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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 192 added, 199 removed, 511 unchanged (43% of the section changed)

1 unchanged sentence

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements, wherein WES Operating is fully consolidated, and which are included under Part I, Item 1 of this quarterly report, and the historical consolidated financial statements, and the notes thereto, which are included under Part II, Item 8 of the 2020 Form 10-K as filed with the SEC on February 26, 2021.

The Partnership’s assets include assets owned and ownership interests accounted for by us under the equity method of accounting, through our 98.0% partnership interest in WES Operating, as of March 31, 2021 (see Note 7—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q).

The Partnership’s assets include assets owned and ownership interests accounted for by us under the equity method of accounting, through our 98.0% partnership interest in WES Operating, as of June 30, 2021 (see Note 7—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q).

We also own and control the entire non-economic general partner interest in WES Operating GP, and our general partner is owned by Occidental.

43 unchanged sentences

In our capacity as a natural - gas processor, we also buy and sell natural gas, NGLs, and condensate on behalf of ourselves and as an agent for our customers under certain contracts.

To provide superior midstream service, we focus on ensuring the reliability and performance of our systems, creating sustainable cost efficiencies, enhancing our safety culture, and protecting the environment.

We own or have investments in assets located in Texas, New Mexico, the Rocky Mountains (Colorado, Utah, and Wyoming), and North - central Pennsylvania.

As of March 31, 2021, our assets and investments consisted of the following:

As of June 30, 2021, our assets and investments consisted of the following:

Operated Operated

9 unchanged sentences

(1) Includes the DBM water systems.

Significant financial and operational events during the three months ended March 31, 2021, included the following:

Significant financial and operational events during the six months ended June 30, 2021, included the following:

• WES Operating redeemed the total principal amount outstanding of the 5.375% Senior Notes due 2021 at par value, pursuant to the optional redemption terms in WES Operating’s indenture.

• We repurchased 1,115,808 common units for an aggregate purchase price of $16.2 million during the three months ended March 31, 2021.

• Our first - quarter 2021 per - unit distribution of $0.31500 increased $0.004 from the fourth - quarter 2020 per - unit distribution of $0.31100.

• Natural - gas throughput attributable to WES totaled 4,045 MMcf/d for the three months ended March 31, 2021, representing a 2% increase and 9% decrease compared to the three months ended December 31, 2020, and March 31, 2020, respectively.

• Crude - oil and NGLs throughput attributable to WES totaled 604 MBbls/d for the three months ended March 31, 2021, representing a 2% decrease and 21% decrease compared to the three months ended December 31, 2020, and March 31, 2020, respectively.

• Produced - water throughput attributable to WES totaled 595 MBbls/d for the three months ended March 31, 2021, representing a 9% decrease and 15% decrease compared to the three months ended December 31, 2020, and March 31, 2020, respectively.

• Operating income (loss) was $292.3 million for the three months ended March 31, 2021, compared to $373.0 million and $(214.9) million for the three months ended December 31, 2020, and March 31, 2020, respectively.

The three months ended March 31, 2020, included goodwill and long - lived asset impairments of $596.8 million.

• Adjusted gross margin for natural - gas assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $1.19 per Mcf for the three months ended March 31, 2021, representing no change and a 3% increase compared to the three months ended December 31, 2020, and March 31, 2020, respectively.

• Adjusted gross margin for crude - oil and NGLs assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $2.45 per Bbl for the three months ended March 31, 2021, representing a 9% decrease and 1% increase compared to the three months ended December 31, 2020, and March 31, 2020, respectively.

• Adjusted gross margin for produced - water assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $0.92 per Bbl for the three months ended March 31, 2021, representing a 6% decrease and 5% decrease compared to the three months ended December 31, 2020, and March 31, 2020, respectively.

• We repurchased 1,115,808 common units for an aggregate purchase price of $16.2 million during the six months ended June 30, 2021.

• Our second - quarter 2021 per - unit distribution of $0.31900 increased $0.004 from the first - quarter 2021 per - unit distribution of $0.31500.

• Natural - gas throughput attributable to WES totaled 4,265 MMcf/d and 4,157 MMcf/d for the three and six months ended June 30, 2021, respectively, representing a 5% increase and 6% decrease compared to the three months ended March 31, 2021, and six months ended June 30, 2020, respectively.

• Crude - oil and NGLs throughput attributable to WES totaled 687 MBbls/d and 645 MBbls/d for the three and six months ended June 30, 2021, respectively, representing a 14% increase and 13% decrease compared to the three months ended March 31, 2021, and six months ended June 30, 2020, respectively.

• Produced - water throughput attributable to WES totaled 688 MBbls/d and 642 MBbls/d for the three and six months ended June 30, 2021, respectively, representing a 16% increase and 12% decrease compared to the three months ended March 31, 2021, and six months ended June 30, 2020, respectively.

• Gross margin was $503.2 million and $958.7 million for the three and six months ended June 30, 2021, respectively, representing a 10% increase and 11% decrease compared to the three months ended March 31, 2021, and six months ended June 30, 2020, respectively.

See Key Performance Metrics within this Item 2.

• Adjusted gross margin for natural - gas assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $1.21 per Mcf and $1.20 per Mcf for the three and six months ended June 30, 2021, respectively, representing a 2% increase and 4% increase compared to the three months ended March 31, 2021, and six months ended June 30, 2020, respectively.

• Adjusted gross margin for crude - oil and NGLs assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $2.40 per Bbl and $2.43 per Bbl for the three and six months ended June 30, 2021, respectively, representing a 2% decrease compared to the three months ended March 31, 2021, and six months ended June 30, 2020.

• Adjusted gross margin for produced - water assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $0.92 per Bbl for the three and six months ended June 30, 2021, representing no change and a 5% decrease compared to the three months ended March 31, 2021, and six months ended June 30, 2020, respectively.

The following table provides additional information on throughput for the periods presented below:

Three Months Ended

March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Throughput for natural-gas assets (MMcf/d)

16 unchanged sentences

702 607 16 % 655 745 (12) %

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

Weather-related impacts.

2 unchanged sentences

Winter storm Uri adversely affected our volumes for approximately ten days and the blizzard in Colorado likewise disrupted our assets in that state.

We estimate the impact of these weather events to have reduced net income and Adjusted EBITDA (as defined under the caption Key Performance Metrics within this Item 2) for the quarter ended March 31, 2021, by approximately $30 million due to lower volumes, the impact of commodity-prices, and higher operating expenses related to utilities.

We estimate the impact of these weather events to have reduced net income and Adjusted EBITDA (as defined under the caption Key Performance Metrics within this Item 2) for the six months ended June 30, 2021, by approximately $30 million due to lower volumes, the impact of commodity-prices, and higher operating expenses related to utilities.

The estimated impact of the adverse winter weather on our operations and financial results may change and those changes may be material.

13 unchanged sentences

Accordingly, we no longer recognize service revenues and/or product sales revenues and the equivalent cost of product expense for the marketing services performed by AESC.

Year - over - year variances for the three months ended March 31, 2021, include the following impacts related to this change (i) decrease of $45.9 million in Service revenues – fee based, (ii) decrease of $20.4 million in Product sales, and (iii) decrease of $66.3 million in Cost of product expense.

Year - over - year variances for the six months ended June 30, 2021, include the following impacts related to this change (i) decrease of $45.9 million in Service revenues – fee based, (ii) decrease of $21.2 million in Product sales, and (iii) decrease of $67.1 million in Cost of product expense.

These changes had no impact to Operating income (loss), Net income (loss), the balance sheets, cash flows, or any non - GAAP metric used to evaluate our operations (see Key Performance Metrics within this Item 2).

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During the first quarter of 2020, oil and natural - gas prices decreased significantly, driven by the expectation of increased supply and sharp declines in demand resulting from the worldwide macroeconomic downturn that followed the global outbreak of COVID - 19.

For example, NYMEX West Texas Intermediate crude - oil daily settlement prices ranged from a high of $63.27 per barrel in January 2020 to a low below $20.00 per barrel in April 2020, with prices rebounding to $59.16 per barrel at March 31, 2021.

While the extent and duration of the recent commodity - price volatility cannot be predicted, potential impacts to our business include the following:

For example, NYMEX West Texas Intermediate crude - oil daily settlement prices ranged from a high of $63.27 per barrel in January 2020 to a low below $20.00 per barrel in April 2020.

Although commodity prices have rebounded to pre-pandemic levels, the extent and duration of the recent commodity - price volatility cannot be predicted, and potential impacts to our business include the following:

• We have exposure to increased credit risk to the extent any of our customers, including Occidental, is in financial distress.

