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Item 8. Financial Statements and Supplementary Data

2022-02-23 compared with 2021-02-26 · 458 added, 630 removed, 1333 unchanged (45% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Management

Management’s Assessment of Internal Control Over Financial Reporting

28 unchanged sentences

Commitments and Contingencies

WESTERN MIDSTREAM PARTNERS, LP

WESTERN MIDSTREAM OPERATING, LP

REPORT OF MANAGEMENT

Management of Western Midstream Partners, LP’s (the “Partnership”) general partner and Western Midstream Operating, LP’s (“WES Operating”) general partner prepared, and is responsible for, the consolidated financial statements and the other information appearing in this annual report.

The consolidated financial statements present fairly the Partnership’s and WES Operating’s financial positions, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).

In preparing the consolidated financial statements, the Partnership and WES Operating include amounts that are based on estimates and judgments that Management believes are reasonable under the circumstances.

The Partnership’s and WES Operating’s consolidated financial statements have been audited by KPMG LLP, an independent registered public accounting firm appointed by the Audit Committee of the Board of Directors.

Management has made available to KPMG LLP all of the Partnership’s and WES Operating’s financial records and related data, and the minutes of the meetings of the Board of Directors.

MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

23 unchanged sentences

Western Midstream Partners, LP:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Western Midstream Partners, LP and subsidiaries (the Partnership) as of December 31, 2021 and 2020, the related consolidated statements of operations, equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2022 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.

Basis for Opinion

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

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

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S.

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

We conducted our audits in accordance with the standards of the PCAOB.

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

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

Critical Audit Matter

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

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

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

Evaluation of potential impairment indicators for long-lived assets

As discussed in Notes 1, 9, and 10 to the consolidated financial statements, the Partnership assesses property, plant, and equipment together with any associated materials and supplies inventory and intangible assets (collectively, long-lived assets) for impairment when events or changes in circumstances indicate their carrying values may not

be recoverable.

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

We identified the evaluation of potential impairment indicators for long-lived assets as a critical audit matter.

Evaluating the Partnership’s judgments in determining whether events or changes in circumstances indicate carrying values may not be recoverable required a higher degree of subjective auditor judgment.

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

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

This included controls related to the identification and assessment of qualitative impairment indicators of long-lived assets and the underlying quantitative data used to perform the analysis.

We assessed the Partnership’s identification of long-lived assets for potential impairment indicators by evaluating the Partnership’s assessment of the factors considered.

Specifically, we:

• evaluated overall macro-economic conditions and commodity price trends;

• analyzed the financial results for long-lived assets to identify significant degradations in the related cash flows;

• compared the remaining useful lives of the long-lived assets to the period of time required to recover the carrying value of the assets based on current cash flows;

• examined external information on certain of the Partnership’s customers’ drilling plans and performed sensitivity analysis to determine the impact significant declines in volumes could have on the recoverability of the related long-lived assets.

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

Houston, Texas

February 23, 2022

WESTERN MIDSTREAM PARTNERS, LP

Report of Independent Registered Public Accounting Firm

To the Board of Directors of

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

Western Midstream Partners, LP:

Opinion on Internal Control Over Financial Reporting

22 unchanged sentences

WESTERN MIDSTREAM PARTNERS, LP

Report of Independent Registered Public Accounting Firm

To the Board of Directors of

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

Western Midstream Partners, LP:

Opinion on the Consolidated Financial Statements

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

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

generally accepted accounting principles.

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

Basis for Opinion

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

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

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S.

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

We conducted our audits in accordance with the standards of the PCAOB.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

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

Critical Audit Matters

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

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

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

Impairment assessment of long-lived assets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Goodwill impairment assessment for the gathering and processing reporting unit

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Houston, Texas

February 26, 2021

WESTERN MIDSTREAM PARTNERS, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

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Service revenues – fee based $ 2,462,835 $ 2,584,323 $ 2,388,191

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

Service revenues – product based 122,584 48,369 70,127

48,369 70,127 88,785

Product sales 290,947 138,559 286,388

10 unchanged sentences

Long - lived asset and other impairments

30,543 203,889 6,279

Goodwill impairment — 441,017 —

19 unchanged sentences

896,477 515,908 662,325

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

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

$ 2.18 $ 1.18 $ 1.59

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

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

$ 2.18 $ 1.18 $ 1.59

Weighted - average common units outstanding – basic (4)

411,309 435,554 415,794

Weighted - average common units outstanding – diluted (4)

412,022 435,624 415,794

_________________________________________________________________________________________

(1) Total revenues and other includes related - party amounts of $ 1.6 billion, $ 1.8 billion, and $ 1.6 billion for the years ended December 31, 2021, 2020, and 2019, respectively.

(2) Total operating expenses includes related - party amounts of $ 86.2 million, $ 182.7 million, and $ 503.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

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

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

See Note 13 .

(4) See Note 5.

See accompanying Notes to Consolidated Financial Statements.

7 unchanged sentences

Total current assets 684,764 943,064

Anadarko note receivable — 260,000

Property, plant, and equipment

13 unchanged sentences

Short - term debt

505,932 438,870

Accrued ad valorem taxes 44,955 41,427

3 unchanged sentences

Long - term debt

6,400,616 7,415,832

Deferred income taxes 12,425 22,195

2 unchanged sentences

Total long - term liabilities

7,037,122 7,973,880

Total liabilities (3)

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(1) Other assets includes $ 9.8 million and $ 4.2 million of NGLs line - fill inventory as of December 31, 2021 and 2020, respectively.

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

Other assets also includes $ 56.2 million and $ 71.9 million of materials and supplies inventory as of December 31, 2021 and 2020, respectively.

(2) Total assets includes related - party amounts of $ 1.4 billion and $ 1.6 billion as of December 31, 2021 and 2020, respectively, which includes related - party Accounts receivable, net of $ 180.2 million and $ 291.3 million as of December 31, 2021 and 2020, respectively.

(3) Total liabilities includes related - party amounts of $ 270.5 million and $ 164.7 million as of December 31, 2021 and 2020, respectively.

(4) See Note 1 .

See accompanying Notes to Consolidated Financial Statements.

4 unchanged sentences

by Anadarko Common

Units General

Units General Partner

Units Noncontrolling

1 unchanged sentence

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

Cumulative effect of accounting change (1)

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

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

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

— 51,618 — — 51,618

WES Operating equity transactions, net (3)

— ( 19,577 ) — 19,577 —

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

Distributions to noncontrolling interest owners of WES Operating — — — ( 386,326 ) ( 386,326 )

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

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

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

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

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

Other — 209 — 397 606

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

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

Cumulative impact of the Merger transactions (1)

1 unchanged sentence

Issuance of general partner units — 19,861 ( 19,861 ) — —

— 19,861 ( 19,861 ) — —

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

9 unchanged sentences

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

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

Net contributions from (distributions to) related parties of other assets — ( 90 ) — — ( 90 )

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

3 unchanged sentences

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

Distributions to noncontrolling interest owners of WES Operating

— — — ( 15,434 ) ( 15,434 )

Distributions to noncontrolling interest owner of WES Operating — — — ( 15,434 ) ( 15,434 )

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

10 unchanged sentences

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

Net income (loss) — 896,477 19,815 27,707 943,999

Distributions to Chipeta noncontrolling interest owner — — — ( 9,117 ) ( 9,117 )

Distributions to noncontrolling interest owner of WES Operating — — — ( 14,984 ) ( 14,984 )

Distributions to Partnership unitholders — ( 522,269 ) ( 11,489 ) — ( 533,758 )

Unit repurchases (5)

— ( 217,465 ) — — ( 217,465 )

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

(2) See Note 6 .

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

Contributions of equity - based compensation from Occidental

— 10,087 — — 10,087

Equity - based compensation expense

— 17,589 — — 17,589

Net contributions from (distributions to) related parties — 8,533 — — 8,533

Other — ( 4,336 ) — — ( 4,336 )

Balance at December 31, 2021 $ — $ 2,966,955 $ ( 8,882 ) $ 137,687 $ 3,095,760

_________________________________________________________________________________________

(1) See Note 1 .

(2) See Note 6 .

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

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

(5) See Note 5 .

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

9 unchanged sentences

Long - lived asset and other impairments

30,543 203,889 6,279

Goodwill impairment — 441,017 —

Non - cash equity - based compensation expense

27,676 22,462 15,494

Deferred income taxes ( 9,770 ) 3,296 7,609

Accretion and amortization of long - term obligations, net

7,635 8,654 8,441

Equity income, net – related parties ( 204,645 ) ( 226,750 ) ( 237,518 )

Distributions from equity - investment earnings – related parties

213,516 246,637 234,572

(Gain) loss on divestiture and other, net ( 44 ) ( 8,634 ) 1,406

10 unchanged sentences

Capital expenditures (1)

( 313,674 ) ( 423,602 ) ( 1,189,254 )

Acquisitions from related parties — — ( 2,007,501 )

3 unchanged sentences

Proceeds from the sale of assets to third parties 8,102 20,333 342

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

(Increase) decrease in materials and supplies inventory and other 11,084 ( 57,757 ) —

Net cash used in investing activities ( 257,538 ) ( 448,254 ) ( 3,387,853 )

1 unchanged sentence

Borrowings, net of debt issuance costs 480,000 3,681,173 4,169,695

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

Repayments of debt ( 1,432,966 ) ( 3,803,888 ) ( 1,467,595 )

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

Increase (decrease) in outstanding checks ( 21,631 ) 20,699 1,571

3 unchanged sentences

Distributions to Chipeta noncontrolling interest owner ( 9,117 ) ( 8,644 ) ( 9,663 )

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

Distributions to noncontrolling interest owner of WES Operating ( 14,984 ) ( 15,434 ) ( 118,225 )

Net contributions from (distributions to) related parties 8,533 24,466 458,819

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

— 7,407 51,618

Finance lease payments (3)

1 unchanged sentence

Unit repurchases (4)

( 217,465 ) ( 32,535 ) —

Other ( 4,336 ) — —

Net cash provided by (used in) financing activities ( 1,752,237 ) ( 844,204 ) 2,071,573

5 unchanged sentences

$ — $ ( 261,878 ) $ —

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

Interest paid, net of capitalized interest 375,007 349,913 293,795

Taxes paid (reimbursements received) ( 384 ) 96 2,408

Income taxes paid (reimbursements received) 938 ( 384 ) 96

Accrued capital expenditures 35,240 25,126 140,954

_________________________________________________________________________________________

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

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

(1) Includes purchases from related parties of $ 2.0 million and $ 0.4 million for the years ended December 31, 2021 and 2019, respectively.

