Western Midstream Partners, LP 10-Q

Item 1. Financial Statements WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, thousands except per-unit amounts 2021 2020 2021 2020 Revenues and other Service revenues – fee based $ 650,482 $ 636,522 $ 1,841,742 $ 1,980,546 Service revenues – product based 28,812 12,316 88,267 35,237 Product sales 84,298 30,106 227,359 108,491 Other 248 100 577 838 Total revenues and other (1) 763,840 679,044 2,157,945 2,125,112 Equity income, net – related parties 48,506 61,026 159,337 176,788 Operating expenses Cost of product 83,232 31,739 250,245 153,611 Operation and maintenance 140,838 132,293 434,198 436,670 General and administrative 50,409 41,578 139,973 118,466 Property and other taxes 13,641 19,392 45,992 57,263 Depreciation and amortization 139,002 132,564 407,404 384,688 Long - lived asset and other impairments 1,594 34,640 29,198 200,575 Goodwill impairment — — — 441,017 Total operating expenses (2) 428,716 392,206 1,307,010 1,792,290 Gain (loss) on divestiture and other, net ( 364 ) ( 768 ) 278 ( 3,651 ) Operating income (loss) 383,266 347,096 1,010,550 505,959 Interest income – Anadarko note receivable — 3,286 — 11,736 Interest expense ( 93,257 ) ( 95,571 ) ( 287,040 ) ( 278,811 ) Gain (loss) on early extinguishment of debt ( 24,655 ) 1,632 ( 24,944 ) 10,372 Other income (expense), net 110 720 ( 1,013 ) 612 Income (loss) before income taxes 265,464 257,163 697,553 249,868 Income tax expense (benefit) 1,826 3,028 4,403 3,792 Net income (loss) 263,638 254,135 693,150 246,076 Net income (loss) attributable to noncontrolling interests 7,913 7,524 20,375 ( 17,045 ) Net income (loss) attributable to Western Midstream Partners, LP $ 255,725 $ 246,611 $ 672,775 $ 263,121 Limited partners’ interest in net income (loss): Net income (loss) attributable to Western Midstream Partners, LP $ 255,725 $ 246,611 $ 672,775 $ 263,121 General partner interest in net (income) loss ( 5,527 ) ( 5,132 ) ( 14,484 ) ( 5,462 ) Limited partners’ interest in net income (loss) (3) 250,198 241,479 658,291 257,659 Net income (loss) per common unit – basic (3) $ 0.61 $ 0.55 $ 1.60 $ 0.58 Net income (loss) per common unit – diluted (3) $ 0.61 $ 0.55 $ 1.59 $ 0.58 Weighted - average common units outstanding – basic (3) 411,909 438,857 412,690 442,255 Weighted - average common units outstanding – diluted (3) 412,714 438,926 413,150 442,275 _________________________________________________________________________________________ (1) Total revenues and other includes related - party amounts of $ 431.7 million and $ 1.2 billion for the three and nine months ended September 30, 2021, respectively, and $ 455.6 million and $ 1.4 billion for the three and nine months ended September 30, 2020, respectively. See Note 6 . (2) Total operating expenses includes related - party amounts of $ 22.7 million and $ 91.5 million for the three and nine months ended September 30, 2021, respectively, and $ 10.4 million and $ 161.5 million for the three and nine months ended September 30, 2020, respectively. See Note 6 . (3) See Note 5. See accompanying Notes to Consolidated Financial Statements. 7 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED BALANCE SHEETS (UNAUDITED) thousands except number of units September 30, 2021 December 31, 2020 ASSETS Current assets Cash and cash equivalents $ 99,862 $ 444,922 Accounts receivable, net 583,652 452,880 Other current assets 73,196 45,262 Total current assets 756,710 943,064 Property, plant, and equipment Cost 12,732,926 12,641,745 Less accumulated depreciation 4,208,845 3,931,800 Net property, plant, and equipment 8,524,081 8,709,945 Goodwill 4,783 4,783 Other intangible assets 752,659 776,409 Equity investments 1,181,181 1,224,813 Other assets (1) 199,964 171,013 Total assets (2) $ 11,419,378 $ 11,830,027 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 341,220 $ 210,691 Short - term debt 726,429 438,870 Accrued ad valorem taxes 49,065 41,427 Accrued liabilities 190,628 269,947 Total current liabilities 1,307,342 960,935 Long-term liabilities Long - term debt 6,399,874 7,415,832 Deferred income taxes 24,470 22,195 Asset retirement obligations 271,022 260,283 Other liabilities 320,224 275,570 Total long - term liabilities 7,015,590 7,973,880 Total liabilities (3) 8,322,932 8,934,815 Equity and partners’ capital Common units ( 408,610,916 and 413,839,863 units issued and outstanding at September 30, 2021, and December 31, 2020, respectively) 2,965,944 2,778,339 General partner units ( 9,060,641 units issued and outstanding at September 30, 2021, and December 31, 2020) ( 11,286 ) ( 17,208 ) Total partners’ capital 2,954,658 2,761,131 Noncontrolling interests 141,788 134,081 Total equity and partners’ capital 3,096,446 2,895,212 Total liabilities, equity, and partners’ capital $ 11,419,378 $ 11,830,027 ________________________________________________________________________________________ (1) Other assets includes $ 11.2 million and $ 4.2 million of NGLs line - fill inventory as of September 30, 2021, and December 31, 2020, respectively. Other assets also includes $ 63.1 million and $ 71.9 million of materials and supplies inventory as of September 30, 2021, and December 31, 2020, respectively. (2) Total assets includes related - party amounts of $ 1.6 billion as of September 30, 2021, and December 31, 2020, which includes related - party Accounts receivable, net of $ 289.4 million and $ 291.3 million as of September 30, 2021, and December 31, 2020, respectively. See Note 6 . (3) Total liabilities includes related - party amounts of $ 250.7 million and $ 164.7 million as of September 30, 2021, and December 31, 2020, respectively. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 8 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) Partners’ Capital thousands Common Units General Partner Units Noncontrolling Interests Total Balance at December 31, 2020 $ 2,778,339 $ ( 17,208 ) $ 134,081 $ 2,895,212 Net income (loss) 181,798 3,993 5,444 191,235 Distributions to Chipeta noncontrolling interest owner — — ( 276 ) ( 276 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,551 ) ( 2,551 ) Distributions to Partnership unitholders ( 128,447 ) ( 2,818 ) — ( 131,265 ) Unit repurchases (1) ( 16,241 ) — — ( 16,241 ) Contributions of equity - based compensation from Occidental 3,210 — — 3,210 Equity - based compensation expense 3,524 — — 3,524 Net contributions from (distributions to) related parties 1,627 — — 1,627 Other ( 2,355 ) — — ( 2,355 ) Balance at March 31, 2021 $ 2,821,455 $ ( 16,033 ) $ 136,698 $ 2,942,120 Net income (loss) 226,295 4,964 7,018 238,277 Distributions to Chipeta noncontrolling interest owner — — ( 1,245 ) ( 1,245 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,741 ) ( 2,741 ) Distributions to Partnership unitholders ( 130,115 ) ( 2,854 ) — ( 132,969 ) Contributions of equity - based compensation from Occidental 2,375 — — 2,375 Equity - based compensation expense 4,746 — — 4,746 Net contributions from (distributions to) related parties 2,881 — — 2,881 Other ( 571 ) — — ( 571 ) Balance at June 30, 2021 $ 2,927,066 $ ( 13,923 ) $ 139,730 $ 3,052,873 Net income (loss) 250,198 5,527 7,913 263,638 Distributions to Chipeta noncontrolling interest owner — — ( 1,213 ) ( 1,213 ) Distributions to noncontrolling interest owner of WES Operating — — ( 4,642 ) ( 4,642 ) Distributions to Partnership unitholders ( 131,772 ) ( 2,890 ) — ( 134,662 ) Unit repurchases (1) ( 88,125 ) — — ( 88,125 ) Contributions of equity - based compensation from Occidental 2,311 — — 2,311 Equity - based compensation expense 4,668 — — 4,668 Net contributions from (distributions to) related parties 2,165 — — 2,165 Other ( 567 ) — — ( 567 ) Balance at September 30, 2021 $ 2,965,944 $ ( 11,286 ) $ 141,788 $ 3,096,446 _________________________________________________________________________________________ (1) See Note 5 . See accompanying Notes to Consolidated Financial Statements. 9 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) Partners’ Capital thousands Common Units General Partner Units Noncontrolling Interests Total Balance at December 31, 2019 $ 3,209,947 $ ( 14,224 ) $ 149,570 $ 3,345,293 Net income (loss) ( 251,396 ) ( 5,131 ) ( 32,873 ) ( 289,400 ) Distributions to Chipeta noncontrolling interest owner — — ( 1,738 ) ( 1,738 ) Distributions to noncontrolling interest owner of WES Operating — — ( 5,807 ) ( 5,807 ) Distributions to Partnership unitholders ( 276,151 ) ( 5,635 ) — ( 281,786 ) Acquisitions from related parties ( 3,987 ) — 3,987 — Contributions of equity - based compensation from Occidental 4,105 — — 4,105 Equity - based compensation expense 1,129 — — 1,129 Net contributions from (distributions to) related parties (1) 489 — 20,000 20,489 Balance at March 31, 2020 $ 2,684,136 $ ( 24,990 ) $ 133,139 $ 2,792,285 Net income (loss) 267,576 5,461 8,304 281,341 Distributions to Chipeta noncontrolling interest owner — — ( 1,037 ) ( 1,037 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,869 ) ( 2,869 ) Distributions to Partnership unitholders ( 138,075 ) ( 2,818 ) — ( 140,893 ) Contributions of equity-based compensation from Occidental 3,562 — — 3,562 Equity-based compensation expense 2,115 — — 2,115 Net contributions from (distributions to) related parties 1,343 — — 1,343 Other ( 330 ) — — ( 330 ) Balance at June 30, 2020 $ 2,820,327 $ ( 22,347 ) $ 137,537 $ 2,935,517 Net income (loss) 241,479 5,132 7,524 254,135 Distributions to Chipeta noncontrolling interest owner — — ( 1,148 ) ( 1,148 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,869 ) ( 2,869 ) Distributions to Partnership unitholders ( 138,083 ) ( 2,817 ) — ( 140,900 ) Unit exchange with Occidental (2) ( 256,640 ) — ( 5,238 ) ( 261,878 ) Contributions of equity-based compensation from Occidental 3,488 — — 3,488 Equity-based compensation expense 2,128 — — 2,128 Net contributions from (distributions to) related parties 842 — — 842 Other 1,141 — — 1,141 Balance at September 30, 2020 $ 2,674,682 $ ( 20,032 ) $ 135,806 $ 2,790,456 _________________________________________________________________________________________ (1) See Services Agreement within Note 6 . (2) See Note 6 . See accompanying Notes to Consolidated Financial Statements. 