Item 1. Financial Statements
Item 1. Financial Statements
WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30, Nine Months Ended
September 30,
thousands except per-unit amounts 2022 2021 2022 2021
Revenues and other
Service revenues – fee based $ 666,555 $ 650,482 $ 1,954,105 $ 1,841,742
Service revenues – product based 91,356 28,812 202,721 88,267
Product sales 79,430 84,298 314,755 227,359
Other 227 248 703 577
Total revenues and other (1)
837,568 763,840 2,472,284 2,157,945
Equity income, net – related parties 41,317 48,506 139,388 159,337
Operating expenses
Cost of product 106,833 83,232 328,237 250,245
Operation and maintenance 190,514 140,838 487,643 434,198
General and administrative 48,185 50,409 144,635 139,973
Property and other taxes 19,390 13,641 60,494 45,992
Depreciation and amortization 156,837 139,002 430,455 407,404
Long - lived asset and other impairments
4 1,594 94 29,198
Total operating expenses (2)
521,763 428,716 1,451,558 1,307,010
Gain (loss) on divestiture and other, net ( 104 ) ( 364 ) ( 884 ) 278
Operating income (loss) 357,018 383,266 1,159,230 1,010,550
Interest expense ( 83,106 ) ( 93,257 ) ( 249,333 ) ( 287,040 )
Gain (loss) on early extinguishment of debt — ( 24,655 ) 91 ( 24,944 )
Other income (expense), net 56 110 117 ( 1,013 )
Income (loss) before income taxes 273,968 265,464 910,105 697,553
Income tax expense (benefit) 387 1,826 3,683 4,403
Net income (loss) 273,581 263,638 906,422 693,150
Net income (loss) attributable to noncontrolling interests 7,836 7,913 25,643 20,375
Net income (loss) attributable to Western Midstream Partners, LP $ 265,745 $ 255,725 $ 880,779 $ 672,775
Limited partners’ interest in net income (loss):
Net income (loss) attributable to Western Midstream Partners, LP $ 265,745 $ 255,725 $ 880,779 $ 672,775
General partner interest in net (income) loss ( 6,244 ) ( 5,527 ) ( 19,794 ) ( 14,484 )
Limited partners’ interest in net income (loss) (3)
259,501 250,198 860,985 658,291
Net income (loss) per common unit – basic (3)
$ 0.67 $ 0.61 $ 2.16 $ 1.60
Net income (loss) per common unit – diluted (3)
$ 0.66 $ 0.61 $ 2.15 $ 1.59
Weighted - average common units outstanding – basic (3)
388,906 411,909 398,343 412,690
Weighted - average common units outstanding – diluted (3)
390,318 412,714 399,545 413,150
_________________________________________________________________________________________
(1) Total revenues and other includes related-party amounts of $ 476.5 million and $ 1.4 billion for the three and nine months ended September 30, 2022, respectively, and $ 431.7 million and $ 1.2 billion for the three and nine months ended September 30, 2021, respectively. See Note 6 .
(2) Total operating expenses includes related-party amounts of $( 4.5 ) million and $( 33.3 ) million for the three and nine months ended September 30, 2022, respectively, and $ 22.7 million and $ 91.5 million for the three and nine months ended September 30, 2021, respectively. See Note 6 .
(3) See Note 5.
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
thousands except number of units September 30,
2022 December 31,
2021
ASSETS
Current assets
Cash and cash equivalents $ 159,093 $ 201,999
Accounts receivable, net 650,922 436,513
Other current assets 86,285 46,252
Total current assets 896,300 684,764
Property, plant, and equipment
Cost 13,236,499 12,846,078
Less accumulated depreciation 4,696,816 4,333,171
Net property, plant, and equipment 8,539,683 8,512,907
Goodwill 4,783 4,783
Other intangible assets 720,992 744,742
Equity investments 1,142,103 1,167,187
Other assets (1)
168,721 158,696
Total assets (2)
$ 11,472,582 $ 11,273,079
LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL
Current liabilities
Accounts and imbalance payables $ 492,776 $ 326,061
Short - term debt
2,030 505,932
Accrued ad valorem taxes 61,492 44,955
Accrued liabilities 189,625 263,249
Total current liabilities 745,923 1,140,197
Long-term liabilities
Long - term debt
7,027,361 6,400,616
Deferred income taxes 14,182 12,425
Asset retirement obligations 310,500 298,275
Other liabilities 368,930 325,806
Total long - term liabilities
7,720,973 7,037,122
Total liabilities (3)
8,466,896 8,177,319
Equity and partners’ capital
Common units ( 385,586,841 and 402,993,919 units issued and outstanding at September 30, 2022, and December 31, 2021, respectively)
2,868,665 2,966,955
General partner units ( 9,060,641 units issued and outstanding at September 30, 2022, and December 31, 2021)
( 1,112 ) ( 8,882 )
Total partners’ capital 2,867,553 2,958,073
Noncontrolling interests 138,133 137,687
Total equity and partners’ capital 3,005,686 3,095,760
Total liabilities, equity, and partners’ capital $ 11,472,582 $ 11,273,079
________________________________________________________________________________________
(1) Other assets includes $ 9.3 million and $ 9.8 million of NGLs line - fill inventory as of September 30, 2022, and December 31, 2021, respectively. Other assets also includes $ 61.3 million and $ 56.2 million of materials and supplies inventory as of September 30, 2022, and December 31, 2021, respectively.
(2) Total assets includes related - party amounts of $ 1.5 billion and $ 1.4 billion as of September 30, 2022, and December 31, 2021, respectively, which includes related - party Accounts receivable, net of $ 327.3 million and $ 180.2 million as of September 30, 2022, and December 31, 2021, respectively. See Note 6 .
(3) Total liabilities includes related - party amounts of $ 326.8 million and $ 270.5 million as of September 30, 2022, and December 31, 2021, respectively. See Note 6 .
See accompanying Notes to Consolidated Financial Statements.