(2) See Note 6 .

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

(4) Includes unit repurchases from Occidental of $ 50.2 million for the year ended December 31, 2021.

See accompanying Notes to Consolidated Financial Statements.

21 unchanged sentences

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

Critical Audit Matters

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

Impairment assessment of long-lived assets

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

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

On at least a quarterly basis,

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

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

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

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

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

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

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

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

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

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

Goodwill impairment assessment for the gathering and processing reporting unit

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Critical Audit Matter

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

Evaluation of potential impairment indicators for long-lived assets

As discussed in Notes 1, 9, and 10 to the consolidated financial statements, WES Operating assesses property, plant, and equipment together with any associated materials and supplies inventory and intangible assets (collectively, long-lived assets) for impairment when events or changes in circumstances indicate their carrying

values may not be recoverable.

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

We identified the evaluation of potential impairment indicators for long-lived assets as a critical audit matter.

Evaluating WES Operating’s judgments in determining whether events or changes in circumstances indicate carrying values may not be recoverable required a higher degree of subjective auditor judgment.

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

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

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

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

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

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

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

This included controls related to the identification and assessment of qualitative impairment indicators of long-lived assets and the underlying quantitative data used to perform the analysis.

We assessed WES Operating’s identification of long-lived assets for potential impairment indicators by evaluating WES Operating’s assessment of the factors considered.

Specifically, we:

• evaluated overall macro-economic conditions and commodity price trends;

• analyzed the financial results for long-lived assets to identify significant degradations in the related cash flows;

• compared the remaining useful lives of the long-lived assets to the period of time required to recover the carrying value of the assets based on current cash flows;

• examined external information on certain of WES Operating’s customers’ drilling plans and performed sensitivity analysis to determine the impact significant declines in volumes could have on the recoverability of the related long-lived assets.

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

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Year Ended December 31,

thousands except per-unit amounts 2020 2019 2018

thousands 2021 2020 2019

Revenues and other

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Long - lived asset and other impairments

30,543 203,889 6,279

Goodwill impairment — 441,017 —

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

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

— — ( 346,538 )

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

541,377 778,311 99,237

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

N/A N/A $ 0.55

Limited partners’ interest in net income (loss) 937,987 541,377 778,311

________________________________________________________________________________________

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(2) Total operating expenses includes related - party amounts of $ 89.0 million, $ 184.0 million, and $ 501.4 million for the years ended December 31, 2021, 2020, and 2019, respectively.

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

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

See Note 13 .

See accompanying Notes to Consolidated Financial Statements.

WESTERN MIDSTREAM OPERATING, LP

6 unchanged sentences

Total current assets 676,532 869,330

Anadarko note receivable — 260,000

Property, plant, and equipment

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Short - term debt

505,932 438,870

Accrued ad valorem taxes 44,955 41,427

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Long - term debt

6,400,616 7,415,832

Deferred income taxes 12,425 22,195

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Total long - term liabilities

7,036,158 7,973,880

Total liabilities (3)

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(1) Other assets includes $ 9.8 million and $ 4.2 million of NGLs line - fill inventory as of December 31, 2021 and 2020, respectively.

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

Other assets also includes $ 56.2 million and $ 71.9 million of materials and supplies inventory as of December 31, 2021 and 2020, respectively.

(2) Total assets includes related - party amounts of $ 1.4 billion and $ 1.5 billion as of December 31, 2021 and 2020, respectively, which includes related - party Accounts receivable, net of $ 180.2 million and $ 246.1 million as of December 31, 2021 and 2020, respectively.

(3) Total liabilities includes related - party amounts of $ 318.7 million and $ 164.3 million as of December 31, 2021 and 2020, respectively.

See accompanying Notes to Consolidated Financial Statements.

WESTERN MIDSTREAM OPERATING, LP

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

Cumulative effect of accounting change (1)

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

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

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

— 51,618 — — — 51,618

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

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

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

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

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

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

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

Other — 396 — — — 396

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

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

Cumulative impact of the Merger transactions (1)

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

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

Net contributions from (distributions to) related parties of other assets — ( 90 ) — — — ( 90 )

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

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

Net income (loss) — 937,987 — — 8,942 946,929

Distributions to Chipeta noncontrolling interest owner — — — — ( 9,117 ) ( 9,117 )

Distributions to WES Operating unitholders — ( 749,018 ) — — — ( 749,018 )

Contributions of equity - based compensation from Occidental

— 10,087 — — — 10,087

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

Contributions of equity - based compensation from WES

— 24,501 — — — 24,501

Net contributions from (distributions to) related parties — 8,533 — — — 8,533

Balance at December 31, 2021 $ — $ 3,063,289 $ — $ — $ 29,377 $ 3,092,666

_______________________________________________________________________________________

(1) See Note 1 .

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

(4) See Note 5 .

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

See accompanying Notes to Consolidated Financial Statements.

WESTERN MIDSTREAM OPERATING, LP

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Long - lived asset and other impairments

30,543 203,889 6,279

Goodwill impairment — 441,017 —

Non - cash equity - based compensation expense

34,588 14,604 14,235

Deferred income taxes ( 9,770 ) 3,296 7,609

Accretion and amortization of long - term obligations, net

7,635 8,654 8,421

Equity income, net – related parties ( 204,645 ) ( 226,750 ) ( 237,518 )

Distributions from equity - investment earnings – related parties

213,516 246,637 234,572

(Gain) loss on divestiture and other, net ( 44 ) ( 8,634 ) 1,406

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Increase (decrease) in accounts and imbalance payables and accrued liabilities, net 150,055 105,352 ( 29,745 )

105,352 ( 29,745 ) 44,424

Change in other items, net 48,704 24,816 56,044

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Capital expenditures (1)

( 313,674 ) ( 423,602 ) ( 1,189,254 )

Acquisitions from related parties — — ( 2,007,501 )

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Proceeds from the sale of assets to third parties 8,102 20,333 342

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

(Increase) decrease in materials and supplies inventory and other 11,084 ( 57,757 ) —

Net cash used in investing activities ( 257,538 ) ( 448,254 ) ( 3,387,853 )

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Borrowings, net of debt issuance costs 480,000 3,681,173 4,169,695

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

Repayments of debt ( 1,432,966 ) ( 3,803,888 ) ( 1,439,595 )

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

Increase (decrease) in outstanding checks ( 21,699 ) 20,664 1,571

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

— 7,407 51,618

Finance lease payments (3)

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$ — $ ( 261,878 ) $ —

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

Interest paid, net of capitalized interest 375,007 349,913 293,561

Taxes paid (reimbursements received) ( 384 ) 96 2,408

Income taxes paid (reimbursements received) 938 ( 384 ) 96

Accrued capital expenditures 35,240 25,126 140,954

________________________________________________________________________________________

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

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

(1) Includes purchases from related parties of $ 2.0 million and $ 0.4 million for the years ended December 31, 2021 and 2019, respectively.

(2) See Note 6.

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

See accompanying Notes to Consolidated Financial Statements.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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Western Midstream Partners, LP is a Delaware master limited partnership formed in September 2012.

Western Midstream Operating, LP (together with its subsidiaries, “WES Operating”) is a Delaware limited partnership formed by Anadarko Petroleum Corporation in 2007 to acquire, own, develop, and operate midstream assets.

Western Midstream 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.

“Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding Western Midstream Holdings, LLC.

Anadarko became a wholly owned subsidiary of Occidental Petroleum Corporation as a result of Occidental Petroleum Corporation’s acquisition by merger of Anadarko on August 8, 2019.

For purposes of these consolidated financial statements, the “Partnership” refers to Western Midstream Partners, LP in its individual capacity or to Western Midstream Partners, LP and its subsidiaries, including Western Midstream Operating GP, LLC and WES Operating, as the context requires.

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

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

“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;

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

Latham Train II, a cryogenic train at the DJ Basin complex, commenced operations during the first quarter of 2020.

Loving ROTF Trains III and IV, oil-stabilization trains at the DBM oil system, commenced operations during the first and third quarters of 2020, respectively.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

December 2019 Agreements.

On December 31, 2019, (i) the Partnership and certain of its subsidiaries, including WES Operating and WES Operating GP, entered into the below-described agreements with Occidental and/or certain of its subsidiaries, including Anadarko, and (ii) WES Operating entered into the below-described amendments to its debt agreements (collectively, the “December 2019 Agreements”).

• Exchange Agreement.

Western Gas Resources, Inc.

(“WGRI”), the general partner, and the Partnership entered into a partnership interests exchange agreement (the “Exchange Agreement”), pursuant to which the Partnership canceled the non-economic general partner interest in the Partnership and simultaneously issued a 2.0 % general partner interest to the general partner in exchange for which WGRI transferred 9,060,641 common units to the Partnership, which immediately canceled such units on receipt.

• Services, Secondment, and Employee Transfer Agreement.

Occidental, Anadarko, and WES Operating GP entered into an amended and restated Services, Secondment, and Employee Transfer Agreement (the “Services Agreement”), pursuant to which Occidental, Anadarko, and their subsidiaries (i) seconded certain personnel employed by Occidental to WES Operating GP, in exchange for which WES Operating GP paid a monthly secondment and shared services fee to Occidental equivalent to the direct cost of the seconded employees until their transfer to the Partnership and (ii) agreed to continue to provide certain administrative and operational services to the Partnership for up to a two-year transition period.

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

The Services Agreement also included provisions governing the transfer of certain employees to the Partnership and the assumption by the Partnership of liabilities relating to those employees at the time of their transfer.

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

• RCF amendment.

WES Operating entered into an amendment to its $ 2.0 billion senior unsecured revolving credit facility (“RCF”) to, among other things, (i) effective on February 14, 2020, exercise the final one-year extension option to extend the maturity date of the RCF to February 14, 2025, for the extending lenders, and (ii) modify the change of control definition to provide, among other things, that, subject to certain conditions, if the limited partners of the Partnership elect to remove the general partner as the general partner of the Partnership in accordance with the terms of the partnership agreement, then such removal will not constitute a change of control under the RCF.

See Note 13 .

• Term loan facility amendment.

WES Operating entered into an amendment to its $ 3.0 billion senior unsecured credit facility (“Term loan facility”) to, among other things, modify the change of control definition to provide, among other things, that, subject to certain conditions, if the limited partners of the Partnership elect to remove the general partner as the general partner of the Partnership in accordance with the terms of the partnership agreement, then such removal will not constitute a change of control under the Term loan facility.