3 unchanged sentences

See Liquidity and Capital Resources—Debt and credit facilities within this Item 2 for additional information.

• As of March 31, 2021, it is reasonably possible that future commodity - price declines, prolonged depression of commodity prices, changes to producers’ drilling plans in response to lower prices, and potential producer bankruptcies could result in future long - lived asset impairments.

• As of June 30, 2021, it is reasonably possible that future commodity - price declines, prolonged depression of commodity prices, changes to producers’ drilling plans in response to lower prices, and potential producer bankruptcies could result in future long - lived asset impairments.

To the extent producers continue with development plans in our areas of operation, we will continue to connect new wells or production facilities to our systems to maintain throughput on our systems and mitigate the impact of production declines.

3 unchanged sentences

Fort Union and Bison facilities.

In October 2020, we (i) sold our 14.81% interest in Fort Union, which was accounted for under the equity method of accounting, and (ii) entered into an option agreement to sell the Bison treating facility, located in Northeast Wyoming, to a third party, initially exercisable during the first quarter of 2021 and subsequently extended to May 9, 2021.

During the second quarter of 2021, the third party exercised its option to purchase the Bison treating facility and it satisfied the held - for - sale criteria.

The sale is expected to close in the second quarter of 2021.

During the second quarter of 2021, the third party exercised its option to purchase the Bison treating facility and the sale closed.

We received total proceeds of $8.0 million, $7.0 million in the fourth quarter of 2020 and $1.0 million when the sale closed in the second quarter of 2021, resulting in a net gain on sale of $5.4 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations.

See Note 3—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for further information.

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As permitted by this final rule, the analysis herein reflects the optional approach to discuss results of operations on a sequential - quarter basis, which we believe will provide information that is most useful to investors in assessing our quarterly results of operations going forward.

Also as required by the final rule, we have included the comparison of the current quarter to the prior-year quarter for this filing only, and will cease to provide this comparison in future filings.

For purposes of the following discussion, any increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended December 31, 2020, or to the three months ended March 31, 2020, as applicable.

In addition, as required by the final rule, we have continued to include a comparison of the current year-to-date period to the prior year-to-date period.

For purposes of the following discussion, any increases or decreases “for the three months ended June 30, 2021” refer to the comparison of the three months ended June 30, 2021, to the three months ended March 31, 2021;

and any increases or decreases “for the six months ended June 30, 2021” refer to the comparison of the six months ended June 30, 2021, to the six months ended June 30, 2020.

The following tables and discussion present a summary of our results of operations:

Three Months Ended

thousands March 31, 2021 December 31, 2020 March 31, 2020

Three Months Ended Six Months Ended

thousands June 30, 2021 March 31, 2021 June 30, 2021 June 30, 2020

Total revenues and other (1)

26 unchanged sentences

For reconciliations of these non - GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP, see Key Performance Metrics—Reconciliation of non-GAAP financial measures within this Item 2.

Three Months Ended

March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Throughput for natural-gas assets (MMcf/d)

24 unchanged sentences

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

(1) Represents the 14.81% share of average Fort Union throughput (until divested in October 2020), 22% share of average Rendezvous throughput, 50% share of average Mi Vida and Ranch Westex throughput, and 30% share of average Red Bluff Express throughput.

6 unchanged sentences

Natural-gas assets

Gathering, treating, and transportation throughput decreased by 2 MMcf/d and 20 MMcf/d compared to the three months ended December 31, 2020, and March 31, 2020, respectively, primarily due to (i) production declines and the impact of winter storm Uri at the Springfield gas - gathering system and (ii) lower throughput at the Bison facility due to production declines in the area.

Gathering, treating, and transportation throughput increased by 15 MMcf/d for the three months ended June 30, 2021, primarily due to increased production in areas around the Marcellus Interest systems.

Gathering, treating, and transportation throughput decreased by 20 MMcf/d for the six months ended June 30, 2021, primarily due to (i) production declines and the impact of winter storm Uri at the Springfield gas - gathering system and (ii) lower throughput at the Bison treating facility due to production declines in the area.

These decreases were offset partially by increased production in areas around the Marcellus Interest systems.

Processing throughput increased by 67 MMcf/d compared to the three months ended December 31, 2020, primarily due to an additional third - party connection to Latham Train II at the DJ Basin complex beginning January 1, 2021, partially offset by lower production and the impact of winter storm Uri at the West Texas complex.

Processing throughput decreased by 412 MMcf/d compared to the three months ended March 31, 2020, primarily due to (i) lower production and the impact of winter storm Uri at the West Texas complex, (ii) lower throughput at the DJ Basin complex due to production declines in the area, partially offset by an additional third - party connection to Latham Train II beginning January 1, 2021, and (iii) lower throughput at the Chipeta and Granger complexes due to production declines in the area.

Equity - investment throughput increased by 10 MMcf/d compared to the three months ended December 31, 2020, primarily due to increased volumes on Red Bluff Express resulting from increased pipeline commitments, partially offset by decreased volumes at the Fort Union system, which was sold to a third party during the fourth quarter of 2020.

Equity - investment throughput decreased by 5 MMcf/d compared to the three months ended March 31, 2020, primarily due to (i) decreased volumes at the Fort Union system, which was sold to a third party during the fourth quarter of 2020 and (ii) decreased volumes at the Rendezvous system due to production declines in the area.

Processing throughput increased by 196 MMcf/d for the three months ended June 30, 2021, primarily due to (i) increased production and recovery from the impact of winter storm Uri during the first quarter of 2021 at the West Texas complex, (ii) increased production in areas around the DJ Basin complex, and (iii) higher throughput at the Chipeta complex.

Processing throughput decreased by 268 MMcf/d for the six months ended June 30, 2021, primarily due to (i) lower production and the impact of winter storm Uri at the West Texas complex, (ii) the Granger straddle plant being held idle beginning in the third quarter of 2020, and (iii) lower throughput at the Chipeta and Granger complexes due to production declines in the area.

Equity - investment throughput increased by 18 MMcf/d for the three months ended June 30, 2021, primarily due to increased volumes at the Mi Vida plant and on Red Bluff Express.

Equity - investment throughput decreased by 3 MMcf/d for the six months ended June 30, 2021, primarily due to (i) decreased volumes at the Rendezvous system due to production declines in the area and (ii) decreased volumes at the Fort Union system, which was sold to a third party during the fourth quarter of 2020.

These decreases were offset partially by increased volumes on Red Bluff Express resulting from increased pipeline commitments.

Crude-oil and NGLs assets

Gathering, treating, and transportation throughput decreased by 13 MBbls/d compared to the three months ended December 31, 2020, primarily due to decreased throughput at the DBM oil system resulting from lower production and the impact of winter storm Uri.

Gathering, treating, and transportation throughput decreased by 82 MBbls/d compared to the three months ended March 31, 2020, primarily due to (i) lower throughput at the DJ Basin oil system due to production declines in the area and (ii) lower throughput at the DBM oil system resulting from lower production and the impact of winter storm Uri.

Equity - investment throughput decreased by 2 MBbls/d compared to the three months ended December 31, 2020, primarily due to decreased volumes on the Whitethorn pipeline, partially offset by increased volumes on Cactus II and the Saddlehorn pipeline.

Equity - investment throughput decreased by 81 MBbls/d compared to the three months ended March 31, 2020, primarily due to decreased volumes on the Whitethorn pipeline and Cactus II.

Gathering, treating, and transportation throughput increased by 36 MBbls/d for the three months ended June 30, 2021, primarily due to (i) increased production and recovery from the impact of winter storm Uri during the first quarter of 2021 at the DBM oil system and (ii) increased production in areas around the DJ Basin oil system.

Gathering, treating, and transportation throughput decreased by 63 MBbls/d for the six months ended June 30, 2021, primarily due to (i) lower throughput at the DJ Basin oil system due to production declines in the area and (ii) lower throughput at the DBM oil system resulting from lower production and the impact of winter storm Uri.

Equity - investment throughput increased by 49 MBbls/d for the three months ended June 30, 2021, primarily due to increased volumes on the Whitethorn and Saddlehorn pipelines, TEP, FRP, and Mont Belvieu JV.

Equity - investment throughput decreased by 34 MBbls/d for the six months ended June 30, 2021, primarily due to decreased volumes on the Whitethorn pipeline, partially offset by increased volumes on the Saddlehorn pipeline.

Produced-water assets

Gathering and disposal throughput decreased by 63 MBbls/d and 110 MBbls/d compared to the three months ended December 31, 2020, and March 31, 2020, respectively, due to decreased throughput at the DBM water systems resulting from lower production and the impact of winter storm Uri.