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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
Net income (loss) 299,550 6,767 8,854 315,171
Distributions to Chipeta noncontrolling interest owner — — ( 1,198 ) ( 1,198 )
Distributions to noncontrolling interest owner of WES Operating — — ( 6,007 ) ( 6,007 )
Distributions to Partnership unitholders ( 201,667 ) ( 4,530 ) — ( 206,197 )
Unit repurchases (1)
( 74,068 ) — — ( 74,068 )
Contributions of equity - based compensation from Occidental
241 — — 241
Equity - based compensation expense
6,797 — — 6,797
Net contributions from (distributions to) related parties 375 — — 375
Other ( 918 ) — — ( 918 )
Balance at June 30, 2022 $ 3,164,328 $ ( 2,825 ) $ 143,500 $ 3,305,003
Net income (loss) 259,501 6,244 7,836 273,581
Distributions to Chipeta noncontrolling interest owner — — ( 1,838 ) ( 1,838 )
Distributions to noncontrolling interest owner of WES Operating — — ( 11,365 ) ( 11,365 )
Distributions to Partnership unitholders ( 193,213 ) ( 4,531 ) — ( 197,744 )
Unit repurchases (1)
( 367,858 ) — — ( 367,858 )
Contributions of equity - based compensation from Occidental
81 — — 81
Equity - based compensation expense
6,383 — — 6,383
Net contributions from (distributions to) related parties 377 — — 377
Other ( 934 ) — — ( 934 )
Balance at September 30, 2022 $ 2,868,665 $ ( 1,112 ) $ 138,133 $ 3,005,686
_________________________________________________________________________________________
(1) See Note 5 .
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL
(UNAUDITED)
Partners’ Capital
thousands Common
Units General Partner
Units Noncontrolling
Interests Total
Balance at December 31, 2020 $ 2,778,339 $ ( 17,208 ) $ 134,081 $ 2,895,212
Net income (loss) 181,798 3,993 5,444 191,235
Distributions to Chipeta noncontrolling interest owner — — ( 276 ) ( 276 )
Distributions to noncontrolling interest owner of WES Operating — — ( 2,551 ) ( 2,551 )
Distributions to Partnership unitholders ( 128,447 ) ( 2,818 ) — ( 131,265 )
Unit repurchases (1)
( 16,241 ) — — ( 16,241 )
Contributions of equity - based compensation from Occidental
3,210 — — 3,210
Equity - based compensation expense
3,524 — — 3,524
Net contributions from (distributions to) related parties 1,627 — — 1,627
Other ( 2,355 ) — — ( 2,355 )
Balance at March 31, 2021 $ 2,821,455 $ ( 16,033 ) $ 136,698 $ 2,942,120
Net income (loss) 226,295 4,964 7,018 238,277
Distributions to Chipeta noncontrolling interest owner — — ( 1,245 ) ( 1,245 )
Distributions to noncontrolling interest owner of WES Operating — — ( 2,741 ) ( 2,741 )
Distributions to Partnership unitholders ( 130,115 ) ( 2,854 ) — ( 132,969 )
Contributions of equity - based compensation from Occidental
2,375 — — 2,375
Equity - based compensation expense
4,746 — — 4,746
Net contributions from (distributions to) related parties 2,881 — — 2,881
Other ( 571 ) — — ( 571 )
Balance at June 30, 2021 $ 2,927,066 $ ( 13,923 ) $ 139,730 $ 3,052,873
Net income (loss) 250,198 5,527 7,913 263,638
Distributions to Chipeta noncontrolling interest owner — — ( 1,213 ) ( 1,213 )
Distributions to noncontrolling interest owner of WES Operating — — ( 4,642 ) ( 4,642 )
Distributions to Partnership unitholders ( 131,772 ) ( 2,890 ) — ( 134,662 )
Unit repurchases (1)
( 88,125 ) — — ( 88,125 )
Contributions of equity - based compensation from Occidental
2,311 — — 2,311
Equity - based compensation expense
4,668 — — 4,668
Net contributions from (distributions to) related parties 2,165 — — 2,165
Other ( 567 ) — — ( 567 )
Balance at September 30, 2021 $ 2,965,944 $ ( 11,286 ) $ 141,788 $ 3,096,446
_________________________________________________________________________________________
(1) See Note 5 .
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
thousands 2022 2021
Cash flows from operating activities
Net income (loss) $ 906,422 $ 693,150
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 430,455 407,404
Long - lived asset and other impairments
94 29,198
Non - cash equity - based compensation expense
21,245 20,834
Deferred income taxes 1,757 2,275
Accretion and amortization of long - term obligations, net
5,359 5,873
Equity income, net – related parties ( 139,388 ) ( 159,337 )
Distributions from equity - investment earnings – related parties
139,710 164,772
(Gain) loss on divestiture and other, net 884 ( 278 )
(Gain) loss on early extinguishment of debt ( 91 ) 24,944
Other 299 46
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net ( 212,955 ) ( 130,773 )
Increase (decrease) in accounts and imbalance payables and accrued liabilities, net 65,069 56,495
Change in other items, net ( 6,653 ) ( 9,609 )
Net cash provided by operating activities 1,212,207 1,104,994
Cash flows from investing activities
Capital expenditures (1)
( 341,505 ) ( 219,757 )
Acquisitions from third parties ( 41,018 ) —
Contributions to equity investments – related parties ( 8,899 ) ( 3,683 )
Distributions from equity investments in excess of cumulative earnings – related parties 41,058 30,075
Proceeds from the sale of assets to third parties 1,111 8,002
(Increase) decrease in materials and supplies inventory and other ( 6,999 ) ( 1,924 )
Net cash used in investing activities ( 356,252 ) ( 187,287 )
Cash flows from financing activities
Borrowings, net of debt issuance costs 1,389,010 400,000
Repayments of debt ( 1,268,548 ) ( 1,132,966 )
Increase (decrease) in outstanding checks 1,459 ( 11,757 )
Distributions to Partnership unitholders (2)
( 538,690 ) ( 398,896 )
Distributions to Chipeta noncontrolling interest owner ( 5,020 ) ( 2,734 )
Distributions to noncontrolling interest owner of WES Operating ( 20,177 ) ( 9,934 )
Net contributions from (distributions to) related parties 1,161 6,673
Unit repurchases (2)
( 447,075 ) ( 104,366 )
Other ( 10,981 ) ( 8,787 )
Net cash provided by (used in) financing activities ( 898,861 ) ( 1,262,767 )
Net increase (decrease) in cash and cash equivalents ( 42,906 ) ( 345,060 )
Cash and cash equivalents at beginning of period 201,999 444,922
Cash and cash equivalents at end of period $ 159,093 $ 99,862
Supplemental disclosures
Interest paid, net of capitalized interest $ 314,192 $ 348,904
Income taxes paid (reimbursements received) 905 932
Accrued capital expenditures 71,955 29,085
_________________________________________________________________________________________
(1) Includes purchases from related parties of $ 2.0 million for the nine months ended September 30, 2021. See Note 6 .
