What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-10 · 173 added, 167 removed, 481 unchanged (41% of the section changed)

1 unchanged sentence

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements, wherein WES Operating is fully consolidated, and which are included under Part I, Item 1 of this quarterly report, and the historical consolidated financial statements, and the notes thereto, which are included under Part II, Item 8 of the 2021 Form 10-K as filed with the SEC on February 23, 2022.

The Partnership’s assets include assets owned and ownership interests accounted for by us under the equity method of accounting, through our 98.0% partnership interest in WES Operating, as of March 31, 2022 (see Note 6—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q).

The Partnership’s assets include assets owned and ownership interests accounted for by us under the equity method of accounting, through our 98.0% partnership interest in WES Operating, as of June 30, 2022 (see Note 7—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q).

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

14 unchanged sentences

• the supply of, demand for, and price of oil, natural gas, NGLs, and related products or services;

• commodity - price risks inherent in percent - of - proceeds, percent - of - product, and keep - whole contracts;

• commodity - price risks inherent in percent - of - proceeds, percent - of - product, keep - whole, and fixed-recovery processing contracts;

• weather and natural disasters;

29 unchanged sentences

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

As of March 31, 2022, our assets and investments consisted of the following:

As of June 30, 2022, our assets and investments consisted of the following:

Operated Operated

9 unchanged sentences

(1) Includes the DBM water systems.

Significant financial and operational events during the three months ended March 31, 2022, included the following:

Significant financial and operational events during the six months ended June 30, 2022, included the following:

• WES Operating redeemed the $502.2 million total principal amount outstanding of the 4.000% Senior Notes due 2022 at par value.

• We repurchased 3,314,562 common units on the open market for an aggregate purchase price of $79.2 million.

• Our first - quarter 2022 per - unit distribution of $0.50000 increased $0.17300 from the fourth - quarter 2021 per - unit distribution of $0.32700.

• Natural - gas throughput attributable to WES totaled 4,058 MMcf/d for the three months ended March 31, 2022, representing a 3% decrease compared to the three months ended December 31, 2021, and no change compared to the three months ended March 31, 2021.

• Crude - oil and NGLs throughput attributable to WES totaled 675 MBbls/d for the three months ended March 31, 2022, representing a 4% decrease and a 12% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively.

• Produced - water throughput attributable to WES totaled 751 MBbls/d for the three months ended March 31, 2022, representing a 5% decrease and a 26% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively.

• Gross margin was $550.9 million for the three months ended March 31, 2022, representing a 10% increase and a 21% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively.

• Our second - quarter 2022 per - unit distribution is unchanged from the first-quarter 2022 per-unit distribution of $0.50000.

• Natural - gas throughput attributable to WES totaled 4,270 MMcf/d and 4,165 MMcf/d for the three and six months ended June 30, 2022, respectively, representing a 5% increase compared to the three months ended March 31, 2022, and no change compared to the six months ended June 30, 2021, respectively.

• Crude - oil and NGLs throughput attributable to WES totaled 666 MBbls/d and 670 MBbls/d for the three and six months ended June 30, 2022, respectively, representing a 1% decrease and a 4% increase compared to the three months ended March 31, 2022, and six months ended June 30, 2021, respectively.

• Produced - water throughput attributable to WES totaled 864 MBbls/d and 808 MBbls/d for the three and six months ended June 30, 2022, respectively, representing a 15% increase and a 26% increase compared to the three months ended March 31, 2022, and six months ended June 30, 2021, respectively.

• Gross margin was $588.8 million and $1,139.7 million for the three and six months ended June 30, 2022, respectively, representing a 7% increase and a 19% increase compared to the three months ended March 31, 2022, and six months ended June 30, 2021, respectively.

See Key Performance Metrics within this Item 2.

• Adjusted gross margin for natural - gas assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $1.34 per Mcf for the three months ended March 31, 2022, representing a 6% increase and a 13% increase compared to the three months ended December 31, 2021, and March 31, 2021, respectively.

• Adjusted gross margin for crude - oil and NGLs assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $2.44 per Bbl for the three months ended March 31, 2022, representing a 37% increase compared to the three months ended December 31, 2021, and no change compared to the three months ended March 31, 2021.

• Adjusted gross margin for produced - water assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $1.00 per Bbl for the three months ended March 31, 2022, representing a 9% increase compared to the three months ended December 31, 2021, and March 31, 2021.

• Adjusted gross margin for natural - gas assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $1.36 per Mcf and $1.35 per Mcf for the three and six months ended June 30, 2022, respectively, representing a 1% increase and a 13% increase compared to the three months ended March 31, 2022, and six months ended June 30, 2021, respectively.

• Adjusted gross margin for crude - oil and NGLs assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $2.57 per Bbl and $2.50 per Bbl for the three and six months ended June 30, 2022, respectively, representing a 5% increase and a 3% increase compared to the three months ended March 31, 2022, and six months ended June 30, 2021, respectively.

• Adjusted gross margin for produced - water assets (as defined under the caption Key Performance Metrics within this Item 2) averaged $0.90 per Bbl and $0.95 per Bbl for the three and six months ended June 30, 2022, respectively, representing a 10% decrease and a 3% increase compared to the three months ended March 31, 2022, and six months ended June 30, 2021, respectively.

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

Three Months Ended

March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Throughput for natural-gas assets (MMcf/d)

24 unchanged sentences

In 2021, prices began to increase and in the first quarter of 2022, commodity prices increased significantly in connection with the war in Ukraine.

For example, NYMEX West Texas Intermediate crude - oil daily settlement prices during 2021 ranged from a low of $47.62 per barrel in January 2021 to a high of $84.65 per barrel in October 2021, and prices during the first quarter of 2022 ranged from a low of $76.08 per barrel in January 2022 to a high of $123.70 per barrel in March 2022.

For example, NYMEX West Texas Intermediate crude - oil daily settlement prices during 2021 ranged from a low of $47.62 per barrel in January 2021 to a high of $84.65 per barrel in October 2021, and prices during the six months ended June 30, 2022, ranged from a low of $76.08 per barrel in January 2022 to a high of $123.70 per barrel in March 2022.

The extent and duration of the recent commodity - price volatility cannot be predicted.

8 unchanged sentences

and global supply chains, creating logistical delays along with labor shortages.

Continued increases in inflation will raise our costs for labor, materials, and services, which will increase our operating costs and capital expenditures materially and negatively impact our financial results.

Continued increases in inflation will raise our costs for labor, materials, fuel, and services, which will increase our operating costs and capital expenditures materially and negatively impact our financial results.

To the extent permitted by regulations and escalation provisions in certain of our existing agreements, we have the ability to recover a portion of increased costs in the form of higher fees.