See Note 13 .

• Termination of debt-indemnification agreements.

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

• Termination of omnibus agreements.

The Partnership and WES Operating entered into agreements with Occidental to terminate the WES and WES Operating omnibus agreements.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Merger transactions .

On February 28, 2019, the Partnership, WES Operating, Anadarko, and certain of their affiliates completed the transactions contemplated by the Contribution Agreement and Agreement and Plan of Merger (the “Merger Agreement”), dated November 7, 2018, pursuant to which, among other things, (i) Clarity Merger Sub, LLC, a wholly owned subsidiary of the Partnership, merged with and into WES Operating, with WES Operating continuing as the surviving entity and as a subsidiary of the Partnership (the “Merger”), and (ii) WES Operating acquired the Anadarko Midstream Assets (“AMA”).

Basis of presentation.

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

The consolidated financial statements include the accounts of the Partnership and entities in which it holds a controlling financial interest, including WES Operating and WES Operating GP.

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.

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

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, (v) transactions between the Partnership and WES Operating that eliminate upon consolidation, and (vi) the senior secured revolving credit facility (“WGP RCF”) until its repayment in March 2019.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

1 unchanged sentence

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

The Partnership’s consolidated financial statements differ from those of WES Operating primarily as a result of (i) the presentation of noncontrolling interest ownership (see Noncontrolling interests below and Note 5 ), (ii) the elimination of WES Operating GP’s investment in WES Operating with WES Operating GP’s underlying capital account, (iii) the general and administrative expenses incurred by the Partnership, which are separate from, and in addition to, those incurred by WES Operating, (iv) the inclusion of the impact of Partnership equity balances and Partnership distributions, and (v) the senior secured revolving credit facility (“WGP RCF”) until its repayment in March 2019.

See Note 13 .

Presentation of the Partnership’s assets.

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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.

therefore, the Partnership’s prior asset acquisitions from Anadarko were classified as transfers of net assets between entities under common control.

As such, assets acquired from Anadarko initially were recorded at Anadarko’s historic carrying value, which did not equate to the total acquisition price paid by the Partnership.

Further, subsequent to asset acquisitions from Anadarko, the Partnership was required to recast its financial statements to include the activities of acquired assets from the date of common control.

For reporting periods that required recast, the consolidated financial statements for periods prior to the acquisition of assets from Anadarko were prepared from Anadarko’s historical cost-basis accounts and may not be necessarily indicative of the actual results of operations that would have occurred if the Partnership had owned the assets during the periods reported.

Net income (loss) attributable to the assets acquired from Anadarko for periods prior to the Partnership’s acquisition of such assets was not allocated to the limited partners.

Use of estimates.

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Noncontrolling interests.

For periods subsequent to Merger completion, the Partnership’s noncontrolling interests in the consolidated financial statements consist of (i) the 25 % third-party interest in Chipeta and (ii) the 2.0 % Occidental subsidiary-owned limited partner interest in WES Operating.

For periods prior to Merger completion, the Partnership’s noncontrolling interests in the consolidated financial statements consisted of (i) the 25 % third-party interest in Chipeta, (ii) the publicly held limited partner interests in WES Operating, (iii) the common units issued by WES Operating to subsidiaries of Anadarko as part of the consideration paid for prior-period acquisitions from Anadarko, and (iv) the Class C units issued by WES Operating to a subsidiary of Anadarko as part of the funding for the acquisition of Delaware Basin Midstream, LLC (“DBM”).

For periods subsequent to Merger completion (see Merger transactions below), the Partnership’s noncontrolling interests in the consolidated financial statements consist of (i) the 25 % third - party interest in Chipeta and (ii) the 2.0 % Occidental subsidiary - owned limited partner interest in WES Operating.

For periods prior to Merger completion, the Partnership’s noncontrolling interests in the consolidated financial statements consisted of (i) the 25 % third-party interest in Chipeta, (ii) the publicly held limited partner interests in WES Operating, (iii) the common units issued by WES Operating to subsidiaries of Anadarko as part of the consideration paid for prior acquisitions from Anadarko, and (iv) the Class C units issued by WES Operating to a subsidiary of Anadarko as part of the funding for the acquisition of Delaware Basin Midstream, LLC (“DBM”).

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

When WES Operating issues equity, the carrying amount of the noncontrolling interest reported by the Partnership is adjusted to reflect the noncontrolling ownership interest in WES Operating.

The resulting impact of such noncontrolling interest adjustment on the Partnership’s interest in WES Operating is reflected as an adjustment to the Partnership’s partners’ capital.

December 2019 Agreements.

• Exchange Agreement.

Western Gas Resources, Inc.

• Services, Secondment, and Employee Transfer Agreement.

Occidental, Anadarko, and WES Operating GP entered into an amended and restated Services, Secondment, and Employee Transfer Agreement (the “Services Agreement”), pursuant to which Occidental, Anadarko, and their subsidiaries, among other things agreed to (i) continue to provide certain administrative and operational services to the Partnership for up to a two-year transition period, and (ii) transfer certain Occidental employees to the Partnership, with the Partnership assuming liabilities relating to those employees at the time of their transfer.

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

Most of the administrative and operational services previously provided by Occidental fully transitioned to the Partnership by December 31, 2021, with certain limited transition services remaining in place pursuant to the terms of the Services Agreement.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

1 unchanged sentence

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

• RCF amendment.

See Note 13 .

• Termination of debt-indemnification agreements.

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

• Termination of omnibus agreements.

The Partnership and WES Operating entered into agreements with Occidental to terminate the WES and WES Operating omnibus agreements.

Merger transactions .

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

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Level 3 – Inputs that are not observable from objective sources, such as management’s internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in management’s internally developed present value of future cash flows model that underlies the fair value measurement).

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

8 unchanged sentences

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

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

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

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

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

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

3 unchanged sentences

All highly liquid investments with a maturity of three months or less when purchased are considered cash equivalents.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Credit losses.

3 unchanged sentences

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

As of December 31, 2020, there have been no negative indications regarding the collectability of significant receivables as it relates to impacts from the global outbreak of the coronavirus (“COVID-19”) and the oil-market disruption resulting from significantly lower global demand and corresponding oversupply of crude oil.

The Partnership will continue to monitor the credit quality of its customer base and assess collectability of these assets as appropriate.

As of December 31, 2021, there are no negative indications regarding the collectability of significant receivables and the Partnership will continue to monitor the credit quality of its customer base and assess collectability of these assets as appropriate.

The allowance for expected credit losses was immaterial at December 31, 2021 and 2020.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

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Materials and supplies inventory is valued at weighted-average cost, reviewed periodically for obsolescence, and assessed for impairment together with any associated property, plant, and equipment and other intangible assets.

Beginning with the second quarter of 2020, materials and supplies inventory, previously reported in Other current assets, is prospectively reported in Other assets on the consolidated balance sheets.

See Note 11 .

Materials and supplies inventory is reported in Other assets on the consolidated balance sheets.

Property, plant, and equipment and other intangible assets.

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

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and gather and dispose of produced water in the United States.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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.

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See Note 12 .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Environmental expenditures.

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Contracts with customers generally have initial terms ranging from 5 to 10 years.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Service revenues – fee based is recognized for fee-based contracts in the month of service based on the volumes delivered by the customer.

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Defined-contribution plan.

2 unchanged sentences

The Partnership also makes other contributions based on plan guidelines.

The Partnership recognized expense related to the plan of $ 12.5 million for the year ended December 31, 2020.

The Partnership recognized expense related to the plan of $ 23.7 million and $ 12.5 million for the years ended December 31, 2021 and 2020, respectively.

Partnership income taxes.

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WES Operating had no material uncertain tax positions at December 31, 2021 or 2020.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

Subsequent to entering into the Exchange Agreement, the Partnership applies the two-class method in determining net income (loss) per unit applicable to master limited partnerships having multiple classes of securities, including common units and general partner units.

Net income (loss) per common unit.

The Partnership applies the two-class method in determining net income (loss) per unit applicable to master limited partnerships having multiple classes of securities, including common units and general partner units.

The two-class method allocates earnings pursuant to a formula that treats participating securities as having rights to earnings that otherwise would have been available to common unitholders.

2 unchanged sentences

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

WES Operating’s net income (loss) per common unit.

For periods subsequent to the closing of the Merger, net income (loss) per common unit for WES Operating is not calculated because no publicly traded units remained outstanding.

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

Net income (loss) per common unit for WES Operating is not calculated because no publicly traded units are outstanding.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

13 unchanged sentences

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

Recently adopted accounting standards.

Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326) significantly changes the accounting and disclosure requirements related to credit losses on financial assets.

Under the new standard, entities are now required to estimate lifetime expected credit losses for trade receivables, loans, and other financial instruments as of the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, resulting in earlier recognition of credit losses.

There was no impact to the consolidated financial statements with the Partnership’s adoption of the standard on January 1, 2020.

The Partnership has implemented the necessary changes to its processes and controls to support accounting and disclosure requirements under this ASU.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Partnership’s gathering and processing assets, we elected the practical expedient to not separate lease and non-lease components.

When the non-lease component is determined to be the predominant component, the combined components are accounted for under Revenue from Contracts with Customers (Topic 606) .

REVENUE FROM CONTRACTS WITH CUSTOMERS

4 unchanged sentences

Service revenues – fee based $ 2,283,584 $ 2,360,680 $ 2,388,191

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

Service revenues – product based 122,584 48,369 70,127

48,369 70,127 88,785

Product sales 290,947 138,559 287,055

2 unchanged sentences

Lease revenue (1)

179,251 223,643 —

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

2 unchanged sentences

_________________________________________________________________________________________

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

See Operating lease within Note 6.

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

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

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

(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.

Beginning on December 31, 2020, 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.

As of September 30, 2021, the Partnership determined it was no longer necessary to constrain revenue under these cost-of-service agreements.

The Partnership has resolved the legal proceedings and commercial negotiations with the contract counterparties as of December 31, 2021.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract balances.

Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $ 424.6 million and $ 428.2 million as of December 31, 2021 and 2020, respectively.