(2) Includes related-party amounts. See Note 6 .
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30, Nine Months Ended
September 30,
thousands 2022 2021 2022 2021
Revenues and other
Service revenues – fee based $ 666,555 $ 650,482 $ 1,954,105 $ 1,841,742
Service revenues – product based 91,356 28,812 202,721 88,267
Product sales 79,430 84,298 314,755 227,359
Other 227 248 703 577
Total revenues and other (1)
837,568 763,840 2,472,284 2,157,945
Equity income, net – related parties 41,317 48,506 139,388 159,337
Operating expenses
Cost of product 106,833 83,232 328,237 250,245
Operation and maintenance 190,514 140,838 487,643 434,198
General and administrative 47,783 50,689 142,871 137,767
Property and other taxes 19,390 13,641 60,494 45,992
Depreciation and amortization 156,837 139,002 430,455 407,404
Long - lived asset and other impairments
4 1,594 94 29,198
Total operating expenses (2)
521,361 428,996 1,449,794 1,304,804
Gain (loss) on divestiture and other, net ( 104 ) ( 364 ) ( 884 ) 278
Operating income (loss) 357,420 382,986 1,160,994 1,012,756
Interest expense ( 83,106 ) ( 93,257 ) ( 249,333 ) ( 287,040 )
Gain (loss) on early extinguishment of debt — ( 24,655 ) 91 ( 24,944 )
Other income (expense), net 45 106 99 ( 1,022 )
Income (loss) before income taxes 274,359 265,180 911,851 699,750
Income tax expense (benefit) 387 1,823 3,683 4,400
Net income (loss) 273,972 263,357 908,168 695,350
Net income (loss) attributable to noncontrolling interest 2,404 2,699 7,627 6,596
Net income (loss) attributable to Western Midstream Operating, LP $ 271,568 $ 260,658 $ 900,541 $ 688,754
________________________________________________________________________________________
(1) Total revenues and other includes related-party amounts of $ 476.5 million and $ 1.4 billion for the three and nine months ended September 30, 2022, respectively, and $ 431.7 million and $ 1.2 billion for the three and nine months ended September 30, 2021, respectively. See Note 6 .
(2) Total operating expenses includes related-party amounts of $( 3.7 ) million and $( 30.9 ) million for the three and nine months ended September 30, 2022, respectively, and $ 23.7 million and $ 93.6 million for the three and nine months ended September 30, 2021, respectively. See Note 6 .
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
thousands except number of units September 30,
2022 December 31,
2021
ASSETS
Current assets
Cash and cash equivalents $ 150,329 $ 195,598
Accounts receivable, net 650,922 436,513
Other current assets 85,431 44,421
Total current assets 886,682 676,532
Property, plant, and equipment
Cost 13,236,499 12,846,078
Less accumulated depreciation 4,696,816 4,333,171
Net property, plant, and equipment 8,539,683 8,512,907
Goodwill 4,783 4,783
Other intangible assets 720,992 744,742
Equity investments 1,142,103 1,167,187
Other assets (1)
168,076 158,696
Total assets (2)
$ 11,462,319 $ 11,264,847
LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL
Current liabilities
Accounts and imbalance payables $ 527,444 $ 374,443
Short - term debt
2,030 505,932
Accrued ad valorem taxes 61,492 44,955
Accrued liabilities 141,799 210,693
Total current liabilities 732,765 1,136,023
Long-term liabilities
Long - term debt
7,027,361 6,400,616
Deferred income taxes 14,182 12,425
Asset retirement obligations 310,500 298,275
Other liabilities 368,286 324,842
Total long - term liabilities
7,720,329 7,036,158
Total liabilities (3)
8,453,094 8,172,181
Equity and partners’ capital
Common units ( 318,675,578 units issued and outstanding at September 30, 2022, and December 31, 2021)
2,977,241 3,063,289
Total partners’ capital 2,977,241 3,063,289
Noncontrolling interest 31,984 29,377
Total equity and partners’ capital 3,009,225 3,092,666
Total liabilities, equity, and partners’ capital $ 11,462,319 $ 11,264,847
_________________________________________________________________________________________
(1) Other assets includes $ 9.3 million and $ 9.8 million of NGLs line - fill inventory as of September 30, 2022, and December 31, 2021, respectively. Other assets also includes $ 61.3 million and $ 56.2 million of materials and supplies inventory as of September 30, 2022, and December 31, 2021, respectively.
(2) Total assets includes related - party amounts of $ 1.5 billion and $ 1.4 billion as of September 30, 2022, and December 31, 2021, respectively, which includes related - party Accounts receivable, net of $ 327.3 million and $ 180.2 million as of September 30, 2022, and December 31, 2021, respectively. See Note 6 .
(3) Total liabilities includes related - party amounts of $ 361.2 million and $ 318.7 million as of September 30, 2022, and December 31, 2021, respectively. See Note 6 .
See accompanying Notes to Consolidated Financial Statements.