Impact of interest rates.

Overall, short- and long-term interest rates increased during 2021 and continued to increase during the first quarter of 2022.

Overall, short- and long-term interest rates increased during 2021 and have continued to increase during 2022.

Any future increases in interest rates likely will result in an increase in financing costs.

3 unchanged sentences

ACQUISITIONS AND DIVESTITURES

Bison facilities.

Bison facility.

In October 2020, we entered into an option agreement to sell the Bison treating facility, located in Northeast Wyoming, to a third party.

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

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

RESULTS OF OPERATIONS

1 unchanged sentence

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

Three Months Ended

thousands March 31, 2022 December 31,

2021 March 31, 2021

Three Months Ended Six Months Ended

thousands June 30, 2022 March 31,

2022 June 30, 2022 June 30, 2021

Total revenues and other (1)

19 unchanged sentences

(2) For reconciliations to comparable consolidated results of WES Operating, see Items Affecting the Comparability of Financial Results with WES Operating within this Item 2.

For purposes of the following discussion, any increases or decreases refer to the comparison of the three months ended March 31, 2022, to the three months ended December 31, 2021, or to the three months ended March 31, 2021, as applicable.

Three Months Ended

March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

For purposes of the following discussion, any increases or decreases “for the three months ended June 30, 2022” refer to the comparison of the three months ended June 30, 2022, to the three months ended March 31, 2022;

and any increases or decreases “for the six months ended June 30, 2022” refer to the comparison of the six months ended June 30, 2022, to the six months ended June 30, 2021.

Three Months Ended Six Months Ended

June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Throughput for natural-gas assets (MMcf/d)

32 unchanged sentences

Natural-gas assets

Gathering, treating, and transportation throughput decreased by 31 MMcf/d compared to the three months ended December 31, 2021, primarily due to decreased production in areas around the Marcellus Interest systems.

Gathering, treating, and transportation throughput decreased by 113 MMcf/d compared to the three months ended March 31, 2021, primarily due (i) decreased volumes at the Bison treating facility, which was sold to a third party during the second quarter of 2021 and (ii) production declines in areas around the Marcellus Interest systems.

Processing throughput decreased by 84 MMcf/d compared to the three months ended December 31, 2021, primarily due to (i) lower volumes at the West Texas complex due to production declines in the area and the impacts of inclement weather in the first quarter of 2022 and (ii) lower volumes at the DJ Basin and Granger complexes due to production declines in the areas.

Processing throughput increased by 88 MMcf/d compared to the three months ended March 31, 2021, primarily due to higher volumes at the West Texas complex resulting from the impact of winter storm Uri during the first quarter of 2021, partially offset by lower volumes at the DJ Basin, Granger, and Brasada complexes due to production declines in the areas.

Equity - investment throughput decreased by 34 MMcf/d compared to the three months ended December 31, 2021, primarily due to decreased volumes at the Mi Vida and Ranch Westex plants and on Red Bluff Express.

Equity - investment throughput increased by 40 MMcf/d compared to the three months ended March 31, 2021, primarily due to increased volumes on Red Bluff Express and at the Mi Vida plant resulting from the impact of winter storm Uri during the first quarter of 2021.

These increases were offset partially by (i) decreased volumes at the Rendezvous system due to production declines in the area and (ii) decreased volumes at Ranch Westex plant.

Gathering, treating, and transportation throughput decreased by 119 MMcf/d for the six months ended June 30, 2022, primarily due to (i) decreased volumes at the Bison treating facility, which was sold to a third party during the second quarter of 2021, and (ii) production declines in areas around the Marcellus Interest and Springfield gas-gathering systems.

Processing throughput increased by 176 MMcf/d for the three months ended June 30, 2022, primarily due to (i) higher volumes at the West Texas complex due to increased production in the area and the impacts of inclement weather in the first quarter of 2022 and (ii) higher volumes at the DJ Basin complex due to a third-party contract amendment effective in March 2022.

Processing throughput increased by 76 MMcf/d for the six months ended June 30, 2022, primarily due to higher volumes at the West Texas complex due to increased production in the area and the impact of winter storm Uri during the first quarter of 2021.

This increase was offset partially by lower volumes at the DJ Basin, Granger, and Brasada complexes due to production declines in the areas.

Equity - investment throughput increased by 37 MMcf/d for the three months ended June 30, 2022, primarily due to increased volumes on Red Bluff Express, partially offset by decreased volumes at the Ranch Westex plant.

Equity - investment throughput increased by 50 MMcf/d for the six months ended June 30, 2022, primarily due to increased volumes on Red Bluff Express and at the Mi Vida plant resulting from the impact of winter storm Uri during the first quarter of 2021.

These increases were offset partially by (i) decreased volumes at the Ranch Westex plant and (ii) decreased volumes at the Rendezvous system due to production declines in the area.

Crude-oil and NGLs assets

Gathering, treating, and transportation throughput decreased by 8 MBbls/d compared to the three months ended December 31, 2021, primarily due to lower volumes at the DBM oil system resulting from the impacts of inclement weather in the first quarter of 2022.

Gathering, treating, and transportation throughput increased by 36 MBbls/d compared to the three months ended March 31, 2021, primarily due (i) higher volumes at the DBM oil system resulting from the impact of winter storm Uri during the first quarter of 2021 and (ii) increased production in areas around the DJ Basin oil system.

Equity - investment throughput decreased by 19 MBbls/d compared to the three months ended December 31, 2021, primarily due to decreased volumes on the Whitethorn pipeline.

Equity - investment throughput increased by 37 MBbls/d compared to the three months ended March 31, 2021, primarily due to (i) increased volumes on FRP and the Saddlehorn pipeline resulting from increased pipeline commitments and (ii) increased volumes on the Whitethorn pipeline.

Gathering, treating, and transportation throughput increased by 20 MBbls/d for the six months ended June 30, 2022, primarily due to higher volumes at the DBM oil system resulting from increased production in the area and the impact of winter storm Uri during the first quarter of 2021.

Equity - investment throughput decreased by 14 MBbls/d for the three months ended June 30, 2022, primarily due to decreased volumes on the Whitethorn and Cactus II pipelines, partially offset by increased volumes on FRP.

Equity - investment throughput increased by 6 MBbls/d for the six months ended June 30, 2022, primarily due to increased volumes on FRP resulting from increased pipeline commitments, partially offset by decreased volumes on the Whitethorn pipeline.

Produced-water assets

Gathering and disposal throughput decreased by 42 MBbls/d compared to the three months ended December 31, 2021, due to decreased volumes at the DBM water systems resulting from lower production and the impacts of inclement weather in the first quarter of 2022.