10 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, thousands 2021 2020 Cash flows from operating activities Net income (loss) $ 693,150 $ 246,076 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 407,404 384,688 Long - lived asset and other impairments 29,198 200,575 Goodwill impairment — 441,017 Non - cash equity - based compensation expense 20,834 16,527 Deferred income taxes 2,275 2,393 Accretion and amortization of long - term obligations, net 5,873 6,482 Equity income, net – related parties ( 159,337 ) ( 176,788 ) Distributions from equity - investment earnings – related parties 164,772 187,816 (Gain) loss on divestiture and other, net ( 278 ) 3,651 (Gain) loss on early extinguishment of debt 24,944 ( 10,372 ) Cash paid to settle interest-rate swaps — ( 19,181 ) Other 46 192 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 130,773 ) ( 192,338 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net 56,495 37,814 Change in other items, net ( 9,609 ) 3,341 Net cash provided by operating activities 1,104,994 1,131,893 Cash flows from investing activities Capital expenditures ( 217,757 ) ( 372,262 ) Purchases from related parties ( 2,000 ) — Contributions to equity investments – related parties ( 3,683 ) ( 19,017 ) Distributions from equity investments in excess of cumulative earnings – related parties 30,075 21,750 Proceeds from the sale of assets to third parties 8,002 — (Increase) decrease in materials and supplies inventory and other ( 1,924 ) ( 57,141 ) Net cash used in investing activities ( 187,287 ) ( 426,670 ) Cash flows from financing activities Borrowings, net of debt issuance costs 400,000 3,681,173 Repayments of debt ( 1,132,966 ) ( 3,780,390 ) Increase (decrease) in outstanding checks ( 11,757 ) 691 Distributions to Partnership unitholders (1) ( 398,896 ) ( 563,579 ) Distributions to Chipeta noncontrolling interest owner ( 2,734 ) ( 3,923 ) Distributions to noncontrolling interest owner of WES Operating ( 9,934 ) ( 11,545 ) Net contributions from (distributions to) related parties 6,673 22,674 Finance lease payments (2) ( 5,295 ) ( 12,241 ) Unit repurchases ( 104,366 ) — Other ( 3,492 ) — Net cash provided by (used in) financing activities ( 1,262,767 ) ( 667,140 ) Net increase (decrease) in cash and cash equivalents ( 345,060 ) 38,083 Cash and cash equivalents at beginning of period 444,922 99,962 Cash and cash equivalents at end of period $ 99,862 $ 138,045 Supplemental disclosures Non-cash unit exchange with Occidental (1) $ — $ ( 261,878 ) Interest paid, net of capitalized interest 348,904 307,713 Income taxes paid (reimbursements received) 932 ( 384 ) Accrued capital expenditures 29,085 20,275 _________________________________________________________________________________________ (1) See Note 6 . (2) For the nine months ended September 30, 2020, includes related-party payments of $ 6.4 million. See accompanying Notes to Consolidated Financial Statements. 11 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, thousands 2021 2020 2021 2020 Revenues and other Service revenues – fee based $ 650,482 $ 636,522 $ 1,841,742 $ 1,980,546 Service revenues – product based 28,812 12,316 88,267 35,237 Product sales 84,298 30,106 227,359 108,491 Other 248 100 577 838 Total revenues and other (1) 763,840 679,044 2,157,945 2,125,112 Equity income, net – related parties 48,506 61,026 159,337 176,788 Operating expenses Cost of product 83,232 31,739 250,245 153,611 Operation and maintenance 140,838 132,293 434,198 436,670 General and administrative 50,689 41,483 137,767 115,783 Property and other taxes 13,641 19,392 45,992 57,263 Depreciation and amortization 139,002 132,564 407,404 384,688 Long - lived asset and other impairments 1,594 34,640 29,198 200,575 Goodwill impairment — — — 441,017 Total operating expenses (2) 428,996 392,111 1,304,804 1,789,607 Gain (loss) on divestiture and other, net ( 364 ) ( 768 ) 278 ( 3,651 ) Operating income (loss) 382,986 347,191 1,012,756 508,642 Interest income – Anadarko note receivable — 3,286 — 11,736 Interest expense ( 93,257 ) ( 95,571 ) ( 287,040 ) ( 278,811 ) Gain (loss) on early extinguishment of debt ( 24,655 ) 1,632 ( 24,944 ) 10,372 Other income (expense), net 106 718 ( 1,022 ) 606 Income (loss) before income taxes 265,180 257,256 699,750 252,545 Income tax expense (benefit) 1,823 3,028 4,400 3,792 Net income (loss) 263,357 254,228 695,350 248,753 Net income (loss) attributable to noncontrolling interest 2,699 2,488 6,596 ( 22,471 ) Net income (loss) attributable to Western Midstream Operating, LP $ 260,658 $ 251,740 $ 688,754 $ 271,224 ________________________________________________________________________________________ (1) Total revenues and other includes related - party amounts of $ 431.7 million and $ 1.2 billion for the three and nine months ended September 30, 2021, respectively, and $ 455.6 million and $ 1.4 billion for the three and nine months ended September 30, 2020, respectively. See Note 6 . (2) Total operating expenses includes related - party amounts of $ 23.7 million and $ 93.6 million for the three and nine months ended September 30, 2021, respectively, and $ 11.1 million and $ 162.2 million for the three and nine months ended September 30, 2020, respectively. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 12 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED BALANCE SHEETS (UNAUDITED) thousands except number of units September 30, 2021 December 31, 2020 ASSETS Current assets Cash and cash equivalents $ 92,863 $ 418,537 Accounts receivable, net 583,652 407,549 Other current assets 70,907 43,244 Total current assets 747,422 869,330 Property, plant, and equipment Cost 12,732,926 12,641,745 Less accumulated depreciation 4,208,845 3,931,800 Net property, plant, and equipment 8,524,081 8,709,945 Goodwill 4,783 4,783 Other intangible assets 752,659 776,409 Equity investments 1,181,181 1,224,813 Other assets (1) 199,964 171,013 Total assets (2) $ 11,410,090 $ 11,756,293 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 382,406 $ 210,532 Short - term debt 726,429 438,870 Accrued ad valorem taxes 49,065 41,427 Accrued liabilities 145,241 230,833 Total current liabilities 1,303,141 921,662 Long-term liabilities Long - term debt 6,399,874 7,415,832 Deferred income taxes 24,470 22,195 Asset retirement obligations 271,022 260,283 Other liabilities 320,224 275,570 Total long - term liabilities 7,015,590 7,973,880 Total liabilities (3) 8,318,731 8,895,542 Equity and partners’ capital Common units ( 318,675,578 units issued and outstanding at September 30, 2021, and December 31, 2020) 3,057,945 2,831,199 Total partners’ capital 3,057,945 2,831,199 Noncontrolling interest 33,414 29,552 Total equity and partners’ capital 3,091,359 2,860,751 Total liabilities, equity, and partners’ capital $ 11,410,090 $ 11,756,293 _________________________________________________________________________________________ (1) Other assets includes $ 11.2 million and $ 4.2 million of NGLs line - fill inventory as of September 30, 2021, and December 31, 2020, respectively. Other assets also includes $ 63.1 million and $ 71.9 million of materials and supplies inventory as of September 30, 2021, and December 31, 2020, respectively. (2) Total assets includes related - party amounts of $ 1.6 billion and $ 1.5 billion as of September 30, 2021, and December 31, 2020, respectively, which includes related - party Accounts receivable, net of $ 289.4 million and $ 246.1 million as of September 30, 2021, and December 31, 2020, respectively. See Note 6 . (3) Total liabilities includes related - party amounts of $ 291.6 million and $ 164.3 million as of September 30, 2021, and December 31, 2020, respectively. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 13 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) thousands Common Units Noncontrolling Interest Total Balance at December 31, 2020 $ 2,831,199 $ 29,552 $ 2,860,751 Net income (loss) 190,485 1,633 192,118 Distributions to Chipeta noncontrolling interest owner — ( 276 ) ( 276 ) Distributions to WES Operating unitholders ( 127,470 ) — ( 127,470 ) Contributions of equity - based compensation from Occidental 3,210 — 3,210 Contributions of equity - based compensation from WES 10,826 — 10,826 Net contributions from (distributions to) related parties 1,627 — 1,627 Balance at March 31, 2021 $ 2,909,877 $ 30,909 $ 2,940,786 Net income (loss) 237,611 2,264 239,875 Distributions to Chipeta noncontrolling interest owner — ( 1,245 ) ( 1,245 ) Distributions to WES Operating unitholders ( 137,030 ) — ( 137,030 ) Contributions of equity - based compensation from Occidental 2,375 — 2,375 Contributions of equity - based compensation from WES 4,613 — 4,613 Net contributions from (distributions to) related parties 2,881 — 2,881 Balance at June 30, 2021 $ 3,020,327 $ 31,928 $ 3,052,255 Net income (loss) 260,658 2,699 263,357 Distributions to Chipeta noncontrolling interest owner — ( 1,213 ) ( 1,213 ) Distributions to WES Operating unitholders ( 232,055 ) — ( 232,055 ) Contributions of equity - based compensation from Occidental 2,311 — 2,311 Contributions of equity - based compensation from WES 4,539 — 4,539 Net contributions from (distributions to) related parties 2,165 — 2,165 Balance at September 30, 2021 $ 3,057,945 $ 33,414 $ 3,091,359 See accompanying Notes to Consolidated Financial Statements. 14 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) thousands Common Units Noncontrolling Interest Total Balance at December 31, 2019 $ 3,286,620 $ 55,199 $ 3,341,819 Net income (loss) ( 260,330 ) ( 27,665 ) ( 287,995 ) Distributions to Chipeta noncontrolling interest owner — ( 1,738 ) ( 1,738 ) Distributions to WES Operating unitholders ( 290,314 ) — ( 290,314 ) Acquisitions from related parties ( 3,987 ) 3,987 — Contributions of equity - based compensation from Occidental 4,105 — 4,105 Net contributions from (distributions to) related parties (1) 20,489 — 20,489 Balance at March 31, 2020 $ 2,756,583 $ 29,783 $ 2,786,366 Net income (loss) 279,814 2,706 282,520 Distributions to Chipeta noncontrolling interest owner — ( 1,037 ) ( 1,037 ) Distributions to WES Operating unitholders ( 143,404 ) — ( 143,404 ) Contributions of equity-based compensation from Occidental 3,562 — 3,562 Net contributions from (distributions to) related parties 1,343 — 1,343 Balance at June 30, 2020 $ 2,897,898 $ 31,452 $ 2,929,350 Net income (loss) 251,740 2,488 254,228 Distributions to Chipeta noncontrolling interest owner — ( 1,148 ) ( 1,148 ) Distributions to WES Operating unitholders ( 143,404 ) — ( 143,404 ) Contributions of equity-based compensation from Occidental 3,488 — 3,488 Unit exchange with Occidental (2) ( 261,878 ) — ( 261,878 ) Net contributions from (distributions to) related parties 842 — 842 Other 1,545 — 1,545 Balance at September 30, 2020 $ 2,750,231 $ 32,792 $ 2,783,023 _______________________________________________________________________________________ (1) See Services Agreement within Note 6 . (2) See Note 6 . See accompanying Notes to Consolidated Financial Statements. 