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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
Net income (loss) 313,201 2,587 315,788
Distributions to Chipeta noncontrolling interest owner — ( 1,198 ) ( 1,198 )
Distributions to WES Operating unitholders ( 300,248 ) — ( 300,248 )
Contributions of equity - based compensation from Occidental
241 — 241
Contributions of equity - based compensation from WES
6,652 — 6,652
Net contributions from (distributions to) related parties 375 — 375
Balance at June 30, 2022 $ 3,267,086 $ 31,418 $ 3,298,504
Net income (loss) 271,568 2,404 273,972
Distributions to Chipeta noncontrolling interest owner — ( 1,838 ) ( 1,838 )
Distributions to WES Operating unitholders ( 568,107 ) — ( 568,107 )
Contributions of equity - based compensation from Occidental
81 — 81
Contributions of equity - based compensation from WES
6,236 — 6,236
Net contributions from (distributions to) related parties 377 — 377
Balance at September 30, 2022 $ 2,977,241 $ 31,984 $ 3,009,225
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL
(UNAUDITED)
thousands Common
Units Noncontrolling
Interest Total
Balance at December 31, 2020 $ 2,831,199 $ 29,552 $ 2,860,751
Net income (loss) 190,485 1,633 192,118
Distributions to Chipeta noncontrolling interest owner — ( 276 ) ( 276 )
Distributions to WES Operating unitholders ( 127,470 ) — ( 127,470 )
Contributions of equity - based compensation from Occidental
3,210 — 3,210
Contributions of equity - based compensation from WES
10,826 — 10,826
Net contributions from (distributions to) related parties 1,627 — 1,627
Balance at March 31, 2021 $ 2,909,877 $ 30,909 $ 2,940,786
Net income (loss) 237,611 2,264 239,875
Distributions to Chipeta noncontrolling interest owner — ( 1,245 ) ( 1,245 )
Distributions to WES Operating unitholders ( 137,030 ) — ( 137,030 )
Contributions of equity - based compensation from Occidental
2,375 — 2,375
Contributions of equity - based compensation from WES
4,613 — 4,613
Net contributions from (distributions to) related parties 2,881 — 2,881
Balance at June 30, 2021 $ 3,020,327 $ 31,928 $ 3,052,255
Net income (loss) 260,658 2,699 263,357
Distributions to Chipeta noncontrolling interest owner — ( 1,213 ) ( 1,213 )
Distributions to WES Operating unitholders ( 232,055 ) — ( 232,055 )
Contributions of equity - based compensation from Occidental
2,311 — 2,311
Contributions of equity - based compensation from WES
4,539 — 4,539
Net contributions from (distributions to) related parties 2,165 — 2,165
Balance at September 30, 2021 $ 3,057,945 $ 33,414 $ 3,091,359
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
thousands 2022 2021
Cash flows from operating activities
Net income (loss) $ 908,168 $ 695,350
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 430,455 407,404
Long - lived asset and other impairments
94 29,198
Non - cash equity - based compensation expense
20,822 27,874
Deferred income taxes 1,757 2,275
Accretion and amortization of long - term obligations, net
5,359 5,873
Equity income, net – related parties ( 139,388 ) ( 159,337 )
Distributions from equity - investment earnings – related parties
139,710 164,772
(Gain) loss on divestiture and other, net 884 ( 278 )
(Gain) loss on early extinguishment of debt ( 91 ) 24,944
Other 299 46
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net ( 212,955 ) ( 176,104 )
Increase (decrease) in accounts and imbalance payables and accrued liabilities, net 55,981 91,508
Change in other items, net ( 6,666 ) ( 9,336 )
Net cash provided by operating activities 1,204,429 1,104,189
Cash flows from investing activities
Capital expenditures (1)
( 341,505 ) ( 219,757 )
Acquisitions from third parties ( 41,018 ) —
Contributions to equity investments – related parties ( 8,899 ) ( 3,683 )
Distributions from equity investments in excess of cumulative earnings – related parties 41,058 30,075
Proceeds from the sale of assets to third parties 1,111 8,002
(Increase) decrease in materials and supplies inventory and other ( 6,999 ) ( 1,924 )
Net cash used in investing activities ( 356,252 ) ( 187,287 )
Cash flows from financing activities
Borrowings, net of debt issuance costs 1,389,010 400,000
Repayments of debt ( 1,268,548 ) ( 1,132,966 )
Increase (decrease) in outstanding checks 1,562 ( 11,699 )
Distributions to WES Operating unitholders (2)
( 1,008,572 ) ( 496,555 )
Distributions to Chipeta noncontrolling interest owner ( 5,020 ) ( 2,734 )
Net contributions from (distributions to) related parties 1,161 6,673
Other ( 3,039 ) ( 5,295 )
Net cash provided by (used in) financing activities ( 893,446 ) ( 1,242,576 )
Net increase (decrease) in cash and cash equivalents ( 45,269 ) ( 325,674 )
Cash and cash equivalents at beginning of period 195,598 418,537
Cash and cash equivalents at end of period $ 150,329 $ 92,863
Supplemental disclosures
Interest paid, net of capitalized interest $ 314,192 $ 348,904
Income taxes paid (reimbursements received) 905 932
Accrued capital expenditures 71,955 29,085
________________________________________________________________________________________
(1) Includes purchases from related parties of $ 2.0 million for the nine months ended September 30, 2021. See Note 6 .
(2) Includes related-party amounts. See Note 6.
See accompanying Notes to Consolidated Financial Statements.
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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
General. Western Midstream Partners, LP is a Delaware master limited partnership formed in September 2012. Western Midstream Operating, LP (together with its subsidiaries, “WES Operating”) is a Delaware limited partnership formed in 2007 to acquire, own, develop, and operate midstream assets. Western Midstream Partners, LP owns, directly and indirectly, a 98.0 % limited partner interest in WES Operating, and directly owns all of the outstanding equity interests of Western Midstream Operating GP, LLC, which holds the entire non - economic general partner interest in WES Operating.
For purposes of these consolidated financial statements, the “Partnership” refers to Western Midstream Partners, LP in its individual capacity or to Western Midstream Partners, LP and its subsidiaries, including Western Midstream Operating GP, LLC and WES Operating, as the context requires. “WES Operating GP” refers to Western Midstream Operating GP, LLC, individually as the general partner of WES Operating. The Partnership’s general partner, Western Midstream Holdings, LLC (the “general partner”), is a wholly owned subsidiary of Occidental Petroleum Corporation. “Occidental” refers to Occidental Petroleum Corporation, as the context requires, and its subsidiaries, excluding the general partner. “Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding Western Midstream Holdings, LLC. Anadarko became a wholly owned subsidiary of Occidental as a result of Occidental’s acquisition by merger of Anadarko on August 8, 2019. “Related parties” refers to Occidental (see Note 6 ), the Partnership’s investments accounted for under the equity method of accounting (see Note 7 ), and the Partnership and WES Operating for transactions that eliminate upon consolidation (see Note 6 ).