Gathering and disposal throughput increased by 159 MBbls/d compared to the three months ended March 31, 2021, due to (i) new third-party connections brought online during the fourth quarter of 2021 and (ii) the impact of winter storm Uri during the first quarter of 2021.

Gathering and disposal throughput increased by 116 MBbls/d for the three months ended June 30, 2022, due to (i) new third-party connections brought online at the end of the first quarter and during the second quarter of 2022, (ii) higher production, and (iii) the impacts of inclement weather in the first quarter of 2022.

Gathering and disposal throughput increased by 169 MBbls/d for the six months ended June 30, 2022, due to (i) higher production, (ii) new third-party connections brought online during the fourth quarter of 2021 and in 2022, and (iii) the impact of winter storm Uri during the first quarter of 2021.

Service Revenues

Three Months Ended

thousands except percentages March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Service revenues – fee based $ 655,952 $ 631,598 4 % $ 1,287,550 $ 1,191,260 8 %

2 unchanged sentences

Service revenues – fee based

Service revenues – fee based increased by $10.5 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $28.7 million at the DJ Basin oil system due to an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2021, partially offset by decreased throughput, (ii) $7.6 million at the DBM oil system due to the treatment of lease revenue under the operating and maintenance agreement with Occidental that was terminated effective December 31, 2021, partially offset by decreased throughput, and (iii) $3.1 million at the Marcellus Interest systems due to an increase in the average gathering fee effective January 1, 2022, partially offset by decreased throughput.

These increases were offset partially by decreases of (i) $18.8 million at the West Texas complex due to a lower cost-of-service rate effective January 1, 2022, and decreased throughput, (ii) $4.9 million at the DJ Basin complex due to decreased throughput, and (iii) $4.8 million at the Springfield system due to an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2021, in addition to a lower cost - of - service rate effective January 1, 2022.

Service revenues – fee based increased by $59.3 million compared to the three months ended March 31, 2021, primarily due to increases of (i) $22.1 million at the West Texas complex due to increased throughput, including the impact of winter storm Uri during the first quarter of 2021, partially offset by a lower cost-of-service rate effective January 1, 2022, and (ii) $17.5 million at the DBM water systems and $15.7 million at the DBM oil system due to increased throughput, including the impact of winter storm Uri during the first quarter of 2021.

Service revenues – fee based increased by $24.4 million for the three months ended June 30, 2022, primarily due to increases of (i) $19.7 million and $3.2 million at the West Texas complex and DBM oil system, respectively, attributable to increased throughput and (ii) $3.0 million at the DBM water systems due to increased throughput, partially offset by a decrease in deficiency fees.

Service revenues – fee based increased by $96.3 million for the six months ended June 30, 2022, primarily due to increases of (i) $46.9 million at the West Texas complex due to increased throughput, including the impact of winter storm Uri during the first quarter of 2021, partially offset by a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2022, and (ii) $30.4 million and $29.8 million at the DBM oil and DBM water systems, respectively, due to increased throughput, including the impact of winter storm Uri during the first quarter of 2021, and increased deficiency fees.

These increases were offset partially by a decrease of $11.1 million at the DJ Basin complex due to decreased throughput, partially offset by increased deficiency fees.

Service revenues – product based

Service revenues – product based increased by $6.6 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $2.7 million at the West Texas complex due to increased volumes and prices for certain third-party contracts and (ii) $2.3 million at the DJ Basin complex and $0.7 million at the Chipeta complex due to increased prices.

Service revenues – product based increased by $9.2 million compared to the three months ended March 31, 2021, primarily due to increases of (i) $3.9 million at the DJ Basin complex, $2.3 million at the Chipeta complex, and $1.4 million at the Granger complex due to increased prices, and (ii) $1.4 million at the DBM water systems due to increased prices and volumes.

Service revenues – product based increased by $29.6 million for the three months ended June 30, 2022, primarily due to increases of (i) $19.1 million at the West Texas complex due to increased prices, change in contract mix, and increased electricity-related rates billed to customers, and (ii) $10.2 million at the DJ Basin complex due to change in contract mix.

Service revenues – product based increased by $51.9 million for the six months ended June 30, 2022, primarily due to increases of (i) $21.2 million and $19.4 million at the West Texas and DJ Basin complexes, respectively, attributable to increased prices and changes in contract mix during the second quarter of 2022, and (ii) $3.4 million at the Chipeta complex, $2.8 million at the DBM water systems, $2.6 million at the MGR assets, and $2.3 million at the Granger complex due to increased prices.

Product Sales

Three Months Ended

thousands except percentages and per-unit amounts March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages and per-unit amounts June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Natural - gas sales

6 unchanged sentences

Natural-gas sales

Natural - gas sales increased by $3.7 million compared to the three months ended December 31, 2021, primarily due to an increase of $2.3 million at the West Texas complex due to increased volumes sold as a result of throughput increases on certain third-party contracts.

NGLs sales increased by $18.3 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $8.6 million at the West Texas complex due to increases in average prices and volumes sold and (ii) $5.4 million at the DJ Basin complex and $4.2 million at the Chipeta complex due to an increase in average prices.

NGLs sales increased by $17.1 million compared to the three months ended March 31, 2021, primarily due to increases of (i) $8.1 million at the Chipeta complex, $1.4 million at the DBM water systems, and $1.2 million at the Hilight complex attributable to increases in average prices and volumes sold, and (ii) $2.8 million at the Granger complex and $2.0 million at the DJ Basin complex due to an increase in average prices.

Natural - gas sales increased by $28.2 million for the three months ended June 30, 2022, primarily due to increases of $25.8 million and $4.1 million at the West Texas complex and MGR assets, respectively, attributable to increased average prices and volumes sold.

Natural - gas sales increased by $30.7 million for the six months ended June 30, 2022, primarily due to an increase of $36.6 million at the West Texas complex attributable to increased average prices and volumes sold.

This increase was partially offset by a decrease of $6.5 million at the DJ Basin complex due to decreased volumes sold, partially offset by an increase in average prices.

NGLs sales increased by $35.9 million for the three months ended June 30, 2022, primarily due to an increase of $40.7 million at the West Texas complex due to increased average prices and volumes sold.

NGLs sales increased by $61.5 million for the six months ended June 30, 2022, primarily due to increases of (i) $31.7 million at the West Texas complex, $13.3 million at the Chipeta complex, $2.8 million at the DBM water systems, and $2.8 million at the MGR assets attributable to increased average prices and volumes sold, and (ii) $4.4 million and $3.2 million at the Granger and DJ Basin complexes, respectively, due to an increase in average prices, partially offset by a decrease in volumes sold.