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

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:

2 unchanged sentences

Contract assets balance at beginning of year

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

$ 56,344 $ 67,357

Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period ( 10,380 ) ( 7,129 )

Additional estimated revenues recognized 120 3,877

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

Cumulative catch-up adjustment for change in estimated consideration ( 23,527 ) ( 7,761 )

Contract assets balance at end of year

$ 22,557 $ 56,344

thousands 2021 2020

2 unchanged sentences

Total contract assets from contracts with customers $ 22,557 $ 56,344

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract liabilities primarily relate to (i) fees that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of customer benefit, (ii) fixed and variable fees under cost-of-service contracts that are received from customers for which revenue recognition is deferred, and (iii) aid-in-construction payments received from customers that must be recognized over the expected period of customer benefit.

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:

2 unchanged sentences

Contract liabilities balance at beginning of year

$ 266,937 $ 222,274

Cash received or receivable, excluding revenues recognized during the period 83,326 65,215

Revenues recognized that were included in the contract liability balance at the beginning of the period ( 17,265 ) ( 13,842 )

( 13,842 ) ( 12,110 )

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

( 6,710 ) 13,594

Cumulative catch-up adjustment for change in estimated consideration ( 19,852 ) ( 6,710 )

Contract liabilities balance at end of year

$ 313,146 $ 266,937

thousands 2021 2020

2 unchanged sentences

Total contract liabilities from contracts with customers $ 313,146 $ 266,937

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE FROM CONTRACTS WITH CUSTOMERS

Transaction price allocated to remaining performance obligations.

6 unchanged sentences

Total $ 6,634,292

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

AMA acquisition.

10 unchanged sentences

The initial investment was funded with cash on hand and the interest in Red Bluff Express is accounted for under the equity method of accounting.

Whitethorn LLC acquisition.

In June 2018, the Partnership acquired a 20 % interest in Whitethorn LLC, which owns a crude-oil and condensate pipeline that originates in Midland, Texas, and terminates in Sealy, Texas (the “Midland-to-Sealy pipeline”) and related storage facilities (collectively referred to as “Whitethorn”).

A third party operates Whitethorn and oversees the related commercial activities.

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

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

Cactus II acquisition.

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

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

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

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

Fort Union and Bison facilities.

A gain related to the option agreement and potential sale of the Bison treating facility will be recognized in the first quarter of 2021 if the option is exercised or expires.

Newcastle system divestiture.

In December 2018, the Newcastle system, located in Northeast Wyoming, was sold to a third party for $ 3.2 million, resulting in a net gain on sale of $ 0.6 million recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations.

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

3 unchanged sentences

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:

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

thousands except per-unit amounts

3 unchanged sentences

Cash Distribution Distribution

$ 0.56875 $ 124,518 May 2018

0.58250 127,531 August 2018

0.59500 130,268 November 2018

0.60250 131,910 February 2019

$ 0.61000 $ 276,324 May 2019

0.61800 279,959 August 2019

0.62000 280,880 November 2019

0.62200 281,786 February 2020

$ 0.31100 $ 140,893 May 2020

0.31100 140,900 August 2020

March 31 $ 0.61000 $ 276,324 May 2019

June 30 0.61800 279,959 August 2019

September 30 0.62000 280,880 November 2019

December 31 0.62200 281,786 February 2020

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

March 31 $ 0.31500 $ 132,969 May 2021

June 30 0.31900 134,662 August 2021

September 30 0.32300 134,862 November 2021

December 31 (1)

1 unchanged sentence

_________________________________________________________________________________________

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

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

The cash distribution was paid on February 12, 2021 to unitholders of record at the close of business on February 1, 2021, including the general partner units that were issued on December 31, 2019 (see Note 1 ).

Following the transactions contemplated by the Exchange Agreement, the general partner units are entitled to all quarterly distributions beginning with the cash distribution declared for the fourth quarter of 2019.

(1) The Board declared a cash distribution to the Partnership’s unitholders for the fourth quarter of 2021 of $ 0.32700 per unit, or $ 134.7 million in aggregate.

The cash distribution was paid on February 14, 2022, to unitholders of record at the close of business on January 31, 2022, 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.

The amount of available cash (beyond proper reserves as defined in the partnership agreement) generally is all cash on hand at the end of the quarter, plus, at the discretion of the general partner, working capital borrowings made subsequent to the end of such quarter, less the amount of cash reserves established by the general partner to provide for the proper conduct of the Partnership’s business, including (i) reserves to fund future capital expenditures;

(ii) to comply with applicable laws, debt instruments, or other agreements;

or (iii) to provide funds for unitholder distributions for any one or more of the next four quarters.

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

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

WES Operating partnership distributions.

Immediately prior to the closing of the Merger, the WES Operating incentive distribution rights (“IDRs”) and general partner units were converted into WES Operating common units and a non-economic general partner interest in WES Operating, and at Merger completion, all WES Operating common units held by the public and subsidiaries of Anadarko (other than common units held by the Partnership, WES Operating GP, and 6.4 million common units held by a subsidiary of Anadarko) were converted into common units of the Partnership.

Beginning with the first quarter of 2019, WES Operating makes quarterly cash distributions to the Partnership and WGRAH, a subsidiary of Occidental, in proportion to their share of limited partner interests in WES Operating.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

1 unchanged sentence

PARTNERSHIP DISTRIBUTIONS

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

Quarters Ended

Total Quarterly

Cash Distribution

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

thousands except per-unit amounts

WES Operating partnership distributions.

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

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

Quarters Ended

Total Quarterly

Distribution Total Quarterly

Cash Distribution Distribution

$ 0.935 $ 221,133 May 2018

0.950 225,691 August 2018

0.965 230,239 November 2018

0.980 234,787 February 2019

WES Operating Class C unit distributions.

Prior to the closing of the Merger, WES Operating’s Class C units received quarterly distributions at an equivalent rate to WES Operating’s publicly traded common units.

The Class C unit distributions were paid-in-kind with additional Class C Units (“PIK Class C units”) and were disregarded with respect to WES Operating’s distributions of available cash.

The number of PIK Class C units issued in connection with a distribution payable on the Class C units was determined by dividing the corresponding distribution attributable to the Class C units by the volume-weighted average price of WES Operating’s common units for the ten days immediately preceding the payment date of the common unit distribution, less a 6 % discount.

WES Operating recorded the PIK Class C unit distributions at fair value at the time of issuance.

This Level-2 fair value measurement used WES Operating’s unit price as a significant input in the determination of the fair value.

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

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

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

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

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31 $ 283,271 May 2019

June 30 288,083 August 2019

September 30 289,676 November 2019

December 31 290,314 February 2020

March 31 $ 143,404 May 2020

June 30 143,404 August 2020

September 30 143,404 November 2020

December 31 127,470 February 2021

March 31 $ 137,030 May 2021

June 30 140,217 August 2021

September 30 140,217 November 2021

December 31 140,217 February 2022

In addition to the distributions above, during the years ended December 31, 2021 and 2020, WES Operating made distributions of $ 204.1 million and $ 51.0 million, respectively, to the Partnership and WGRAH.

The Partnership used its portion of the distribution to repurchase common units.

EQUITY AND PARTNERS’ CAPITAL

Holdings of Partnership equity.

The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” On September 11, 2020, the Partnership assigned its 98 % interest in the 30-year $ 260.0 million note established in May 2008 between WES Operating and Anadarko (the “Anadarko note receivable”) to Anadarko, which Anadarko canceled and retired immediately upon receipt, in exchange for which Occidental caused certain of its subsidiaries to transfer an aggregate of 27,855,398 common units representing limited partner interests in the Partnership to the Partnership.

The units were canceled by the Partnership immediately upon receipt.

As of December 31, 2020, Occidental held 214,281,578 common units, representing a 50.7 % limited partner interest in the Partnership, and through its ownership of the general partner, Occidental indirectly held 9,060,641 general partner units, representing a 2.1 % general partner interest in the Partnership (see Note 1 ).

The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” As of December 31, 2021, Occidental held 200,281,578 common units, representing a 48.6 % 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 202,712,341 common units, representing a 49.2 % 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 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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL

Partnership equity repurchases.

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

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

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

In November 2020, the Board 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 were purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions.

The Partnership repurchased 8,707,869 and 2,368,711 common units on the open market during the years ended December 31, 2021 and 2020, respectively, for an aggregate purchase price of $ 167.2 million and $ 32.5 million, respectively.

In addition, the Partnership repurchased 2,500,000 common units from Occidental during the year ended December 31, 2021, for an aggregate purchase price of $ 50.2 million.

The units were canceled by the Partnership immediately upon receipt.

As of December 31, 2021, the entire $ 250.0 million authorized program had been fulfilled.

Holdings of WES Operating equity.

3 unchanged sentences

The Class C units were issued to partially fund the acquisition of DBM.

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

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

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

The beneficial conversion feature was amortized assuming an extended conversion date of March 1, 2020, using the effective yield method.

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

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL

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

Following the transactions contemplated by the Exchange Agreement, the common and general partner unitholders’ allocation of net income (loss) attributable to the Partnership was equal to their cash distributions plus their respective allocations of undistributed earnings or losses using the two-class method.

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

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

The 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.

Net income (loss) attributable to assets acquired from Anadarko for periods prior to the acquisition of such assets was not allocated to the limited partners when calculating net income (loss) per common unit.

WES Operating’s net income (loss) per common unit.

For periods subsequent to the closing of the Merger, net income (loss) per common unit for WES Operating is not calculated because no publicly traded units remained outstanding.

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

Net income (loss) attributable to assets acquired from Anadarko for periods prior to the acquisition of such assets was not allocated to the unitholders for purposes of calculating net income (loss) per common unit.

WES Operating GP.

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

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

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

WES Operating Common and Class C unitholders.

The Class C units were considered a participating security because they participated in distributions with common units according to a predetermined formula (see Note 4 ).

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

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

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

The common unitholder allocation also included the impact of the amortization of the Class C units beneficial conversion feature.

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY AND PARTNERS’ CAPITAL

Calculation of net income (loss) per unit.

Basic net income (loss) per common unit was calculated by dividing the net income (loss) attributable to common unitholders by the weighted-average number of common units outstanding during the period.

