ) ( 2,210,813 )

1 unchanged sentence

Borrowings, net of debt issuance costs (1)

3,681,173 4,169,695 2,671,344

Repayments of debt (2)

Settlement of the Deferred purchase price obligation – Anadarko (4)

( 3,803,888 ) ( 1,439,595 ) ( 1,040,000 )

Increase (decrease) in outstanding checks 20,664 1,571 ( 3,206 )

Proceeds from the issuance of common units, net of offering expenses

Distributions to WES Operating unitholders (3)

( 771,546 ) ( 1,124,388 ) ( 893,649 )

Distributions to Chipeta noncontrolling interest owner ( 8,644 ) ( 9,663 ) ( 13,529 )

Net contributions from (distributions to) Anadarko

Net contributions from (distributions to) related parties 24,466 458,819 97,755

Above-market component of swap agreements with Anadarko (3)

Finance lease payments – affiliates

— 7,407 51,618

Finance lease payments (4)

( 14,207 ) ( 508 ) —

Net cash provided by (used in) financing activities ( 871,982 ) 2,063,338 870,333

3 unchanged sentences

Supplemental disclosures

Accretion expense and revisions to the Deferred purchase price obligation – Anadarko (4)

Non-cash unit exchange with Occidental (3)

$ ( 261,878 ) $ — $ —

Net distributions to (contributions from) Anadarko of other assets — 90 ( 58,835 )

2 unchanged sentences

Accrued capital expenditures 25,126 140,954 274,632

Fair value of properties and equipment from non-cash third-party transactions (4)

Includes losses related to an incident at the DBM complex for the year ended December 31, 2017.

________________________________________________________________________________________

(1) For the years ended December 31, 2019 and 2018, includes $ 11.0 million and $ 321.8 million of borrowings, respectively, under the APCWH Note Payable.

(2) For the year ended December 31, 2019, includes a $ 439.6 million repayment to settle the APCWH Note Payable.

See accompanying Notes to Consolidated Financial Statements.

(3) See Note 6.

(4) For the year ended December 31, 2020, includes related-party payments of $ 6.4 million.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Western Midstream Partners, LP (formerly Western Gas Equity Partners, LP) is a Delaware master limited partnership formed in September 2012.

Western Midstream Operating, LP (formerly Western Gas Partners, LP, and 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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.

5 unchanged sentences

“Occidental” refers to Occidental Petroleum Corporation, as the context requires, and its subsidiaries, excluding the general partner.

“Affiliates” 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 (the “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.

“Related parties” refers to Occidental (see Note 6 ) and the Partnership’s investments accounted for under the equity method of accounting (see Note 7 ).

The Partnership is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas;

2 unchanged sentences

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.

The Partnership provides the above-described midstream services for Occidental and third-party customers.

As of December 31, 2020, the Partnership’s assets and investments consisted of the following:

Operated Operated

Interests Non-Operated

Interests Equity

Gathering systems (1)

4 unchanged sentences

Crude-oil pipelines 3 1 — 4

_________________________________________________________________________________________

(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 I, a processing train that is part of the DJ Basin complex, commenced operations in the fourth quarter of 2019.

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

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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 also entered into the below-described amendments to its debt agreements (collectively referred to as the “ 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.

2 unchanged sentences

• 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 will (i) second certain personnel employed by Occidental to WES Operating GP, in exchange for which WES Operating GP will pay a monthly secondment and shared services fee to Occidental equivalent to the direct cost of the seconded employees and (ii) continue to provide certain administrative and operational services to the Partnership for up to a two-year transition period.

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 January 2020, pursuant to the Services Agreement, Occidental made a one-time cash contribution of $ 20.0 million to the Partnership for anticipated transition costs required to establish stand-alone human resources and information technology functions.

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 paid 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 included 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.

See Note 13 .

• Term loan facility amendment.

WES Operating entered into an amendment of 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.

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 13 .

• Termination of debt-indemnification agreements.

WES Operating GP and certain wholly owned subsidiaries of Occidental mutually terminated the debt-indemnification agreements related to indebtedness incurred by WES Operating.

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.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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, 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”).

In connection with the Merger closing, (i) the common units of WES Operating, which previously traded under the symbol “WES,” ceased to trade on the New York Stock Exchange (“NYSE”), (ii) the common units of the Partnership, which previously traded under the symbol “WGP,” began to trade on the NYSE under the symbol “WES,” (iii) the Partnership changed its name from Western Gas Equity Partners, LP to Western Midstream Partners, LP, and (iv) WES Operating changed its name from Western Gas Partners, LP to Western Midstream Operating, LP.

The Merger Agreement also provided that the Partnership, WES Operating, and Anadarko cause their respective affiliates to execute the following transactions, among others, immediately prior to the Merger becoming effective in the following order:

(1) Anadarko E&P Onshore LLC and WGR Asset Holding Company LLC (“WGRAH”) (the “Contributing Parties”) contribute to WES Operating, and WES Operating subsequently contributes to WGR Operating, LP, Kerr-McGee Gathering LLC, and DBM (each wholly owned by WES Operating), all of their interests in each of Anadarko Wattenberg Oil Complex LLC, Anadarko DJ Oil Pipeline LLC, Anadarko DJ Gas Processing LLC, Wamsutter Pipeline LLC, DBM Oil Services, LLC, Anadarko Pecos Midstream LLC, Anadarko Mi Vida LLC, and APC Water Holdings 1, LLC (“APCWH”) in exchange for aggregate consideration of $ 1.814 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;

(2) APC Midstream Holdings, LLC (“AMH”) transfers its interests in Saddlehorn and Panola to WES Operating in exchange for $ 193.9 million of cash;

(3) WES Operating contributes cash in an amount equal to the outstanding balance of the APCWH Note Payable immediately prior to the effective time of the Merger to APCWH, which in turn uses the contributed cash to satisfy the APCWH Note Payable to Anadarko;

(4) the WES Operating Class C units convert into WES Operating common units on a one -for-one basis;

and (5) WES Operating and WES Operating GP convert the incentive distribution rights (“IDRs”) and the 2,583,068 general partner units in WES Operating held by WES Operating GP into a non-economic general partner interest in WES Operating and 105,624,704 WES Operating common units.

The 45,760,201 WES Operating common units issued to the Contributing Parties, less 6,375,284 WES Operating common units retained by WGRAH, convert into the right to receive an aggregate of 55,360,984 common units of the Partnership at Merger completion.

Each WES Operating common unit issued and outstanding immediately prior to the closing of the Merger (other than WES Operating common units owned by the Partnership and WES Operating GP, and certain common units held by subsidiaries of Anadarko) converts into the right to receive 1.525 common units of the Partnership.

See Note 13 for additional information.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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”).

Basis of presentation.

9 unchanged sentences

Equity investments (3)

Red Bluff Express

Mont Belvieu JV

Whitethorn LLC

The 25 % third-party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements, in addition to the noncontrolling interests noted below.

Mi Vida JV LLC (“Mi Vida”) 50.00 %

Ranch Westex JV LLC (“Ranch Westex”) 50.00 %

Front Range Pipeline LLC (“FRP”) 33.33 %

Red Bluff Express Pipeline, LLC (“Red Bluff Express”) 30.00 %

Enterprise EF78 LLC (“Mont Belvieu JV”) 25.00 %

Rendezvous Gas Services, LLC (“Rendezvous”) 22.00 %

Texas Express Pipeline LLC (“TEP”) 20.00 %

Texas Express Gathering LLC (“TEG”) 20.00 %

Whitethorn Pipeline Company LLC (“Whitethorn LLC”) 20.00 %

Saddlehorn Pipeline Company, LLC (“Saddlehorn”) 20.00 %

Cactus II Pipeline LLC (“Cactus II”) 15.00 %

Panola Pipeline Company, LLC (“Panola”) 15.00 %

White Cliffs Pipeline, LLC (“White Cliffs”) 10.00 %

_________________________________________________________________________________________

(1) The 25 % third-party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements.

See Noncontrolling interests below.

(2) The Partnership proportionately consolidates its associated share of the assets, liabilities, revenues, and expenses attributable to these assets.

1 unchanged sentence

“Equity-investment throughput” refers to the Partnership’s share of average throughput for these investments.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

The consolidated financial results of WES Operating are included in the Partnership’s consolidated financial statements.

2 unchanged sentences

See Note 13 .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Presentation of the Partnership’s assets.

14 unchanged sentences

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 acquisitions from Anadarko, (iv) the Class C units issued by WES Operating to a subsidiary of Anadarko as part of the funding for the acquisition of DBM, and (v) the WES Operating Series A Preferred units issued to private investors as part of the funding of the Springfield acquisition, until converted into WES Operating common units in 2017.

For all periods presented, WES Operating’s noncontrolling interest in the consolidated financial statements consisted of the 25% third-party interest in Chipeta.

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 Delaware Basin Midstream, LLC (“DBM”).

For all periods presented, WES Operating’s noncontrolling interest in the consolidated financial statements consists of the 25 % third-party interest in Chipeta.

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.

Shutdown of gathering systems.

In May 2018, after assessing a number of factors, and with safety and protection of the environment as the primary focus, the Partnership decided to permanently cease 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).

Results for the year ended December 31, 2018, reflect (i) an accrual of $ 10.9 million in anticipated costs associated with the system shutdowns, recorded as a reduction in affiliate Product sales in the consolidated statements of operations, and (ii) impairment expense of $ 134.0 million associated with reducing the net book value of the gathering systems and recording an additional asset retirement obligation.

During the year ended December 31, 2019, $ 6.1 million of the accrual related to the Kitty Draw gathering system shutdown was reversed due to producer settlements being less than initial estimates.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

The fair-value-measurement standard defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

5 unchanged sentences

In determining fair value, management uses observable market data when available, or models that incorporate observable market data.

When a fair value measurement is required and there is not a market-observable price for the asset or liability or a market-observable price for a similar asset or liability, the cost, income, or multiples approach is used, depending on the quality of information available to support management’s assumptions.

When a fair value measurement is required and there is not a market-observable price for the asset or liability or a market-observable price for a similar asset or liability, the cost, income, or market approach is used, depending on the quality of information available to support management’s assumptions.

The cost approach is based on management’s best estimate of the current asset replacement cost.

The income approach uses management’s best assumptions regarding expectations of projected cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate.

Such evaluations involve significant judgment because results are based on expected future events or conditions, such as sales prices, estimates of future throughput, capital and operating costs and the timing thereof, economic and regulatory climates, and other factors.

A multiples approach uses management’s best assumptions regarding expectations of projected earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and an assumed multiple of that EBITDA that a willing buyer would pay to acquire an asset.

Such evaluations involve significant judgment because results are based on expected future events or conditions, such as contractual rates, estimates of future throughput, capital and operating costs and the timing thereof, economic and regulatory climates, and other factors.

The market approach uses management’s best assumptions regarding expectations of projected earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and an assumed multiple of that EBITDA that a willing buyer would pay to acquire an asset.

Management’s estimates of future net cash flows and EBITDA are inherently imprecise because they reflect management’s expectation of future conditions that are often outside of management’s control.

However, the assumptions used reflect a market participant’s view of long-term prices, costs, and other factors, and are consistent with assumptions used in the Partnership’s business plans and investment decisions.

However, the assumptions used reflect a market participant’s view of long-term revenues, costs, and other factors, and are consistent with assumptions used in the Partnership’s business plans and investment decisions.

Management uses relevant observable inputs available for the valuation technique employed to estimate fair value.

If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based on the lowest level of input that is significant to the fair-value measurement.

Non-financial assets and liabilities initially measured at fair value include certain assets and liabilities acquired in a third-party business combination, assets and liabilities exchanged in non-monetary transactions, goodwill and other intangibles, initial recognition of asset retirement obligations, and initial recognition of environmental obligations assumed in a third-party acquisition.

Impairment analyses for long-lived assets, goodwill and other intangibles, and the initial recognition of asset retirement obligations and environmental obligations use Level-3 inputs.

Non-financial assets and liabilities initially measured at fair value include certain assets and liabilities acquired in a third-party business combination, assets and liabilities exchanged in non-monetary transactions, goodwill and other intangibles, initial measurement of asset retirement obligations, and initial measurement of environmental obligations assumed in a third-party acquisition.

Impairment analyses for long-lived assets, goodwill, equity investments, and the initial recognition of asset retirement obligations and environmental obligations use Level-3 inputs.

The fair value of debt reflects any premium or discount for the difference between the stated interest rate and the quarter-end market interest rate and is based on quoted market prices for identical instruments, if available, or based on valuations of similar debt instruments.

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Allowance for uncollectible accounts.

Exposure to bad debts is analyzed on a customer-by-customer basis for affiliate and third-party accounts receivable and the Partnership may establish credit limits for significant affiliate and third-party customers.

The allowance for uncollectible accounts was immaterial at December 31, 2019 and 2018 .

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Credit losses.

Accounts receivable represent contractual rights for services performed, with, on average, 30-day payment terms from the invoice date.

Contract assets primarily relate to revenue accrued but not yet billed under cost-of-service contracts and accrued deficiency fees.

Exposure to credit losses is analyzed within collective pools for all of our customers and, if necessary, individual customers may be analyzed separately if their credit quality becomes a concern.

The Partnership monitors credit exposure to all customers to ensure exposures are within established credit limits.

As of December 31, 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.

The allowance for expected credit losses was immaterial at December 31, 2020 and 2019.

The consolidated balance sheets include imbalance receivables and payables resulting from differences in volumes received into the Partnership’s systems and volumes delivered by the Partnership to customers.

4 unchanged sentences

Net changes in imbalance receivables and payables are reported in Cost of product in the consolidated statements of operations.

The cost of NGLs inventories is determined by the weighted-average cost method on a location-by-location basis.

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 line-fill inventory and NGLs inventory are reported in Other assets and Other current assets, respectively, on the consolidated balance sheets.

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, reviewed periodically for obsolescence, and assessed for impairment together with any associated property, plant, and equipment and other intangible assets.

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 11 .

Property, plant, and equipment.

Property, plant, and equipment generally is stated at the lower of historical cost less accumulated depreciation or fair value if impaired.

Because prior acquisitions of assets from Anadarko were transfers of net assets between entities under common control, the assets acquired initially were recorded at Anadarko’s historic carrying value.

Property, plant, and equipment and other intangible assets.

Property, plant, and equipment and other intangible assets are stated at historical cost less accumulated depreciation or amortization, or fair value if impaired.

Because prior long-lived asset acquisitions from Anadarko were transfers of net assets between entities under common control, the assets acquired were initially recorded at Anadarko’s historic carrying value.

The difference between the carrying value of net assets acquired from Anadarko and the consideration paid has been recorded as an adjustment to partners’ capital.

4 unchanged sentences

Depreciation is computed using the straight-line method based on estimated useful lives and salvage values of assets.

However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts.

Subsequent events could cause a change in estimates of remaining useful lives or salvage value, thereby impacting future depreciation amounts.

Uncertainties that may impact these estimates include, but are not limited to, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand in the area.

Management evaluates the ability to recover the carrying amount of its long-lived assets to determine whether its long-lived assets have been impaired.

Impairments exist when the carrying amount of an asset exceeds estimates of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

When alternative courses of action to recover the carrying amount of a long-lived asset are under consideration, estimates of future undiscounted cash flows take into account possible outcomes and probabilities of their occurrence.