Equity Income, Net – Related Parties

Three Months Ended

thousands except percentages March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Equity income, net – related parties $ 48,464 $ 49,607 (2) % $ 98,071 $ 110,831 (12) %

Equity income, net – related parties increased by $4.3 million compared to the three months ended December 31, 2021, primarily due to increases of (i) $1.7 million at Whitethorn LLC related to commercial activities and (ii) $1.2 million at Mi Vida related to decreases in certain expenses during the current period.

Equity income, net – related parties decreased by $2.6 million compared to the three months ended March 31, 2021, primarily due to decreases of (i) $3.0 million at Saddlehorn Pipeline related to contracts with higher tariff rates expiring in August 2021 and (ii) $2.7 million at Cactus II related to a decrease in trunk revenues.

These decreases were offset partially by an increase of $2.2 million at Mi Vida due to higher volumes.

Equity income, net – related parties decreased by $12.8 million for the six months ended June 30, 2022, primarily due to (i) decreases of $6.7 million and $6.0 million at Saddlehorn and Cactus II, respectively, and (ii) $4.5 million at Whitethorn LLC due to decreases in revenues and volumes.

These decreases were offset partially by an increase of $8.7 million at Mi Vida, FRP, and TEP due to higher volumes.

Cost of Product and Operation and Maintenance Expenses

Three Months Ended

thousands except percentages March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Residue purchases $ 65,168 $ 34,992 86 % $ 100,160 $ 77,682 29 %

7 unchanged sentences

Residue purchases

Residue purchases decreased by $3.5 million compared to the three months ended December 31, 2021, primarily due to a decrease of $2.0 million at the West Texas complex attributable to decreased volumes for certain third-party contracts.

Residue purchases decreased by $20.8 million compared to the three months ended March 31, 2021, primarily due to decreases of $13.2 million at the West Texas complex, $3.3 million at the DJ Basin complex, and $3.0 million at the Hilight system attributable to decreases in average prices.

Residue purchases increased by $30.2 million for the three months ended June 30, 2022, primarily due to increases of (i) $25.6 million at the West Texas complex attributable to increased volumes purchased and average prices, as well as a change in contract mix, and (ii) $2.6 million at the MGR assets attributable to increased volumes purchased and average prices.

Residue purchases increased by $22.5 million for the six months ended June 30, 2022, primarily due to increases of (i) $17.1 million at the West Texas complex attributable to increased volumes purchased and average prices, as well as a change in contract mix during the second quarter of 2022, and (ii) $5.8 million at the DJ Basin complex attributable to increased volumes purchased and average prices.

NGLs purchases

NGLs purchases increased by $7.8 million compared to the three months ended December 31, 2021, primarily due to an increase of $5.1 million at the West Texas complex attributable to an increase in average prices.

NGLs purchases increased by $39.5 million compared to the three months ended March 31, 2021, primarily due to increases of $19.0 million at the West Texas complex, $12.3 million at the DJ Basin complex, and $3.6 million at the Chipeta complex attributable to increases in average prices.

Other items decreased by $3.5 million compared to the three months ended December 31, 2021, primarily due to decreases of $3.7 million at the West Texas complex and $3.0 million at the DJ Basin complex, primarily due to changes in imbalance positions, partially offset by an increase of $3.2 million at the Chipeta complex due to a change in imbalance positions.

Other items decreased by $34.9 million compared to the three months ended March 31, 2021, primarily due to decreases of $29.3 million at the West Texas complex and $6.9 million at the DJ Basin complex, primarily due to changes in imbalance positions.

NGLs purchases increased by $32.2 million for the three months ended June 30, 2022, primarily due to increases of (i) $23.1 million at the West Texas complex attributable to increased volumes purchased and average prices, as well as a change in contract mix, and (ii) $10.1 million at the DJ Basin complex due to a change in contract mix.

NGLs purchases increased by $99.8 million for the six months ended June 30, 2022, primarily due to increases of (i) $52.9 million at the West Texas complex attributable to increased volumes purchased and average prices, as well as a change in contract mix during the second quarter of 2022, and (ii) $34.3 million at the DJ Basin complex attributable to increased average prices and a change in contract mix during the second quarter of 2022, and (iii) $5.7 million at the Chipeta complex attributable to increased average prices.

Other items increased by $13.3 million for the three months ended June 30, 2022, primarily due to an increase of $20.8 million at the West Texas complex attributable to changes in imbalance positions, partially offset by a decrease of $7.9 million at the DJ Basin complex attributable to changes in imbalance positions.

Other items decreased by $67.9 million for the six months ended June 30, 2022, primarily due to decreases of $40.8 million and $31.6 million at the West Texas and DJ Basin complexes, respectively, attributable to changes in imbalance positions.

The decreases were offset partially by an increase of $3.8 million at the MGR assets attributable to changes in imbalance positions.

Operation and maintenance expense

Operation and maintenance expense decreased by $18.1 million compared to the three months ended December 31, 2021, primarily due to decreases of (i) $14.1 million at the West Texas complex attributable to a sales tax accrual in the fourth quarter of 2021 on compressor rentals and reduced utilities and salaries and wages expense, (ii) $7.3 million at the DJ Basin complex due to lower utilities expense and surface maintenance and plant repairs, and (iii) $4.3 million at the DBM water systems attributable to lower surface-use fees and utilities expense.

These decreases were offset partially by an increase of $3.1 million at the DBM oil system, primarily due to an increase in salaries and wages.

Operation and maintenance expense decreased by $11.4 million compared to the three months ended March 31, 2021, primarily due to decreases of $5.0 million at the DBM oil system and $4.4 million at the West Texas complex attributable to reduced utilities expense and contract and consulting costs.

Operation and maintenance expense increased by $39.2 million for the three months ended June 30, 2022, primarily due to increases of (i) $13.4 million attributable to higher utility expense, (ii) $8.4 million due to higher maintenance and repair expense, (iii) $5.8 million in regulatory and environmental expense, and (iv) $3.8 million in contract labor and consulting expense.

Operation and maintenance expense increased by $3.8 million for the six months ended June 30, 2022, primarily due to increases of (i) $8.0 million due to an increase in chemicals and treating services, (ii) $6.1 million attributable to land related costs, and (iii) $4.1 million due to higher maintenance and repair expense.

These increases were offset partially by decreases of (i) $9.1 million attributable to lower contract labor and consulting expense, (ii) $7.6 million attributable to lower utilities expense, and (iii) $5.0 million attributable to lower field area costs.

Other Operating Expenses

Three Months Ended

thousands except percentages March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

General and administrative $ 47,848 $ 48,602 (2) % $ 96,450 $ 89,564 8 %

5 unchanged sentences

General and administrative expenses

General and administrative expenses decreased by $7.0 million compared to the three months ended December 31, 2021, primarily due to decreases in consulting costs and corporate expenses primarily related to information technology services and legal fees.