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

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

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

The following table provides a reconciliation between basic and diluted net income (loss) per common unit:

Year Ended December 31,

thousands except per-unit amounts 2021 2020 2019

Net income (loss) attributable to Western Midstream Operating, LP $ 627,917

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

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

Common and Class C limited partners’ interest in net income (loss) $ 99,237

Net income (loss) allocable to common units (1)

Net income (loss) allocable to Class C units (1)

Common and Class C limited partners’ interest in net income (loss) $ 99,237

Net income (loss) per unit

Common units – basic and diluted (2)

Weighted-average units outstanding

Common units – basic and diluted 152,606

Net income (loss)

Limited partners’ interest in net income (loss) $ 896,477 $ 515,908 $ 662,325

Weighted-average common units outstanding

Basic 411,309 435,554 415,794

Dilutive effect of non-vested phantom units 713 70 —

Diluted 412,022 435,624 415,794

Excluded due to anti-dilutive effect 589 997 —

Class C units (2)

_________________________________________________________________________________________

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

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

Net income (loss) per common unit

Basic $ 2.18 $ 1.18 $ 1.59

Diluted $ 2.18 $ 1.18 $ 1.59

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

24 unchanged sentences

(1) See Note 7 .

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

(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

1 unchanged sentence

Accounts receivable, net $ 180,205 $ 291,253

$ 291,253 $ 113,345

Other current assets 12,490 5,493

Anadarko note receivable — 260,000

Equity investments (1)

3 unchanged sentences

Accounts and imbalance payables 49,242 6,664

Short-term debt (3)

Accrued liabilities 13,914 19,195

2 unchanged sentences

_________________________________________________________________________________________

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

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

(1) See Note 7 .

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

Consolidated statements of cash flows

2 unchanged sentences

Distributions from equity - investment earnings – related parties

$ 213,516 $ 246,637 $ 234,572

Capital expenditures ( 2,000 ) — ( 425 )

Acquisitions from related parties — — ( 2,007,501 )

3 unchanged sentences

Repayment of APCWH Note Payable — — ( 439,595 )

— ( 439,595 ) —

Distributions to Partnership unitholders (1)

4 unchanged sentences

Above-market component of swap agreements with Anadarko — — 7,407

— 7,407 51,618

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

Unit repurchases from Occidental (3)

( 50,225 ) — —

_________________________________________________________________________________________

(1) Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5 ).

(2) Represents distributions paid to certain subsidiaries of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ).

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

(2) Represents distributions paid to Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ).

(3) The Partnership repurchased 2.5 million common units from Occidental during the year ended December 31, 2021 (see 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:

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_________________________________________________________________________________________

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

(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

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Accounts receivable, net $ 180,205 $ 246,083

Accounts and imbalance payables (1)

_________________________________________________________________________________________

(1) As of December 31, 2021, includes balances related to transactions between the Partnership and WES Operating.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

Consolidated statements of cash flows

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_________________________________________________________________________________________

(1) Represents distributions paid to the Partnership and certain subsidiaries of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ).

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

(1) Represents distributions paid to the Partnership and Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement.

Includes distributions made from WES Operating to the Partnership during the years ended December 31, 2021 and 2020, that were used by the Partnership to repurchase common units.

See Note 4 and Note 5 .

Related-party revenues.

Related-party revenues include (i) income from the Partnership’s investments accounted for under the equity method of accounting (see Note 7 ) and (ii) amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental.

Related - party revenues include amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental.

Gathering and processing agreements.

The Partnership has significant gathering and processing arrangements with affiliates of Occidental on most of its systems.

The Partnership has significant gathering, processing, and produced-water disposal 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.

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Produced-water throughput attributable to production owned or controlled by Occidental was 87 %, 87 %, and 82 % for the years ended December 31, 2021, 2020, and 2019, respectively.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

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.

In December 2021, the Brasada gas processing agreement was assigned from Anadarko to Mesquite effective July 1, 2023.

For this reason, Anadarko continues to be liable under the Brasada gas processing agreement until June 30, 2023, 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.

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

Commodity purchase and sale agreements.

Through December 31, 2020, the Partnership sold a significant amount of its natural gas and NGLs to Anadarko Energy Services Company (“AESC”), Occidental’s marketing affiliate.

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.

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This change has no impact to Operating income (loss), Net income (loss), the balance sheets, cash flows, or any non - GAAP metric used to evaluate the Partnership’s operations (see Key Performance Metrics under Part II, Item 7 of this Form 10-K).

In addition, the Partnership purchases natural gas from AESC pursuant to purchase agreements.

Marketing Transition Services Agreement.

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

Operating lease.

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 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.

In April 2021, the Partnership exercised its option to terminate the operating and maintenance agreement with Occidental effective December 31, 2021.

See Note 14 .

Related-party expenses.

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

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.

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RELATED-PARTY TRANSACTIONS

Shared services agreements.

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

Under these agreements, Occidental has performed certain centralized corporate functions for the Partnership and WES Operating.

Services Agreement.

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”).

Prior to December 31, 2019, the Partnership and WES Operating had separate omnibus agreements with Occidental that were terminated as part of the December 2019 Agreements.

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.

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

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

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

• WES omnibus agreement.

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

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

• WES Operating omnibus agreement.

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

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

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RELATED-PARTY TRANSACTIONS

Incentive Plans.

General and administrative expense includes equity-based compensation expense allocated to the Partnership by Occidental for awards granted to the executive officers of the general partner and to other employees prior to their employment with the Partnership under (i) the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated, (ii) Occidental’s 2015 Long-Term Incentive Plan, and (iii) Occidental’s Phantom Share Unit Award Plan (collectively referred to as the “Incentive Plans”).

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

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

General and administrative expense includes 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 costs related to the Incentive Plans of $ 10.1 million, $ 14.6 million, and $ 12.9 million for the years ended December 31, 2021, 2020, and 2019, respectively.

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

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

As of December 31, 2021, $ 2.2 million of estimated unrecognized compensation expense attributable to the Incentive Plans will be allocated to the Partnership over a weighted-average period of 0.5 years.

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As discussed in more detail in Note 1 , on February 28, 2019, the Partnership, WES Operating, Anadarko, and certain of their affiliates completed the Merger and the other transactions contemplated in the Merger Agreement, which included the acquisition of AMA from Anadarko.

Anadarko note receivable.

In May 2008, WES Operating loaned $ 260.0 million to Anadarko in exchange for a 30-year note that bore interest at a fixed annual rate of 6.50 %, payable quarterly and classified as interest income in the consolidated statements of operations.

On September 11, 2020, the Partnership and Occidental entered into a Unit Redemption Agreement, pursuant to which (i) WES Operating transferred and assigned its interest in the Anadarko note receivable to its limited partners on a pro-rata basis, transferring 98 % of its interest (and accrued interest owed under) the Anadarko note receivable to the Partnership and the remaining 2 % of its interest to WGRAH, a subsidiary of Occidental, (ii) the Partnership subsequently assigned the 98 % interest in (and accrued interest owed under) the Anadarko note receivable to Anadarko, which Anadarko canceled and retired immediately upon receipt, in exchange for which Occidental caused certain of its subsidiaries to transfer an aggregate of 27,855,398 common units of the Partnership to the Partnership, and (iii) the Partnership canceled such common units immediately upon receipt.

Purchases from related parties.

During the fourth quarter of 2020, a subsidiary of the Partnership entered into an agreement to purchase three electrical substations located in the DJ Basin from a subsidiary of Occidental for $ 2.0 million.

This purchase was recorded as an Accrued capital expenditure as of December 31, 2020, and cash was paid in January of 2021.

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.

During 2019, the Partnership purchased $ 18.4 million of materials and supplies inventory from Occidental.

Related-party asset contributions.

The following table summarizes related-party contributions of other assets to the Partnership:

Year Ended December 31,

thousands 2019 2018

Cash consideration paid $ ( 425 ) $ ( 254 )

Net carrying value 335 59,089

Partners’ capital adjustment $ ( 90 ) $ 58,835

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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RELATED-PARTY TRANSACTIONS

Anadarko note receivable.

In May 2008, WES Operating loaned $ 260.0 million to Anadarko in exchange for a 30 - year note that bore interest at a fixed annual rate 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 (see Note 5 ).

APCWH Note Payable.

In June 2017, APC Water Holdings 1, LLC (“APCWH”) entered into an eight-year note payable agreement with Anadarko, which was repaid in the first quarter of 2019 at the Merger completion date.

See Note 13 .

In June 2017, in connection with funding the construction of the APC water systems that were acquired as part of the AMA acquisition, APC Water Holdings 1, LLC (“APCWH”) entered into an eight-year note payable agreement with Anadarko.

This note payable had a maximum borrowing limit of $ 500.0 million, including accrued interest.

The APCWH Note Payable was repaid at Merger completion (see Note 1 ).

Commodity-price swap agreements.

WES Operating previously entered into commodity-price swap agreements with Anadarko to mitigate exposure to the commodity-price risk inherent in WES Operating’s percent-of-proceeds, percent-of-product, and keep-whole natural-gas processing contracts.

WES Operating entered into commodity-price swap agreements with Anadarko to mitigate exposure to the commodity-price risk inherent in WES Operating’s percent-of-proceeds, percent-of-product, and keep-whole natural-gas processing contracts.

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

Notional volumes for each product-based commodity-price swap agreement were not specifically defined.

Instead, the commodity-price swap agreements applied to the actual volumes of natural gas, condensate, and NGLs purchased and sold.

The commodity-price swap agreements did not satisfy the definition of a derivative financial instrument and, therefore did not require fair-value measurement.

Net losses on commodity-price swap agreements were $ 0.7 million (due to settlement of 2018 activity in 2019) and $ 7.9 million for the years ended December 31, 2019 and 2018, respectively, reported in the consolidated statements of operations as related-party Product sales.

A capital contribution from Anadarko related to the commodity-price swap agreements of $ 7.4 million and $ 51.6 million was recorded in the consolidated statements of equity and partners’ capital for the years ended December 31, 2019 and 2018, respectively.

Concentration of credit risk.

For the year ended December 31, 2019, net gains (losses) on commodity-price swap agreements were $( 0.7 ) million (due to settlement of 2018 activity in 2019) and the capital contribution from Anadarko was $ 7.4 million.

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.

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The following tables present the financial statement impact of the Partnership’s equity investments for the years ended December 31, 2020 and 2021:

thousands Balance at December 31, 2018 Acquisitions Equity

income, net Contributions (1)

Distributions Distributions

Balance at December 31, 2019

thousands Balance at December 31, 2019 Other-than-temporary

income, net Contributions Distributions Distributions

Divestitures Balance at December 31, 2020

Fort Union $ ( 610 ) $ — $ ( 544 ) $ — $ — $ — $ 1,154 $ —

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income, net Contributions Distributions Distributions

Divestitures Balance at December 31, 2020

Fort Union $ ( 610 ) $ — $ ( 544 ) $ — $ — $ — $ 1,154 $ —

Balance at December 31, 2021

White Cliffs $ 45,623 $ — $ 780 $ — $ ( 199 ) $ ( 5,451 ) $ 40,753

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_________________________________________________________________________________________

(1) Includes capitalized interest of $ 3.6 million for the year ended December 31, 2019 related to the construction of the Cactus II pipeline.