The Partnership is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural - gas liquids (“NGLs”), and crude oil; and gathering and disposing of produced water. In its capacity as a natural - gas processor, the Partnership also buys and sells natural gas, NGLs, and condensate on behalf of itself and as an agent for its customers under certain contracts. As of September 30, 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
25 3 — 3
NGLs pipelines 2 — — 5
Natural - gas pipelines
6 — — 1
Crude - oil pipelines
3 1 — 4
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(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.
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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 (see Note 3 and Note 7) :
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 %
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 %
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(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.
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1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The consolidated financial results of WES Operating are included in the Partnership’s consolidated financial statements. Throughout these notes to consolidated financial statements, and to the extent material, any differences between the consolidated financial results of the Partnership and WES Operating are discussed separately. The Partnership’s consolidated financial statements differ from those of WES Operating primarily as a result of (i) the presentation of noncontrolling interest ownership (see Noncontrolling interests below), (ii) the elimination of WES Operating GP’s investment in WES Operating with WES Operating GP’s underlying capital account, (iii) the general and administrative expenses incurred by the Partnership, which are separate from, and in addition to, those incurred by WES Operating, (iv) the inclusion of the impact of Partnership equity balances and Partnership distributions, and (v) transactions between the Partnership and WES Operating that eliminate upon consolidation.
Presentation of the Partnership’s assets. The Partnership’s assets include assets owned and ownership interests accounted for by the Partnership under the equity method of accounting, through its 98.0 % partnership interest in WES Operating, as of September 30, 2022 (see Note 7 ). The Partnership also owns and controls the entire non - economic general partner interest in WES Operating GP, and the Partnership’s general partner is owned by Occidental.
Use of estimates. In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, using historical experience and other reasonable methods. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Effects on the business, financial condition, and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information included herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements, 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 5.
Segments. The Partnership’s operations continue to be organized into a single operating segment, the assets of which gather, compress, treat, process, and transport natural gas; gather, stabilize, and transport condensate, NGLs, and crude oil; and gather and dispose of produced water in the United States.
Equity-based compensation. During the nine months ended September 30, 2022, the Partnership issued 575,279 common units under its long-term incentive plans. Compensation expense was $ 6.4 million and $ 19.0 million for the three and nine months ended September 30, 2022, respectively, and $ 4.7 million and $ 12.9 million for the three and nine months ended September 30, 2021, respectively.
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2. REVENUE FROM CONTRACTS WITH CUSTOMERS
The following table summarizes revenue from contracts with customers:
Three Months Ended
September 30, Nine Months Ended
September 30,
thousands 2022 2021 2022 2021
Revenue from customers
Service revenues – fee based $ 666,555 $ 605,967 $ 1,954,105 $ 1,707,987
Service revenues – product based 91,356 28,812 202,721 88,267
Product sales 79,430 84,298 314,755 227,359
Total revenue from customers 837,341 719,077 2,471,581 2,023,613
Revenue from other than customers
Lease revenue (1)
— 44,515 — 133,755
Other 227 248 703 577
Total revenues and other $ 837,568 $ 763,840 $ 2,472,284 $ 2,157,945
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(1) Includes fixed - and variable - lease revenue from an operating and maintenance agreement entered into with Occidental. See Operating leases within Note 6.
Contract balances. Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $ 646.5 million and $ 424.6 million as of September 30, 2022, and December 31, 2021, respectively.
Contract assets primarily relate to (i) accrued deficiency fees the Partnership expects to charge customers once the related performance periods are completed and (ii) revenue accrued but not yet billed under cost - of - service contracts with fixed and variable fees. 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 (1)
( 1,849 )
Additional estimated revenues recognized (2)
20,532
Contract assets balance at September 30, 2022
$ 41,240
Contract assets at September 30, 2022
Other current assets $ 22,813
Other assets 18,427
Total contract assets from contracts with customers $ 41,240
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(1) Includes $( 1.5 ) million for the three months ended September 30, 2022.
(2) Includes $ 8.1 million for the three months ended September 30, 2022.
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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 (1)
56,230
Revenues recognized that were included in the contract liability balance at the beginning of the period (2)
( 16,447 )
Contract liabilities balance at September 30, 2022
$ 352,929
Contract liabilities at September 30, 2022
Accrued liabilities $ 19,223
Other liabilities 333,706
Total contract liabilities from contracts with customers $ 352,929
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(1) Includes $ 28.2 million for the three months ended September 30, 2022.
(2) Includes $( 2.5 ) million for the three months ended September 30, 2022.
Transaction price allocated to remaining performance obligations. Revenues expected to be recognized from certain performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 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 $ 270,626
2023 1,045,627
2024 1,019,350
2025 935,624
2026 808,051
Thereafter 2,175,329
Total $ 6,254,607
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3. ACQUISITIONS AND DIVESTITURES
Ranch Westex. In September 2022, the Partnership acquired the remaining 50 % interest in Ranch Westex JV LLC (“Ranch Westex”) from a third party for $ 41.0 million. Subsequent to the acquisition, the Partnership is the sole owner and operator of the asset and Ranch Westex will be included as part of the operations of the West Texas complex.
Cactus II. In November 2022, the Partnership sold its 15.00 % interest in Cactus II to two third parties for $ 264.8 million, which includes a $ 1.8 million pro-rata distribution through closing. Total proceeds are expected to be received during the fourth quarter of 2022.
Bison facility. In October 2020, the Partnership 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. The Partnership received total proceeds of $ 8.0 million, $ 7.0 million in the fourth quarter of 2020 and $ 1.0 million when the sale closed in the second quarter of 2021, resulting in a net gain on sale of $ 5.4 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations.
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4. PARTNERSHIP DISTRIBUTIONS
Partnership distributions. Under its partnership agreement, the Partnership distributes all of its available cash (beyond proper reserves as defined in its partnership agreement) to unitholders of record on the applicable record date within 55 days following each quarter’s end. The Board of Directors of the general partner (the “Board”) 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
June 30 0.50000 197,744 August 12, 2022 August 1, 2022
September 30 0.50000 197,065 November 14, 2022 October 31, 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 5 . 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
June 30 213,513 August 2022
September 30 213,513 November 2022
In addition to the distributions above, during the nine months ended September 30, 2022 and 2021, WES Operating made distributions of $ 441.3 million and $ 91.8 million, respectively, to the Partnership and WGRAH. The Partnership used its portion of the distribution to repurchase common units. See Note 5 .
