Western Midstream Partners, LP 10-Q

Item 1. Financial Statements WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, thousands except per-unit amounts 2022 2021 Revenues and other Service revenues – fee based $ 631,598 $ 572,275 Service revenues – product based 40,867 31,652 Product sales 85,589 70,805 Other 243 242 Total revenues and other (1) 758,297 674,974 Equity income, net – related parties 49,607 52,165 Operating expenses Cost of product 72,848 88,969 Operation and maintenance 128,976 140,332 General and administrative 48,602 45,116 Property and other taxes 18,442 14,384 Depreciation and amortization 134,582 130,553 Long - lived asset and other impairments — 14,866 Total operating expenses (2) 403,450 434,220 Gain (loss) on divestiture and other, net 370 ( 583 ) Operating income (loss) 404,824 292,336 Interest expense ( 85,455 ) ( 98,493 ) Gain (loss) on early extinguishment of debt — ( 289 ) Other income (expense), net 106 ( 1,207 ) Income (loss) before income taxes 319,475 192,347 Income tax expense (benefit) 1,805 1,112 Net income (loss) 317,670 191,235 Net income (loss) attributable to noncontrolling interests 8,953 5,444 Net income (loss) attributable to Western Midstream Partners, LP $ 308,717 $ 185,791 Limited partners’ interest in net income (loss): Net income (loss) attributable to Western Midstream Partners, LP $ 308,717 $ 185,791 General partner interest in net (income) loss ( 6,783 ) ( 3,993 ) Limited partners’ interest in net income (loss) (3) 301,934 181,798 Net income (loss) per common unit – basic (3) $ 0.75 $ 0.44 Net income (loss) per common unit – diluted (3) $ 0.75 $ 0.44 Weighted - average common units outstanding – basic (3) 403,254 413,104 Weighted - average common units outstanding – diluted (3) 404,460 413,446 _________________________________________________________________________________________ (1) Total revenues and other includes related-party amounts of $ 428.7 million and $ 378.3 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5 . (2) Total operating expenses includes related-party amounts of $( 17.6 ) million and $ 39.9 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5 . (3) See Note 4. 7 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED BALANCE SHEETS (UNAUDITED) thousands except number of units March 31, 2022 December 31, 2021 ASSETS Current assets Cash and cash equivalents $ 248,249 $ 201,999 Accounts receivable, net 601,647 436,513 Other current assets 56,397 46,252 Total current assets 906,293 684,764 Property, plant, and equipment Cost 12,930,358 12,846,078 Less accumulated depreciation 4,455,162 4,333,171 Net property, plant, and equipment 8,475,196 8,512,907 Goodwill 4,783 4,783 Other intangible assets 736,825 744,742 Equity investments 1,163,069 1,167,187 Other assets (1) 159,707 158,696 Total assets (2) $ 11,445,873 $ 11,273,079 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 395,893 $ 326,061 Short - term debt 718,153 505,932 Accrued ad valorem taxes 62,833 44,955 Accrued liabilities 160,247 263,249 Total current liabilities 1,337,126 1,140,197 Long-term liabilities Long - term debt 6,188,750 6,400,616 Deferred income taxes 13,557 12,425 Asset retirement obligations 297,187 298,275 Other liabilities 338,446 325,806 Total long - term liabilities 6,837,940 7,037,122 Total liabilities (3) 8,175,066 8,177,319 Equity and partners’ capital Common units ( 403,333,810 and 402,993,919 units issued and outstanding at March 31, 2022, and December 31, 2021, respectively) 3,134,018 2,966,955 General partner units ( 9,060,641 units issued and outstanding at March 31, 2022, and December 31, 2021) ( 5,062 ) ( 8,882 ) Total partners’ capital 3,128,956 2,958,073 Noncontrolling interests 141,851 137,687 Total equity and partners’ capital 3,270,807 3,095,760 Total liabilities, equity, and partners’ capital $ 11,445,873 $ 11,273,079 ________________________________________________________________________________________ (1) Other assets includes $ 14.6 million and $ 9.8 million of NGLs line - fill inventory as of March 31, 2022, and December 31, 2021, respectively. Other assets also includes $ 51.9 million and $ 56.2 million of materials and supplies inventory as of March 31, 2022, and December 31, 2021, respectively. (2) Total assets includes related - party amounts of $ 1.5 billion and $ 1.4 billion as of March 31, 2022, and December 31, 2021, respectively, which includes related - party Accounts receivable, net of $ 274.2 million and $ 180.2 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5 . (3) Total liabilities includes related - party amounts of $ 275.7 million and $ 270.5 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5 . See accompanying Notes to Consolidated Financial Statements. 8 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) Partners’ Capital thousands Common Units General Partner Units Noncontrolling Interests Total Balance at December 31, 2021 $ 2,966,955 $ ( 8,882 ) $ 137,687 $ 3,095,760 Net income (loss) 301,934 6,783 8,953 317,670 Distributions to Chipeta noncontrolling interest owner — — ( 1,984 ) ( 1,984 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,805 ) ( 2,805 ) Distributions to Partnership unitholders ( 131,786 ) ( 2,963 ) — ( 134,749 ) Unit repurchases (1) ( 5,149 ) — — ( 5,149 ) Contributions of equity - based compensation from Occidental 1,949 — — 1,949 Equity - based compensation expense 5,794 — — 5,794 Net contributions from (distributions to) related parties 409 — — 409 Other ( 6,088 ) — — ( 6,088 ) Balance at March 31, 2022 $ 3,134,018 $ ( 5,062 ) $ 141,851 $ 3,270,807 _________________________________________________________________________________________ (1) See Note 4 . Partners’ Capital thousands Common Units General Partner Units Noncontrolling Interests Total Balance at December 31, 2020 $ 2,778,339 $ ( 17,208 ) $ 134,081 $ 2,895,212 Net income (loss) 181,798 3,993 5,444 191,235 Distributions to Chipeta noncontrolling interest owner — — ( 276 ) ( 276 ) Distributions to noncontrolling interest owner of WES Operating — — ( 2,551 ) ( 2,551 ) Distributions to Partnership unitholders ( 128,447 ) ( 2,818 ) — ( 131,265 ) Unit repurchases (1) ( 16,241 ) — — ( 16,241 ) Contributions of equity - based compensation from Occidental 3,210 — — 3,210 Equity - based compensation expense 3,524 — — 3,524 Net contributions from (distributions to) related parties 1,627 — — 1,627 Other ( 2,355 ) — — ( 2,355 ) Balance at March 31, 2021 $ 2,821,455 $ ( 16,033 ) $ 136,698 $ 2,942,120 _________________________________________________________________________________________ (1) See Note 4 . See accompanying Notes to Consolidated Financial Statements. 