Gathering and disposal throughput increased by 95 MBbls/d for the three months ended June 30, 2021, due to increased throughput at the DBM water systems resulting from higher production and recovery from the impact of winter storm Uri during the first quarter of 2021.

Gathering and disposal throughput decreased by 90 MBbls/d for the six months ended June 30, 2021, due to decreased throughput at the DBM water systems resulting from lower production and the impact of winter storm Uri.

Service Revenues

Three Months Ended

thousands except percentages March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Service revenues – fee based $ 618,985 $ 572,275 8 % $ 1,191,260 $ 1,344,024 (11) %

1 unchanged sentence

Total service revenues $ 646,788 $ 603,927 7 % $ 1,250,715 $ 1,366,945 (9) %

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

Service revenues – fee based

Service revenues – fee based decreased by $31.5 million compared to the three months ended December 31, 2020, primarily due to (i) $10.2 million at the DBM water systems from decreased throughput, including the impact of winter storm Uri, and a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021, (ii) $8.9 million at the Springfield system due to annual cost - of - service rate adjustments that increased revenue in the fourth quarter of 2020, (iii) $6.7 million at the DBM oil system and $4.9 million at the West Texas complex from decreased throughput, including the impact of winter storm Uri, and (iv) $5.5 million at the DJ Basin complex from a lower average gathering fee, partially offset by increased throughput.

These decreases were offset partially by an increase of $8.2 million at the DJ Basin oil system due to an annual cost - of - service rate adjustment made during the fourth quarter of 2020 and increased throughput.

Service revenues – fee based decreased by $129.1 million compared to the three months ended March 31, 2020, primarily due to (i) $45.9 million, resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2), (ii) $22.7 million at the DJ Basin complex from a lower average gathering fee and decreased throughput, (iii) $20.9 million at the West Texas complex from decreased throughput, including the impact of winter storm Uri, (iv) $16.8 million at the DBM oil system from decreased throughput, including the impact of winter storm Uri, and the effect of the straight - line treatment of lease revenue under the operating and maintenance agreement with Occidental, and (v) $13.1 million at the DBM water systems from decreased throughput, including the impact of winter storm Uri, and a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021.

Service revenues – fee based increased by $46.7 million for the three months ended June 30, 2021, primarily due to increases of (i) $16.8 million at the West Texas complex, $8.4 million at the DBM water systems, and $4.3 million at the DBM oil system resulting from increased throughput, including recovery from the impact of winter storm Uri in the first quarter of 2021, and (ii) $14.1 million at the DJ Basin complex from increased throughput.

Service revenues – fee based decreased by $152.8 million for the six months ended June 30, 2021, primarily due to decreases of (i) $45.9 million, resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2), (ii) $28.7 million at the DBM oil system due to decreased throughput, including the impact of winter storm Uri, and lower lease revenue under the operating and maintenance agreement with Occidental, (iii) $24.5 million at the DBM water systems resulting from decreased throughput, including the impact of winter storm Uri, and a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021, (iv) $20.8 million at the West Texas complex from decreased throughput, including the impact of winter storm Uri, (v) $20.7 million at the DJ Basin complex due to decreased throughput on certain fee-based contracts, and (vi) $7.1 million at the Bison treating facility due to decreased throughput and the expiration of a minimum-volume commitment contract in the fourth quarter of 2020.

Service revenues – product based

Service revenues – product based increased by $18.5 million and $15.7 million compared to the three months ended December 31, 2020, and March 31, 2020, respectively, primarily due to (i) $8.6 million and $4.2 million, respectively, at the West Texas complex due to an increase in electricity - related rates billed to customers during winter storm Uri, (ii) $3.6 million and $3.6 million, respectively, at the Hilight system due to increased prices, (iii) $3.3 million and $4.0 million, respectively, at the DJ Basin complex due to increased third - party volumes, and (iv) increased pricing across several systems.

Service revenues – product based decreased by $3.8 million for the three months ended June 30, 2021, primarily due to a decrease of $3.2 million at the Hilight system attributable to increased prices in the first quarter of 2021 due to the impact of winter storms in the area.

Service revenues – product based increased by $36.5 million for the six months ended June 30, 2021, primarily due to increases of (i) $13.3 million at the West Texas complex due to an increase in electricity - related rates billed to customers during winter storm Uri, (ii) $9.2 million at the DJ Basin complex due to increased third - party volumes, and (iii) $4.8 million at the Hilight system and $3.9 million at the Granger complex due to increased prices.

Product Sales

Three Months Ended

thousands except percentages and per-unit amounts March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

thousands except percentages and per-unit amounts June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Natural - gas sales

$ 21,419 $ 6,593 NM $ 10,539 103 %

$ 14,195 $ 21,419 (34) % $ 35,614 $ 16,723 113 %

NGLs sales 58,061 49,386 18 % 107,447 61,662 74 %

1 unchanged sentence

Per - unit gross average sales price:

Natural gas (per Mcf) $ 5.98 $ 1.86 NM $ 1.30 NM

NGLs (per Bbl) 55.25 16.29 NM 15.45 NM

Natural gas (per Mcf) $ 2.65 $ 5.98 (56) % $ 4.26 $ 1.22 NM

NGLs (per Bbl) 27.16 28.42 (4) % 27.73 11.76 136 %

_________________________________________________________________________________________

NM — Not meaningful

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

Natural-gas sales

Natural - gas sales increased by $14.8 million compared to the three months ended December 31, 2020, primarily due to increases of $15.4 million at the West Texas complex and $3.7 million at the MGR assets attributable to increases in average prices.

These increases were offset partially by a decrease of $4.9 million at the DJ Basin complex attributable to a decrease in volumes, partially offset by increased average prices.

Natural - gas sales increased by $10.9 million compared to the three months ended March 31, 2020, primarily due to increases of (i) $16.3 million at the West Texas complex attributable to an increase in average prices, partially offset by decreased volumes sold, (ii) $4.4 million at the MGR assets attributable to an increase in average prices, and (iii) $1.4 million resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2).

These increases were offset partially by a decrease of $10.5 million at the DJ Basin complex attributable to a decrease in volumes, partially offset by increased average prices.

NGLs sales increased by $25.9 million compared to the three months ended December 31, 2020, primarily due to increases of (i) $17.6 million at the West Texas Complex attributable to an increase in average prices, partially offset by decreased volumes sold, (ii) $2.5 million at the Chipeta complex attributable to an increase in average prices, and (iii) $2.4 million at the DJ Basin complex attributable to an increase in average prices and volumes sold.

NGLs sales increased by $3.3 million compared to the three months ended March 31, 2020, primarily due to increases of (i) $19.1 million at the West Texas complex attributable to an increase in average prices, partially offset by decreased volumes sold and (ii) $3.6 million at the Chipeta complex and $2.6 million at the Granger complex attributable to increases in average prices.

Natural - gas sales decreased by $7.2 million for the three months ended June 30, 2021, primarily due to decreases of (i) $13.4 million at the West Texas complex attributable to a decrease in average prices and (ii) $3.8 million at the MGR assets attributable to a decrease in average prices and volumes sold.

These decreases were offset partially by an increase of $9.0 million at the DJ Basin complex attributable to an increase in volumes, partially offset by decreased average prices.

Natural - gas sales increased by $18.9 million for the six months ended June 30, 2021, primarily due to increases of (i) $22.4 million at the West Texas complex and $5.1 million at the MGR assets attributable to increases in average prices and (ii) $1.8 million resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2).

These increases were offset partially by a decrease of $11.1 million at the DJ Basin complex attributable to a decrease in volumes sold, partially offset by increased average prices.

NGLs sales increased by $8.7 million for the three months ended June 30, 2021, primarily due to an increase of $8.0 million at the West Texas complex attributable to an increase in volumes sold, partially offset by a decrease in average prices.

NGLs sales increased by $45.8 million for the six months ended June 30, 2021, primarily due to increases of (i) $47.8 million at the West Texas complex attributable to an increase in average prices, partially offset by decreased volumes sold, (ii) $9.4 million at the Chipeta complex and $5.7 million at the Granger complex attributable to increases in average prices, and (iii) $4.9 million at the DJ Basin complex attributable to an increase in average prices and volumes sold.

These increases were offset partially by a decrease of $23.0 million resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2).

Equity Income, Net – Related Parties

Three Months Ended

thousands except percentages March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Equity income, net – related parties $ 58,666 $ 52,165 12 % $ 110,831 $ 115,762 (4) %

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

Equity income, net – related parties decreased by $9.2 million compared to the three months ended March 31, 2020, primarily due to a decrease in equity income from Whitethorn LLC related to commercial activities and lower volumes.