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5. EQUITY AND PARTNERS’ CAPITAL
Holdings of Partnership equity. The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” As of September 30, 2022, Occidental held 190,281,578 common units, representing a 48.2 % 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 2.3 % general partner interest in the Partnership. The public held 195,305,263 common units, representing a 49.5 % 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 nine months ended September 30, 2022, the Partnership repurchased 17,982,357 common units, which includes 10,000,000 common units repurchased from Occidental, for an aggregate purchase price of $ 447.1 million. The units were canceled immediately upon receipt. As of September 30, 2022, the Partnership had an authorized amount of $ 552.9 million remaining under the program. In November 2022, the Board authorized an increase in the $ 1.0 billion Purchase Program to $ 1.25 billion.
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 nine months ended September 30, 2021, the Partnership repurchased 5,586,419 common units on the open market for an aggregate purchase price of $ 104.4 million. The units were canceled by the Partnership immediately upon receipt. As of December 31, 2021, the entire $ 250.0 million authorized program had been fulfilled.
Holdings of WES Operating equity. As of September 30, 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.
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5. EQUITY AND PARTNERS’ CAPITAL
The following table provides a reconciliation between basic and diluted net income (loss) per common unit:
Three Months Ended
September 30, Nine Months Ended
September 30,
thousands except per-unit amounts 2022 2021 2022 2021
Net income (loss)
Limited partners’ interest in net income (loss) $ 259,501 $ 250,198 $ 860,985 $ 658,291
Weighted-average common units outstanding
Basic 388,906 411,909 398,343 412,690
Dilutive effect of non-vested phantom units 1,412 805 1,202 460
Diluted 390,318 412,714 399,545 413,150
Excluded due to anti-dilutive effect 108 4 597 700
Net income (loss) per common unit
Basic $ 0.67 $ 0.61 $ 2.16 $ 1.60
Diluted $ 0.66 $ 0.61 $ 2.15 $ 1.59
WES Operating’s net income (loss) per common unit. Net income (loss) per common unit for WES Operating is not calculated because it has no publicly traded units.
6. RELATED-PARTY TRANSACTIONS
Summary of related-party transactions. The following tables summarize material related - party transactions included in the Partnership’s consolidated financial statements:
Consolidated statements of operations
Three Months Ended
September 30, Nine Months Ended
September 30,
thousands 2022 2021 2022 2021
Revenues and other
Service revenues – fee based $ 431,944 $ 418,520 $ 1,275,474 $ 1,188,679
Service revenues – product based 24,246 1,499 48,297 9,662
Product sales 20,323 11,662 38,232 27,034
Total revenues and other 476,513 431,681 1,362,003 1,225,375
Equity income, net – related parties (1)
41,317 48,506 139,388 159,337
Operating expenses
Cost of product (2)
( 7,771 ) 17,384 ( 39,462 ) 53,968
Operation and maintenance 3,231 3,497 3,874 24,534
General and administrative (3)
81 1,808 2,289 13,003
Total operating expenses ( 4,459 ) 22,689 ( 33,299 ) 91,505
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(1) See Note 7 .
(2) Includes related-party natural - gas and NGLs imbalances.
(3) Includes equity - based compensation expense allocated to the Partnership by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6 ). Balances for the three and nine months ended September 30, 2021, also include amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ).
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6. RELATED-PARTY TRANSACTIONS
Consolidated balance sheets
thousands September 30,
2022 December 31,
2021
Assets
Accounts receivable, net $ 327,285 $ 180,205
Other current assets 18,486 12,490
Equity investments (1)
1,142,103 1,167,187
Other assets 45,544 45,494
Total assets 1,533,418 1,405,376
Liabilities
Accounts and imbalance payables 65,484 49,242
Accrued liabilities 7,439 13,914
Other liabilities 253,912 207,365
Total liabilities 326,835 270,521
_________________________________________________________________________________________
(1) See Note 7 .
Consolidated statements of cash flows
Nine Months Ended
September 30,
thousands 2022 2021
Distributions from equity - investment earnings – related parties
$ 139,710 $ 164,772
Capital expenditures — ( 2,000 )
Contributions to equity investments – related parties ( 8,899 ) ( 3,683 )
Distributions from equity investments in excess of cumulative earnings – related parties 41,058 30,075
Distributions to Partnership unitholders (1)
( 260,774 ) ( 195,205 )
Distributions to WES Operating unitholders (2)
( 20,177 ) ( 9,934 )
Net contributions from (distributions to) related parties 1,161 6,673
Unit repurchases from Occidental (3)
( 252,500 ) —
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(1) Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5 ).
(2) Represents distributions paid to Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ).
(3) Represents common units repurchased from Occidental (see Note 5 ).
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6. 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 materially from the Partnership’s consolidated financial statements:
Consolidated statements of operations
Three Months Ended
September 30, Nine Months Ended
September 30,
thousands 2022 2021 2022 2021
General and administrative (1)
$ 795 $ 2,775 $ 4,662 $ 15,061
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(1) Includes (i) an intercompany service fee between the Partnership and WES Operating and (ii) equity - based compensation expense allocated to WES Operating by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6 ). Balances for the three and nine months ended September 30, 2021, also include amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ).
Consolidated balance sheets
thousands September 30,
2022 December 31,
2021
Other current assets $ 18,473 $ 12,490
Other assets 44,899 45,494
Accounts and imbalance payables (1)
100,159 97,749
Accrued liabilities 7,122 13,597
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(1) Includes balances related to transactions between the Partnership and WES Operating.
Consolidated statements of cash flows
Nine Months Ended
September 30,
thousands 2022 2021
Distributions to WES Operating unitholders (1)
$ ( 1,008,572 ) $ ( 496,555 )
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(1) Represents distributions paid to the Partnership and Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement. Includes distributions made from WES Operating to the Partnership that were used by the Partnership to repurchase common units. See Note 4 and Note 5 .