General and administrative expenses increased by $3.5 million compared to the three months ended March 31, 2021, primarily due to increases of $3.3 million in personnel costs, including increased bonus-related expenses and equity-based compensation expense.

General and administrative expenses increased by $6.9 million for the six months ended June 30, 2022, primarily due to an increase of $7.9 million in personnel costs, including increased bonus-related expenses and other miscellaneous employee expenses.

Property and other taxes

Property and other taxes increased by $4.1 million compared to the three months ended March 31, 2021, primarily due to ad valorem tax increases at the DJ Basin complex due to higher rates, partially offset by favorable differences between actual and estimated tax payments related to the 2021 fiscal year.

Property and other taxes increased by $4.2 million for the three months ended June 30, 2022, primarily due to expected valuation increases at the DJ Basin complex.

Property and other taxes increased by $8.8 million for the six months ended June 30, 2022, primarily due to ad valorem tax increases and expected valuation increases at the DJ Basin complex.

Depreciation and amortization expense

Depreciation and amortization expense decreased by $9.6 million compared to the three months ended December 31, 2021, primarily due to decreases of $5.0 million and $4.8 million at the Hilight system and the MGR assets, respectively, due to revisions in cost estimates related to asset retirement obligations made in the fourth quarter of 2021.

Depreciation and amortization expense increased by $4.0 million compared to the three months ended March 31, 2021, primarily due to an increase of $3.2 million at a Wyoming asset primarily as a result of a change in estimate for asset retirement obligations in the comparative prior period.

Depreciation and amortization expense increased by $4.5 million for the three months ended June 30, 2022, primarily due to increases of $2.3 million and $1.9 million at the Hilight system and MGR assets.

Depreciation and amortization expense increased by $5.2 million for the six months ended June 30, 2022, primarily due to (i) an increase of $3.3 million at a transportation asset in Southwest Wyoming primarily as a result of a change in estimate for asset retirement obligations and (ii) an increase of $2.3 million resulting from capital projects being placed into service.

These increases were offset partially by a net decrease in depreciation of $2.2 million at the Hilight system and MGR assets.

Long-lived asset and other impairment expense

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

Long - lived asset and other impairment expense for the six months ended June 30, 2021, was primarily due to (i) an $11.6 million other-than-temporary impairment of our investment in Ranch Westex and (ii) $14.0 million of impairments at the DJ Basin complex due to cancellation of projects.

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

Interest Expense

Three Months Ended

thousands except percentages March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Long - term and short - term debt

5 unchanged sentences

Interest expense

Interest expense decreased by $4.0 million compared to the three months ended December 31, 2021, primarily due to decreases of $3.8 million for credit-rating related interest rate changes on the Fixed-Rate Senior Notes and Floating-Rate Senior Notes.

Interest expense decreased by $13.0 million compared to the three months ended March 31, 2021, primarily due to decreases of (i) $4.1 million due to the redemption of the total principal amount outstanding of the 5.375% Senior Notes due 2021 on March 1, 2021, (ii) $4.1 million due to credit-rating related interest rate changes and lower outstanding balances on the 3.100% Senior Notes due 2025 and Floating-Rate Senior Notes, (iii) $2.3 million due to credit-rating related interest rate changes on the 4.050% Senior Notes due 2030 and 5.250% Senior Notes due 2050, and (iv) $2.1 million due to lower outstanding balances on the 3.950% Senior Notes due 2025, 4.000% Senior Notes due 2022, and 4.650% Senior Notes due 2026, portions of which were repaid during the third quarter of 2021.

Interest expense decreased by $4.7 million for the three months ended June 30, 2022, primarily due to the redemption of the total principal amount outstanding of the 4.000% Senior Notes due 2022 during the second quarter of 2022.

Interest expense decreased by $27.6 million for the six months ended June 30, 2022, primarily due to decreases of (i) $10.7 million primarily due to the redemption of the total principal amount outstanding of the 4.000% Senior Notes due 2022 and 5.375% Senior Notes due 2021 during the second quarter of 2022 and first quarter of 2021, respectively, (ii) $8.1 million due to credit-rating related interest rate changes and a lower outstanding balance on the 3.100% Senior Notes due 2025, (iii) $6.4 million due to credit-rating related interest rate changes on the 4.050% Senior Notes due 2030 and 5.250% Senior Notes due 2050, and (iv) $2.1 million due to a lower outstanding balance on the 3.950% Senior Notes due 2025, a portion of which was repaid during the third quarter of 2021.

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

Income Tax Expense (Benefit)

Three Months Ended

thousands except percentages March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Income (loss) before income taxes $ 316,662 $ 319,475 (1) % $ 636,137 $ 432,089 47 %

Income tax expense (benefit) 1,491 1,805 (17) % 3,296 2,577 28 %

Effective tax rate 1 % NM 1 %

Effective tax rate — % 1 % 1 % 1 %

We are not a taxable entity for U.S.

2 unchanged sentences

However, income apportionable to Texas is subject to Texas margin tax.

For the three months ended March 31, 2022 and 2021, the variance from the federal statutory rate was primarily due to our Texas margin tax liability.

For the three months 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 all periods presented, the variance from the federal statutory rate was primarily due to our Texas margin tax liability.

KEY PERFORMANCE METRICS

Three Months Ended

thousands except percentages and per-unit amounts March 31, 2022 December 31,

(Dec) March 31, 2021 Inc/

Three Months Ended Six Months Ended

thousands except percentages and per-unit amounts June 30, 2022 March 31,

(Dec) June 30, 2022 June 30, 2021 Inc/

Adjusted gross margin for natural - gas assets

26 unchanged sentences

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

Adjusted gross margin increased by $34.5 million compared to the three months ended December 31, 2021, primarily due to (i) an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2021 at the DJ Basin oil system, partially offset by decreased throughput, (ii) the treatment of lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system that was terminated effective December 31, 2021, partially offset by decreased throughput, and (iii) strong plant performance and contract mix at the West Texas and DJ Basin complexes leading to increased product recoveries and higher commodity prices, partially offset by lower throughput.

These increases were offset partially by (i) an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2021 at the Springfield system and (ii) a decrease in distributions from Whitethorn LLC.

Adjusted gross margin increased by $90.1 million compared to the three months ended March 31, 2021, primarily due to (i) increased throughput, partially offset by a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2022, at the West Texas complex, (ii) increased throughput at the DBM water systems and DBM oil system, and (iii) a higher average gathering and processing fee and increased deficiency fees on certain contracts at the DJ Basin complex.

These increases were offset partially by a decrease in distributions from Whitethorn LLC.