15 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, thousands 2021 2020 Cash flows from operating activities Net income (loss) $ 695,350 $ 248,753 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 407,404 384,688 Long - lived asset and other impairments 29,198 200,575 Goodwill impairment — 441,017 Non - cash equity - based compensation expense 27,874 11,155 Deferred income taxes 2,275 2,393 Accretion and amortization of long - term obligations, net 5,873 6,482 Equity income, net – related parties ( 159,337 ) ( 176,788 ) Distributions from equity - investment earnings – related parties 164,772 187,816 (Gain) loss on divestiture and other, net ( 278 ) 3,651 (Gain) loss on early extinguishment of debt 24,944 ( 10,372 ) Cash paid to settle interest-rate swaps — ( 19,181 ) Other 46 192 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 176,104 ) ( 155,008 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net 91,508 4,836 Change in other items, net ( 9,336 ) 3,763 Net cash provided by operating activities 1,104,189 1,133,972 Cash flows from investing activities Capital expenditures ( 217,757 ) ( 372,262 ) Purchases from related parties ( 2,000 ) — Contributions to equity investments – related parties ( 3,683 ) ( 19,017 ) Distributions from equity investments in excess of cumulative earnings – related parties 30,075 21,750 Proceeds from the sale of assets to third parties 8,002 — (Increase) decrease in materials and supplies inventory and other ( 1,924 ) ( 57,141 ) Net cash used in investing activities ( 187,287 ) ( 426,670 ) Cash flows from financing activities Borrowings, net of debt issuance costs 400,000 3,681,173 Repayments of debt ( 1,132,966 ) ( 3,780,390 ) Increase (decrease) in outstanding checks ( 11,699 ) 1,007 Distributions to WES Operating unitholders (1) ( 496,555 ) ( 577,122 ) Distributions to Chipeta noncontrolling interest owner ( 2,734 ) ( 3,923 ) Net contributions from (distributions to) related parties 6,673 22,674 Finance lease payments (2) ( 5,295 ) ( 12,241 ) Net cash provided by (used in) financing activities ( 1,242,576 ) ( 668,822 ) Net increase (decrease) in cash and cash equivalents ( 325,674 ) 38,480 Cash and cash equivalents at beginning of period 418,537 98,122 Cash and cash equivalents at end of period $ 92,863 $ 136,602 Supplemental disclosures Non-cash unit exchange with Occidental (1) $ — $ ( 261,878 ) Interest paid, net of capitalized interest 348,904 307,713 Income taxes paid (reimbursements received) 932 ( 384 ) Accrued capital expenditures 29,085 20,275 ________________________________________________________________________________________ (1) See Note 6. (2) For the nine months ended September 30, 2020, includes related-party payments of $ 6.4 million. See accompanying Notes to Consolidated Financial Statements. 16 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION General. Western Midstream Partners, LP is a Delaware master limited partnership formed in September 2012. Western Midstream Operating, LP (together with its subsidiaries, “WES Operating”) is a Delaware limited partnership formed in 2007 to acquire, own, develop, and operate midstream assets. Western Midstream Partners, LP owns, directly and indirectly, a 98.0 % limited partner interest in WES Operating, and directly owns all of the outstanding equity interests of Western Midstream Operating GP, LLC, which holds the entire non - economic general partner interest in WES Operating. For purposes of these consolidated financial statements, the “Partnership” refers to Western Midstream Partners, LP in its individual capacity or to Western Midstream Partners, LP and its subsidiaries, including Western Midstream Operating GP, LLC and WES Operating, as the context requires. “WES Operating GP” refers to Western Midstream Operating GP, LLC, individually as the general partner of WES Operating. The Partnership’s general partner, Western Midstream Holdings, LLC (the “general partner”), is a wholly owned subsidiary of Occidental Petroleum Corporation. “Occidental” refers to Occidental Petroleum Corporation, as the context requires, and its subsidiaries, excluding the general partner. “Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding Western Midstream Holdings, LLC. Anadarko became a wholly owned subsidiary of Occidental as a result of Occidental’s acquisition by merger of Anadarko on August 8, 2019. “Related parties” refers to Occidental (see Note 6 ), the Partnership’s investments accounted for under the equity method of accounting (see Note 7 ), and the Partnership and WES Operating for transactions that eliminate upon consolidation (see Note 6 ). The Partnership is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural - gas liquids (“NGLs”), and crude oil; and gathering and disposing of produced water. In its capacity as a natural - gas processor, the Partnership also buys and sells natural gas, NGLs, and condensate on behalf of itself and as an agent for its customers under certain contracts. As of September 30, 2021, the Partnership’s assets and investments consisted of the following: Wholly Owned and Operated Operated Interests Non-Operated Interests Equity Interests Gathering systems (1) 17 2 3 1 Treating facilities 36 3 — — Natural - gas processing plants/trains 24 3 — 5 NGLs pipelines 2 — — 5 Natural - gas pipelines 5 — — 1 Crude - oil pipelines 3 1 — 4 _________________________________________________________________________________________ (1) Includes the DBM water systems. These assets and investments are located in Texas, New Mexico, the Rocky Mountains (Colorado, Utah, and Wyoming), and North - central Pennsylvania. 17 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Basis of presentation. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of the Partnership and entities in which it holds a controlling financial interest, including WES Operating, WES Operating GP, proportionately consolidated interests, and equity investments (see table below). All significant intercompany transactions have been eliminated. The following table outlines the ownership interests and the accounting method of consolidation used in the consolidated financial statements for entities not wholly owned: Percentage Interest Full consolidation Chipeta (1) 75.00 % Proportionate consolidation (2) Springfield system 50.10 % Marcellus Interest systems 33.75 % Equity investments (3) Mi Vida JV LLC (“Mi Vida”) 50.00 % Ranch Westex JV LLC (“Ranch Westex”) 50.00 % Front Range Pipeline LLC (“FRP”) 33.33 % Red Bluff Express Pipeline, LLC (“Red Bluff Express”) 30.00 % Enterprise EF78 LLC (“Mont Belvieu JV”) 25.00 % Rendezvous Gas Services, LLC (“Rendezvous”) 22.00 % Texas Express Pipeline LLC (“TEP”) 20.00 % Texas Express Gathering LLC (“TEG”) 20.00 % Whitethorn Pipeline Company LLC (“Whitethorn LLC”) 20.00 % Saddlehorn Pipeline Company, LLC (“Saddlehorn”) 20.00 % Cactus II Pipeline LLC (“Cactus II”) 15.00 % Panola Pipeline Company, LLC (“Panola”) 15.00 % White Cliffs Pipeline, LLC (“White Cliffs”) 10.00 % _________________________________________________________________________________________ (1) The 25 % third - party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements. See Noncontrolling interests below. (2) The Partnership proportionately consolidates its associated share of the assets, liabilities, revenues, and expenses attributable to these assets. (3) Investments in non - controlled entities over which the Partnership exercises significant influence are accounted for under the equity method of accounting. “Equity - investment throughput” refers to the Partnership’s share of average throughput for these investments. Certain information and note disclosures commonly included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying consolidated financial statements and notes should be read in conjunction with the Partnership’s 2020 Form 10 - K, as filed with the SEC on February 26, 2021. Management believes that the disclosures made are adequate to make the information not misleading. 18 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION The consolidated financial results of WES Operating are included in the Partnership’s consolidated financial statements. Throughout these notes to consolidated financial statements, and to the extent material, any differences between the consolidated financial results of the Partnership and WES Operating are discussed separately. The Partnership’s consolidated financial statements differ from those of WES Operating primarily as a result of (i) the presentation of noncontrolling interest ownership (see Noncontrolling interests below), (ii) the elimination of WES Operating GP’s investment in WES Operating with WES Operating GP’s underlying capital account, (iii) the general and administrative expenses incurred by the Partnership, which are separate from, and in addition to, those incurred by WES Operating, (iv) the inclusion of the impact of Partnership equity balances and Partnership distributions, and (v) transactions between the Partnership and WES Operating that eliminate upon consolidation. Presentation of the Partnership’s assets. The Partnership’s assets include assets owned and ownership interests accounted for by the Partnership under the equity method of accounting, through its 98.0 % partnership interest in WES Operating, as of September 30, 2021 (see Note 7 ). The Partnership also owns and controls the entire non - economic general partner interest in WES Operating GP, and the Partnership’s general partner is owned by Occidental. Use of estimates. In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, using historical experience and other reasonable methods. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Effects on the business, financial condition, and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information included herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements. Noncontrolling interests. The Partnership’s noncontrolling interests in the consolidated financial statements consist of (i) the 25 % third - party interest in Chipeta and (ii) the 2.0 % Occidental subsidiary - owned limited partner interest in WES Operating. WES Operating’s noncontrolling interest in the consolidated financial statements consists of the 25 % third - party interest in Chipeta. See Note 5. Segments. The Partnership’s operations continue to be organized into a single operating segment, the assets of which gather, compress, treat, process, and transport natural gas; gather, stabilize, and transport condensate, NGLs, and crude oil; and gather and dispose of produced water in the United States. Equity-based compensation. During the nine months ended September 30, 2021, the Partnership issued 357,472 common units under its long-term incentive plans. Compensation expense was $ 4.7 million and $ 12.9 million for the three and nine months ended September 30, 2021, respectively, and $ 2.1 million and $ 5.4 million for the three and nine months ended September 30, 2020, respectively. On March 22, 2021, the Board of Directors approved the Western Midstream Partners, LP 2021 Long - Term Incentive Plan (the “2021 LTIP”). Subject to the capitalization adjustment provisions included in the 2021 LTIP, the total aggregate number of common units that may be delivered with respect to awards under the 2021 LTIP is 9,500,000 (the “2021 LTIP Limit”). Common units withheld from an award or surrendered by a participant to satisfy tax withholding obligations or to satisfy the payment of any exercise price with respect to an award will not be considered to be common units delivered under the 2021 LTIP for purposes of the 2021 LTIP Limit. If any award is forfeited, cancelled, exercised, settled in cash, or otherwise terminates or expires without the actual delivery of common units, the common units subject to such award will again be available for awards under the 2021 LTIP. The 2021 LTIP provides for the grant of unit options, unit appreciation rights, restricted units, phantom units, other unit - based awards, cash awards, and a unit award or a substitute award to employees and directors of the Partnership and its general partner. Affiliates of Occidental who held a majority of the Partnership’s outstanding common units as of March 22, 2021, approved the 2021 LTIP via written consent. On April 7, 2021, the Partnership mailed an information statement on Schedule 14C to its unitholders of record as of March 22, 2021. The 2021 LTIP became effective on April 27, 2021. 19 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Defined-contribution plan. Beginning in the first quarter of 2020, employees of the Partnership are eligible to participate in the Western Midstream Savings Plan, a defined - contribution benefit plan maintained by the Partnership. All regular employees may participate in the plan by making elective contributions that are matched by the Partnership, subject to certain limitations. The Partnership also makes other contributions based on plan guidelines. The Partnership recognized expense related to the plan of $ 5.3 million and $ 18.3 million for the three and nine months ended September 30, 2021, respectively, and $ 3.8 million and $ 8.2 million for the three and nine months ended September 30, 2020, respectively. 2. REVENUE FROM CONTRACTS WITH CUSTOMERS The following table summarizes revenue from contracts with customers: Three Months Ended September 30, Nine Months Ended September 30, thousands 2021 2020 2021 2020 Revenue from customers Service revenues – fee based $ 605,967 $ 582,725 $ 1,707,987 $ 1,806,097 Service revenues – product based 28,812 12,316 88,267 35,237 Product sales 84,298 30,106 227,359 108,491 Total revenue from customers 719,077 625,147 2,023,613 1,949,825 Revenue from other than customers Lease revenue (1) 44,515 53,797 133,755 174,449 Other 248 100 577 838 Total revenues and other $ 763,840 $ 679,044 $ 2,157,945 $ 2,125,112 _________________________________________________________________________________________ (1) Includes fixed - and variable - lease revenue from an operating and maintenance agreement entered into with Occidental. See Operating leases within Note 6. Certain of the Partnership’s midstream services contracts have minimum - volume commitment demand fees and fees that require periodic rate redeterminations based on the related facility cost - of - service rate provisions. During the year ended December 31, 2020, and the six months ended June 30, 2021, the Partnership constrained revenue on certain cost-of-service agreements based on the status of commercial negotiations relating to a legal dispute with one of the contract counterparties. During the three months ended September 30, 2021, the Partnership determined it was no longer necessary to constrain revenue under these cost-of-service agreements. The Partnership updated its estimate of variable consideration and a cumulative catch-up revenue adjustment of $ 18.9 million was recorded to Service revenues – fee based. Future revenue reversals could occur to the extent the outcome of the legal proceedings and commercial negotiations differ from our current assumptions. 20 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. REVENUE FROM CONTRACTS WITH CUSTOMERS Contract balances. Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $ 572.8 million and $ 428.2 million as of September 30, 2021, and December 31, 2020, respectively. Contract assets primarily relate to (i) revenue accrued but not yet billed under cost - of - service contracts with fixed and variable fees and (ii) accrued deficiency fees the Partnership expects to charge customers once the related performance periods are completed. The following table summarizes activity related to contract assets from contracts with customers: thousands Contract assets balance at December 31, 2020 $ 56,344 Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period (1) ( 3,858 ) Additional estimated revenues recognized (2) 17,472 Contract assets balance at September 30, 2021 $ 69,958 Contract assets at September 30, 2021 Other current assets $ 23,766 Other assets 46,192 Total contract assets from contracts with customers $ 69,958 _________________________________________________________________________________________ (1) Includes $( 3.9 ) million for the three months ended September 30, 2021. (2) Includes $ 8.9 million for the three months ended September 30, 2021. Contract liabilities primarily relate to (i) aid - in - construction payments received from customers that must be recognized over the expected period of customer benefit, (ii) fixed and variable fees under cost - of - service contracts that are received from customers for which revenue recognition is deferred, and (iii) fees that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of customer benefit. The following table summarizes activity related to contract liabilities from contracts with customers: thousands Contract liabilities balance at December 31, 2020 $ 266,937 Cash received or receivable, excluding revenues recognized during the period (1) 60,786 Revenues recognized that were included in the contract liability balance at the beginning of the period (2) ( 13,553 ) Cumulative catch-up adjustment for change in estimated consideration (3) ( 17,209 ) Contract liabilities balance at September 30, 2021 $ 296,961 Contract liabilities at September 30, 2021 Accrued liabilities $ 22,854 Other liabilities 274,107 Total contract liabilities from contracts with customers $ 296,961 _________________________________________________________________________________________ (1) Includes $ 26.7 million for the three months ended September 30, 2021. (2) Includes $( 5.5 ) million for the three months ended September 30, 2021, $( 1.7 ) million of which is related to the cumulative catch-up revenue adjustment recognized for the nine months ended September 30, 2021. (3) Includes $( 17.2 ) million for the three months ended September 30, 2021. 21 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. REVENUE FROM CONTRACTS WITH CUSTOMERS Transaction price allocated to remaining performance obligations. Revenues expected to be recognized from certain performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2021, are presented in the following table. The Partnership applies the optional exemptions in Revenue from Contracts with Customers (Topic 606) and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Therefore, the following table represents only a portion of expected future revenues from existing contracts as most future revenues from customers are dependent on future variable customer volumes and, in some cases, variable commodity prices for those volumes. thousands Remainder of 2021 $ 211,353 2022 1,057,409 2023 1,002,351 2024 973,300 2025 890,903 Thereafter 2,719,380 Total $ 6,854,696 3. ACQUISITIONS AND DIVESTITURES Fort Union and Bison facilities. In October 2020, the Partnership (i) sold its 14.81 % interest in Fort Union Gas Gathering, LLC (“Fort Union”), which was accounted for under the equity method of accounting, and (ii) entered into an option agreement to sell the Bison treating facility, located in Northeast Wyoming, to a third party. The Partnership received combined proceeds of $ 27.0 million, resulting in a net gain on sale of $ 21.0 million related to the Fort Union interest that was recorded in the fourth quarter of 2020 as Gain (loss) on divestiture and other, net in the consolidated statements of operations. During the second quarter of 2021, the third party exercised its option to purchase the Bison treating facility and the sale closed. The Partnership 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. 22 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. PARTNERSHIP DISTRIBUTIONS Partnership distributions. Under its partnership agreement, the Partnership distributes all of its available cash (beyond proper reserves as defined in its partnership agreement) to unitholders of record on the applicable record date within 55 days following each quarter’s end. The Board of Directors of the general partner (the “Board of Directors”) declared the following cash distributions to the Partnership’s unitholders for the periods presented: thousands except per-unit amounts Quarters Ended Total Quarterly Per-unit Distribution Total Quarterly Cash Distribution Distribution Date 2020 March 31 $ 0.31100 $ 140,893 May 2020 June 30 0.31100 140,900 August 2020 September 30 0.31100 132,255 November 2020 December 31 0.31100 131,265 February 2021 2021 March 31 $ 0.31500 $ 132,969 May 2021 June 30 0.31900 134,662 August 2021 September 30 (1) 0.32300 134,862 November 2021 _________________________________________________________________________________________ (1) The Board of Directors declared a cash distribution to the Partnership’s unitholders for the third quarter of 2021 of $ 0.32300 per unit, or $ 134.9 million in aggregate. The cash distribution is payable on November 12, 2021, to unitholders of record at the close of business on November 1, 2021, including the general partner units. Available cash. The amount of available cash (beyond proper reserves as defined in our partnership agreement) generally is all cash on hand at the end of the quarter, plus, at the discretion of the general partner, working capital borrowings made subsequent to the end of such quarter, less the amount of cash reserves established by the general partner to provide for the proper conduct of the Partnership’s business, including reserves to fund future capital expenditures; to comply with applicable laws, debt instruments, or other agreements; or to provide funds for unitholder distributions for any one or more of the next four quarters. Working capital borrowings generally include borrowings made under a credit facility or similar financing arrangement and are intended to be repaid or refinanced within 12 months. In all cases, working capital borrowings are used solely for working capital purposes or to fund unitholder distributions. WES Operating partnership distributions. WES Operating makes quarterly cash distributions to the Partnership and WGR Asset Holding Company LLC (“WGRAH”), a subsidiary of Occidental, in proportion to their share of limited partner interests in WES Operating. See Note 5 . WES Operating made the following cash distributions to its limited partners for the periods presented: thousands Quarters Ended Total Quarterly Cash Distribution 2020 March 31 $ 143,404 June 30 143,404 September 30 143,404 December 31 127,470 2021 March 31 $ 137,030 June 30 140,217 September 30 140,217 23 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. PARTNERSHIP DISTRIBUTIONS In addition to the distributions above, during the quarter ended September 30, 2021, WES Operating made a distribution of $ 91.8 million to the Partnership and WGRAH. The Partnership used its portion of the distribution to repurchase common units on the open market. See Note 5 . 