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 35 % and 36 % for the three and nine months ended September 30, 2022, respectively, and 38 % and 36 % for the three and nine months ended September 30, 2021, respectively. Crude - oil and NGLs throughput (excluding equity - investment throughput) attributable to production owned or controlled by Occidental was 88 % for the three and nine months ended September 30, 2022, and 88 % and 89 % for the three and nine months ended September 30, 2021, respectively. Produced - water throughput attributable to production owned or controlled by Occidental was 75 % and 80 % for the three and nine months ended September 30, 2022, respectively, and 89 % and 87 % for the three and nine months ended September 30, 2021, respectively.
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6. RELATED-PARTY TRANSACTIONS
The Partnership is currently discussing varying interpretations of certain contractual provisions 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 discussions are resolved in a manner adverse to the Partnership, such resolution could have a negative impact on the Partnership’s financial condition and results of operations, including a reduction in rates and a non - cash charge to earnings.
In connection with the sale of its Eagle Ford assets in 2017, Anadarko remained the primary counterparty to the Partnership’s Brasada gas processing agreement and entered into an agency relationship with Sanchez Energy Corporation (“Sanchez”), now Mesquite Energy, Inc. (“Mesquite”), that allows Mesquite to process gas under such agreement. 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 ended as of September 30, 2022.
Marketing Transition Services Agreement. During the year ended December 31, 2020, Occidental provided marketing-related services to certain of the Partnership’s subsidiaries (the “Marketing Transition Services Agreement”). 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 is being 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. For the three and nine months ended September 30, 2021, the Partnership recognized fixed-lease revenue of $ 43.9 million and $ 131.9 million, respectively, and variable-lease revenue of $ 0.6 million and $ 1.9 million, respectively, related to these agreements, 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. 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 $ 0.1 million and $ 2.3 million for the three and nine months ended September 30, 2022, respectively, and $ 2.3 million and $ 7.9 million for the three and nine months ended September 30, 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. EQUITY INVESTMENTS
The following table presents the financial statement impact of the Partnership’s equity investments for the nine months ended September 30, 2022:
thousands Balance at December 31, 2021 Equity
income, net Contributions Distributions Distributions
in excess of
cumulative
earnings (1)
Acquisitions and Divestitures Balance at September 30, 2022
White Cliffs $ 40,753 $ 539 $ — $ ( 103 ) $ ( 2,760 ) $ — $ 38,429
Rendezvous 22,075 ( 1,910 ) — ( 534 ) ( 2,074 ) — 17,557
Mont Belvieu JV 96,728 21,651 — ( 21,765 ) ( 3,378 ) — 93,236
TEG 16,116 4,832 75 ( 4,849 ) ( 21 ) — 16,153
TEP 188,925 32,457 — ( 32,646 ) ( 2,733 ) — 186,003
FRP 196,632 34,074 455 ( 34,384 ) ( 2,364 ) — 194,413
Whitethorn LLC 149,690 ( 2,736 ) 255 3,553 ( 1,565 ) — 149,197
Cactus II 171,294 10,903 — ( 11,028 ) ( 7,567 ) — 163,602
Saddlehorn 110,441 15,813 — ( 15,470 ) ( 5,150 ) — 105,634
Panola 20,044 1,688 — ( 1,454 ) ( 864 ) — 19,414
Mi Vida 51,763 8,256 — ( 7,209 ) ( 3,105 ) — 49,705
Ranch Westex 979 3,392 — ( 3,392 ) ( 8,376 ) 7,397 —
Red Bluff Express 101,747 10,429 8,114 ( 10,429 ) ( 1,101 ) — 108,760
Total $ 1,167,187 $ 139,388 $ 8,899 $ ( 139,710 ) $ ( 41,058 ) $ 7,397 $ 1,142,103
_________________________________________________________________________________________
(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.
In September 2022, the Partnership acquired the remaining 50 % interest in Ranch Westex from a third party. Subsequent to the acquisition, the Partnership is the sole owner and operator of the asset and Ranch Westex is no longer accounted for under the equity method of accounting. See Note 3.
During the nine months ended September 30, 2021, the Partnership recognized an impairment loss on its investment in Ranch Westex of $ 11.8 million that resulted from a decline in value below the carrying value, which was determined to be other than temporary in nature. This investment was impaired to its estimated fair value of $ 2.9 million, using the income approach and Level-3 fair value inputs, due to a reduction in estimated future cash flows resulting from lower forecasted producer throughput.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. PROPERTY, PLANT, AND EQUIPMENT
A summary of the historical cost of property, plant, and equipment is as follows:
thousands Estimated Useful Life September 30,
2022 December 31,
2021
Land N/A $ 10,983 $ 10,955
Gathering systems – pipelines 30 years 5,466,010 5,386,003
Gathering systems – compressors 15 years 2,247,871 2,172,953
Processing complexes and treating facilities 25 years 3,413,159 3,375,317
Transportation pipeline and equipment 4 to 48 years
172,256 169,356
Produced - water disposal systems
20 years 912,599 882,527
Assets under construction N/A 228,418 98,473
Other 3 to 40 years
785,203 750,494
Total property, plant, and equipment 13,236,499 12,846,078
Less accumulated depreciation 4,696,816 4,333,171
Net property, plant, and equipment $ 8,539,683 $ 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 nine months ended September 30, 2021, the Partnership recognized impairments of $ 29.2 million, primarily attributable to (i) $ 14.1 million of impairments at the DJ Basin complex due to cancellation of projects and (ii) an $ 11.8 million other-than-temporary impairment of the Partnership’s investment in Ranch Westex (see Note 7 ).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SELECTED COMPONENTS OF WORKING CAPITAL
A summary of accounts receivable, net is as follows:
The Partnership WES Operating
thousands September 30, 2022 December 31, 2021 September 30, 2022 December 31, 2021
Trade receivables, net $ 644,516 $ 431,649 $ 644,516 $ 431,649
Other receivables, net 6,406 4,864 6,406 4,864
Total accounts receivable, net $ 650,922 $ 436,513 $ 650,922 $ 436,513