9 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, thousands 2022 2021 Cash flows from operating activities Net income (loss) $ 317,670 $ 191,235 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 134,582 130,553 Long - lived asset and other impairments — 14,866 Non - cash equity - based compensation expense 7,743 6,734 Deferred income taxes 1,132 557 Accretion and amortization of long - term obligations, net 1,782 2,088 Equity income, net – related parties ( 49,607 ) ( 52,165 ) Distributions from equity - investment earnings – related parties 45,870 49,048 (Gain) loss on divestiture and other, net ( 370 ) 583 (Gain) loss on early extinguishment of debt — 289 Other — 11 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 165,134 ) ( 30,182 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net ( 14,292 ) ( 16,467 ) Change in other items, net ( 2,918 ) ( 35,600 ) Net cash provided by operating activities 276,458 261,550 Cash flows from investing activities Capital expenditures (1) ( 83,971 ) ( 61,783 ) Contributions to equity investments – related parties ( 2,070 ) ( 86 ) Distributions from equity investments in excess of cumulative earnings – related parties 9,925 12,141 Proceeds from the sale of assets to third parties 383 — (Increase) decrease in materials and supplies inventory and other 4,116 3,256 Net cash used in investing activities ( 71,617 ) ( 46,472 ) Cash flows from financing activities Borrowings, net of debt issuance costs — 100,000 Repayments of debt — ( 531,085 ) Increase (decrease) in outstanding checks ( 7,088 ) ( 22,017 ) Distributions to Partnership unitholders (2) ( 134,749 ) ( 131,265 ) Distributions to Chipeta noncontrolling interest owner ( 1,984 ) ( 276 ) Distributions to noncontrolling interest owner of WES Operating ( 2,805 ) ( 2,551 ) Net contributions from (distributions to) related parties 409 1,627 Unit repurchases ( 5,149 ) ( 16,241 ) Other ( 7,225 ) ( 1,816 ) Net cash provided by (used in) financing activities ( 158,591 ) ( 603,624 ) Net increase (decrease) in cash and cash equivalents 46,250 ( 388,546 ) Cash and cash equivalents at beginning of period 201,999 444,922 Cash and cash equivalents at end of period $ 248,249 $ 56,376 Supplemental disclosures Interest paid, net of capitalized interest $ 149,289 $ 153,979 Income taxes paid (reimbursements received) 905 932 Accrued capital expenditures 36,821 22,964 _________________________________________________________________________________________ (1) Includes purchases from related parties of $ 2.0 million for the three months ended March 31, 2021. See Note 5 . (2) See Note 5 . See accompanying Notes to Consolidated Financial Statements. 10 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, thousands 2022 2021 Revenues and other Service revenues – fee based $ 631,598 $ 572,275 Service revenues – product based 40,867 31,652 Product sales 85,589 70,805 Other 243 242 Total revenues and other (1) 758,297 674,974 Equity income, net – related parties 49,607 52,165 Operating expenses Cost of product 72,848 88,969 Operation and maintenance 128,976 140,332 General and administrative 47,861 44,230 Property and other taxes 18,442 14,384 Depreciation and amortization 134,582 130,553 Long - lived asset and other impairments — 14,866 Total operating expenses (2) 402,709 433,334 Gain (loss) on divestiture and other, net 370 ( 583 ) Operating income (loss) 405,565 293,222 Interest expense ( 85,455 ) ( 98,493 ) Gain (loss) on early extinguishment of debt — ( 289 ) Other income (expense), net 103 ( 1,210 ) Income (loss) before income taxes 320,213 193,230 Income tax expense (benefit) 1,805 1,112 Net income (loss) 318,408 192,118 Net income (loss) attributable to noncontrolling interest 2,636 1,633 Net income (loss) attributable to Western Midstream Operating, LP $ 315,772 $ 190,485 ________________________________________________________________________________________ (1) Total revenues and other includes related - party amounts of $ 428.7 million and $ 378.3 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5 . (2) Total operating expenses includes related - party amounts of $( 16.7 ) million and $ 40.4 million for the three months ended March 31, 2022 and 2021, respectively. See Note 5 . See accompanying Notes to Consolidated Financial Statements. 11 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED BALANCE SHEETS (UNAUDITED) thousands except number of units March 31, 2022 December 31, 2021 ASSETS Current assets Cash and cash equivalents $ 244,213 $ 195,598 Accounts receivable, net 601,647 436,513 Other current assets 55,023 44,421 Total current assets 900,883 676,532 Property, plant, and equipment Cost 12,930,358 12,846,078 Less accumulated depreciation 4,455,162 4,333,171 Net property, plant, and equipment 8,475,196 8,512,907 Goodwill 4,783 4,783 Other intangible assets 736,825 744,742 Equity investments 1,163,069 1,167,187 Other assets (1) 158,795 158,696 Total assets (2) $ 11,439,551 $ 11,264,847 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 412,221 $ 374,443 Short - term debt 718,153 505,932 Accrued ad valorem taxes 62,833 44,955 Accrued liabilities 132,309 210,693 Total current liabilities 1,325,516 1,136,023 Long-term liabilities Long - term debt 6,188,750 6,400,616 Deferred income taxes 13,557 12,425 Asset retirement obligations 297,187 298,275 Other liabilities 337,647 324,842 Total long - term liabilities 6,837,141 7,036,158 Total liabilities (3) 8,162,657 8,172,181 Equity and partners’ capital Common units ( 318,675,578 units issued and outstanding at March 31, 2022, and December 31, 2021) 3,246,865 3,063,289 Total partners’ capital 3,246,865 3,063,289 Noncontrolling interest 30,029 29,377 Total equity and partners’ capital 3,276,894 3,092,666 Total liabilities, equity, and partners’ capital $ 11,439,551 $ 11,264,847 _________________________________________________________________________________________ (1) Other assets includes $ 14.6 million and $ 9.8 million of NGLs line - fill inventory as of March 31, 2022, and December 31, 2021, respectively. Other assets also includes $ 51.9 million and $ 56.2 million of materials and supplies inventory as of March 31, 2022, and December 31, 2021, respectively. (2) Total assets includes related - party amounts of $ 1.5 billion and $ 1.4 billion as of March 31, 2022, and December 31, 2021, respectively, which includes related - party Accounts receivable, net of $ 274.2 million and $ 180.2 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5 . (3) Total liabilities includes related - party amounts of $ 292.3 million and $ 318.7 million as of March 31, 2022, and December 31, 2021, respectively. See Note 5 . See accompanying Notes to Consolidated Financial Statements. 