In addition, decreased equity income from lower volumes at White Cliffs, Cactus II, and FRP were mostly offset by increased equity income from higher volumes at Red Bluff Express and Saddlehorn.

Equity income, net – related parties increased by $6.5 million for the three months ended June 30, 2021, primarily due to (i) an increase in equity income at Mont Belvieu JV from higher volumes and a load-reduction electricity credit received related to winter storm Uri and (ii) higher volumes at FRP.

Equity income, net – related parties decreased by $4.9 million for the six months ended June 30, 2021, primarily due to (i) a decrease in equity income from Whitethorn LLC related to commercial activities and lower volumes and (ii) lower volumes at White Cliffs.

These decreases were offset partially by an increase in equity income from higher volumes at Saddlehorn and Red Bluff Express.

Cost of Product and Operation and Maintenance Expenses

Three Months Ended

thousands except percentages March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

NGLs purchases $ 42,305 $ 30,919 37 % $ 73,224 $ 92,781 (21) %

Residue purchases 23,019 57,904 (60) % 80,923 33,160 144 %

Other 146 (6,873) 102 % (1,738) 108 %

Other 12,720 146 NM 12,866 (4,069) NM

Cost of product 78,044 88,969 (12) % 167,013 121,872 37 %

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Total Cost of product and Operation and maintenance expenses $ 231,072 $ 229,301 1 % $ 460,373 $ 426,249 8 %

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

NGLs purchases

NGLs purchases increased by $10.8 million compared to the three months ended December 31, 2020, primarily due to increases of (i) $3.3 million at the DJ Basin complex attributable to average - price and purchased - volume increases, (ii) $2.4 million at the West Texas complex attributable to average - price increases, and (iii) average - price increases across several other systems.

NGLs purchases decreased by $52.9 million compared to the three months ended March 31, 2020, primarily due to a decrease of $60.0 million resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2), partially offset by an increase of $5.2 million at the DJ Basin complex attributable to average - price increases, partially offset by purchased - volume decreases.

NGLs purchases increased by $11.4 million for the three months ended June 30, 2021, primarily due to an increase of $8.2 million at the West Texas complex attributable to purchased - volume increases, partially offset by an average - price decrease.

NGLs purchases decreased by $19.6 million for the six months ended June 30, 2021, primarily due to a decrease of $61.1 million resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2), partially offset by increases of $18.4 million at the West Texas complex, $12.9 million at the DJ Basin complex, $4.8 million at the Chipeta complex, and $3.5 million at the Granger complex attributable to average - price increases.

Residue purchases

Residue purchases increased by $36.7 million compared to the three months ended December 31, 2020, primarily due to increases of (i) $24.5 million at the West Texas complex attributable to purchased - volume increases and an average - price increase due to the impact of winter storm Uri, (ii) $3.8 million at the Hilight system attributable to average - price increases due to weather-related impacts, and (iii) $3.3 million at the DJ Basin complex attributable to average - price increases, partially offset by purchased - volume decreases.

Residue purchases increased by $36.7 million compared to the three months ended March 31, 2020, primarily due to increases of (i) $26.8 million at the West Texas complex attributable to average - price increases due to the impact of winter storm Uri, partially offset by purchased - volume decreases, (ii) $4.1 million at the Hilight system attributable to average - price increases due to weather-related impacts, (iii) $3.2 million at the MGR assets attributable to average - price increases, and (iv) $3.1 million at the Chipeta complex due to average - price increases.

These increases were partially offset by a decrease of $5.6 million resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2).

Other items increased by $7.0 million and $1.9 million compared to the three months ended December 31, 2020, and March 31, 2020, respectively, primarily due to increases of $12.3 million and $12.7 million, respectively, at the West Texas complex primarily attributable to changes in imbalance positions, partially offset by decreases of $6.1 million and $11.2 million, respectively, at the DJ Basin complex due to changes in imbalance positions.

Residue purchases decreased by $34.9 million for the three months ended June 30, 2021, primarily due to decreases of $19.3 million at the West Texas complex, $4.1 million at the DJ Basin complex, $3.7 million at the Hilight system, $2.4 million at the MGR assets, and $2.3 million at the Granger complex attributable to average - price decreases.

Residue purchases increased by $47.8 million for the six months ended June 30, 2021, primarily due to increases of $35.4 million at the West Texas complex, $4.9 million at the Chipeta complex, $4.6 million at the Hilight system, and $4.0 million at the MGR assets attributable to average - price increases.

These increases were offset partially by a decrease of $5.2 million resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020 (see Executive Summary—Commodity purchase and sale agreements within this Item 2).

Other items increased by $12.6 million for the three months ended June 30, 2021, primarily due to increases of (i) $9.8 million at the DJ Basin complex and (ii) $3.6 million at the West Texas complex, primarily attributable to changes in imbalance positions.

Other items increased by $16.9 million for the six months ended June 30, 2021, primarily due to an increase of $28.8 million at the West Texas complex, primarily attributable to changes in imbalance positions, partially offset by a decrease of $11.9 million at the DJ Basin complex due to changes in imbalance positions.

Operation and maintenance expense

Operation and maintenance expense decreased by $3.9 million compared to the three months ended December 31, 2020, due to combined decreases of $8.2 million primarily related to $2.9 million and $2.7 million at the Springfield system and DJ Basin complex, respectively, due to reduced field - related expenses, partially offset by increased salaries and wages and surface maintenance and plant repairs expense.

These decreases were offset partially by an increase of $5.4 million at the West Texas complex as a result of increased utilities expense due to the impact of winter storm Uri, partially offset by a decrease in other field-related expenses.

Operation and maintenance expense decreased by $18.9 million compared to the three months ended March 31, 2020, primarily as a result of focused cost - savings initiatives related to the stand - up of WES as an independent organization, resulting in decreases of (i) $11.4 million at the West Texas complex primarily attributable to reduced field - related expenses, partially offset by increased utilities due to the impact of winter storm Uri, and (ii) $9.5 million at the DJ Basin complex primarily due to reduced field - related expenses, partially offset by increased utilities.

Operation and maintenance expense increased by $12.7 million for the three months ended June 30, 2021, primarily due to an increase of $9.1 million at the DJ Basin complex due to an environmental liability of $4.1 million recorded in the second quarter of 2021, as well as increased surface maintenance and plant repairs, and field-related expenses.

Operation and maintenance expense decreased by $11.0 million for the six months ended June 30, 2021, primarily due to decreases of (i) $10.7 million at the West Texas complex, primarily attributable to reduced salaries and wages, surface maintenance and plant repairs, and safety expense, partially offset by increased utilities expense primarily resulting from the impact of winter storm Uri and (ii) $6.7 million at the DBM water systems attributable to lower disposal fees resulting from reduced volumes and lower surface-use fees, partially offset by increased utilities expense and surface maintenance and plant repairs, including the impact of winter storm Uri.

These decreases were offset partially by an increase of $5.3 million at the DBM oil system, primarily attributable to increases in field-related expenses and utilities expense primarily resulting from the impact of winter storm Uri.

Other Operating Expenses

Three Months Ended

thousands except percentages March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

General and administrative $ 44,448 $ 45,116 (1) % $ 89,564 $ 76,888 16 %

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Long - lived asset and other impairments

14,866 3,314 NM 155,785 (90) %

Goodwill impairment — — NM 441,017 (100) %

Total other operating expenses $ 204,919 $ 158,092 30 % $ 788,062 (74) %

12,738 14,866 (14) % 27,604 165,935 (83) %

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

Goodwill impairment — — NM — 441,017 NM

Total other operating expenses $ 213,002 $ 204,919 4 % $ 417,921 $ 973,835 (57) %

General and administrative expenses

General and administrative expenses increased by $7.8 million compared to the three months ended December 31, 2020, primarily due to an increase of $6.9 million in personnel costs primarily related to customary fluctuations in employee vacation accruals and increased bonus-related contributions under our employee savings plan.

General and administrative expenses increased by $4.7 million compared to the three months ended March 31, 2020, primarily due to (i) a $4.5 million increase in corporate expenses and professional fees and (ii) a $1.9 million increase related to information technology services and fees.

These increases were offset partially by a decrease of $2.3 million in personnel costs primarily due to WES securing its own dedicated workforce as of December 2019 and the related transition activities.

General and administrative expenses increased by $12.7 million for the six months ended June 30, 2021, primarily due to (i) a $6.3 million increase in personnel costs primarily related to increased bonus-related contributions under our employee savings plan, (ii) a $5.3 million increase in contract and consulting costs primarily related to information technology services and fees, and (iii) a $3.7 million increase in corporate expenses and professional fees.