5. EQUITY AND PARTNERS’ CAPITAL Holdings of Partnership equity. The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” As of September 30, 2021, Occidental held 202,781,578 common units, representing a 48.5 % limited partner interest in the Partnership, and through its ownership of the general partner, Occidental indirectly held 9,060,641 general partner units, representing a 2.2 % general partner interest in the Partnership. The public held 205,829,338 common units, representing a 49.3 % limited partner interest in the Partnership. In March 2021, an affiliate of Occidental sold 11,500,000 of the Partnership’s common units it held to the public through an underwritten offering, including 1,500,000 common units pursuant to the full exercise of the underwriters’ over - allotment option. The Partnership did not receive any proceeds from the public offering. On September 11, 2020, the Partnership assigned its 98 % interest in the 30 - year $ 260.0 million note established in May 2008 between WES Operating and Anadarko (the “Anadarko note receivable”) to Anadarko, which Anadarko canceled and retired immediately upon receipt, in exchange for which Occidental caused certain of its subsidiaries to transfer an aggregate of 27,855,398 common units representing limited partner interests in the Partnership to the Partnership. The units were canceled by the Partnership immediately upon receipt. See Note 6. Partnership equity repurchases. In November 2020, the Board of Directors authorized the Partnership to buy back up to $ 250.0 million of the Partnership’s common units through December 31, 2021 (the “Purchase Program”). The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. During the nine months ended September 30, 2021, the Partnership repurchased 5,586,419 common units on the open market for an aggregate purchase price of $ 104.4 million. The units were canceled by the Partnership immediately upon receipt. As of September 30, 2021, the Partnership had an authorized amount of $ 113.1 million remaining under the Purchase Program. Holdings of WES Operating equity. As of September 30, 2021, (i) the Partnership, directly and indirectly through its ownership of WES Operating GP, owned a 98.0 % limited partner interest and the entire non - economic general partner interest in WES Operating and (ii) Occidental, through its ownership of WGRAH, owned a 2.0 % limited partner interest in WES Operating, which is reflected as a noncontrolling interest within the consolidated financial statements of the Partnership (see Note 1 ). Partnership’s net income (loss) per common unit. The common and general partner unitholders’ allocation of net income (loss) attributable to the Partnership was equal to their cash distributions plus their respective allocations of undistributed earnings or losses in accordance with their weighted - average ownership percentage during each period using the two - class method. The Partnership’s basic net income (loss) per common unit is calculated by dividing the limited partners’ interest in net income (loss) by the weighted - average number of common units outstanding during the period. Diluted net income (loss) per common unit includes the effect of outstanding units issued under the Partnership’s long-term incentive plans. 24 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. EQUITY AND PARTNERS’ CAPITAL The following table provides a reconciliation between basic and diluted net income (loss) per common unit: Three Months Ended September 30, Nine Months Ended September 30, thousands except per-unit amounts 2021 2020 2021 2020 Net income (loss) Limited partners’ interest in net income (loss) $ 250,198 $ 241,479 $ 658,291 $ 257,659 Weighted-average common units outstanding Basic 411,909 438,857 412,690 442,255 Dilutive effect of non-vested phantom units 805 69 460 20 Diluted 412,714 438,926 413,150 442,275 Excluded due to anti-dilutive effect 4 1,084 700 1,271 Net income (loss) per common unit Basic $ 0.61 $ 0.55 $ 1.60 $ 0.58 Diluted $ 0.61 $ 0.55 $ 1.59 $ 0.58 WES Operating’s net income (loss) per common unit. Net income (loss) per common unit for WES Operating is not calculated because it has no publicly traded units. 25 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS Summary of related-party transactions. The following tables summarize material related - party transactions included in the Partnership’s consolidated financial statements: Consolidated statements of operations Three Months Ended September 30, Nine Months Ended September 30, thousands 2021 2020 2021 2020 Revenues and other Service revenues – fee based $ 418,520 $ 436,405 $ 1,188,679 $ 1,344,326 Service revenues – product based 1,499 2,544 9,662 6,690 Product sales 11,662 16,692 27,034 60,452 Total revenues and other 431,681 455,641 1,225,375 1,411,468 Equity income, net – related parties (1) 48,506 61,026 159,337 176,788 Operating expenses Cost of product 17,384 1,483 53,968 85,353 Operation and maintenance 3,497 1,303 24,534 35,660 General and administrative (2) 1,808 7,607 13,003 40,456 Total operating expenses 22,689 10,393 91,505 161,469 Interest income – Anadarko note receivable — 3,286 — 11,736 _________________________________________________________________________________________ (1) See Note 7 . (2) Includes (i) amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ) and (ii) equity - based compensation expense allocated to the Partnership by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6 ). Consolidated balance sheets thousands September 30, 2021 December 31, 2020 Assets Accounts receivable, net $ 289,402 $ 291,253 Other current assets 29,021 5,493 Equity investments (1) 1,181,181 1,224,813 Other assets 76,560 50,967 Total assets 1,576,164 1,572,526 Liabilities Accounts and imbalance payables 42,384 6,664 Accrued liabilities 19,232 19,195 Other liabilities 189,119 138,796 Total liabilities 250,735 164,655 _________________________________________________________________________________________ (1) See Note 7 . 26 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS Consolidated statements of cash flows Nine Months Ended September 30, thousands 2021 2020 Distributions from equity - investment earnings – related parties $ 164,772 $ 187,816 Purchases from related parties ( 2,000 ) — Contributions to equity investments – related parties ( 3,683 ) ( 19,017 ) Distributions from equity investments in excess of cumulative earnings – related parties 30,075 21,750 Distributions to Partnership unitholders (1) ( 195,205 ) ( 301,219 ) Distributions to WES Operating unitholders (2) ( 9,934 ) ( 11,545 ) Net contributions from (distributions to) related parties 6,673 22,674 Finance lease payments — ( 6,382 ) _________________________________________________________________________________________ (1) Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5 ). (2) Represents distributions paid to a certain subsidiary of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ). The following tables summarize material related - party transactions for WES Operating (which are included in the Partnership’s consolidated financial statements) to the extent the amounts differ from the Partnership’s consolidated financial statements: Consolidated statements of operations Three Months Ended September 30, Nine Months Ended September 30, thousands 2021 2020 2021 2020 General and administrative (1) $ 2,775 $ 8,314 $ 15,061 $ 41,220 _________________________________________________________________________________________ (1) Includes (i) amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ), (ii) equity - based compensation expense allocated to WES Operating by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6 ), and (iii) an intercompany service fee between the Partnership and WES Operating. Consolidated balance sheets thousands September 30, 2021 December 31, 2020 Accounts receivable, net $ 289,402 $ 246,083 Accounts and imbalance payables (1) 83,576 6,664 _________________________________________________________________________________________ (1) As of September 30, 2021, includes balances related to transactions between the Partnership and WES Operating. Consolidated statements of cash flows Nine Months Ended September 30, thousands 2021 2020 Distributions to WES Operating unitholders (1) $ ( 496,555 ) $ ( 577,122 ) _________________________________________________________________________________________ (1) Represents distributions paid to the Partnership and a certain subsidiary of Occidental pursuant to WES Operating’s partnership agreement. Includes a distribution made from WES Operating to the Partnership during the quarter ended September 30, 2021, that was used by the Partnership to repurchase common units on the open market. See Note 4 and Note 5 . 