If the carrying amount of the long-lived asset is not recoverable based on the estimated future undiscounted cash flows, the impairment loss is measured as the excess of the asset’s carrying amount over its estimated fair value, such that the asset’s carrying amount is adjusted to its estimated fair value with an offsetting charge to impairment expense.

Refer to Note 8 for a description of impairments recorded during the years ended December 31, 2019 , 2018 , and 2017 .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Insurance recoveries.

Involuntary conversions result from the loss of an asset because of unforeseen events (e.g., destruction due to fire).

Some of these events are insurable and result in property damage insurance recovery.

Amounts that are received from insurance carriers are net of any deductibles related to the covered event.

A receivable is recorded from insurance to the extent a loss is recognized from an involuntary conversion event and the likelihood of recovering such loss is deemed probable.

To the extent that any insurance claim receivables are later judged not probable of recovery (e.g., due to new information), such amounts are expensed.

A gain on involuntary conversion is recognized when the amount received from insurance exceeds the net book value of the retired asset(s).

In addition, gains related to insurance recoveries are not recognized until all contingencies related to such proceeds have been resolved;

that is, a cash payment is received from the insurance carrier or there is a binding settlement agreement with the carrier that clearly states that a payment will be made.

To the extent that an asset is rebuilt, the associated expenditures are capitalized, as appropriate, on the consolidated balance sheets and presented as Capital expenditures in the consolidated statements of cash flows.

With respect to business interruption insurance claims, income is recognized only when cash proceeds are received from insurers, which are presented in the consolidated statements of operations as a component of Operating income (loss).

In December 2015, there was an initial fire and secondary explosion at the processing facility within the DBM complex.

The majority of the damage from the incident was to the liquid-handling facilities and the amine-treating units at the inlet of the complex.

During the year ended December 31, 2017, a $ 5.7 million loss was recorded in Gain (loss) on divestiture and other, net in the consolidated statements of operations, related to a change in the Partnership’s estimate of the amount that would be recovered under the property insurance claim based on continued discussions with insurers.

During the second quarter of 2017, the Partnership reached a settlement with insurers and final proceeds were received.

During the year ended December 31, 2017, the Partnership received $ 52.9 million in cash proceeds from insurers, including $ 29.9 million in proceeds from business interruption insurance claims and $ 23.0 million in proceeds from property insurance claims.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Management assesses property, plant, and equipment together with any associated materials and supplies inventory and intangible assets, as described in Note 10 , for impairment when events or changes in circumstances indicate their carrying values may not be recoverable.

Impairments exist when the carrying value of a long-lived asset exceeds the total estimated undiscounted net cash flows from the future use and eventual disposition of the asset.

When alternative courses of action for future use of a long-lived asset are under consideration, estimates of future undiscounted net cash flows incorporate the possible outcomes and probabilities of their occurrence.

If an impairment exists, an impairment loss is measured as the excess of the asset’s carrying value over its estimated fair value, such that the asset’s carrying value is adjusted down to its estimated fair value with an offsetting charge to Long-lived asset and other impairments.

Refer to Note 9 for a description of impairments recorded during the years ended December 31, 2020, 2019, and 2018.

Capitalized interest.

1 unchanged sentence

Capitalized interest is determined by multiplying the Partnership’s weighted-average borrowing cost on debt by the average amount of assets under construction.

Once construction of an asset subject to interest capitalization is substantially complete, the associated capitalized interest is expensed through depreciation or impairment.

Cumulative capitalized interest accrued during the year is expensed through depreciation or impairment.

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.

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.

In addition, goodwill represents the allocated historic carrying value of midstream goodwill attributed to the Partnership’s assets previously acquired from Anadarko.

The Partnership has allocated goodwill on its two reporting units:

The Partnership had allocated goodwill on its two reporting units:

(i) gathering and processing and (ii) transportation.

Goodwill is evaluated for impairment annually, as of October 1, or more often as facts and circumstances warrant.

Goodwill is evaluated for impairment at the reporting unit level 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.

If management concludes, based on qualitative factors, that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount, then no goodwill impairment is recorded and further testing is not necessary.

If an assessment of qualitative factors does not result in management’s determination that the fair value of the reporting unit more likely than not exceeds its carrying amount, then a quantitative assessment must be 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 through a charge to impairment expense.

Other intangible assets.

The Partnership assesses intangible assets, as described in Note 9 , for impairment together with related underlying long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

See Property, plant, and equipment within this Note 1 for further discussion of management’s process to evaluate potential impairment of long-lived assets.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

If management concludes, based on qualitative factors, that it is more likely than not that the fair value of the reporting unit exceeds its carrying value, then no goodwill impairment is recorded and further testing is not necessary.

If an assessment of qualitative factors does not result in management’s determination that the fair value of the reporting unit more likely than not exceeds its carrying value, then a quantitative assessment must be performed.

If the quantitative assessment indicates that the carrying value 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 through a charge to Goodwill impairment.

The Partnership recognized a goodwill impairment of $ 441.0 million during the first quarter of 2020, which reduced the carrying value of goodwill to zero for the gathering and processing reporting unit.

See Note 10 .

Asset retirement obligations.

A liability based on the estimated costs of retiring tangible long-lived assets is recognized as an asset retirement obligation in the period incurred.

The liability is recognized at fair value, measured using discounted expected future cash outflows for the asset retirement obligation when the obligation originates, which generally is when an asset is acquired or constructed.

The carrying amount of the associated asset is increased commensurate with the liability recognized.

Over time, the discounted liability is adjusted to its expected settlement value through accretion expense, which is reported within Depreciation and amortization in the consolidated statements of operations.

Subsequent to the initial recognition, the liability is also adjusted for any changes in the expected value of the retirement obligation (with a corresponding adjustment to property, plant, and equipment) until the obligation is settled.

Revisions in estimated asset retirement obligations may result from changes in estimated inflation rates, discount rates, asset retirement costs, and the estimated timing of settling asset retirement obligations.

When tangible long-lived assets are acquired or constructed, the initial estimated asset retirement obligation liability is recognized at fair value, measured using discounted expected future cash outflows of the settlement obligation, with an associated increase in property, plant, and equipment.

Over time, the discounted liability is adjusted up to its expected settlement value through accretion expense, which is reported within Depreciation and amortization in the consolidated statements of operations.

Estimated asset retirement costs typically extend many years into the future, and estimation requires significant judgment.

Subsequent to the initial recognition, the liability is adjusted for any changes in the expected value of the retirement obligation (with a corresponding adjustment to property, plant, and equipment, or depreciation expense if the asset is fully depreciated) until the obligation is settled.

Revisions in estimated asset retirement obligations may result from changes in estimated asset retirement costs, inflation rates, discount rates, and the estimated timing of settlement.

See Note 12 .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Environmental expenditures.

The Partnership expenses environmental obligations related to conditions caused by past operations that do not generate current or future revenues.

Environmental obligations related to operations that generate current or future revenues are expensed or capitalized, as appropriate.

Liabilities are recorded when the necessity for environmental remediation or other potential environmental liabilities becomes probable and the costs can be reasonably estimated.

Accruals for estimated losses from environmental-remediation obligations are recognized no later than at the time of the completion of the remediation feasibility study.

The Partnership is subject to various environmental-remediation obligations arising from federal, state, and local laws and regulations.

Losses associated with environmental obligations are accrued when the necessity for environmental remediation or other potential environmental liabilities becomes probable and the costs can be reasonably estimated, with the exception of environmental obligations acquired in a business combination, which are recorded at fair value at the time of acquisition.

Accruals for estimated losses from environmental-remediation obligations are recognized no later than at the time of the completion of the remediation feasibility study or when the evaluation of response options is complete.

These accruals are adjusted as additional information becomes available or as circumstances change.

Costs of future expenditures for environmental-remediation obligations are not discounted to their present value.

See Note 15 .

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.

Revenue and cost of product.

On January 1, 2018, the Partnership adopted Revenue from Contracts with Customers (Topic 606) (“Topic 606”) and changed its accounting policy for revenue recognition as described below.

The 2017 financial information was not adjusted and is reported under Revenue Recognition (Topic 605) .

The Partnership provides gathering, processing, treating, transportation, and disposal services pursuant to a variety of contracts.

8 unchanged sentences

Because of its significant upfront capital investment, the Partnership may charge additional service fees to customers for only a portion of the contract term (i.e., for the first year of a contract or until reaching a volume threshold), and these fees are recognized as revenue over the expected period of customer benefit, which is generally the life of the related properties.

The Partnership also recognizes revenue and cost of product expense from marketing services performed on behalf of its customers by Occidental.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Timing differences between amounts recognized in Service revenues – fee based and the amounts billed to customer are recognized as contract assets or contract liabilities, and are amortized over the related contract period.

Prior to April 1, 2020, the Partnership also recognized revenue and cost of product expense from marketing services performed on behalf of its customers by Occidental.

Effective April 1, 2020, changes to marketing-contract terms with Occidental terminated Occidental’s prior status as an agent of the Partnership for third-party sales and established Occidental as a customer of the Partnership.

Accordingly, the Partnership no longer recognizes revenue and the equivalent cost of product expense for the marketing services performed by Occidental.

The Partnership also receives Service revenues – fee based from contracts that have minimum-volume commitment demand fees and fees that require periodic rate redeterminations based on the related facility cost of service.

These fees include fixed and variable consideration that are recognized on a consistent per-unit rate over the term of the contract.

Annual adjustments are made to the cost-of-service rates charged to customers, and a cumulative catch-up revenue adjustment related to services already provided to the minimum volumes under the contract may be recorded in future periods, with revenues for the remaining term of the contract recognized on a consistent per-unit rate.

The cost-of-service rates are calculated using a contractually specified rate of return and estimates including long-term assumptions for capital invested, receipt volumes, and operating and maintenance expenses.

If the Partnership determines it is probable that a significant reversal in the cumulative catch-up revenue adjustment could occur, the variable consideration may be constrained up to the amount of the probable significant reversal.

Service revenues – product based includes service revenues from percent-of-proceeds gathering and processing contracts that are recognized net of the cost of product for purchases from the Partnership’s customers since it is acting as the agent in the product sale.

1 unchanged sentence

Non-cash consideration for these services is valued at the time the services are provided.

Revenue from product sales also is recognized, along with the cost of product expense related to the sale, when the product received as non-cash consideration is sold to either Occidental or a third party.

When the product is sold to Occidental, Occidental is acting as the Partnership’s agent in the product sale, with the Partnership recognizing revenue and related cost of product expense associated with these marketing activities based on the Occidental sales price to the third party.

Revenue is also recognized in Product sales, along with the cost of product expense related to the sale, when the product received as non-cash consideration is sold to either Occidental or a third party.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

The Partnership also purchases natural-gas volumes from producers at the wellhead or from a production facility, typically at an index price, and charges the producer fees associated with the downstream gathering and processing services.

3 unchanged sentences

The Partnership receives aid-in-construction reimbursements for certain capital costs necessary to provide services to customers (i.e., connection costs, etc.) under certain service contracts.

Aid-in-construction reimbursements are reflected as a contract liability as received and are amortized to Service revenues – fee based over the expected period of customer benefit, which is generally the life of the related properties.

Equity-based compensation.

The general partner awards phantom units under the Western Gas Partners, LP 2017 Long-Term Incentive Plan (assumed by the Partnership in connection with the Merger) and the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan to its independent directors, executive officers, and Occidental employees performing services for the Partnership from time to time.

As of December 31, 2019 , the Western Gas Partners, LP 2017 Long-Term Incentive Plan and the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan had 3,419,020 and 2,911,985 units, respectively, available for future issuance.

At vesting, each phantom unit under the Western Gas Partners, LP 2017 Long-Term Incentive Plan or the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan, the holder will receive common units of the Partnership, or, at the discretion of the general partner’s Board of Directors (the “Board of Directors”), cash in an amount equal to the market value of the common units on the vesting date.

Equity-based compensation expense attributable to grants made under the plans impacts cash flows from operating activities only to the extent cash payments are made to a participant in lieu of issuance of the common units to the participant.

Equity-based compensation expense attributable to awards granted under the plans is amortized over the vesting periods applicable to the awards.

Additionally, 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 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.

Grants made under equity-based compensation plans result in equity-based compensation expense, which is determined by reference to the fair value of equity compensation.

For equity-based awards ultimately settled through the issuance of units or stock, the fair value is measured as of the date of the relevant equity grant.

Portions of these amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital.

Any unrecognized compensation expense attributable to these plans is allocated to the Partnership over a weighted-average period applicable to the awards.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Aid-in-construction reimbursements are reflected as a contract liability when received and are amortized to Service revenues – fee based over the expected period of customer benefit, which is generally the life of the related properties.

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 $ 12.5 million for the year ended December 31, 2020.

Partnership income taxes.

1 unchanged sentence

The Partnership’s accounting policy is to “look through” its investment in WES Operating for purposes of calculating deferred income tax asset and liability balances attributable to the Partnership’s interests in WES Operating.

The application of such accounting policy resulted in no deferred income taxes being recognized for the book and tax basis difference in goodwill, which is non-deductible for tax purposes for all periods presented.

The Partnership had no material uncertain tax positions at December 31, 2020 or 2019.

10 unchanged sentences

WES Operating had no material uncertain tax positions at December 31, 2020 or 2019.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Partnership’s net income (loss) per common unit.

3 unchanged sentences

The accounting guidance provides the methodology for the allocation of undistributed earnings to the general partner and limited partners and the circumstances in which such an allocation should be made.

For the Partnership, earnings per unit is calculated based on the assumption that the Partnership distributes to its unitholders an amount of cash equal to the net income of the Partnership, notwithstanding the general partner’s ultimate discretion over the amount of cash to be distributed for the period, the existence of other legal or contractual limitations that would prevent distributions of all of the net income for the period, or any other economic or practical limitation on the ability to make a full distribution of all of the net income for the period.

For the Partnership, earnings per unit is calculated based on the assumption that the Partnership distributes cash to its unitholders equal to the net income of the Partnership, notwithstanding the general partner’s ultimate discretion over the amount of cash to be distributed for the period, the existence of other legal or contractual limitations that would prevent distributions of all of the net income for the period, or any other economic or practical limitation on the ability to make a full distribution of the net income for the period.

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 as it no longer has publicly traded units.

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.

For periods prior to the closing of the Merger, WES Operating applied the two-class method in determining net income (loss) per unit applicable to master limited partnerships having multiple classes of securities, including common units, Class C units, general partner units, and IDRs.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently adopted accounting standards.

ASU 2016-02, Leases (Topic 842) requires lessee recognition of a lease liability and a right-of-use (“ROU”) asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet.

This ASU modifies the definition of a lease and outlines the recognition, measurement, presentation, and disclosure of leasing arrangements by lessees and lessors.

The Partnership adopted this standard on January 1, 2019, using the modified retrospective method applied to all leases in existence on January 1, 2019, and prior-period financial statements were not adjusted.

The Partnership elected not to reassess contracts that commenced prior to adoption, to continue applying its current accounting policy for existing or expired land easements, and not to recognize ROU assets or lease liabilities for short-term leases.

The Partnership determines if an arrangement is a lease based on the rights and obligations conveyed at contract inception.

Significant judgment is required when determining whether a customer obtains the right to direct the use of identified property or equipment.

When the Partnership is a lessee at the lease-commencement date, a lease is classified as either operating or finance, and ROU assets and lease liabilities are recognized based on the present value of future lease payments over the lease term.