Property and other taxes

Property and other taxes increased by $3.3 million compared to the three months ended December 31, 2020, due to ad valorem tax increases of $4.6 million at the West Texas complex primarily due to capital projects being placed into service.

This increase was offset partially by ad valorem tax decreases of $2.5 million at the DJ Basin complex primarily attributable to favorable differences between actual and estimated tax payments related to the 2020 fiscal year.

Property and other taxes decreased by $4.1 million compared to the three months ended March 31, 2020, primarily due to ad valorem tax decreases at the DJ Basin complex, DJ Basin oil system, and West Texas complex due to favorable differences between actual and estimated tax payments related to the 2020 fiscal year.

Property and other taxes increased by $3.6 million for the three months ended June 30, 2021, due to ad valorem tax increases at the DJ Basin complex and DJ Basin oil system, primarily due to favorable differences between actual and estimated tax payments related to the 2020 fiscal year recognized in the first quarter of 2021.

Property and other taxes decreased by $5.5 million for the six months ended June 30, 2021, primarily due to ad valorem tax decreases at the West Texas and DJ Basin complexes, and DJ Basin oil system due to favorable differences between actual and estimated tax payments related to the 2020 fiscal year.

Depreciation and amortization expense

Depreciation and amortization expense increased by $24.2 million compared to the three months ended December 31, 2020, primarily due to increases of $16.3 million and $9.3 million at the DJ Basin complex and Hilight system, respectively, primarily as a result of downward asset retirement obligation revisions made at year-end 2020.

Depreciation and amortization expense increased by $7.3 million for the three months ended June 30, 2021, primarily due to increases of (i) $3.2 million at a transportation asset in Southwest Wyoming, primarily as a result of downward asset retirement obligation revisions made in the first quarter of 2021 and (ii) $2.3 million at the MGR assets and Hilight system due to an acceleration of depreciation expense.

Depreciation and amortization expense increased by $16.3 million for the six months ended June 30, 2021, primarily due to increases of (i) $13.1 million at the DJ Basin complex, primarily as a result of a change in estimate for asset retirement obligations for the Third Creek gathering system in the comparative prior period, (ii) $5.6 million at the West Texas complex resulting from capital projects being placed into service, and (iii) $4.5 million related to depreciation for capitalized information technology implementation costs related to the stand-up of WES as an independent organization.

These increases were offset partially by decreases of (i) $8.4 million due to the sale of the Bison treating facility and (ii) $3.3 million at a transportation asset in Southwest Wyoming, primarily as a result of downward asset retirement obligation revisions made in the first quarter of 2021.

Long-lived asset and other impairment expense

Long - lived asset and other impairment expense for the three months ended June 30, 2021, was primarily due to an $11.6 million other-than-temporary impairment of our investment in Ranch Westex.

Long - lived asset and other impairment expense for the three months ended March 31, 2021, was primarily due to $13.5 million of impairments at the DJ Basin complex due to cancellation of projects.

Long - lived asset and other impairment expense for the three months ended December 31, 2020, was primarily due to an impairment at the DBM oil system primarily due to cancellation of projects.

Long - lived asset and other impairment expense for the three months ended March 31, 2020, was primarily due to (i) $145.1 million of impairments for assets located in Wyoming and Utah and (ii) impairments at the DJ Basin complex.

Long - lived asset and other impairment expense for the six months ended June 30, 2020, was primarily due to (i) $149.4 million of impairments for assets located in Wyoming and Utah and (ii) impairments at the DJ Basin complex due to cancellation of projects and impairments of rights - of - way.

For further information on Long - lived asset and other impairment expense, see Note 8—Property, Plant, and Equipment in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

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Interest Income – Anadarko Note Receivable and Interest Expense

Three Months Ended

thousands except percentages March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Interest income – Anadarko note receivable $ — $ — — % $ — $ 8,450 (100) %

8 unchanged sentences

Interest expense $ (95,290) $ (98,493) (3) % $ (193,783) $ (183,240) 6 %

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

Interest income

Interest income - Anadarko note receivable decreased by $4.2 million compared to the three months ended March 31, 2020, due to the exchange of the Anadarko note receivable under the Unit Redemption Agreement in September 2020.

Interest income - Anadarko note receivable decreased by $8.5 million for the six months ended June 30, 2021, due to the exchange of the Anadarko note receivable under the Unit Redemption Agreement in September 2020.

See Note 6—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Interest expense

Interest expense decreased by $2.8 million compared to the three months ended December 31, 2020, primarily due to (i) $2.0 million of lower interest incurred on the 5.375% Senior Notes due 2021 that were called on March 1, 2021 and (ii) an increase of $2.2 million in capitalized interest due to a change in the mix of active projects.

These decreases to interest expense were offset partially by increases of $1.4 million due to higher effective interest rates resulting from credit - rating downgrades on the 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, 5.250% Senior Notes due 2050, and Floating - Rate Senior Notes due 2023.

Interest expense increased by $9.9 million compared to the three months ended March 31, 2020, primarily due to (i) $13.8 million of additional interest incurred from higher effective interest rates resulting from credit - rating downgrades and a full quarter of expense on the 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050 and (ii) a decrease of $3.9 million in capitalized interest due to decreased capital expenditures.

Interest expense decreased by $3.2 million for the three months ended June 30, 2021, primarily due to lower interest incurred on the 5.375% Senior Notes due 2021 that were called on March 1, 2021.

Interest expense increased by $10.5 million for the six months ended June 30, 2021, primarily due to (i) $23.8 million of additional interest incurred from higher effective interest rates resulting from credit - rating downgrades on the 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050 and (ii) a decrease of $2.1 million in capitalized interest due to decreased capital expenditures.

These increases were offset partially by decreases of (i) $11.0 million due to lower outstanding balances on the 5.375% Senior Notes due 2021 that were called on March 1, 2021, 4.000% Senior Notes due 2022, and Floating - Rate Senior Notes due 2023 and (ii) $4.1 million due to lower outstanding borrowings under the RCF in 2021.

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Income Tax Expense (Benefit)

Three Months Ended

thousands except percentages March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Income (loss) before income taxes $ 192,347 $ 272,982 (30) % $ (293,680) 165 %

Income tax expense (benefit) 1,112 2,206 (50) % (4,280) 126 %

Effective tax rate 1 % 1 % 1 %

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

Three Months Ended Six Months Ended

thousands except percentages June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Income (loss) before income taxes $ 239,742 $ 192,347 25 % $ 432,089 $ (7,295) NM

Income tax expense (benefit) 1,465 1,112 32 % 2,577 764 NM

Effective tax rate 1 % 1 % 1 % NM

We are not a taxable entity for U.S.

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KEY PERFORMANCE METRICS

Three Months Ended

thousands except percentages and per-unit amounts March 31, 2021 December 31, 2020 Inc/

(Dec) March 31, 2020 Inc/

Three Months Ended Six Months Ended

thousands except percentages and per-unit amounts June 30, 2021 March 31, 2021 Inc/

(Dec) June 30, 2021 June 30, 2020 Inc/

Adjusted gross margin for natural - gas assets

14 unchanged sentences

_________________________________________________________________________________________

(1) Increases or decreases refer to the comparison of the three months ended March 31, 2021, to the three months ended March 31, 2020.

(1) Average for period.

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We believe Adjusted gross margin is an important performance measure of our operations’ profitability and performance as compared to other companies in the midstream industry.

Cost of product expenses include (i) costs associated with the purchase of natural gas and NGLs pursuant to our percent - of - proceeds, percent - of - product, and keep - whole contracts, (ii) costs associated with the valuation of gas imbalances, and (iii) costs associated with our obligations under certain contracts to redeliver a volume of natural gas to shippers, which is thermally equivalent to condensate retained by us and sold to third parties.

Cost of product expenses include (i) costs associated with the purchase of natural gas and NGLs pursuant to our percent - of - proceeds, percent - of - product, and keep - whole contracts, (ii) costs associated with the valuation of gas and NGLs imbalances, and (iii) costs associated with our obligations under certain contracts to redeliver a volume of natural gas to shippers, which is thermally equivalent to condensate retained by us and sold to third parties.

To facilitate investor and industry analyst comparisons between us and our peers, we also disclose per-Mcf Adjusted gross margin for natural-gas assets, per-Bbl Adjusted gross margin for crude-oil and NGLs assets, and per-Bbl Adjusted gross margin for produced-water assets .

Adjusted gross margin decreased by $33.8 million compared to the three months ended December 31, 2020, primarily due to (i) decreased throughput and a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021, at the DBM water systems, (ii) a decrease in distributions from Whitethorn LLC and Cactus II, (iii) an annual cost - of - service rate adjustment at the Springfield system that increased revenues in the fourth quarter of 2020, and (iv) decreased throughput at the DBM oil system.