A summary of other current assets is as follows:
The Partnership WES Operating
thousands September 30, 2022 December 31, 2021 September 30, 2022 December 31, 2021
NGLs inventory $ 2,652 $ 3,370 $ 2,652 $ 3,370
Imbalance receivables 38,682 25,309 38,682 25,309
Prepaid insurance 14,279 10,369 13,438 8,538
Contract assets 22,813 5,307 22,813 5,307
Other 7,859 1,897 7,846 1,897
Total other current assets $ 86,285 $ 46,252 $ 85,431 $ 44,421
A summary of accrued liabilities is as follows:
The Partnership WES Operating
thousands September 30, 2022 December 31, 2021 September 30, 2022 December 31, 2021
Accrued interest expense $ 60,960 $ 131,177 $ 60,960 $ 131,177
Short - term asset retirement obligations
7,456 9,934 7,456 9,934
Short - term remediation and reclamation obligations
6,515 7,454 6,515 7,454
Income taxes payable 3,443 1,516 3,443 1,516
Contract liabilities 19,223 27,763 19,223 27,763
Accrued payroll and benefits 40,989 41,311 — 20
Other 51,039 44,094 44,202 32,829
Total accrued liabilities $ 189,625 $ 263,249 $ 141,799 $ 210,693
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. DEBT AND INTEREST EXPENSE
WES Operating is the borrower for all outstanding debt and is expected to be the borrower for all future debt issuances. The following table presents the outstanding debt:
September 30, 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 $ 502,138 $ 505,153
Finance lease liabilities 2,030 2,030 2,030 3,794 3,794 3,794
Total short - term debt
$ 2,030 $ 2,030 $ 2,030 $ 506,040 $ 505,932 $ 508,947
Long - term debt
Floating - Rate Senior Notes due 2023
$ 213,138 $ 213,000 $ 211,778 $ 213,138 $ 212,642 $ 213,072
3.100 % Senior Notes due 2025
730,706 727,637 680,853 732,106 728,096 764,815
3.950 % Senior Notes due 2025
399,163 396,598 373,318 399,163 395,928 418,506
4.650 % Senior Notes due 2026
474,242 472,027 441,417 474,242 471,629 516,473
4.500 % Senior Notes due 2028
400,000 396,557 357,866 400,000 396,145 437,673
4.750 % Senior Notes due 2028
400,000 397,237 363,431 400,000 396,938 444,550
4.050 % Senior Notes due 2030
1,200,000 1,191,089 1,022,784 1,200,000 1,190,339 1,323,595
5.450 % Senior Notes due 2044
600,000 593,842 497,942 600,000 593,733 717,804
5.300 % Senior Notes due 2048
700,000 687,435 575,740 700,000 687,265 844,223
5.500 % Senior Notes due 2048
350,000 342,751 285,661 350,000 342,659 418,907
5.250 % Senior Notes due 2050
1,000,000 983,884 811,100 1,000,000 983,709 1,183,514
RCF 625,000 625,000 625,000 — — —
Finance lease liabilities 304 304 304 1,533 1,533 1,533
Total long - term debt
$ 7,092,553 $ 7,027,361 $ 6,247,194 $ 6,470,182 $ 6,400,616 $ 7,284,665
_________________________________________________________________________________________
(1) Fair value is measured using the market approach and Level - 2 fair value inputs.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. DEBT AND INTEREST EXPENSE
Debt activity. The following table presents the debt activity for the nine months ended September 30, 2022:
thousands Carrying Value
Balance at December 31, 2021 $ 6,906,548
RCF borrowings 1,390,000
Repayments of RCF borrowings ( 765,000 )
Repayment of 4.000 % Senior Notes due 2022
( 502,246 )
Repayment of 3.100 % Senior Notes due 2025
( 1,400 )
Finance lease liabilities ( 2,992 )
Other 4,481
Balance at September 30, 2022 $ 7,029,391
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 September 30, 2022, and were 4.542 %, 5.424 %, and 6.629 %, respectively, at September 30, 2021. The interest rate on the Floating - Rate Senior Notes was 3.56 % and 2.23 % at September 30, 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 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.
During the third quarter of 2021, WES Operating purchased and retired $ 500.0 million of certain of its senior notes via a tender offer. For the three months ended September 30, 2021, losses of $ 24.7 million were recognized for the early retirement of these notes. During the first quarter of 2021, WES Operating redeemed the total principal amount outstanding of the 5.375 % Senior Notes due 2021 at par value, pursuant to the optional redemption terms in WES Operating’s indenture.
As of September 30, 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. As of September 30, 2022, WES Operating was in compliance with all covenants under the relevant governing indentures.
Revolving credit facility. In June 2022, WES Operating entered into an amendment to its $ 2.0 billion senior unsecured revolving credit facility (“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 the Secured Overnight Financing Rate (“SOFR”) instead of the London Interbank Offered Rate (“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 (Standard and Poor’s / 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 September 30, 2022, there were $ 625.0 million of outstanding borrowings and $ 5.1 million of outstanding letters of credit, resulting in $ 1.4 billion of available borrowing capacity under the RCF. As of September 30, 2022 and 2021, the interest rate on any outstanding RCF borrowings was 4.65 % and 1.58 %, respectively. The facility - fee rate was 0.25 % at September 30, 2022 and 2021. As of September 30, 2022, WES Operating was in compliance with all covenants under the RCF.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. DEBT AND INTEREST EXPENSE
Interest expense. The following table summarizes the amounts included in interest expense:
Three Months Ended
September 30, Nine Months Ended
September 30,
thousands 2022 2021 2022 2021
Long - term and short - term debt
$ ( 81,554 ) $ ( 90,913 ) $ ( 243,559 ) $ ( 279,122 )
Finance lease liabilities ( 23 ) ( 218 ) ( 96 ) ( 808 )
Commitment fees and amortization of debt-related costs ( 3,049 ) ( 3,147 ) ( 9,149 ) ( 9,664 )
Capitalized interest 1,520 1,021 3,471 2,554
Interest expense $ ( 83,106 ) $ ( 93,257 ) $ ( 249,333 ) $ ( 287,040 )
11. COMMITMENTS AND CONTINGENCIES
Environmental obligations. The Partnership is subject to various environmental-remediation obligations arising from federal, state, and local regulations regarding air and water quality, hazardous and solid waste disposal, and other environmental matters. As of September 30, 2022, and December 31, 2021, the consolidated balance sheets included $ 8.3 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 and offload 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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.