12 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL (UNAUDITED) thousands Common Units Noncontrolling Interest Total Balance at December 31, 2021 $ 3,063,289 $ 29,377 $ 3,092,666 Net income (loss) 315,772 2,636 318,408 Distributions to Chipeta noncontrolling interest owner — ( 1,984 ) ( 1,984 ) Distributions to WES Operating unitholders ( 140,217 ) — ( 140,217 ) Contributions of equity - based compensation from Occidental 1,949 — 1,949 Contributions of equity - based compensation from WES 5,663 — 5,663 Net contributions from (distributions to) related parties 409 — 409 Balance at March 31, 2022 $ 3,246,865 $ 30,029 $ 3,276,894 thousands Common Units Noncontrolling Interest Total Balance at December 31, 2020 $ 2,831,199 $ 29,552 $ 2,860,751 Net income (loss) 190,485 1,633 192,118 Distributions to Chipeta noncontrolling interest owner — ( 276 ) ( 276 ) Distributions to WES Operating unitholders ( 127,470 ) — ( 127,470 ) Contributions of equity - based compensation from Occidental 3,210 — 3,210 Contributions of equity - based compensation from WES 10,826 — 10,826 Net contributions from (distributions to) related parties 1,627 — 1,627 Balance at March 31, 2021 $ 2,909,877 $ 30,909 $ 2,940,786 See accompanying Notes to Consolidated Financial Statements. 13 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, thousands 2022 2021 Cash flows from operating activities Net income (loss) $ 318,408 $ 192,118 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 134,582 130,553 Long - lived asset and other impairments — 14,866 Non - cash equity - based compensation expense 7,612 14,036 Deferred income taxes 1,132 557 Accretion and amortization of long - term obligations, net 1,782 2,088 Equity income, net – related parties ( 49,607 ) ( 52,165 ) Distributions from equity - investment earnings – related parties 45,870 49,048 (Gain) loss on divestiture and other, net ( 370 ) 583 (Gain) loss on early extinguishment of debt — 289 Other — 11 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 165,134 ) ( 50,540 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net ( 21,864 ) ( 3,748 ) Change in other items, net ( 2,294 ) ( 36,028 ) Net cash provided by operating activities 270,117 261,668 Cash flows from investing activities Capital expenditures (1) ( 83,971 ) ( 61,783 ) Contributions to equity investments – related parties ( 2,070 ) ( 86 ) Distributions from equity investments in excess of cumulative earnings – related parties 9,925 12,141 Proceeds from the sale of assets to third parties 383 — (Increase) decrease in materials and supplies inventory and other 4,116 3,256 Net cash used in investing activities ( 71,617 ) ( 46,472 ) Cash flows from financing activities Borrowings, net of debt issuance costs — 100,000 Repayments of debt — ( 531,085 ) Increase (decrease) in outstanding checks ( 6,953 ) ( 22,209 ) Distributions to WES Operating unitholders (2) ( 140,217 ) ( 127,470 ) Distributions to Chipeta noncontrolling interest owner ( 1,984 ) ( 276 ) Net contributions from (distributions to) related parties 409 1,627 Other ( 1,140 ) ( 1,816 ) Net cash provided by (used in) financing activities ( 149,885 ) ( 581,229 ) Net increase (decrease) in cash and cash equivalents 48,615 ( 366,033 ) Cash and cash equivalents at beginning of period 195,598 418,537 Cash and cash equivalents at end of period $ 244,213 $ 52,504 Supplemental disclosures Interest paid, net of capitalized interest $ 149,289 $ 153,979 Income taxes paid (reimbursements received) 905 932 Accrued capital expenditures 36,821 22,964 ________________________________________________________________________________________ (1) Includes purchases from related parties of $ 2.0 million for the three months ended March 31, 2021. See Note 5 . (2) See Note 5 . See accompanying Notes to Consolidated Financial Statements. 14 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION General. Western Midstream Partners, LP is a Delaware master limited partnership formed in September 2012. Western Midstream Operating, LP (together with its subsidiaries, “WES Operating”) is a Delaware limited partnership formed in 2007 to acquire, own, develop, and operate midstream assets. Western Midstream Partners, LP owns, directly and indirectly, a 98.0 % limited partner interest in WES Operating, and directly owns all of the outstanding equity interests of Western Midstream Operating GP, LLC, which holds the entire non - economic general partner interest in WES Operating. For purposes of these consolidated financial statements, the “Partnership” refers to Western Midstream Partners, LP in its individual capacity or to Western Midstream Partners, LP and its subsidiaries, including Western Midstream Operating GP, LLC and WES Operating, as the context requires. “WES Operating GP” refers to Western Midstream Operating GP, LLC, individually as the general partner of WES Operating. The Partnership’s general partner, Western Midstream Holdings, LLC (the “general partner”), is a wholly owned subsidiary of Occidental Petroleum Corporation. “Occidental” refers to Occidental Petroleum Corporation, as the context requires, and its subsidiaries, excluding the general partner. “Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding Western Midstream Holdings, LLC. Anadarko became a wholly owned subsidiary of Occidental as a result of Occidental’s acquisition by merger of Anadarko on August 8, 2019. “Related parties” refers to Occidental (see Note 5 ), the Partnership’s investments accounted for under the equity method of accounting (see Note 6 ), and the Partnership and WES Operating for transactions that eliminate upon consolidation (see Note 5 ). The Partnership is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural - gas liquids (“NGLs”), and crude oil; and gathering and disposing of produced water. In its capacity as a natural - gas processor, the Partnership also buys and sells natural gas, NGLs, and condensate on behalf of itself and as an agent for its customers under certain contracts. As of March 31, 2022, the Partnership’s assets and investments consisted of the following: Wholly Owned and Operated Operated Interests Non-Operated Interests Equity Interests Gathering systems (1) 17 2 3 1 Treating facilities 37 3 — — Natural - gas processing plants/trains 24 3 — 5 NGLs pipelines 2 — — 5 Natural - gas pipelines 5 — — 1 Crude - oil pipelines 3 1 — 4 _________________________________________________________________________________________ (1) Includes the DBM water systems. These assets and investments are located in Texas, New Mexico, the Rocky Mountains (Colorado, Utah, and Wyoming), and North - central Pennsylvania. 15 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Basis of presentation. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of the Partnership and entities in which it holds a controlling financial interest, including WES Operating, WES Operating GP, proportionately consolidated interests, and equity investments (see table below). All significant intercompany transactions have been eliminated. The following table outlines the ownership interests and the accounting method of consolidation used in the consolidated financial statements for entities not wholly owned: Percentage Interest Full consolidation Chipeta (1) 75.00 % Proportionate consolidation (2) Springfield system 50.10 % Marcellus Interest systems 33.75 % Equity investments (3) Mi Vida JV LLC (“Mi Vida”) 50.00 % Ranch Westex JV LLC (“Ranch Westex”) 50.00 % Front Range Pipeline LLC (“FRP”) 33.33 % Red Bluff Express Pipeline, LLC (“Red Bluff Express”) 30.00 % Enterprise EF78 LLC (“Mont Belvieu JV”) 25.00 % Rendezvous Gas Services, LLC (“Rendezvous”) 22.00 % Texas Express Pipeline LLC (“TEP”) 20.00 % Texas Express Gathering LLC (“TEG”) 20.00 % Whitethorn Pipeline Company LLC (“Whitethorn LLC”) 20.00 % Saddlehorn Pipeline Company, LLC (“Saddlehorn”) 20.00 % Cactus II Pipeline LLC (“Cactus II”) 15.00 % Panola Pipeline Company, LLC (“Panola”) 15.00 % White Cliffs Pipeline, LLC (“White Cliffs”) 10.00 % _________________________________________________________________________________________ (1) The 25 % third - party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements. See Noncontrolling interests below. (2) The Partnership proportionately consolidates its associated share of the assets, liabilities, revenues, and expenses attributable to these assets. (3) Investments in non - controlled entities over which the Partnership exercises significant influence are accounted for under the equity method of accounting. “Equity - investment throughput” refers to the Partnership’s share of average throughput for these investments. Certain information and note disclosures commonly included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying consolidated financial statements and notes should be read in conjunction with the Partnership’s 2021 Form 10-K, as filed with the SEC on February 23, 2022. Management believes that the disclosures made are adequate to make the information not misleading. 16 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION The consolidated financial results of WES Operating are included in the Partnership’s consolidated financial statements. Throughout these notes to consolidated financial statements, and to the extent material, any differences between the consolidated financial results of the Partnership and WES Operating are discussed separately. The Partnership’s consolidated financial statements differ from those of WES Operating primarily as a result of (i) the presentation of noncontrolling interest ownership (see Noncontrolling interests below), (ii) the elimination of WES Operating GP’s investment in WES Operating with WES Operating GP’s underlying capital account, (iii) the general and administrative expenses incurred by the Partnership, which are separate from, and in addition to, those incurred by WES Operating, (iv) the inclusion of the impact of Partnership equity balances and Partnership distributions, and (v) transactions between the Partnership and WES Operating that eliminate upon consolidation. Presentation of the Partnership’s assets. The Partnership’s assets include assets owned and ownership interests accounted for by the Partnership under the equity method of accounting, through its 98.0 % partnership interest in WES Operating, as of March 31, 2022 (see Note 6 ). The Partnership also owns and controls the entire non - economic general partner interest in WES Operating GP, and the Partnership’s general partner is owned by Occidental. Use of estimates. In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, using historical experience and other reasonable methods. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Effects on the business, financial condition, and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information included herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements, and certain prior-period amounts have been reclassified to conform to the current-year presentation. Noncontrolling interests. The Partnership’s noncontrolling interests in the consolidated financial statements consist of (i) the 25 % third - party interest in Chipeta and (ii) the 2.0 % Occidental subsidiary - owned limited partner interest in WES Operating. WES Operating’s noncontrolling interest in the consolidated financial statements consists of the 25 % third - party interest in Chipeta. See Note 4. Segments. The Partnership’s operations continue to be organized into a single operating segment, the assets of which gather, compress, treat, process, and transport natural gas; gather, stabilize, and transport condensate, NGLs, and crude oil; and gather and dispose of produced water in the United States. Equity-based compensation. During the three months ended March 31, 2022, the Partnership issued 565,246 common units under its long-term incentive plans. Compensation expense was $ 5.8 million and $ 3.5 million for the three months ended March 31, 2022 and 2021, respectively. 17 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. REVENUE FROM CONTRACTS WITH CUSTOMERS The following table summarizes revenue from contracts with customers: Three Months Ended March 31, thousands 2022 2021 Revenue from customers Service revenues – fee based $ 631,598 $ 529,413 Service revenues – product based 40,867 31,652 Product sales 85,589 70,805 Total revenue from customers 758,054 631,870 Revenue from other than customers Lease revenue (1) — 42,862 Other 243 242 Total revenues and other $ 758,297 $ 674,974 _________________________________________________________________________________________ (1) Includes fixed - and variable - lease revenue from an operating and maintenance agreement entered into with Occidental. See Operating leases within Note 5. Contract balances. Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $ 589.5 million and $ 424.6 million as of March 31, 2022 and December 31, 2021, respectively. Contract assets primarily relate to (i) revenue accrued but not yet billed under cost - of - service contracts with fixed and variable fees and (ii) accrued deficiency fees the Partnership expects to charge customers once the related performance periods are completed. The following table summarizes activity related to contract assets from contracts with customers: thousands Contract assets balance at December 31, 2021 $ 22,557 Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period ( 208 ) Additional estimated revenues recognized 6,553 Contract assets balance at March 31, 2022 $ 28,902 Contract assets at March 31, 2022 Other current assets $ 10,897 Other assets 18,005 Total contract assets from contracts with customers $ 28,902 18 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. REVENUE FROM CONTRACTS WITH CUSTOMERS Contract liabilities primarily relate to (i) fixed and variable fees under cost - of - service contracts that are received from customers for which revenue