These decreases were partially offset by an increase at the DJ Basin oil system due to an annual cost - of - service rate adjustment made during the fourth quarter of 2020.

Adjusted gross margin decreased by $86.7 million compared to the three months ended March 31, 2020, primarily due to (i) decreased throughput at the West Texas complex and DJ Basin oil system, (ii) a lower average gathering fee and decreased throughput at the DJ Basin complex, (iii) decreased throughput and the effect of the straight - line treatment of lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system, and (iv) decreased throughput and a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021 at the DBM water systems.

Per - Mcf Adjusted gross margin for natural - gas assets increased by $0.03 compared to the three months ended March 31, 2020, primarily due to a higher cost - of - service rate effective January 1, 2021, at the West Texas complex, partially offset by decreased throughput at the DJ Basin complex, which has a higher - than - average per - Mcf margin as compared to our other natural - gas assets.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets decreased by $0.24 compared to the three months ended December 31, 2020, primarily due to (i) an annual cost - of - service rate adjustment at the Springfield system that increased revenues in the fourth quarter of 2020 and (ii) a decrease in distributions from Cactus II.

These decreases were partially offset by an annual cost - of - service rate adjustment made during the fourth quarter of 2020 and increased throughput at the DJ Basin oil system.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets increased by $0.03 compared to the three months ended March 31, 2020, primarily due to a higher cost - of - service rate effective January 1, 2021, at the DJ Basin oil system, partially offset by (i) decreased throughput and the effect of the straight - line treatment of lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system, which has a higher - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets and (ii) a decrease in distributions from Cactus II.

Per - Bbl Adjusted gross margin for produced - water assets decreased by $0.06 and $0.05 compared to the three months ended December 31, 2020, and March 31, 2020, respectively, primarily due to a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021.

Adjusted gross margin increased by $62.6 million for the three months ended June 30, 2021, primarily due to (i) increased throughput at the West Texas and DJ Basin complexes and the DBM water, DBM oil, and DJ Basin oil systems and (ii) an increase in distributions from Mont Belvieu JV.

Adjusted gross margin decreased by $96.4 million for the six months ended June 30, 2021, primarily due to (i) decreased throughput and lower lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system, (ii) decreased throughput and a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021, at the DBM water systems, (iii) decreased throughput at the West Texas complex, (iv) decreased throughput on certain fee-based contracts at the DJ Basin complex, and (v) a decrease in distributions from Whitethorn LLC.

Per - Mcf Adjusted gross margin for natural - gas assets increased by $0.02 for the three months ended June 30, 2021, primarily due to increased throughput at the DJ Basin complex, which has a higher - than - average per - Mcf margin as compared to our other natural-gas assets.

Per - Mcf Adjusted gross margin for natural - gas assets increased by $0.05 for the six months ended June 30, 2021, primarily due to a higher cost - of - service rate effective January 1, 2021, at the West Texas complex, partially offset by decreased throughput on certain fee-based contracts at the DJ Basin complex, which has a higher - than - average per - Mcf margin as compared to our other natural-gas assets.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets decreased by $0.05 for the three months ended June 30, 2021, primarily due to (i) increased volumes on the Whitethorn pipeline, which has a lower - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets and (ii) a decrease in distributions from White Cliffs and FRP.

These decreases were offset partially by an increase in distributions from Mont Belvieu JV.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets decreased by $0.05 for the six months ended June 30, 2021, primarily due to decreased throughput and lower lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system, which has a higher - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets, partially offset by a higher cost - of - service rate effective January 1, 2021, at the DJ Basin oil system.

Per - Bbl Adjusted gross margin for produced - water assets decreased by $0.05 for the six months ended June 30, 2021, primarily due to a lower average fee resulting from a cost - of - service rate redetermination effective January 1, 2021.

Adjusted EBITDA.

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

Adjusted EBITDA decreased by $40.9 million compared to the three months ended December 31, 2020, primarily due to (i) a $54.5 million increase in cost of product (net of lower of cost or market inventory adjustments), (ii) an $8.0 million decrease in distributions from equity investments, (iii) $7.0 million increase in general and administrative expenses excluding non - cash equity - based compensation expense, and (iv) $3.3 million increase in property taxes.

These amounts were offset partially by (i) a $27.5 million increase in total revenues and other and (ii) a $3.9 million decrease in operation and maintenance expenses.

Adjusted EBITDA decreased by $70.5 million compared to the three months ended March 31, 2020, primarily due to (i) a $99.3 million decrease in total revenues and other, (ii) a $4.7 million decrease in distributions from equity investments, and (iii) a $3.2 million increase in general and administrative expenses excluding non - cash equity - based compensation expense.

These amounts were offset partially by (i) an $18.9 million decrease in operation and maintenance expenses, (ii) a $14.1 million decrease in cost of product (net of lower of cost or market inventory adjustments), and (iii) a $4.1 million decrease in property taxes.

Adjusted EBITDA increased by $48.0 million for the three months ended June 30, 2021, primarily due to (i) a $44.2 million increase in total revenues and other, (ii) a $10.9 million decrease in cost of product (net of lower of cost or market inventory adjustments), and (iii) a $9.8 million increase in distributions from equity investments.

These amounts were offset partially by (i) a $12.7 million increase in operation and maintenance expenses and (ii) a $3.6 million increase in property taxes.

Adjusted EBITDA decreased by $93.8 million for the six months ended June 30, 2021, primarily due to (i) a $52.0 million decrease in total revenues and other, (ii) a $45.3 million increase in cost of product (net of lower of cost or market inventory adjustments), (iii) a $9.7 million increase in general and administrative expenses excluding non - cash equity - based compensation expense, and (iv) a $5.4 million decrease in distributions from equity investments.

These amounts were offset partially by (i) an $11.0 million decrease in operation and maintenance expenses and (ii) a $5.5 million decrease in property taxes.

The above - described variances in cost of product and total revenues and other include the impacts resulting from a change in accounting for the marketing contracts with AESC effective April 1, 2020, which had no net impact on Adjusted EBITDA (see Executive Summary—Commodity purchase and sale agreements within this Item 2).

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Instead, Free cash flow should be considered indicative of the amount of cash that is available for distributions, debt repayments, and other general partnership purposes.

Free cash flow decreased by $250.9 million compared to the three months ended December 31, 2020, primarily due to (i) a decrease of $244.0 million in net cash provided by operating activities and (ii) an increase of $9.0 million in capital expenditures.

Free cash flow decreased by $0.8 million compared to the three months ended March 31, 2020, primarily due to a decrease of $131.8 million in net cash provided by operating activities, partially offset by (i) a decrease of $113.0 million in capital expenditures, (ii) a decrease of $10.9 million in contributions to equity investments, and (iii) a $7.1 million increase in distributions from equity investments in excess of cumulative earnings.

Free cash flow increased by $166.0 million for the three months ended June 30, 2021, primarily due to an increase of $190.6 million in net cash provided by operating activities, partially offset by (i) an increase of $18.4 million in capital expenditures and (ii) an increase of $3.3 million in contributions to equity investments.

Free cash flow increased by $170.4 million for the six months ended June 30, 2021, primarily due to (i) a decrease of $175.1 million in capital expenditures, (ii) a decrease of $12.6 million in contributions to equity investments, and (iii) an $8.0 million increase in distributions from equity investments in excess of cumulative earnings.

These amounts were offset partially by a decrease of $25.3 million in net cash provided by operating activities.

See Capital Expenditures and Historical Cash Flow within this Item 2 for further information.

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Adjusted gross margin, Adjusted EBITDA, and Free cash flow are not defined in GAAP.

The GAAP measure used by us that is most directly comparable to Adjusted gross margin is operating income (loss).

The GAAP measure used by us that is most directly comparable to Adjusted gross margin is gross margin.

Net income (loss) and net cash provided by operating activities are the GAAP measures used by us that are most directly comparable to Adjusted EBITDA.

The GAAP measure used by us that is most directly comparable to Free cash flow is net cash provided by operating activities.

Our non - GAAP financial measures of Adjusted gross margin, Adjusted EBITDA, and Free cash flow should not be considered as alternatives to the GAAP measures of operating income (loss), net income (loss), net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP.

Adjusted gross margin, Adjusted EBITDA, and Free cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect operating income (loss), net income (loss), and net cash provided by operating activities.

Our non - GAAP financial measures of Adjusted gross margin, Adjusted EBITDA, and Free cash flow should not be considered as alternatives to the GAAP measures of gross margin, net income (loss), net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP.