(2) Distributions in excess of cumulative earnings, classified as investing cash flows in the consolidated statements of cash flows, are calculated on an individual-investment basis.

(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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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The investment balance in White Cliffs at December 31, 2021, is $ 4.6 million less than the Partnership’s underlying equity in White Cliffs’ net assets, primarily due to the Partnership recording the acquisition of its initial 0.4 % interest in White Cliffs at Anadarko’s historic carrying value.

This difference will be amortized to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of the White Cliffs pipeline.

This difference will be accreted to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of the White Cliffs pipeline.

The investment balance in Rendezvous at December 31, 2021, includes $ 27.2 million for the purchase price allocated to the investment in Rendezvous in excess of the historic cost basis of WGRI, the entity that previously owned the interest in Rendezvous, which Anadarko acquired in August 2006.

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The investment balance in Whitethorn LLC at December 31, 2021, is $ 35.1 million less than the Partnership’s underlying equity in Whitethorn LLC’s net assets, primarily due to terms of the acquisition agreement which provided the Partnership a share of pre-acquisition operating cash flow.

This difference will be amortized to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of Whitethorn.

This difference will be accreted to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of Whitethorn.

The investment balance in Saddlehorn at December 31, 2021, was $ 18.7 million less than the Partnership’s underlying equity in Saddlehorn’s net assets, primarily due to income from an expansion project that was funded by Saddlehorn’s other owners being disproportionately allocated to the Partnership beginning in the second quarter of 2020.

This difference will be amortized to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of the Saddlehorn pipeline.

The investment balance in Ranch Westex at December 31, 2020, was $ 25.4 million less than the Partnership’s underlying equity in Ranch Westex’s net assets, primarily due to an impairment loss recognized by the Partnership in the third quarter of 2020.

The impairment loss of $ 29.4 million resulted from a decline in value below the carrying value, which was determined to be other than temporary in nature.

This investment was impaired to its estimated fair value of $ 16.7 million at September 30, 2020, using the income approach and Level-3 fair value inputs, due to a reduction in estimated future cash flows resulting from lower forecasted producer throughput.

This difference will be accreted to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of the Saddlehorn pipeline.

The investment balance in Ranch Westex at December 31, 2021, was $ 36.1 million less than the Partnership’s underlying equity in Ranch Westex’s net assets.

During the year ended December 31, 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.

During the year ended December 31, 2020, the Partnership recognized an impairment loss of $ 29.4 million that resulted from a decline in value below the carrying value, which was determined to be other than temporary in nature.

Management evaluates its equity investments for impairment whenever events or changes in circumstances indicate that the carrying value of such investments may have experienced a decline in value that is other than temporary.

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Income earned on the AMA assets for periods subsequent to February 2019 was subject only to Texas margin tax on income apportionable to Texas.

For the year ended December 31, 2021, the variance from the federal statutory rate was primarily impacted by a state margin rate reduction associated with Occidental’s settlement of state audit matters and our Texas margin tax liability.

For the year ended December 31, 2020, the variance from the federal statutory rate was primarily due to our Texas margin tax liability.

For the years ended December 31, 2019 and 2018, the variance from the federal statutory rate primarily was due to federal and state taxes on pre-acquisition income attributable to assets previously acquired from Anadarko, and our share of applicable Texas margin tax.

For the year ended December 31, 2019, the variance from the federal statutory rate primarily was due to federal and state taxes on pre-acquisition income attributable to assets previously acquired from Anadarko, and our share of applicable Texas margin tax.

The components of income tax expense (benefit) are as follows:

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Federal taxes on pre-acquisition income attributable to assets acquired from Anadarko — — 8,332

State taxes on pre-acquisition income attributable to assets acquired from Anadarko (net of federal benefit) — — 1,745

Texas margin tax expense (benefit) (1)

( 9,807 ) 5,998 5,140

Income tax expense (benefit) $ ( 9,807 ) $ 5,998 $ 13,472

Effective tax rate ( 1 ) % 1 % 2 %

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(1) Includes a tax benefit of $ 12.5 million for the year ended December 31, 2021, related to a reduced Texas margin tax rate resulting from Occidental’s settlement of state audit matters.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows:

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169,356 168,205

Produced-water disposal systems 20 years 831,719 754,774

Produced - water disposal systems

20 years 882,527 831,719

Assets under construction N/A 98,473 176,834

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Long-lived asset and other impairments.

During the year ended December 31, 2021, the Partnership recognized impairments of $ 30.5 million, primarily attributable to (i) $ 14.2 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 year ended December 31, 2020, the Partnership recognized impairments of $ 203.9 million, primarily due to $ 150.2 million of impairments for assets located in Wyoming and Utah.

These assets were impaired to estimated fair values of $ 112.2 million.

The Partnership assesses whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

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.

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These impairments were primarily triggered by reductions in estimated future cash flows resulting from lower forecasted producer throughput and lower commodity prices.

Long-lived asset and other impairments on the consolidated statements of operations for the year ended December 31, 2020, also includes a $ 29.4 million other-than-temporary impairment of the Partnership’s investment in Ranch Westex (see Note 7 ).

Long-lived asset and other impairments on the consolidated statements of operations also includes a $ 29.4 million other-than-temporary impairment for the year ended December 31, 2020, of the Partnership’s investment in Ranch Westex.

The remaining impairments of $ 24.3 million were primarily at the DJ Basin complex and DBM oil system due to the cancellation of projects and impairments of rights - of - way.

During the year ended December 31, 2019, the Partnership recognized impairments of $ 6.3 million, primarily at the DJ Basin complex due to impairments of rights-of-way and cancellation of projects.

During the year ended December 31, 2018, the Partnership recognized impairments of $ 230.6 million, including impairments of $ 125.9 million at the Third Creek gathering system and $ 8.1 million at the Kitty Draw gathering system.

These assets were impaired to estimated salvage values of $ 1.8 million and zero , respectively, using the market approach and Level-3 fair value inputs, due to the shutdown of these systems in May 2018.

During 2018, the Partnership also recognized impairments of $ 38.7 million and $ 34.6 million at the Hilight and MIGC systems, respectively.

These assets were impaired to estimated fair values of $ 4.9 million and $ 15.2 million, respectively, using the income approach and Level-3 fair value inputs, due to a reduction in estimated future cash flows.

The remaining $ 23.3 million of impairments primarily was related to (i) a $ 10.9 million impairment at the GNB NGL pipeline, which was impaired to estimated fair value of $ 10.0 million using the income approach and Level-3 fair value inputs, and (ii) a $ 5.6 million impairment related to an idle facility at the Chipeta complex, which was impaired to estimated salvage value of $ 1.5 million using the market approach and Level-3 fair value inputs.

Potential future long-lived asset impairments.

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY, PLANT, AND EQUIPMENT

Potential future long-lived asset impairments.

As of December 31, 2020, it is reasonably possible that prolonged low commodity prices, further commodity-price declines, changes to producers’ drilling plans in response to lower prices, and potential producer bankruptcies could result in future long-lived asset impairments.

For example, on April 29, 2020, the Partnership received notice that Sanchez is attempting to reject a number of midstream and downstream agreements with commercial counterparties, including Sanchez’s Springfield gathering agreements and agreements obligating Sanchez to deliver the gas volumes gathered by the Springfield system to our Brasada processing plant.

If the attempted rejection is successful, the Partnership’s South Texas assets could be impaired.

GOODWILL AND OTHER INTANGIBLES

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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.

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, and 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.

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This assessment also indicated no impairment.

Other intangible assets.

The other intangible assets balance on the consolidated balance sheets includes the fair value, net of amortization, primarily related to (i) contracts assumed in connection with the Platte Valley and Wattenberg processing plant acquisitions in 2011, which are being amortized on a straight-line basis over 38 years and (ii) contracts assumed in connection with the DBM acquisition in November 2014, which are being amortized on a straight-line basis over 30 years.

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

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

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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GOODWILL AND OTHER INTANGIBLES

Other intangible assets.

The other intangible assets balance on the consolidated balance sheets includes the fair value, net of amortization, primarily related to (i) contracts assumed in connection with processing plant acquisitions in 2011 that are part of the DJ Basin complex, which are being amortized on a straight-line basis over 38 years and (ii) contracts assumed in connection with the DBM acquisition in November 2014, which are being amortized on a straight-line basis over 30 years.

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

The following table presents the gross carrying value and accumulated amortization of other intangible assets:

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Amortization expense for intangible assets was $ 31.7 million, $ 33.0 million, and $ 32.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Intangible asset amortization to be recorded in each of the next five years is estimated to be $ 31.7 million for the years ended December 31, 2021 to December 31, 2025.

Intangible asset amortization to be recorded in each of the next five years is estimated to be $ 31.7 million per year.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED COMPONENTS OF WORKING CAPITAL

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NGLs inventory $ 3,370 $ 882 $ 3,370 $ 882

Materials and supplies inventory (1)

— 23,444 — 23,444

Imbalance receivables 25,309 12,976 25,309 12,976

3 unchanged sentences

Total other current assets $ 46,252 $ 45,262 $ 44,421 $ 43,244

_________________________________________________________________________________________

(1) See Note 1 .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED COMPONENTS OF WORKING CAPITAL

A summary of accrued liabilities is as follows:

9 unchanged sentences

Contract liabilities 27,763 31,477 27,763 31,477

74,599 31,373 35,485 31,219

Other 85,405 74,599 32,849 35,485

Total accrued liabilities $ 263,249 $ 269,947 $ 210,693 $ 230,833

_________________________________________________________________________________________

(1) As of December 31, 2019, includes amounts related to WES Operating’s interest-rate swap agreements and lease liabilities related to the implementation of ASU 2016-02, Leases (Topic 842) (see Note 13 and Note 14) .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ASSET RETIREMENT OBLIGATIONS

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Revisions in estimated liabilities for the year ended December 31, 2020, primarily related to a reduction in expected settlement costs across several of the Partnership’s assets, with the largest decreases at the Third Creek gathering system, DJ Basin complex, Hilight system, and West Texas complex.