Per - Mcf Adjusted gross margin for natural - gas assets increased by $0.08 compared to the three months ended December 31, 2021, primarily due to strong plant performance and contract mix at the West Texas and DJ Basin complexes leading to increased product recoveries, coupled with higher commodity prices and lower throughput.

Per - Mcf Adjusted gross margin for natural - gas assets increased by $0.15 compared to the three months ended March 31, 2021, primarily due to increased throughput at the West Texas complex, which has a higher - than - average per - Mcf margin as compared to our other natural-gas assets.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets increased by $0.66 compared to the three months ended December 31, 2021, primarily due to (i) an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2021 at the DJ Basin oil system and (ii) the treatment of lease revenue under the operating and maintenance agreement with Occidental at the DBM oil system that was terminated effective December 31, 2021.

Adjusted gross margin increased by $50.9 million for the three months ended June 30, 2022, primarily due to (i) strong plant performance and contract mix leading to increased product recoveries, coupled with high commodity prices and increased throughput at the West Texas complex, (ii) increased throughput at the DJ Basin complex and DBM oil system, (iii) increased distributions from equity investments, and (iv) increased throughput, partially offset by a decrease in deficiency fees, at the DBM water systems.

Adjusted gross margin increased by $168.6 million for the six months ended June 30, 2022, primarily due to (i) strong plant performance and contract mix leading to increased product recoveries, coupled with higher commodity prices and increased throughput at the West Texas complex, partially offset by a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2022, and (ii) increased throughput and deficiency fees at the DBM water systems and DBM oil system.

These increases were offset partially by a decrease in distributions from Whitethorn LLC.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets decreased by $0.01 compared to the three months ended March 31, 2021, primarily due to a decrease in distributions from Whitethorn LLC and Saddlehorn.

These decreases were offset partially by increased throughput at the DBM oil system, which has a higher - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets

Per - Bbl Adjusted gross margin for produced - water assets increased by $0.08 compared to the three months ended December 31, 2021 and March 31, 2021, primarily due to deficiency fees recorded in the first quarter of 2022.

Per - Mcf Adjusted gross margin for natural - gas assets increased by $0.02 for the three months ended June 30, 2022, primarily due to strong plant performance and contract mix leading to increased product recoveries, coupled with high commodity prices and increased throughput at the West Texas complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets.

Per - Mcf Adjusted gross margin for natural - gas assets increased by $0.15 for the six months ended June 30, 2022, primarily due to strong plant performance and contract mix leading to increased product recoveries, coupled with higher commodity prices and increased throughput at the West Texas complex, which has a higher - than - average per - Mcf margin as compared to our other natural-gas assets.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets increased by $0.13 for the three months ended June 30, 2022, primarily due to (i) decreased throughput and increased distributions from the Whitethorn and Cactus II pipelines and (ii) increased throughput at the DBM oil system, which has a higher - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets.

These increases were offset partially by (i) increased throughput on FRP, which has a lower - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets and (ii) a decrease in distributions from Mont Belvieu JV.

Per - Bbl Adjusted gross margin for crude - oil and NGLs assets increased by $0.07 for the six months ended June 30, 2022, primarily due to increased throughput and increased deficiency fees at the DBM oil system, which has a higher - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets.

This increase was offset partially by (i) increased throughput on FRP, which has a lower - than - average per - Bbl margin as compared to our other crude - oil and NGLs assets and (ii) a decrease in distributions from Saddlehorn.

Per - Bbl Adjusted gross margin for produced - water assets decreased by $0.10 for the three months ended June 30, 2022, primarily due to a decrease in deficiency fees and contract mix.

Per - Bbl Adjusted gross margin for produced - water assets increased by $0.03 for the six months ended June 30, 2022, primarily due to deficiency fees recorded in 2022.

Adjusted EBITDA.

5 unchanged sentences

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

Adjusted EBITDA increased by $58.2 million compared to the three months ended December 31, 2021, primarily due to (i) a $39.1 million increase in total revenues and other, (ii) an $18.1 million decrease in operation and maintenance expenses, and (iii) a $7.9 million decrease in general and administrative expenses excluding non - cash equity - based compensation expense.

These amounts were offset partially by a $4.3 million decrease in distributions from equity investments.

Adjusted EBITDA increased by $95.9 million compared to the three months ended March 31, 2021, primarily due to (i) an $83.3 million increase in total revenues and other, (ii) a $16.1 million decrease in cost of product (net of lower of cost or market inventory adjustments), and (iii) an $11.4 million decrease in operation and maintenance expenses.

These amounts were offset partially by (i) a $5.4 million decrease in distributions from equity investments, (ii) a $4.1 million increase in property taxes, and (iii) a $2.5 million increase in general and administrative expenses excluding non - cash equity - based compensation expense.

Adjusted EBITDA increased by $9.3 million for the three months ended June 30, 2022, primarily due to a $118.1 million increase in total revenues and other and a $10.2 million increase in distributions from equity investments.

These amounts were offset partially by (i) a $75.6 million increase in cost of product (net of lower of cost or market inventory adjustments), (ii) a $39.2 million increase in operation and maintenance expenses, and (iii) a $4.2 million increase in property taxes.

Adjusted EBITDA increased by $153.1 million for the six months ended June 30, 2022, primarily due to a $240.6 million increase in total revenues and other.

This amount was offset partially by (i) a $54.3 million increase in cost of product (net of lower of cost or market inventory adjustments), (ii) a $10.3 million decrease in distributions from equity investments, (iii) an $8.8 million increase in property taxes, and (iv) a $6.0 million increase in general and administrative expenses excluding non - cash equity - based compensation expense.

Free cash flow.

3 unchanged sentences

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

Free cash flow decreased by $376.2 million compared to the three months ended December 31, 2021, primarily due to a decrease of $385.4 million in net cash provided by operating activities related to working capital fluctuations and timing, partially offset by a decrease of $11.9 million in capital expenditures.

Free cash flow decreased by $11.5 million compared to the three months ended March 31, 2021, primarily due to (i) an increase of $22.2 million in capital expenditures, (ii) a $2.2 million decrease in distributions from equity investments in excess of cumulative earnings, and (iii) an increase of $2.0 million in contributions to equity investments.

These amounts were offset partially by an increase of $14.9 million in net cash provided by operating activities.

Free cash flow increased by $171.8 million for the three months ended June 30, 2022, primarily due to (i) an increase of $190.5 million in net cash provided by operating activities related to working capital fluctuations and timing, and (ii) a $5.6 million increase in distributions from equity investments in excess of cumulative earnings.

These amounts were offset partially by an increase of $23.4 million in capital expenditures.