27 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS Related-party revenues. Related - party revenues include (i) amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental and (ii) income from the Partnership’s investments accounted for under the equity method of accounting (see Note 7 ). Gathering and processing agreements. The Partnership has significant gathering and processing arrangements with affiliates of Occidental on most of its systems. While Occidental is the contracting counterparty of the Partnership, these arrangements with Occidental include not just Occidental - produced volumes, but also, in some instances, the volumes of other working - interest owners of Occidental who rely on the Partnership’s facilities and infrastructure to bring their volumes to market. Natural - gas throughput (excluding equity - investment throughput) attributable to production owned or controlled by Occidental was 38 % and 36 % for the three and nine months ended September 30, 2021, respectively, and 41 % and 42 % for the three and nine months ended September 30, 2020, respectively. Crude - oil and NGLs throughput (excluding equity - investment throughput) attributable to production owned or controlled by Occidental was 88 % and 89 % for the three and nine months ended September 30, 2021, respectively, and 87 % and 88 % for the three and nine months ended September 30, 2020, respectively. Produced - water throughput attributable to production owned or controlled by Occidental was 89 % and 87 % for the three and nine months ended September 30, 2021, respectively, and 87 % and 88 % for the three and nine months ended September 30, 2020, respectively. The Partnership is currently involved in a dispute with Occidental regarding the calculation of the cost - of - service rates under an oil - gathering contract related to the Partnership’s DJ Basin oil - gathering system. If such dispute is resolved in a manner adverse to the Partnership, such resolution could have a negative impact on the Partnership’s financial condition and results of operations, including a reduction in rates and a non - cash charge to earnings. In connection with the sale of its Eagle Ford assets in 2017, Anadarko remained the primary counterparty to the Partnership’s Brasada gas processing agreement and entered into an agency relationship with Sanchez Energy Corporation (“Sanchez”), now Mesquite Energy, Inc. (“Mesquite”) that allows Mesquite to process gas under such agreement. For this reason, Anadarko continues to be liable under the Brasada gas processing agreement through 2034 to the extent Mesquite does not perform. For all periods presented, Mesquite has performed Anadarko’s obligations under the Brasada gas processing agreement pursuant to its agency arrangement with Anadarko. Further, in connection with the sale of its Uinta Basin assets in 2020, Kerr McGee Oil & Gas Onshore LP, a subsidiary of Occidental, retained the deficiency payment obligations under a gas processing agreement at the Chipeta plant. This contingent payment obligation extends through the earlier of October 1, 2022, or the termination of the processing agreement. Commodity purchase and sale agreements. Through December 31, 2020, the Partnership purchased and sold a significant amount of natural gas and NGLs from and to Anadarko Energy Services Company (“AESC”), a marketing affiliate of Occidental. Prior to April 1, 2020, AESC acted as an agent on behalf of either the Partnership or the Partnership’s customers for third - party sales. Where AESC sold natural gas and NGLs on the Partnership’s customers’ behalf, the Partnership recognized associated service revenues and cost of product expense for the marketing services performed by AESC. When product sales were on the Partnership’s behalf, the Partnership recognized product sales revenues based on Occidental’s sales price to the third party and recorded the associated cost of product expense associated with the marketing activities provided by AESC. Effective April 1, 2020, changes to marketing - contract terms with AESC terminated AESC’s prior status as an agent of the Partnership for third - party sales and established AESC as a customer of the Partnership. Accordingly, the Partnership no longer recognizes service revenues and/or product sales revenues and the equivalent cost of product expense for the marketing services performed by AESC. This change has no impact to Operating income (loss), Net income (loss), the balance sheets, cash flows, or any non - GAAP metric used to evaluate the Partnership’s operations (see Key Performance Metrics under Part I, Item 2 of this Form 10-Q). 28 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS Marketing Transition Services Agreement. Effective December 31, 2019, certain subsidiaries of Anadarko entered into a transition services agreement (the “Marketing Transition Services Agreement”) to provide marketing - related services to certain of the Partnership’s subsidiaries through December 31, 2020, subject to the option to extend such services for an additional six - month period. The Marketing Transition Services Agreement was terminated on December 31, 2020. While the Partnership still has some marketing agreements with affiliates of Occidental, the Partnership began marketing and selling substantially all of its natural gas and NGLs directly to third parties beginning on January 1, 2021. Operating leases. As a result of the surface - use and salt - water disposal agreements being amended under the CUA (see Related-party Commercial Agreement below), these agreements are now classified as operating leases and a $ 30.0 million right-of-use (“ROU”) asset, included in Other assets on the consolidated balance sheets, was recognized during the first quarter of 2021. The ROU asset will be amortized to Operation and maintenance expense over the remaining term of the agreements. Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership, the lessor, entered into an operating and maintenance agreement pursuant to which Occidental provides operational and maintenance services with respect to a crude - oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021. The agreement and underlying contracts include (i) fixed consideration, which is measured as the minimum - volume commitment for both gathering and treating, and (ii) variable consideration, which consists of all volumes above the minimum - volume commitment. Subsequent to the initial two - year term, the agreement provides for automatic one - year extensions, unless either party exercises its option to terminate the lease with advance notice. In April 2021, the Partnership exercised its option to terminate the operating and maintenance agreement with Occidental effective December 31, 2021. For the three and nine months ended September 30, 2021, the Partnership recognized fixed - lease revenue of $ 43.9 million and $ 131.9 million, respectively, and variable - lease revenue of $ 0.6 million and $ 1.9 million, respectively, related to these agreements. For the three and nine months ended September 30, 2020, the Partnership recognized fixed-lease revenue of $ 44.0 million and $ 131.8 million, respectively, and variable-lease revenue of $ 9.8 million and $ 42.6 million, respectively, related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations. Related-party expenses. Operation and maintenance expense includes amounts accrued for or paid to related parties for field - related costs provided by related parties at certain of the Partnership’s assets. A portion of general and administrative expense is paid by Occidental, which results in related - party transactions pursuant to the reimbursement provisions of the Partnership’s and WES Operating’s agreements with Occidental. Cost of product expense includes amounts related to certain continuing marketing arrangements with affiliates of Occidental, related - party imbalances, and transactions with affiliates accounted for under the equity method of accounting. See Commodity purchase and sale agreements and Marketing Transition Services Agreement in the sections above. Related - party expenses do not bear a direct relationship to related - party revenues, and third - party expenses do not bear a direct relationship to third - party revenues. Services Agreement. General and administrative expense includes costs incurred pursuant to the agreement dated as of December 31, 2019, by and among Occidental, Anadarko, and WES Operating GP, under which Occidental has performed certain centralized corporate functions for the Partnership and WES Operating (“Services Agreement”). Pursuant to the Services Agreement, which was amended and restated on December 31, 2019, specified employees of Occidental were seconded to WES Operating GP to provide, under the direction, supervision, and control of the general partner, (i) operating and routine maintenance service and (ii) corporate, administrative, and other services, with respect to the assets owned and operated by the Partnership. Occidental was reimbursed for the services provided by the seconded employees. In January 2020, pursuant to the Services Agreement, Occidental made a one - time cash contribution of $ 20.0 million to WES Operating for anticipated transition costs required to establish stand - alone human resources and information technology functions. In late March 2020, seconded employees’ employment was transferred to the Partnership. Occidental continues to provide certain limited administrative and operational services to the Partnership, with most services expected to be fully transitioned to the Partnership by December 31, 2021. 29 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RELATED-PARTY TRANSACTIONS Incentive Plans. General and administrative expense includes non - cash equity - based compensation expense allocated to the Partnership by Occidental for awards granted to the executive officers of the general partner and to other employees prior to their employment with the Partnership under (i) the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated, (ii) Occidental’s 2015 Long - Term Incentive Plan, and (iii) Occidental’s Phantom Share Unit Award Plan (collectively referred to as the “Incentive Plans”). General and administrative expense includes allocated expense related to the Incentive Plans of $ 2.3 million and $ 7.9 million for the three and nine months ended September 30, 2021, respectively, and $ 3.5 million and $ 11.2 million for the three and nine months ended September 30, 2020, respectively. These amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital. Construction reimbursement agreements and Purchases from related parties . From time to time, the Partnership enters into construction reimbursement agreements with Occidental providing that the Partnership will manage the construction of certain midstream infrastructure for Occidental in the Partnership’s areas of operation. Such arrangements generally provide for a reimbursement of costs incurred by the Partnership on a cost or cost-plus basis. Additionally, from time to time, in support of the Partnership’s business, the Partnership purchases equipment, inventory, and other miscellaneous assets, from Occidental or its affiliates. These amounts are included in Purchases from related parties in the consolidated statements of cash flows. Related-party commercial agreement. During the first quarter of 2021, an affiliate of Occidental and certain wholly owned subsidiaries of the Partnership entered into a Commercial Understanding Agreement (“CUA”). Under the CUA, certain West Texas surface - use and salt - water disposal agreements were amended to reduce usage fees owed by the Partnership in exchange for the forgiveness of certain deficiency fees owed by Occidental and other unrelated contractual amendments. The present value of the reduced usage fees under the CUA was $ 30.0 million at the time the agreement was executed. Anadarko note receivable. In May 2008, WES Operating loaned $ 260.0 million to Anadarko in exchange for a 30 - year note that bore interest at a fixed annual rate and was classified as interest income in the consolidated statements of operations. On September 11, 2020, the Partnership and Occidental entered into a Unit Redemption Agreement, pursuant to which WES Operating transferred the note receivable to Anadarko, which Anadarko immediately canceled and retired upon receipt. Customer concentration. Occidental was the only customer from which revenues exceeded 10% of consolidated revenues for all periods presented in the consolidated statements of operations. 