Adjusted gross margin, Adjusted EBITDA, and Free cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect gross margin, net income (loss), and net cash provided by operating activities.

Adjusted gross margin, Adjusted EBITDA, and Free cash flow should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

Our definitions of Adjusted gross margin, Adjusted EBITDA, and Free cash flow may not be comparable to similarly titled measures of other companies in our industry, thereby diminishing their utility as comparative measures.

Management compensates for the limitations of Adjusted gross margin, Adjusted EBITDA, and Free cash flow as analytical tools by reviewing the comparable GAAP measures, understanding the differences between Adjusted gross margin, Adjusted EBITDA, and Free cash flow compared to (as applicable) operating income (loss), net income (loss), and net cash provided by operating activities, and incorporating this knowledge into its decision - making processes.

Management compensates for the limitations of Adjusted gross margin, Adjusted EBITDA, and Free cash flow as analytical tools by reviewing the comparable GAAP measures, understanding the differences between Adjusted gross margin, Adjusted EBITDA, and Free cash flow compared to (as applicable) gross margin, net income (loss), and net cash provided by operating activities, and incorporating this knowledge into its decision - making processes.

We believe that investors benefit from having access to the same financial measures that our management considers in evaluating our operating results.

The following tables present (i) a reconciliation of the GAAP financial measure of operating income (loss) to the non - GAAP financial measure of Adjusted gross margin, (ii) a reconciliation of the GAAP financial measures of net income (loss) and net cash provided by operating activities to the non - GAAP financial measure of Adjusted EBITDA, and (iii) a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non - GAAP financial measure of Free cash flow:

Three Months Ended

thousands March 31, 2021 December 31, 2020 March 31, 2020

Reconciliation of Operating income (loss) to Adjusted gross margin

Operating income (loss) $ 292,336 $ 372,954 $ (214,903)

The following tables present (i) a reconciliation of the GAAP financial measure of gross margin to the non - GAAP financial measure of Adjusted gross margin, (ii) a reconciliation of the GAAP financial measures of net income (loss) and net cash provided by operating activities to the non - GAAP financial measure of Adjusted EBITDA, and (iii) a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non - GAAP financial measure of Free cash flow:

Three Months Ended Six Months Ended

thousands June 30, 2021 March 31, 2021 June 30, 2021 June 30, 2020

Reconciliation of Gross margin to Adjusted gross margin

Total revenues and other $ 719,131 $ 674,974 $ 1,394,105 $ 1,446,068

Cost of product 78,044 88,969 167,013 121,872

Depreciation and amortization 137,849 130,553 268,402 252,124

Gross margin 503,238 455,452 958,690 1,072,072

Distributions from equity investments 70,947 61,189 132,136 137,496

Operation and maintenance 140,332 144,204 159,191

General and administrative 45,116 37,303 40,465

Property and other taxes 14,384 11,077 18,476

Depreciation and amortization 137,849 130,553 268,402 252,124

Impairments (1)

14,866 3,314 596,802

Gain (loss) on divestiture and other, net (583) 12,285 (40)

Equity income, net – related parties 52,165 49,962 61,347

Reimbursed electricity-related charges recorded as revenues 17,585 17,312 34,897 40,828

17,312 18,161 19,223

Adjusted gross margin attributable to noncontrolling interests (1)

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(1) Includes goodwill impairment for the three months ended March 31, 2020.

See Note 9—Goodwill in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

(1) For all periods presented, includes (i) the 25% third - party interest in Chipeta and (ii) the 2.0% Occidental subsidiary - owned limited partner interest in WES Operating, which collectively represent WES’s noncontrolling interests.

Three Months Ended

thousands March 31, 2021 December 31, 2020 March 31, 2020

Three Months Ended Six Months Ended

thousands June 30, 2021 March 31, 2021 June 30, 2021 June 30, 2020

Reconciliation of Net income (loss) to Adjusted EBITDA

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(1) Includes goodwill impairment for the three months ended March 31, 2020.

(1) Includes goodwill impairment for the six months ended June 30, 2020.

See Note 9—Goodwill in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

(2) For all periods presented, includes (i) the 25% third - party interest in Chipeta and (ii) the 2.0% Occidental subsidiary - owned limited partner interest in WES Operating, which collectively represent WES’s noncontrolling interests.

Three Months Ended

thousands March 31, 2021 December 31, 2020 March 31, 2020

Three Months Ended Six Months Ended

thousands June 30, 2021 March 31, 2021 June 30, 2021 June 30, 2020

Reconciliation of Net cash provided by operating activities to Free cash flow

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LIQUIDITY AND CAPITAL RESOURCES

Our primary cash uses include quarterly distributions, debt service, capital expenditures, customary operating expenses, and distributions to our noncontrolling interest owners.

Our sources of liquidity as of March 31, 2021, included cash and cash equivalents, cash flows generated from operations, available borrowing capacity under the RCF, and potential issuances of additional equity or debt securities.

We believe that cash flows generated from these sources will be sufficient to satisfy our short - term working capital requirements and long - term capital - expenditure requirements.

Our primary cash uses include quarterly distributions, debt service, capital expenditures, and customary operating expenses.

Our sources of liquidity as of June 30, 2021, included cash and cash equivalents, cash flows generated from operations, available borrowing capacity under the RCF, and potential issuances of additional equity or debt securities.

We believe that cash flows generated from these sources will be sufficient to satisfy our short - term working capital requirements and long - term capital - expenditure and debt service requirements.

The amount of future distributions to unitholders will depend on our results of operations, financial condition, capital requirements, and other factors, and will be determined by the Board of Directors on a quarterly basis.

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We have made cash distributions to our unitholders each quarter since our initial public offering in 2012.

The Board of Directors declared a cash distribution to unitholders for the first quarter of 2021 of $0.31500 per unit, or $133.0 million in the aggregate.

The cash distribution is payable on May 14, 2021, to our unitholders of record at the close of business on April 30, 2021.

The Board of Directors declared a cash distribution to unitholders for the second quarter of 2021 of $0.31900 per unit, or $134.7 million in the aggregate.

The cash distribution is payable on August 13, 2021, to our unitholders of record at the close of business on July 30, 2021.

In November 2020, we announced a buyback program of up to $250.0 million of our common units through December 31, 2021.

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The program does not obligate us to purchase any specific dollar amount or number of units and may be suspended or discontinued at any time.

During the quarter ended March 31, 2021, we repurchased 1,115,808 common units on the open market for an aggregate purchase price of $16.2 million.

During the six months ended June 30, 2021, we repurchased 1,115,808 common units on the open market for an aggregate purchase price of $16.2 million.

We canceled the units immediately upon receipt.

As of March 31, 2021, we had an authorized amount of $201.2 million remaining under the Purchase Program.

As of June 30, 2021, we had an authorized amount of $201.2 million remaining under the Purchase Program.

Management continuously monitors our leverage position and coordinates our capital expenditures and quarterly distributions with expected cash inflows and projected debt service requirements.

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Working capital .

As of March 31, 2021, we had a $120.9 million working capital surplus, which we define as the amount by which current assets exceed current liabilities.

Working capital is an indication of liquidity and potential needs for short - term funding.

Working capital requirements are driven by changes in accounts receivable and accounts payable and other factors such as credit extended to, and the timing of collections from, our customers, and the level and timing of our spending for acquisitions, maintenance, and other capital activities.

As of March 31, 2021, there was $2.0 billion available for borrowing under the RCF.

As of June 30, 2021, we had a $240.4 million working capital deficit, which we define as the amount by which current liabilities exceed current assets.

Our working capital deficit was primarily due to the 4.000% Senior Notes due 2022 of $580.7 million being classified as short-term debt on the consolidated balance sheet as of June 30, 2021.

As of June 30, 2021, there was $2.0 billion available for borrowing under the RCF.

See Note 10—Selected Components of Working Capital and Note 11—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

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Acquisitions and capital expenditures as presented in the consolidated statements of cash flows and capital incurred were as follows:

Three Months Ended

Six Months Ended

thousands 2021 2020

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(1) See Note 6—Related-Party Transactions for information regarding equipment purchases from related parties.

(2) For the three months ended March 31, 2021 and 2020, included $0.9 million and $4.8 million, respectively, of capitalized interest.