Free cash flow decreased by $19.1 million for the six months ended June 30, 2022, primarily due to an increase of $51.4 million in capital expenditures, partially offset by (i) an increase of $29.8 million in net cash provided by operating activities and (ii) a $4.0 million increase in distributions from equity investments in excess of cumulative earnings.

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

11 unchanged sentences

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

Three Months Ended

thousands March 31, 2022 December 31,

2021 March 31, 2021

Three Months Ended Six Months Ended

thousands June 30, 2022 March 31,

2022 June 30, 2022 June 30, 2021

Reconciliation of Gross margin to Adjusted gross margin

17 unchanged sentences

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

Three Months Ended

thousands March 31, 2022 December 31,

2021 March 31, 2021

Three Months Ended Six Months Ended

thousands June 30, 2022 March 31,

2022 June 30, 2022 June 30, 2021

Reconciliation of Net income (loss) to Adjusted EBITDA

12 unchanged sentences

Other income — 106 106 84

Income tax benefit — 14,210 —

Adjusted EBITDA attributable to noncontrolling interests (1)

22 unchanged sentences

Three Months Ended

thousands March 31, 2022 December 31,

2021 March 31, 2021

Three Months Ended Six Months Ended

thousands June 30, 2022 March 31,

2022 June 30, 2022 June 30, 2021

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

9 unchanged sentences

LIQUIDITY AND CAPITAL RESOURCES

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

Our sources of liquidity as of March 31, 2022, included cash and cash equivalents, cash flows generated from operations, available borrowing capacity under the RCF, and potential issuances of additional equity or debt securities.

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

Our sources of liquidity as of June 30, 2022, included cash and cash equivalents, cash flows generated from operations, available borrowing capacity under the RCF, and potential issuances of additional equity or debt securities.

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

1 unchanged sentence

We may rely on external financing sources, including equity and debt issuances, to fund capital expenditures and future acquisitions.

However, we also may use operating cash flows to fund capital expenditures or acquisitions, which could result in borrowings under the RCF to pay distributions or to fund other short - term working capital requirements.

However, we also may use operating cash flows to fund capital expenditures or acquisitions, which could result in borrowings under the RCF to fund equity or other short - term working capital requirements.

Under our partnership agreement, we distribute all of our available cash (beyond proper reserves as defined in our partnership agreement) within 55 days following each quarter’s end.

3 unchanged sentences

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

The Board declared a cash distribution to unitholders for the first quarter of 2022 of $0.50000 per unit, or $206.2 million in the aggregate.

The cash distribution is payable on May 13, 2022, to our unitholders of record at the close of business on May 2, 2022.

The Board declared a cash distribution to unitholders for the second quarter of 2022 of $0.50000 per unit, or $197.7 million in the aggregate.

The cash distribution is payable on August 12, 2022, to our unitholders of record at the close of business on August 1, 2022.

In February 2022, we announced a buyback program of up to $1.0 billion of our common units through December 31, 2024.

2 unchanged sentences

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

During the three months ended March 31, 2022, we repurchased 225,355 common units on the open market for an aggregate purchase price of $5.1 million.

During the six months ended June 30, 2022, we repurchased 3,314,562 common units on the open market for an aggregate purchase price of $79.2 million.

From July 1, 2022, through July 29, 2022, we repurchased 13,800,805 common units, which includes 10,000,000 common units repurchased from Occidental, for an aggregate purchase price of $346.1 million.

The units were canceled immediately upon receipt.

As of March 31, 2022, we had an authorized amount of $994.9 million remaining under the program.

For the year ended December 31, 2022, capital expenditures are expected to range between $550.0 million to $600.0 million (accrual-based, includes equity investments, excludes capitalized interest, and excludes capital expenditures associated with the 25% third-party interest in Chipeta), representing a $150.0 million increase to the midpoint of our previously announced guidance.

This updated guidance range includes capital expenditures attributable to a portion of Mentone Train III, a new 300 MMcf/d cryogenic processing plant at our West Texas complex that was sanctioned in May 2022, and additional well connect and expansion capital to support accelerated producer activity in the Delaware Basin.

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

Inclusive of the unit repurchases through July 29, 2022, we had an authorized amount of $574.6 million remaining under the $1.0 billion Purchase Program.

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

We will continue to evaluate funding alternatives, including additional borrowings and the issuance of debt or equity securities, to secure funds as needed or to refinance maturing debt balances with longer - term debt issuances.

4 unchanged sentences

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

As of March 31, 2022, we had a $430.8 million working capital deficit, which we define as the amount by which current liabilities exceed current assets.

Our working capital deficit was primarily due to the 4.000% Senior Notes due 2022 and the Floating-Rate Senior Notes being classified as short-term debt on the consolidated balance sheet as of March 31, 2022.

As of March 31, 2022, there was $2.0 billion available for borrowing under the RCF.

As of June 30, 2022, we had a $108.8 million working capital surplus, which we define as the amount by which current assets exceed current liabilities.

As of June 30, 2022, there was $1.7 billion available for borrowing under the RCF.

See Note 9—Selected Components of Working Capital and Note 10—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

5 unchanged sentences

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

Three Months Ended

Six Months Ended

thousands 2022 2021

4 unchanged sentences

_________________________________________________________________________________________

(1) For the three months ended March 31, 2022 and 2021, included $1.0 million and $0.9 million, respectively, of capitalized interest.

Capital expenditures increased by $22.2 million for the three months ended March 31, 2022, primarily due to increases of (i) $29.7 million at the West Texas complex primarily attributable to facility expansion and pipeline projects, and (ii) $4.5 million at the DBM oil system primarily related to an increase in pipeline and well connection projects.

These increases were offset partially by decreases of (i) $3.2 million at the DBM water systems primarily due to reduced construction of additional water - disposal facilities and gathering projects, and (ii) $2.8 million at the DJ Basin oil system primarily related to a decrease in pipeline projects.

(1) For the six months ended June 30, 2022 and 2021, included $2.0 million and $1.5 million, respectively, of capitalized interest.

Capital expenditures increased by $51.4 million for the six months ended June 30, 2022, primarily due to increases of (i) $63.2 million at the West Texas complex primarily attributable to facility expansion and pipeline projects and (ii) $8.4 million at the DBM oil system primarily related to an increase in pipeline, well connection, oil treating, and oil pumping projects.

These increases were offset partially by decreases of (i) $8.4 million at the DBM water systems primarily due to reduced construction of additional water - disposal facilities and well connection projects and (ii) $4.4 million at the DJ Basin oil system primarily related to a decrease in pipeline projects.

Historical cash flow .

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

Three Months Ended

Six Months Ended

thousands 2022 2021

5 unchanged sentences

Operating activities .

Net cash provided by operating activities increased for the three months ended March 31, 2022, primarily due to (i) higher cash operating income and (ii) lower interest expense.