When the Partnership is a lessee at the lease-commencement date, a lease is classified as either operating or finance, and right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of future lease payments over the lease term.

As the rate implicit in the Partnership’s leases is generally not readily determinable, the Partnership discounts lease liabilities using the Partnership’s incremental borrowing rate at the commencement date.

10 unchanged sentences

The Partnership does not have sales-type or direct financing leases.

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE FROM CONTRACTS WITH CUSTOMERS

1 unchanged sentence

Year Ended December 31,

thousands 2020 2019 2018

Revenue from customers

Service revenues – fee based

$ 2,360,680 $ 2,388,191 $ 1,905,728

Service revenues – product based

48,369 70,127 88,785

Product sales 138,559 287,055 310,895

1 unchanged sentence

Revenue from other than customers

Lease revenue (1)

Net gains (losses) on commodity-price swap agreements — ( 667 ) ( 7,875 )

Other 1,341 1,468 2,125

Total revenues and other $ 2,772,592 $ 2,746,174 $ 2,299,658

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE FROM CONTRACTS WITH CUSTOMERS (CONTINUED)

_________________________________________________________________________________________

(1) For the year ended December 31, 2020, includes fixed- and variable-lease revenue from an operating and maintenance agreement entered into with Occidental.

See Operating lease within Note 6.

Certain of the Partnership’s midstream services contracts have minimum-volume commitment demand fees and fees that require periodic rate redeterminations based on the related facility cost-of-service rate provisions (see Note 1) .

During the year ended December 31, 2020, the Partnership constrained revenue under one of its gas-gathering and oil-gathering contracts due to uncertainty related to ongoing legal proceedings and commercial negotiations with the counterparties to the contracts.

Future revenue reversals could occur to the extent the outcome of the legal proceedings and commercial negotiations differ from our current assumptions.

Contract balances.

Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $ 428.2 million and $ 362.6 million as of December 31, 2020 and 2019, respectively.

Contract assets primarily relate to accrued deficiency fees the Partnership expects to charge customers once the related performance periods are completed and revenue accrued but not yet billed under cost-of-service contracts with fixed and variable fees.

The following table summarizes current-period activity related to contract assets from contracts with customers:

Balance at December 31, 2018

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 activity related to contract assets from contracts with customers:

Year Ended December 31,

thousands 2020 2019

Contract assets balance at beginning of year $ 67,357 $ 47,621

Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period

( 7,129 ) ( 4,841 )

Additional estimated revenues recognized 3,877 14,698

Cumulative catch-up adjustment for change in estimated consideration due to an annual cost-of-service rate update ( 7,761 ) 9,879

Balance at December 31, 2019

Contract assets at December 31, 2019

Contract assets balance at end of year $ 56,344 $ 67,357

thousands 2020 2019

Other current assets $ 5,338 $ 7,129

Other assets 51,006 60,228

Total contract assets from contracts with customers $ 56,344 $ 67,357

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE FROM CONTRACTS WITH CUSTOMERS

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:

Balance at December 31, 2018

The following table summarizes activity related to contract liabilities from contracts with customers:

Year Ended December 31,

thousands 2020 2019

Contract liabilities balance at beginning of year $ 222,274 $ 145,624

Cash received or receivable, excluding revenues recognized during the period 65,215 75,166

Revenues recognized that were included in the contract liability balance at the beginning of the period

( 13,842 ) ( 12,110 )

Cumulative catch-up adjustment for change in estimated consideration due to an annual cost-of-service rate update

Balance at December 31, 2019

Contract liabilities at December 31, 2019

( 6,710 ) 13,594

Contract liabilities balance at end of year $ 266,937 $ 222,274

thousands 2020 2019

Accrued liabilities $ 31,477 $ 19,659

1 unchanged sentence

Total contract liabilities from contracts with customers $ 266,937 $ 222,274

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 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.

The Partnership applies the optional exemptions in Revenue from Contracts with Customers (Topic 606) and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations.

Therefore, the following table represents only a portion of expected future revenues from existing contracts as most future revenues from customers are dependent on future variable customer volumes and, in some cases, variable commodity prices for those volumes.

ACQUISITIONS AND DIVESTITURES

AMA acquisition.

In February 2019, WES Operating acquired the following assets from Anadarko (see Note 1 ), which collectively are referred to as the Anadarko Midstream Assets (“AMA”):

Wattenberg processing plant.

The Wattenberg processing plant consists of a cryogenic train (with capacity of 190 million cubic feet per day (“MMcf/d”)) and a refrigeration train (with capacity of 80 MMcf/d) located in Adams County, Colorado, now part of the DJ Basin complex.

Wamsutter pipeline.

The Wamsutter pipeline is a crude-oil gathering pipeline located in Sweetwater County, Wyoming and delivers crude oil into MPLX LP’s SLC Core Pipeline System (formerly referred to as the Wamsutter Pipeline System).

DJ Basin oil system.

The DJ Basin oil system consists of (i) a crude-oil gathering system, (ii) a centralized oil stabilization facility (“COSF”), and (iii) a 12 -mile crude-oil pipeline, located in Weld County, Colorado.

The COSF consists of Trains I through VI with total capacity of 155 thousand barrels per day (“MBbls/d”) and two storage tanks with total capacity of 500,000 barrels.

Train VI commenced operations in 2018.

The pipeline connects the COSF to Tampa Rail.

DBM oil system.

The DBM oil system consists of (i) a crude-oil gathering system, (ii) three central production facilities (“CPFs”), which include ten processing trains with total capacity of 75 MBbls/d, (iii) three storage tanks with total capacity of 30,000 barrels, (iv) a 14 -mile crude-oil pipeline, and (v) two regional oil treating facilities (“ROTFs”), which include four trains with total capacity of 120 MBbls/d, located in Reeves and Loving Counties, Texas.

The ROTFs commenced operations in 2018.

The pipeline transports crude oil from the DBM oil system and one third-party CPF into Plains All American Pipeline.

APC water systems.

The APC water systems consist of five produced-water disposal systems with total capacity of 565 MBbls/d, located in Reeves, Loving, and Ward Counties, Texas, which are now part of the DBM water systems.

One produced-water disposal system commenced operations in 2017 and the other four commenced operations in 2018.

2021 $ 792,553

2022 1,048,087

Thereafter 2,698,435

Total $ 7,378,774

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACQUISITIONS AND DIVESTITURES (CONTINUED)

A 20 % interest in Saddlehorn.

Saddlehorn owns (i) a crude-oil and condensate pipeline (excluding pipeline capacity leased by Saddlehorn) that originates in Laramie County, Wyoming, and terminates in Cushing, Oklahoma, and (ii) four storage tanks with total capacity of 300,000 barrels.

The Saddlehorn interest is accounted for under the equity method of accounting and the pipeline is operated by a third party.

A 15 % interest in Panola.

Panola owns a 248 -mile NGLs pipeline that originates in Panola County, Texas, and terminates in Mont Belvieu, Texas.

The Panola interest is accounted for under the equity method of accounting and the pipeline is operated by a third party.

A 50 % interest in Mi Vida.

Mi Vida owns a cryogenic gas processing plant (with capacity of 200 MMcf/d) located in Ward County, Texas.

The interest in Mi Vida is accounted for under the equity method of accounting and the processing plant is operated by a third party.

A 50 % interest in Ranch Westex.

Ranch Westex owns a processing plant consisting of a cryogenic train (with capacity of 100 MMcf/d) and a refrigeration train (with capacity of 25 MMcf/d), located in Ward County, Texas.

The interest in Ranch Westex is accounted for under the equity method of accounting and the processing plant is operated by a third party.

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 natural-gas pipeline operated by a third party that connects 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 its share of costs incurred up to the date of 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.

See Note 10 .

Whitethorn LLC acquisition.

2 unchanged sentences

In connection with its investment in Whitethorn LLC, the Partnership shares proportionally in the commercial activities.

The Partnership acquired its 20% interest via a $ 150.6 million net investment, which was funded with cash on hand and is accounted for under the equity method.

See Note 10 .

The Partnership acquired its 20 % interest via a $ 150.6 million net investment, which was funded with cash on hand and is accounted for under the equity method of accounting.

Cactus II acquisition.

In June 2018, the Partnership acquired a 15 % interest in Cactus II, which owns a crude-oil pipeline operated by a third party (the “Cactus II pipeline”) connecting West Texas to the Corpus Christi area.

The Cactus II pipeline began delivering crude oil during the third quarter of 2019 and is expected to become fully operational in the first quarter of 2020.

The Cactus II pipeline began delivering crude oil during the third quarter of 2019 and became fully operational in the first quarter of 2020.

The Partnership acquired its 15 % interest from a third party via an initial net investment of $ 12.1 million, which represented its share of costs incurred up to the date of acquisition.

The initial investment was funded with cash on hand, and the interest in Cactus II is accounted for under the equity method of accounting.

See Note 10 .

Property exchange.

In March 2017, the Partnership acquired an additional 50 % interest in the Delaware Basin JV Gathering LLC (“DBJV”) system (the “Additional DBJV System Interest”) from a third party in exchange for (a) the Partnership’s 33.75 % non-operated interest in two natural-gas gathering systems located in northern Pennsylvania (the “Non-Operated Marcellus Interest”), commonly referred to as the Liberty and Rome systems, and (b) $ 155.0 million of cash consideration (collectively, the “Property Exchange”).

The Partnership previously held a 50 % interest in, and operated, the DBJV system.

The Property Exchange was accounted for as a non-monetary transaction whereby the acquired Additional DBJV System Interest was recorded at the fair value of the divested Non-Operated Marcellus Interest plus the $ 155.0 million of cash consideration.

The Property Exchange resulted in a net gain of $ 125.7 million recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations.

Results of operations attributable to the Property Exchange were included in the consolidated statements of operations beginning on the acquisition date in the first quarter of 2017.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACQUISITIONS AND DIVESTITURES (CONTINUED)

DBJV acquisition - Deferred purchase price obligation - Anadarko.

Prior to WES Operating’s agreement with Anadarko to settle the deferred purchase price obligation early, the consideration that would have been paid for the March 2015 acquisition of DBJV from Anadarko consisted of a cash payment to Anadarko due on March 31, 2020.

In May 2017, WES Operating reached an agreement with Anadarko to settle this obligation with a cash payment to Anadarko of $ 37.3 million , which was equal to the estimated net present value of the obligation at March 31, 2017.

Fort Union and Bison facilities.

In October 2020, the Partnership (i) sold its 14.81 % interest in Fort Union Gas Gathering, LLC (“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, located in Northeast Wyoming, to a third party, exercisable during the first quarter of 2021.

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 was recorded in the fourth quarter of 2020 as Gain (loss) on divestiture and other, net in the consolidated statements of operations.

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.

Newcastle system divestiture.

1 unchanged sentence

The Partnership previously held a 50 % interest in, and operated, the Newcastle system.

Helper and Clawson systems divestiture.

In June 2017, the Helper and Clawson systems, located in Utah, were sold to a third party, resulting in a net gain on sale of $ 16.3 million recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 declared the following cash distributions to the Partnership’s unitholders for the periods presented:

Under its partnership agreement, the Partnership distributes all of its available cash (beyond proper reserves as defined in its partnership agreement) to unitholders of record on the applicable record date within 55 days following each quarter’s end.

The Board of Directors of the general partner (the “Board of Directors”) declared the following cash distributions to the Partnership’s unitholders for the periods presented:

thousands except per-unit amounts

1 unchanged sentence

Total Quarterly

Cash Distribution

Distribution Total Quarterly

Cash Distribution Distribution

$ 0.56875 $ 124,518 May 2018

0.58250 127,531 August 2018

0.59500 130,268 November 2018

0.60250 131,910 February 2019

$ 0.61000 $ 276,324 May 2019

0.61800 279,959 August 2019

0.62000 280,880 November 2019

0.62200 281,786 February 2020

November 2019

$ 0.31100 $ 140,893 May 2020

0.31100 140,900 August 2020

September 30 0.31100 132,255 November 2020

December 31 (2)

0.31100 131,265 February 2021

The 2017 and 2018 distributions were declared and paid prior to the closing of the Merger.

_________________________________________________________________________________________

(1) The 2018 distributions were declared and paid prior to the closing of the Merger.

(2) The Board of Directors declared a cash distribution to the Partnership’s unitholders for the fourth quarter of 2020 of $ 0.31100 per unit, or $ 131.3 million in aggregate.

The cash distribution was paid on February 13, 2020 , to unitholders of record at the close of business on January 31, 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 is entitled to 2.0 % of all quarterly distributions beginning with the cash distribution declared for the fourth quarter of 2019.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARTNERSHIP DISTRIBUTIONS (CONTINUED)

The cash distribution was paid on February 12, 2021 to unitholders of record at the close of business on February 1, 2021, 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;

The amount of available cash (beyond proper reserves as defined in our 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.

Working capital borrowings generally include borrowings made under a credit facility or similar financing arrangement and are intended to be repaid or refinanced within 12 months.

In all cases, working capital borrowings are used solely for working capital purposes or to fund unitholder distributions.

WES Operating partnership distributions.

For the below-presented periods, WES Operating paid the cash distributions to WES Operating’s common and general partner unitholders as follows:

thousands except per-unit amounts

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 makes quarterly cash distributions to the Partnership and WGRAH, a subsidiary of Occidental, in proportion to their share of limited partner interests in WES Operating.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARTNERSHIP DISTRIBUTIONS

WES Operating paid the following cash distributions to its limited partners for the periods presented:

Quarters Ended

Total Quarterly

Cash Distribution

November 2017

February 2018

Prior to the closing of the Merger, WES Operating paid the following cash distributions to WES Operating’s common and general partner unitholders for the periods presented:

thousands except per-unit amounts

Quarters Ended

Total Quarterly

Distribution Total Quarterly

Cash Distribution Distribution

$ 0.935 $ 221,133 May 2018

0.950 225,691 August 2018

0.965 230,239 November 2018

0.980 234,787 February 2019

Immediately prior to the closing of the Merger, the WES Operating 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 first quarter of 2019, WES Operating makes cash distributions to the Partnership and WGRAH, a subsidiary of Occidental, in respect of their proportionate share of limited partner interests in WES Operating.

For the quarters ended March 31, 2019, June 30, 2019, and September 30, 2019 WES Operating distributed $ 283.3 million , $ 288.1 million , and $ 289.7 million , respectively, to its limited partners.

For the quarter ended December 31, 2019 , WES Operating distributed $ 290.3 million to its limited partners.

WES Operating Class C unit distributions.

5 unchanged sentences

See Note 5 for further discussion of the Class C units.

In February 2019, immediately prior to the closing of the Merger, all outstanding Class C units converted into WES Operating common units on a one -for-one basis (see Note 1 ).

In February 2019, immediately prior to the closing of the Merger, all outstanding Class C units converted into WES Operating common units on a one -for-one basis.

WES Operating’s general partner interest and incentive distribution rights.

Prior to the closing of the Merger, WES Operating GP was entitled to 1.5 % of all quarterly distributions that WES Operating made prior to its liquidation, and as the former holder of the IDRs, was entitled to incentive distributions at the maximum distribution-sharing percentage of 48.0 %.

Immediately prior to the closing of the Merger, the IDRs and the general partner units converted into WES Operating common units and a non-economic general partner interest in WES Operating.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARTNERSHIP DISTRIBUTIONS (CONTINUED)

WES Operating Series A Preferred unit distributions.