recognition is deferred, (ii) aid - in - construction payments received from customers that must be recognized over the expected period of customer benefit, and (iii) fees that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of customer benefit. The following table summarizes activity related to contract liabilities from contracts with customers: thousands Contract liabilities balance at December 31, 2021 $ 313,146 Cash received or receivable, excluding revenues recognized during the period 8,245 Revenues recognized that were included in the contract liability balance at the beginning of the period ( 11,241 ) Contract liabilities balance at March 31, 2022 $ 310,150 Contract liabilities at March 31, 2022 Accrued liabilities $ 8,924 Other liabilities 301,226 Total contract liabilities from contracts with customers $ 310,150 Transaction price allocated to remaining performance obligations. Revenues expected to be recognized from certain performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2022, are presented in the following table. The Partnership applies the optional exemptions in Revenue from Contracts with Customers (Topic 606) and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Therefore, the following table represents only a portion of expected future revenues from existing contracts as most future revenues from customers are dependent on future variable customer volumes and, in some cases, variable commodity prices for those volumes. thousands Remainder of 2022 $ 824,085 2023 1,047,028 2024 1,021,224 2025 937,443 2026 809,384 Thereafter 2,177,567 Total $ 6,816,731 19 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 3. PARTNERSHIP DISTRIBUTIONS Partnership distributions. Under its partnership agreement, the Partnership distributes all of its available cash (beyond proper reserves as defined in its partnership agreement) to unitholders of record on the applicable record date within 55 days following each quarter’s end. The Board of Directors of the general partner (the “Board”) declared the following cash distributions to the Partnership’s unitholders for the periods presented: thousands except per-unit amounts Quarters Ended Total Quarterly Per-unit Distribution Total Quarterly Cash Distribution Distribution Date Record Date 2021 March 31 $ 0.31500 $ 132,969 May 14, 2021 April 30, 2021 June 30 0.31900 134,662 August 13, 2021 July 30, 2021 September 30 0.32300 134,862 November 12, 2021 November 1, 2021 December 31 0.32700 134,749 February 14, 2022 January 31, 2022 2022 March 31 $ 0.50000 $ 206,197 May 13, 2022 May 2, 2022 Available cash. 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) 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. WES Operating makes quarterly cash distributions to the Partnership and WGR Asset Holding Company LLC (“WGRAH”), a subsidiary of Occidental, in proportion to their share of limited partner interests in WES Operating. See Note 4 . WES Operating made the following cash distributions to its limited partners for the periods presented: thousands Quarters Ended Total Quarterly Cash Distribution Distribution Date 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 2022 March 31 $ 213,513 May 2022 20 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. EQUITY AND PARTNERS’ CAPITAL Holdings of Partnership equity. The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” As of March 31, 2022, 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 203,052,232 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. Partnership equity repurchases. In February 2022, the Board authorized the Partnership to buy back up to $ 1.0 billion of the Partnership’s common units through December 31, 2024 (the “$ 1.0 billion Purchase Program”). The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2022, the Partnership repurchased 225,355 common units on the open market for an aggregate purchase price of $ 5.1 million. The units were canceled immediately upon receipt. As of March 31, 2022, the Partnership had an authorized amount of $ 994.9 million remaining under the program. 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 “$250.0 million Purchase Program”). The common units were purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2021, the Partnership repurchased 1,115,808 common units on the open market for an aggregate purchase price of $ 16.2 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. As of March 31, 2022, (i) the Partnership, directly and indirectly through its ownership of WES Operating GP, owned a 98.0 % limited partner interest and the entire non - economic general partner interest in WES Operating and (ii) Occidental, through its ownership of WGRAH, owned a 2.0 % limited partner interest in WES Operating, which is reflected as a noncontrolling interest within the consolidated financial statements of the Partnership (see Note 1 ). Partnership’s net income (loss) per common unit. The common and general partner unitholders’ allocation of net income (loss) attributable to the Partnership was equal to their cash distributions plus their respective allocations of undistributed earnings or losses in accordance with their weighted - average ownership percentage during each period using the two - class method. The Partnership’s basic net income (loss) per common unit is calculated by dividing the limited partners’ interest in net income (loss) by the weighted - average number of common units outstanding during the period. Diluted net income (loss) per common unit includes the effect of outstanding units issued under the Partnership’s long-term incentive plans. 21 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. EQUITY AND PARTNERS’ CAPITAL The following table provides a reconciliation between basic and diluted net income (loss) per common unit: Three Months Ended March 31, thousands except per-unit amounts 2022 2021 Net income (loss) Limited partners’ interest in net income (loss) $ 301,934 $ 181,798 Weighted-average common units outstanding Basic 403,254 413,104 Dilutive effect of non-vested phantom units 1,206 342 Diluted 404,460 413,446 Excluded due to anti-dilutive effect 469 404 Net income (loss) per common unit Basic $ 0.75 $ 0.44 Diluted $ 0.75 $ 0.44 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. 5. RELATED-PARTY TRANSACTIONS Summary of related-party transactions. The following tables summarize material related - party transactions included in the Partnership’s consolidated financial statements: Consolidated statements of operations Three Months Ended March 31, thousands 2022 2021 Revenues and other Service revenues – fee based $ 414,899 $ 367,475 Service revenues – product based 2,243 4,505 Product sales 11,567 6,271 Total revenues and other 428,709 378,251 Equity income, net – related parties (1) 49,607 52,165 Operating expenses Cost of product (2) ( 19,543 ) 17,647 Operation and maintenance ( 59 ) 18,122 General and administrative (3) 1,975 4,093 Total operating expenses ( 17,627 ) 39,862 _________________________________________________________________________________________ (1) See Note 6 . (2) Includes related-party natural - gas and NGLs imbalances. (3) Includes (i) amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 5 ) 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 5 ). 