Western Midstream Partners, LP 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk Commodity-price risk. Certain of our processing services are provided under percent - of - proceeds and keep - whole agreements. Under percent - of - proceeds agreements, we receive a specified percentage of the net proceeds from the sale of residue and/or NGLs. Under keep - whole agreements, we keep 100% of the NGLs produced, and the processed natural gas, or value of the natural gas, is returned to the producer, and because some of the gas is used and removed during processing, we compensate the producer for the amount of gas used and removed in processing by supplying additional gas or by paying an agreed - upon value for the gas used. For the nine months ended September 30, 2022, 92% of our wellhead natural - gas volume (excluding equity investments) and 100% of our crude - oil and produced - water throughput (excluding equity investments) were serviced under fee - based contracts. A 10% increase or decrease in commodity prices would not have a material impact on our operating income (loss), financial condition, or cash flows for the next 12 months, excluding the effect of the below - described imbalances. We bear a limited degree of commodity - price risk with respect to settlement of natural - gas and NGLs imbalances that arise from differences in gas volumes received into our systems and gas volumes delivered by us to customers, and for instances where actual liquids recovery or fuel usage varies from contractually stipulated amounts. Natural - gas and NGLs volumes owed to or by us that are subject to monthly cash settlement are valued according to the terms of the contract as of the balance sheet dates and generally reflect market - index prices. Other natural - gas and NGLs volumes owed to or by us are valued at our weighted - average cost as of the balance sheet dates and are settled in - kind. Our exposure to the impact of changes in commodity prices on outstanding imbalances depends on the settlement timing of the imbalances. See Outlook under Part I, Item 2 and Risk Factors under Part II, Item 1A of this Form 10-Q. Interest-rate risk. The Federal Open Market Committee made no changes to its target range for the federal funds rate in 2021 and increased its target range five times during the nine months ended September 30, 2022. Any future increases in the federal funds rate likely will result in an increase in short - term financing costs. As of September 30, 2022, we had (i) $625.0 million of outstanding borrowings under the RCF that bear interest at a rate based on SOFR or an alternative base rate at WES Operating’s option, and (ii) the Floating - Rate Senior Notes that bear interest at a rate based on LIBOR. While a 10% change in the applicable benchmark interest rate would not materially impact interest expense on our outstanding borrowings at September 30, 2022, it would impact the fair value of the senior notes. In addition, the transition from LIBOR to SOFR as a result of reference rate reform is not expected to materially impact interest expense on our outstanding borrowings. Additional variable - rate debt may be issued in the future, either under the RCF or other financing sources, including commercial paper borrowings or debt issuances.