As further described in Note 5 , WES Operating issued Series A Preferred units representing limited partner interests in WES Operating to private investors in 2016.

The Series A Preferred unitholders received quarterly distributions of cash equal to $ 0.68 per Series A Preferred unit, subject to certain adjustments.

On March 1, 2017, 50 % of the outstanding Series A Preferred units converted into WES Operating common units on a one -for-one basis, and on May 2, 2017, all remaining Series A Preferred units converted into WES Operating common units on a one -for-one basis.

Such converted WES Operating common units were entitled to distributions made to WES Operating common unitholders with respect to the quarter during which the applicable conversion occurred and did not include a prorated Series A Preferred unit distribution.

For the quarter ended March 31, 2017, the WES Operating Series A Preferred unitholders received an aggregate cash distribution of $ 7.5 million (paid in May 2017).

WES Operating’s general partner interest and incentive distribution rights.

Immediately prior to the closing of the Merger, the IDRs and the general partner units converted into WES Operating common units and a non-economic general partner interest in WES Operating (see Note 1 ).

EQUITY AND PARTNERS’ CAPITAL

Holdings of Partnership equity.

The Partnership’s common units are listed on the NYSE under the symbol “WES.” As of December 31, 2019 , Occidental held 242,136,976 common units, representing a 53.4 % 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 2.0 % general partner interest in the Partnership (see Note 1 ).

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.

As of December 31, 2020, Occidental held 214,281,578 common units, representing a 50.7 % 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 199,558,285 common units, representing a 47.2 % limited partner interest in the Partnership.

In February 2019, the Partnership issued common units in connection with the closing of the Merger (see Note 1 ) as follows:

Partnership common units outstanding prior to the Merger

WES Operating common units outstanding prior to the Merger

WES Operating Class C units outstanding prior to the Merger

WES Operating common units owned by the Partnership

WES Operating common units subject to conversion into Partnership common units

Exchange ratio per unit

Partnership common units issued for WES Operating common units (1)

WES Operating common units issued as part of the AMA acquisition

WES Operating common units retained by a subsidiary of Anadarko

WES Operating acquisition common units subject to conversion into Partnership common units

Conversion ratio per unit

Partnership common units issued for WES Operating acquisition common units

Partnership common units outstanding at February 28, 2019

Total Partnership units issued at Merger completion exceeds the calculation of such units using the exchange ratio due to the rounding convention described in the Merger Agreement.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL (CONTINUED)

Partnership equity repurchases.

In November 2020, the Board of Directors authorized the Partnership to buy back up to $ 250.0 million of the Partnership’s common units through December 31, 2021 (the “Purchase Program”).

The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions.

As of December 31, 2020, the Partnership had repurchased 2,368,711 common units through open-market purchases for a total of $ 32.5 million.

The units were canceled by the Partnership immediately upon receipt.

Holdings of WES Operating equity.

As of December 31, 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 interests.

The following table summarizes WES Operating’s units issued during the years ended December 31, 2019 and 2018:

Balance at December 31, 2017

PIK Class C units

Vesting of Long-Term Incentive Plan Awards

Balance at December 31, 2018

PIK Class C units

Conversion of Class C units

IDR and General partner unit conversion

Units issued as part of the AMA acquisition

Balance at December 31, 2019 (1)

All WES Operating common units that converted into the Partnership’s common units at closing of the Merger were canceled and an equivalent amount of the canceled WES Operating common units were issued to the Partnership.

See Note 1 for further details on the units issued and converted in connection with the closing of the Merger.

WES Operating Class C units.

In November 2014, WES Operating issued 10,913,853 Class C units to AMH, pursuant to a Unit Purchase Agreement with Anadarko and AMH.

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.

The Class C units were issued at a discount to the then-current market price of the common units into which they were convertible.

This discount, totaling $ 34.8 million , represented a beneficial conversion feature, and at issuance, was reflected as an increase to WES Operating common unitholders’ capital and a decrease to Class C unitholder capital to reflect the fair value of the Class C units at issuance.

This discount represented a beneficial conversion feature, and at issuance, was reflected as an increase to WES Operating common unitholders’ capital and a decrease to Class C unitholder capital to reflect the fair value of the Class C units at issuance.

The beneficial conversion feature was considered a non-cash distribution that was recognized from the date of issuance through the date of conversion, resulting in an increase to Class C unitholder capital and a decrease to WES Operating common unitholders’ capital as amortized.

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL (CONTINUED)

WES Operating Series A Preferred units.

In 2016, WES Operating issued 21,922,831 Series A Preferred units to private investors, generating proceeds of $ 686.9 million (net of fees and expenses, but including a 2.0 % transaction fee paid to the private investors).

The Series A Preferred units were issued at a discount to the then-current market price of the common units into which they were convertible.

This discount, totaling $ 93.4 million , represented a beneficial conversion feature, and at issuance, was reflected as an increase to WES Operating common unitholders’ capital and a decrease to Series A Preferred unitholders’ capital to reflect the fair value of the Series A Preferred units on the date of issuance.

The beneficial conversion feature was considered a non-cash distribution that was recognized from the date of issuance through the date of conversion, resulting in an increase to Series A Preferred unitholders’ capital and a decrease to WES Operating common unitholders’ capital as amortized.

The beneficial conversion feature was amortized using the effective yield method.

The impact of the beneficial conversion feature amortization was also included in the calculation of earnings per unit (see WES Operating’s net income (loss) per common unit below).

For the year ended December 31, 2017, the amortization for the beneficial conversion feature of the Series A Preferred units was $ 62.3 million .

Pursuant to an agreement between WES Operating and the holders of the Series A Preferred units, 50 % of the Series A Preferred units converted into WES Operating common units on a one -for-one basis on March 1, 2017, and all remaining Series A Preferred units converted into WES Operating common units on a one -for-one basis on May 2, 2017.

EQUITY AND PARTNERS’ CAPITAL

Partnership’s net income (loss) per common unit.

As of December 31, 2019, following the transactions contemplated to 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.

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) were then allocated to the common and general partner unitholders in accordance with their weighted-average ownership percentage during each period.

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 (beyond proper reserves 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.

For periods prior to the Merger, dilutive net income (loss) per common unit was calculated by dividing the limited partners’ interest in net income (loss) adjusted for distributions on the WES Operating Series A Preferred units and a reallocation of the limited partners’ interest in net income (loss) assuming, prior to the actual conversion, conversion of the WES Operating Series A Preferred units into WES Operating common units, by the weighted-average number of the Partnership’s common units outstanding during the period.

As of May 2, 2017, all WES Operating Series A Preferred units were converted into WES Operating common units on a one -for-one basis.

The impact of the WES Operating Series A Preferred units assuming, prior to the actual conversion, conversion to WES Operating common units would be anti-dilutive for the year ended December 31, 2017.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL (CONTINUED)

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 as it no longer has publicly traded units.

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.

For periods prior to the closing of the Merger, Net income (loss) attributable to Western Midstream Operating, LP earned on and subsequent to the date of acquisition of the Partnership’s assets was allocated in the below-described manner.

2 unchanged sentences

The general partner’s allocation was equal to cash distributions plus its portion of undistributed earnings or losses.

Specifically, net income equal to the amount of available cash (as defined by WES Operating’s partnership agreement) was allocated to the general partner consistent with actual cash distributions and capital account allocations, including incentive distributions.

Undistributed earnings (net income in excess of distributions) or undistributed losses (available cash in excess of net income) were then allocated to the general partner in accordance with its weighted-average ownership percentage during each period.

WES Operating Series A Preferred unitholders.

The Series A Preferred units were not considered a participating security as they only had distribution rights up to the specified per-unit quarterly distribution and had no rights to WES Operating’s undistributed earnings and losses.

As such, the Series A Preferred unitholders’ allocation was equal to their cash distribution plus the amortization of the Series A Preferred units beneficial conversion feature (see WES Operating Series A Preferred units above).

Specifically, net income equal to the amount of available cash (beyond proper reserves as defined by WES Operating’s partnership agreement) was allocated to the general partner consistent with actual cash distributions and capital account allocations, including incentive distributions.

Undistributed earnings (net income in excess of distributions) or undistributed losses (available cash in excess of net income(loss)) were then allocated to the general partner in accordance with its weighted-average ownership percentage during each period.

WES Operating Common and Class C unitholders.

1 unchanged sentence

The common and Class C unitholders’ allocation was equal to their cash distributions plus their respective allocations of undistributed earnings or losses.

Specifically, net income equal to the amount of available cash (as defined by the WES Operating partnership agreement) was allocated to the common and Class C unitholders consistent with actual cash distributions and capital account allocations.

Specifically, net income equal to the amount of available cash (beyond proper reserves as defined by the WES Operating partnership agreement) was allocated to the common and Class C unitholders consistent with actual cash distributions and capital account allocations.

Undistributed earnings or undistributed losses were then allocated to the common and Class C unitholders in accordance with their respective weighted-average ownership percentages during each period.

1 unchanged sentence

Similarly, the Class C unitholder allocation was impacted by the amortization of the Class C units beneficial conversion feature (see WES Operating Class C units above).

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL

Calculation of net income (loss) per unit.

1 unchanged sentence

The common units issued in connection with acquisitions and equity offerings were included on a weighted-average basis for the periods these units were outstanding.

Diluted net income (loss) per common unit was calculated by dividing the sum of (i) the net income (loss) attributable to common units adjusted for distributions on the Series A Preferred units and a reallocation of the common and Class C limited partners’ interest in net income (loss) assuming, prior to the actual conversion, conversion of the Series A Preferred units into common units, and (ii) the net income (loss) attributable to the Class C units as a participating security, by the sum of the weighted-average number of common units outstanding plus the dilutive effect of the (i) weighted-average number of outstanding Class C units and (ii) the weighted-average number of common units outstanding assuming, prior to the actual conversion, conversion of the Series A Preferred units.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL (CONTINUED)

The following table illustrates the calculation of WES Operating’s net income (loss) per common unit:

Year Ended December 31,

Diluted net income (loss) per common unit was calculated by dividing the sum of (i) the net income (loss) attributable to common units adjusted for a reallocation of the common and Class C limited partners’ interest in net income (loss) and (ii) the net income (loss) attributable to the Class C units as a participating security, by the sum of the weighted-average number of common units outstanding plus the dilutive effect of the weighted-average number of outstanding Class C units.

The following table illustrates the calculation of WES Operating’s net income (loss) per common unit for the year ended December 31, 2018:

thousands except per-unit amounts

1 unchanged sentence

Pre-acquisition net (income) loss allocated to Anadarko ( 182,142 )

Series A Preferred units interest in net (income) loss (1)

General partner interest in net (income) loss ( 346,538 )

9 unchanged sentences

Class C units (2)

Series A Preferred units assuming conversion to common units (2)

Adjusted to reflect amortization of the beneficial conversion features.

The impact of Class C units would be anti-dilutive for the periods presented and the conversion of Series A Preferred units would be anti-dilutive for the year ended December 31, 2017.

On March 1, 2017, 50 % of the outstanding Series A Preferred units converted into common units on a one -for-one basis, and on May 2, 2017, all remaining Series A Preferred units converted into common units on a one -for-one basis.

_________________________________________________________________________________________

(1) Adjusted to reflect amortization of the beneficial conversion feature.

(2) The impact of Class C units would be anti-dilutive for the period presented.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES

Affiliate transactions.

Affiliate revenues include (i) income from the Partnership’s investments accounted for under the equity method of accounting (see Note 10 ) and (ii) amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental.

Occidental sells natural gas and NGLs as an agent on behalf of either the Partnership or the Partnership’s customers.

When product sales are on the Partnership’s customers’ behalf, the Partnership recognizes associated service revenues and cost of product expense.

When product sales are on the Partnership’s behalf, the Partnership recognizes product sales revenues based on Occidental’s sales price to the third party and records the associated cost of product expense.

In addition, the Partnership purchases natural gas from an affiliate of Occidental pursuant to gas purchase agreements.

Operation and maintenance expense includes amounts accrued for or paid to affiliates for the operation of the Partnership’s assets and for services provided to affiliates, including field labor, measurement and analysis, and other disbursements.

A portion of general and administrative expense is paid by Occidental, which results in affiliate transactions pursuant to the reimbursement provisions of the Partnership’s and WES Operating’s agreements with Occidental.

Affiliate expenses do not bear a direct relationship to affiliate revenues, and third-party expenses do not bear a direct relationship to third-party revenues.

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.

Cash management.

Occidental operates a cash management system for its subsidiaries’ separate bank accounts, including accounts for the Partnership and WES Operating.

Prior to the acquisition of assets from Anadarko, third-party sales and purchases related to such assets were received or paid in cash by Anadarko within its centralized cash management system.

Outstanding affiliate balances as of the dates of acquisition were settled entirely through an adjustment to net investment by Anadarko in connection with the acquisitions.

Subsequent to asset acquisitions from Anadarko, transactions related to the acquired assets were cash-settled directly by the Partnership with third parties and Anadarko affiliates.

Chipeta cash-settles its transactions directly with third parties, Occidental, and other subsidiaries of the Partnership.

Note receivable - Anadarko.

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 – affiliates in the consolidated statements of operations.

The fair value of the Anadarko note receivable was $ 337.7 million and $ 279.6 million at December 31, 2019 and 2018 , respectively.

Following Occidental’s acquisition by merger of Anadarko, the fair value of the Anadarko note receivable reflects consideration of Occidental’s credit risk and any premium or discount for the differential between the stated interest rate and quarter-end market interest rate, based on quoted market prices of similar debt instruments.

Accordingly, the fair value of the note receivable is measured using Level-2 fair value inputs.

APCWH Note Payable.

In June 2017, APCWH entered into an eight-year note payable agreement with Anadarko, which was repaid at the Merger completion date.

See Note 1 and Note 13 .

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

Year Ended December 31,

thousands 2020 2019 2018

Revenues and other

Service revenues – fee based $ 1,740,999 $ 1,441,875 $ 1,070,066

Service revenues – product based 8,509 7,062 3,339

Product sales 71,104 158,459 280,306

Total revenues and other 1,820,612 1,607,396 1,353,711

Equity income, net – related parties (1)

226,750 237,518 195,469

Operating expenses

Cost of product 92,884 254,771 168,535

Operation and maintenance 49,533 146,990 115,948

General and administrative (2)

40,295 101,485 49,672

Total operating expenses 182,712 503,246 334,155

Gain (loss) on divestiture and other, net ( 2,870 ) — —

Interest income – Anadarko note receivable 11,736 16,900 16,900

Interest expense ( 6 ) ( 1,970 ) ( 6,746 )

_________________________________________________________________________________________

(1) See Note 7 .

(2) Includes (i) amounts charged by Occidental pursuant to the shared services agreements (see Shared services agreements within this Note 6 ) and (ii) equity-based compensation expense allocated to the Partnership by Occidental, portions of which are not reimbursed to Occidental and are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6 ).

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES (CONTINUED)

Commodity-price swap agreements.

WES Operating 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.

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 $( 0.7 ) million (due to settlement of 2018 activity in 2019), $( 7.9 ) million , and $ 0.6 million for the years ended December 31, 2019, 2018, and 2017, respectively, and are reported in the consolidated statements of operations as affiliate Product sales in 2019 and 2018 and as affiliate Product sales and Cost of product in 2017.

These commodity-price swap agreements expired without renewal on December 31, 2018.

Revenues or costs attributable to volumes sold and purchased under the commodity-price swap agreements for the DJ Basin complex and the MGR assets were recognized in the consolidated statements of operations at the applicable market price in the tables below.

A capital contribution from Anadarko was recorded in the consolidated statements of equity and partners’ capital for an amount equal to (i) the amount by which the swap price for product sales exceeds the applicable market price in the tables below, minus (ii) the amount by which the swap price for product purchases exceeds the applicable market price in the tables below.

For the years ended December 31, 2019, 2018, and 2017, the capital contributions from Anadarko were $ 7.4 million , $ 51.6 million , and $ 58.6 million , respectively.

The tables below summarize the swap prices compared to the forward market prices:

DJ Basin Complex

per barrel except natural gas

2017 - 2018 Swap Prices

2017 Market Prices (1)

2018 Market Prices (1)

Normal butane

Natural gasoline

Natural gas (per MMBtu)

per barrel except natural gas

2017 - 2018 Swap Prices

2017 Market Prices (1)

2018 Market Prices (1)

Normal butane

Natural gasoline

Natural gas (per MMBtu)

Represents the New York Mercantile Exchange forward strip price as of December 1, 2016 and December 20, 2017, for the 2017 Market Prices and 2018 Market Prices, respectively, adjusted for product specification, location, basis, and, in the case of NGLs, transportation and fractionation costs.

RELATED-PARTY TRANSACTIONS

Consolidated balance sheets

thousands 2020 2019

Accounts receivable, net (1)

$ 291,253 $ 113,345

Other current assets 5,493 4,982

Anadarko note receivable — 260,000

Equity investments (2)

1,224,813 1,285,717

Other assets 50,967 60,221

Total assets 1,572,526 1,724,265

Accounts and imbalance payables 6,664 —

Short-term debt (3)

Accrued liabilities 19,195 3,087

Other liabilities 138,796 97,800

Total liabilities 164,655 108,760

_________________________________________________________________________________________

(1) Increase attributable to the timing of certain related-party cash receipts.

The Partnership received $ 77.8 million of the December 31, 2020, Accounts receivable, net balance by January 11, 2021.

(2) See Note 7 .

(3) Includes amounts related to finance leases (see Note 14 ) .

Consolidated statements of cash flows

Year Ended December 31,

thousands 2020 2019 2018

Distributions from equity-investment earnings – related parties $ 246,637 $ 234,572 $ 187,392

Acquisitions from related parties — ( 2,007,926 ) ( 254 )

Contributions to equity investments – related parties ( 19,388 ) ( 128,393 ) ( 133,629 )

Distributions from equity investments in excess of cumulative earnings – related parties 32,160 30,256 29,585

APCWH Note Payable borrowings — 11,000 321,780

Repayment of APCWH Note Payable

— ( 439,595 ) —

Distributions to Partnership unitholders (1)

( 367,861 ) ( 566,868 ) ( 400,194 )

Distributions to WES Operating unitholders (2)

( 15,434 ) ( 19,768 ) ( 7,583 )

Net contributions from (distributions to) related parties 24,466 458,819 97,755

Above-market component of swap agreements with Anadarko

— 7,407 51,618

Finance lease payments ( 6,382 ) ( 508 ) —

_________________________________________________________________________________________

(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 ).

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES (CONTINUED)

RELATED-PARTY TRANSACTIONS

The following tables summarize material related-party transactions for WES Operating (which are included in the Partnership’s consolidated financial statements) to the extent the amounts differ from the Partnership’s consolidated financial statements:

Consolidated statements of operations

Year Ended December 31,

thousands 2020 2019 2018

General and administrative (1)

$ 41,609 $ 99,613 $ 48,819

_________________________________________________________________________________________

(1) Includes (i) amounts charged by Occidental pursuant to the shared services agreements (see Shared services agreements within this Note 6 ) and (ii) equity-based compensation expense allocated to WES Operating by Occidental, portions of which are not reimbursed to Occidental and are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6 ).

Consolidated balance sheets

thousands 2020 2019

Accounts receivable, net $ 246,083 $ 113,581

Consolidated statements of cash flows

Year Ended December 31,

thousands 2020 2019 2018

Distributions to WES Operating unitholders (1)

$ ( 771,546 ) $ ( 1,025,931 ) $ ( 514,906 )

_________________________________________________________________________________________

(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 year ended December 31, 2019, includes distributions to the Partnership and a subsidiary of Occidental related to the repayment of the WGP RCF (see Note 13 ).

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.

While Occidental is the contracting counterparty of the Partnership, these arrangements with Occidental include not just Occidental-produced volumes, but also, in some instances, the volumes of other working-interest owners of Occidental who rely on the Partnership’s facilities and infrastructure to bring their volumes to market.

Natural-gas throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 41 %, 38 %, and 36 % for the years ended December 31, 2020, 2019, and 2018, respectively.

Crude-oil, NGLs, and produced-water throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 83 % , 85 % , and 81 % for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

Crude-oil and NGLs throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 88 %, 84 %, and 80 % for the years ended December 31, 2020, 2019, and 2018, respectively.

Produced-water throughput attributable to production owned or controlled by Occidental was 87 %, 82 %, and 91 % for the years ended December 31, 2020, 2019, and 2018, respectively.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

In connection with the sale of its Eagle Ford assets in 2017, Anadarko remained the primary counterparty to the Partnership’s Brasada gas processing agreement and entered into an agency relationship with Sanchez Energy Corporation (“Sanchez”), now Mesquite Energy, Inc.

(“Mesquite”) that allows Mesquite to process gas under such agreement.

For this reason, Anadarko continues to be liable under the Brasada gas processing agreement through 2034 to the extent Mesquite does not perform.

For all periods presented, Mesquite has performed Anadarko’s obligations under the Brasada gas processing agreement pursuant to its agency arrangement with Anadarko.

Further, in connection with the sale of its Uinta Basin assets in 2020, Kerr McGee Oil & Gas Onshore LP, a subsidiary of Occidental, retained the deficiency payment obligations under a gas processing agreement at the Chipeta plant.

This contingent payment obligation extends through the earlier of October 1, 2022, or the termination of the processing agreement.

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 that acts as the Partnership’s agent for third-party sales.

Through December 31, 2020, the Partnership sold 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 II, Item 7 of this Form 10-K).

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 certain marketing-related services to certain of the Partnership’s subsidiaries through December 31, 2020, subject to the Partnership’s subsidiaries’ option to extend such services for an additional six-month period.

Effective December 31, 2019, certain subsidiaries of Anadarko entered into a transition services agreement (the “Marketing Transition Services Agreement”) to provide marketing-related services to certain of the Partnership’s subsidiaries through December 31, 2020, subject to the option to extend such services for an additional six-month period.

The Marketing Transition Services Agreement was terminated on December 31, 2020.

While the Partnership still has some marketing agreements with affiliates of Occidental, the Partnership began marketing and selling substantially all of its natural gas and NGLs directly to third parties beginning on January 1, 2021.

Operating lease.

Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership, the lessor, entered into an operating and maintenance agreement pursuant to which Occidental 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.

See Note 14 .

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

Shared services agreements.

Pursuant to the agreements discussed below, Occidental performs centralized corporate functions for the Partnership and WES Operating such as legal;

cash management;

investor relations;

insurance administration and claims processing;

risk management;

health, safety, and environmental;

information technology;

human resources;

internal audit;

and marketing and midstream administration.

General and administrative expense includes costs incurred pursuant to the agreements discussed below.

Under these agreements, Occidental has performed 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 was reimbursed for the services provided by the seconded employees.

In late March 2020, seconded employees’ employment was transferred to the Partnership.

Occidental continues to provide certain limited administrative and operational services to the Partnership, with most services expected to be fully transitioned to the Partnership by December 31, 2021.

For additional information on the Services Agreement, see Note 1 .

• WES omnibus agreement.

(ii) the Partnership’s obligation to pay Occidental, in quarterly installments, an administrative services fee of $ 250,000 per year, which was subject to an annual increase pursuant to the omnibus agreement;

and (iii) the Partnership’s obligation to reimburse Occidental for all insurance coverage expenses it incurred or payments it made on the Partnership’s behalf.

Prior to December 31, 2019, the Partnership had an omnibus agreement with Occidental and the general partner (the “WES omnibus agreement”) that governed (i) the Partnership’s obligation to reimburse Occidental for expenses incurred or payments made on its behalf in connection with Occidental’s provision of general and administrative services provided to the Partnership, including certain public company expenses and general and administrative expenses, (ii) the Partnership’s obligation to pay Occidental, in quarterly installments, an administrative services fee of $ 250,000 per year, which was subject to an annual increase pursuant to the omnibus agreement, and (iii) the Partnership’s obligation to reimburse Occidental for all insurance coverage expenses it incurred or payments it made on the Partnership’s behalf.

The WES omnibus agreement was terminated as part of the December 2019 Agreements (see Note 1 ).

The following table summarizes the amounts the Partnership reimbursed to Occidental, separate from, and in addition to, those reimbursed by WES Operating:

Year Ended December 31,

General and administrative expenses

Public company expenses

Total reimbursement

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES (CONTINUED)

• WES Operating omnibus agreement.

Prior to December 31, 2019, WES Operating had a separate omnibus agreement with Occidental and WES Operating GP (the “WES Operating omnibus agreement”) that governed (i) Occidental’s obligation to indemnify WES Operating for certain liabilities and WES Operating’s obligation to indemnify Occidental for certain liabilities, (ii) WES Operating’s obligation to reimburse Occidental for expenses incurred or payments made on its behalf in conjunction with Occidental’s provision of general and administrative services provided to WES Operating, including salary and benefits of Occidental personnel, public company expenses, general and administrative expenses, and salaries and benefits of WES Operating’s executive management who were employees of Occidental, and (iii) WES Operating’s obligation to reimburse Anadarko for all insurance coverage expenses it incurred or payments it made with respect to WES Operating’s assets.

Prior to December 31, 2019, WES Operating had a separate omnibus agreement with Occidental and WES Operating GP (the “WES Operating omnibus agreement”) that governed (i) Occidental’s obligation to indemnify WES Operating for certain liabilities and WES Operating’s obligation to indemnify Occidental for certain liabilities, (ii) WES Operating’s obligation to reimburse Occidental for expenses incurred or payments made on its behalf in conjunction with Occidental’s provision of general and administrative services provided to WES Operating, including salary and benefits of Occidental personnel, public company expenses, general and administrative expenses, and salaries and benefits of WES Operating’s executive management who were employees of Occidental, and (iii) WES Operating’s obligation to reimburse Occidental for all insurance coverage expenses it incurred or payments it made with respect to WES Operating’s assets.

Occidental, in accordance with the partnership agreement and the WES Operating omnibus agreement, determined, in its reasonable discretion, amounts to be reimbursed by WES Operating in exchange for services provided under the WES Operating omnibus agreement.

The WES Operating omnibus agreement was terminated as part of the December 2019 Agreements (see Note 1 ) .

The following table summarizes the amounts WES Operating reimbursed to Occidental pursuant to the WES Operating omnibus agreement:

Year Ended December 31,

General and administrative expenses

Public company expenses

Total reimbursement

Services and secondment agreement.

Pursuant to the services and secondment agreement, which was amended and restated on December 31, 2019, and is now referred to as the Services Agreement, specified employees of Occidental are seconded to WES Operating GP to provide, under the direction, supervision, and control of the general partner, operating, routine maintenance, 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.

The consolidated financial statements include costs allocated by Occidental for expenses incurred under the services and secondment agreement for periods including and subsequent to the Partnership’s prior asset acquisitions from Anadarko.

Pursuant to the Services Agreement, Occidental (i) seconds 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 and (ii) continues to provide certain administrative and operational services to the Partnership.

The initial term of the Services Agreement is two years and will automatically extend for additional six-month periods unless either party provides a 30-day written notice of termination prior to the initial two-year or additional six-month period expires.

However, the Services Agreement provides for the transfer of certain employees to the Partnership, which is anticipated to occur prior to the end of 2020.

For additional information on the Services Agreement, see Note 1 .

Allocation of costs.

For periods prior to the acquisition of assets from Anadarko, the consolidated financial statements include costs allocated by Anadarko in the form of a management services fee.

This management services fee was allocated based on the proportionate share of Anadarko’s revenues and expenses or other contractual arrangements.

Management believes these allocation methodologies were reasonable.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES (CONTINUED)

Excluding the Partnership’s management team, who became employees of the Partnership on December 31, 2019, pursuant to the Services Agreement, the employees supporting the Partnership’s operations are employees of Occidental.

Occidental allocates costs to the Partnership for its share of personnel costs, including costs associated with equity-based compensation plans, non-contributory defined benefit pension and postretirement plans, and defined contribution savings plans.

In general, reimbursement to Occidental is either (i) on an actual basis for direct expenses Occidental and the general partner incur on the Partnership’s behalf, or (ii) based on an allocation of salaries and related employee benefits between WES Operating, WES Operating GP, and Occidental, based on estimates of time spent on each entity’s business and affairs.

Most general and administrative expenses charged by Occidental are on an actual basis, and no general and administrative expenses, direct or allocable, include a mark-up or subsidy component.

With respect to allocated costs, management believes the allocation method employed by Occidental is reasonable.

Although it is not practicable to determine what the amount of these direct and allocated costs would be if the Partnership were to directly obtain these services, management believes that aggregate costs charged by Occidental are reasonable.

Tax sharing agreements.

The Partnership and WES Operating have tax sharing agreements with Occidental, pursuant to which Occidental is reimbursed for the Partnership’s and WES Operating’s estimated share of taxes from all forms of taxation, excluding taxes imposed by the United States.

Taxes for which Occidental is reimbursed include state taxes attributable to the Partnership’s and WES Operating’s income that are directly borne by Occidental through its filing of a combined or consolidated tax return.

Taxes related to assets previously acquired from Anadarko were reimbursed in periods beginning on and subsequent to the acquisition of such assets.

Occidental may use its own tax attributes to reduce or eliminate the tax liability of its combined or consolidated group, which may include the Partnership and WES Operating as members.

However, under this circumstance, the Partnership and WES Operating nevertheless are required to reimburse Occidental for the allocable share of taxes that would have been owed had the tax attributes not been available to Occidental.

Indemnification agreements.

Prior to December 31, 2019, WES Operating GP was indemnified by wholly owned subsidiaries of Occidental against any claims made against WES Operating GP for WES Operating’s long-term debt and/or borrowings under the RCF and Term loan facility.

These indemnification agreements were terminated as part of the December 2019 Agreements (see Note 1 ).

The general partner has the authority to grant equity compensation awards under the Western Gas Partners, LP 2017 Long-Term Incentive Plan (assumed by the Partnership in connection with the Merger) and the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan (collectively referred to as the “LTIPs”) to its independent directors, executive officers, and Occidental employees performing services for the Partnership from time to time.

Phantom units awarded to the independent directors vest one year from the grant date, while all other phantom unit awards are subject to ratable vesting over a three-year service period.