22 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. RELATED-PARTY TRANSACTIONS Consolidated balance sheets thousands March 31, 2022 December 31, 2021 Assets Accounts receivable, net $ 274,222 $ 180,205 Other current assets 28,847 12,490 Equity investments (1) 1,163,069 1,167,187 Other assets 46,531 45,494 Total assets 1,512,669 1,405,376 Liabilities Accounts and imbalance payables 47,281 49,242 Accrued liabilities 4,476 13,914 Other liabilities 223,972 207,365 Total liabilities 275,729 270,521 _________________________________________________________________________________________ (1) See Note 6 . Consolidated statements of cash flows Three Months Ended March 31, thousands 2022 2021 Distributions from equity - investment earnings – related parties $ 45,870 $ 49,048 Capital expenditures — ( 2,000 ) Contributions to equity investments – related parties ( 2,070 ) ( 86 ) Distributions from equity investments in excess of cumulative earnings – related parties 9,925 12,141 Distributions to Partnership unitholders (1) ( 65,492 ) ( 66,642 ) Distributions to WES Operating unitholders (2) ( 2,805 ) ( 2,551 ) Net contributions from (distributions to) related parties 409 1,627 _________________________________________________________________________________________ (1) Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 3 and Note 4 ). (2) Represents distributions paid to Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement (see Note 3 and Note 4 ). 23 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. RELATED-PARTY TRANSACTIONS The following tables summarize material related - party transactions for WES Operating (which are included in the Partnership’s consolidated financial statements) to the extent the amounts differ from the Partnership’s consolidated financial statements: Consolidated statements of operations Three Months Ended March 31, thousands 2022 2021 General and administrative (1) $ 2,948 $ 4,587 _________________________________________________________________________________________ (1) Includes (i) amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 5 ), (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 5 ), and (iii) an intercompany service fee between the Partnership and WES Operating. Consolidated balance sheets thousands March 31, 2022 December 31, 2021 Other assets $ 45,619 $ 45,494 Accounts and imbalance payables (1) 64,211 97,749 Accrued liabilities 4,159 13,597 _________________________________________________________________________________________ (1) Includes balances related to transactions between the Partnership and WES Operating. Consolidated statements of cash flows Three Months Ended March 31, thousands 2022 2021 Distributions to WES Operating unitholders (1) $ ( 140,217 ) $ ( 127,470 ) _________________________________________________________________________________________ (1) Represents distributions paid to the Partnership and Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement. See Note 3 and Note 4 . Related-party revenues. 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, 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. Natural-gas throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 36 % and 35 % for the three months ended March 31, 2022 and 2021, respectively. Crude-oil and NGLs throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 89 % and 88 % for the three months ended March 31, 2022 and 2021, respectively. Produced-water throughput attributable to production owned or controlled by Occidental was 84 % and 86 % for the three months ended March 31, 2022 and 2021, respectively. The Partnership is currently involved in a dispute with Occidental regarding the calculation of the cost - of - service rates under an oil - gathering contract related to the Partnership’s DJ Basin oil - gathering system. If such dispute is resolved in a manner adverse to the Partnership, such resolution could have a negative impact on the Partnership’s financial condition and results of operations, including a reduction in rates and a non - cash charge to earnings. 24 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. RELATED-PARTY TRANSACTIONS In connection with the sale of its Eagle Ford assets in 2017, Anadarko remained the primary counterparty to the Partnership’s Brasada gas processing agreement and entered into an agency relationship with Sanchez Energy Corporation (“Sanchez”), now Mesquite Energy, Inc. (“Mesquite”), that allows Mesquite to process gas under such agreement. 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. Further, in connection with the sale of its Uinta Basin assets in 2020, Kerr McGee Oil & Gas Onshore LP, a subsidiary of Occidental, retained the deficiency payment obligations under a gas processing agreement at the Chipeta plant. This contingent payment obligation extends through the earlier of October 1, 2022, or the termination of the processing agreement. Marketing Transition Services Agreement. Effective December 31, 2019, certain subsidiaries of Anadarko entered into a transition services agreement (the “Marketing Transition Services Agreement”) to provide marketing - related services to certain of the Partnership’s subsidiaries through December 31, 2020, subject to the option to extend such services for an additional six - month period. The Marketing Transition Services Agreement was terminated on December 31, 2020. While the Partnership still has some marketing agreements with affiliates of Occidental, the Partnership began marketing and selling substantially all of its natural gas and NGLs directly to third parties beginning on January 1, 2021. Operating leases. As a result of the surface - use and salt - water disposal agreements being amended under the CUA (see Related-party commercial agreement below), these agreements are now classified as operating leases and a $ 30.0 million right-of-use (“ROU”) asset, included in Other assets on the consolidated balance sheets, was recognized during the first quarter of 2021. The ROU asset will be amortized to Operation and maintenance expense over the remaining term of the agreements. Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership, the lessor, entered into an operating and maintenance agreement pursuant to which Occidental provided 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 included (i) fixed consideration, which was measured as the minimum - volume commitment for both gathering and treating, and (ii) variable consideration, which consisted of all volumes above the minimum - volume commitment. In April 2021, the Partnership exercised its option to terminate the operating and maintenance agreement with Occidental effective December 31, 2021. For the three months ended March 31, 2021, the Partnership recognized fixed-lease revenue of $ 43.9 million and variable-lease revenue of $( 1.1 ) million related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations. Related-party expenses. Operation and maintenance expense includes amounts accrued for or paid to related parties for field - related costs provided by related parties at certain of the Partnership’s assets. A portion of general and administrative expense is paid by Occidental, which results in related - party transactions pursuant to the reimbursement provisions of the Partnership’s and WES Operating’s agreements with Occidental. Cost of product expense includes amounts related to certain continuing marketing arrangements with affiliates of Occidental, related - party imbalances, and transactions with affiliates accounted for under the equity method of accounting. See 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. 25 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. RELATED-PARTY TRANSACTIONS 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”). 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. Incentive Plans. General and administrative expense includes non - cash equity - based compensation expense allocated to the Partnership by Occidental for awards granted to the executive officers of the general partner and to other employees prior to their employment with the Partnership under (i) the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated, (ii) Occidental’s 2015 Long - Term Incentive Plan, and (iii) Occidental’s Phantom Share Unit Award Plan (collectively referred to as the “Incentive Plans”). General and administrative expense includes costs related to the Incentive Plans of $ 1.9 million and $ 3.2 million for the three months ended March 31, 2022 and 2021, respectively. These amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital. Construction reimbursement agreements and purchases from related parties . From time to time, the Partnership enters into construction reimbursement agreements with Occidental providing that the Partnership will manage the construction of certain midstream infrastructure for Occidental in the Partnership’s areas of operation. Such arrangements generally provide for a reimbursement of costs incurred by the Partnership on a cost or cost-plus basis. Additionally, from time to time, in support of the Partnership’s business, the Partnership purchases equipment, inventory, and other miscellaneous assets from Occidental or its affiliates. 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. 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. 26 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. EQUITY INVESTMENTS The following table presents the financial statement impact of the Partnership’s equity investments for the three months ended March 31, 2022: thousands Balance at December 31, 2021 Equity income, net Contributions Distributions Distributions in excess of cumulative earnings (1) Balance at March 31, 2022 White Cliffs $ 40,753 $ 231 $ — $ ( 86 ) $ ( 899 ) $ 39,999 Rendezvous 22,075 ( 703 ) — ( 112 ) ( 651 ) 20,609 Mont Belvieu JV 96,728 7,891 — ( 7,986 ) ( 1,907 ) 94,726 TEG 16,116 1,482 — ( 1,363 ) — 16,235 TEP 188,925 10,086 — ( 10,149 ) ( 882 ) 187,980 FRP 196,632 9,997 — ( 10,220 ) ( 1,304 ) 195,105 Whitethorn LLC 149,690 260 255 2,575 ( 882 ) 151,898 Cactus II 171,294 3,575 — ( 3,617 ) ( 2,412 ) 168,840 Saddlehorn 110,441 5,471 — ( 5,354 ) ( 180 ) 110,378 Panola 20,044 571 — ( 571 ) ( 171 ) 19,873 Mi Vida 51,763 4,218 — ( 3,823 ) — 52,158 Ranch Westex 979 3,862 — ( 2,498 ) — 2,343 Red Bluff Express 101,747 2,666 1,815 ( 2,666 ) ( 637 ) 102,925 Total $ 1,167,187 $ 49,607 $ 2,070 $ ( 45,870 ) $ ( 9,925 ) $ 1,163,069 _________________________________________________________________________________________ (1) 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. 27 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. PROPERTY, PLANT, AND EQUIPMENT A summary of the historical cost of property, plant, and equipment is as follows: thousands Estimated Useful Life March 31, 2022 December 31, 2021 Land N/A $ 10,955 $ 10,955 Gathering systems – pipelines 30 years 5,429,779 5,386,003 Gathering systems – compressors 15 years 2,203,895 2,172,953 Processing complexes and treating facilities 25 years 3,380,819 3,375,317 Transportation pipeline and equipment 6 to 45 years 169,380 169,356 Produced - water disposal systems 20 years 885,265 882,527 Assets under construction N/A 91,268 98,473 Other 3 to 40 years 758,997 750,494 Total property, plant, and equipment 12,930,358 12,846,078 Less accumulated depreciation 4,455,162 4,333,171 Net property, plant, and equipment $ 8,475,196 $ 8,512,907 The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet placed into productive service as of the respective balance sheet date. Long-lived asset and other impairments. During the three months ended March 31, 2021, the Partnership recognized impairments of $ 14.9 million, primarily attributable to $ 13.5 million of impairments at the DJ Basin complex due to cancellation of projects. 28 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 8. SELECTED COMPONENTS OF WORKING CAPITAL A summary of accounts receivable, net is as follows: The Partnership WES Operating thousands March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021 Trade receivables, net $ 601,640 $ 436,513 $ 601,640 $ 436,513 Other receivables, net 7 — 7 — Total accounts receivable, net $ 601,647 $ 436,513 $ 601,647 $ 436,513 A summary of other current assets is as follows: The Partnership WES Operating thousands March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021 NGLs inventory $ 1,953 $ 3,370 $ 1,953 $ 3,370 Imbalance receivables 34,757 25,309 34,757 25,309 Prepaid insurance 5,792 10,369 4,418 8,538 Contract assets 10,897 5,307 10,897 5,307 Other 2,998 1,897 2,998 1,897 Total other current assets $ 56,397 $ 46,252 $ 55,023 $ 44,421 A summary of accrued liabilities is as follows: The Partnership WES Operating thousands March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021 Accrued interest expense $ 65,562 $ 131,177 $ 65,562 $ 131,177 Short - term asset retirement obligations 12,337 9,934 12,337 9,934 Short - term remediation and reclamation obligations 8,316 7,454 8,316 7,454 Income taxes payable 2,190 1,516 2,190 1,516 Contract liabilities 8,924 27,763 8,924 27,763 Other 62,918 85,405 34,980 32,849 Total accrued liabilities $ 160,247 $ 