Liabilities incurred for the year ended December 31, 2019, represented additions in asset retirement obligations primarily due to capital expansions at the West Texas and DJ Basin complexes.

Revisions in estimated liabilities for the year ended December 31, 2019, primarily related to (i) changes in expected settlement costs at the West Texas and DJ Basin complexes and (ii) changes to the expected abandonment timing of transportation assets in Wyoming.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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$ 502,246 $ 502,138 $ 505,153 $ — $ — $ —

Finance lease liabilities (2)

5.375 % Senior Notes due 2021

— — — 431,081 430,606 436,241

Finance lease liabilities 3,794 3,794 3,794 8,264 8,264 8,264

Total short - term debt

3 unchanged sentences

$ — $ — $ — $ 580,917 $ 580,555 $ 597,568

4.000 % Senior Notes due 2022

580,917 580,555 597,568 670,000 669,322 689,784

Floating - Rate Senior Notes due 2023

20 unchanged sentences

1,000,000 983,709 1,183,514 1,000,000 983,512 1,100,375

— — — 380,000 380,000 380,000

Term loan facility — — — 3,000,000 3,000,000 3,000,000

Finance lease liabilities 1,533 1,533 1,533 23,644 23,644 23,644

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(1) Fair value is measured using the market approach and Level - 2 fair value inputs.

(2) Includes related-party amounts as of December 31, 2019.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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RCF borrowings 220,000

Term loan facility borrowings 3,000,000

APCWH Note Payable borrowings 11,000

Finance lease liabilities 7,873

Repayments of RCF borrowings ( 1,000,000 )

Repayment of WGP RCF borrowings ( 28,000 )

Repayment of APCWH Note Payable ( 439,595 )

Balance at December 31, 2019 $ 7,959,438

RCF borrowings 220,000

Issuance of Floating-Rate Senior Notes due 2023 300,000

10 unchanged sentences

Balance at December 31, 2020 $ 7,854,702

RCF borrowings 480,000

Repayments of RCF borrowings ( 480,000 )

Repayment of 5.375 % Senior Notes due 2021

Repayment of 4.000 % Senior Notes due 2022

Repayment of Floating-Rate Senior Notes due 2023 ( 26,840 )

Repayment of 3.100 % Senior Notes due 2025

Repayment of 3.950 % Senior Notes due 2025

Repayment of 4.650 % Senior Notes due 2026

Finance lease liabilities ( 26,582 )

Balance at December 31, 2021 $ 6,906,548

WES Operating Senior Notes.

In January 2020, WES Operating issued the following notes:

• Fixed-Rate 3.100 % Senior Notes due 2025, 4.050 % Senior Notes due 2030, and 5.250 % Senior Notes due 2050, offered to the public at prices of 99.962 %, 99.900 %, and 99.442 %, respectively, of the face amount (collectively referred to as the “Fixed-Rate Senior Notes”).

Including the effects of the issuance prices, underwriting discounts, and interest-rate adjustments (described below), the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 4.291 %, 5.173 %, and 6.375 %, respectively, at December 31, 2020.

These effective interest rates will increase by 0.25 % on February 1, 2021, due to credit-rating downgrades.

Interest is paid on each such series semi-annually on February 1 and August 1 of each year, beginning August 1, 2020;

• Floating-Rate Senior Notes due 2023 (the “Floating-Rate Senior Notes”).

As of December 31, 2020, the interest rate on the Floating-Rate Senior Notes was 2.07 %.

Interest is paid quarterly in arrears on January 13, April 13, July 13, and October 13 of each year.

Interest is determined at a benchmark rate (which is initially a three-month London Interbank Offered Rate) on the interest determination date plus an initial spread of 0.85 %.

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 December 31, 2021, and were 4.291 %, 5.173 %, and 6.375 %, respectively, at December 31, 2020.

The interest rate on the Floating - Rate Senior Notes was 1.97 % and 2.07 % at December 31, 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).

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.

During the year ended December 31, 2021, losses of $ 24.9 million were recognized for the retirement of these notes.

During the year ended December 31, 2020, WES Operating purchased and retired $ 218.0 million of certain of its senior notes and Floating-Rate Senior Notes via open-market repurchases, and gains of $ 13.5 million were recognized for the early retirement of these notes.

Net proceeds from the Fixed-Rate Senior Notes and Floating-Rate Senior Notes were used to repay the $ 3.0 billion in outstanding borrowings under the Term loan facility and outstanding amounts under the RCF, and for general partnership purposes.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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DEBT AND INTEREST EXPENSE

The interest payable on each of the Fixed-Rate Senior Notes and Floating-Rate Senior Notes is subject to adjustment from time to time if the credit rating assigned to such notes declines below certain specified levels or if credit-rating downgrades are subsequently followed by credit-rating upgrades.

In 2020, Fitch Ratings and Standard and Poor’s downgraded WES Operating’s long-term debt from “BBB-” to “BB” and Moody’s Investors Service downgraded WES Operating’s long-term debt from “Ba1” to “Ba2.” As a result of these downgrades, annualized borrowing costs will increase by $ 43.0 million.

As of December 31, 2021, the 4.000 % Senior Notes due 2022 were classified as short-term debt on the consolidated balance sheet.

Subsequent to December 31, 2020, WES Operating delivered notice to redeem the 5.375% Senior Notes due 2021 on March 1, 2021, as per the optional redemption terms in WES Operating’s indenture.

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

The WGP RCF, which previously was available to purchase WES Operating common units and for general partnership purposes, matured in March 2019, and the $ 28.0 million of outstanding borrowings were repaid.

Revolving credit facility.

The RCF is expandable to a maximum of $ 2.5 billion and bears interest at the London Interbank Offered Rate (“LIBOR”), plus applicable margins ranging from 1.00 % to 1.50 %, or an alternate base rate equal to the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.50 %, or (c) LIBOR plus 1.00 %, in each case plus applicable margins currently ranging from zero to 0.50 %, based on WES Operating’s senior unsecured debt rating.

A required quarterly facility fee is paid ranging from 0.125 % to 0.250 % of the commitment amount (whether drawn or undrawn), which also is based on the senior unsecured debt rating.

In December 2019, WES Operating entered into an amendment to the RCF to, among other things, exercise the final one-year extension option to extend the maturity date of the RCF from February 2024 to February 2025, for each extending lender.

The maturity date with respect to each non-extending lender, whose commitments represent $ 100.0 million out of $ 2.0 billion of total commitments from all lenders, remains February 2024.

WES Operating’s $ 2.0 billion RCF is expandable to a maximum of $ 2.5 billion, and matures in February 2025 for each extending lender (see Note 1) .

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 December 31, 2021, there were no outstanding borrowings and $ 5.1 million of outstanding letters of credit, resulting in $ 2.0 billion of available borrowing capacity under the RCF.

As of December 31, 2021 and 2020, the interest rate on any outstanding RCF borrowings was 1.60 % and 1.64 %, respectively.

The facility-fee rate was 0.25 % and 0.20 % at December 31, 2020 and 2019, respectively.

The facility - fee rate was 0.25 % at December 31, 2021 and 2020.

The RCF bears interest at the London Interbank Offered Rate (“LIBOR”), plus applicable margins ranging from 1.00 % to 1.50 %, or an alternate base rate equal to the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.50 %, or (c) LIBOR plus 1.00 %, in each case plus applicable margins currently ranging from zero to 0.50 %, based on WES Operating’s senior unsecured debt rating.

A required quarterly facility fee is paid ranging from 0.125 % to 0.250 % of the commitment amount (whether drawn or undrawn), which also is based on the senior unsecured debt rating.

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

As a result of credit-rating downgrades (see WES Operating Senior Notes above), beginning in the second quarter of 2020, the interest rate on outstanding RCF borrowings increased by 0.20 % and the RCF facility-fee rate increased by 0.05 %, from 0.20 % to 0.25 %.

Term loan facility.

In December 2018, WES Operating entered into the Term loan facility, the proceeds from which were used to fund substantially all of the cash portion of the consideration under the Merger Agreement and the payment of related transaction costs (see Note 1 ).

As of December 31, 2019, the interest rate on the outstanding borrowings was 3.10 %.

In January 2020, WES Operating repaid the outstanding borrowings with proceeds from the issuance of the Fixed-Rate Senior Notes and Floating-Rate Senior Notes and terminated the Term loan facility (see WES Operating Senior Notes above).

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.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEBT AND INTEREST EXPENSE

APCWH Note Payable.

In June 2017, in connection with funding the construction of the APC water systems that were acquired as part of the AMA acquisition, APCWH entered into an eight-year note payable agreement with Anadarko.

This note payable had a maximum borrowing limit of $ 500.0 million, including accrued interest.

The APCWH Note Payable was repaid at Merger completion.

Interest-rate swaps.

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For the year ended December 31, 2019, non-cash losses of $ 125.3 million were recognized, which are included in Other income (expense), net in the consolidated statements of operations.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Certain of these equipment leases were amended during the third quarter of 2021 requiring reassessment of lease classification.

As a result, these leases were classified as operating leases.

See Note 14—Leases .

Interest expense.

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Long - term and short - term debt

$ ( 366,570 ) $ ( 369,815 ) $ ( 315,872 )

Finance lease liabilities ( 861 ) ( 1,510 ) —

Amortization of debt issuance costs and commitment fees ( 13,501 ) ( 12,424 ) ( 9,110 )

Commitment fees and amortization of debt-related costs ( 12,705 ) ( 13,501 ) ( 12,424 )

Capitalized interest 3,624 4,774 26,980

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Partnership adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019, using the modified retrospective method applied to all leases in existence on January 1, 2019, and prior-period financial statements were not adjusted.

The Partnership adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019, using the modified retrospective method applied to all leases in existence on January 1, 2019.

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

The Partnership has entered into operating leases that extend through 2039 for corporate offices, shared field offices, easements, and equipment supporting the Partnership’s operations, with both Occidental and third parties as lessors.

The Partnership has entered into operating leases for corporate offices, shared field offices, easements, and equipment supporting the Partnership’s operations, with both Occidental and third parties as lessors.

The Partnership also had subleased equipment from Occidental via finance leases that extended through April 2020.

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

During the first quarter of 2020, the Partnership entered into finance leases with third parties for equipment and vehicles.

Certain of these equipment leases were amended during the third quarter of 2021 requiring reassessment of lease classification.

As a result, these leases were classified as operating leases.