The following table summarizes award activity under the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan for the years ended December 31, 2019 , 2018 , and 2017 :

Weighted-Average Grant-Date Fair Value

Phantom units outstanding at beginning of year

Converted (1)

Phantom units outstanding at end of year

At closing of the Merger, WES Operating phantom units awarded under the Western Gas Partners, LP 2017 Long-Term Incentive Plan converted into phantom units of the Partnership under the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES (CONTINUED)

The following table summarizes award activity under the Western Gas Partners, LP 2017 Long-Term Incentive Plan, which was assumed by the Partnership in connection with the Merger, for the years ended December 31, 2019 , 2018 , and 2017 :

Weighted-Average Grant-Date Fair Value

Phantom units outstanding at beginning of year

Converted (1)

Phantom units outstanding at end of year

Compensation expense for the LTIPs is recognized over the vesting period and was $ 1.0 million , $ 0.7 million , and $ 0.6 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

RELATED-PARTY TRANSACTIONS

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 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 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”).

Grants made under equity-based compensation plans result in equity-based compensation expense, which is determined by reference to the fair value of equity compensation.

For equity-based awards ultimately settled through the issuance of units or stock, the fair value is measured as of the grant date.

General and administrative expense includes costs related to the Incentive Plans of $ 14.6 million, $ 12.9 million, and $ 6.6 million for the years ended December 31, 2020, 2019, and 2018, respectively.

1 unchanged sentence

As of December 31, 2020, $ 12.5 million of estimated unrecognized compensation expense attributable to the Incentive Plans will be allocated to the Partnership over a weighted-average period of 0.7 years.

Affiliate purchases.

During the third quarter of 2019, the Partnership purchased $ 18.4 million of materials and supplies inventory from Occidental, which is included in Other current assets on the consolidated balance sheets.

Affiliate asset contributions.

The following table summarizes affiliate contributions of other assets to the Partnership:

December 2019 Agreements.

Merger transactions.

Anadarko note receivable.

In May 2008, WES Operating loaned $ 260.0 million to Anadarko in exchange for a 30-year note that bore 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 % of its interest (and accrued interest owed under) the Anadarko note receivable to the Partnership and the remaining 2 % of its interest to WGRAH, a subsidiary of Occidental, (ii) the Partnership subsequently assigned the 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 such common units immediately upon receipt.

Purchases from related parties.

During the fourth quarter of 2020, a subsidiary of the Partnership entered into an agreement to purchase three electrical substations located in the DJ Basin from a subsidiary of Occidental for $ 2.0 million.

This purchase was recorded as an Accrued capital expenditure as of December 31, 2020, and cash was paid in January of 2021.

During 2019, the Partnership purchased $ 18.4 million of materials and supplies inventory from Occidental.

Related-party asset contributions.

The following table summarizes related-party contributions of other assets to the Partnership:

Year Ended December 31,

thousands 2019 2018

Cash consideration paid $ ( 425 ) $ ( 254 )

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES (CONTINUED)

Summary of affiliate transactions.

The following table summarizes material affiliate transactions included in the Partnership’s consolidated financial statements:

Year ended December 31,

Revenues and other (1)

Equity income, net – affiliates (1)

Operating expenses

Cost of product (1)

Operation and maintenance (1)

General and administrative (2)

Total operating expenses

Interest income (3)

Interest expense (4)

APCWH Note Payable borrowings

Repayment of APCWH Note Payable

Settlement of the Deferred purchase price obligation – Anadarko (5)

Distributions to Partnership unitholders (6)

Distributions to WES Operating unitholders (7)

Above-market component of swap agreements with Anadarko

Represents amounts earned or incurred on and subsequent to the date of the acquisition of assets from Anadarko, and amounts earned or incurred by Anadarko on a historical basis for periods prior to the acquisition of such assets.

Represents general and administrative expense incurred on and subsequent to the date of the acquisition of assets from Anadarko, and a management services fee for expenses incurred by Anadarko for periods prior to the acquisition of such assets.

These amounts include equity-based compensation expense allocated to the Partnership by Occidental (see LTIPs and Incentive Plans within this Note 6 ) and amounts charged by Occidental under the WES and WES Operating omnibus agreements.

Represents interest income recognized on the Anadarko note receivable.

Includes amounts related to finance leases and the APCWH Note Payable (see Note 1 and Note 13 ).

Represents the cash payment to Anadarko for the settlement of the Deferred purchase price obligation – Anadarko (see Note 3 ).

Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5 ).

Represents distributions paid to certain subsidiaries of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ).

The following table summarizes material affiliate 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:

Year ended December 31,

General and administrative (1)

Distributions to WES Operating unitholders (2)

These amounts include equity-based compensation expense allocated to WES Operating by Occidental (see LTIPs and Incentive Plans within this Note 6 ) and amounts charged by Occidental pursuant to the WES Operating omnibus agreement.

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 year ended December 31, 2019 , includes distributions to the Partnership and a subsidiary of Occidental related to the repayment of the WGP RCF (see Note 13 ).

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTIONS WITH AFFILIATES (CONTINUED)

RELATED-PARTY TRANSACTIONS

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 13 .

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 losses on commodity-price swap agreements were $ 0.7 million (due to settlement of 2018 activity in 2019) and $ 7.9 million for the years ended December 31, 2019 and 2018, 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 and $ 51.6 million was recorded in the consolidated statements of equity and partners’ capital for the years ended December 31, 2019 and 2018, respectively.

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY INVESTMENTS

The following tables present the financial statement impact of the Partnership’s equity investments for the years ended December 31, 2020 and 2019:

thousands Balance at December 31, 2018 Acquisitions Equity

income, net Contributions (1)

Distributions Distributions

Balance at December 31, 2019

Fort Union $ 2,259 $ — $ ( 2,232 ) $ — $ — $ ( 637 ) $ ( 610 )

White Cliffs 43,020 — 9,500 5,414 ( 8,918 ) ( 3,139 ) 45,877

Rendezvous 37,841 — 769 — ( 2,710 ) ( 2,936 ) 32,964

Mont Belvieu JV 104,949 — 28,412 — ( 28,451 ) ( 1,874 ) 103,036

TEG 19,358 — 4,088 — ( 4,110 ) ( 1,137 ) 18,199

TEP 193,198 — 30,871 12,220 ( 32,733 ) — 203,556

FRP 176,436 — 32,617 30,175 ( 31,446 ) — 207,782

Whitethorn LLC 161,858 — 74,548 10,332 ( 74,856 ) ( 10,217 ) 161,665

Cactus II 106,360 — 10,755 56,252 ( 1,202 ) — 172,165

Saddlehorn 108,507 — 25,524 3,550 ( 24,726 ) — 112,855

Panola 22,769 — 2,136 — ( 2,137 ) ( 985 ) 21,783

Mi Vida 64,631 — 10,655 — ( 12,077 ) ( 5,402 ) 57,807

Ranch Westex 50,902 — 6,812 — ( 8,143 ) ( 2,893 ) 46,678

Red Bluff Express — 92,546 3,063 10,450 ( 3,063 ) ( 1,036 ) 101,960

Total $ 1,092,088 $ 92,546 $ 237,518 $ 128,393 $ ( 234,572 ) $ ( 30,256 ) $ 1,285,717

thousands Balance at December 31, 2019 Other-than-temporary

income, net Contributions Distributions Distributions

Divestitures Balance at December 31, 2020

Fort Union $ ( 610 ) $ — $ ( 544 ) $ — $ — $ — $ 1,154 $ —

White Cliffs 45,877 — 5,474 993 ( 4,892 ) ( 1,829 ) — 45,623

Rendezvous 32,964 — 52 — ( 1,994 ) ( 2,824 ) — 28,198

Mont Belvieu JV 103,036 — 25,913 — ( 25,951 ) ( 4,124 ) — 98,874

TEG 18,199 — 4,483 — ( 4,504 ) ( 1,517 ) — 16,661

TEP 203,556 — 36,351 — ( 39,655 ) ( 5,063 ) — 195,189

FRP 207,782 — 37,736 3,670 ( 39,254 ) ( 10,053 ) — 199,881

Whitethorn LLC 161,665 — 35,725 428 ( 41,070 ) ( 19 ) — 156,729

Cactus II 172,165 — 22,193 13,645 ( 31,982 ) ( 2,100 ) — 173,921

Saddlehorn 112,855 — 26,255 — ( 27,393 ) — — 111,717

Panola 21,783 — 2,047 — ( 2,047 ) ( 916 ) — 20,867

Mi Vida 57,807 — 10,764 — ( 11,563 ) ( 1,977 ) — 55,031

Ranch Westex 46,678 ( 29,399 ) 12,127 — ( 9,802 ) ( 706 ) — 18,898

Red Bluff Express 101,960 — 8,174 652 ( 6,530 ) ( 1,032 ) — 103,224

Total $ 1,285,717 $ ( 29,399 ) $ 226,750 $ 19,388 $ ( 246,637 ) $ ( 32,160 ) $ 1,154 $ 1,224,813

_________________________________________________________________________________________

(1) Includes capitalized interest of $ 3.6 million for the year ended December 31, 2019 related to the construction of the Cactus II pipeline.

(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.

(3) Recorded in Long-lived asset and other impairments in the consolidated statements of operations.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY INVESTMENTS

The investment balance in White Cliffs at December 31, 2020, is $ 5.2 million less than the Partnership’s underlying equity in White Cliffs’ net assets, primarily due to the Partnership recording the acquisition of its initial 0.4 % interest in White Cliffs at Anadarko’s historic carrying value.

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 White Cliffs pipeline.

The investment balance in Rendezvous at December 31, 2020, includes $ 30.4 million for the purchase price allocated to the investment in Rendezvous in excess of the historic cost basis of WGRI, the entity that previously owned the interest in Rendezvous, which Anadarko acquired in August 2006.

This excess balance is attributable to the difference between the fair value and book value of such gathering and treating facilities (at the time WGRI was acquired by Anadarko) and will be amortized to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of those facilities.

The investment balance in Whitethorn LLC at December 31, 2020, is $ 36.2 million less than the Partnership’s underlying equity in Whitethorn LLC’s net assets, primarily due to terms of the acquisition agreement which provided the Partnership a share of pre-acquisition operating cash flow.

This difference will be amortized to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of Whitethorn.

The investment balance in Saddlehorn at December 31, 2020, was $ 17.0 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.

The investment balance in Ranch Westex at December 31, 2020, was $ 25.4 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 at September 30, 2020, 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.

Management evaluates its equity investments for impairment whenever events or changes in circumstances indicate that the carrying value of such investments may have experienced a decline in value that is other than temporary.

When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether the investment has been impaired.

Management assesses the fair value of equity investments using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash flow models.

If the estimated fair value is less than the carrying value, the excess of the carrying value over the estimated fair value is recognized as an impairment loss in the consolidated statements of operations.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY INVESTMENTS

The following tables present the summarized combined financial information for equity investments (amounts represent 100% of investee financial information):

Year Ended December 31,

thousands 2020 2019 2018

Revenues $ 1,635,132 $ 1,687,116 $ 1,300,921

Operating income 1,045,889 1,107,664 876,910

Net income 1,045,076 1,108,173 874,587

thousands 2020 2019

Current assets $ 398,933 $ 433,390

Property, plant, and equipment, net 5,653,853 5,754,160

Other assets 171,353 175,231

Total assets $ 6,224,139 $ 6,362,781

Current liabilities $ 144,629 $ 223,171

Non-current liabilities 31,383 27,024

Equity 6,048,127 6,112,586

Total liabilities and equity $ 6,224,139 $ 6,362,781

The Partnership is not a taxable entity for U.S.

federal income tax purposes;

therefore, our federal statutory rate is zero percent.

However, income apportionable to Texas is subject to Texas margin tax.

Income attributable to the AMA assets prior to and including February 2019 was subject to federal and state income tax.

Following the adoption of the U.S.

Tax Cuts and Jobs Act signed into law on December 22, 2017, AMA recognized a one-time deferred tax benefit of $ 87.3 million due to the remeasurement of its U.S.

deferred tax assets and liabilities based on the reduction of the corporate tax rate from 35 % to 21 % .

During 2018, the accounting for the income tax effects related to the adoption of the Tax Reform Legislation was completed before the end of the measurement period.

No additional adjustments to the provisional amount recorded in 2017 were recognized.

The federal tax benefit is included in the Deferred income taxes balance as presented on the consolidated balance sheets.

Income earned on the AMA assets for periods subsequent to February 2019 was subject only to Texas margin tax on income apportionable to Texas.

For the year ended December 31, 2020, the variance from the federal statutory rate was primarily due to our Texas margin tax liability.

For the years ended December 31, 2019 and 2018, the variance from the federal statutory rate primarily was due to federal and state taxes on pre-acquisition income attributable to assets previously acquired from Anadarko, and our share of applicable Texas margin tax.

The components of income tax expense (benefit) are as follows:

Year Ended December 31,

thousands 2020 2019 2018

Current income tax expense (benefit)

7 unchanged sentences

Total income tax expense (benefit) $ 5,998 $ 13,472 $ 58,934

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total income taxes differed from the amounts computed by applying the statutory income tax rate to income (loss) before income taxes.

6 unchanged sentences

Adjustments resulting from:

federal tax reform

Federal taxes on pre-acquisition income attributable to assets acquired from Anadarko — 8,332 54,243

3 unchanged sentences

Effective tax rate 1 % 2 % 9 %

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES (CONTINUED)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows:

thousands 2020 2019

Depreciable property $ ( 22,061 ) $ ( 18,642 )

Credit carryforwards

Other intangible assets ( 812 ) ( 678 )

Other 678 421

Net long-term deferred income tax liabilities $ ( 22,195 ) $ ( 18,899 )

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY, PLANT, AND EQUIPMENT

A summary of the historical cost of property, plant, and equipment is as follows:

Estimated Useful Life

Gathering systems – pipelines

Gathering systems – compressors

Processing complexes and treating facilities

Transportation pipeline and equipment

6 to 45 years

Produced-water disposal systems

Assets under construction

3 to 40 years

thousands Estimated Useful Life 2020 2019

Land N/A $ 9,696 $ 9,495

Gathering systems – pipelines 30 years 5,231,212 5,092,004

Gathering systems – compressors 15 years 2,096,905 1,929,377

Processing complexes and treating facilities 25 years 3,424,368 3,237,801

Transportation pipeline and equipment 6 to 45 years

168,205 173,572

Produced-water disposal systems 20 years 831,719 754,774

Assets under construction N/A 176,834 486,584

Other 3 to 40 years

702,806 672,064

Total property, plant, and equipment 12,641,745 12,355,671

3 unchanged sentences

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 year ended December 31, 2020, the Partnership recognized impairments of $ 203.9 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 $ 105.5 million.

The Partnership assesses whether events or changes in circumstances indicate that the carrying value 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 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.

Long-lived asset and other impairments on the consolidated statements of operations for the year ended December 31, 2020, also includes a $ 29.4 million other-than-temporary impairment of the Partnership’s investment in Ranch Westex (see Note 7 ).

The remaining impairments of $ 24.3 million were primarily at the DJ Basin complex and DBM oil system due to the cancellation of projects and impairments of rights-of-way.

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.

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY, PLANT, AND EQUIPMENT (CONTINUED)

During the year ended December 31, 2017, the Partnership recognized impairments of $ 180.1 million , including an impairment of $ 158.8 million at the Granger complex, which was impaired to estimated fair value of $ 48.5 million using the income approach and Level-3 fair value inputs, due to a reduced throughput fee as a result of a producer’s bankruptcy.