30 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. EQUITY INVESTMENTS The following table presents the financial statement impact of the Partnership’s equity investments for the nine months ended September 30, 2021: thousands Balance at December 31, 2020 Other-than-temporary impairment expense (1) Equity income, net Contributions Distributions Distributions in excess of cumulative earnings (2) Balance at September 30, 2021 White Cliffs $ 45,623 $ — $ 701 $ — $ ( 266 ) $ ( 4,583 ) $ 41,475 Rendezvous 28,198 — ( 1,560 ) — ( 884 ) ( 2,058 ) 23,696 Mont Belvieu JV 98,874 — 25,066 — ( 25,095 ) ( 2,193 ) 96,652 TEG 16,661 — 3,390 — ( 3,409 ) ( 299 ) 16,343 TEP 195,189 — 27,572 — ( 27,623 ) ( 4,491 ) 190,647 FRP 199,881 — 28,351 — ( 28,482 ) ( 4,004 ) 195,746 Whitethorn LLC 156,729 — 6,380 347 ( 5,736 ) ( 4,018 ) 153,702 Cactus II 173,921 — 14,290 3,336 ( 14,415 ) ( 3,926 ) 173,206 Saddlehorn 111,717 — 26,045 — ( 26,157 ) — 111,605 Panola 20,867 — 1,629 — ( 1,628 ) ( 555 ) 20,313 Mi Vida 55,031 — 7,445 — ( 7,334 ) ( 2,245 ) 52,897 Ranch Westex 18,898 ( 11,805 ) 9,267 — ( 12,517 ) ( 1,624 ) 2,219 Red Bluff Express 103,224 — 10,761 — ( 11,226 ) ( 79 ) 102,680 Total $ 1,224,813 $ ( 11,805 ) $ 159,337 $ 3,683 $ ( 164,772 ) $ ( 30,075 ) $ 1,181,181 _________________________________________________________________________________________ (1) Recorded in Long-lived asset and other impairments in the consolidated statements of operations. (2) Distributions in excess of cumulative earnings, classified as investing cash flows in the consolidated statements of cash flows, are calculated on an individual - investment basis. The investment balance in Ranch Westex at September 30, 2021, was $ 37.1 million less than the Partnership’s underlying equity in Ranch Westex’s net assets. During the nine months ended September 30, 2021, the Partnership recognized an impairment loss of $ 11.8 million that resulted from a decline in value below the carrying value, which was determined to be other than temporary in nature. This investment was impaired to its estimated fair value of $ 2.9 million, using the income approach and Level-3 fair value inputs, due to a reduction in estimated future cash flows resulting from lower forecasted producer throughput. 31 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8. PROPERTY, PLANT, AND EQUIPMENT A summary of the historical cost of property, plant, and equipment is as follows: thousands Estimated Useful Life September 30, 2021 December 31, 2020 Land N/A $ 10,955 $ 9,696 Gathering systems – pipelines 30 years 5,343,971 5,231,212 Gathering systems – compressors 15 years 2,111,639 2,096,905 Processing complexes and treating facilities 25 years 3,367,933 3,424,368 Transportation pipeline and equipment 6 to 45 years 168,384 168,205 Produced - water disposal systems 20 years 879,916 831,719 Assets under construction N/A 123,115 176,834 Other 3 to 40 years 727,013 702,806 Total property, plant, and equipment 12,732,926 12,641,745 Less accumulated depreciation 4,208,845 3,931,800 Net property, plant, and equipment $ 8,524,081 $ 8,709,945 The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet placed into productive service as of the respective balance sheet date. Long-lived asset and other impairments. During the nine months ended September 30, 2021, the Partnership recognized impairments of $ 29.2 million, primarily attributable to (i) $ 14.1 million of impairments at the DJ Basin complex due to cancellation of projects and (ii) an $ 11.8 million other-than-temporary impairment of the Partnership’s investment in Ranch Westex (see Note 7 ). During the nine months ended September 30, 2020, the Partnership recognized impairments of $ 200.6 million, primarily due to $ 150.2 million of impairments for assets located in Wyoming and Utah. These assets were impaired to estimated fair values of $ 112.2 million. The Partnership assesses whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of assets with impairment triggers were measured using the income approach and Level - 3 fair value inputs. The income approach was based on the Partnership’s projected future earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and free cash flows, which requires significant assumptions including, among others, future throughput volumes based on current expectations of producer activity and operating costs. These impairments were primarily triggered by reductions in estimated future cash flows resulting from lower forecasted producer throughput and lower commodity prices. The remaining impairments of $ 21.0 million were primarily at the DJ Basin complex and DBM water systems due to cancellation of projects and impairments of rights - of - way. Long-lived asset and other impairments on the consolidated statements of operations also includes a $ 29.4 million other-than-temporary impairment for the nine months ended September 30, 2020, of the Partnership’s investment in Ranch Westex. 32 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8. PROPERTY, PLANT, AND EQUIPMENT Potential future long-lived asset impairments. As of September 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. For example, on April 29, 2020, the Partnership received notice that Sanchez, in its bankruptcy, was seeking to reject a number of midstream and downstream agreements with commercial counterparties, including Sanchez’s Springfield gathering agreements and agreements obligating Sanchez to deliver the gas volumes gathered by the Springfield system to our Brasada processing plant. On May 6, 2021, the Bankruptcy Court issued an opinion determining, among other things, that Sanchez’s Springfield gathering agreements were rejected, but that such agreements contain covenants running with the land that survive rejection, thus preserving the acreage dedication to the Partnership’s Springfield system. Depending on the ultimate outcome of the Partnership’s continuing efforts to defend its contractual rights in the bankruptcy proceeding, as well as the Partnership’s ongoing commercial discussions, the Partnership’s South Texas assets could be impaired. 9. GOODWILL Goodwill is recorded when the purchase price of a business acquired exceeds the fair market value of the tangible and separately measurable intangible net assets. Goodwill also includes the allocated historic carrying value of midstream goodwill attributed to the Partnership’s assets previously acquired from Anadarko. The Partnership’s goodwill has been allocated to two reporting units: (i) gathering and processing and (ii) transportation. The Partnership evaluates goodwill for impairment at the reporting - unit level on an annual basis, as of October 1, or more often as facts and circumstances warrant. An initial qualitative assessment is performed to determine the likelihood of whether goodwill is impaired and if deemed necessary based on this assessment, a quantitative assessment is then performed. If the quantitative assessment indicates that the carrying value of the reporting unit, including goodwill, exceeds its fair value, a goodwill impairment is recorded for the amount by which the reporting unit’s carrying value exceeds its fair value. During the three months ended March 31, 2020, the Partnership performed an interim goodwill impairment test due to a significant decline in the trading price of the Partnership’s common units, triggered by the combined impacts from the global outbreak of COVID - 19 and the oil - market disruption resulting from significantly lower global demand and corresponding oversupply of crude oil. The Partnership primarily used the market approach and Level - 3 inputs to estimate the fair value of its two reporting units. The market approach was based on multiples of EBITDA and the Partnership’s projected future EBITDA. The EBITDA multiples were based on current and historic multiples for comparable midstream companies of similar size and business profit to the Partnership. The EBITDA projections require significant assumptions including, among others, future throughput volumes based on current expectations of producer activity and operating costs. The reasonableness of the market approach was tested against an income approach that was based on a discounted cash - flow analysis. Key assumptions in this analysis include the use of an appropriate discount rate, terminal - year multiples, and estimated future cash flows, including estimates of throughput, capital expenditures, operating, and general and administrative costs. The Partnership also reviewed the reasonableness of the total fair value of both reporting units to the market capitalization as of March 31, 2020, and the reasonableness of an implied acquisition premium. Impairment determinations involve significant assumptions and judgments, and differing assumptions regarding any of these inputs could have a significant effect on the valuations. As a result of the interim impairment test, the Partnership recognized a goodwill impairment of $ 441.0 million during the first quarter of 2020, which reduced the carrying value of goodwill for the gathering and processing reporting unit to zero . Goodwill allocated to the transportation reporting unit of $ 4.8 million as of March 31, 2020, was not impaired. Recurring goodwill impairment assessments have indicated no further impairment. 