The following table summarizes information related to the Partnership’s leases:

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________________________________________________________________________________________

(1) Includes additions to ROU assets and lease liabilities of $ 39.7 million and $ 8.5 million related to finance leases for the year ended December 31, 2020 and 2019, respectively.

Includes additions to ROU assets and lease liabilities of $ 40.5 million related to operating leases for the year ended December 31, 2020.

Lease expense charged to the Partnership was $ 56.5 million for the year ended December 31, 2018.

(1) For the years ended December 31, 2021 and 2020, includes additions to ROU assets of $ 44.9 million and $ 40.5 million, respectively, and additions to lease liabilities of $ 14.9 million and $ 40.5 million, respectively, related to operating leases.

Includes additions to ROU assets and lease liabilities of $ 0.9 million and $ 39.7 million related to finance leases for the years ended December 31, 2021 and 2020, respectively.

The following table summarizes the Partnership’s lease cost:

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Year Ended December 31,

thousands Operating Leases Finance Leases Operating Leases Finance Leases

2021 2020 2019

thousands Operating Leases Finance Leases Operating Leases Finance Leases Operating Leases Finance Leases

Operating cash flows $ 5,805 $ 861 $ 5,750 $ 1,516 $ 7,042 $ 118

6 unchanged sentences

2025 4,444 23

2025 4,101 3,095

Thereafter 22,896 —

2 unchanged sentences

Total lease liabilities $ 46,000 $ 5,327

Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership entered into an operating and maintenance agreement pursuant to which Occidental provides operational and maintenance services with respect to a crude-oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021.

The agreement and underlying contracts include (i) fixed consideration, which is measured as the minimum - volume commitment for both gathering and treating, and (ii) variable consideration, which consists of all volumes above the minimum - volume commitment.

Subsequent to the initial two - year term, the agreement provides for automatic one - year extensions, unless either party exercises its option to terminate the lease with advance notice.

For the year ended December 31, 2020, the Partnership recognized fixed-lease revenue of $ 175.8 million and variable-lease revenue of $ 47.9 million related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations.

The following table presents the undiscounted cash flows expected to be received for all operating leases in effect as of December 31, 2020.

This presentation includes minimum fixed lease payments and does not include an estimate of variable lease consideration.

2021 $ 193,925

Total lease payments $ 193,925

In April 2021, the Partnership exercised its option to terminate the operating and maintenance agreement with Occidental effective December 31, 2021.

For the years ended December 31, 2021 and 2020, the Partnership recognized fixed-lease revenue of $ 175.8 million and $ 175.8 million, respectively, and variable-lease revenue of $ 3.5 million and $ 47.9 million, respectively, related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations.

In December 2021, one of the Partnership’s processing agreements was amended.

The amended contract was determined to be a lease agreement;

however, the Partnership elected the practical expedient to combine the lease and the non-lease components, which consists of processing and stabilization services, into a single service component and will account for the contract under Revenue from Contracts with Customers (Topic 606) .

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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EQUITY-BASED COMPENSATION

The general partner has the authority to grant equity compensation awards under the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan (“WES LTIP”) and the Western Gas Partners, LP 2017 Long-Term Incentive Plan (assumed by the Partnership in connection with the Merger) to its independent directors, executive officers, and employees.

As of December 31, 2020, the WES LTIP and the Western Gas Partners, LP 2017 Long-Term Incentive Plan had 2,823,967 and 3,431,251 units, respectively, available for future issuance.

On February 10, 2020, the Board of Directors approved awards of phantom units (the “Awards”) to the Partnership’s executive officers under the WES LTIP.

The Awards include (i) an award of time-vested phantom units that vest ratably over a three-year period (“Time-Based Awards”), (ii) a market award that vests after a three-year performance period based on the Partnership’s relative total unitholder return as compared to a group of peer companies (“TUR Awards”), and (iii) a performance award that vests based on the Partnership’s average return on assets over a three-year performance period (“ROA Awards”).

The general partner has the authority to grant equity compensation awards to its independent directors, executive officers, and employees under the (i) Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan (the “2012 LTIP”), (ii) the Western Gas Partners, LP 2017 Long-Term Incentive Plan (the “2017 LTIP,” assumed by the Partnership in connection with the Merger), and (iii) the Western Midstream Partners, LP 2021 Long - Term Incentive Plan (the “2021 LTIP”).

These plans are collectively referred to as the “WES LTIPs.” The 2012 LTIP, the 2017 LTIP, and the 2021 LTIP permit the issuance of up to 3,000,000 , 3,431,251 , and 9,500,000 units, respectively, of which 484,909 , 2,308,578 , and 9,500,000 units, respectively, remained available for future issuance as of December 31, 2021.

On March 22, 2021, the Board approved 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.

The Board awards phantom units (the “Awards”) to the Partnership’s executive officers under the WES LTIPs.

The Awards include (i) an award of time-vested phantom units that vest ratably over a period of three years (“Time-Based Awards”), (ii) a market award that vests after a performance period of three years based on the Partnership’s relative total unitholder return as compared to a group of peer companies (“TUR Awards”), and (iii) a performance award that vests based on the Partnership’s average return on assets over a performance period of three years (“ROA Awards”).

At vesting, the number of vested units for the TUR Awards and the ROA Awards will be determined in accordance with the terms of the respective award agreements that provide for payout percentages ranging from 0 % to 200 % based on results achieved over the applicable performance period.

At vesting, the Awards generally will be settled in Partnership common units.

Prior to vesting, the Awards pay in-kind distributions in the form of Partnership common units.

During the year ended December 31, 2020, the Partnership issued 48,070 common units as in-kind distributions under such Awards.

In addition, time-vested phantom units are awarded under the WES LTIP to non-executive employees and independent directors of the Partnership from time to time, which vest ratably over a three-year period and one year from the grant date, respectively.

Prior to vesting, the Awards granted in 2020 pay in-kind distributions in the form of Partnership common units.

During the years ended December 31, 2021 and 2020, the Partnership issued 21,681 and 48,070 common units, respectively, as in-kind distributions under such Awards.

Prior to vesting, the Time-Based Awards granted in 2021 pay cash distributions ratably.

The TUR and ROA Awards granted in 2021 pay cash distributions at vesting based on actual performance.

In addition, time-vested phantom units may be awarded under the WES LTIPs to non-executive employees and independent directors of the Partnership, which vest ratably over a period of three years and one year from the grant date, respectively.

Prior to vesting, the awards to non-executive employees and independent directors pay distribution equivalents in cash.

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The fair value of the TUR Awards is determined using a Monte Carlo simulation at the grant date of the award.

The fair value of the ROA awards is adjusted quarterly based on the current period unit price and the estimated performance rating at vesting.

The fair value of the ROA awards is adjusted quarterly based on the estimated performance rating at vesting.

For ROA Awards, all performance-related fair-value changes are recognized in compensation expense during the performance period.

The total fair value of phantom units vested was $ 8.5 million, $ 0.5 million, and $ 1.2 million for the years ended December 31, 2021, 2020, and 2019, respectively, based on the market price at the vesting date.

Compensation expense for the long-term incentive plans was $ 7.9 million, $ 1.0 million, and $ 0.7 million for the years ended December 31, 2020, 2019, and 2018, respectively.

As of December 31, 2020, the Partnership had $ 16.9 million of estimated unrecognized compensation expense attributable to the WES LTIP that will be recognized over a weighted-average period of 1.6 years.

The following table summarizes time-vested award activity under the WES LTIP for the years ended December 31, 2020, 2019, and 2018:

Compensation expense for the WES LTIPs was $ 17.6 million, $ 7.9 million, and $ 1.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021, the Partnership had $ 27.4 million of estimated unrecognized compensation expense attributable to the WES LTIPs that will be recognized over a weighted-average period of 1.1 years.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY-BASED COMPENSATION

The following table summarizes time-vested award activity under the WES LTIPs for the years ended December 31, 2021, 2020, and 2019:

2021 2020 2019

Time-Vested Awards Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units

Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units

Non-vested units at beginning of year $ 15.69 1,307,606 $ — — $ 35.08 7,128

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________________________________________________________________________________________

(1) At closing of the Merger, WES Operating phantom units awarded under the Western Gas Partners, LP 2017 Long-Term Incentive Plan converted into phantom units of the Partnership under the WES LTIP.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EQUITY-BASED COMPENSATION

The following table summarizes TUR Awards and ROA Awards activity under the WES LTIP for the year ended December 31, 2020:

TUR Awards ROA Awards

(1) At closing of the Merger, 8,020 WES Operating phantom units awarded under the 2017 LTIP converted into phantom units of the Partnership under the 2012 LTIP.

The following table summarizes TUR Awards activity under the WES LTIPs for the years ended December 31, 2021 and 2020:

Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units

Non-vested units at January 1, 2020 $ — — $ — —

Non-vested units at beginning of year $ 17.79 108,481 $ — —

Granted 22.77 237,720 17.79 124,067

Forfeited 21.78 ( 20,984 ) 17.79 ( 15,586 )

Non-vested units at December 31, 2020 17.79 108,481 17.97 108,481

The following table summarizes award activity under the Western Gas Partners, LP 2017 Long-Term Incentive Plan for the years ended December 31, 2019 and 2018.

There were no awards issued under this plan in 2020.

Non-vested units at end of year 21.17 325,217 17.79 108,481

The following table summarizes ROA Awards activity under the WES LTIPs for the years ended December 31, 2021 and 2020:

Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units

Non-vested units at beginning of year $ 16.27 108,481 $ — —

— — 49.88 8,020

— — 55.73 ( 7,180 )

Converted (1)

49.88 ( 8,020 ) — —

Granted 15.88 237,720 16.27 124,067

Forfeited 15.96 ( 20,984 ) 16.27 ( 15,586 )

Non-vested units at end of year 16.01 325,217 16.27 108,481

_________________________________________________________________________________________

(1) At closing of the Merger, WES Operating phantom units awarded under the Western Gas Partners, LP 2017 Long-Term Incentive Plan converted into phantom units of the Partnership under the WES LTIP.

WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP

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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 recorded obligations do not include any anticipated insurance recoveries.

The majority of payments related to these obligations are expected to be made over the next five years.

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Other commitments.

The Partnership has short-term payment obligations, or commitments, related to its capital spending programs, and those of its unconsolidated related parties, the majority of which is expected to be paid in the next twelve months.

These commitments primarily relate to construction and expansion projects at the West Texas and DJ Basin complexes, DBM water systems, and DBM oil system.

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 12 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.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data