The remaining $ 21.3 million of impairments primarily was related to (i) an $ 8.2 million impairment due to the cancellation of a plant project at the Hilight system, (ii) a $ 3.7 million impairment at the Granger straddle plant, which was impaired to estimated salvage value of $ 0.6 million using the income approach and Level-3 fair value inputs, (iii) a $ 3.1 million impairment of the Fort Union equity investment, (iv) a $ 2.0 million impairment of an idle facility in northeast Wyoming, which was impaired to estimated salvage value of $ 0.4 million using the market approach and Level-3 fair value inputs, and (v) the cancellation of a pipeline project in West Texas.

GOODWILL AND INTANGIBLES

PROPERTY, PLANT, AND EQUIPMENT

Potential future long-lived asset impairments.

As of December 31, 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.

For example, on April 29, 2020, the Partnership received notice that Sanchez is attempting to reject a number of midstream and downstream agreements with commercial counterparties, including Sanchez’s Springfield gathering agreements and agreements obligating Sanchez to deliver the gas volumes gathered by the Springfield system to our Brasada processing plant.

If the attempted rejection is successful, the Partnership’s South Texas assets could be impaired.

GOODWILL AND OTHER INTANGIBLES

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.

In addition, goodwill represents the allocated historic carrying value of midstream goodwill attributed to the Partnership’s assets previously acquired from Anadarko.

The carrying value of Anadarko’s midstream goodwill at the time the assets were acquired from Anadarko, represented the excess of the purchase price paid to a third party over the estimated fair value of the identifiable assets acquired and liabilities assumed by Anadarko.

Accordingly, the Partnership’s allocated goodwill balance does not represent, and in some cases is significantly different from, the difference between the consideration the Partnership paid for its acquisitions from Anadarko and the fair value of such net assets on their respective acquisition dates.

Goodwill is evaluated for impairment annually (see Note 1 ).

The Partnership’s annual qualitative goodwill impairment assessment as of October 1, 2019 , indicated no impairment.

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 at the reporting-unit level on an annual basis, 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.

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 value of goodwill for the gathering and processing reporting unit to zero .

Goodwill allocated to the transportation reporting unit of $ 4.8 million as of March 31, 2020, was not impaired.

The Partnership’s annual qualitative goodwill impairment assessment as of October 1, 2020, indicated no further impairment.

Qualitative factors also were assessed in the fourth quarter of 2020 to review any changes in circumstances subsequent to the annual test.

1 unchanged sentence

Other intangible assets.

The intangible asset balance on the consolidated balance sheets includes the fair value, net of amortization, of (i) contracts assumed in connection with the Platte Valley and Wattenberg processing plant acquisitions in 2011, which are being amortized on a straight-line basis over 38 years , (ii) interconnect agreements at Chipeta entered into in November 2012, which are being amortized on a straight-line basis over 10 years , and (iii) contracts assumed in connection with the DBM acquisition in November 2014, which are being amortized on a straight-line basis over 30 years .

The Partnership assesses intangible assets for impairment together with related underlying long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

See Property, plant, and equipment in Note 1 for further discussion of management’s process to evaluate potential impairment of long-lived assets.

No intangible asset impairment has been recognized in these consolidated financial statements.

The following table presents the gross carrying amount and accumulated amortization of other intangible assets:

Gross carrying amount

The other intangible assets balance on the consolidated balance sheets includes the fair value, net of amortization, primarily related to (i) contracts assumed in connection with the Platte Valley and Wattenberg processing plant acquisitions in 2011, which are being amortized on a straight-line basis over 38 years and (ii) contracts assumed in connection with the DBM acquisition in November 2014, which are being amortized on a straight-line basis over 30 years.

The Partnership assesses other intangible assets for impairment together with related underlying long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

See Property, plant, and equipment and other intangible assets in Note 1 for further discussion of management’s process to evaluate potential impairment of long-lived assets.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER INTANGIBLES

The following table presents the gross carrying value and accumulated amortization of other intangible assets:

thousands 2020 2019

Gross carrying value $ 979,863 $ 979,863

Accumulated amortization ( 203,454 ) ( 170,472 )

1 unchanged sentence

Amortization expense for intangible assets was $ 33.0 million, $ 32.0 million, and $ 30.8 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Intangible asset amortization recorded in each of the next five years is estimated to be $ 32.0 million for the years ended December 31, 2020 to December 31, 2022, and $ 31.7 million for the years ended December 31, 2023 and 2024 .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY INVESTMENTS

The following tables present the equity-investments activity for the years ended December 31, 2019 and 2018:

Balance at December 31, 2017

Contributions (1)

Distributions

Distributions in

Balance at December 31, 2018

Mont Belvieu JV

Whitethorn LLC

Balance at December 31, 2018

Contributions (1)

Distributions

Distributions in

Balance at December 31, 2019

Mont Belvieu JV

Whitethorn LLC

Red Bluff Express

Includes capitalized interest of $ 1.4 million and $ 3.6 million for the years ended December 31, 2018 and 2019, respectively, related to the construction of the Cactus II pipeline.

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY INVESTMENTS (CONTINUED)

The investment balance in Fort Union at December 31, 2019 , is $ 3.1 million less than the Partnership’s underlying equity in Fort Union’s net assets due to an impairment loss recognized by the Partnership in 2017 for its investment in Fort Union.

The investment balance in Rendezvous at December 31, 2019 , includes $ 32.4 million for the purchase price allocated to the investment in Rendezvous in excess of the historic cost basis of WGRI, the entity that previously owned the interest in Rendezvous, which Anadarko acquired in August 2006.

This excess balance is attributable to the difference between the fair value and book value of such gathering and treating facilities (at the time WGRI was acquired by Anadarko) and is being amortized to Equity income, net – affiliates over the remaining estimated useful life of those facilities.

The investment balance in White Cliffs at December 31, 2019 , is $ 5.8 million less than the Partnership’s underlying equity in White Cliffs’ net assets, primarily due to the Partnership recording the acquisition of its initial 0.4 % interest in White Cliffs at Anadarko’s historic carrying value.

This difference is being amortized to Equity income, net – affiliates over the remaining estimated useful life of the White Cliffs pipeline.

The investment balance in Whitethorn LLC at December 31, 2019 , is $ 37.3 million less than the Partnership’s underlying equity in Whitethorn LLC’s net assets, primarily due to terms of the acquisition agreement which provided the Partnership a share of pre-acquisition operating cash flow.

This difference is being amortized to Equity income, net – affiliates over the remaining estimated useful life of Whitethorn.

If the estimated fair value is less than the carrying value, the excess of the carrying value over the estimated fair value is recognized as an impairment loss.

The following tables present the summarized combined financial information for equity investments (amounts represent 100% of investee financial information):

Year Ended December 31,

Operating income

Current assets

Property, plant, and equipment, net

Current liabilities

Non-current liabilities

Total liabilities and equity

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMPONENTS OF WORKING CAPITAL

Intangible asset amortization to be recorded in each of the next five years is estimated to be $ 31.7 million for the years ended December 31, 2021 to December 31, 2025.

SELECTED COMPONENTS OF WORKING CAPITAL

A summary of accounts receivable, net is as follows:

The Partnership

WES Operating

The Partnership WES Operating

December 31, December 31,

thousands 2020 2019 2020 2019

Trade receivables, net $ 452,718 $ 260,458 $ 407,547 $ 260,694

2 unchanged sentences

A summary of other current assets is as follows:

The Partnership

WES Operating

The Partnership WES Operating

December 31, December 31,

thousands 2020 2019 2020 2019

NGLs inventory $ 882 $ 906 $ 882 $ 906

Materials and supplies inventory (1)

— 23,444 — 23,444

Imbalance receivables 12,976 4,690 12,976 4,690

1 unchanged sentence

Contract assets 5,338 7,129 5,338 7,129

Other 17,935 93 17,935 93

Total other current assets $ 45,262 $ 41,938 $ 43,244 $ 39,914

_________________________________________________________________________________________

(1) See Note 1 .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED COMPONENTS OF WORKING CAPITAL

A summary of accrued liabilities is as follows:

The Partnership

WES Operating

The Partnership WES Operating

December 31, December 31,

thousands 2020 2019 2020 2019

Accrued interest expense $ 137,307 $ 72,064 $ 137,307 $ 72,064

Short-term asset retirement obligations

20,215 22,472 20,215 22,472

Short-term remediation and reclamation obligations

2,950 3,528 2,950 3,528

Income taxes payable 3,399 697 3,399 697

Contract liabilities 31,477 19,659 31,477 19,659

74,599 31,373 35,485 31,219

Total accrued liabilities $ 269,947 $ 149,793 $ 230,833 $ 149,639

Includes amounts related to WES Operating’s interest-rate swap agreements as of December 31, 2019 and 2018 (see Note 13 ).

Includes lease liabilities related to the implementation of ASU 2016-02, Leases (Topic 842) as of December 31, 2019 (see Note 1 ).

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_________________________________________________________________________________________

(1) As of December 31, 2019, includes amounts related to WES Operating’s interest-rate swap agreements and lease liabilities related to the implementation of ASU 2016-02, Leases (Topic 842) (see Note 13 and Note 14) .

ASSET RETIREMENT OBLIGATIONS

1 unchanged sentence

Year Ended December 31,

thousands 2020 2019

Carrying amount of asset retirement obligations at beginning of year $ 358,868 $ 325,962

4 unchanged sentences

Carrying amount of asset retirement obligations at end of year $ 280,498 $ 358,868

The liabilities incurred for the year ended December 31, 2019 , represented additions in asset retirement obligations primarily due to capital expansions at the West Texas and DJ Basin complexes.

Revisions in estimated liabilities for the year ended December 31, 2020, primarily related to a reduction in expected settlement costs across several of the Partnership’s assets, with the largest decreases at the Third Creek gathering system, DJ Basin complex, Hilight system, and West Texas complex.

Liabilities incurred for the year ended December 31, 2019, represented additions in asset retirement obligations primarily due to capital expansions at the West Texas and DJ Basin complexes.

Revisions in estimated liabilities for the year ended December 31, 2019, primarily related to (i) changes in expected settlement costs at the West Texas and DJ Basin complexes and (ii) changes to the expected abandonment timing of transportation assets in Wyoming.

The liabilities incurred for the year ended December 31, 2018 , represented additions in asset retirement obligations primarily due to capital expansions at the West Texas and DJ Basin complexes, the DBM water systems, and the DBM oil system.

Revisions in estimated liabilities for the year ended December 31, 2018 , primarily included (i) $ 71.8 million related to changes in expected settlement costs and timing, primarily at the DJ Basin and West Texas complexes and the MGR assets, and (ii) $ 43.4 million related to the shutdown of the Third Creek gathering system during the second quarter of 2018.

See Note 1 for further information.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

1 unchanged sentence

DEBT AND INTEREST EXPENSE

WES Operating is the borrower for all outstanding debt, excluding the WGP RCF, and is expected to be the borrower for all future debt issuances.

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:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

thousands Principal Carrying

Principal Carrying

Short-term debt

5.375% Senior Notes due 2021

$ 431,081 $ 430,606 $ 436,241 $ — $ — $ —

Finance lease liabilities (2)

8,264 8,264 8,264 7,873 7,873 7,873

Total short-term debt

$ 439,345 $ 438,870 $ 444,505 $ 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

580,917 580,555 597,568 670,000 669,322 689,784

Floating-Rate Senior Notes due 2023

239,978 238,879 235,066 — — —

3.100 % Senior Notes due 2025

1,000,000 992,900 1,028,614 — — —

3.950 % Senior Notes due 2025

500,000 494,866 512,807 500,000 493,830 504,968

4.650 % Senior Notes due 2026

500,000 496,708 524,880 500,000 496,197 513,393

4.500 % Senior Notes due 2028

400,000 395,617 415,454 400,000 395,113 390,920

4.750 % Senior Notes due 2028

400,000 396,555 418,786 400,000 396,190 400,962

4.050 % Senior Notes due 2030

1,200,000 1,189,407 1,342,996 — — —

5.450 % Senior Notes due 2044

600,000 593,598 607,234 600,000 593,470 533,710

5.300 % Senior Notes due 2048

700,000 687,048 694,172 700,000 686,843 610,841

5.500 % Senior Notes due 2048

350,000 342,543 343,928 350,000 342,432 310,198

5.250 % Senior Notes due 2050

1,000,000 983,512 1,100,375 — — —

— — — 380,000 380,000 380,000

Term loan facility — — — 3,000,000 3,000,000 3,000,000

APCWH Note Payable

Finance lease liabilities 23,644 23,644 23,644 — — —

Total long-term debt

$ 7,494,539 $ 7,415,832 $ 7,845,524 $ 8,000,000 $ 7,951,565 $ 7,849,818

_________________________________________________________________________________________

(1) Fair value is measured using the market approach and Level-2 fair value inputs.

Amounts are considered affiliate.

See Note 14 .

(2) Includes related-party amounts as of December 31, 2019.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEBT AND INTEREST EXPENSE (CONTINUED)

DEBT AND INTEREST EXPENSE

Debt activity.

The following table presents the debt activity for the years ended December 31, 2020 and 2019:

Carrying Value

Balance at December 31, 2017

RCF borrowings

APCWH Note Payable borrowings

Issuance of 4.500% Senior Notes due 2028

Issuance of 5.300% Senior Notes due 2048

Issuance of 4.750% Senior Notes due 2028

Issuance of 5.500% Senior Notes due 2048

Repayment of 2.600% Senior Notes due 2018

Repayments of RCF borrowings

thousands Carrying Value

Balance at December 31, 2018 $ 5,242,874

7 unchanged sentences

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

Issuance of 4.050 % Senior Notes due 2030

Issuance of 5.250 % Senior Notes due 2050

Finance lease liabilities 24,035

Repayments of RCF borrowings ( 600,000 )

Repayment of Term loan facility borrowings ( 3,000,000 )

Repayment of 5.375 % Senior Notes due 2021

Repayment of 4.000 % Senior Notes due 2022

Repayment of Floating-Rate Senior Notes due 2023 ( 60,022 )

Other ( 30,747 )

Balance at December 31, 2020 $ 7,854,702

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 December 31, 2020.

These effective interest rates will increase by 0.25 % on February 1, 2021, due to credit-rating downgrades.

Interest is paid on each such series semi-annually on February 1 and August 1 of each year, beginning August 1, 2020;

• Floating-Rate Senior Notes due 2023 (the “Floating-Rate Senior Notes”).

As of December 31, 2020, the interest rate on the Floating-Rate Senior Notes was 2.07 %.

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 an initial spread of 0.85 %.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEBT AND INTEREST EXPENSE

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 2020, Fitch Ratings and Standard and Poor’s downgraded WES Operating’s long-term debt from “BBB-” to “BB” and 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 $ 43.0 million.

During the year ended December 31, 2020, WES Operating purchased and retired $ 218.0 million of certain of its senior notes and Floating-Rate Senior Notes via open-market repurchases, and gains of $ 13.5 million were recognized for the early retirement of these notes.

As of December 31, 2020, the 5.375% Senior Notes due 2021 were classified as short-term debt on the consolidated balance sheet.

Subsequent to December 31, 2020, WES Operating delivered notice to redeem the 5.375% Senior Notes due 2021 on March 1, 2021, as per the optional redemption terms in WES Operating’s indenture.

At December 31, 2020, WES Operating was in compliance with all covenants under the relevant governing indentures.

In February 2018, the Partnership voluntarily reduced the aggregate commitment of lenders under the WGP RCF to $ 35.0 million .

The WGP R CF, 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.

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.

3 unchanged sentences

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.