33 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 10. SELECTED COMPONENTS OF WORKING CAPITAL A summary of accounts receivable, net is as follows: The Partnership WES Operating thousands September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 Trade receivables, net $ 583,646 $ 452,718 $ 583,646 $ 407,547 Other receivables, net 6 162 6 2 Total accounts receivable, net $ 583,652 $ 452,880 $ 583,652 $ 407,549 A summary of other current assets is as follows: The Partnership WES Operating thousands September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 NGLs inventory $ 4,002 $ 882 $ 4,002 $ 882 Imbalance receivables 14,958 12,976 14,958 12,976 Prepaid insurance 14,425 8,131 12,136 6,113 Contract assets 23,766 5,338 23,766 5,338 Other 16,045 17,935 16,045 17,935 Total other current assets $ 73,196 $ 45,262 $ 70,907 $ 43,244 A summary of accrued liabilities is as follows: The Partnership WES Operating thousands September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 Accrued interest expense $ 69,570 $ 137,307 $ 69,570 $ 137,307 Short - term asset retirement obligations 14,365 20,215 14,365 20,215 Short - term remediation and reclamation obligations 6,101 2,950 6,101 2,950 Income taxes payable 4,593 3,399 4,593 3,399 Contract liabilities 22,854 31,477 22,854 31,477 Other 73,145 74,599 27,758 35,485 Total accrued liabilities $ 190,628 $ 269,947 $ 145,241 $ 230,833 34 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. DEBT AND INTEREST EXPENSE WES Operating is the borrower for all outstanding debt and is expected to be the borrower for all future debt issuances. The following table presents the outstanding debt: September 30, 2021 December 31, 2020 thousands Principal Carrying Value Fair Value (1) Principal Carrying Value Fair Value (1) Short - term debt 4.000 % Senior Notes due 2022 $ 502,246 $ 502,086 $ 510,243 $ — $ — $ — 5.375 % Senior Notes due 2021 — — — 431,081 430,606 436,241 RCF 220,000 220,000 220,000 — — — Finance lease liabilities 4,343 4,343 4,343 8,264 8,264 8,264 Total short - term debt $ 726,589 $ 726,429 $ 734,586 $ 439,345 $ 438,870 $ 444,505 Long - term debt 4.000 % Senior Notes due 2022 $ — $ — $ — $ 580,917 $ 580,555 $ 597,568 Floating - Rate Senior Notes due 2023 213,138 212,521 212,773 239,978 238,879 235,066 3.100 % Senior Notes due 2025 732,106 727,794 774,328 1,000,000 992,900 1,028,614 3.950 % Senior Notes due 2025 399,163 395,708 421,970 500,000 494,866 512,807 4.650 % Senior Notes due 2026 474,242 471,500 513,758 500,000 496,708 524,880 4.500 % Senior Notes due 2028 400,000 396,010 433,214 400,000 395,617 415,454 4.750 % Senior Notes due 2028 400,000 396,840 437,005 400,000 396,555 418,786 4.050 % Senior Notes due 2030 1,200,000 1,190,102 1,324,159 1,200,000 1,189,407 1,342,996 5.450 % Senior Notes due 2044 600,000 593,699 691,067 600,000 593,598 607,234 5.300 % Senior Notes due 2048 700,000 687,210 807,613 700,000 687,048 694,172 5.500 % Senior Notes due 2048 350,000 342,629 409,945 350,000 342,543 343,928 5.250 % Senior Notes due 2050 1,000,000 983,659 1,176,283 1,000,000 983,512 1,100,375 Finance lease liabilities 2,202 2,202 2,202 23,644 23,644 23,644 Total long - term debt $ 6,470,851 $ 6,399,874 $ 7,204,317 $ 7,494,539 $ 7,415,832 $ 7,845,524 _________________________________________________________________________________________ (1) Fair value is measured using the market approach and Level - 2 fair value inputs. 35 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. DEBT AND INTEREST EXPENSE Debt activity. The following table presents the debt activity for the nine months ended September 30, 2021: thousands Carrying Value Balance at December 31, 2020 $ 7,854,702 RCF borrowings 400,000 Repayments of RCF borrowings ( 180,000 ) Repayment of 5.375 % Senior Notes due 2021 ( 431,081 ) Repayment of 4.000 % Senior Notes due 2022 ( 78,671 ) Repayment of Floating-Rate Senior Notes due 2023 ( 26,840 ) Repayment of 3.100 % Senior Notes due 2025 ( 267,894 ) Repayment of 3.950 % Senior Notes due 2025 ( 100,837 ) Repayment of 4.650 % Senior Notes due 2026 ( 25,758 ) Finance lease liabilities ( 25,364 ) Other 8,046 Balance at September 30, 2021 $ 7,126,303 WES Operating Senior Notes. In mid - January 2020, WES Operating issued the Fixed - Rate 3.100 % Senior Notes due 2025, 4.050 % Senior Notes due 2030, and 5.250 % Senior Notes due 2050 (collectively referred to as the “Fixed - Rate Senior Notes”) and the Floating - Rate Senior Notes due 2023 (the “Floating - Rate Senior Notes”). Including the effects of the issuance prices, underwriting discounts, and interest - rate adjustments, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 4.542 %, 5.424 %, and 6.629 %, respectively, at September 30, 2021, and were 4.291 %, 5.173 %, and 6.375 %, respectively, at September 30, 2020. The interest rate on the Floating - Rate Senior Notes was 2.23 % and 2.12 % at September 30, 2021 and 2020, respectively. The effective interest rate of these notes is subject to adjustment from time to time due to a change in credit rating. During the third quarter of 2021, WES Operating purchased and retired $ 500.0 million of certain of its senior notes via a tender offer (see Debt activity above). For the three months ended September 30, 2021, losses of $ 24.7 million were recognized for the early retirement of these notes. During the first quarter of 2021, WES Operating redeemed the total principal amount outstanding of the 5.375 % Senior Notes due 2021 at par value, pursuant to the optional redemption terms in WES Operating’s indenture. As of September 30, 2021, the 4.000 % Senior Notes due 2022 were classified as short-term debt on the consolidated balance sheet. At September 30, 2021, WES Operating was in compliance with all covenants under the relevant governing indentures. Revolving credit facility. WES Operating’s $2.0 billion senior unsecured revolving credit facility (“RCF”) is expandable to a maximum of $ 2.5 billion, and matures in February 2025 for each extending lender. The non - extending lender’s commitments mature in February 2024 and represent $ 100.0 million out of $ 2.0 billion of total commitments from all lenders. As of September 30, 2021, there were $ 220.0 million of outstanding borrowings and $ 5.1 million of outstanding letters of credit, resulting in $ 1.8 billion of available borrowing capacity under the RCF. As of September 30, 2021 and 2020, the interest rate on any outstanding RCF borrowings was 1.58 % and 1.65 %, respectively. The facility - fee rate was 0.25 % at September 30, 2021 and 2020. At September 30, 2021, WES Operating was in compliance with all covenants under the RCF. Any outstanding RCF borrowings are classified as short-term debt on the consolidated balance sheet due to management’s intent to repay within the next twelve months. Term loan facility. In January 2020, WES Operating repaid the outstanding borrowings with proceeds from the issuance of the Fixed - Rate Senior Notes and Floating - Rate Senior Notes and terminated its $ 3.0 billion senior unsecured credit facility (“Term loan facility”), see WES Operating Senior Notes above. During the first quarter of 2020, a loss of $ 2.3 million was recognized for the early termination of the Term loan facility. 36 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. DEBT AND INTEREST EXPENSE Finance lease liabilities. The Partnership subleased equipment from Occidental via finance leases through April 2020. During the first quarter of 2020, the Partnership entered into finance leases with third parties for equipment and vehicles extending through 2029. Certain equipment leases were amended during the third quarter of 2021 requiring reassessment of lease classification. As a result, these leases are now classified as operating leases resulting in a reduction of $ 19.6 million in Net property, plant, and equipment and $ 20.3 million in Short-term and Long-term debt. The operating leases resulted in additions of $ 4.8 million in Other assets, $ 3.1 million in Accrued liabilities, and $ 2.4 million in Other liabilities, on the consolidated balance sheet. The Partnership has future payments for its finance leases of $ 6.7 million as of September 30, 2021. Interest expense. The following table summarizes the amounts included in interest expense: Three Months Ended September 30, Nine Months Ended September 30, thousands 2021 2020 2021 2020 Third parties Long - term and short - term debt $ ( 90,913 ) $ ( 94,201 ) $ ( 279,122 ) $ ( 273,620 ) Finance lease liabilities ( 218 ) ( 369 ) ( 808 ) ( 1,162 ) Commitment fees and amortization of debt-related costs ( 3,147 ) ( 3,463 ) ( 9,664 ) ( 10,052 ) Capitalized interest 1,021 2,462 2,554 6,066 Total interest expense – third parties ( 93,257 ) ( 95,571 ) ( 287,040 ) ( 278,768 ) Related parties Finance lease liabilities — — — ( 43 ) Total interest expense – related parties — — — ( 43 ) Interest expense $ ( 93,257 ) $ ( 95,571 ) $ ( 287,040 ) $ ( 278,811 ) 12. COMMITMENTS AND CONTINGENCIES Environmental obligations. The Partnership is subject to various environmental-remediation obligations arising from federal, state, and local regulations regarding air and water quality, hazardous and solid waste disposal, and other environmental matters. As of September 30, 2021, and December 31, 2020, the consolidated balance sheets included $ 12.0 million and $ 8.2 million, respectively, of liabilities for remediation and reclamation obligations. The current portion of these amounts is included in Accrued liabilities, and the long-term portion of these amounts is included in Other liabilities. The majority of payments related to these obligations are expected to be made over the next five years. Litigation and legal proceedings. From time to time, the Partnership is involved in legal, tax, regulatory, and other proceedings in various forums regarding performance, contracts, and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which the final disposition could have a material adverse effect on the Partnership’s financial condition, results of operations, or cash flows. Other commitments. The Partnership has payment obligations, or commitments, that include, among other things, a revolving credit facility, other third - party long - term debt, obligations related to the Partnership’s capital spending programs, pipeline commitments, and various operating and finance leases. The payment obligations related to the Partnership’s capital spending programs, the majority of which is expected to be paid in the next twelve months, primarily relate to construction, expansion, and asset - integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, and DBM oil system. 37 Table of Contents