Capital expenditures decreased by $113.0 million for the three months ended March 31, 2021, primarily due to decreases of (i) $56.2 million at the West Texas complex primarily attributable to decreases in pipeline and well connection projects, (ii) $21.4 million at the DJ Basin complex primarily related to the completion of Latham Train II that commenced operations in the first quarter of 2020 and decreases in pipeline, well connection, and compression projects, (iii) $18.2 million at the DBM water systems primarily due to reduced construction of additional water - disposal facilities and gathering projects, and (iv) $16.5 million at the DBM oil system primarily related to the completion of the Loving ROTF Trains III and IV that commenced operations during the first and third quarters of 2020, respectively, and decreases in pipeline and well connection projects.

(1) For information regarding equipment purchases from related parties, see Note 6—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

(2) For the six months ended June 30, 2021 and 2020, included $1.5 million and $3.6 million, respectively, of capitalized interest.

Capital expenditures decreased by $175.1 million for the six months ended June 30, 2021, primarily due to decreases of (i) $79.7 million at the West Texas complex primarily attributable to decreases in facility expansion and pipeline projects, (ii) $48.4 million at the DJ Basin complex primarily related to the completion of Latham Train II that commenced operations in the first quarter of 2020 and decreases in pipeline, well connection, and compression projects, (iii) $26.0 million at the DBM oil system primarily related to the completion of the Loving ROTF Trains III and IV that commenced operations during the first and third quarters of 2020, respectively, and decreases in pipeline and well connection projects, and (iv) $15.9 million at the DBM water systems primarily due to reduced construction of additional water - disposal facilities and gathering projects.

Historical cash flow .

The following table and discussion present a summary of our net cash flows provided by (used in) operating, investing, and financing activities:

Three Months Ended

Six Months Ended

thousands 2021 2020

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Operating activities .

Net cash provided by operating activities decreased for the three months ended March 31, 2021, primarily due to (i) lower cash operating income, (ii) the impact of changes in assets and liabilities, (iii) lower distributions from equity investments, (iv) higher interest expense, and (v) lower interest income.

Net cash provided by operating activities decreased for the six months ended June 30, 2021, primarily due to (i) lower cash operating income, (ii) lower distributions from equity investments, (iii) higher interest expense, and (iv) lower interest income.

These decreases were offset partially by (i) the impact of changes in assets and liabilities and (ii) cash paid during the six months ended June 30, 2020, to settle interest-rate swaps.

Refer to Operating Results within this Item 2 for a discussion of our results of operations as compared to the prior period.

Investing activities .

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

Net cash used in investing activities for the six months ended June 30, 2021, included the following:

• $137.9 million of capital expenditures, primarily related to construction, expansion, and asset - integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, and DBM oil system;

• $3.5 million of capital contributions primarily paid to Cactus II;

• $2.0 million of acquisitions from related parties;

• $21.4 million of distributions received from equity investments in excess of cumulative earnings;

• $8.0 million related to the sale of the Bison treating facility;

• $7.7 million of decreases to materials and supplies inventory.

Net cash used in investing activities for the three months ended March 31, 2020, included the following:

Net cash used in investing activities for the six months ended June 30, 2020, included the following:

• $313.1 million of capital expenditures, primarily related to construction and expansion at the West Texas and DJ Basin complexes, DBM water systems, and DBM oil system;

• $39.2 million of increases to materials and supplies inventory;

• $16.1 million of capital contributions primarily paid to Cactus II and FRP for construction activities;

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Financing activities .

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

Net cash used in financing activities for the six months ended June 30, 2021, included the following:

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

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• $16.2 million of unit repurchases;

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

• $5.3 million of distributions paid to the noncontrolling interest owner of WES Operating;

• $3.6 million of finance lease payments;

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• $4.5 million of contributions from related parties.

Net cash provided by financing activities for the three months ended March 31, 2020, included the following:

Net cash provided by financing activities for the six months ended June 30, 2020, included the following:

• $3.0 billion of repayments of outstanding borrowings under the Term loan facility;

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• $422.7 million of distributions paid to WES unitholders;

• $90.1 million to purchase and retire portions of WES Operating’s 5.375% Senior Notes due 2021 and 4.000% Senior Notes due 2022 via open - market repurchases;

• $5.8 million of distributions paid to the noncontrolling interest owners of WES Operating;

• $153.1 million to purchase and retire portions of WES Operating’s 5.375% Senior Notes due 2021, 4.000% Senior Notes due 2022, and Floating-Rate Senior Notes via open - market repurchases;

• $10.3 million of finance lease payments;

• $8.7 million of distributions paid to the noncontrolling interest owner of WES Operating;

• $2.8 million of distributions paid to the noncontrolling interest owner of Chipeta;

• $3.5 billion of net proceeds from the Fixed - Rate Senior Notes and Floating - Rate Senior Notes issued in January 2020, which were used to repay the $3.0 billion outstanding borrowings under the Term loan facility, repay outstanding amounts under the RCF, and for general partnership purposes;

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Debt and credit facilities.

As of March 31, 2021, the carrying value of outstanding debt was $7.4 billion.

As of June 30, 2021, the carrying value of outstanding debt was $7.4 billion.

See Note 11—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

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In mid - January 2020, WES Operating issued the Fixed - Rate 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050 and the Floating - Rate Senior Notes due 2023.

Including the effects of the issuance prices, underwriting discounts, and interest - rate adjustments, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 4.542%, 5.424%, and 6.629%, respectively, at March 31, 2021.

The interest rate on the Floating - Rate Senior Notes was 2.33% at March 31, 2021.

The interest rate on the Floating - Rate Senior Notes was 2.29% at June 30, 2021.

The effective interest rate of these notes is subject to adjustment from time to time due to a change in credit rating.

During the first quarter of 2021, WES Operating redeemed the total principal amount outstanding of the 5.375% Senior Notes due 2021 at par value, pursuant to the optional redemption terms in WES Operating’s indenture.

At March 31, 2021, WES Operating was in compliance with all covenants under the relevant governing indentures.

As of June 30, 2021, the 4.000% Senior Notes due 2022 were classified as short-term debt on the consolidated balance sheet due to management’s intent to retire the notes within the next twelve months.

At June 30, 2021, WES Operating was in compliance with all covenants under the relevant governing indentures.

We may, from time to time, seek to retire, rearrange, or amend some or all of our outstanding debt or debt agreements through cash purchases, exchanges, open - market repurchases, privately negotiated transactions, tender offers, or otherwise.

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The non - extending lender’s commitments mature in February 2024 and represent $100.0 million out of $2.0 billion of total commitments from all lenders.

As of March 31, 2021, 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.

At March 31, 2021, the interest rate on any outstanding RCF borrowings was 1.61% and the facility - fee rate was 0.25%.

At March 31, 2021, WES Operating was in compliance with all covenants under the RCF.

As of June 30, 2021, 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.

At June 30, 2021, the interest rate on any outstanding RCF borrowings was 1.60% and the facility - fee rate was 0.25%.

At June 30, 2021, WES Operating was in compliance with all covenants under the RCF.

The RCF contains certain covenants that limit, among other things, WES Operating’s ability, and that of certain of its subsidiaries, to incur additional indebtedness, grant certain liens, merge, consolidate, or allow any material change in the character of its business, enter into certain related - party transactions and use proceeds other than for partnership purposes.

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During the first quarter of 2020, WES entered into finance leases with third parties for equipment and vehicles extending through 2029.

As of March 31, 2021, we have future finance - lease payments of $6.3 million for the remainder of 2021 and a total of $28.2 million in years thereafter.

As of June 30, 2021, we have future lease payments of $4.4 million for the remainder of 2021 and a total of $28.7 million in years thereafter.

Credit risk .

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The differences between net income (loss) attributable to WES and WES Operating are reconciled as follows:

Three Months Ended

thousands March 31, 2021 December 31, 2020 March 31, 2020

Three Months Ended Six Months Ended

thousands June 30, 2021 March 31, 2021 June 30, 2021 June 30, 2020

Net income (loss) attributable to WES $ 231,259 $ 185,791 $ 417,050 $ 16,510

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The differences between net cash provided by (used in) operating and financing activities for WES and WES Operating are reconciled as follows:

Three Months Ended

Six Months Ended

thousands 2021 2020

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Noncontrolling interest.

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

WES Operating’s noncontrolling interest consists of the 25% third - party interest in Chipeta.

See Note 1—Description of Business and Basis of Presentation in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

WES Operating distributions.

WES Operating distributes all of its available cash (beyond proper reserves as defined in its partnership agreement) to WES Operating unitholders of record on the applicable record date within 45 days following each quarter’s end.

WES Operating distributes all of its available cash on a quarterly basis to WES Operating unitholders in proportion to their share of limited partner interests in WES Operating.

See Note 4—Partnership Distributions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q .

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the amounts of assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recognized during the periods reported.

There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

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-Q

Item 2. Management’s Discussion and Analysis