As of December 31, 2019 , there were $ 380.0 million of outstanding borrowings and $ 4.6 million of outstanding letters of credit, resulting in $ 1.6 billion of available borrowing capacity under the RCF.

As of December 31, 2020, there were no outstanding borrowings and $ 5.1 million of outstanding letters of credit, resulting in $ 2.0 billion of available borrowing capacity under the RCF.

As of December 31, 2020 and 2019, the interest rate on any outstanding RCF borrowings was 1.64 % and 3.04 %, respectively.

The facility fee rate was 0.20 % at December 31, 2019 and 2018 .

The facility-fee rate was 0.25 % and 0.20 % at December 31, 2020 and 2019, respectively.

At December 31, 2020, WES Operating was in compliance with all covenants under the RCF.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEBT AND INTEREST EXPENSE (CONTINUED)

As a result of credit-rating downgrades (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 ).

The Term loan facility bears interest at LIBOR, plus applicable margins ranging from 1.000 % to 1.625 % , or an alternate base rate equal to the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.50 % , or (c) LIBOR plus 1.00 % , in each case as defined in the Term loan facility and plus applicable margins currently ranging from zero to 0.625 % , based on WES Operating’s senior unsecured debt rating.

Net cash proceeds received from future asset sales and debt or equity offerings must be used to repay amounts outstanding under the facility.

In July 2019, WES Operating entered into an amendment to the Term loan facility to (i) extend the maturity date from February 2020 to December 2020, (ii) increase commitments available under the Term loan facility from $ 2.0 billion to $ 3.0 billion , the incremental $ 1.0 billion of which was subsequently drawn by WES Operating on September 13, 2019, and used to repay outstanding borrowings under the RCF, and (iii) modify the provision requiring that all debt issuance proceeds be used to repay the Term loan facility to allow for a $ 1.0 billion exclusion for debt-offering proceeds.

As of December 31, 2019 , there were $ 3.0 billion of outstanding borrowings under the Term loan facility that were subject to an interest rate of 3.10 % .

WES Operating was in compliance with all covenants under the Term loan facility as of December 31, 2019 .

The outstanding borrowings under the Term loan facility were classified as Long-term debt on the consolidated balance sheet at December 31, 2019.

In January 2020, WES Operating repaid the outstanding borrowings under the Term loan facility with proceeds from the issuance of the Senior Notes and Floating Rate Notes (see Note 16 ).

These indemnification agreements were terminated as part of the December 2019 Agreements (see Note 1 ).

As of December 31, 2019, the interest rate on the outstanding borrowings was 3.10 %.

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEBT AND INTEREST EXPENSE

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, which was payable at maturity at the applicable mid-term federal rate based on a quarterly compounding basis as determined by the U.S.

Secretary of the Treasury.

As of December 31, 2018 , the interest rate on the outstanding borrowings was 3.04 % .

This note payable had a maximum borrowing limit of $ 500.0 million, including accrued interest.

The APCWH Note Payable was repaid at Merger completion.

2 unchanged sentences

Pursuant to these swap agreements, WES Operating received a floating interest rate indexed to the three-month LIBOR and paid a fixed interest rate.

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 .

Pursuant to these swap agreements, WES Operating received a fixed interest rate and paid a floating interest rate indexed to the three-month LIBOR, effectively offsetting the swap agreements entered into in December 2018 and March 2019.

In December 2019, all outstanding interest-rate swap agreements were cash-settled.

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.

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.

These cash payments were classified as cash flows from operating activities in the consolidated statement of cash flows.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEBT AND INTEREST EXPENSE (CONTINUED)

For the year ended December 31, 2020, WES Operating made cash payments of $ 25.6 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 years ended December 31, 2019 and 2018 , net losses of $ 125.3 million and $ 8.0 million , respectively, were recognized, which are included in Other income (expense), net in the consolidated statements of operations.

Valuation of the interest-rate swaps was based on similar transactions observable in active markets and industry standard models that primarily rely on market-observable inputs.

Inputs used to estimate fair value in industry standard models are categorized as Level-2 inputs because substantially all assumptions and inputs are observable in active markets throughout the full term of the instruments.

Inputs used to estimate the fair value include market price curves, contract terms and prices, and credit risk adjustments.

The fair value of the interest-rate swaps was a liability of $ 8.0 million at December 31, 2018, which is reported within Accrued liabilities on the consolidated balance sheets.

For the year ended December 31, 2019, non-cash losses of $ 125.3 million were recognized, which are included in Other income (expense), net in the consolidated statements of operations.

Interest expense.

1 unchanged sentence

Year Ended December 31,

thousands 2020 2019 2018

Third parties

Long-term and short-term debt $ ( 369,815 ) $ ( 315,872 ) $ ( 200,454 )

Finance lease liabilities ( 1,510 ) — —

Amortization of debt issuance costs and commitment fees ( 13,501 ) ( 12,424 ) ( 9,110 )

1 unchanged sentence

Total interest expense – third parties ( 380,052 ) ( 301,316 ) ( 177,085 )

Related parties

APCWH Note Payable — ( 1,833 ) ( 6,746 )

Finance lease liabilities ( 6 ) ( 137 ) —

Deferred purchase price obligation – Anadarko

Total interest expense – affiliates

Total interest expense – related parties ( 6 ) ( 1,970 ) ( 6,746 )

Interest expense $ ( 380,058 ) $ ( 303,286 ) $ ( 183,831 )

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Partnership has entered into operating leases that extend through 2028 for corporate offices, shared field offices, and equipment supporting the Partnership’s operations, with both Occidental and third parties as lessors.

The Partnership also has subleased equipment from Occidental via finance leases extending through April 2020.

The following table summarizes information related to the Partnership’s leases at December 31, 2019 :

thousands except lease term and discount rate

Operating Leases

Finance Leases

The Partnership adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019, using the modified retrospective method applied to all leases in existence on January 1, 2019, and prior-period financial statements were not adjusted.

The Partnership has entered into operating leases that extend through 2039 for corporate offices, shared field offices, easements, and equipment supporting the Partnership’s operations, with both Occidental and third parties as lessors.

The Partnership also had subleased equipment from Occidental via finance leases that extended 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.

The following table summarizes information related to the Partnership’s leases:

thousands except lease term and discount rate Operating Leases Finance Leases Operating Leases Finance Leases

Other assets $ 38,985 $ — $ 3,985 $ —

Net property, plant, and equipment — 31,487 — 7,892

Total lease assets (1)

$ 38,985 $ 31,487 $ 3,985 $ 7,892

Accrued liabilities $ 3,958 $ — $ 1,805 $ —

1 unchanged sentence

Other liabilities 34,843 — 3,035 —

Long-term debt — 23,644 — —

Total lease liabilities (1)

$ 38,801 $ 31,908 $ 4,840 $ 7,873

Weighted-average remaining lease term (years)

Weighted-average discount rate (%) 5.1 4.3 4.7 2.9

Includes additions to ROU assets and lease liabilities of $ 8.5 million related to finance leases for the year ended December 31, 2019 .

Lease expense charged to the Partnership was $ 56.5 million and $ 45.5 million for the years ended December 31, 2018 and 2017, respectively.

The following table summarizes the Partnership’s lease cost for the year ended December 31, 2019 :

December 31, 2019

________________________________________________________________________________________

(1) Includes additions to ROU assets and lease liabilities of $ 39.7 million and $ 8.5 million related to finance leases for the year ended December 31, 2020 and 2019, respectively.

Includes additions to ROU assets and lease liabilities of $ 40.5 million related to operating leases for the year ended December 31, 2020.

Lease expense charged to the Partnership was $ 56.5 million for the year ended December 31, 2018.

The following table summarizes the Partnership’s lease cost:

Year Ended December 31,

thousands 2020 2019

Operating lease cost $ 7,702 $ 6,932

6 unchanged sentences

Total lease cost $ 60,206 $ 8,768

The following table summarizes cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2019 :

Operating Leases

Finance Leases

Operating cash flows

Financing cash flows

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LEASES (CONTINUED)

The following table summarizes cash paid for amounts included in the measurement of lease liabilities:

Year Ended December 31,

thousands Operating Leases Finance Leases Operating Leases Finance Leases

Operating cash flows $ 5,750 $ 1,516 $ 7,042 $ 118

Financing cash flows — 14,207 — 508

The following table reconciles the undiscounted cash flows to the operating and finance lease liabilities at December 31, 2020:

Operating Leases

Finance Leases

thousands Operating Leases Finance Leases

2021 $ 4,042 $ 8,557

2022 7,763 6,757

2023 4,902 4,383

2024 4,253 3,205

2025 4,101 3,095

Thereafter 25,415 10,752

Total lease payments 50,476 36,749

1 unchanged sentence

Total lease liabilities $ 38,801 $ 31,908

The amounts in the table below represent contractual operating lease commitments at December 31, 2018 , that were assigned or otherwise charged to the Partnership pursuant to the reimbursement provisions of the omnibus agreement (see Note 1 ):

Total lease payments

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.

This agreement includes (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.

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 year ended December 31, 2020, the Partnership recognized fixed-lease revenue of $ 175.8 million and variable-lease revenue of $ 47.9 million related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations.

The following table presents the undiscounted cash flows expected to be received for all operating leases in effect as of December 31, 2020.

This presentation includes minimum fixed lease payments and does not include an estimate of variable lease consideration.

2021 $ 193,925

Total lease payments $ 193,925

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY-BASED COMPENSATION

The general partner has the authority to grant equity compensation awards under the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan (“WES LTIP”) and the Western Gas Partners, LP 2017 Long-Term Incentive Plan (assumed by the Partnership in connection with the Merger) to its independent directors, executive officers, and employees.

As of December 31, 2020, the WES LTIP and the Western Gas Partners, LP 2017 Long-Term Incentive Plan had 2,823,967 and 3,431,251 units, respectively, available for future issuance.

On February 10, 2020, the Board of Directors approved awards of phantom units (the “Awards”) to the Partnership’s executive officers under the 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 number of vested units for 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 year ended December 31, 2020, the Partnership issued 48,070 common units as in-kind distributions under such Awards.

In addition, time-vested 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 actual forfeitures, as General and administrative expense in the consolidated statements of operations.

The fair value of the Time-Based 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.

The fair value of the ROA awards is adjusted quarterly based on the current period unit price and the estimated performance rating at vesting.

For ROA Awards, all performance-related fair-value changes are recognized in compensation expense during the performance period.

The total fair value of phantom units vested was $ 0.5 million, $ 1.2 million, and $ 0.6 million for the years ended December 31, 2020, 2019, and 2018, respectively, based on the market price at the vesting date.

Compensation expense for the long-term incentive plans was $ 7.9 million, $ 1.0 million, and $ 0.7 million for the years ended December 31, 2020, 2019, and 2018, respectively.

As of December 31, 2020, the Partnership had $ 16.9 million of estimated unrecognized compensation expense attributable to the WES LTIP that will be recognized over a weighted-average period of 1.6 years.

The following table summarizes time-vested award activity under the WES LTIP for the years ended December 31, 2020, 2019, and 2018:

2020 2019 2018

Time-Vested Awards Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units

Non-vested units at beginning of year $ — — $ 35.08 7,128 $ 43.39 5,763

Granted 15.49 1,442,821 29.75 25,212 35.08 7,128

Vested 9.54 ( 53,551 ) 31.62 ( 44,572 ) 43.39 ( 5,763 )

Forfeited 16.27 ( 81,664 ) — — — —

Converted (1)

— — 33.46 12,232 — —

Non-vested units at end of year 15.69 1,307,606 — — 35.08 7,128

________________________________________________________________________________________

(1) At closing of the Merger, WES Operating phantom units awarded under the Western Gas Partners, LP 2017 Long-Term Incentive Plan converted into phantom units of the Partnership under the WES LTIP.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY-BASED COMPENSATION

The following table summarizes TUR Awards and ROA Awards activity under the WES LTIP for the year ended December 31, 2020:

TUR Awards ROA Awards

Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units

Non-vested units at January 1, 2020 $ — — $ — —

Granted 17.79 124,067 16.27 124,067

Forfeited 17.79 ( 15,586 ) 16.27 ( 15,586 )

Non-vested units at December 31, 2020 17.79 108,481 17.97 108,481

The following table summarizes award activity under the Western Gas Partners, LP 2017 Long-Term Incentive Plan for the years ended December 31, 2019 and 2018.

There were no awards issued under this plan in 2020.

Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units

Non-vested units at beginning of year $ 49.88 8,020 $ 55.73 7,180

— — 49.88 8,020

— — 55.73 ( 7,180 )

Converted (1)

49.88 ( 8,020 ) — —

Non-vested units at end of year — — 49.88 8,020

_________________________________________________________________________________________

(1) At closing of the Merger, WES Operating phantom units awarded under the Western Gas Partners, LP 2017 Long-Term Incentive Plan converted into phantom units of the Partnership under the WES LTIP.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

There can be no assurance, however, that current regulatory requirements will not change, or past non-compliance with environmental issues will not be discovered.

See Note 11 and Note 12 .

See Note 11 .

Litigation and legal proceedings.

2 unchanged sentences

Other commitments.

The Partnership has short-term payment obligations, or commitments, related to its capital spending programs, and those of its unconsolidated affiliates, 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 oil system, and DBM water systems.

SUBSEQUENT EVENTS

In January 2020, WES Operating issued the following notes:

$ 1.0 billion in aggregate principal amount of 3.100 % Senior Notes due 2025, $ 1.2 billion in aggregate principal amount of 4.050 % Senior Notes due 2030, and $ 1.0 billion in aggregate principal amount of 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 “Senior Notes”).

Interest is paid on each such series semi-annually on February 1 and August 1 of each year, beginning August 1, 2020;

$ 300.0 million in aggregate principal amount of floating rate Senior Notes due 2023 (the “Floating Rate Notes”).

Interest is paid quarterly in arrears on January 13, April 13, July 13, and October 13 of each year, beginning April 13, 2020.

Interest will accrue from January 13, 2020 at a benchmark rate (which will initially be a three-month LIBOR rate) on the interest determination date plus 0.85 % .

The interest payable on the Senior Notes and Floating Rate Notes will be subject to adjustment from time to time if the credit rating assigned to the notes declines below certain specified levels or if it declines and subsequently increases.

The net proceeds from the Senior Notes and Floating Rate Notes were used to repay the $ 3.0 billion outstanding borrowings under the Term loan facility, outstanding amounts under the RCF, and for general partnership purposes.

WESTERN MIDSTREAM PARTNERS, LP

SUPPLEMENTAL QUARTERLY INFORMATION

The following table presents a summary of operating results by quarter for the years ended December 31, 2019 and 2018 .

Operating results reflect the operations of our assets (as defined in Note 1—Summary of Significant Accounting Policies ) from the dates of common control, unless otherwise noted.

See Note 1—Summary of Significant Accounting Policies and Note 3—Acquisitions and Divestitures .

thousands except per-unit amounts

Total revenues and other

Equity income, net – affiliates

Cost of product

Operating income (loss)

Net income (loss)

Net income (loss) attributable to Western Midstream Partners, LP

Net income (loss) per common unit – basic and diluted (1)

Total revenues and other

Equity income, net – affiliates

Cost of product

Operating income (loss)

Net income (loss)

Net income (loss) attributable to Western Midstream Partners, LP

Net income (loss) per common unit – basic and diluted (1)

Represents net income (loss) earned on and subsequent to the date of the acquisition of assets from Anadarko.

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.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data