263,249 $ 132,309 $ 210,693 29 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 9. DEBT AND INTEREST EXPENSE WES Operating is the borrower for all outstanding debt and is expected to be the borrower for all future debt issuances. The following table presents the outstanding debt: March 31, 2022 December 31, 2021 thousands Principal Carrying Value Fair Value (1) Principal Carrying Value Fair Value (1) Short - term debt 4.000 % Senior Notes due 2022 $ 502,246 $ 502,192 $ 502,250 $ 502,246 $ 502,138 $ 505,153 Floating - Rate Senior Notes due 2023 213,138 212,760 212,425 — — — Finance lease liabilities 3,201 3,201 3,201 3,794 3,794 3,794 Total short - term debt $ 718,585 $ 718,153 $ 717,876 $ 506,040 $ 505,932 $ 508,947 Long - term debt Floating - Rate Senior Notes due 2023 $ — $ — $ — $ 213,138 $ 212,642 $ 213,072 3.100 % Senior Notes due 2025 732,106 728,404 728,061 732,106 728,096 764,815 3.950 % Senior Notes due 2025 399,163 396,149 402,063 399,163 395,928 418,506 4.650 % Senior Notes due 2026 474,242 471,761 485,982 474,242 471,629 516,473 4.500 % Senior Notes due 2028 400,000 396,281 407,380 400,000 396,145 437,673 4.750 % Senior Notes due 2028 400,000 397,037 413,219 400,000 396,938 444,550 4.050 % Senior Notes due 2030 1,200,000 1,190,584 1,201,380 1,200,000 1,190,339 1,323,595 5.450 % Senior Notes due 2044 600,000 593,769 609,529 600,000 593,733 717,804 5.300 % Senior Notes due 2048 700,000 687,321 694,990 700,000 687,265 844,223 5.500 % Senior Notes due 2048 350,000 342,689 347,087 350,000 342,659 418,907 5.250 % Senior Notes due 2050 1,000,000 983,765 982,278 1,000,000 983,709 1,183,514 Finance lease liabilities 990 990 990 1,533 1,533 1,533 Total long - term debt $ 6,256,501 $ 6,188,750 $ 6,272,959 $ 6,470,182 $ 6,400,616 $ 7,284,665 _________________________________________________________________________________________ (1) Fair value is measured using the market approach and Level - 2 fair value inputs. 30 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 9. DEBT AND INTEREST EXPENSE Debt activity. The following table presents the debt activity for the three months ended March 31, 2022: thousands Carrying Value Balance at December 31, 2021 $ 6,906,548 Finance lease liabilities ( 1,135 ) Other 1,490 Balance at March 31, 2022 $ 6,906,903 WES Operating Senior Notes. In mid - January 2020, WES Operating issued the Fixed - Rate 3.100 % Senior Notes due 2025, 4.050 % Senior Notes due 2030, and 5.250 % Senior Notes due 2050 (collectively referred to as the “Fixed - Rate Senior Notes”) and the Floating - Rate Senior Notes due 2023 (the “Floating - Rate Senior Notes”). Including the effects of the issuance prices, underwriting discounts, and interest - rate adjustments, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 3.790 %, 4.671 %, and 5.869 %, respectively, at March 31, 2022, and were 4.542 %, 5.424 %, and 6.629 %, respectively, at March 31, 2021. The interest rate on the Floating - Rate Senior Notes was 1.84 % and 2.33 % at March 31, 2022 and 2021, 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 first quarter of 2021, WES Operating redeemed the total principal amount outstanding of the 5.375 % Senior Notes due 2021 at par value, pursuant to the optional redemption terms in WES Operating’s indenture. As of March 31, 2022, the 4.000 % Senior Notes due 2022 and the Floating-Rate Senior Notes were classified as short-term debt on the consolidated balance sheet. Subsequent to March 31, 2022, WES Operating redeemed the 4.000% Senior Notes due 2022 at par value on April 1, 2022, pursuant to the optional redemption terms in WES Operating’s indenture. At March 31, 2022, WES Operating was in compliance with all covenants under the relevant governing indentures. Revolving credit facility. WES Operating’s $ 2.0 billion senior unsecured revolving credit facility (“RCF”) is expandable to a maximum of $ 2.5 billion, and matures in February 2025 for each extending lender. The non - extending lender’s commitments mature in February 2024 and represent $ 100.0 million out of $ 2.0 billion of total commitments from all lenders. As of March 31, 2022, 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 March 31, 2022 and 2021, the interest rate on any outstanding RCF borrowings was 1.95 % and 1.61 %, respectively. The facility - fee rate was 0.25 % at March 31, 2022 and 2021. At March 31, 2022, WES Operating was in compliance with all covenants under the RCF. Finance lease liabilities. 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 Partnership has future payments for its finance leases of $ 4.3 million as of March 31, 2022. 31 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 9. DEBT AND INTEREST EXPENSE Interest expense. The following table summarizes the amounts included in interest expense: Three Months Ended March 31, thousands 2022 2021 Long - term and short - term debt $ ( 83,428 ) $ ( 95,722 ) Finance lease liabilities ( 42 ) ( 298 ) Commitment fees and amortization of debt-related costs ( 3,032 ) ( 3,338 ) Capitalized interest 1,047 865 Interest expense $ ( 85,455 ) $ ( 98,493 ) 10. COMMITMENTS AND CONTINGENCIES Environmental obligations. The Partnership is subject to various environmental-remediation obligations arising from federal, state, and local regulations regarding air and water quality, hazardous and solid waste disposal, and other environmental matters. As of March 31, 2022 and December 31, 2021, the consolidated balance sheets included $ 9.8 million and $ 10.1 million, respectively, of liabilities for remediation and reclamation obligations. The current portion of these amounts is included in Accrued liabilities, and the long-term portion of these amounts is included in Other liabilities. The majority of payments related to these obligations are expected to be made over the next year. Litigation and legal proceedings. From time to time, the Partnership is involved in legal, tax, regulatory, and other proceedings in various forums regarding performance, contracts, and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which the final disposition could have a material adverse effect on the Partnership’s financial condition, results of operations, or cash flows. Other commitments. The Partnership has payment obligations, or commitments, that include, among other things, a revolving credit facility, other third - party long - term debt, obligations related to the Partnership’s capital spending programs, pipeline commitments, and various operating and finance leases. The payment obligations related to the Partnership’s capital spending programs, the majority of which is expected to be paid in the next 12 months, primarily relate to construction, expansion, and asset - integrity projects at the West Texas complex, DBM water systems, DBM oil system, and DJ Basin complex. 32 Table of Contents