These increases were offset partially by (i) the impact of changes in assets and liabilities and (ii) lower distributions from equity investments.

Net cash provided by operating activities increased for the six months ended June 30, 2022, primarily due to (i) higher cash operating income and (ii) lower interest expense.

These increases were partially offset by (i) the impact of changes in assets and liabilities and (ii) lower distributions from equity investments.

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

Investing activities .

Net cash used in investing activities for the three months ended March 31, 2022, primarily included the following:

Net cash used in investing activities for the six months ended June 30, 2022, primarily included the following:

• $191.4 million of capital expenditures, primarily related to construction, expansion, and asset - integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, and DBM oil system;

1 unchanged sentence

• $25.4 million of distributions received from equity investments in excess of cumulative earnings.

• $4.1 million of decreases to materials and supplies inventory.

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

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

• $139.9 million of capital expenditures, primarily related to construction, expansion, and asset - integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, and DBM oil system;

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

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

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

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

Financing activities .

Net cash used in financing activities for the three months ended March 31, 2022, primarily included the following:

Net cash used in financing activities for the six months ended June 30, 2022, primarily included the following:

• $883.5 million to redeem the total principal amount outstanding of WES Operating’s 4.000% Senior Notes due 2022 and repay borrowings under the RCF;

• $340.9 million of distributions paid to WES unitholders;

• $7.1 million of decreases in outstanding checks;

• $79.2 million of unit repurchases;

1 unchanged sentence

• $3.2 million of distributions paid to the noncontrolling interest owner of Chipeta;

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

• $634.0 million of borrowings under the RCF, which were used for general partnership purposes and to redeem portions of certain of WES Operating’s senior notes;

• $13.0 million of increases in outstanding checks.

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

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

3 unchanged sentences

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

• $3.6 million of finance lease payments;

• $1.5 million of distributions paid to the noncontrolling interest owner of Chipeta;

• $100.0 million of borrowings under the RCF, which were used for general partnership purposes;

1 unchanged sentence

Debt and credit facilities.

As of March 31, 2022, the carrying value of outstanding debt was $6.9 billion.

As of June 30, 2022, the carrying value of outstanding debt was $6.7 billion.

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

1 unchanged sentence

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

Including the effects of the issuance prices, underwriting discounts, and interest - rate adjustments, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 3.790%, 4.671%, and 5.869%, respectively, at March 31, 2022.

The interest rate on the Floating - Rate Senior Notes was 1.84% at March 31, 2022.

The interest rate on the Floating - Rate Senior Notes was 2.12% at June 30, 2022.

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

In January 2022, S&P upgraded WES Operating’s long-term debt from “BB+” to “BBB-.” As a result of this upgrade, annualized borrowing costs will decrease by $7.9 million.

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.

In January 2022, Standard and Poor’s (“S&P”) upgraded WES Operating’s long-term debt from “BB+” to “BBB-.” As a result of this upgrade, annualized borrowing costs decreased by $7.9 million.

During the second quarter of 2022, WES Operating (i) redeemed the total principal amount outstanding of the 4.000% Senior Notes due 2022 at par value and (ii) purchased and retired $1.4 million of the 3.100% Senior Notes due 2025 via open-market repurchases.

As of June 30, 2022, the Floating-Rate Senior Notes were classified as long-term debt on the consolidated balance sheet as WES Operating has the ability and intent to refinance these obligations using long-term debt.

At June 30, 2022, WES Operating was in compliance with all covenants under the relevant governing indentures.

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

2 unchanged sentences

Revolving credit facility.

WES Operating’s $2.0 billion senior unsecured revolving credit facility is expandable to a maximum of $2.5 billion, and matures in February 2025 for each extending lender.

In June 2022, WES Operating entered into an amendment to its $2.0 billion RCF, which is expandable to a maximum of $2.5 billion, to, among other things, (i) extend the maturity date applicable to the loans and commitments of certain lenders totaling $1.6 billion to February 2026, (ii) provide for the ability of WES Operating to extend the maturity date by one year on up to two additional occasions, (iii) provide that loans under the RCF with a fixed interest rate for a specified period bear interest based on SOFR instead of LIBOR, and (iv) include an additional level of pricing if WES Operating’s senior unsecured debt rating is less than or equal to BB/Ba2/BB (S&P / Moody’s Investors Service / Fitch Ratings).

The non - extending lender’s commitments mature in February 2025 and represent $400.0 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, the interest rate on any outstanding RCF borrowings was 1.95% and the facility - fee rate was 0.25%.

At March 31, 2022, WES Operating was in compliance with all covenants under the RCF.

As of June 30, 2022, there were $255.0 million of outstanding borrowings and $5.2 million of outstanding letters of credit, resulting in $1.7 billion of available borrowing capacity under the RCF.

As of June 30, 2022, the interest rate on any outstanding RCF borrowings was 3.12% and the facility - fee rate was 0.25%.

At June 30, 2022, WES Operating was in compliance with all covenants under the RCF.

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

1 unchanged sentence

As a result of certain covenants contained in the RCF, our capacity to borrow under the RCF may be limited.

Finance lease liabilities.

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

As of March 31, 2022, we have future finance-lease payments of $2.7 million for the remainder of 2022 and a total of $1.6 million in years thereafter.

Offload commitments.

During the six months ended June 30, 2022, we entered into offload agreements with third parties providing firm-processing capacity through 2025.

As of June 30, 2022, we have future minimum payments under offload agreements totaling $6.3 million for the remainder of 2022 and a total of $29.3 million in years thereafter.

Credit risk .

We bear credit risk through exposure to non - payment or non - performance by our counterparties, including Occidental, financial institutions, customers, and other parties.

Generally, non - payment or non - performance results from a customer’s inability to satisfy payables to us for services rendered, minimum - volume - commitment deficiency payments owed, or volumes owed pursuant to gas - imbalance agreements.

We examine and monitor the creditworthiness of customers and may establish credit limits for customers.

12 unchanged sentences

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

Three Months Ended

thousands March 31, 2022 December 31,

2021 March 31, 2021

Three Months Ended Six Months Ended

thousands June 30, 2022 March 31,

2022 June 30, 2022 June 30, 2021

Net income (loss) attributable to WES $ 306,317 $ 308,717 $ 615,034 $ 417,050

2 unchanged sentences

General and administrative expenses (2)

621 741 1,362 2,486

Other income (expense), net (4) (3) (7) (5)

Income taxes — 6 —

Net income (loss) attributable to WES Operating $ 313,201 $ 315,772 $ 628,973 $ 428,096

5 unchanged sentences

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

Three Months Ended

Six Months Ended

thousands 2022 2021

30 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis